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Dis-Chem on healthy track with strong annuals as it hits R30bn revenue milestone

During the reported period, the group continued with its expansion strategy as it opened 12 new Dis-Chem stores and three Baby City stores. | Karen Sandison, ANA.

During the reported period, the group continued with its expansion strategy as it opened 12 new Dis-Chem stores and three Baby City stores. | Karen Sandison, ANA.

Published May 24, 2022

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DIS-CHEM pharmacies posted a 30 percent hike in its annual earnings as it continued to expand and saw its revenue exceed the R30 billion mark for the first time, despite a challenging and complex operating environment posed by Covid-19 and the civil unrest last year.

Chief executive Ivan Saltzman: “Over the last financial year, we have navigated a challenging and complex operating environment, progressed strategic initiatives and completed acquisitions that will drive the group forward in years to come. On the back of significant investments in prior periods, this financial year has been a period of implementation, integration and growth.”

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The share price rose 2.57 percent to R34.35 in intraday trade yesterday.

Dis-Chem, the second-largest retail pharmacy chain in South Africa, in its results for the year ended February 28, said its headline earnings per share were 99.2 cents, a 27.6 percent increase compared to last year's earnings.

It reported strong revenue growth of 15.7 percent for the period, exceeding R30 billion for the first time (R30.4bn). Its retail revenue grew by 15.6 percent to R27.1bn with comparable store revenue at 6.1 percent.

The pharmacy retailer also declared a final dividend of 20.2 cents per share.

“Total income grew by 18.4 percent to R8.8 billion, with the group’s total income margin being 28.9 percent compared to 28.3 percent in the prior comparative period," Dis-Chem said.

Earnings before interest, tax, depreciation, and amortisation (Ebitda) grew by 21.4 percent to R2.4bn, with its Ebitda margin being 7.9 percent.

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The group’s wholesale revenue grew by 13.7 percent to R21.9bn, with external wholesale revenue from sales to independent pharmacies and The Local Choice (TLC) growing by 16.5 percent.

“This growth is attributable to a combination of an increase in TLC franchise stores from 122 to 147, increased support in the supply chain from existing TLC franchisees, and increased support from independent pharmacies. Revenue from sales to its own retail stores, the biggest contributor to wholesale revenue, grew by 13.2 percent,” Dis-Chem said.

Dis-Chem was one of the retailers that were impacted by the civil unrest that gripped KwaZulu-Natal and Gauteng last year. The unrest left stores damaged and some looted. Dis-chem said it re-opened three of its stores within a month of the unrest, and a final store in October.

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During the reported period, the group continued with its expansion strategy as it opened 12 new Dis-Chem stores and three Baby City stores. The company acquired Baby city in 2020.

Dis-Chem said 48 Medicare pharmacies were acquired effective October 1, 2021, taking the group’s footprint to 254 retail pharmacy stores and 35 retail baby stores as of February 2022.

“Baby City and Medicare have been fully integrated into the group including migration onto the group’s common technology platforms. The unlocking of synergies from the integration is expected to be further seen in the group’s performance in FY2022/23,” the group said.

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On the Covid-19 pandemic, Saltzman said: “We have seen a continued stabilisation in our operating environment. Covid-19 waves became less severe with the consumer resuming their pre-pandemic routines and shopping habits, driving normalisation of baskets and seasonal patterns.”

Looking forward, Saltzman said the group expected that the trading environment would remain constrained.

“The recent launch of a medical insurance and gap cover offering, Dis-Chem Health, has seen the evolution of the group’s health care focus. In the two months since launching medical insurance, uptake has exceeded our initial expectations, supporting our view of the market opportunity, and our focus is now to accelerate our efforts to grow penetration in this market,” Saltzman said.

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BUSINESS REPORT ONLINE

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