Nedcor Securities Healthcare Conference

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• Nedcor SecuritiesHealthcare Conference
• March 2004

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New Clicks Healthcare in changing regulatory
environment

• Healthcare strategy
• Integrated channel to market
• UPD
• Clicks Pharmacy
• Legislative changes
• Draft pricing regulations

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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

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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

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Wholesale distribution - UPD model
UPD 43of other wholesalebusiness
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UPD

• Growth in turnover from PMA 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

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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

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Pharmacy in Clicks

• Regulatory approval for PMA deal
• Application for licences
• PMA (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
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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 A45k per week from 300m²
• Front shop sales 50

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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

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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
• Dont 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

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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

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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

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• Questions ?

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• Thank You