Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Group revenue increased by 11.1% to ZAR36.3 billion, showcasing strong financial growth.

• Profit before tax grew by 22% in the second half, driven by effective cost control and operational leverage.

• Retail revenue increased by 9.7%, supported by new store openings and a strong like-for-like sales growth of 6.9%.

• Wholesale revenue rose by 13.3% to ZAR27.4 billion, with a significant contribution from internalized sales.

• The company maintained a strong market position with a 24.6% pharmacy market share and growth in key categories like health and medical.

Negative Points

• The group's performance was impacted by the absence of a ZAR72 million property gain from the previous year.

• COVID-19 vaccine and testing services revenue of ZAR143 million from the prior period was not repeated, affecting overall revenue.

• Finance costs increased due to higher interest rates and property acquisition loans.

• Operating margin declined from 5.1% to 4.9%, reflecting increased costs and margin compression.

• Occupancy costs rose by 21% due to higher municipal charges and short-term leases.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with JSE:DCP.

Q: Can you elaborate on the strategic objectives and how they have been supported in the past year? A: Rui Morais, CEO, explained that strategic objectives have been supported through operational leverage and cost control, leading to a 22% growth in profit before tax in the second half of the year. This was achieved by managing costs effectively and increasing revenue growth, resulting in a 4% increase in earnings per share, excluding non-trade property gains.

Q: How has the retail revenue performed, and what factors contributed to its growth? A: Retail revenue increased by 9.7%, reaching nearly ZAR32 billion, driven by the maturity of existing stores and new space additions. Like-for-like retail sales grew by 6.9%, with a significant portion attributed to price inflation and a 1.5% volume growth.

Q: What are the key highlights of the wholesale revenue performance? A: Wholesale revenue grew by 13.3% to ZAR27.4 billion, with a 21.4% increase in external revenue, driven by the TLC franchise offering and support from independent pharmacies. This growth reflects the strong performance of the wholesale segment in supporting retail stores.

Q: How has the company managed its cost control, particularly in the retail segment? A: Julia Pope, CFO, highlighted that employee costs, the largest expense in the retail segment, were well controlled in the second half of the year through the implementation of a retail framework. This resulted in a 6.4% increase in employment costs in the second half, compared to 9.7% in the first half.