Pharmacy News | July 2023

Modiplus • Jul 26, 2023

In our Summer 2023 newsletter, we report on important matters relating to the pharmacy sector

NHS is 75!

We celebrated the 75th birthday of the NHS on 5th July 2023, this milestone makes a perfect opportunity to recognise dedicated staff who make the NHS what it is today. Treating over a million people a day, the NHS touches all our lives. Community pharmacies are an integral part of the NHS, recognised for their hard work, dedication and making a key contribution most recently by administrating new record of 5 million flu jabs.  


Government investment for community pharmacy

The government has promised a £645m investment in community pharmacies over two years which will help community pharmacies. However, there are still questions that need answering and it is not clear if this is a one-off cash injection or new long-term commitment. This is a significant investment in community pharmacy set out to improve access to primary care. It is a step in the right direction for pharmacy however more investment is required to address the funding crisis, staff shortages and medicine supply issues.


Continuing corporate closures and disposals

After months of speculation, LloydsPharmacy permanently closed 237 of its stores in Sainsburys on 13 June 2023. Only a few weeks later, Boots made a shocking announcement that it is set to close 300 branches within the next 12 months. Several of the big pharmacy multiples such as Rowlands Pharmacy are also considering taking similar tough decisions of closure and/or disposal. These changes mean that pharmacies that are being off-loaded by the larger multiples are being acquired by medium, smaller and other independent groups, including many of the first-time buyers and investors, which is a positive for community pharmacy.   


New NHS Pharmaceutical and Local Pharmaceutical Services (PLPS) Regulations

With new regulations, 100-hour pharmacies can opt to reduce their core contractual hours from 100 to 72. Some of our clients have already taken advantage of this and submitted application to reduce the hours. With reduced opening hours, the overheads such as staffing costs will be lower, and in return the profits will be higher. Therefore, if you are looking to dispose a 100-hour pharmacy, a higher price can potentially be achieved. 


Pharmacy locum rates

On another note, the locum rates have increased to record highs for the second year in a row according to the C+D salary survey. The average locum rate has risen by a fifth to nearly £39 per hour, the main factor being shortage of pharmacists, the cost-of-living crisis and inflation. The recent Lloyds Bank webinar suggested that locum costs could potentially go down in the coming months following the large corporate disposals.


Interest rate woes

Banks are still keen to lend money to support acquisitions of pharmacies, however, with current interest rates of 5% which will likely increase to 5.5% in early August (Bank of England), makes it very difficult for first-time buyers to enter the market. In our most recent transactions, we have seen banks requesting additional security and increased deposit from 20% to 30%. First-time buyers are having to borrow additional funds from family and friends or going into partnerships to secure the deal.


Preparing your pharmacy for a sale

There will always be a market for good pharmacies that come up for sale. So, what should you do to make your pharmacy attractive to a potential buyer and get the best price possible?

  • Signage – ensure there is a proper signage to the pharmacy. We visit pharmacies regularly and note that many do not have a proper sign to direct patients into the pharmacy. You want to aim for a higher football and therefore business.
  • Shop window – an attractive shop window will always attract customers. Ensure that your windows are cleaned on regular basis and display offers / promotions to boost sales.
  • Pharmacy shop floor – your pharmacy layout plays a significant role in patient perception which will have a positive impact on sales. Ensure it flows and is free of clutter and boxes. A clinical feel and look of the pharmacy inspire confidence in the patients.  
  • Online presence – having a good website will attract new customers. From our experience when we get instructed to sell the pharmacy, usually there is no or very limited online presence. Potential new customers do tend to check the website and read reviews prior to their visit so having a good professional looking website is important.  
  • Competition – be mindful of your competition and what are they offering. This is very useful information to attract more customers and offer better products at competitive prices. You can also monitor your competitors and how they are preforming by subscribing to PharmData for a small monthly fee of £3.59.


It is not only the aesthetics of the business but also financials; you should also engage a pharmacy specialist accountant at least few years prior to selling to get your financials in order which will also help maximise the goodwill of your pharmacy.

 

Other news

We will be at The Pharmacy Show at NEC Birmingham on 15 and 16 October 2023. If you are thinking of selling or buying a pharmacy, or looking for specialist pharmacy accountancy and tax advice, our team will be happy to discuss options with you at stand number N20 located next to the business theatre.


Last month we participated with our associated company Silver Levene LLP in the annual 10km London Legal Walk. We thank you for all your donations to support such a good cause and we were pleased to have been featured in The Law Society Gazette who announced this year’s charity walk as biggest ever with a record 16,000 participants raising a total of £910,000.

 

Thinking of selling or buying?

If you would like a free valuation or talk about how you could achieve a fantastic price for your pharmacy, please do contact us our direct dial numbers on 020 7380 3446 or 020 7380 3424 and ask for Sanja or Diana in the first instance. We would welcome the opportunity to have a chat with you.


