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  • Количество слайдов: 66

 • Annual Results 2004 1 • Annual Results 2004 1

Outline of presentation • Introduction • Review of the year • Financial results • Outline of presentation • Introduction • Review of the year • Financial results • Group operations • Pharmacy update – the way forward • Conclusion 2

At interim we said focus would be on: • Integration of pharmacies à 21 At interim we said focus would be on: • Integration of pharmacies à 21 converted to Clicks Pharmacy • Continued focus on lifestyle category àSuccessful trial of new look stores, good response to homewares & improved margin mix • Clicks to be the pre-eminent health, home & beauty brand àStrategy remains unchanged • UPD integral to healthcare plans àIntegrated channel to market core part of strategy • Increase volumes in UPD àSuccessful, even in uncertain legislative environment 3

At interim we said focus would be on: (continued) • Increasing profitability in Discom At interim we said focus would be on: (continued) • Increasing profitability in Discom àTurnaround is continuing & strategy intact • Enhancing entertainment offering in music (Musica & CDW) àSuccessful expansion particularly into DVDs • Focus on stock distribution & management systems àImplementation on track • Continued focus on expense control àExpense growth below revenue growth 4

Review of the year • Disposal of Australian operations • Turnaround in homeware • Review of the year • Disposal of Australian operations • Turnaround in homeware • Q 4 Clicks performance disappointing • Improved performance from Discom • Strong performance from UPD • Deflationary environment • Challenging pharmacy environment • Medicine pricing regulations introduced • Legislation challenged in court 5

Operational disappointments • August ’ 04 sales growth in Clicks down 12% • Resultant Operational disappointments • August ’ 04 sales growth in Clicks down 12% • Resultant increase in stock levels in Clicks • Shrinkage in Clicks – mainly cellular airtime • H 2 - pharmacy made a further operating loss 6

 • Financial Results • André Vermeulen 7 • Financial Results • André Vermeulen 7

Performance 2004 2003 % change 271 22. 3 248 208 19. 4 23 13 Performance 2004 2003 % change 271 22. 3 248 208 19. 4 23 13 66. 2 Headline EPS (cents) 76. 5 65. 6 16. 6 Diluted headline EPS (cents) 74. 5 64. 5 15. 5 ROE (%) 18. 2 15. 6 16. 7 Headline earnings (R’m) Continuing operations Discontinued operations 8

Turnover R’m 2004 2003 % change Clicks Discom Entertainment The Body Shop Total SA Turnover R’m 2004 2003 % change Clicks Discom Entertainment The Body Shop Total SA - Retail UPD Pharmacy Intragroup elim. & Shared Services Total SA Australia Total group 3 266 879 544 51 4 746 2 310 523 (179) 7 394 655 8 049 2 997 772 482 46 4 297 1 451 5 748 1 620 7 368 9. 0 13. 9 12. 8 12. 0 10. 5 * ** 28. 6 *** * UPD included for 8 months in 2003 (comparatively up by 8. 0%) ** PM&A included for 6 months in 2004 *** Australia turnover impacted negatively by strong Rand, but only included for 4 months in 2004 9. 2 9

Gross profit margin 2004 R’m SA – Retail SA – UPD Intragroup elim. * Gross profit margin 2004 R’m SA – Retail SA – UPD Intragroup elim. * 2004 % 2003 R’m 2003 % 1 336 25. 4 1 084 25. 2 204 8. 8 128 8. 8 - - - (3) Total SA 1 537 20. 8 1 212 21. 1 Australia 210 32. 0 544 33. 6 1 747 21. 7 1 756 23. 8 Total Group * Margin in respect of stock on hand at year end sold by UPD to PM&A & Clicks 10

Operating expenditure R’m Clicks Discom Entertainment The Body Shop Shared Services Total SA – Operating expenditure R’m Clicks Discom Entertainment The Body Shop Shared Services Total SA – Retail UPD Pharmacy Total continuing ops. Intercare Australia Total group 2004 794 256 194 20 7 1 272 189 138 1 599 8 237 1 844 2003 714 237 178 16 7 1 152 128 1 280 8 614 1 902 % change 11. 3 7. 8 9. 2 26. 2 10. 4 * ** 24. 9 *** (3. 0) * UPD included for 8 months in 2003 (comparatively up by 4. 8%) ** PM&A included for 6 months in 2004 *** Australia expenses impacted positively by strong Rand & only included for 4 months in 2004 11

