Dis-Chem hikes dividend, continues to roll out new pharmacies

Dis-Chem pharmacy store. Picture: Karen Sandison/African News Agency(ANA)

Dis-Chem pharmacy store. Picture: Karen Sandison/African News Agency(ANA)

Published Jun 3, 2024


Dis-Chem Pharmacies raised its final dividend 22% to 22.49 cents a share in the year to March 1, 2024 after headline earnings a share fell slightly mainly due to an imbalance in six month performances in previous years.

Shares had dipped 0.34% to R32.69 on Friday afternoon, but the price is nonetheless a whopping 44% higher than a year before.

The company said Friday it would invest in OneSpark, a life insurance business that Dis-Chem said possesses “the experience, capability and proprietary technology to offer transformative insurance products that align to the better health mandate of the Dis-Chem brand”.

Dis-Chem’s R1560 million share subscription investment would result in it holding a 50% stake in OneSpark.

OneSpark was established by a team of actuaries and engineers, and uses AI and proprietary technology to create an offering that “transforms the traditional insurance experience”, Dis-Chem chief executive Rui Morais said.

“The OneSpark transaction is a natural extension of our journey to unlock integrated health across our business. OneSpark’s capabilities and financial services expertise will enhance Dis-Chem’s ability to augment and deliver a compelling customer value proposition, supporting our vision of increasing access to healthcare at low cost,” Morais said.

Dis-Chem’s other area of focus for the new financial year included an accelerated retail space rollout, wholesale market share expansion, incremental improvement in total income, cost control to support positive operating leverage, working capital improvement, analytics at the core, and digital health ownership.

In the past year, retail revenue grew 9.7% to R31.7bn, with comparable pharmacy store revenue growth at 6.9%. Retail revenue growth was impacted by Covid-19 vaccine administration and testing in the prior period. If this was excluded from both periods, retail revenue grew by 10.3%. The full-year dividend was down 1.8% to 45.74c a share.

Total revenue increased 11.1% to R36.3bn. Operating profit benefited in the prior year from a R72m once-off gain from warehouses that were acquired, releasing it from lease liabilities, while it also lost contributions from Covid-19 vaccine administration and testing services.

Excluding the once-off property gain, earnings per share (EPS) and headline earnings per share (HEPS) would have increased by 4% and 3.8% respectively.

In the event, EPS and HEPS were 114.7 cents and 114.6 cents per share, a 1.4% and 1.6% decline, respectively.

Morais said they were pleased with the performance that was driven by a strong second half, where earnings before tax increased by 22%.

The improvement was supported by cost control measures, with a particular focus on employment costs.

Fifteen pharmacy stores were opened or acquired – there were now 273 retail pharmacies and 54 baby stores.

Wholesale revenue grew 13.3% to R27.4bn. Wholesale revenue to the group’s own retail stores, the biggest contributor, grew 11.8%, while external revenue to independent pharmacies and The Local Choice (TLC) franchises was up 21.4%.

Independent pharmacy growth of 23.2% was due to new customers and increased support. TLC growth of 19.6% was mainly driven by an increase in TLC franchise stores, from 171 to 205.