JOHANNESBURG - Dis-Chem, South Africa’s leading pharmacy and beauty group, closed 0.67percent a share stronger on the JSE yesterday as its revenue jumped to almost R10billion in the five months to July 31, 2019.
The group recorded a 13.5 percent jump in group revenue to R9.9billion in a tough economic environment, with increased competition and constrained consumers. Retail revenue jumped 12percent to R9bn for the period.
Group chief executive Ivan Saltzman said the group had weathered the stagnant economy. “This talks to the resilience of our brand and industry, together with our unmatched offerings, great customer service and a clear everyday low price strategy,” he said.
He said with the strike and warehouse decentralisation concluded, the group continued to focus on reducing and rationalising its stock holding to improve free cash flow generation and to ensure that it meets its medium-term net working capital targets.
“This focus, not at the expense of stock availability in its retail stores, has resulted in inventory levels being down R660million from year-end. This will have a significant impact on our purchases-driven rebates in the first half of 2020,” Saltzman said.
Around 2300 employees at the group’s wholesale operations downed tools in a national four-month long strike for higher pay led by the National Union of Public Service and Allied Workers (Nupsaw) between November 16, 2018, to April 10, 2019.
Saltzman said the group was on track to add another 13 stores before year-end, and had opened nine new stores to date.
He said the Single Exit Price (SEP), which came into effect in March, had boosted the balance sheet as comparable sales growth was 5.3percent thanks to the 3.78percent SEP.
The SEP is a mechanism that lists the maximum price that a medicine can be charged at and had a positive impact on pharmacies.
Previous Health Minister Aaron Motsoaledi last year announced a 3.78percent private-sector medicine price increase for 2019, compared to 1.2percent in 2018. Retail sales price inflation was 2.54percent.
“I am extremely satisfied with the rationalisation of stock levels post the strike and SEP buy-in, as we focus on improving free cash flow, ensuring that we require less net working capital investment, which will better enable us to fund future growth strategies,” Saltzman said.
Wholesale revenue increased by 15.3percent to R6.8bn, while sales to retail stores, which contribute 86percent of wholesale revenue, grew by 13.1percent. Sales to independent pharmacies and The Local Choice (TLC) franchisees increased by 49percent and 27.7percent respectively, mainly due to the Quenets Proprietary acquisition and a growing TLC customer base. “With national warehouse representation now enabling us to access the independent pharmacy markets in the Western Cape and KwaZulu-Natal, we will continue to focus on growing the TLC and independent customer bases,” Saltzman said.
The share price closed at R20.89 on the JSE yesterday.