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Ivan Saltzman, CEO of Dischem.
Ivan Saltzman, CEO of Dischem.

Dis-Chem warns of sharp decline in interim earnings

RETAILER NEWS

By Warren Thompson - Nov 4th, 09:50

Discount pharmaceutical retailer Dis-Chem expects a drop in half-year earnings due to one-off costs such as a change in bonus policy and a strike by employees. 

Dis-Chem said on Friday headline earnings per share for the six months to August will be 30.7c-31.7c. This is a decrease of 38.7%-40.6% compared to the previous corresponding period.

The company attributed the decrease to accounting changes which have affected its bonus policy. “Previously the group expensed the full bonus amount when paid in December of each year. The bonus is now evenly accrued throughout the financial period due to its guaranteed nature,” Dis-Chem said. This has increased costs in the current period by R75m.

The company incurred additional costs of R19m relating to security and additional staff due to the strike, which extended into the current financial period. It incurred R23m in additional finance costs related to holding more stock during the strike which ended on April 10.

Dis-Chem said previously that the strike affected operations at three of its four distribution centres and involved about 2,300 of its 15,000 staff who were affiliated to the National Union of Public Service and Allied Workers

The group said it continues to see strong cash generation as a result of an overall reduction and rationalisation of stock which reduced its networking capital requirement. But it warned that the new accounting treatment of leases will continue to be earnings dilutive for the short-to-medium term.

About two weeks ago, Dis-Chem's rival Clicks reported a 12.2% rise in headline earnings per share to 683.9c while operating profit increased 14.2% to R2.3bn. Cash generated by operations rose 19.5% to R2.9bn.
Business Live 

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