reviewed interim condensed consolidated results 30 bps wholesale turnover ... • onc of renegoti...

REVIEWED INTERIM CONDENSED CONSOLIDATED RESULTSfor the six-months ended 31 August

2017

DIS-CHEM PHARMACIES Reviewed interim condensed consolidated results for the six-months ended 31 August 2017

CONTENTS

Results presentation 1Commentary 17Condensed consolidated statement of comprehensive income 19Condensed consolidated statement of financial position 20Condensed consolidated statement of changes in equity 21Condensed consolidated statement of cash flows 22Earnings per share 23Segmental information 24Commitments 26Fair value hierarchy 26Additional information 27Notes to the reviewed interim condensed consolidated results 28Supplementary information 30Definitions 31

HEPS

38.1%

EBITDA

21.0%

OPERATING PROFIT

21.4%

TURNOVER

13.3%

The reviewed interim condensed consolidated financial statements have been prepared under the supervision of Mr Rui Manuel Morais CA(SA), the Chief Financial Officer of the Group.

DIS-CHEM PHARMACIES Reviewed interim condensed consolidated results for the six months ended 31 August 2017 1

NOTES

NOTES

3

Ivan Saltzman

REVIEW OF THE PERIOD

2

Contents

REVIEW OF THE PERIOD

TRADING AND FINANCIAL PERFORMANCE

OUTLOOK

QUESTIONS


NOTES

NOTES

5

Rui Morais

TRADING AND FINANCIAL PERFORMANCE

4

Opened

10 new stores since 28 February 2017

increasing thestore foot print

to 118

Opened first

TLC corporate store

Retail turnover

▲ 15%

Retail L-F-L growth of

8.6%

Retail operating margin

▲30 bps

Wholesaleturnover

▲ 21%

Cape Town DC complete

15 693m²

Total Wholesale space at 80 123m²

up 63% from comparative period

Group turnover

▲13%

EBITDA

▲21%

Profit after tax

▲37% to R409m

Strong

volume growth

Review of the Period


NOTES

NOTES

7

Group Financial Summary

R’m HY 2018 HY 2017 % change YE 2017Turnover 9 606 8 478 13.3 17 268

Gross profit 2 371 2 012 17.8 4 209

Other income 340 229 48.6 605

Operating expenses (2 061) (1 702) 21.1 (3 679)

Transaction costs - (3) (8)

Net finance costs (85) (121) (29.7) (225)

Taxation (156) (117) 33.2 (247)

Net profit after tax 409 298 37.4 655

6

Group Financial Highlights

Retail turnover

▲15%to R8.8bn

Wholesale turnover

▲20.9%to R6.5bn

Turnover

▲13.3%to R9.6bn

Profit after tax

▲37.4%

Net working capital

improved to 38 daysfrom 43 days at

28 February 2017

Operating margin

▲ to 6.8%from 6.5%

at 28 February 2017

Adjusted HEPS

46.8 cps

Headline earnings

▲49.5%to R403m

from R269m

HEPS

▲38.1%to 46.8 cps


NOTES

NOTES

9

Turnover

• Turnover growth underpinned by volume growth, maturing stores and addition of space

• Like-for-like turnover growth at 8.6%

• Wholesale turnover increased as vendors are centralised, wholesale control of retail stock at 79%

R’m HY 2018 HY 2017 % change YE 2017 % LFL % inflationRetail 8 784 7 640 15.0 15 646 8.6 4.0

Wholesale 6 460 5 342 20.9 10 918

Intergroup (5 638) (4 504) 25.2 (9 296)

Total Group 9 606 8 478 13.3 17 268

8

Group Financial Summary

R’m HY 2018 YE 2017 % change HY 2017Property, plant and equipment 1 098 995 10.4 925

Inventory 3 578 3 234 10.6 2 863

Trade and other receivables 1 069 1 092 (2.1) 815

Other assets 496 281 76.5 455

Net cash and bank 24 128 (81.3) (2 168)

Finance lease liability (629) (625) 0.6 (673)

ABSA loan (720) (796) (9.5) -

Trade and other payables (2 846) (2 641) 7.8 (1 620)

Other liabilities (581) (538) 8.0 (373)

Equity (1 489) (1 130) 31.8 (224)


NOTES

NOTES

11

Market Share

Market share increased in all categories

1. Prestige fragrance and cosmetics not included# Nielsons

% HY 2018 Dec 2016 Dec 2015Dispensary 22.0 21.4 19.6

Personal care and beauty# / 1 15.4 15.0 12.4

Healthcare and nutrition# 44.2 43.1 38.0

Baby care# 9.5 9.1 7.4

10

Category Contribution to Retail Turnover

% HY 2018 Feb 2017 Feb 2016Dispensary 37 36 37

Personal care and beauty 27 27 26

Healthcare and nutrition 20 21 22

Baby care 6 6 5

Other 10 10 10


NOTES

NOTES

13

Gross Profit

• Retail gross margin improvement due to better trade terms and scale leverage

• Wholesale gross margin improved due to centralisation of vendors and gross margin support

R’m HY 2018 HY 2017 % change YE 2017HY 2018

margin %HY 2017

margin %Retail 2 126 1 826 16.4 3 792 24.2 23.9

Wholesale 565 399 41.6 923 8.8 7.5

Intergroup (320) (213) 50.2 (506)

