Analyst Presentation 2002

Welcome

Programme

• Strategic Review

• Financial Results

• Healthcare

• New Clicks Australia (NCA) Review

• New Clicks South Africa (NCSA) Review

• Questions

Strategic Review

• Vision

• Mission

• Positioning Statement

Our Vision

We wish to be a world-class trans-national player,

specialised and highly networked with local market

responsiveness and accountability, rapid distribution

capability, adding value to the quality of life through

the convenient supply of health, home and beauty

products and services with a preferential interactive

relationship with our customers

Our Mission

To be a major multi-brand retailer of Health,

Lifestyle and Beauty products in the Asia Pacific

Region by 2005, without limiting our activities and

dominance in southern Africa

Our Positioning Statement

We are world-class originators and distributors of a

range of compelling and differentiated health,

lifestyle and beauty retail products and services to

multiple brand formats in a variety of ownership

models.

GSF

Trevor Honneysett…..

David Nurek………….

Allen Zimbler…………

Errol Gray…………….

Jeff Sher……………..

Peter Green………….

Raymond Godfrey…..

Simon Burrow……….

Simon Kilner…………

George Meiliunas……

Group Leader

Non-Executive Chairman

Non-Executive Director

NCSA Country Leader

NCA Country Leader

Group Finance

Group Merchandise

Group Marketing

Group IT/Supply Chain

Group OD

Agenda

• High-level financial overview• Purchase Milton & Associates• Healthcare update - South Africa

Financial Resultsfor year ending31 August 2002

Income Statement

• Turnover R5.5bn +25.7%• Operating Profit R318m +21.3%• Operating Margin 5.8%

Excluding Discom• Operating Profit +31.9%• Operating Margin 7.04%

Goodwill

Balance Sheet Income Statement

Rm Rm

Link 16.120 0.895

House 78.304 9.042

Price Attack 88.078 1.419

Total 182.502 11.346

Accounts Receivable

• Increases due to:– acquisitions – franchisees

2002 2001 Rm Rm

SA 120.353 82.630Aus 76.271 24.640

Total 196.624 107.270

Accounts Payable

• Increases due to extending terms

Cash Flow

• Big Improvement– Improving Working Capital

Cash Flow from Operating

2002 2001

Rm Rm

296.927 145.337

Future Focus

• Continue to focus on:– Asset turnover (stock turn goal 7x over 3 years)– Cash generation– Improving margins (goal still 8%) - (UPD will

lower margin but has high asset turnover)• Resulting in improving:

– Returns and EVA (ROE goal still 30%)

Strengthened Financial structure as we go forward• Appointment of CFO in each geography• Focus on efficiency improvements• Trans-national project:

– cost centres to profit centres - franchising– process innovation to reduce overall costs– strict financial regime

Loan to Pharmacy (PM&A)

2002 2001

Rm Rm

Loan 276.900 239.028

Interest charge 45.5 10.1

Cost recovery 11.4 4.0• Interest turn• Fees income Link• Loan impairment & recoverability

PM&A• They are budgeting high profit growth as they

consolidate

• Some of the largest stores were acquired

• Acquisitions stopped - consolidation phase - convert to largest and most profitable chain of Pharmacies in SA

• Operating profit could exceed 10% if we could integrate (7% otherwise)

• Cash generating

Healthcare SA

New Clicks Holdings South Africa

NCH

Funding & Suspensive Sale

PM&A100%

Ownership

R1 Billion

76 Stores

56%

LIT

R2 Billion

248 Stores

FranchiseStores

New Clicks Holdings South Africa

NCH

56%

LIT

Funding

PM&A

FranchiseStores

100% Ownership

Interest

Franchise Fees, LOB,

Rebates

Wholesale Margin & Rebates

Fees for Services

Different store ownership models

• There will always be franchise (LINK)– income from fees, rebates,

wholesale profits

but if law allows there will also be:• pharmacies in Clicks & Discom• 100% ownership (PM&A) • JV (80%:20% for any of the brands)

Merchandising

OD / HR

Marketing

Fin & Admin

Logistics

IT

Store Design

Store Develop

Supply Chain

Distribution

Buying

Store Services

Franchise Stores(0%:100%)

Joint Venture Stores(80%:20%)

Owned Stores(100%:0%)

Centralised services model

56%

LIT

Funding

PM&A

R2 Billion

248 Stores

FranchiseStores

R1 Billion

76 Stores

100% now; JV in future

CLICKS

R2,7 Billion

261 Stores

DISCOM

R721 Million

182 Stores

New Clicks South Africa

PRESENT PHARMACY NETWORK

DESIRED FUTURE PHARMACY NETWORK

A nationwide network of +/- 800 efficient, compliant, professional and profitable pharmacies within various ownership

models

The Objective

The Integrated Healthcare Model

Pharmacy

Clinical Care

Retail consumer health

BackShop

FrontShop

Intercare

• A close relationship with the doctors who prescribe

• Objective is to improve pharmacy turnover • Pilot project

Link Investment Trust

• Budgeting for break-even • Funding new initiatives• Link - The best known pharmacy brand• Income from

