Dis-Chem’s profit falls 39% as strike costs bite

The pharmacy group Dis-Chem saw its revenue grow by 13% to R11.8bn in the six months to end-August – still, its profit declined by a large margin due to costs related to a months-long strike that started at the end of 2018.

Its headline earnings fell by 39% as its expenses climbed over the six months due to strike-related costs, including additional security. Its profit was also dented by a change in the group’s bonus policy: previously it expensed the full bonus amount when paid in December of each year. The bonus is now evenly accrued throughout the financial period.

In addition, its net finance costs increased by almost 21% to R202 million.

“The Group took advantage of favourable financing by replacing the existing Absa facility with a new facility in order to facilitate the recent acquisitions in both the retail and wholesale businesses,” Dis-Chem said.

Prices at its 158 stores rose by 2.3% compared to the same period last year. The group opened 20 new stores, and bought two pharmacies, over the past six months. Its loyalty members now total 5.1m.

While Dis-Chem warned that “the consumer will continue to remain constrained as a result of the current macroeconomic environment”, it said it its “resilient markets” and brand will afford it some protection.

It is focused on adding more stores, and have opened four shops since the start of September, with seven more planned before February 2020.

“The labour issues that led to strikes across two consecutive financial years have been settled and we are actively rebuilding the relationship with distribution staff so that they understand the culture of our brand and our commitment to values that I, together with my partners, have built over many years,” CEO Ivan Saltzman said in a statement.

Dis-Chem's share price took a large knock on Monday after the company issued a profit warning on Friday evening. The share price is down 23% over the past year.