Group Results 2003

Outline of presentation Financial ResultsAndré Vermeulen New Clicks AustraliaJeff Sher (video) New Clicks South AfricaTrevor Honneysett ConclusionTrevor Honneysett

Financial Results André Vermeulen

Performance % change Turnover (R’m) Turnover growth excluding UPD8.2 Headline earnings (R’m) Headline EPS (cents) Diluted headline EPS (cents) Diluted HEPS increase adjusted for PM&A provision 13.4 Gross profit margin (%) (14.1) Operating profit margin (%) (10.3) ROE (%)

Headline earnings per share Undiluted Diluted At 31 August 2002 previously reported PM&A impairment(18.1) (17.2) Restated 31 August Increased by: Acquisitions16.3 Organic growth5.1 Decreased by: Cost of acquisitions(6.8) (7.3) Impact of exchange rate movement(1.2) Impact of share options 1.9 At 31 August

Performance per six months 1 st half nd half 2003 Total Turnover Total Excluding UPD Percentage Headline earnings Total Excluding UPD Percentage

Turnover R’m % change Clicks Discom Music Division Body Shop Link – own brand Total SA excl. UPD UPD Total SA Australia *1.8 Total group * Australia impacted by exchange rate & move to franchise model

Turnover - geographic contribution * Australia impacted by exchange rate & move to franchise model

Turnover - Australia AU$’ % change Turnover Priceline Priceline Pharmacy House Price Attack785- NCA Total House Franchisee turnover Price Attack Franchisee t/o Pharmacy Franchisee t/o NCA Total (incl Franchisees) Notes: Priceline Pharmacy Sales = Distribution Fee of product sales to franchisees House Sales = 1 Company Store & Import Sales. Last Year 2 stores operating Price Attack = 2 Company Owned stores for part year

Gross profit margin - group excl UPD 2002 Gross profit Gross profit margin (%) Reduction in gross margin due to: UPD operates at a lower gross profit margin Impact of lower Lifestyle product contribution

Expenditure R’ % change Clicks Discom (1.2) Music Division Body Shop Link Investment Trust (1.9) Intercare Shared Services – SA Priceline *1.8 House *(23.8) Shared Services – Australia * Priceline Pharmacy Price Attack UPD Total group * Impacted by exchange rate (total benefit of R51 865k) & move to franchise model

Expenditure R’ excl UPD 2002% change Depreciation Occupancy costs Employment costs Other costs (5.3) Total

Operating profit R’ % change Clicks (1.4) Discom(5 571)(20 637) Music Division Body Shop Link Investment Trust(2 712)(2 801) Intercare(962)(1 764) Shared Services unallocated(7 376)2 167 Total SA excl. UPD UPD Total SA Australia * (5.1) Total group * Australian profit in Rand adversely impacted by strong Rand

Operating profit - Australia AU$’ % change Priceline Retail Store sales Priceline Pharmacy(397)- House (1.9) Retail Store sales-600 Price Attack3 518(17) Shared Services(20 158)(14 882)(35.6) NCA Total Retail Store sales Notes: Priceline Pharmacy = Costs for setup, late opening of stores Priceline = 2 Stores converted to Pharmacies

Interest Net interest bearing debt to shareholders’ funds at year end 27.7% 28.0% R’000 % change Interest paid Interest PM&A (net) - -- Other interest received Net interest paid Increase in rates (Average 2003: 13.5%, 2002: 11.0%) Funding for acquisition of Price Attack (R72.2m / A$12.2m) Increase in inventory

PM&A R’m PM&A EBIT 1 st half(8.1)0.2 2 nd half7.9(15.3) Total(0.2)(15.1) Loan to PM&A Interest charge Provision against interest(59.3)(45.5)

PM&A R’m Shareholder deficit at Aug 2002(78.3) Post year-end adjustments(14.6) Adjusted deficit(92.9) Loss for the period(0.2) Interest(59.3) Goodwill(23.7) Shareholder deficit at Aug 2003(176.1)

Balance sheet R’ incl. UPD 2003 excl. UPD2002 % change excl. UPD Fixed assets Inventories Accounts receivable (5.5) Accounts payable