Total Group 2 371 2 012 17.8 4 209 24.7 23.7

12

Wholesale Turnover

• Wholesale turnover up 20.9% to R6.5bn

• Wholesale control of own store stock increasedto 79% from 78% at year end

• Optimum levels between 75% to 80%

• The Local Choice (“TLC”) like-for-like turnover growth increased by 9%

88%(Feb 2017:

85%)

8%4%

Dis-ChemIndependent pharmaciesTLC


NOTES

NOTES

15

Operating Expenditure

• Overall costs increased due to costs associated with the increase in Warehouse (31 093m² added) and Retail space(19 stores added)

R’m HY 2018 HY 2017 % change YE 2017Depreciation and amortisation 92 78 17.9 162

Occupancy costs 285 229 24.5 504

Employment costs 1 168 942 24.0 2 038

Transaction costs on listing - 3 8

Other operating costs 516 453 13.9 975

Total Group costs 2 061 1 705 20.9 3 687

% of turnover 21.5% 20.1% 21.4%

14

Other Income

• Other income increased from better terms and scale leverage

• Once off renegotiated lease term will impact second half of earnings growth

R’m HY 2018 HY 2017 % change YE 2017Retail 352 282 24.8 611

Wholesale 15 6 150 91

Intergroup (27) (59) (54.2) (97)

Total Group 340 229 48.5 605

Renegotiated lease terms - - - (109)

Other income excl renegotiated lease terms 340 229 48.5 496


NOTES

NOTES

17

EPS and HEPS

• The weighted average number of shares in issue as at 31 August 2017 is 860 062 450 compared to the WANOS of794 446 200 for the corresponding period. The increase in the WANOS is as a result of the listing of the Group on the JSEon 18 November 2016

Cents per share HY 2017 HY 2017 % change YE 2017EPS 46.8 33.9 38.1 75.0

HEPS 46.8 33.9 38.1 74.7

Adjusted HEPS 46.8 33.9 38.1 69.2

WANOS (millions) 860.1 794.4 816.6

16

Operating Profit

• Operating profit increased by 21.5% to R 651m

• Retail margin increased by 30 bps while the Wholesale margin decreased by 0.2 bps

• The Group’s operating margin increased by 50 bps to 6.8%

R’m HY 2018 HY 2017 % change YE 2017HY 2018

margin %HY 2017

margin %Retail 682 571 19.4 1 102 7.8 7.5

Wholesale (20) (4) 400 93 (0.3) (0.1)

Intergroup (11) (31) (64.5) (68)

Total Group 651 536 21.5 1 127 6.8 6.3


NOTES

NOTES

19

Working Capital

• Creditors days, as a result of concerted effect by management, reflect the appropriate level of funding received from our creditor base. This continues to be a focus for management

• Inventory days have increased to 87 days from 84 days at year end predominantly as a result of the investment in new wholesale and retail space

• The Group is expected to maintain the overall working capital position between 35 and 40 days going forward

HY 2018 YE 2017 % change HY 2017Debtors days 21 20 (5.0) 17

Inventory days 87 84 (3.6) 83

Creditors days 70 61 14.8 50

Total working capital 38 43 11.6 50

18

Adjusted HEPS

R’m HY 2018 HY 2017 % change YE 2017Headline earnings 403 269 49.5 610

Items deemed to relate to capital structure of group

Finance lease obligation renegotiation - - (80)

Operating lease renegotiation - - (29)

Items related to neither Retail nor Wholesale day-to-day operations

Fair value loss relating to non-hedging derivative - - 36

Items not expected to reoccur

Transaction costs on listing - - 8

Taxation - - 20

Adjusted headline earnings 403 269 49.5 565

WANOS (millions) 860.1 794.4 816.6

Adjusted headline earnings per share (cps) 46.8 33.9 69.2


NOTES

NOTES

21

Capital Management

Continue to invest in capex through new stores and IT FY 2015 FY 2016 FY 2017 HY 2018

Expansion capex (R’m) 169 180 148 132

Maintenance capex (R’m) 43 45 73 41

212 225 221 173

Maintenance capex % of turnover 0.3 0.3 0.4 0.4

Total capex % of turnover 1.6 1.5 1.3 1.8

20

746

(104)

(258) (23)(78) (17)

(173)(66)

(162) (73)

Cash inflowfrom tradingoperations

Workingcapital

movements

Contingentconsideration

Loan andfinance

lease paid

Acquisition ofbusiness

combination

Capex andproceeds on

disposal

Dividends Tax Net financecosts

Decrease incash and cash

equivalents

Cash Management

R’000


NOTES

NOTES

23

Ivan Saltzman

OUTLOOK

22

Medium-term Targets

AchievedFY 2016

AchievedFY 2017

AchievedHY 2018 2018-2020 target

Working capital days 50 43 38 35 - 40

New store capex (m²) 5 000 5 350 5 523 Inflation adjusted

Gross margin (%) 23.4 24.4 24.7 24.0 - 25.0

EBITDA (%) 7.0 7.5 7.7 7.0 - 8.0

Operating margin (%) 6.0 6.5 6.8 6.0 - 7.0

Dividend pay-out ratio (%) 40 40 - 50


NOTES

NOTES

25

1 276 91

111

96

113

FY15¹ FY16¹ HY17² FY17¹ HY18²

Retail Density

• Trading density improved

• Trading density underpinned by core pharmacyfirst business model

• Digital enhances trading density› Click & Collect (100% of stores facilitating

Click & Collect)

› Online platform positioned to cater for growth

› High growth in Click & Collect and online platformbut off a small base

Trading density (R000/m²)

