Annual Results 2004

1. Annual Results 2004

2. Outline of presentation • Introduction • Review of the year • Financial results • Group operations • Pharmacy update – the way forward • Conclusion

3. At interim we said focus would be on: • Integration of pharmacies • 21 converted to Clicks Pharmacy • Continued focus on lifestyle category • Successful trial of new look stores, good response to homewares & improved margin mix • Clicks to be the pre-eminent health, home & beauty brand • Strategy remains unchanged • UPD integral to healthcare plans • Integrated channel to market core part of strategy • Increase volumes in UPD • Successful, even in uncertain legislative environment

4. At interim we said focus would be on: (continued) • Increasing profitability in Discom • Turnaround is continuing & strategy intact • Enhancing entertainment offering in music (Musica & CDW) • Successful expansion particularly into DVDs • Focus on stock distribution & management systems • Implementation on track • Continued focus on expense control • Expense growth below revenue growth

5. Review of the year • Disposal of Australian operations • Turnaround in homeware • Q4 Clicks performance disappointing • Improved performance from Discom • Strong performance from UPD • Deflationary environment • Challenging pharmacy environment • Medicine pricing regulations introduced • Legislation challenged in court

6. Operational disappointments • August ’04 sales growth in Clicks down 12% • Resultant increase in stock levels in Clicks • Shrinkage in Clicks – mainly cellular airtime • H2 - pharmacy made a further operating loss

7. Financial Results André Vermeulen

8. Performance

9. Turnover * UPD included for 8 months in 2003 (comparatively up by 8.0%) ** PM&A included for 6 months in 2004 *** Australia turnover impacted negatively by strong Rand, but only included for 4 months in 2004

10. Gross profit margin * Margin in respect of stock on hand at year end sold by UPD to PM&A & Clicks

11. Operating expenditure * UPD included for 8 months in 2003 (comparatively up by 4.8%) ** PM&A included for 6 months in 2004 *** Australia expenses impacted positively by strong Rand & only included for 4 months in 2004

12. Profit before capital items, interest & tax (gross profit + other revenue – operating expenditure) * UPD included for 8 months in 2003 (comparatively up 21.3%) ** PM&A included for 6 months in 2004 *** Australia profit benefited by strong Rand, but only included for 4 months in 2004

13. Interest

14. Interest (continued) Booklet only

15. PM&A – goodwill on acquisition

16. Goodwill impairment methodology Booklet only • Calculate carrying value of net assets • Calculate goodwill on acquisition • Carry out valuation (value in use calculation)(DCF model over next 5 years) • Calculate goodwill impairment(amount by which carrying value exceeds the value in use) • Impair other assets if value in use deficit exceeds goodwill - provided other assets are not written down to below theirrespective recoverable amounts

17. PM&A - take-on balance sheet at 1 March 2004 Booklet only Note: Loan includes interest expense & is pre impairments

18. Inventory * Stock on turnover

19. Cash - utilisation

20. Capital management

21. Capital expenditure Booklet only

22. Group Operations Trevor Honneysett

23. Clicks - snapshot Booklet only * A number of part-time employees became full-time employees, in terms of the new Labour Relations Act

24. Clicks - key action plans revisited • Further enhance homeware experience • Reflected in solid growth in homeware categories • Value proposition maintained • Maintained – ongoing aggressive focus • Continued focus on top 50 stores • Ongoing – 18% account for 40% of performance • Store presentation – 77 of 270 stores in 2004 • On schedule for completion by December 2004 • Continued aggressive promotional programme • Promotional programme for August not strong enough to hold market share

25. Clicks - key action plans revisited (continued) • Maintain focus on costs • Expense growth ahead of sales increase again due to poor August sales • New datamining initiatives in May • Now an integral part of marketing programme • Developing Clicks/Discovery Health alliance • Take-on slower than expected • Profitable pharmacy integration • Ongoing – strong growth in converted pharmacies

26. Clicks – inflation at cost

27. Clicks - ClubCard • New ClubCard holders during the year 80 k • Active ClubCard holders 2.1m • Active Gold ClubCard holders 688 k • Average ClubCard spend up 14% • Average units per spend up 11% • Average frequency of use up 14%

28. Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% on previous year • Communications category under pressure as cellular providers reduced industry margins on airtime sales • Poor shrinkage result in card-based airtime • Stock levels increased to optimise sales, but hit by stock-up for expected August sales which did not materialise

29. Clicks – turnover trend

30. Clicks - turnover growth • Lifestyle impacted by flat growth in cellular • All categories, but particularly health & beauty impacted by poor August sales

31. Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% on previous year • Communications category under pressure as cellular providers reduced industry margins on airtime sales • Poor shrinkage result in card-based airtime • Stock levels increased to optimise sales, but hit by stock-up for expected August sales which did not materialise

32. Cellular airtime conversion During the year airtime sold using cards Conversions to date Currently 118 Clicks & 31 Discom storesnow sell virtual airtime on a KwikPay system Next phase By November 238 Clicks & 111 Discom stores will be selling airtime on the KwikPay system

33. Clicks – performance • Disappointing profit performance by Clicks with August turnover down 12% on previous year • Communications category under pressure as cellular providers reduced industry margins on airtime sales • Poor shrinkage result in card-based airtime • Stock levels increased to optimise sales, but hit by stock-up for expected August sales which did not materialise

34. Clicks - comparative pricing Industry survey comparing to food based retailers conducted by an independent research house - top 100 lines Clicks cheapest in 3 out of 4 provincesbefore ClubCard benefits

35. Clicks - comparative pricing Price comparison of “front & middle shop” merchandise against a pharmacy discount chain competitor Internal survey of a basket of 100 high volume items Before ClubCard benefits

36. Clicks - key action plans 2005 • Continued commitment to strategy • Integration of pharmacy • Focus on high margin lifestyle merchandise • Ongoing product & price promotions to drive volumes in low inflationary environment • Significantly reduce levels of shrinkage • Tight expense control • Focus on ClubCard basket size & frequency of use

37. Discom - snapshot Booklet only * A number of part-time employees became full-time employees, in terms of the new Labour Relations Act

38. Discom - key action plans revisited • Procure new store locations • Leasing space in mainstream malls remains a challenge • Entrench dominant position in African beauty & hair care • Ongoing – evidenced through sales growth • Continued & sustainable improvement in margin • Ongoing margin improvement during year • Continuing improvement in lifestyle offering • Reversed five year trend of declining market share • Implement POSware platform & merchandise planning • Completed in September 2004

39. Discom - key action plans revisited (continued) • Exploit potential of inland consumer markets • Majority of new stores being opened in inland region • Improvement in sales growth (inland 19.1%)  • Continual improvements in store design for new stores • New design completed – implemented for new stores from November ‘04 • Focused promotion activity • Themed promotions added value through sales growth & enhancement of image

40. Discom – performance • Returned to profitability after several years • Comeback of the imported & lifestyle merchandise • Strong growth in FMCG business • 6 stores opened, 5 relocated & 10 closed • Trading densities improved by 15%

41. Discom - comparative pricing Industry survey conducted by an independent research house - top 100 lines Discom cheapest in 3 out of 4 provinces

42. Discom - key action plans 2005 • Strategy implementation ongoing • Continue improvement in profitability • Continued focus on African beauty & decorative homeware • Sourcing new store locations • Expense management • Improving operating margin

43. Entertainment - snapshot Booklet only

44. Entertainment - key action plans revisited • Continuing repositioning from music to broader entertainment offering • Benefits of strategy being realised – non-CD sales grown from 11.3% to 18.2% of sales • Store plans: 4 new stores, 2 stores relocated & 2 revamped • 7 new stores opened; 7 closed • Aggressive price promotions • Overwhelming response to top 20 promotion • Collaboration with NuMetro & Ster Kinekor to dominate DVD market • Suppliers endorsed the strategy

45. Entertainment - performance • Strong comeback in second half • Top 20 promotion at R99 • boosted sales from April onwards • increased traffic to cross-sell non-discounted product • changed perceptions of Musica’s pricing • DVD grown from 7% to 13% of sales • Margin down – top 20 promotion & changing margin mix • Shrinkage improved • Expense growth maintained below sales growth

46. Entertainment– turnover trend Booklet only

47. Entertainment - key action plans 2005 • Continue to drive down retail pricing • Upgrading of urban stores with more aggressive pricing & promotion • Improve volumes & profitability of CDW stores • Continue realising opportunities in DVD, gaming & lifestyle

48. The Body Shop - snapshot Booklet only

49. The Body Shop – action plans revisited • Promotions programme & radio advertising • Extensive promotional & advertising campaigns • Opening two new stores • Six new stores opened during year • ClubCard points - earned at Body Shop from May • ClubCard successfully launched • Tight control on costs with further savings • Expenses impacted by new stores & increased marketing costs

50. The Body Shop Performance • Disappointing H2 reversed profit growth in H1 • Expense growth of 37% - store growth & increased marketing spend • Margin improvement Key action plans 2005 • Focus on cost control • Launch several key product ranges / Christmas gifting range • Opening 3 to 5 new stores