Business review: UPD

UPD logo

UPD continued to increase its market share and gained four new distribution contracts to maintain its market-leading positions in both the pharmaceutical wholesale and bulk distribution markets.

Turnover increased by 4.0% and UPD grew its operating margin by 60 basis points to 3.3%, benefiting from new distribution contracts secured over the past two years.

UPD’s total managed turnover, combining fine wholesale turnover with the turnover managed on behalf of bulk distribution clients, increased by 17.6% to R21.1 billion.

“UPD gained four new bulk distribution contracts and increased its portfolio of distribution clients to 30.”

Wholesale turnover by channel

Wholesale turnover

Wholesale turnover increased by 6.8%. Sales to Clicks pharmacies increased by 8.4% and Clicks remains UPD’s largest single customer, accounting for 55.3% of wholesale turnover.

Sales to private hospital groups, including Life Healthcare, Mediclinic and Netcare, showed muted growth of 1.6%.

UPD services approximately 1 200 independent pharmacies and sales to this channel grew by 13.9% and accounted for 15.9% of turnover. The business benefited from the addition of a new buying group, improved purchases from the Link brand and the preference of independent pharmacies for UPD’s excellent service levels.


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The strong performance from UPD’s customer base contributed to wholesale market share increasing from 26.0% to 27.0%.

UPD faces ongoing margin pressure from the faster growth in lower-priced generic medication, with sales of generics increasing by 11.0% and now accounting for 68% of wholesale turnover volume.

As UPD has a relatively high fixed cost base management continuously seeks ways to off-set margin pressure by extracting efficiencies across all aspects of the operations, including inventory management, labour productivity and transport optimisation. UPD expenses, which include the costs related to the new distribution contracts, grew by 10.2%, well below the growth in total managed turnover of 17.6%.

UPD owns distribution centres located in Gauteng (Lea Glen), Cape Town, Durban, Bloemfontein and Port Elizabeth. All the distribution centres are ISO9001:2015 certified. Owing to the increasing scale and size of its third-party distribution business, UPD will be increasing its capacity by renting an additional warehouse facility in Gauteng.

Product availability, which is core to offering superior range and service to customers, averaged 96% for the year while on-time deliveries were at 98.5%.

Outlook for 2020

UPD aims to increase wholesale market share through the growth of the Clicks pharmacy channel benefiting from the planned opening of 30 to 35 new pharmacies in Clicks, purchases from Link pharmacies and service to the private hospital groups.

The business will continue to prospect for new distribution contracts and one new contract commenced in the first quarter of the 2020 financial year.

Capital expenditure of R83 million has been committed for warehouse equipment and information technology in the year ahead.

UPD remains committed to its long-term strategic objective of growing market share in wholesale to 30% and bulk distribution to 35%.

Vikash Singh

Vikash Singh

Managing director

Vikesh Ramsunder

Vikash Singh (46)

Managing director

B Com (Acc), MBA

Joined the group in 2006

Appointed as managing director in 2015

Previously head of operations and distribution at UPD

A seasoned executive whose career has spanned financial, operational, supply chain and logistics responsibilities, with extensive experience in logistics management in both Clicks and UPD

Performance against objectives in 2019 and plans for 2020

Growing market share

Plans and targets for 2019
Achieved in 2019
Plans and targets for 2020

Increase market share to 26.5%

Market share increased to 27.0%

Increase market share to 28.0%

Maintain volume of business with private hospital groups

Sales to hospital groups increased 1.6% with volumes maintained

Grow volume of business with private hospital groups

Clicks’ buying levels from UPD at 99%

Clicks’ buying levels from UPD at 98.6%

Clicks’ buying levels from UPD at 99%

Tender for new agency distribution contracts

Four new agency distribution contracts secured; 30 contracts managed at year-end

Tender for new agency distribution contracts

Protecting income

Plans and targets for 2019
Achieved in 2019
Plans and targets for 2020

Maintain licences

Licences maintained

Maintain licences

Optimising efficiency

Plans and targets for 2019
Achieved in 2019
Plans and targets for 2020

Maintain 99% on-time deliveries

98.5% on-time deliveries

Target 99% on-time deliveries

Drive further productivity initiatives across the business

Efficiencies achieved in labour and transport

Drive further productivity initiatives across the business

Improve order fulfilment to 96.8%

Order fulfilment of 99.1% achieved

Achieve order fulfilment of 98%

Building capacity

Plans and targets for 2019
Achieved in 2019
Plans and targets for 2020

Reduce employee turnover to 11%

Employee turnover 7.4%

Maintain employee turnover below 8%

Maintain Transported Asset Protection Association (TAPA) certification for transport fleet

Achieved TAPA Level 1 accreditation

Maintain TAPA accreditation

Market UPD training academy

Launched with 30 learners

Expand learners to 60

Design and build replacement IT system

New system chosen

Design system solution and prepare roll-out