1. Space not weighted2. Space weighted for half year

24

Expanding Retail Space

• 21 total new stores in FY18• Total space to be added in FY18 – approximately 26 900m², to date space added of 16 633m²• Second corporate The Local Choice (“TLC”) to be opened in H2 FY18• Additional store to be opened in Walvis Bay, Namibia• Additional 20 stores concluded (predominantly in FY19), of these 5 alternate format stores• 2 flag ship stores in major existing regional malls• On track to reach 200 stores by 2022/2023• Space and space maturity still the main structural drivers of growth

TotalNumber of stores – February 2017 108

New stores opened until 31 August 2017 10 Trading well (including first TLC corporate store)

118

New stores opened until 20 October 3

New stores to be opened by year end 2018 8 All planned to open before Christmas trade

129


NOTES

NOTES

27

Wholesale

• Wholesale space increased to accommodate our future Retail growth and increase in independent fine Wholesale market share

• Target to maintain own store stock ownership from own warehouses between 75% to 80%. Currently at 79%

• TLC franchises important supply chain tool to leverage off invested Wholesale base and grow supply into independent market

• Corporate TLC’s will be the model that loyal independent customers will follow

2016 2017 HY 2018Johannesburg (m²) 44 000 44 000 44 000

Cape Town (m²) 2 250 2 250 15 693

Delmas (m²) 2 780 6 030 6 030

Kwa-Zulu Natal (m²) - 14 400 14 400

Total (m²) 49 030 66 680 80 123

26

Alternative formats

• Successful opening of alternative Dis-Chem format in FY17 – 670m² trading store

• Located in a convenience focussed centre

• 90% of the core range delivered

• Trading density at 125 000 per square. Expected year end trading density at R130 000/m²

• Average cost per square meter 20% lower than average store in the group

• 15% improved inventory days compared to average size store of similar maturity

• Corporate TLC (The Local Choice) opened in August 2017, second store to be opened in H2 FY18


NOTES

NOTES

29

QUESTIONS

28

Outlook

• Inflation is estimated to decrease in the next six months of the financial year,driven by lower pharmacy price inflation

• Weak consumer spending environment is expected to continue

• Resilient markets in which group operates offers protection

• Our Retail strategy is:› Adding Retail stores to our base and leveraging off an invested cost base

› Continued cost control remains a focus in a high growth environment

› Ensuring dispensary focus to drive total store density

• In Wholesale:› We will grow independent market share now that we are fully invested


NOTES

30

Disclaimer

This presentation is provided for information purposes only. This is a commercial communication. The information does not include a personalrecommendation and does not constitute an offer, or the solicitation of an offer for the sale or purchase of any financial product, service, investmentor security. The information, investments and/or strategies discussed here may not be suitable for all investors; if you have any doubts you shouldconsult your investment advisor.

This presentation contains certain forward-looking information and statements with respect to the financial condition and results of operations ofthe Dis-Chem Group. Dis-Chem Group has made every reasonable effort to ensure the accuracy of the information in the presentation, butforward-looking information by their very nature involve risk and uncertainty because they relate to events and depend on circumstances that mayoccur in the future. Past performance is not indicative of future results.

No assurance can be given that the forward-looking information and statements will prove to be correct and undue reliance should not be placedon such statements. Factors that could cause actual results to differ materially from those in the forward-looking information or statements include,but not limited to: global and local economic conditions; changes in legislations; changes to International Financial Reporting Standards andinterpretations; changes in trading space; changes in working capital ratios and changes in margins achieved.

The Dis-Chem Group does not undertake to update or revise any of the forward-looking information or statements, whether to reflect new or futureevents and no liability is accepted by the Dis-Chem Group whatsoever for any direct or consequential loss arising out of reliance upon all or anypart of the information contained in this presentation.


NOTES


COMMENTARY

OverviewThe performance for the interim period resulted in an increase in earnings before interest, tax, depreciation and amortisation (EBITDA) of 21% and an increase in profit after tax of 37.4% from the prior comparative period.

Earnings attributable to shareholders and earnings per share increased by 49.4% and 38.1% respectively from the prior comparative period. Part of this increase is due to the buy-out of the non-controlling interest in certain subsidiaries in September and November 2016.

Headline earnings per share and adjusted headline earnings per share are 46.8 cents per share, an increase of 38.1%, despite the change in the weighted average number of shares (“WANOS”) which increased to 860 062 450 as at 31 August 2017 compared to the WANOS of 794 446 200 for the comparative period. The increase in the WANOS is as a result of the listing of the Group on the JSE on 18 November 2016.

The strong performance is principally due to a maturing store base, good margin management and 19 new stores (10 new stores since February 2017) being added to the Group.

Trading and financial performanceGroup turnover increased by 13.3% to R9.6 billion from the prior comparative period.

• Retail turnover increased by 15.0% from the prior comparative period with like-for-like (LFL) turnover increasing by 8.6%.

• Product inflation was estimated at 4.0% for the period.• Wholesale turnover increased by 20.9% from the prior comparative period.

Turnover growth for the Group was a result of maturing store base and the addition of 19 stores since the prior comparative period, resulting in 118 stores at August 2017.

CJ Distribution’s wholesale space, which now totals 80 123 m2, was increased with the addition of the Cape Town space (15 693 m2) which was completed in July 2017. Management believes that the wholesale space is fully invested and will be able to accommodate the retail and wholesale growth strategies over the next three to five years.