Inventory Inventory turn (times) Inventory (R’m) % change Held at the DCs Held at stores UPD175- Total SA inventory Australia276314(11.9) Total inventory at year end

Inventory turn in SA, incl. UPD5.3 times Inventory turn in SA, excl. UPD4.5 times (2002: 5.2) Inventory turn in Aus 5.9 times (2002: 5.1) Clicks - aggressive & successful promotions Discom - additional promotions during this period Body Shop growth - new stores & cosmetics range DC growth is apportioned to new suppliers Imports up 57% to R217m & landing earlier this year Music - lower sales & decentralised buying controls Inventory levels

Loans to third parties R’m PM&A Share trust Franchise set-up (Aus) Intercare professionals Other Total

Cash flow R’ Operating activities Investing activities ( ) ( ) Property & equipment ( ) ( ) Acquisition of subsidiaries (89 723) Investments (7 550) - Loans (54 434) (68 974) Financing activities Net increase/(decrease) (95 652) Note: UPD acquisition through share issue

New Clicks Australia Jeff Sher

New Clicks Australia – Review Shared service capability now in place Franchise skills developing Successful integration of Price Attack Formulated & started to roll out pharmacy model New management structure – ASF/OMF Restructured to meet future growth Leading the way in haircare, homeware & healthcare

New Clicks Australia – The new way 1. Selling of stores: –Non-performers converted to Pharmacy –Franchisees who do not meet compliance standards - managed –Buying & selling now part of the business –Not limited to Priceline 2. Profit centres: –Marketing services –Store development

New Clicks Australia – Behind the numbers One-off costs quite significant for pharmacy & completion of Price Attack acquisition Anomalies in the House performance Pharmacy development Reallocation of costs to meet demands of franchise business

Priceline - Snapshot SalesA$’000 R’ Sales growth% (A$) % (R) Comparable stores sales growth% (A$) Operating profit before interest & before allocation of net costs of support structures A$’000 R’ Number of stores Company owned Number of full-time permanent employees Weighted trading aream² Net increase in trading area for the period% Weighted annual sales per m²A$ R

Priceline Pharmacy - Snapshot 2003 Operating loss before interest & before allocation of net costs of support structures A$’000 R’000 (397) (2 029) Number of stores Franchised7 Weighted trading aream²2 999 Franchisee salesA$’m R’ Franchise feesA$’000 R’

Priceline & Priceline Pharmacy HIGHLIGHTS Appointment of Phillip Smith – brand leader Appointment of John Stapleton – merchandise head Restructure to meet demands of Pharmacy operations Repositioned in response to market 1.2m ClubCard members 15 new stores (7 pharmacies) Stock growth well below income growth Achieved good sales growth in tough market

Priceline & Priceline Pharmacy KEY ACTION PLANS Interlocking marketing programme underpinned by “You Pay Less” Change to Priceline business model Changes to operational structure to deal with pharmacy Supplier relationships for middle shop product Investment in technology to cope with systems requirements Upgrade in security procedures CHALLENGES EDLP approach & Woolworths aggression Pharmacy positioning Pharmacy supply chain Systems development Shrinkage

Priceline Pharmacy – Success factors 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%

House - Snapshot Operating profit before interest & before allocation of net costs of support structures A$’000 R’ Number of stores Company owned Franchised Franchisee salesA$’m R’m Franchisee feesA$ R

House HIGHLIGHTS Brand Repositioning – Inspirational Homewares Appointment of Simon Dryden & a restructured brand team Developed a Local area marketing approach Developed strategic Supplier relationships enhancements to other income to follow Achieved 23% growth in Franchise fees Won National Award for Retail Excellence

House KEY ACTION PLANS New marketing programme & Pay-TV alliance Redefine product classification Implementation of new in-store positioning Franchisee compliance Upgraded receivables Development of extranet & enhancement to billing CHALLENGES Growth in competition Sameness of product SARS – impact on import quantity Bad debts

Price Attack - Snapshot 2003 Operating profit before interest & before allocation of net costs of support structures A$’000 R’ Number of stores Franchised101 Franchisee salesA$’m R’m Store openings during the year12