Profit before capital items, interest & tax (gross profit + other revenue – operating Profit before capital items, interest & tax (gross profit + other revenue – operating expenditure) R’m 2004 2003 % change Clicks Discom Entertainment The Body Shop Style Studio Total SA - Retail UPD Pharmacy Intragroup elim. & Shared Services Total continuing operations Intercare Australia Total group 304. 2 5. 7 20. 6 10. 3 (0. 2) 340. 6 75. 6 (5. 5) (9. 9) 400. 8 (1. 4) 43. 6 443. 0 259. 3 (5. 6) 25. 7 10. 0 289. 4 51. 6 (7. 3) 333. 7 (1. 0) 49. 3 382. 0 17. 3 (19. 8) 2. 4 17. 7 * ** 20. 1 *** * UPD included for 8 months in 2003 (comparatively up 21. 3%) ** PM&A included for 6 months in 2004 *** Australia profit benefited by strong Rand, but only included for 4 months in 2004 16. 0 12

Interest Long term debt R'm Fixed rate H 1 H 2 R'm Deal 1 Interest Long term debt R'm Fixed rate H 1 H 2 R'm Deal 1 (02/2006) 20 16. 15% (1. 5) (1. 6) (3. 1) Deal 2 (02/2006) 3 16. 92% (1. 8) (1. 7) (3. 5) Deal 3 (10/2006) 16 18. 45% (0. 6) (0. 5) (1. 1) Deal 4 (08/2010) 69 15. 41% (6. 1) (6. 2) (12. 3) Deal 5 (08/2006) 38 12. 05% (2. 9) (5. 8) Deal 6 (08/2008) 430 11. 65% Pref set off deal 6 (260) 9. 20% (15. 1) (15. 2) (30. 3) Total fixed rate (28. 0) (28. 1) (56. 1) Variable rate (12. 7) (9. 2) (21. 9) Total interest paid (40. 7) (37. 3) (78. 0) Interest received 4. 4 13. 8 18. 2 Net interest paid (36. 3) (23. 5) (59. 8) 13

Interest (continued) 2004 2003 Net interest bearing debt to shareholders’ funds 25. 4% 27. Interest (continued) 2004 2003 Net interest bearing debt to shareholders’ funds 25. 4% 27. 7% Net interest bearing debt (net of cash) to shareholders’ funds (4. 5%) 16. 6% R’m Interest paid Interest from PM&A (78. 0) (88. 8) 25. 0 59. 3 Interest impairment (25. 0) (59. 3) 18. 2 4. 7 (59. 8) (84. 1) Other interest received Net interest paid 14

PM&A – goodwill on acquisition R’m Net liabilities acquired Adjustment for internal goodwill Loan PM&A – goodwill on acquisition R’m Net liabilities acquired Adjustment for internal goodwill Loan adjustment Fair value adjustments Purchase consideration Goodwill on acquisition Impairment already taken Goodwill before final impairment 270 157 (12) 5 420 (162) 258 Impairment of property & equipment 13 Tax impact (4) Net Impairment 9 15

Goodwill impairment methodology 1. Calculate carrying value of net assets 2. Calculate goodwill on Goodwill impairment methodology 1. Calculate carrying value of net assets 2. Calculate goodwill on acquisition 3. Carry out valuation (value in use calculation) (DCF model over next 5 years) 4. Calculate goodwill impairment (amount by which carrying value exceeds the value in use) 5. Impair other assets if value in use deficit exceeds goodwill - provided other assets are not written down to below their respective recoverable amounts 16

