New Clicks came out with solid results, with all the business, Musica, Body Shop, Clicks and UPD performing well. But the margins are tight, with the group still charging the prices that were overturned by the Constitutional Court.

Bruce Whitfield:
Well considerably better results coming out of New Clicks today. You just have to go into the Clicks outlets and get a sense of a new vibrancy really coming through the business, which is now focusing on upper income markets since announcing the sale of the Discom business.

Group turnover up just 12 percent to more than R11-billion but margins improved and profits were up as well. The chief executive of New Clicks is David Kneale who joins us now on the line from Johannesburg and that core Clicks business David seems really to be back on track.

David Kneale:
Good evening yes I think that is true. We have got a pretty focused merchandise strategy now. We want to be famous for health and beauty complemented by homeware, which has been part of the Clicks brand heritage. So we are clear on what we want to be and we have started this store blueprint program with a different look and feel which I think better reflects what I have just described and we have now got a 125 stores with pharmacies in and those stores have grown on average by 20 percent. So yes I think the business has a clearer focus and is beginning to motor.

Bruce Whitfield:
Because 70 percent of your revenues in the Clicks business come from those health and beauty products is that the sort of balance you want in terms of health and beauty versus the homeware?

David Kneale:
I think it is getting pretty close to that. I would imagine that it would probably get to between 75 and 80 percent over time but I always think that you have to be guided by your customers on that rather than setting targets as to what you want your customers to buy. Having said that we have three key areas of focus within non-health and beauty, that is confectionery, electrical products and homeware and all of those in the past 12 months have grown in double-digit numbers.

Bruce Whitfield:
The pharmacy business that is also growing nicely. You have got 125 this dispensaries across the country, 320 Clicks stores, is the idea there to get a pharmacy in each and every single one of those?

David Kneale:
Yes we have always said that the ultimate vision is a pharmacy in every Clicks store. How long it will take us to get there we have never put a timescale to because to be honest we don't know.

It is going to be dependent on licences, the availability of pharmacists, and so forth but certainly we have said this morning that we will open 15 new stores next year all of which will have pharmacies in them and we hope to open in addition to that I think between a further 15 and 30 pharmacies in existing Clicks stores. So we will certainly open between 30 and 40 pharmacies in the next 12 months.

Bruce Whitfield:
So the margins then justify the expansion?

David Kneale:
The margins in pharmacy are low. We continue to offer patients a very competitively priced service because we continue unlike many independent pharmacies to charge the prices that were overturned by the Constitutional Court so they are very tight margins but we have taken the view we will work with that until the situation is resolved because that is forcing us to run a very tight and disciplined business.

Bruce Whitfield:
And again the more scale you have the better buying power you have et cetera et cetera.

David Kneale:
Well bear in mind that as far as ethical products are concerned single exit pricing prohibits any volume discounting so there isn't any volume discounts to be had in terms of buying the product but clearly you get operational efficiencies because to be quite straight and honest with you what you have is pharmacists who are busy for eight or 10 hours a day rather than just standing there.

Bruce Whitfield:
Sure absolutely. I mean the Musica business has taken on a new lease of life as well growth there of 46 percent. Body Shop a small contributor good growth coming through there as well. United Pharmacy Distributors a bit of work to be done?

David Kneale:
No look UPD grew market share, it was up to 25.6 percent, so it is growing a shade ahead of the overall pharmaceutical market which is around 10 percent and its operating margin of 3.2 percent that is a world-class operating margin in pharmaceutical wholesaling.

So UPD is a great operation but it is a low margin business and that is about scale, which is why we have said in the year ahead we will target dispensing doctors and we will also diversify the income base and seek to gain more distribution contracts.

Bruce Whitfield:
David Kneale apologies we must leave it there he is the chief executive of New Clicks.