May 4, 2018 / 7:08 AM / 5 months ago

UPDATE 2-South African pharmacy group Dis-Chem to add more stores, enter Botswana

* Pharmacy group to open 20 stores in FY19

* Expanding into convenience store model

* First store in Botswana

* FY Adjusted HEPS up 13.7 pct (Adds details on new stores, shares, analyst comment)

By Nqobile Dludla

JOHANNESBURG, May 4 (Reuters) - South African drugstore chain Dis-Chem Pharmacies plans to add more retail outlets, 10 of which will be convenience stores, as it looks to increase its market share after reporting a 13.7 percent increase in full-year adjusted earnings.

In response to fewer shoppers visiting malls, Dis-Chem, which made its debut on the Johannesburg stock exchange in 2016, has developed various store sizes ranging down to 150 square metres compared to its usual 1,000 square metre plus stores.

“There’s definitely a change in the retail landscape. We’re seeing more opportunities that present themselves to ourselves around 400 to 100 square metre space,” Chief Financial Officer Rui Morais said in the group’s results conference call.

“So we need to cater for that in order to grow our store base beyond 200 (stores by 2023).”

Dis-Chem plans 20 new stores in the 2019 financial year, eight of which will be convenience stores and two smaller outlets in residential areas under The Local Choice (TLC) brand.

The firm, which also has presence in Namibia, will enter Botswana for the first time with its planned first store there.

Morais said it was in talks with a further seven independent pharmacies for minority partnerships under the TLC brand.

Co-founded in 1978 by group Chief Executive Ivan Saltzman, Dis-Chem competes with larger health and beauty retail rival Clicks Group and retailers Shoprite and Pick n Pay, which also sell medicines.

Adjusted headline earnings per share, which strips out certain one-off items and is the main profit measure in South Africa, increased to 78.7 cents per share from 69.2 cents per share in the prior year, while adjusted headline earnings rose 19.7 percent to 677 million rand ($53.68 million).

Group turnover increased to 19.6 billion rand from 17.3 billion rand in the prior year, supported by a growing store base and tight cost controls, while operating profit was flat at 1.1 billion rand.

At 1147 GMT, its shares were off 8.76 percent at 32.20 rand.

“The earnings performance was lower than what we were expecting,” Avior Capital Markets’ Private Client Manager, Yusuf Moola said in a note. Avior had expected a 35 percent rise in adjusted headline earnings.

While the consumer market is expected to remain constrained despite improving sentiment, Dis-Chem expects the resilient markets in which it operates to offer some protection against the weak environment. ($1 = 12.6126 rand) (Additional reporting by Nomvelo Chalumbira; Editing by Keith Weir/David Evans)

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