From the increased wholesale space CJ Distribution will be focusing on increasing its current market share by continuing to service Dis-Chem, increasing supply to a greater number of The Local Choice (“TLC”) franchisees and serving a greater number of independent pharmacies.

Gross profit increased by 17.8% to R2.4 billion from the prior comparative period (August 2017 margin: 24.7%; August 2016 margin 23.7%). The increase is a result of the additional centralisation of vendors and better trade terms with suppliers as the Group continued to increase market shares across our core categories.

Other income, being 3.5% of turnover increased by 48.6% to R340 million from the prior comparative period. Other expenses increased by 21.1% due to costs associated with the increase in warehouse and retail space.

Operating profit increased by 21.4% to R0.7 billion from the prior comparative period. The increase was a result of the retail margin increasing by 0.3%, offsetting a 0.2% decrease in wholesale margin on the back of the costs associated with the investment in adding space. The Group’s operating margin increased from 6.3% to 6.8%.

Net finance costs decreased by 29.7% to R86 million from the prior comparable period. The decrease is due to the settlement of debt across the IPO and the additional repayment of term debt in the first half of the financial year.

Total assets increased by 24.1% or R1.2 billion from the comparable period. This increase is due to the opening of 19 new stores and the related fixed assets and working capital requirements. Total capital expenditure of R173 million in the current six-month period comprises of R41 million replacement expenditure and R132 million expansionary expenditure. On 1 April 2017, the Group also acquired certain assets and liabilities of Optipharm Proprietary Limited, a pharmaceutical courier.

In the current year, the Group has improved its overall working capital position from 43 days at year-end to 38 days. The improvement continues to be as a result of extended creditor days.

Management continues to focus on the overall working capital position and specifically on improving stock days post the investment in the additional distribution space that has been added in the last 12 months.


DirectorateWith effect from 3 May 2017, M Gani joined the board as a non-executive independent director. No other changes have been made to the board since year-end.

OutlookFor the six weeks up until 15 October 2017, Group and retail turnover increased by 13% and 14% respectively, relative to the prior comparative period. It is expected that the weak consumer spending environment will continue into the second half of the financial year with low economic growth and an increase in taxes constraining consumers.

The Group continues to remain focused on adding retail stores to its base and growing market share. In addition, the Group will focus on leveraging off an invested cost base associated with a relatively young store base. As proven to be the case in the first half of the financial year, resilient markets in which the group operates will offer some protection against the relatively weak consumer environment.

Dividend declarationNotice is hereby given that a gross interim cash dividend of 18.73035 cents per share, in respect of the interim ended 31 August 2017 has been declared based on 40% of adjusted headline earnings. The number of shares in issue at the date of this declaration is 860 084 483. The dividend has been declared out of income reserves as defined in the Income Tax Act, 1962, and will be subject to the South African dividend withholding tax (“DWT”) rate of 20% which will result in a net dividend of 14.98428 cents per share to those shareholders who are not exempt from paying dividend tax. Dis-Chem’s tax reference number is 9931586144.

The salient dates relating to the payment of the dividend are as follows:

• Last day to trade cum dividend on the JSE: Tuesday, 7 November 2017• First trading day ex dividend on the JSE: Wednesday, 8 November 2017• Record date: Friday, 10 November 2017• Payment date: Monday, 13 November 2017

Share certificates may not be dematerialised or rematerialised between Wednesday, 8 November 2017 and Friday, 10 November 2017, both days inclusive. Shareholders who hold ordinary shares in certificated form (“certificated shareholders”) should note that dividends will be paid by cheque and by means of an electronic funds transfer (“EFT”) method. Where the dividend payable to a particular certificated shareholder is less than R100, the dividend will be paid by EFT only to such certificated shareholder. Certificated shareholders who do not have access to any EFT facilities are advised to contact the company’s transfer secretaries, Computershare Investor Services at Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196; on 011 370 5000; or on 0861 100 9818 (fax), in order to make the necessary arrangements to take delivery of the proceeds of their dividend.

Shareholders who hold ordinary shares in dematerialised form will have their accounts held at their CSDP or broker credited electronically with the proceeds of their dividend.

ApprovalThe interim condensed consolidated financial statements of the Group were authorised for issue in accordance with a resolution of the directors on 19 October 2017.

On behalf of the BoardIvan Saltzman Rui MoraisChief Executive Officer Chief Financial Officer

COMMENTARY CONTINUED


Six months to Six months to Year to 31 August 31 August 28 February 2017 2016 2017 (Reviewed) (Reviewed) % (Audited) R’000 R’000 change R’000

Revenue 9 950 690 8 718 914 14.1 17 897 313

Turnover 9 605 723 8 478 300 13.3 17 268 475Cost of sales (7 234 576) (6 465 978) 11.9 (13 059 154)

Gross profit 2 371 147 2 012 322 17.8 4 209 321Other income 340 307 228 978 48.6 604 861Other expenses (2 060 587) (1 702 003) 21.1 (3 679 386)Transaction costs – (3 000) (8 074)

Operating profit 650 867 536 297 21.4 1 126 722Net finance costs (85 572) (121 810) (29.7) (225 240)

– Finance income 4 660 11 636 23 977– Finance costs (90 232) (133 446) (249 217)

Share of profit from associates – 501 501

Profit before taxation 565 295 414 988 36.2 901 983Taxation (155 969) (117 115) 33.2 (246 871)

Total comprehensive income for the period, net of tax 409 326 297 873 37.4 655 112