PM&A - take-on balance sheet at 1 March 2004 R’m Goodwill Property & equipment PM&A - take-on balance sheet at 1 March 2004 R’m Goodwill Property & equipment Investments Inventories 157. 2 30. 0 0. 8 132. 1 Accounts receivable 35. 1 Other assets 12. 6 Total assets Note: Loan includes interest expense & is pre impairments 367. 8 Shareholders’ deficit (269. 9) Loan from New Clicks 473. 8 Accounts payable 154. 2 Other liabilities Total equity & liabilities 9. 7 367. 8 17

Inventory Turn (times)* 2004 2003 Inventory (R’m) 2004 2003 Clicks 5. 5 5. 9 Inventory Turn (times)* 2004 2003 Inventory (R’m) 2004 2003 Clicks 5. 5 5. 9 595 510 Discom 6. 5 6. 2 135 125 Entertainment The Body Shop Pharmacy Held at DCs Total Retail UPD Intragroup elim. Total SA inventory 4. 8 4. 4 7. 0 - 4. 5 11. 0 4. 6 11. 9 5. 6 5. 1 114 2 140 217 1 203 210 (2) 1 411 * Stock on turnover 111 2 197 945 180 1 125 18

Cash - utilisation Net cash impact of Australian disposal Cash from operations (pre dividends) Cash - utilisation Net cash impact of Australian disposal Cash from operations (pre dividends) Shares issued Other cash generated Store refurbishment & pharmacy conversion Information technology Other fixed asset purchases Loan repayment Dividends paid Purchase of treasury shares Net increase in cash during the year R’m 317 33 29 696 (83) (60) (38) (62) (98) (100) 255 19

Capital management Treasury shares bought back during the year Cost of buy back Average Capital management Treasury shares bought back during the year Cost of buy back Average price paid 13. 0 m R 99. 5 m 765 cps Key action plans 2005 Share buyback programme to continue Dividend cover reduced to Full year dividend up by Interim dividend 12. 5 cps, final 22. 5 cps 2. 2 times 34. 6% 20

Capital expenditure during the period: Store refurbishments and new stores Pharmacy conversions IT Other Capital expenditure during the period: Store refurbishments and new stores Pharmacy conversions IT Other Total Forecast for the year to August 2005: Store refurbishments New stores Pharmacy conversions IT Other Forecast total expenditure R’m 78. 6 4. 6 59. 6 38. 2 181. 0 72. 3 14. 0 94. 5 35. 9 225. 7 21

 • Group Operations • Trevor Honneysett 22 • Group Operations • Trevor Honneysett 22

Clicks - snapshot 2004 2003 3 266. 1 2 997. 2 Sales R’m Sales Clicks - snapshot 2004 2003 3 266. 1 2 997. 2 Sales R’m Sales growth % 9. 0 11. 3 Comparable store sales growth % 6. 6 7. 1 Operating profit before interest & after allocation of net costs of support structures R’m 304. 2 259. 3 264 14 260 14 Number of stores Company owned Franchised Number of full-time permanent employees 3 897* 3 552 Weighted trading area m² 144 916 140 099 Net increase in trading area for the period % 3. 4 4. 7 Weighted annual sales per m² R 22 538 21 394 * A number of part-time employees became full-time employees, in terms of the new Labour Relations Act 23

Clicks - key action plans revisited • Further enhance homeware experience àReflected in solid Clicks - key action plans revisited • Further enhance homeware experience àReflected in solid growth in homeware categories • Value proposition maintained àMaintained – ongoing aggressive focus • Continued focus on top 50 stores àOngoing – 18% account for 40% of performance • Store presentation – 77 of 270 stores in 2004 àOn schedule for completion by December 2004 • Continued aggressive promotional programme àPromotional programme for August not strong enough to hold market share 24

Clicks - key action plans revisited (continued) • Maintain focus on costs àExpense growth Clicks - key action plans revisited (continued) • Maintain focus on costs àExpense growth ahead of sales increase again due to poor August sales • New datamining initiatives in May àNow an integral part of marketing programme • Developing Clicks/Discovery Health alliance àTake-on slower than expected • Profitable pharmacy integration àOngoing – strong growth in converted pharmacies 25

