Dis-Chem reinstates dividends after reporting a solid rise in full-year earnings

Dis-Chem has reinstated its dividend after reporting a solid rise in full-year earnings despite its financial year coinciding with the outbreak of the Covid-19 pandemic, which had mixed fortunes for the discount pharmacy and healthcare group.

Although it was an essential service provider and allowed to trade throughout the year, it says the various regulations imposed during the different levels of lockdown restricted its operating hours and also what it was and was not allowed to sell. During the level 5 lockdown last April, it was unable to sell 20% of its merchandise, including higher-margin beauty products.

As a result of social distancing, increased hand washing, people working from home and children not going to school, fewer South Africans caught the cold or flu last year than in previous years. This affected sales of over-the-counter medication. However, this was partially offset by strong chronic drug adherence due to health education, awareness and higher patient risk.

Dis-Chem said the various restrictions during each level of lockdown dramatically changed the shopping behaviour of its customers. Like other retailers, it grew online sales significantly, 261% in its case. This was supported by the addition of 39 hubs and continued investment in its e-commerce platform to meet the increased demand.

Costs directly related to Covid-19 amounted to R56.6-million, mainly relating to providing personal protection equipment, screening costs, staff Covid-19 testing and vouchers worth R23.5-million that it distributed to all staff as a gratuity for their commitment to the front-line fight against the virus.

Retail revenue grew by 7.6% to R23.4-billion, with comparable store revenue up 2.7%. It added a net 22 new stores to its network, including three Mediclinic stores, and acquired two new pharmacies during the year, ending February with 194 stores. Baby City, which it acquired from 1 January, contributed R128-million to revenue in January and February.

Wholesale revenue improved by 16.4% to R19.3-billion, mostly back to its retail outlets, while external revenue to independent pharmacies and The Local Choice franchisees grew by 27.7% and 37.1% respectively.

For the group as a whole, revenue for the year to 28 February increased by 9.6% to R26.3-billion. Total income grew by 8.5% to R7.4-billion. Earnings and headline earnings per share rose 11.8% to 77.8c. After holding back on a final dividend last year and an interim dividend due to Covid-19, it raised its total dividend for the year by 148% to 31.1c per share.

For the past week, Dis-Chem has been vaccinating over 60s and healthcare workers and will expand its Covid-19 vaccination programme from today. Operating at full capacity, it said it would be able to administer up to 800,000 vaccines a month.The Group expects that, with the full extent of the impact of Covid-19 still unknown, the consumer will continue to remain constrained,” Dis-Chem said. “With the focus on ROIC (return on invested capital), the resilient nature of the markets in which the Group operates, together with the brands positioning, the Group is continuing to adapt to the current environment.”

Dis-Chem’s shares closed 0.1% down at R27.56 on Friday

Main Image: AMA-ARCHITECHS