– franchise fees - potential for new members,

– rebates– own brands

UPD transaction reminder

• R 2 billion turnover, NPAT R43m • Transaction to be funded through issue of

39 024k New Clicks shares at R7.20• P/E for valuation was 6.5x• Earnings enhancing• Awaiting approval from Competition

Commission

Healthcare Legal Issues

Status of Law•Ownership

–still awaiting regulations –under-serviced areas - Discom–need urban stores as well (PM&A)

•Single Exit Pricing–schedule 3, some only–modelling difficult for total pharmacy–believe no impact on UPD

• Court Case

State of the Industry • Healthcare in SA is in crisis • Need for greater affordability & access • Potential changes to Legislation

– Lay ownership/deregulation– Professional Fee – Dispensing Doctors

• Fragmented Industry

• Opportunities for greater efficiencies

• We are the best suited to play a role

Jeff Sher Country Leader

• Introduction - a perspective• The year in review• Our pharmacy model• The year ahead• Summary

Agenda

August 2001

AustralianManagement Forum

Shared Services

2001/02 Performance

Results – Aug 2002

• Sales up 13.9%

• Operating Profit up 22.9%

Results – Aug 2002

• Franchise Incomeup 99.2%

• Operating Profit up 117.5%

• Store Growth10

NOTE! Pre-allocation of Support Office costs

House Key Issues

• Response to competitive environment

through differentiation

- Private label

- Direct imports

• Government home loan scheme ends

• Competent team now in place

• NZ on hold due to supply chain complications

Results – Aug 2002

• Sales Up 13.2%

• Operating ProfitUp 10.34%

• Store Growth9

NOTE! Pre-allocation of Support Office costs

Priceline Key Issues

• Why did we only open 9 stores • Intense competition – our response

– Lifestyle category repositioning– Differentiation through imports– Loyalty - a positive outcome

• Leverage to be gained with Price Attack• Margin focus• Loyalty - a positive outcome• Stock levels - growth due to strategic

opportunity• Operating Profit - 7.61% to sales

A Snapshot

• 94 stores

• Average turnover per store - $950 000

• Franchise fees - 5% on sales

• Advertising fee - 3% of sales

• Local area marketing - 1% of sales

• Master franchise arrangement - WA, SA -

1% franchise fee, 3% marketing fee

Opportunities

• Synergy with Sunday Group - access to 1800 formulations

• Private label• Easily transported• Monopolistic environment• High margin

• Make-up of the industry• Regulatory environment• Our offer• How income is generated• Store growth

• Number of pharmacies in Australia:

Approximately 4,900

• Bannered pharmacies:

• Approximately 1,900 (39%)

                                         

Retail Pharmacy Sales Mix

Retail Pharmacy$6.5b

Non Pharm.$1.2b

Prescriptions$4.1b

OTC$2.4b

Non Sched$639m

S2/S3$550m

72%

Amcal395

Guardian 264

Chemworld131

Pharm Adv.91

Soul Patt230

Med. Shoppe7

Healthsense110

Full Life40

Terry White105

Chemmart255

SIGMA API MAYNE

WHOLESALERS

Wholesaler & Pharmacist Relationship

• Wholesalers guarantee loans for pharmacists to acquire

pharmacies.

• The pricing mechanism for pharmacists is artificially

inflated, 1:1 ratio of turnover to goodwill

• Pharmacists align to a banner through loose agreement

• Distribution on a twice-a-day basis

• Banner groups offer marketing programmes and some

operational support

• Private label products are key to the relationship

Regulatory environment

• Agreement between Government & Pharmacy Guild

• No corporation can have pecuniary interest

• Geographic restriction

• Usage clause restriction - landlord

• Limit to numbers in shopping centres

• Regulations applied by Pharmacy Board - layout of stores

• Approval numbers

• Pharmacy Act - differs in each state

Sales

Pharmacy Paradox

Prescriptions & medicines

back of storeFront of

store

70% 30%

Costs 20% 80%

Margins 10% 32%

Our Offer• Category management - increased margin• Rebalance front and back of shop - increase sales• Common IT platform• Marketing programme - including ClubCard• Retail services (merchandising and space

management)• The Pharmacy Academy• Operational focus - shopfloor productivity• Brand equity

Benefits for Fees

• Annual franchise fee - a flat amount• Distribution fee linked to purchases on front of shop• IT annual maintenance fee• Marketing fee linked to marketing programme costs• Supplier rebates• Significantly - no capital employed

Store Growth

• Three Opportunities• Existing Pharmacies convert to Priceline model

• Convert Priceline stores to Pharmacies through a

franchise arrangement

• Secure new locations and through a relationship

with pharmacists acquire approval numbers

• Objective• 14 - 20 Stores secured by August 2003

• 1000 by ??

