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Pharmaceutical group Dis-Chem reported 8.1% revenue growth in the six months ending August 2020 to R12.8 billion and a 16.1% increase in earnings per share , despite a challenging business and economic environment.
“The start of the Covid-19 lockdown period coincided with the current six-month reporting period, which has been challenging for the group.
“During the first levels of lockdown, the prohibited sale of non-essential categories that amounts to 20% of our business, saw us operating in extremely difficult circumstances, with a change in business hours, a significant reduction in weekend operations. and a notable drop in both buys and footprints.
“Having said that, we quickly adapted to an unexpected business environment that resulted in an improvement in total revenue by 9.4% to R3.6 billion as we continue to focus on return on invested capital, with a margin of total revenue improving 40 basis points to 27.9%, ”says Ivan Saltzman, CEO of Dis-Chem.
Retail revenue grew 6% to R11.4 billion, while fast-moving consumer goods (FMCG) and health and nutrition categories and comparable retail sales grew 1.5%, it said.
Dis-Chem’s wholesale revenues increased 14.9% to R9.3 billion and total wholesale revenues benefited from the combination of more favorable conditions and an increase in external customers.
For the first time, the wholesale business made an operating profit of 41 million rand. TLC franchises and independent pharmacies drove foreign sales growth of 28.1%.
Saltzman said the online contribution to revenue growth grew by as much as 353% during the reporting period. “This is the result of significant investment in online store processes and systems over the past five years, with a lot of work applied behind the scenes to drive operational efficiencies.”
Across the group, the current average online basket size is significantly higher than the in-store equivalent, but Saltzman said Dis-Chem anticipates that online numbers will stabilize as the economy of people entering stay at home shrinks and consumers start venturing into stores again
During the six months, Dis-Chem opened thirteen new stores with a total area of just over 11,500 square meters, bringing the total number to 182. Plans are underway for ten additional store openings scheduled for the end of the year, which will occupy the total area for 254,968 m2.
Following the Baby City acquisition, announced in May and still pending Competition Commission approval, the group said it intends to continue its acquisition path.
Rui Morais, Dis-Chem’s chief financial officer, says the group is investigating the acquisition of a community pharmacy group that will expand its store base and its ability to provide primary health care solutions.
Currently in the due diligence stage, this acquisition will augment the existing store network with most of the locations in convenience centers.
In addition, a non-binding indicative offer was made on a primary health care asset and due diligence was initiated, the executive said.
“We are in the advanced stages of completing the acquisition of a strategic interest in a health asset, specializing in the design, administration, risk management and delivery of primary care insurance, as well as coverage of gaps and psychological well-being.”
This transaction will see Dis-Chem benefit from vertical integration in the healthcare value chain, with access to a unique set of assets in a sector of the healthcare market that is experiencing rapid and sustainable growth, he said.
“This investment will further strengthen our primary health care mandate as it will provide us with access to segments of the population that have historically not been covered by the private healthcare sector. In doing so, Dis-Chem will help provide deeper access to health care to a larger and underserved community. ”
Due to pending acquisitions and the current uncertainty around the Covid-19 recovery, Dis-Chem said dividends will be withheld.
Going forward, Saltzman said that while the group has no illusions that the next reporting period will remain challenging as consumers remain under heavy pressure, he believes measures taken in recent months point to six months. positive ahead.
“While we are reverting to pre-Covid trading hours and the category sales mix will put pressure on margins in the second half of the financial year, we are confident that our most recent and anticipated acquisitions will enhance value for all of our shareholders.” , said. .
Read: Dis-Chem is buying Baby City for R430 million
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