Dis-Chem up by more than 10% as earnings soar, Newsline

DURBAN – DIS-CHEM Pharmacies’ share price leapt by more than 10 percent yesterday after the pharmacy group reported double-digit growth in interim earnings, despite Covid-19 challenges and the deepening economic recession in the country.

For the six months to end August, Dis-Chem reported a 16.1 percent increase in headline earnings per share (Heps) to 36 cents a share and an 8.1 percent growth in revenue to R12.8 billion.

Chief executive Ivan Saltzman said the Covid-19 lockdown period coincided with the current six-month reporting period, which had been challenging for the group.

“During the early lockdown levels, the prohibited sale of non-essential categories which equates to 20 percent of our business, saw us operating under extremely difficult circumstances, with a change in trading hours, significantly reduced weekend trading and a noticeable downturn in both impulse buying and footfall,” Saltzman said.

However, he said Dis-Chem had adapted quickly to an unexpected trading environment resulting in total income improving by 9.4 percent to R3.6 billion, with the total income margin improving by 40 basis points to 27.9 percent.

Its retail revenue grew by 6 percent to R11.4bn, supported by strong sales in personal care, fast-moving consumer goods and healthcare and nutrition categories while like-forlike retail sales were marginally up by 1.5 percent.

Dis-Chem’s wholesale revenue inched-up by 14.9 percent to R9.3bn.

Online contribution to revenue increased by 353 percent, which chief executive Saltzman said was due to significant investment in the online stores processes and systems in the past five years.

Dis-Chem said that due to the future unknown impact of Covid-19 together with a number of potential strategic acquisitions, including the acquisition of Baby City, it had decided to preserve cash resources in order to fund these acquisition. It had, therefore, decided not to declare a dividend.

Dis-Chem opened 13 new stores in the period, and this took the total to 182. The group said following the Baby City acquisition as announced in May, which is still pending on Competition Commission approval, the group intended continuing its acquisition trail in the future.

Looking ahead, Saltzman said that the upcoming reporting period would continue to be challenging as consumers remained under severe pressure, but he believed that steps taken in recent months pointed to a positive six months ahead.

Jordan Weir, a trader at Citadel, said it was unlikely that the market expected these exact numbers to come from Dis-Chem.

“Investors in all likelihood took note of Clicks’ recent robust results released two weeks ago, which can indicate a similar follow-through performance from other players within the same sector,” Weir said.

Clicks reported a 9.6 percent increase in revenue and a 13.7 percent increase in diluted Heps for the year to end August.

“Where Dis-Chem performed notably well was in the reduction of financing costs during the period. This helped to offset some of the larger health and safety costs the company expended on their workforce during the Covid-19 lockdown period,” Weir said.

Dis-Chem shares closed 3.14 percent higher at R20.34 on the JSE yesterday.