Price Attack HIGHLIGHTS Successful integration into business Resolved all franchise agreements Appointed Carmelo Francese as the new brand leader Resolved Master Franchisee in Western Australia Adopted a Marketing focus Overcome supplier & franchisee scepticism

Price Attack CHALLENGES Complexity of salon vs retail Competition in Victoria Transition from previous culture Private label acceptance KEY ACTION PLANS New store format New customer communication Salon contract Association with women’s basketball Local area marketing Change of IT platform - easier decision making

Shared Services HIGHLIGHTS Store development & marketing services shift to nil cost Development of franchise skills JDA first phase completed Developed an Integrated IT pharmacy solution Realigned costs from the centre to brands CHALLENGES Moving from cost centre to profit generation Growth in staff numbers to deal with franchise capability Getting expense allocations right with diversity of business models Office accommodation

New Clicks Australia – The year ahead Restructured – governance in place No additional funding required – store sale methodology Priceline positioning Store growth in pharmacy House marketing Price Attack – Victoria solution Systems development – Franchise Enhance capability – reduce costs

New Clicks South Africa Trevor Honneysett

New Clicks South Africa – Review of the year Deregulation of pharmacy now a reality Lifestyle category in transition … … significant steps taken to address this “You Pay Less at Clicks” is back Benefits of UPD acquisition Improving performance from Discom PM&A performance improving as we move to integration Stock turn improvements not sustained

Clicks - Snapshot SalesR’ Sales growth% Comparable store sales growth%7.1 Operating profit before interest & after allocation of net costs of support structures R’ Number of stores Company owned Franchised Number of full-time permanent employees* Weighted trading aream² Net increase in trading area for the period% Weighted annual sales per m²R * During the year, a number of part-time employees became full-time employees, in terms of the new Labour Relations Act

Clicks HIGHLIGHTS Pharmacy now a reality PM&A integration started PM&A showing ongoing improvement Brand decision for pharmacy taken – Clicks Focused leadership team Integrated merchandising team FMCG & Beauty continue to do well

Clicks turnover growth R’m2003% increase Lifestyle Health & Beauty

Clicks KEY ACTION PLANS New core homeware range Value proposition Store presentation “Expect to pay less” Basket checks vs competitors Promotions Reduce operating costs Greeters & aisle walkers Focus on top 50 stores Dedicated staff for home & beauty Merchandising solution – clustering & ranging CHALLENGES Reverse decline in homewares Price competitiveness Entire customer experience In-store look & feel In stock position

Pharmacy HIGHLIGHTS Multifunctional, implementation team set up Key legislation in place Product & pricing benefits through UPD Better buying discipline Centralised pricing Reduced staff costs Improved shrinkage Professional training Disease management Promotions

Pharmacy integration project PROGRESS: Preparation work well underway –Marketing, IT, Operations, OD, Category, Store development, Finance, Legal, Change management Pilot store (Glengariff PM&A) -> Clicks Pharmacy on 3 Nov as a JV Planning to convert 4 other PM&A pharmacies in 2003 First conversion of a newly opened Clicks store to JV Clicks Pharmacy format in 2003 For 2004: –Other PM&A stores to convert –Up to 17 new Clicks stores with Pharmacy –Up to 40 Clicks refurbs with pharmacy

Pharmacy KEY ACTION PLANS Integration into Clicks Category management/buying In store promotions Generic substitution Phase-out of LinkMax Focus on ICU stores Integration of IT platform Medical aids Build relationships with doctors Sustain relationship with government CHALLENGES Sales & profit growth Stock turn too slow Integration of pharmacy systems Relationship with funders Relationship with doctors

UPD - Snapshot 2003 SalesR’ Operating profit before interest & after allocation of net costs of support structures R’ Inventory turn10.9 Debtors days30.4 Number of full-time permanent employees576

UPD HIGHLIGHTS Acquisition smoothly integrated Growth in turnover from PM&A & independent pharmacies Retained most independent pharmacy customers Clicks pricing on top FMCG lines available to wider customer base Standardised terms on FMCG suppliers Solid profit performance enhanced by sound working capital & cost management