Clicks – inflation at cost Local purchase price inflation at February 2% Local purchase Clicks – inflation at cost Local purchase price inflation at February 2% Local purchase price inflation at August 0% Import purchase price inflation at February Import purchase price inflation at August (22%) (7%) 26

Clicks - Club. Card • New Club. Card holders during the year 80 k Clicks - Club. Card • New Club. Card holders during the year 80 k • Active Club. Card holders 2. 1 m • Active Gold Club. Card holders 688 k • Average Club. Card spend up 14% • Average units per spend up 11% • Average frequency of use up 14% 27

Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% on previous year • Communications category under pressure as cellular providers reduced industry margins on airtime sales • Poor shrinkage result in card-based airtime • Stock levels increased to optimise sales, but hit by stock -up for expected August sales which did not materialise 28

Clicks – turnover trend R’m 2004 2003 % increase 6 months to February 1 Clicks – turnover trend R’m 2004 2003 % increase 6 months to February 1 693 1 522 11. 2 March 221 205 7. 8 April (5 weeks) 298 268 11. 2 May 248 219 13. 2 June 238 214 11. 2 July (5 weeks) 341 311 9. 6 August 227 258 (12. 0) 6 months to August 1 573 1 475 6. 6 Total year 3 266 2 997 9. 0 423 381 11. 0 New year to date (7 weeks) 29

Clicks - turnover growth R’m 2004 2003 % change Lifestyle 1 333 1 188 Clicks - turnover growth R’m 2004 2003 % change Lifestyle 1 333 1 188 12. 2 Health & Beauty 1 933 1 809 6. 9 3 266 2 997 9. 0 • Lifestyle impacted by flat growth in cellular • All categories, but particularly health & beauty impacted by poor August sales 30

Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% on previous year • Communications category under pressure as cellular providers reduced industry margins on airtime sales • Poor shrinkage result in card-based airtime • Stock levels increased to optimise sales, but hit by stock -up for expected August sales which did not materialise 31

Cellular airtime conversion During the year airtime sold using cards Conversions to date Currently Cellular airtime conversion During the year airtime sold using cards Conversions to date Currently 118 Clicks & 31 Discom stores now sell virtual airtime on a Kwik. Pay system Next phase By November 238 Clicks & 111 Discom stores will be selling airtime on the Kwik. Pay system 32

Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% on previous year • Communications category under pressure as cellular providers reduced industry margins on airtime sales • Poor shrinkage result in card-based airtime • Stock levels increased to optimise sales, but hit by stock -up for expected August sales which did not materialise 33

Clicks - comparative pricing Industry survey comparing to food based retailers conducted by an Clicks - comparative pricing Industry survey comparing to food based retailers conducted by an independent research house - top 100 lines Clicks Competitor A B C Gauteng R 2 761. 52 R 2 798. 39 R 2 831. 53 R 2 801. 01 KZN R 2 764. 35 R 2 833. 06 R 2 828. 46 R 2 826. 93 E Cape R 2 778. 28 R 2 788. 10 R 2 827. 94 R 2 747. 03 W Cape R 2 731. 24 R 2 787. 78 R 2 817. 75 R 2 810. 43 Clicks cheapest in 3 out of 4 provinces before Club. Card benefits 34

Clicks - comparative pricing Price comparison of “front & middle shop” merchandise against a Clicks - comparative pricing Price comparison of “front & middle shop” merchandise against a pharmacy discount chain competitor Internal survey of a basket of 100 high volume items Clicks R 1 283. 26 Competitor R 1 282. 92 Before Club. Card benefits 35

Clicks - key action plans 2005 • • Continued commitment to strategy Integration of Clicks - key action plans 2005 • • Continued commitment to strategy Integration of pharmacy Focus on high margin lifestyle merchandise Ongoing product & price promotions to drive volumes in low inflationary environment • Significantly reduce levels of shrinkage • Tight expense control • Focus on Club. Card basket size & frequency of use 36

