Dis-Chem shows off a pretty margin

The prelisting statement for fast-growing health-care retailer Dis-Chem — which will make its JSE debut on November 18 — shows a rosy operating margin of 6% for the financial year to end-February and the interim period to end-August.

This compares favourably with the JSE’s well-established health and beauty retailer Clicks, which managed a 6.2% operating margin in the year to end-August. Clicks, with turnover of R25bn, is larger than Dis-Chem, which had revenue of R15bn in the year to end-February. But Clicks revenue includes a hefty contribution from its pharmaceutical distribution business.
The prelisting statement confirms Dis-Chem has been growing at a rapid pace, with revenue up from R10.3bn in financial 2014 to R15bn in 2016. With 101 stores, the group’s number of stores has doubled since 2010 and tripled since 2008. It has agreed lease terms for 29 new stores since the end of the 2016 financial year.
The latest interim results showed revenue up 18% at R8.5bn, but attributable profit down 10% at R269m.

Market watchers describe Dis-Chem as one of the more intriguing new listings in the past five years. It will raise nearly R5bn in a private placement. The offer price will range from R16.25 to R20.25 a share, with 238.4-million shares being placed. The placement shares will represent about 27.5% of issued shares on listing.
Part of the proceeds will be used to pay down debt, although Dis-Chem also plans to double its store footprint in the next five to eight years.

The statement reiterates that the group’s strategy remains to identify attractive locations for new pharmacies and to convert independent pharmacies.
There are also plans to expand Dis-Chem’s CJ Distribution business, which accounts for about 10% of turnover, by latching on to opportunities to capture the supply chains of independent pharmacies and to serve wholesalers and retailers.

by Marc Hasenfuss/BDlive.