The Year Ahead

The Year Ahead – Store Growth

14 - 20 13 12 16

AMF

Jeff Sher………………

George Meiliunas……

Alan Wein…………….

Amanda Brook……….

Rob Ellis………………

Bradley Wein…………

Andrew Grant………..

Simon Burrow………..

Trevor Harris…………

Country Leader

Organisational Development

Brand Leader - House

Brand Leader - Priceline

Brand Leader - Price Attack

Franchising

Logistics/IT

Marketing

Finance

A Committed Team - Going Places

Summary

• Price Attack, full year of profit • Controlled growth of costs• Loyalty to deliver• Leverage gains in merchandise• Roll-out of pharmacy

A Positive Outlook

Errol Gray Country Leader

• NCSA performance

• NCSA achievements

• NCSA year ahead

Agenda

NCSA Performance

Salesup 17.1%

Operating Profitup 15.3%

Comparative without Discom

Sales up 18.2%

Operating profit up 27.2%

Clicks Performance

Salesup 15.4%

Operating Profitup 23.7%

Store Growth21

Clicks Existing Store Growth

0

2

4

6

8

10

12

September October November December January February March April May June July August

% i

ncr

ease

2001/2002 Cumulative2000/2001 Cumulative

Clicks Key Issues

• Repositioned Clicks - Live Life Beautifully

• CRM loyalty programme

- Data mining

- ClubCard relaunch

• Aggressive store upgrade

• Stock reduction

• Service campaign

• New healthcare statement

- 20 stores

Discom Performance

Salesup 12.1%

Operating Profit Down

Stores Refurbished

Discom Existing Store Growth

-4

-2

0

2

4

6

8

10

12

14

September October November December January February March April May June July August

% i

ncr

ease

2001/2002 Cumulative2000/2001 Cumulative

Discom Key Issues

• Focus on re-engineering the margin mix

• Exploring new primary health statement in store

• Test a hair salon in Mitchell’s Plain store

• Continue to develop private label

• Ongoing focus on expenses

• Ethnic haircare focus - R100m in sales

• Leadership

Music Division Performance

Salesup 24.9%

Operating Profitup 104%

New Stores7

Music Existing Store Growth

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

Septe

mbe

r

Octob

er

Novem

ber

Decem

ber

Janu

ary

Febru

ary

Mar

chApr

ilM

ay

June

July

Augus

t

% i

ncr

ease

2001/2002 Cumulative2000/2001 Cumulative

Music Division Key Issues

• Maintaining margins

• Increased stockturns

• CDW opening two new stores

• Market dominance - 35%

• Bucking international market trends

• Leadership

The Body Shop Performance

SalesR27.1m

Operating ProfitR3.4m

Store Growth11

The Body Shop Key Issues

• Mature brand internationally

• New in SA - years of growth ahead

• Brand being revitalised internationally

• First corporate to be awarded a Master Franchise

NCSA Achievements

• Stock management

• Discom repositioning

• Data mining

• SAMF

Stock Management

• Next year goal R250m improvement

• Centralising imports, single item

picking, algorithms

• Stock turn 5x, 6x, 7x, over next years

to generate cash (JIT)

NCSA DC'sYear on Year Stock

R 0

R 25,000,000

R 50,000,000

R 75,000,000

R 100,000,000

R 125,000,000

R 150,000,000

R 175,000,000

R 200,000,000

R 225,000,000

R 250,000,000

R 275,000,000

R 300,000,000

R 325,000,000

R 350,000,000

R 375,000,000

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Financial Months

Sel

lin

g V

alu

e (R

and

s)

1998/1999yr

1999/2000yr

2000/2001yr

2001/2002yr

NCSA Stocks

600000

700000

800000

900000

1000000

1100000

1200000

1300000

1400000

1500000

S O N D J F M A M J J A

month

va

lue

2001/2002

2000/2001

The Year Ahead - Store Growth

24 8 7 9

SAMF

Errol Gray……………..

Andre Vermeulen…….

Lara Bryant……………

Trevor Vroom…………

Mike Harvey…………..

Colin Robb……………

Monica Goertz………..

Simon Kilner………….

Byron Hofmeyr……….

Country Leader

Finance

Marketing & Merchandise

Brand Leader - Clicks

Brand Leader - Discom

Brand Leader - Music Division

Brand Leader - Healthcare

Supply Chain

IT

Year Ahead

• Sustainable stockturn improvement

• Discom profitability

• Healthcare integration and performance

• Clicks revitalisation

• Focused brand performance

Our Positioning Statement

We are world-class originators and distributors of a

range of compelling and differentiated health,

lifestyle and beauty retail products and services to

multiple brand formats in a variety of ownership

models.

Thank You