Discom - snapshot 2004 2003 878. 7 771. 4 Sales R’m Sales growth % Discom - snapshot 2004 2003 878. 7 771. 4 Sales R’m Sales growth % 13. 9 7. 0 Comparable store sales growth % 11. 0 8. 7 Operating profit/(loss) before interest & after allocation of net costs of support structures R’m 5. 7 (5. 6) 173 1 177 1 Number of stores Company owned Franchised Number of full-time permanent employees 1 792* Weighted trading area m² 49 638 Net increase/(decrease) in trading area for the period % 0. 6 Weighted annual sales per m² R 17 702 1 335 49 351 (4. 8) 15 632 * A number of part-time employees became full-time employees, in terms of the new Labour Relations Act 37

Discom - key action plans revisited • Procure new store locations àLeasing space in Discom - key action plans revisited • Procure new store locations àLeasing space in mainstream malls remains a challenge • Entrench dominant position in African beauty & hair care àOngoing – evidenced through sales growth • Continued & sustainable improvement in margin àOngoing margin improvement during year • Continuing improvement in lifestyle offering àReversed five year trend of declining market share • Implement POSware platform & merchandise planning àCompleted in September 2004 38

Discom - key action plans revisited (continued) • Exploit potential of inland consumer markets Discom - key action plans revisited (continued) • Exploit potential of inland consumer markets àMajority of new stores being opened in inland region àImprovement in sales growth (inland 19. 1%) • Continual improvements in store design for new stores àNew design completed – implemented for new stores from November ‘ 04 • Focused promotion activity àThemed promotions added value through sales growth & enhancement of image 39

Discom – performance • Returned to profitability after several years • Comeback of the Discom – performance • Returned to profitability after several years • Comeback of the imported & lifestyle merchandise • Strong growth in FMCG business • 6 stores opened, 5 relocated & 10 closed • Trading densities improved by 15% 40

Discom - comparative pricing Industry survey conducted by an independent research house - top Discom - comparative pricing Industry survey conducted by an independent research house - top 100 lines Discom Competitor A Competitor B Competitor C Gauteng R 475. 87 R 480. 00 R 480. 13 R 476. 42 KZN R 479. 44 R 483. 62 R 488. 06 R 497. 17 E Cape R 480. 27 R 478. 55 R 482. 92 R 471. 83 W Cape R 478. 78 R 488. 35 R 490. 80 R 490. 90 Discom cheapest in 3 out of 4 provinces 41

Discom - key action plans 2005 • Strategy implementation ongoing • Continue improvement in Discom - key action plans 2005 • Strategy implementation ongoing • Continue improvement in profitability • Continued focus on African beauty & decorative homeware • Sourcing new store locations • Expense management • Improving operating margin 42

Entertainment - snapshot 2004 2003 544. 2 482. 3 Sales R’m Sales growth % Entertainment - snapshot 2004 2003 544. 2 482. 3 Sales R’m Sales growth % 12. 8 9. 8 Comparable store sales growth % 11. 9 9. 6 Operating profit before interest & after allocation of net costs of support structures R’m 20. 6 25. 7 Number of stores Company owned 138 Number of full-time permanent employees 592 545 Weighted trading area m² 17 349 17 134 Net increase in trading area for the period % 1. 3 6. 1 Weighted annual sales per m² R 31 369 28 148 43

Entertainment - key action plans revisited • Continuing repositioning from music to broader entertainment Entertainment - key action plans revisited • Continuing repositioning from music to broader entertainment offering àBenefits of strategy being realised – non-CD sales grown from 11. 3% to 18. 2% of sales • Store plans: 4 new stores, 2 stores relocated & 2 revamped à 7 new stores opened; 7 closed • Aggressive price promotions àOverwhelming response to top 20 promotion • Collaboration with Nu. Metro & Ster Kinekor to dominate DVD market àSuppliers endorsed the strategy 44

Entertainment - performance • Strong comeback in second half • Top 20 promotion at Entertainment - performance • Strong comeback in second half • Top 20 promotion at R 99 – boosted sales from April onwards – increased traffic to cross-sell non-discounted product – changed perceptions of Musica’s pricing • DVD grown from 7% to 13% of sales • Margin down – top 20 promotion & changing margin mix • Shrinkage improved • Expense growth maintained below sales growth 45

