Dischem shares soar to 6 month high on strong earnings

Dischem, the South African healthcare giant, has shown resilience and adaptability in the face of the COVID-19 pandemic, with its share price soaring to a six-month high on the release of its interim results. The company's Headline earnings per share increased by 16 per cent for the six months ended August, reflecting the robust nature of the healthcare sector during these challenging times. In a recent CNBC Africa interview, Dischem CFO, Rui Morais, shed light on the impact of the pandemic on the business and the strategic initiatives the company is undertaking to innovate and expand its reach. Morais emphasized the significant challenges faced by the company in navigating through the pandemic, including regulatory changes, employee concerns, and the need for constant adaptability. He commended the dedication and hard work of Dischem's staff and management in supporting South Africans during this crisis. The company witnessed a gradual recovery as economies opened up at different lockdown levels, with store networks starting to show signs of normalization despite the ongoing challenges. Dischem's acquisition of Baby City has generated excitement in the market, with Morais indicating that the transaction is nearing completion pending approval from the competition commission. The company is also venturing into the health insurance sector, targeting the vast market of employed but uninsured South Africans. By providing subscription-based health insurance at lower price points with rich benefits, Dischem aims to tap into this underserved segment of the population. In addition to its foray into health insurance, Dischem is set to establish community-based pharmacies as part of its strategic expansion plan. This acquisition will provide access to community-based centers and enhance the company's presence in local communities. When questioned about the funding strategy for these expansion plans, Morais highlighted the company's cash generative nature and its ability to generate free cash flow. He mentioned that the funding for these initiatives would be sourced from withholding dividends and reinvesting in strategic assets. While acknowledging the impact on dividend payments in the short term, Morais expressed confidence in the long-term returns that these strategic investments could bring to shareholders. The timing of dividend resumption will be contingent on the successful execution of these expansion plans and the overall financial performance of the company. As Dischem continues to navigate the challenges of the pandemic and explore new avenues for growth, the company remains focused on enhancing its offerings, expanding its reach, and delivering long-term value to its stakeholders.