Dis-Chem Pharmacies’ business model, its brand position and a tighter focus on key growth drivers should enable it to adapt and mitigate against the current environment where the consumer is struggling financially.
This is according to chief executive Rui Morais and its chief financial officer, Julia Pope, who said in the pharmacy chain’s results for the six months to August 31, that for two months of the second half, to October 31, group revenue grew 12.1% over the comparative period. This was above the 9.4% revenue growth to R17.9 billion for the interim period.
However, the interim dividend per share fell 17.3% to 23.2 cents, in line with a drop in headline earnings per share by much the same percentage. The share price closed 1% up at R25.25 on Friday, but the price is 20% down over 12 months.
Dis-Chem’s directors said the weaker performance was due to the constrained economy, higher interest rates and costs of load-shedding, as well as base effects of the prior year's performance, with the first half of the prior year delivering a strong performance compared to the second half of the prior year.
The softer second half had largely been due to the impact of negative publicity, which was carried forward into the first quarter of the 2024 financial year, Morais and Pope said.
“A more equal distribution of earnings across halves is expected in the current financial year,” directors said.
They said there were seven areas of focus to deliver better shareholder returns, including the addition of about 137 000 square metres of retail space over 36 months.
The wholesale market share expansion had a dual strategy of supporting internal retail property growth, while growing the independent pharmacy market ahead of peers.
Incremental improvements in income would be made over the medium term. Cost controls would continue to be a focus, as would the establishment of a staffing framework with leadership and management accountability.
A 10% improvement in inventory days would also be a focus, while maintaining debtor and creditor days.
An integrated healthcare ecosystem would entail re-imagining healthcare access via a portfolio of health-centric financial services products, and the synergistic interaction of the pharmacy and clinic footprint.
The seventh focus area was to leverage analytics, with attention on relevance, and commercialising health consumption data for better shopper and patient-centric value.
Contributing to the stronger first half in the prior year was the acquisition of warehouse properties, resulting in a R72 million once-off gain, as well as the impact of Covid-19 vaccine administration and testing services, which did not contribute in the current period.
In the six-month period, retail revenue grew by 8.1% to R15.6bn, with comparable pharmacy store revenue growth at 5.9%.
During the six months, 10 retail pharmacy stores were opened or acquired, resulting in 268 retail pharmacy stores and 54 retail baby stores as at August 31.
Wholesale revenue to own retail stores, still the biggest contributor, grew 12.5%, while external revenue to independent pharmacies and The Local Choice (TLC) franchises grew by 19.1% over the comparable period.
Net financing costs increased 33.2%. Excluding finance costs from IFRS 16 and interest on the new term loan, net financing costs increased by 15.7%. This was due to additional interest paid on the existing loans.
In October 2023, the Competition Commission approved the purchase of the 63 000 square metre distribution centre in Gauteng, for R502m, which would increase the capex spend in the second half of the year.
BUSINESS REPORT