Dis-Chem Pharmacies lifted its interim dividend 16.1% to 26.98 cents in the six months to end August 2024 even as it continued to expand with investments in new stores, the Longmeadow warehouse and spending to enhance information technology.
Capital expenditure on tangible and intangible assets came to R330 million (R690m at the same time last year) with R194m (R114m) going to expansionary expenditure, and the balance of R136m was to maintain the existing retail and wholesale networks, the group said at the release of its interim results on Friday.
The share price ended 3.72% lower at R36.00 on the JSE on Friday, even though the group reported a relatively strong performance - headline earnings a share increased 16.3% to 67.7 cents. This growth is slightly ahead of its bigger listed competitor Clicks, which increased diluted headline earnings per share by 14.3% to 1 193.5 cents for the year to 31 August.
Dis-Chem’s revenue was up 9.6% to R19.6 billion. Clicks’ annual revenue growth to end-August was up 9.2% to R45.5bn.
Dis-Chem’s management said the biggest contributor to earnings growth was the containment of group payroll cost, predominantly driven by the “deployment of staffing framework 1.0”, which delivered positive operating leverage, with operating profit growing at 17.5% ahead of group revenue growth of 9.6%.
From September 1 to October 22, 2024, group revenue grew by 5.6% over the prior comparable period. The group’s management said they expected that the consumer would remain constrained due to the weak economic climate.
The group would continue to focus on several areas for sustainable shareholder returns: The property portfolio would be increased, total income would rise ahead of revenue growth, cost controls would be firmed, there would be further working capital improvements, wholesale market share expansion would continue, Dis-Chem Life would be launched in the first quarter of 2025, investment in information technology would continue to grow digital health ownership, while analytics would be leveraged.
Retail revenue grew by 7.1% to R16.7bn in the interim period, with comparable pharmacy store revenue growth at 4.8%.
A net six retail pharmacy stores were opened, resulting in 274 retail pharmacy stores and 53 retail baby stores as at August 31.
Wholesale revenue grew by 10.1% to R15.1bn. Wholesale revenue to the group’s own retail stores, still the biggest contributor, grew 6.8% while external revenue to independent pharmacies and The Local Choice (TLC) franchises increased by 26.6%.
Independent pharmacy growth was 30.3% attributable to new customers and increased support from the current base, and TLC growth was 21.8% due to an increase in TLC franchise stores from 180 to 221, together with increasing support of the supply chain from existing TLC franchisees.
Expenses grew by 9%. 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%.
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