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Nedcor Securities Healthcare Conference March 2004

Nedcor Securities Healthcare Conference March 2004. New Clicks – Healthcare in changing regulatory environment. Healthcare strategy Integrated channel to market UPD Clicks Pharmacy Legislative changes Draft pricing regulations. Healthcare strategy.

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Nedcor Securities Healthcare Conference March 2004

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  1. Nedcor SecuritiesHealthcare Conference March 2004

  2. New Clicks – Healthcare in changing regulatory environment • Healthcare strategy • Integrated channel to market • UPD • Clicks Pharmacy • Legislative changes • Draft pricing regulations

  3. Healthcare strategy • Leverage benefits of integrated channel to market • Extend retail presence & expertise into pharmacy • Establish efficient, compliant & profitable low-cost drugstores • Promote co-ownership model • Improve front to back shop ratio • Synergies from combining pharmacy with current offering - lower overheads & increased footfall • Franchise model retained – using compliant format • Explore black empowerment opportunities

  4. Wholesale & distribution - UPD model • Model tried & tested internationally • Largest national wholesaler in SA • Efficient working capital management • Expertise in fine distribution UPD provides distribution for integrated channel to market • Pharmacies carry less stock • Act as warehouse for pharmacies • Distribution & service levels key

  5. Wholesale & distribution - UPD model UPD: 43%of other wholesalebusiness

  6. UPD • Growth in turnover from PM&A & independent pharmacies • Retained most independent pharmacy customers • Standardised terms on FMCG suppliers • Clicks pricing on top FMCG lines available to customer base • Two franchise models in the group – Link + Multicare • Develop Link offering as premium banner • Develop programmes to enhance Link pharmacy loyalty to UPD – new franchise agreement

  7. Clicks Pharmacy • Create an experience of pharmacy never seen before in SA • Combine the best of what Clicks offers with the best of the pharmacy experience • Enhance the Clicks brand qualities of value with convenience & service

  8. Pharmacy in Clicks • Regulatory approval for PM&A deal • Application for licences • PM&A (waiting for approval of licence transfers to be able to consolidate) • Additional licences in selected stores • Underserviced areas – discuss with government • All New Clicks wholly-owned/JV pharmacies to be rebranded Clicks Check this

  9. Learning from Australia Conversions: • Converting existing Priceline store (Prahran) • Sales growing in excess of 40% • Back & middle shop sales already at 18% - should double • Converting existing pharmacy (Bentleigh) • Script sales grown by 20% • Front shop sales up from 10% to 75% New site: • Mornington • Turnover A$45k per week from 300m² • Front shop sales 50%

  10. Legislative changes • Original source procurement • Levelling of the playing field – ethical standards + transparency • Small impact on current wholesale customers • Service levels will be the differentiator • Generic substitution • Single channel distribution - lower market shareof branded ethicals - better placed to benefit • Currently, margins better • Single exit pricing

  11. Draft pricing regulations • Support statutory intervention to • address current medicine pricing anomalies • make pricing more transparent • make medicines more affordable & accessible • Concerned about negative impact on viability of pharmacy wholesaling & retailing • 90 day period to engage in constructive dialogue – working together with other interest groups • Don’t expect regulations to be implemented in current form or by May 2004 • Aim to achieve the objectives in a constructive & sustainable way that does not undermine the viability of pharmacy & pharmaceutical services

  12. Impact on New Clicks • Retail pharmacy • Even though reduced pharmacy margin & volumes, will be benefit from increased front shop sales • Independent pharmacists under threat – potential to attract them into the group • Competitive advantage of discount pharmacies to be eroded

  13. Impact on New Clicks (continued) • Wholesale/distribution • Viable for UPD because of efficient model, although volumes would be reduced • However, may lead to consolidation of other distributors - opportunity for UPD to increase volumes & widen geographical footprint • Multinational manufacturers may withdraw from SA – opportunity for UPD to reach distribution & marketing agreements • Public/private partnership possibilities in terms of distribution & dispensaries

  14. Questions ?

  15. Thank You

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