Profit attributable to: – Equity holders of the parent 402 800 269 603 612 346– Non-controlling interests 6 526 28 270 42 766Earnings per share (cents) – Basic 46.8 33.9 75.0– Diluted 46.8 33.9 75.0

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at As at As at 31 Aug 31 Aug 28 Feb 2017 2016 2017 (Reviewed) (Reviewed) (Audited) R’000 R’000 R’000

ASSETS Non-current assets 1 496 166 1 077 687 1 191 740

Property, plant and equipment 1 098 357 925 136 995 401Intangible assets 247 127 32 211 40 310Deferred taxation 150 682 117 904 156 029Investments in associates – 2 436 –

Current assets 4 930 903 4 100 812 4 704 921

Inventories 3 578 075 2 862 856 3 233 911Trade and other receivables 1 068 952 814 944 1 091 901Loans receivable 88 945 247 056 72 270Taxation receivable 9 164 54 587 12 141Cash and cash equivalents 185 767 121 369 294 698

Total assets 6 427 069 5 178 499 5 896 661

EQUITY AND LIABILITIES

Equity attributable to equity holders of parent 1 461 496 104 048 1 106 902

Share capital 6 155 554 1 352 074 6 140 554Common control reserve (990 991) (990 991) (990 991)Retained earnings (3 703 067) (257 035) (4 042 661)

Non–controlling interests 27 290 119 479 23 581

Total equity 1 488 786 223 527 1 130 483

Non–current liabilities 1 446 406 846 359 1 522 378

Finance lease obligation 625 450 670 845 622 907Operating lease obligation 194 579 175 514 179 162Loans payable 571 000 – 647 000Contingent consideration 55 377 – 73 309

Current liabilities 3 491 877 4 108 613 3 243 800

Trade and other payables 2 845 702 1 620 414 2 641 215Employee obligations 123 734 98 451 125 391Deferred revenue 99 893 85 828 95 364Contingent consideration 22 769 – 24 003Finance lease obligation 3 944 2 420 2 390Loans payable 200 424 12 624 173 659Taxation payable 33 783 – 14 719Bank overdraft 161 628 2 288 876 167 059

Total equity and liabilities 6 427 069 5 178 499 5 896 661

Net asset value per share (WANOS) (cents) 173.10 28.14 138.43Net asset value per share (actual shares at period-end) (cents) 173.10 28.14 131.56


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Common Non- Share Retained control controlling capital earnings reserve interest Total R’000 R’000 R’000 R’000 R’000

Balance at 29 February 2016 (audited) 1 352 074 361 483 (990 991) 117 117 839 683Total comprehensive income for the period – 269 603 – 28 270 297 873Dividends paid – (870 000) – (19 641) (889 641)Acquisition of non-controlling interests – (18 121) – (6 267) (24 388)

Balance at 31 August 2016 (reviewed) 1 352 074 (257 035) (990 991) 119 479 223 527Total comprehensive income for the period – 342 743 – 14 496 357 239Dividends paid – – – (20 286) (20 286)Acquisition of non-controlling interests – (497 317) – (94 618) (591 935)Acquisition of subsidiary – – – 4 510 4 510Shares issued during the period 4 830 774 – – – 4 830 774Capitalised share costs for listing (42 294) – – – (42 294)Shares repurchased during the period – (3 631 052) – – (3 631 052)

Balance at 28 February 2017 (audited) 6 140 554 (4 042 661) (990 991) 23 581 1 130 483Total comprehensive income for the period – 402 800 – 6 526 409 326Dividends paid – (63 206) – (2 817) (66 023)Shares issued during the period 15 000 – – – 15 000

Balance at 31 August 2017 (reviewed) 6 155 554 (3 703 067) (990 991) 27 290 1 488 786


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Six months to Six months to Year to 31 Aug 31 Aug 28 Feb 2017 2016 2017 (Reviewed) (Reviewed) (Audited) R’000 R’000 R’000

Cash flow from operating activities 187 061 (806 712) 159 160

Cash inflow from trading operations 746 355 622 538 1 276 127Movement in working capital (257 733) (300 082) 218 460Finance income received 4 660 11 636 23 977Finance costs paid (77 768) (114 400) (201 997)Taxation paid (162 430) (136 763) (247 480)Dividends paid (66 023) (889 641) (909 927)

Cash flow from investing activities (212 667) (79 908) (221 539)Additions to property, plant and equipment and intangible assets – To maintain operations (41 305) (25 435) (73 234)– To expand operations (131 504) (55 221) (148 225)Proceeds on disposal of property, plant and equipment and intangible assets 83 748 7 432Acquisition of assets and liabilities in business combination, net of cash (17 000) – (7 512)Payment of contingent consideration (22 941) – –

Cash flow from financing activities (77 894) (24 388) 1 446 517

Proceeds from issue of share capital – – 4 381 052Costs capitalised to issue share capital – – (42 294)Repurchase of shares – – (3 631 052)(Repayment)/proceeds from bank loans (76 000) – 800 000Finance lease repayment (1 894) – (351)Acquisition of non-controlling interests – (24 388) (60 838)

Net (decrease)/increase in cash and cash equivalents (103 500) (911 008) 1 384 138Cash and cash equivalents at beginning of period 127 639 (1 256 499) (1 256 499)

Cash and cash equivalents at end of period 24 139 (2 167 507) 127 639


EARNINGS PER SHARE

Six months to Six months to Year to 31 Aug 31 Aug 28 Feb 2017 2016 2017 (Reviewed) (Reviewed) (Audited) R’000 R’000 R’000

