Dis-Chem profits drop as shoppers feel the pinch

Pharmacy group Dis-Chem has reported a 17% drop in profit for the six months ending 31 August 2023, attributed to tough trading conditions, load shedding costs and the normalisation of the trade environment.

Group revenue increased by 9.4% to R17.9 billion over the period, but a sharp rise in financing costs saw profit drop to R518 million, compared to the R623 million recorded in the same period last year.

Headline earnings per share declined 17.2% to 58.2 cents versus 70.3 cents in 2022.

The group declared an interim dividend of 23.2 cents per share, also down 17.3%.

Commenting on the performance, the group said that it was satisfied with the results, given the context of the “tough trading environment” in South Africa, which is characterised by a constrained economy and high levels of load shedding and higher interest rates.

The group also attributed the poorer performance against last year to the normalisation of trading conditions.

In the first half of the 2022 financial year, performance was stronger due to the acquisition of the warehouse properties resulting in a R72 million once-off gain, as well as the impact of Covid-19 vaccine
administration and testing services which has ended and did not contribute to the current financial period.

Given that context, the group expects its six-month finances to be more balanced, with a stronger second half in line with historical trends.

“The anticipated performance improvement will be further supported by progress in cost control measures, with a particular focus on the management of staff costs,” it said.

Retail revenue grew by 8.1% to R15.6 billion with comparable pharmacy store revenue growth at 5.9%.

Retail revenue growth was impacted by Covid-19 vaccine administration and testing services in the prior period compared to the current period. If the contribution of Covid-19 vaccines and testing are excluded from both periods, retail revenue grew by 9.2%.

During the six months to 31 August 2023, 10 retail pharmacy stores were opened or acquired, resulting in 268 retail pharmacy stores and 54 retail baby stores at 31 August 2023.

Wholesale revenue grew by 13.5% to R13.7 billion.

Outlook

For the two months 1 September to 31 October 2023, group revenue grew by 12.1% over the prior comparable period.

The group said it expects that the consumer will remain constrained due to the current economic climate.

It said it will adapt to this environment by looking as specific strategic areas to boost the business, including adding 137,000 square metres of retail space over 36 months and expanding its wholesale market share.

Read: Dis-Chem co-founder to step down as CEO after 45 years at the helm