Dis-Chem Pharmacies’ forecast of a 43.1% to 45.4% increase in headline earnings per share for the six months to August 31, 2022 saw its share price ratchet up 5.79% to R33.45 yesterday morning.
The pharmaceutical retailer courted controversy when CEO Ivan Saltzman issued a memo to staff last month saying that the retailer, which has more than 20 000 employees, was falling behind on racial transformation targets at some level and would no longer be hiring whites, unless a special case was made to him or the head of human resources.
Saltzman subsequently apologised for poor wording in the memo, but the group stood by its decision.
The group said in a trading statement yesterday, that headline earnings per share (Heps) was expected to be between 69.5c and 70.8c compared with 48.7 cents for the six months to August 31, 2021.
“The strong operational performance is underpinned by continued market share growth, most noticeably in the Pharmacy market, as well as an increase in total income margin across all core categories.”
On April 1, 2022, 100% of the shares in CT Distribution, KZN Warehouse and Eleadora were acquired. These were a related party transactions due to the companies acquired being owned by directors, previous directors and prescribed officers of Dis-Chem, who were also shareholders of Dis-Chem.
These acquisitions resulted in the release of the lease liabilities and right-of-use assets on the statement of financial position resulting in a R72 million gain recognised in other income, in the income statement.
If this once-off gain was excluded from the wholesale segment, which is indicative of the trading performance of the business, the expected Heps would be between 63.3c and 64.6c, an increase of between 30.4% and 32.6% compared to the Heps for the six-months ended August 31, 2021.
The increase was due to the normalisation of margins with fewer lower margin Covid-19 related lines, as well as improvement in back-end trading terms and service income through increasing scale and continued focus on return on invested capital (ROIC). The focus on ROIC delivered a further improved net working capital position resulting in strong cash generation, the group said. The interim results are expected to be released on November 2.
BUSINESS REPORT