Dis-Chem Pharmacies’ headline earnings a share fell by 39 percent to 31 cents per share in the six months to August 31, due to strike-related costs, additional security and rising finance costs. Photo: Karan Sandison/African News Agency (ANA)

CAPE TOWN – Dis-Chem Pharmacies’ headline earnings a share fell by 39 percent to 31 cents per share in the six months to August 31, due to strike-related costs, additional security and rising finance costs.

Nevertheless, the share price increased by as much as 7.7 percent to R25.72 yesterday morning, in spite of the earnings decline, before closing at R25.25.

Revenue grew by 13 percent to R11.8 billion in the tough consumer environment. Average prices at its 158 stores increased by 2.3 percent over the same period last year. Like-for-like volumes growth was 3.1 percent.

Twenty new stores were opened. The group had faced almost two financial years of strikes, the disputes around which had now been settled.

Chief executive Ivan Saltzman said in a presentation he was “very pleased” with the top line growth that in the extremely tough trading environment, with strong revenue growth in both retail and wholesale segments.

He said the group had reported market share growth in all the core product categories.

Earnings were also impacted by the low growth in purchases from suppliers of only 1.5 percent, against the corresponding period which, despite an improvement in trade terms, that resulted in the total income margin declining.  

Salzman warned, however, that the consumer environment was likely to remain “constrained”, but that its “resilient markets” and brand would provide some protection. More stores would also be added, with four opened since the start of September and seven more planned before February 2020.

A change in bonus policy, also an outcome of the strike, also impacted earnings in the year – the bonus was now evenly accrued through the year instead of being expensed at year-end. Net finance costs increased by almost 21 percent to R202 million.

The Absa financing facility was replaced with a new facility to facilitate the recent acquisitions in both the retail and wholesale businesses.

“The labour issues that led to strikes across two consecutive financial years have been settled and we are actively rebuilding the relationship with distribution staff, so that they understand the culture of our brand and our commitment to values that I, together with my partners, have built over many years,” Saltzman said.

He said one of the positive outcomes of the strike was that the 18 000 staff were now members of a group-wide health scheme.

“This set of half-year results is the last set impacted by once-off strike related items which, once eliminated, highlight our cost containment efforts together with a significant stock rationalisation, effected post the  conclusion of the strike, driven by our return on investment focus,” he said.  

External wholesale revenue growth of 28.5 percent was due to the successful acquisition and integration of Quenets, acquired in November 2018, which resulted in additional revenue of R180m as well as the TLC  franchises growing from 76 to 96 in the year to August 2019.

BUSINESS REPORT