Dis-Chem aims to start paying out as much as half of its net income within the next few years, says chief financial officer Rui Morais.

The pharmacy group said in a presentation to shareholders on Wednesday it wanted to lift its dividend pay-out ratio from 40% of net income to up to 50% of earnings over the medium term.

“But that’s very dependent on how many of these acquisition opportunities we see and take,” Morais told Business Day.

“We’re highly cash generative at the moment and investing in retail space, but we’re seeing quite a few acquisition opportunities which, in the current market, make sense…. So the evolution of that dividend policy will be based on the extent of the acquisitions we make.”

Dis-Chem is in the process of acquiring a wholesaler in the Western Cape called Quenets, as well as Springbok Pharmacy.

The constrained environment for independent players was presenting further consolidation opportunities, Morais said.

Dis-Chem on Wednesday reported a 9.4% rise in revenues to R10.5bn for the six months to end-August. Profit after tax grew 12.3% to R460m as the wholesale business reached break-even.

The group said two new outlets had been added since the reporting period and 13 more store openings were planned by February 2019. Morais said average store sizes were declining by 2% to 3% a year.

“That’s a function of how the retail property market is developing – a lot more convenience centres with longer trading hours focused on residential nodes. It’s generally very difficult for us to get 1,500m² of space in an 8,000m² centre, so naturally that’s reducing space slightly and the mix is changing a little bit.”

Meanwhile, Dis-Chem was still working out the implications for pharmacies following the recent Constitutional Court ruling that effectively decriminalised the private use of cannabis in SA, Morais said.

“It’s certainly something that we’re looking at… I think it presents both risks and opportunities."

Cannabis is used to treat pain and mood and sleep disorders, among other ailments.

A study by Colorado-based BDS Analytics, of 17,000 Canadians in the US, found that 47% of cannabis users had decreased their use of prescription drugs in recent months. As many as 51% of respondents said they had decreased their use of over-the-counter medication.

“As our understanding evolves and as there’s more clarity in terms of what the regulation includes or precludes, that would translate into the strategic direction we’ll take,” Morais said.

According to their websites, Dis-Chem and rival group Clicks already sell products made with hemp oil. Hemp is a type of cannabis that does not contain the psychoactive ingredient tetrahydrocannabinol (THC).

Meanwhile, Dis-Chem CEO Ivan Saltzman said there were signs that consumer confidence was lifting despite fuel price hikes and higher value-added tax.

“After tough trading conditions in April, we experienced another extremely tough trading month in July. Subsequently, we have seen trading improvements in August and then again in September, suggesting consumer confidence is improving slightly,” Saltzman said.

Dis-Chem’s shares gained 1.1% to R27.90 on Wednesday.