Directors' Report

Your directors have pleasure in presenting their report together with the financial statements of the company and of the group for the year ended 31 August 2005.

Nature of business

The company is an investment holding company. Its trading subsidiaries are engaged in discount retailing of health, beauty and lifestyle products and services on a predominantly cash basis in southern Africa. Its wholly-owned subsidiary, New United Pharmaceutical Distributors, is engaged in the buying and distribution of pharmaceutical products.

Certain subsidiaries operate as franchisors in addition to their retail activity. The company is the sole shareholder of property owning subsidiaries.

Group financial results

The results of operations for the year are set out in the group income statement. The profit attributable to ordinary shareholders for the year is R205 million (2004: loss of R19 million).

Share capital

During the year under review the issued share capital of the company was increased by the issue of the following ordinary shares of 1 cent each:

498 950	issued at various dates during the year at a premium of 349 cents per share, pursuant to the company's obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in October 1998.
3 574 650	issued at various dates during the year at a premium of 534 cents per share, pursuant to the company's obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in January 1999.
1 370 000	issued at various dates during the year at a premium of 779 cents per share, pursuant to the company's obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in July 1999.
150 000	issued at various dates during the year at a premium of 929 cents per share, pursuant to the company's obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in September 2000.
1 854 500	issued at various dates during the year at a premium of 739 cents per share, pursuant to the company's obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in April 2001.
1 107 500	issued at various dates during the year at a premium of 669 cents per share, pursuant to the company's obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in July 2002.
500 000	issued at various dates during the year at a premium of 649 cents per share, pursuant to the company's obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in January 2003.
9 055 600
The following ordinary shares of 1 cent each were repurchased during the year by a subsidiary of the company, and are now held as treasury shares:
11 506 296	in respect of the general repurchases between 21 October and 2 December 2004, announced on 3 December 2004.
2 420 175	in respect of general repurchases between 8 December and 20 December 2004.
13 926 471

Distributions to shareholders

Interim

The directors declared an interim cash dividend of 11.2 cents per share to shareholders registered on 24 June 2005. The dividend was paid on 27 June 2005.

Final

The directors have declared a final cash dividend of 18.5 cents per share to shareholders registered on 15 December 2005. The dividend will be paid on 19 December 2005.

Group restructure

The company commenced the process of restructuring the operations of certain of its subsidiary companies. The primary objective of this restructuring is to ensure compliance with current Pharmacy Regulations. As the restructuring is between existing subsidiary companies, the financial position of the group will be unaffected. The restructuring is subject to various regulatory requirements. It is anticipated that the restructuring will be concluded during the 2006 financial year.

Events subsequent to balance sheet date

No significant events, other than the declaration of the final dividend, as set out above, took place between the end of the financial year under review and the date of this report.

Directors and secretary

The names of the directors in office at the date of this report are set out under directorate, and the company secretary's details are given under Corporate Information.

It was announced on 25 August 2005 that Mr RB Godfrey will be resigning as a director with effect from 31 December 2005.

In accordance with the company's articles of association, Messrs PEI Swartz and TC Honneysett and Ms LA Swartz retire at the forthcoming annual general meeting and, being eligible, offer themselves for re-election.

Directors' interest in shares

Details of the directors' beneficial interests in the company's issued share capital are given under corporate governance.

Details of the share options granted to directors are given under corporate governance.

Share incentive scheme

Information relating to the share incentive scheme is set out in note 32.

Special resolutions

No special resolutions of a material nature have been passed by the company or its subsidiaries since the last annual general meeting of the company.

Holding company

The company has no holding company.

Subsidiary companies

The names of the company's main subsidiaries and financial information relating thereto appear under interest in subsidiary companies. The interest of the company in the aggregate income after taxation before goodwill amortisation and impairment of its subsidiaries is R235 million (2004: R161 million).