Reconciliation of profit for the year to headline earnings Profit attributable to equity holders of the parent 402 800 269 603 612 346Profit on disposal of property, plant and equipment and intangible assets (78) (398) 423Insurance recovery from third parties – – (3 245)Taxation 23 111 790

Headline earnings 402 745 269 316 610 314Items deemed to relate to capital structure of the Group Finance lease obligation renegotiation – – (80 136)Operating lease renegotiation – – (29 208)Items related to neither Retail nor Wholesale general operations Fair value loss relating to non-hedging derivatives (5) – 35 812Items not expected to reoccur Transaction costs on listing – – 8 074Taxation 2 – 20 589

Adjusted headline earnings 402 742 269 316 565 445

Earnings per share (cents) – Basic 46.8 33.9 75.0– Diluted 46.8 33.9 75.0Headline earnings per share (cents) – Basic 46.8 33.9 74.7– Diluted 46.8 33.9 74.7Adjusted headline earnings per share (cents) – Basic 46.8 33.9 69.2– Diluted 46.8 33.9 69.2

Reconciliation of shares in issues to weighted average number of shares in issue

As at31 Aug

2017(Reviewed)

’000

As at31 Aug

2016(Reviewed)

’000

As at28 Feb

2017(Audited)

’000 Total numbers of shares in issue at beginning of the year 859 273 673 5 296 308 5 296 308Shares issued during the period before the share split weighted for the period outstanding – – 62 383

Shares in issue before the share split 859 273 673 5 296 308 5 358 691Share split – 789 149 892 798 444 959Shares repurchased after the share split during the period weighted for the period outstanding – – (54 858 637)Shares issued after the share split during the period weighted for the period outstanding 788 777 – 67 672 225

Total weighted number of shares in issue at the end of the period 860 062 450 794 446 200 816 617 238

On 30 September 2016, a 150-for-1 share split took place and therefore increased the number of shares in issue. This has been taken into account in the above calculation of the weighted average number of shares as if the shares as at 28 February 2017 were in issue for the whole period and all earlier periods presented.

The total weighted average number of shares in issue for the period equals the total weighted average diluted number of shares in issue for the period as the Group has no share options or other instruments that would result in a dilutive impact.


SEGMENTAL INFORMATION

The Group has identified two reportable segments being Retail and Wholesale

Retail Wholesale Intergroup TotalSix months to 31 August 2017 (reviewed) R’000 R’000 R’000 R’000

External customers 8 783 578 822 145 – 9 605 723Inter-segment – 5 637 759 (5 637 759) –

Total turnover 8 783 578 6 459 904 (5 637 759) 9 605 723Cost of sales (6 657 310) (5 894 438) 5 317 172 (7 234 576)

Gross profit 2 126 268 565 466 (320 587) 2 371 147Other income 352 034 15 339 (27 066) 340 307Other expenses (excluding depreciation and amortisation) (1 726 740) (578 755) 336 676 (1 968 819)Depreciation and amortisation (69 295) (22 473) – (91 768)Net finance costs (53 154) (32 418) – (85 572)

Profit before tax 629 113 (52 841) (10 977) 565 295

EBITDA 751 562 2 050 (10 977) 742 635Capital expenditure (108 385) (64 424) – (172 809)Total assets 5 249 653 4 057 387 (2 879 971) 6 427 069Total liabilities 3 127 039 2 725 018 (913 774) 4 938 283

Gross profit margin 24.2% 8.8% 24.7%EBITDA margin 8.6% 0.0% 7.7%Operating margin 7.8% (0.3%) 6.8%

Retail Wholesale Intergroup TotalSix months to 31 August 2016 (reviewed) R’000 R’000 R’000 R’000

External customers 7 639 945 838 355 – 8 478 300Inter-segment – 4 503 452 (4 503 452) –


Gross profit 1 825 702 399 400 (212 780) 2 012 322Other income 282 132 5 722 (58 876) 228 978Other expenses (excluding depreciation and amortisation) (1 474 964) (392 798) 240 300 (1 627 462)Depreciation and amortisation (61 415) (16 126) – (77 541)Net finance costs (68 758) (53 052) – (121 810)Associate income – – 501 501


EBITDA 632 870 12 324 (31 356) 613 838Capital expenditure (71 118) (9 538) – (80 656)Total assets 3 986 169 3 418 497 (2 226 167) 5 178 499Total liabilities 3 865 167 1 975 249 (885 444) 4 954 972

Gross profit margin 23.9% 7.5% 23.7%EBITDA margin 8.3% 0.2% 7.2%Operating margin 7.5% (0.1%) 6.3%


Intergroup/ Retail Wholesale Consolidation Total

Twelve months to 28 February 2017 (audited) R’000 R’000 R’000 R’000

External customers 15 646 131 1 622 344 – 17 268 475Inter-segment – 9 295 733 (9 295 733) –


Gross profit 3 792 213 922 791 (505 683) 4 209 321Other income 611 091 90 469 (96 699) 604 861Other expenses (excluding depreciation and amortisation) (3 176 755) (884 352) 535 675 (3 525 432)Depreciation and amortisation (126 036) (35 992) – (162 028)Net finance costs (125 639) (99 601) – (225 240)Associate income – – 501 501


