Dis-Chem scraps interim dividend as it eyes health insurance asset

Pharmacy group Dis-Chem is considering acquisitions, including a stake in an insurance business.
Pharmacy group Dis-Chem is considering acquisitions, including a stake in an insurance business.
Image: FREDDY MAVUNDA

Pharmacy group Dis-Chem has opted to hold on to its interim dividend as it considers further acquisitions, including a stake in an insurance business that aims to cater for people not historically covered by the private health-care sector.

The group said the acquisition of a strategic stake in the health-care insurance asset was at an advanced stage, while it is also investigating an acquisition of a community-based pharmacy group that will expand its store base.

Covid-19 has highlighted that individuals and companies are more prepared than ever to spend on health care and has also led to a deeper understanding of the importance of mental health

“Covid-19 has highlighted that individuals and companies are more prepared than ever to spend on health care and has also led to a deeper understanding of the importance of mental health, accelerating the need for companies to provide support to employees and their families,” Dis-Chem said.

The insurance business specialises in the design, administration, risk management and delivery of primary health-care insurance, as well as gap cover and psychological wellbeing.

Due to potential acquisitions, Dis-Chem has opted not to pay an interim dividend for its six months to end-August, when headline earnings rose 16.2% to R309.6m, amid a mixed effect from the pandemic on its operations.

The group also said it had opted to preserve cash due to Covid-19 uncertainty, and had paid about R110m to shareholders in the prior interim period.

Group revenue rose 8.1% to R12.8bn to end-August 2020, with trading restrictions hitting the sale of some higher-margin goods during SA’s hard lockdown.

Due to people staying at home, SA experienced fewer cold and flu cases during the period, the group said, but strong chronic drug adherence due to health education, awareness and higher patient risk partially offset the impact.

Net financing costs fell 17.4% to R166.5m to end-August, partly due to a decline in interest rates. The group also said a reduction in trading hours had allowed it to reduce variable employee costs.

Costs directly related to Covid-19 amounted to R45.4m, mainly relating to providing personal protective equipment, screening costs, staff Covid-19 testing, as well as staff vouchers the group distributed to employees as a gratuity working in the midst of the pandemic.

The group opened 23 new stores and acquired one new pharmacy, resulting in 182 stores as of the end of August.

Dis-Chem announced in May it had agreed to buy baby-care group Baby City for R430m, as the group pursues a standalone baby-store network that can fit in with the group’s existing product offering. 

Dis-Chem plans to add clinic services to boost Baby City, and will also extend its loyalty programme to the chain, which has 33 stores. The group is still awaiting approval from competition authorities.


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