Investment Case

Clicks Group offers shareholders a sustainable investment proposition. The group’s business model and strategy provide exciting organic growth prospects in the expanding healthcare market in South Africa. The business is largely defensive, with over 75% of turnover being non-cyclical, which has ensured continued strong growth through the current economic downturn.

• Positioning as a health and beauty retail and supply specialist unique in South Africa
• Occupies market-leading positions in all businesses
• National retail coverage through more than 500 stores
• First mover advantage in the corporate pharmacy market
• Clicks has the country’s largest pharmacy network and a nationwide direct-to-patient courier service
• Clicks ClubCard largest loyalty programme in the country, generating 70% of sales
• UPD only national full-range pharmaceutical wholesaler
• Musica leading entertainment retailer
• Predominantly cash-based retailer; highly cash generative business

• Sustainable growth expected in healthcare market owing to increasing proportion of population entering private healthcare market and South Africa has an ageing population
• Clicks aims to expand store base from 350 to 500 in medium term
• Objective to operate a pharmacy in every Clicks store – opportunity therefore to more than double current base of 207 pharmacies
• Pharmacy model based on an average increase in front shop sales of 7% per annum for the first two years when a dispensary is opened in a store
• Dispensaries take at least three years to reach maturity – more than 40% of Clicks pharmacies have been operating for less than two years
• Corporate pharmacy currently only 25% of market in SA and likely to double in the longer term
• UPD to benefit from growth in Clicks pharmacy, Clicks Direct Medicines and increasing loyalty from Link pharmacy network
• UPD positioned to grow third party agency distribution contracts
• As the market leader the Clicks Group is positioned to capitalise on expected consolidation in the following sectors:
  – retail pharmacy
  – pharmaceutical wholesaling and distribution
  – music and entertainment retailing
• Clicks private label and exclusive brands offer highly price competitive products at higher margins
• Organic growth complemented by tactical acquisitions of related businesses to accelerate growth in new markets