The Dis-Chem pharmacy in Canal Walk mall, Cape Town. File picture: Henk Kruger
JOHANNESBURG - In the midst of slow economic growth in the country, Dis-Chem Pharmacies said on Friday it continued to increase its footprints by adding 19 new stores during the year, with 10 coming during the six months to end August.

The group indicated it would continue to grow and it remains focused on adding retail stores to its base and growing market share.

“As proven to be the case in the first half of the financial year, resilient markets in which the group operates will offer some protection against the relatively weak consumer environment,” the group said.

The weak environment did not stop the group from reporting earnings growth. The results showed that the group grew its turnover by 13.3percent to R9.61billion as compared to R8.48bn reported last year.

Retail turnover increased by 15% with like-for-like turnover increasing by 8.6% during the period. The group stated that product inflation was estimated at 4%, while wholesale turnover increased by 20.9% from the prior comparative period.

“Turnover growth for the group was a result of maturing store base and the addition of 19 stores since the prior comparative period, resulting in 118 stores at August,” the group said.

The group also increased its wholesale space during the period. CJ Distribution wholesale space now totals 80123m² was increased with the addition of the Cape Town space of 15693m², completed in July.

“Management believes that the wholesale space is fully invested and will be able to accommodate the retail and wholesale growth strategies over the next three to five years,” it said.

The group said from the increased wholesale space CJ Distribution would be focusing on increasing its current market share by continuing to service Dis-Chem, increasing supply to a greater number of The Local Choice franchisees and serving a greater number of independent pharmacies.

In the results, gross profit increased by 17.8% to R2.4bn, with the increase attributed to additional centralisation of vendors and better trade terms with suppliers as the group continued to increase market shares across its core categories.

Operating profit increased by 21.4% to R650.87 million, as a result of the retail margin increasing by 0.3%, offsetting a 0.2% decrease in wholesale margin on the back of the costs associated with the investment in adding space. The group’s operating margin increased from 6.3% to 6.8%.

Headline earnings per share increased by 38.05% to 46.8cents a share, up from 33.9c reported a year earlier.

The board declared a gross interim cash dividend of 18.73c a share.

Renier de Bruyn, an analyst at Sanlam Private Wealth, said they expected strong earnings growth from Dis-Chem over the next few years, driven by attractive industry dynamics, a compelling offering and aggressive store roll-out.

“The number of stores increased by 10 over the half year to 118. The target is 200 stores by 2022/2023. Free cash flow conversion was relatively low, due to slower inventory turn and higher capital expenditure from space roll-out,” De Bruyn said.

-BUSINESS REPORT