After announcing its decision to list on the Johannesburg Stock Exchange (JSE) earlier this month, South African pharmacy group Dis-Chem on Friday revealed that it expected to start trading on the JSE’s main board on November 18, under the food and drug retailers sector.
The JSE has granted Dis-Chem a listing of up to 866-million ordinary shares, with the company offering its ordinary shares through a private placement. Each share will trade between R16.25 and R20.25 apiece, with up to 238-million, or 27.5% of issued share capital, offered.
Dis-Chem intends to use the net proceeds to pay the total share repurchase price of R3.58-billion to pay down R700-million of existing debt. The group intends to use the remainder of the proceeds for general corporate purposes.
CEO and co-founder Ivan Saltzman said the listing would enable the group to accelerate its growth ambitions to deliver the Dis-Chem vision of being South Africa’s leading retail pharmacy.
“We will continue to grow market share across our product offering by enhancing the focus on the customer and building on Dis-Chem’s brand positioning,” he added.
The company intends to achieve its growth through four pillars, including doubling its store footprint in the next five to eight years by pursuing store roll-out opportunities and converting independent pharmacies to the Dis-Chem brand. Dis-Chem will also continue to seek innovative ways to increase its brand footprint through secondary retail opportunities, as well as improve operating margins by leveraging the investment made over the last two years in its supply chain infrastructure and its head office.
Lastly, it will expand its wholly owned subsidiary, CJ Distribution, in the medium term by seeking opportunities to capture the supply chain of independent pharmacies, gain scale, and expand into the distribution business, whereby it will serve both wholesalers and retailers.
Meanwhile, Dis-Chem’s listing is also expected to enhance the company’s profile with investors, business partners and customers, as well as position the company to pursue its strategic growth plans. Further, it will now be able to access capital markets, if necessary, for future growth.
Other advantages of the listing will be assisting the company in recruiting, retaining and incentivising members of senior management and employees, diversifying the company’s shareholder base, and creating a liquid market for the ordinary shares going forward.
In the financial year ended February 29, Dis-Chem generated R15.5-billion in revenue and achieved earnings before interest, taxes, depreciation and amortisation (Ebitda) of R1.1-billion.
The retail business and CJ Distribution accounted for about 90% and 10%, respectively, of Dis-Chem’s Ebitda, excluding inter-group amounts. Revenue and Ebitda have grown at a three-year compound accelerated growth rate of 20.8% and 21.6% respectively.
For the six months ended August 31, Dis-Chem generated revenue of R8.7-billion and Ebitda of R600-million.