UPD CHALLENGES Two franchise models in the group Increase turnover from Link Continue to add value to third party customers KEY ACTION PLANS Simplify Multicare offering Develop Link offering as premium banner Develop programmes to enhance Link pharmacy loyalty to UPD Concentrate on bringing Clicks pricing to wider customer base

Discom - Snapshot SalesR’ Sales growth% Comparable store sales growth% 8.7 Operating loss before interest & after allocation of net costs of support structures R’000 (5 571) (20 637) Number of stores Company owned Franchised Number of full-time permanent employees Weighted trading aream² Net increase in trading area for the period% (4.8) 8.6 Weighted annual sales per m²R

Discom HIGHLIGHTS Ongoing differentiation from Clicks Three hair salons opened Strong growth in ‘dry hair’ market Introduction of private label Bolstered leadership team Dedicated category leadership

Discom KEY ACTION PLANS Improvement in lifestyle – currently being evidenced Entrench dominant position in African beauty & hair care Improve margin through a stronger lifestyle & import programme Procure new store locations Implement POSware platform & merchandise planning CHALLENGES Decline in homewares business Return to profitability

Music Division - Snapshot SalesR’ Sales growth% Comparable store sales growth%9.6 Operating profit before interest & after allocation of net costs of support structures R’ Number of stores Company owned Number of full-time permanent employees Weighted trading aream² Net increase in trading area for the period% Weighted annual sales per m²R

Music Division HIGHLIGHTS Market share growth despite slowdown in national music sales Strong growth in DVD sales Popularity of local artists Major growth opportunity in gaming & DVD

Music Division KEY ACTION PLANS Repositioning from music to broader entertainment products –70 stores by December –Branded lifestyle accessory range POSware retail store system implemented by March 2004 Major marketing drive for Christmas Store plans: 7 new stores, 7 stores relocated / revamped CHALLENGES Maturity of CD format Global decline in CD sales Piracy & downloads Shrinkage Eliminating redundant stock

The Body Shop - Snapshot SalesR’ Sales growth%68.6- Operating profit before interest & after allocation of net costs of support structures R’ Number of stores Company owned1811 Number of full-time permanent employees7569 Weighted trading aream² Net increase in trading area for the period% Weighted annual sales per m²R

The Body Shop HIGHLIGHTS Strong sales growth Increased number of stores nationally to 18 Stock turn improves to 5.8 Piloted first Body Shop in a Clicks store - Tableview

The Body Shop CHALLENGES Slower than expected take off of new stores in suburban areas Novelty factor of the brand wearing off KEY ACTION PLANS Catalogue mailings & promotions programme Focus on Christmas gifting - accounts for 25% of sales Opening five new stores Four new concept stores planned in Clicks stores

Supply Chain - what have we learned ? Expectations of stock turns 5x, 6x, 7x when Centralised Distribution introduced Not achieving this - questions Centralised Distribution What we have learned : –Previously focused on Supply side of Supply Chain i.e. DC’s –Need to focus on Demand side of supply chain - category, planning, promotions, replenishment & data integrity Shared Services

DC efficiency improvements R %2.93% 1.47%1.23% R % 57%66% 0.64% 19.53% 6.70%Group expenses vs transfer growth Clicks/Discom cost to transfer Clicks/Discom cost per shipper Group cartage costs Volume centralised DC wastage

Supply chain ‘pipe’

Supply chain – ‘demand’ side Address physical store layout, merchandise promotion, ranging Implemented merchandise planning from JDA for lifestyle category Benefits already evident

New Clicks South Africa – The year ahead Roll-out & bedding down of pharmacies Continued focus on Lifestyle category Implementation of financial systems to improve speed & quality of information Focus on stock distribution & management systems Continued focus on expense control – alignment of size of shared services platform to the business

Summary of year ahead SA & Australia managed autonomously Pharmacy proving itself in Australia – expanded opportunity for growth Australia well positioned in a competitive market Pharmacy implementation in SA Emergence of Clicks as a pre-eminent healthcare brand UPD integral to healthcare plans Ongoing turnaround in Discom Continued focus on improvement of stock turns

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