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Analyst Presentation 2002 Welcome

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.

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Analyst Presentation 2002 Welcome

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  1. Analyst Presentation 2002 Welcome

  2. Programme • Strategic Review• Financial Results • Healthcare• New Clicks Australia (NCA) Review• New Clicks South Africa (NCSA) Review • Questions

  3. Strategic Review • Vision• Mission• Positioning Statement

  4. 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

  5. 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

  6. 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.

  7. 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 FinanceGroup MerchandiseGroup MarketingGroup IT/Supply ChainGroup OD

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

  9. Financial Resultsfor year ending31 August 2002

  10. 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%

  11. Goodwill Balance Sheet Income Statement RmRm Link 16.120 0.895 House 78.304 9.042 Price Attack 88.078 1.419 Total 182.502 11.346

  12. Accounts Receivable • Increases due to: • acquisitions • franchisees 20022001 RmRm SA 120.353 82.630 Aus 76.271 24.640 Total 196.624 107.270

  13. Accounts Payable • Increases due to extending terms

  14. Cash Flow • Big Improvement • Improving Working Capital Cash Flow from Operating 2002 2001 Rm Rm 296.927 145.337

  15. 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%)

  16. 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

  17. 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

  18. 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

  19. Healthcare SA

  20. NCH New Clicks Holdings South Africa Funding & Suspensive Sale 56% PM&A LIT 100% Ownership FranchiseStores 76 Stores 248 Stores R1 Billion R2 Billion

  21. NCH Fees for Services New Clicks Holdings South Africa Wholesale Margin & Rebates Interest Funding 56% PM&A LIT 100% Ownership Franchise Fees, LOB, Rebates FranchiseStores

  22. 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)

  23. Centralised services model Owned Stores (100%:0%) Merchandising OD / HR Marketing Joint Venture Stores (80%:20%) Logistics IT Fin & Admin Store Design Store Develop Franchise Stores (0%:100%) Supply Chain Distribution Buying Store Services

  24. New Clicks South Africa 100% now; JV in future 56% Funding PM&A DISCOM CLICKS LIT FranchiseStores 182 Stores 261 Stores 248 Stores 76 Stores R721 Million R2,7 Billion R2 Billion R1 Billion PRESENT PHARMACY NETWORK DESIRED FUTURE PHARMACY NETWORK

  25. The Objective A nationwide network of +/- 800 efficient, compliant, professional and profitable pharmacies within various ownership models

  26. Back Shop Front Shop Pharmacy Clinical Care Retail consumer health The Integrated Healthcare Model

  27. Intercare • A close relationship with the doctors who prescribe • Objective is to improve pharmacy turnover • Pilot project

  28. 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

  29. 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

  30. Healthcare Legal Issues

  31. 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

  32. 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

  33. Jeff Sher Country Leader

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

  35. August 2001

  36. Australian Management Forum Shared Services

  37. 2001/02 Performance

  38. Results – Aug 2002 • Sales up 13.9% • Operating Profit up 22.9%

  39. Results – Aug 2002 • Franchise Incomeup 99.2% • Operating Profitup 117.5% • Store Growth10 NOTE! Pre-allocation of Support Office costs

  40. 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

  41. Results – Aug 2002 • SalesUp 13.2% • Operating ProfitUp 10.34% • Store Growth9 NOTE! Pre-allocation of Support Office costs

  42. 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

  43. 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

  44. Opportunities • Synergy with Sunday Group - access to 1800 formulations • Private label • Easily transported • Monopolistic environment • High margin

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

  46. Number of pharmacies in Australia:Approximately 4,900 • Bannered pharmacies: • Approximately 1,900 (39%)

  47. Retail Pharmacy $6.5b Prescriptions $4.1b OTC $2.4b S2/S3 $550m Non Sched $639m Non Pharm. $1.2b 72% Retail Pharmacy Sales Mix

  48. WHOLESALERS SIGMA API MAYNE Amcal 395 Soul Patt 230 Terry White 105 Chemmart 255 Guardian 264 Chemworld 131 Healthsense 110 Full Life 40 Pharm Adv. 91 Med. Shoppe 7

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