EBITDA 1 226 549 128 908 (66 707) 1 288 750Capital expenditure (191 249) (30 210) – (221 459)Total assets 4 711 001 4 329 291 (3 143 631) 5 896 661Total liabilities 3 123 181 2 955 555 (1 312 558) 4 766 178

Gross profit margin 24.2% 8.5% 24.4%EBITDA margin 7.8% 1.2% 7.5%Operating margin 7.0% 0.9% 6.5%


COMMITMENTS

As at As at As at 31 Aug 31 Aug 28 Feb 2017 2016 2017 (Reviewed) (Reviewed) (Audited) R’000 R’000 R’000

Operating lease commitments – Within one year 396 303 252 528 340 170– One to five years 1 551 222 925 719 1 274 970– Over five years 1 056 864 477 134 828 567Finance lease commitments – Within one year 68 079 58 984 64 040– One to five years 304 982 287 050 301 292

– Over five years 1 268 942 4 026 025 1 303 571

FAIR VALUE HIERACHY

The information below analyses financial assets and liabilities that are carried at fair value or financial assets and liabilities that have carrying amounts that differ from their fair values:

Level 1 Level 2 Level 3August 2017 (R’000) (R’000) (R’000)

Financial liabilities at fair value through profit and loss Contingent consideration – – 78 146

August 2016

Financial liabilities at fair value through profit and loss Contingent consideration – – –

February 2017

Financial liabilities at fair value through profit and loss Derivative liability – 15 783 –Contingent consideration – – 97 312

The fair value of the contingent consideration payable is measured with reference to the performance forecasts which can be used to estimate future cash flows. The key inputs into this valuation are the estimated future cash flows and the average discount rate of 12.9% used to determine the present value of the future cash flows.


ADDITIONAL INFORMATION

2017(R’000)

Ordinary shares in issue (000’s): 860 084 483Closing share price at 31 August 2017 R29.50Six-month share price (high) R30.60Six-month share price (low) R21.50

Reconciliation of recurring Level 3 fair value movements:

As at As at As at31 Aug 31 Aug 28 Feb

2017 2016 2017(Reviewed) (Reviewed) (Audited)

R’000 R’000 R’000

Opening balance 97 312 – –Acquisitions – – 94 027Payments (22 941) – –Interest 5 890 – 3 285Release* (2 115) – –Closing balance 78 146 – 97 312*Relates to an amount, reflected in other income, that was not paid by the Company due to performance conditions not being met.

There has been no change in the range of undiscounted contingent consideration outcomes during the period. A reasonable movement in the unobservable inputs would not significantly impact the fair value of the contingent consideration as at the end of the reporting period and therefore not significantly impact profit after tax or equity.

There were no transfers of financial instruments between Level 1, Level 2 and Level 3 fair value measurements during the period ended August 2017.


NOTES TO THE REVIEWED INTERIM CONDENSED CONSOLIDATED RESULTS1. These interim condensed consolidated financial results for the six months ended 31 August 2017 have been

prepared in accordance with International Financial Reporting Standards (IFRS), International Accounting Standard (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act of South Africa and the JSE Listings Requirements. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 28 February 2017.

The directors take full responsibility for the preparation of these interim condensed consolidated financial results, which have been prepared under the supervision of Mr Rui Morais CA(SA).

The accounting policies and methods of computation used in the preparation of the interim condensed consolidated financial results are consistent in all material respects with those applied in the Group’s annual financial statements as at 28 February 2017 as none of the new standards, interpretations and amendments effective as of 1 March 2017 have had a material impact on the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.

The Group’s assessment of the financial impact of the adoption of IFRS 15: Revenue from Contracts with Customers, IFRS 9: Financial Instruments and IFRS 16: Leases have identified the following which will impact the financial results:

• IFRS 9: The measurement of provisions against receivables will be revised to comply with the expected credit loss method. The Group is still finalising its estimation methodology. Effective from 1 January 2018.

• IFRS 15: The Group does not expect significant changes to current accounting practices. Accounting for contract liabilities and right of return assets for the Group’s return policies could change current accounting practice. The Group currently does not expect changes to how it currently accounts for its customer loyalty programmes, breakage for voucher and similar performance obligations and third party incentives. Areas of possible impact might, however, still be identified as the implementation project is completed. Effective from 1 January 2018.

• IFRS 16: Leases, predominately relating to stores, will be brought onto the Statement of Financial Position. The quantitative impact of this standard is expected to be material due to the number of store leases in place. Effective from 1 January 2019 but the Group is considering early adopting the standard based on the outcome of our assessment.

The Group currently intends to adopt IFRS 15 and IFRS 16 by applying the full retrospective approach and IFRS 9 by applying the modified retrospective approach.

2. Dis-Chem enters into certain transactions with related parties. A finance lease has been entered into with Columbia Falls Property 7 Proprietary Limited on which rental of R30 million was incurred during the six-month period (2016: R28 million). This finance lease obligation amounted to R621 million at 31 August 2017 (2016: R669 million). Other property rental payments amounted to R23 million.

Amounts owing to Josneo Proprietary Limited and Minlou Proprietary Limited at 31 August 2017 amounted to R37 million and R2 million respectively (2016 owing from: R84 million and Rnil). Amounts owing from Eleador Proprietary Limited and MSDS No.3 Proprietary Limited at 31 August 2017 amounted to R3 million and R43 million respectively (2016: R12 million and R3 million).

