In the six-month period ending 31 August 2024, Dis-Chem reported Group revenue growth of 9.6% to R19.6 billion over the corresponding half year period to 31 August 2023.

Basic earnings per share (EPS) of 67.4 cents and basic headline earnings per share (HEPS) of 67.7 cents per share, respectively increased 15.6% and 16.3%.

“Following the identification of the eight strategic areas of focus aimed at delivering sustainable shareholder returns, the Group has made pleasing progress in each of these areas. The biggest contributor to earnings growth was the containment of group payroll cost, predominantly driven by the successful deployment of a staffing framework, with the emphasis on achieving the consistent and optimal mix of staff to ensure that stores run efficiently without compromising on the differentiated service model.  This delivered positive operating leverage, with operating profit growing at 17.5% ahead of Group revenue growth of 9.6%,” says Rui Morais, Chief Executive Officer of Dis-Chem.

Revenue

Dis-Chem’s retail revenue grew by 7.1% to R16.7 billion with comparable pharmacy store revenue growth at 4.8%. During the period under review, seven retail pharmacy stores were opened, resulting in a total of 274 retail pharmacy stores and 53 retail baby stores across the group at 31 August 2024.

Wholesale revenue grew by 10.1% to R15.1 billion. External revenue to independent pharmacies and The Local Choice (TLC) franchises grew by 26.6% over the comparable period. Independent pharmacy growth was 30.3%, attributable to both new customers and increased support from the current base. TLC growth of 21.8% was due to a combination of an increase in TLC franchise stores from 205 at the end of February 2024 to 221, together with increasing support of the supply chain from existing TLC franchisees.

Total income

Total income grew by 10.4% to R6.0 billion, with the Group’s total income margin being 30.7% compared to 30.5% in the prior comparative period.

Retail total income grew by 8.5% with the retail total income margin increasing from 29.8% to 30.2% over the comparable period. The increase in retail total income margin was predominantly due to an increase in transactional gross margin across all core categories. Trade terms increased ahead of purchases growth due to increased scale.

Wholesale total income grew by 17.5%.

Expenses grew by 9.0% over the comparable period. Retail expenses grew by 7.4% as the Group continued to invest in new stores. Retail employment cost, which accounts for 55.6% of total retail expenses, increased by 6.1%. Like-for-like retail employee costs increased by 0.7%, following the successful implementation of the staffing framework.

Wholesale expenses grew by 13.2%, mainly due to the acquisition of the Longmeadow warehouse. Excluding the additional costs incurred for this acquisition, wholesale expenses grew by 5.8%.

The Group has declared an interim dividend of 26.98c per share based on 40% of headline earnings, an increase of 16.1% from the prior comparable period.

The Group will continue to focus on the eight identified strategic areas aimed at delivering sustainable shareholder returns over the long-term:

• Property: a current space pipeline of 107,000m² exists, with the property team continually growing and converting this towards achieving a three-year target of 137,000 m².
• Total income: there will continue to be an incremental increase in total income growth ahead of revenue growth.
• Cost control: the focus will remain on securing sustained positive operating leverage using the  staffing framework facilitating further reductions in invested payroll cost per retail m².
• Working capital: a 10% improvement in inventory days over the next 18 months is projected as Dis-Chem centralises stock management.
• Wholesale market share expansion: the Group will continue to transition its independent pharmacy pipeline into TLC franchise stores as it extends wholesale market share gains.
• Integrated health ecosystem: Dis-Chem Life will launch in Q1 2025 supported by the evolution of extraRewards to drive policyholder/shopper behaviour change and engagement.
• Digital: the Group is re-platforming and building capability to ensure digital health ownership
• Leveraging analytics: the focus is on commercialising relevant health consumption data to deliver enhanced shopper- and patient-centric value, designed to support the Group’s position as the leading provider of accessible, affordable quality integrated primary healthcare.

Looking forward, Morais says the Group foresees first half momentum continuing into the second half, supported by the opening of 13 new retail pharmacy stores, four of which are already trading. The opening of these stores brings the total space added in FY2025 to 22,400m². For the period 1 September to 22 October 2024, Group revenue grew by 5.6% over the prior comparable period. The Group expects that the consumer will remain constrained. The continued focus on cost containment and the customer value creation that the integrated health ecosystem provides will position it for success in the future.

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