April 9, 2003
By Vera von Lieres
Cape Town - Half-year results due out on Friday by multibrand retailer New Clicks Holdings (NuClicks) could be overshadowed by a long-expected announcement on changes to pharmaceutical legislation, which will have a direct impact on the group.
Legislation that those listed retailers that have embarked on healthcare drives - NuClicks, Pick 'n Pay and Shoprite - have been waiting for on tenterhooks relates to non-pharmacist or corporate ownership of pharmacies in the country.
If not released on Friday, the legislation - understood to form part of the Medicines Bill - should at last be imminent after several deadlines have been missed.
Among the three major listed retailers lining up their healthcare strategy, NuClicks has been the frontrunner, having made a sizeable investment. It has adopted a multipronged strategy, while Pick 'n Pay and Shoprite have based their approaches on a looser franchise model.
Retail analysts said yesterday they expected the interim numbers to February to be on the muted side, but a positive announcement on corporate ownership of pharmacies was what NuClicks had been positioning itself for as a new growth phase.
The retailer had stores in place in high-traffic urban areas which could easily integrate the healthcare model. The question was how quickly it could push the button to convert existing group stores
.
A leading buy side analyst said management had set aggressive budgets across divisions but results would be less robust than those put out recently by its peers on the clothing and food side.
Like-on-like real sales growth at local mainstay division Clicks had been negative for a while, with management's business strategy somewhat camouflaged by the rolling out of new stores and impacted by the slow store refurbishment programme.
While legislative changes on pharmacy would transform the business in the long term, initial costs would weigh on it.
Michael Swingler, an analyst at Oasis Asset Management, said NuClicks was one of the most attractive stocks in the retail sector based on his calculations.
Its earnings were below normal levels by 20 percent to 30 percent compared with other retailers, most of which were at peak earnings. In the next year or two it was likely the retailer would add 20 percent to 30 percent of earnings growth over and above the organic earnings growth.
"Looking at the basics makes NuClicks attractive, not because of the pending changes in pharmacy legislation," Swingler noted.
"I am confident that management are positioning the firm to benefit from the healthcare sector showing stronger growth that the rest of the domestic economy."
NuClicks fell 9c to R5.75.
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