UPDATE 2-S.Africa's Dis-Chem lifts profit, withholds dividend as eyes acquisitions

* Will preserve cash to fund acquisitions

* H1 HEPS up 16.2%

* Considering buying community-based pharmacy group

* Shares up more than 6% (Recasts with health insurance acquisition)

JOHANNESBURG, Nov 5 (Reuters) - South African drug store chain Dis-Chem Pharmacies reported on Thursday a 16% jump in half-year earnings, propelling its shares to a six-month high though it withheld an interim dividend to conserve cash to fund acquisitions.

The planned acquisitions include a stake in a healthcare insurance business which Dis-Chem said was at an advanced stage and would provide it access to segments of the population historically not covered by the private healthcare sector.

It was also looking to buy a community-based pharmacy group.

“COVID-19 has highlighted that individuals and companies are more prepared than ever to spend on healthcare,” Dis-Chem said in a statement.

The pharmacy group did not name the health insurance firm but said the business specialised “in the design, administration, risk management and delivery of primary healthcare insurance, as well as gap cover and psychological wellbeing”.

Dis-Chem is also considering buying a community-based pharmacy group that will expand its store base in convenience centres, it said, adding it will not declare an interim dividend to conserve cash.

Its headline earnings per share, the main profit measure in South Africa, for the six months ended Aug. 31 rose by 16.2% to 36 cents from 31 cents in 2019 as it benefited from being an essential services provider during the COVID-19 pandemic.

By 0946 GMT, its shares were 6.5% up.

Group revenue rose by 8.1% to 12.8 billion rand ($810.5 million), with retail revenue growth of 6% and wholesale revenue growth of 14.9%.

Dis-Chem said it is slowly starting to see the sales and gross margin mix normalise but continues to expect gross margin to track behind sales growth into the second half of the financial year.

For the nine weeks to Oct. 31, group revenue grew by 7.1% from the prior comparable period. ($1 = 15.7928 rand) (Reporting by Nqobile Dludla; Editing by Jacqueline Wong, Promit Mukherjee and Emelia Sithole-Matarise)