Nedcor Securities Healthcare Conference March 2004 New Clicks

• 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 • 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

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

Wholesale & distribution - UPD model UPD: 43% of other wholesale business

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

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

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

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$45 k per week from 300 m² – Front shop sales 50%

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 share of branded ethicals - better placed to benefit – Currently, margins better • Single exit pricing

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

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

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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