UPD business review
UPD’s performance continued to stabilise during the year, supported by improved financial, operational and customer service metrics which contributed to increased turnover and trading profit.
Distribution turnover increased by 5.1% (2024: 3.3%) as purchasing compliance from UPD’s core wholesale channels, Clicks and the listed private hospital groups, recovered. The growing contribution of generic medicines, which accounted for 75.7% of volume compared to 68.8% in the prior year, together with lower price inflation, adversely impacted turnover growth.
UPD’s costs were very well managed as expense growth was contained to 1.9%, well below turnover growth, as the systems implementation was completed and efficiencies were realised across the business.
Trading profit increased by 9.0% with the trading margin improving by 10 basis points to 3.3%, driven by solid sales growth and disciplined cost control. The margin is now at the top of management’s medium-term target range of 2.8% – 3.3%.
Wholesale turnover by channel
Performance against objectives in 2024 and plans for 2025
UPD’s wholesale turnover, which excludes bulk distribution and preferred supplier contracts, increased by 5.2% despite a subdued colds and flu season and lower inflation, a pleasing recovery after the 0.5% decline in turnover in the prior year. The improved performance is largely attributable to greatly improved service levels which has always been a core strength of UPD.
Clicks is UPD’s largest single customer and accounted for 58.4% of wholesale turnover. Sales to Clicks pharmacies increased by 9.5% as purchasing compliance improved to 99.0% (2024: 97.5%).
Sales to private hospitals, which comprise 36.2% of sales, grew by only 1.4% despite improved purchasing compliance. However, volumes grew by 8.8% due to increasing genericisation.
The continued consolidation of the independent pharmacy market resulted in sales in this channel declining by 10.7%, contributing to UPD’s wholesale market share reducing from 26.7% to 26.2% (source IQVIA).
Product availability, which is core to offering superior range and service to customers, averaged 96.2% (2024: 97.0%) for the year, while on-time deliveries were at 97.3% (2024: 95.8%). Stock levels were elevated during the year to improve product availability for retail pharmacy and hospital formulary lines as well as to improve access to GLP-1 medicines for customers.
UPD’s total managed turnover, which combines fine wholesale and bulk distribution clients, increased by 2.0% to R30.5 billion. At the financial year-end, UPD had 20 (2024: 25) bulk distribution clients.
The large-scale wholesale systems implementation was completed and the new systems have been installed for seven bulk distribution clients.
As part of its commitment to carbon neutrality, UPD introduced South Africa’s first fleet of zero-emission, pharma-compliant electric delivery vehicles. The 42 vehicles, equipped with solar-powered refrigeration, currently serve customers across Gauteng and the Western Cape. A further 40 electric vehicles (EVs) will be added to the fleet in the new year.
UPD’s early investment in solar, batteries and EVs is reaping rewards. In the past year electricity, water and generator costs declined by 35% despite the double-digit increase in electricity tariffs. The investment in EVs has resulted in transport costs declining 0.2% year on year.
Growth plans for 2026
The improved purchasing compliance from both Clicks and the private hospital groups as well as the stabilisation of UPD’s performance metrics has created positive momentum for the 2026 financial year.
UPD aims to recover market share through the growth of the Clicks pharmacy channel, supported by the opening of 40 to 50 pharmacies, and growing sales to the private hospital groups.
Capital expenditure of R88 million will be invested in warehouse equipment and information technology in the year ahead. This includes the rollout of the new system for the remaining bulk distribution clients.