Entertainment– turnover trend R’m 2004 2003 % increase 6 months to February 284. 3 Entertainment– turnover trend R’m 2004 2003 % increase 6 months to February 284. 3 268. 0 6. 1 March 35. 8 31. 2 14. 7 April (5 weeks) 53. 5 42. 9 24. 7 May 38. 6 31. 2 23. 7 June 38. 5 32. 8 17. 4 July (5 weeks) 52. 3 42. 9 21. 9 August 41. 2 33. 3 23. 7 6 months to August 259. 9 214. 3 21. 3 Total year 544. 2 482. 3 12. 8 46

Entertainment - key action plans 2005 • Continue to drive down retail pricing • Entertainment - key action plans 2005 • Continue to drive down retail pricing • Upgrading of urban stores with more aggressive pricing & promotion • Improve volumes & profitability of CDW stores • Continue realising opportunities in DVD, gaming & lifestyle 47

The Body Shop - snapshot 2004 2003 Sales R’m 51. 3 45. 8 Sales The Body Shop - snapshot 2004 2003 Sales R’m 51. 3 45. 8 Sales growth % 12. 0 68. 6 Operating profit before interest & after allocation of net costs of support structures R’m 10. 3 10. 0 Number of stores Company owned 24 18 Number of full-time permanent employees 76 75 Weighted trading area m² 1 214 942 Net increase in trading area for the period % 28. 9 173. 8 Weighted annual sales per m² R 42 237 48 600 48

The Body Shop – action plans revisited • Promotions programme & radio advertising àExtensive The Body Shop – action plans revisited • Promotions programme & radio advertising àExtensive promotional & advertising campaigns • Opening two new stores àSix new stores opened during year • Club. Card points - earned at Body Shop from May àClub. Card successfully launched • Tight control on costs with further savings àExpenses impacted by new stores & increased marketing costs 49

The Body Shop Performance • Disappointing H 2 reversed profit growth in H 1 The Body Shop Performance • Disappointing H 2 reversed profit growth in H 1 • Expense growth of 37% - store growth & increased marketing spend • Margin improvement Key action plans 2005 • Focus on cost control • Launch several key product ranges / Christmas gifting range • Opening 3 to 5 new stores 50

UPD - snapshot 2004 Sales R’m Sales growth (full year) % Operating profit before UPD - snapshot 2004 Sales R’m Sales growth (full year) % Operating profit before interest & after allocation of net costs of support structures R’m 2003 * 2 309. 5 1 451. 2 8. 0 51. 6 11. 0 Inventory turn 75. 6 11. 9 Trade debtors R’m 228. 9 238. 6 Trade debtors days Days 26. 0 30. 4 519 604 Number of full-time permanent employees * 8 months 51

UPD – key action plans revisited • Continued dialogue with government àOngoing • Continued UPD – key action plans revisited • Continued dialogue with government àOngoing • Continued focus on service & value added services àOngoing & is proving a differentiator in the market • Increase volumes – industry rationalisation àVolume increase reflected in trading performance, with strong growth in last quarter in regulated medicine price environment 52

UPD - performance • Trading profit up 21% on 12 months • Continued growth UPD - performance • Trading profit up 21% on 12 months • Continued growth in turnover from PM&A & independent pharmacies • Growth in turnover from single channel distributors – negotiated settlement terms & logistics fees with all principals • Sound working capital & cost management • Cost increase only 4. 8% • Strong cash generation 53

UPD – key action plans 2005 • Increase volumes & capitalise on industry rationalisation UPD – key action plans 2005 • Increase volumes & capitalise on industry rationalisation • Continued focus on service & delivering value added services • Continual tight management of debtors book 54

