Dis-Chem aims to invest heavily in its pharmacies and nursing skills as part of an ambitious strategy to build an integrated primary health-care system.
The pharmaceutical group is repositioning its brand from being a pharmacy retailer to being a health care provider. The company provides clinics at its pharmacies to enable patients to consult nurses and it offers virtual doctors’ consultations — about 8,000 per month.
“The clinic nurses and pharmacy are important to us in terms of our health-care strategy. There is a shortage of nurses in the country and we are investing in tertiary education to ensure we create an appropriate pool of nurses to meet our ambition,” said incoming CEO Rui Morais, who is the company’s CFO.
Its strategy of providing a one-stop shop for health-care services also includes medical insurance and medical aid gap cover. It is targeting about 12-million employed people without medical aid.
Morais said this market uses public health care and buys medication at pharmacies and, in some cases, private facilities at a premium rate.
“Therein lies the opportunity for us to deliver what we think is an integrated health solution. Globally, health-care systems are being reimagined and reorganised to increase access at the lowest cost,” he said.
Our obsessive focus on value and broadening access to health-care positions the group to continue supporting the financially constrained consumer
— Rui Morais, incoming Dis-Chem CEO
Dis-Chem also wants to partner with hospitals and pathologists “if we truly want to play in the related health solution funding space”, said Morais.
He said the medical insurance product is doing well, and Dis-Chem has decided to reinvest the proceeds to growing its distribution channels by hiring more agents and adding benefits. “We generate more leads but battle to engage with all of them,” he said.
Dis-Chem aims to lower the cost of medicine through providing more generics.
Morais said his “mandate is to focus on an integrated value chain to drive down costs and increase private health care to more South Africans”.
Dis-Chem will also accelerate its geographical retail presence, and in some small cities and towns it may open smaller format stores. It has secured 18 new Dis-Chem pharmacy stores for its 2024 financial year, of which four are already trading.
“The Medicare acquisition has helped us understand how small format stores work, with customers’ insights and the mix of categories required. As we increase stores we will find ourselves in smaller metros but the market needs to exist for us to go in there,” he said.
At the end of February Dis-Chem had 258 stores and 54 baby stores. Retail revenue for the year to February grew 6.5% to R28.9bn, driven largely by dispensaries.
As consumers continue to experience financial pressure, Morais said there has not been a significant change in the items that are being bought but buyers are “value conscious and shop for promotions”.
Moreover, unlike previously when customers would shop any day of the month, “we have seen a polarisation of spending towards payday cycles as people wait to be paid, which points to signs of constrained consumers”.
Like other companies, Dis-Chem’s operating costs were hit by the increased spend on diesel to power up its generators during electricity blackouts. The group said its “other operating costs” at its wholesale business increased by 13.9% to R949m, predominantly driven by an increase in diesel costs of 57.6% from R33m to R52m.
“While the group has taken the necessary measures to minimise the operational impact of load-shedding, the unavoidable increase in operational costs will continue to impact earnings,” said outgoing CEO and co-founder Ivan Saltzman.
As tough trading conditions are expected to persist for the remainder of the calendar year, Morais said “our obsessive focus on value and broadening access to health-care positions the group to continue supporting the financially constrained consumer”.
While the group has taken the necessary measures to minimise the operational impact of load-shedding, the unavoidable increase in operational costs will continue to impact earnings
— Outgoing CEO and co-founder Ivan Saltzman
Total income grew by 15.7% to R10.2bn, with the total income margin being 31.1% compared to 28.9%. Dis-Chem has exceeded its target of 30% total income margin 18 months sooner than anticipated.
Early this year, Dis-Chem said it lost chronic medication customers who cancelled their scripts after a leaked memo by Saltzman stating the company’s intention to impose a moratorium on hiring white employees.
Morais said “the nature of chronic is that once you lose it you lose six repeats. But since April we started recovering and the first 15 days of May have been the [busiest] post the financial year end.”
Morais said Dis-Chem has a plan in place to ensure it meets employment equity requirements. “We continue to prescribe to employment equity codes and are on the right track,” he said.
Dis-Chem announced this week that Saltzman will step down after more than four decades at the helm of the company he started with his wife Lynette.
Saltzman said during the results presentation that he would continue to contribute to the growth of the business, and together with Lynette “we will be focusing our time on retail, and I will continue to identify opportunities to accelerate expansion of our store network. Lynette will continue in her beauty and marketing role.”
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