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Pharmacy
 “Operating
performance showed an encouraging turnaround
in the second half of the year.”
Review of the year
Following the changes in pharmacy ownership legislation, the group
was granted regulatory approval to acquire the Purchase Milton &
Associates (PM&A) network of 80 pharmacies across the country.
The acquisition is subject to the approval of licence applications.
PM&A’s operating performance on an EBIT basis showed
an encouraging turnaround in the second half of the year, posting
a R7.9 million profit against a loss of R8.1 million in the first
half, ending the year with a loss of R0.2 million. This compares
most favourably to the loss of R15.1 million incurred in 2002.
The reduction in people costs, together with improved shrinkage
control, has helped PM&A manage its expenses more tightly and
this is reflecting in the financial results. Plans are afoot to
close or sell underperforming stores as well as restoring some of
the large stores to profitability.
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PM&A is benefiting from UPD’s distribution capability and pricing,
which has resulted in more of the buying being channelled through UPD
rather than a range of smaller suppliers as was the case in the past.
A task team was assembled to manage the implementation of pharmacy into
Clicks, and extensive preparation has been completed around the legal,
information technology, marketing, finance, human resources, operations
and store development issues.
Although the legislation around pharmacy ownership has been passed, we
are still waiting for regulations on other critical issues such as single
exit pricing, dispensing fees and the granting of licences.
A disease state management programme focusing on preventative rather
than curative medicine was launched to educate pharmacists and the public
on chronic states of health. The first campaign around asthma was well
received and will be followed by programmes on hypertension, diabetes
and depression.
The group is developing relationships with medical funders to offer better
pricing as a means of attracting greater volumes through stores. The relationship
formed between Clicks and Discovery Health is an example of these alliances.
Relationships are being maintained with Government to ascertain how healthcare
will be provided to the under-serviced areas of the country. The group
is committed to broadening its network of compliant drug stores but is
also aware of its social responsibility in assisting Government in meeting
the healthcare needs of the country.
Prospects
The sales and profitability of the PM&A group are expected to
grow strongly once it is integrated into Clicks.
Intercare
Intercare was launched last year and seeks to combine the professional
services of independent doctors and pharmacy. The project is still
in its pilot phase and has performed in line with expectations,
reducing its operating loss from R1.76 million to R0.96 million.
Following the changes to pharmacy ownership legislation, the group’s
role in the Intercare project is currently being reviewed.
Link Investment Trust
Link is a household name in South Africa and the leading national
pharmacy brand. New Clicks acquired a 30% stake in Link Investment
Trust (LIT) in 1999. This holding later increased to 56% in 2001.
LIT had 306 franchisees at the end of August 2003 and turnover
of R20 million for the year. In the year to August 2003, LIT made
an operating loss of R2.7 million, but is expecting to make a moderate
profit in the year ahead.
The past year was characterised by numerous changes to the environment
in which LIT operates, with the long-awaited changes to legislation
which brought to an end years of uncertainty around the statutory
standing of the pharmacy profession.
LIT’s relationship with the rest of the New Clicks group
is now managed by New United Pharmaceutical Distributions. This
allows a closer working relationship between the distribution arm
of the group and the retail pharmacies within the franchise.
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| Store Locations |
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| |
Link/LinkMax |
| Province/City |
Pharmacies |
| Gauteng |
|
| Johannesburg |
31 |
| Pretoria |
37 |
| Other |
48 |
| Mpumalanga |
10 |
| Limpopo |
12 |
| North West |
9 |
| Free State |
19 |
| KwaZulu-Natal |
|
| Durban |
16 |
| Pietermaritzburg |
2 |
| Other |
22 |
| Eastern Cape |
|
| Port Elizabeth |
8 |
| East London |
10 |
| Other |
9 |
| Western Cape |
|
| Cape Town |
32 |
| Stellenbosch |
3 |
| Other |
27 |
| Northern Cape |
3 |
| Botswana |
4 |
| Namibia |
4 |
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|
| Total |
306 |
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