Dis-Chem Spends Big on IT, Buys R88m SAP Licences

Pharmacy retail giant Dis-Chem has spent hundreds of millions of rands on information technology, including R88 million on SAP software licences.

This emerged this morning when the JSE-listed company announced its financial results for the 12 months ended 28 February 2021.

In the wake of the COVID-19 pandemic, the pharmacy retailer also witnessed a massive surge on its e-commerce platforms.

The company says despite a tough economic environment, with the COVID-19 pandemic directly overlapping the reporting period, and the deepening economic recession, the Dis-Chem Group achieved positive results.

Earnings attributable to shareholders and headline earnings increased by 11.8% over the corresponding period. Earnings per share and headline earnings per share are both 77.8c per share, an increase of 11.8%.

Retail operating profit was R1.2 billion and the wholesale segment’s performance continued to improve, reporting an operating profit of R65 million.

According to Dis-Chem, the various restrictions during each level of lockdown dramatically changed the shopping behaviour of customers and the group experienced significant online sales growth of 260.7%.

It notes the strategic deployment of 39 additional hub spaces in response, together with continued investment in the group’s e-commerce platform, enabled it to meet the increased demand.

Dis-Chem says wholesale expenses (excluding depreciation and costs directly related to COVID-19) only grew by 0.5% compared to the prior comparable period.

The low growth in wholesale expenses is a result of the investment in technology in the prior financial year that allows for greater visibility of productivity, customer performance and individual supplier profitability within the wholesale space, the company notes.

It explains that capital expenditure on tangible and intangible assets of R401 million comprised R311 million of expansionary expenditure, as the group invested in additional stores as well as information technology enhancements across both the retail and wholesale segments, including R88 million in SAP software licences.

The balance of R90 million relates to replacement expenditure incurred to maintain the existing retail and wholesale networks.

Dis-Chem Group acquired 100% of Baby City on 1 January 2021 for R422 million. Baby City is a specialist destination baby retailer that operates a network of 33 stores across South Africa.

It says all Baby City stores have completed the migration onto the group’s common technology platform. “This was a necessary first step to enable the extraction of the planned synergistic benefits across both brands,” the company explains.

Effective 1 December 2020, the Healthforce solution was rolled out to Dis-Chem’s 336 clinic rooms, becoming the single technology platform used to facilitate all nurse-led consultations.

Over the three-month period since migration to the end of 28 February 2021, Healthforce facilitated 180 000 nurse-led consultations within Dis-Chem’s clinics, the company notes.

On 1 March 2021, the group acquired 87.5% of Healthforce for R48 million. It explains that Healthforce offers clinic management software that, among other system capabilities, sets up clinic nurses as the low-cost entry point into the healthcare system.

According to the firm, the technology includes telemedicine capability, which provides real-time video connections between patients and nurses, and an on-demand remote doctor network. The solution focuses on enabling a multi-disciplinary team-based care offering, it notes.

“In the face of a changing primary healthcare landscape, Healthforce presents the group with an investment in a strategic asset through which it can advance its ambitions to be at the forefront of innovation in the delivery of care.”

This article first appeared on ITWeb.