3. There were no impairments of assets at a group level in the current and prior comparable period.

4. During the period, 810 810 shares were issued.


5. On 1 April 2017, the group acquired certain assets and liabilities of Optipharm Proprietary Limited, a pharmaceutical courier. The provisional fair values of the identifiable assets and liabilities of the company as at the date of acquisition were:

R’000

Assets Property, plant and equipment and software 17 702Trade receivables 8 767Other intangibles 120 891Cash and cash equivalents 8 000Liabilities Finance lease (1 646)Trade and other payables (173 989)Bank overdraft (25 000)Loan payable (7 669)Deferred tax (33 849)

Total identifiable net assets at fair value (86 793)Non-controlling interest at fair value –Goodwill arising on acquisition 86 793

Purchase consideration transferred –

The goodwill comprises the value of expected synergies arising from the acquisition which is not separately recognised. The provisional fair value of the identifiable assets and liabilities changed from R66 million to R87 million since disclosed in the 28 February 2017 annual financial statements.

There were no business combinations during the prior comparable period.

6. No material subsequent events have taken place since reporting date. The Group intends to issue shares/options in regards to the Group share plan in the near future.

7. These reviewed interim condensed consolidated results have been reviewed by independent external auditors Ernst & Young Inc. and their unmodified review report is available for inspection at the Company’s registered office. The review was performed in accordance with ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group’s external auditors.

Shareholders are advised that in order to obtain a full understanding of the nature of the auditor’s engagement, they should obtain a full copy of the auditor’s report from the issuer’s registered office.


SUPPLEMENTARY INFORMATION

DirectorsIndependent non-executive directors LM Nestadt (South African)MJ Bowman (South African)A Coovadia (South African)JS Mthimunye (South African)MSI Gani (South African) (Appointed 3 May 2017)

Executive directors IL Saltzman (South African)LF Saltzman (South African)RM Morais (South African)SE Saltzman (South African) (Alternate for L F Saltzman)

Company registration number2005/009766/06

Registered office23 Stag RoadMidrand1685

Company secretaryWT Green

Registered auditorsErnst & Young Inc.102 Rivonia Road Sandton Johannesburg 2196 South Africa

JSE code DCP

ISINZAE000227831

SponsorThe Standard Bank of South Africa Limited3rd Floor, East Wing30 Baker StreetRosebank2196Johannesburg

Transfer secretariesComputershare Investor Services Proprietary LimitedRosebank Towers15 Biermann AvenueRosebankJohannesburg2196South Africa


Adjusted headline earnings Adjusted Headline earnings per share is (HEPS) is a performance measure derived from HEPS for three categories of items:• items deemed to relate to capital structure of the Group – these

items relates to the capital structure of the Group but is not explicitly provided for in the HEPS circular;

• items related to neither Retail nor Wholesale general operations – these items represent income and expenses that arise outside of the Group’s core retail and wholesale business; and

• items not expected to reoccur – these items are income and expenses that management does not expect to reoccur in the foreseeable future.

Capital expenditure – to maintain operations

Capital expenditure incurred in replacing existing capital (for example, refurbishment of existing new store).

Capital expenditure – to expand operations

Capital expenditure that is not to maintain operations (for example, capital expenditure to open a new store).

Creditors days Creditors days is calculated as the average trade and other payables divided by cost of sales for the period, multiplied by 365 days (184 days for interim).

Debtors days Debtors days is calculated as the average trade and other receivables divided by turnover for the period, multiplied by 365 days (184 days for interim).

Dividend payout ratio Target pay-out ratio is approximately 40% of adjusted headline earnings.

Dividend per share Dividend per share is the interim cash dividend paid and the final cash dividend declared, expressed as cents per share.

Earnings per share Profit attributable to equity holders of the parent divided by the WANOS for the period.

EBIT and EBITDA EBIT is calculated as total comprehensive income plus net financing expense and taxation. EBITDA is calculated as EBIT plus depreciation and amortisation.

Gross profit margin Gross profit margin is calculated as gross profit dividend by turnover.

Headline earnings Profit attributable to equity holders of the parent adjusted for the after-tax effect of goodwill impairment and certain other capital items.

Headline earnings per share Headline earnings divided by the WANOS in issue for the period.

Inventory days Inventory days is calculated as the average inventory divided by cost of sales for the period, multiplied by 365 days (184 days for interim).

Like-for-like turnover growth Like-for-like turnover growth is defined as total growth in turnover only taking into account stores that have been open for at least two full financial years.

Net asset value per share (WANOS)

Net asset value per share is calculated as total equity at period end divided by the WANOS for the period.

Net asset value per share (Actual shares at year end)

Net asset value per share is calculated as total equity at period end divided by the actual number of shares issued at period end.

DEFINITIONS


Operating margin Operating margin is calculated as operating profit dividend by turnover.

Return on Equity Return on Equity is calculated as profit attributable to equity holders of the parent divided by average equity attributable to equity holders of the parent at the start and end of the period.

Revenue Revenue is calculated as turnover plus other income plus finance income.

Total working capital days Total working capital days is calculated as debtors days plus inventory days less creditors days.

Turnover Turnover comprises sales of fast-moving consumer goods, net of returns, discounts and is stated exclusive of value-added tax.

Weighted average number of shares

The number of ordinary shares in issue, increased by shares issued during the period and reduced by shares purchased or shares cancelled during the period, weighted on a time basis for the period during which they have participated in the income of the group. A share split is taken into account in weighted average number of shares as if the shares were issued for the whole period and all earlier periods.

DEFINITIONS CONTINUED

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