Pharmacy - key action plans revisited • Integration into Clicks – 5 stores done, Pharmacy - key action plans revisited • Integration into Clicks – 5 stores done, next 4 by June/July à 21 stores converted – 10 Clicks Pharmacies, 8 smaller Clicks with dispensaries & 3 conventional Clicks store conversions • Category management/buying further integrated with Clicks àWork in progress • More focused & aggressive promotions àPricing as aggressively as major discount competitors • Generic substitution going well & expanding àOngoing • PM&A to move closer to branding used in Clicks Pharmacy àMove to Clicks & Hyperpharm 55

Pharmacy - key action plans revisited (continued) • Hyperpharm introduced – monitored àImproved performance Pharmacy - key action plans revisited (continued) • Hyperpharm introduced – monitored àImproved performance after rebranding & repositioning • IT platform integration on track – automated centralised pricing by August àIn the final testing phase • Sustain relationship with government àDialogue impacted by legislation & court action • Introduce Clicks Chronic Direct àPilot project launched – fully functional by February 2005 56

Pharmacy - performance Average per store (R’ 000) Clicks FUTURE stores Actual 2004 % Pharmacy - performance Average per store (R’ 000) Clicks FUTURE stores Actual 2004 % of t/over Budget 2005* % of t/over % growth Turnover 24 068 100 29 392 100 22. 1 2 046 8. 5 2 096 7. 1 2. 4 916 3. 8 947 3. 2 3. 4 1 324 5. 5 2 542 8. 7 92. 0 340 2. 1 336 1. 9 (1. 2) Employment costs Occupancy costs Net profit Smaller stores Net profit * Based on 3 months of actual trading experience 57

Pharmacy – store projection PM&A Oct ’ 04 47 Hyperpharm Clicks Pharm. Clicks Total Pharmacy – store projection PM&A Oct ’ 04 47 Hyperpharm Clicks Pharm. Clicks Total + Clicks Future 12 10 8 3 80 (13) Closing ’ 05 (12) (1) - - - Transfer (35) (5) 1 - 39 - New ’ 05 - - 1 - 22 23 Dec ‘ 05 - 6 12 8 64 90 Subject to licences 58

Pharmacy - comparative pricing Internal survey: • basket of 221 items • top selling Pharmacy - comparative pricing Internal survey: • basket of 221 items • top selling lines • non promotional prices Hyperpharm R 18 801. 71 Competitor R 19 041. 45 59

Pharmacy Impact of legislation on suppliers • “Heard prices are down by 11% - Pharmacy Impact of legislation on suppliers • “Heard prices are down by 11% - 15%” ? ? ? • Total purchases into PM&A up 5% after SEP • Blue book – never the actual price • Single unit price conveniently avoids efficiency • How will pricing parity & international benchmarking ever work ? ? ? 60

Pharmacy – impact of legislation Increase in net cost price of scheduled product since Pharmacy – impact of legislation Increase in net cost price of scheduled product since the introduction of single exit pricing 4. 7% Decrease in selling price usingle exit prices Impact on gross profit in the pharmacy (44. 0%) Some manufacturers have reduced prices (after previous discounts & rebates) – but most of the impact of SEP is being felt by retail pharmacies 61

Pharmacy Impact of legislation on retail pharmacy • Bearing the bulk of reduction in Pharmacy Impact of legislation on retail pharmacy • Bearing the bulk of reduction in medicine price • Expected to absorb a 44% drop in gross profit • No additional volume from dispensing doctors • Do. H not dealing with administrative capability & capacity 62

Pharmacy What was offered & what we face • Original submission to Do. H Pharmacy What was offered & what we face • Original submission to Do. H showed a 29% gross profit • We offered a 10% drop in gross profit • We now face a 44% reduction in gross profit • Forces us to focus mainly on large stores where we can leverage costs 63

The year ahead • Strategy remains, but adapted for current environment • Pharmacy remains The year ahead • Strategy remains, but adapted for current environment • Pharmacy remains a “have to have” • Pharmacy works as a category within Clicks • Transforming systems will provide greater efficiency • Challenge to operate in a low/no inflation environment • Improve ROE through – efficient capital management – ongoing improvement in margin & mix – continued turnaround in core retail brands – rigorous expense management 64

 • Questions ? 65 • Questions ? 65

 • Thank You 66 • Thank You 66