Alternatively, if you would like to buy a pharmacy, need accounting, or tax advice through our associated company Silver Levene LLP, please also contact us on the same numbers. Your query will be directed to the right person.


Silver Levene LLP offers fixed price packages for accounting and tax services as well as  valuations, cashflow and profit forecasts, raising loan finance, due diligence, accountancy work for asset and company sale transactions. Contact us for more details.


We trust you will all have a good Summer and look forward to hearing from you. 


This article is based on current legislation and practice and is for guidance only. Specific professional advice should be taken before acting on matters mentioned here. Should you require any advice please do not hesitate to contact us.

Latest Pharmacy News | April 2024

16 Apr, 2024
Welcome to the spring edition of our quarterly newsletter Initial reaction to Pharmacy First Recent research conducted by AIMp found that 70.8% of the pharmacy owners do not think there is sufficient funding allocated for the scheme, 20.8% say it is too early to say and just 8.3% responded saying it was adequate. Their #Fight4Pharmacies campaign was also launched on 20 March 2024 outside Parliament which created an extensive amount of interest with the media and politicians. The success of the Pharmacy First scheme will vary and depending on factors such as local implementation, public awareness, pharmacist training etc. To address funding shortfalls, pharmacy owners need to explore other options such as reallocating resources, securing additional funding and enhancing relationships with GPs. Pharmacy contract and funding The old contract has expired, however, there is no news regarding the pharmacy funding negotiations. The negotiations are taking place between Community Pharmacy England (CPE) and the Department of Health and Social Care (DHSC) , supported by NHS England (NHSE) . The reasons for the sale of community pharmacies The sale of community pharmacies can occur for various reasons and under different circumstances as follows: - Retirement - You may choose to sell your business when you reach a retirement age or decide to exit the profession for personal reasons. Selling the pharmacy allows you to liquidate your assets and transition into retirement. Relocation - Changes in your personal circumstances or opportunities in a different location may prompt you to sell and move elsewhere. Relocation could be due to family reasons, lifestyle preferences, or professional opportunities. Financial reasons - Financial challenges or the desire to capitalise on the value of the pharmacy may lead you to consider selling. This could include factors such as declining profitability, changes in reimbursement rates, or the need for additional capital investment. Expansion or consolidation - A multiple may acquire as part of their expansion or consolidation strategies. Selling to a larger entity can provide you with higher value in some cases. Launch of Pharmacy First and providing new services - The running of pharmacies has undergone several changes over the years, particularly with increased automation, digitalisation, and expansion of online services. The model has gone through a complete overhaul. We are seeing lots of our clients for whom we provide accountancy services at Silver Levene who are struggling with Pharmacy First services due to staffing issues which is resulting in decline of their profit margins. Market dynamics - Changes in the healthcare landscape, regulatory environment, or consumer behaviour may influence your decision to sell. Adapting to evolving market conditions or responding to competitive pressures may involve selling the pharmacy to a buyer better positioned to navigate these challenges. Following large corporate disposals, we are now seeing the goodwill value increase compared to last quarter, which makes it an ideal time to exit, if you are looking to sell. With bank interest rates likely to go down from June, affordability becomes easier too. Succession planning - You may sell your pharmacy as part of succession planning efforts, either transferring ownership to family members or grooming internal staff to take over management. Selling the pharmacy ensures a smooth transition of ownership and management responsibilities. The sale of community pharmacy is typically a complex process that involves legal, financial, and regulatory considerations. You as pharmacy owners may work with sales agents, financial advisors, or legal professionals to facilitate the sale and ensure compliance with relevant laws and regulations governing pharmacy ownership and operation. If you are thinking of selling, it is paramount to get your house in order and speak to your accountant well in advance and prior to putting the pharmacy on the market. We can provide accountancy and taxation services through our associated company Silver Levene with a proven track record of over 30 years. Changes in ownership With last year’s corporate disposals, the tide has turned, and more pharmacies are now run by independents compared to corporates. The recent Sigma conference in South Africa highlighted this issue, as shown in the table below courtesy of RWA Pharmacy:

Pharmacy News | December 2023

04 Dec, 2023
Welcome to the winter edition of our quarterly newsletter The future of community pharmacy Nobody knows the future of community pharmacy and the right time to sell. As always, you should consider selling when there is no threat to your business that will affect its goodwill. You might decide to sell due to retirement, ill health or you are going into a new venture. We have seen goodwill values drop in the last 12 months or so due to corporate disposals and other distressed sales flooding the market. But it’s not all gloom and doom as equally, we have been extremely busy completing many deals over the last quarter. Most of the transactions have been to first time buyers, independents, small and medium size groups with a forward-looking plan to grow while the large multiples downsize. We believe next year will present a good opportunity to exit, if you are looking to sell the business, as interest rates start to fall, cost of living crisis abate, and the banks start to lend proactively again. Pharmacy First service This service will launch on 31 January 2024 which will be a new advanced service and will replace the Community Pharmacist Consultation Service (CPCS). The pharmacies will receive a first initial fixed payment of £2,000 that can be claimed from December 2023 and a monthly fixed payment of £1,000 from February 2024 for pharmacy contractors who reach a minimum number of monthly clinical pathway consultations (from 1 consultation in February 2024 to 30 consultations from October 2024). Community pharmacists should seize the opportunity and provide maximum amount of services that they possibly can, to increase sales and profits to mitigate the cost increases of the last couple of years. This will also increase the value of the business. The Pharmacy Show 2023 The Pharmacy Show returned to the NEC Birmingham on 15th and 16th October 2023. Over the course of two days, there were over 8,500 pharmacy professionals attending the show and over 300 exhibitors. A highlight of the show, an automation system (robotic) whereby even a small pharmacy can invest into one model for hub and spoke which was previously only an option for larger groups. There is a whole host of affordable options that will allow you to automate those everyday tasks such as dispensing medication and managing stock levels etc. Our joint stand with Silver Levene was located next to the Business Theatre where some excellent speakers with thought provoking ideas commented on the future of the pharmacy and new funding. Whilst exhibiting, we had numerous enquiries on selling and buying a pharmacy as well as pharmacists looking for an accountancy and tax advice. The show was a success, and we look forward to exhibiting again next year, our 17th year bar the covid years. Pharmacy Valuations If you are thinking of selling your pharmacy, we advise that you seek professional advice and valuation from a pharmacy expert or pharmacy sales agent. The valuation is determined by several factors to name but a few as a reminder: - EBITDA (Earnings before interest, tax, depreciation, and amortisation) profits – this is a preferred measure to value pharmacies and bank’s valuer will do the same. Financial information – Accounts, FP34s, VAT returns should be up to date. Location – pharmacies located in a health centre or next door to a surgery will still fetch abetter price, if there is more footfall too. Lease and rent – ensure there is at least 10 years left on the lease and is renewable. A very high rent will be a detriment to sale, buyers will account for any future rent and increases. Staff costs – high staff and locum costs will reduce the value of the pharmacy. NHS/OTC/services/wholesale/online/export sales – please ensure that these are analysed separately in the accounts. Growth potential – for example if you are not doing many of the services, the buyer will see this as an opportunity to enhance business and this is an attractive proposition for the buyer. Interest rates and buyers’ appetite The banks have maintained the level of lending appetite despite the rise in interest rates and economic pressures. We are pleased to report that most of our recent completion were to first time buyers which leads us to believe that they have a strong desire to acquire good, solid and profitable businesses. To facilitate their lending, many of the banks that are active in the pharmacy market are seeking increased due diligence, business plans, personal guarantee etc. The table below shows interest rates at their peak, and the prediction for 2024 through to 2027 (source Bank of England ).

Pharmacy News | April 2023

By Modiplus • 05 Apr, 2023
As Easter 2023 is approaching, what does the next quarter have in store for pharmacy? Challenges for pharmacy in 2023 2023 started with shocking news of large corporate multiples announcing closures to their branch numbers - Lloyds Pharmacy to close all its 237 branches in Sainsbury’s , Asda closing 7 pharmacies and Tesco closing 8 pharmacies. To top this, there was a further leak in the national press in early March that Aurelius , parent company of Lloyds Pharmacy , has put all of its 1,300 branches at risk of closure. In addition, a recent RPS survey found that three quarters of pharmacists are so stressed and were thinking about quitting. The Pharmaceutical Services Negotiating Committee (PSNC) met for a full committee meeting early in February 2023 to consider the urgent funding and capacity crisis, as well as proposals from the Department of Health and Social Care (DHSC) and NHS England on price concessions reform and relief measures to ease pressure on pharmacies. Surely, this should be a wake-up call for the Government to support the pharmacy sector. The rest of 2023 is likely to be a challenging year for the sector with the UK likely to experience a shallow recession, high interest rates, taxes, inflation, energy costs and rising cost of living which has hit everybody hard. The Government urgently needs to decide whether they want to build community pharmacy into their plans to improve access to primary care or stand by and see the sector continue to dwindle in numbers. How will this impact pharmacy sales? Pharmacy owners contemplating a sale in the next 6 to 12 months, should bring forward their plans and consider a sale sooner rather than later to maximise the value of the business. With the banking crisis upon us again, there is a fear that the banks will tighten their lending policies even further. They are currently lending 70% for the goodwill of the pharmacy compared to up to 90% in 2021/22. This will have an impact on valuations. There will be further divestments in the coming months, with more multiples and small turnover pharmacies sold off and despite more stock coming to the market, the pharmacy business remains attractive. It will be a buyer’s market for a while, and they are being more selective in what they purchase. It is not all doom and gloom! On a more positive note, we have had more first-time and independent groups register with us and are looking to acquire a pharmacy or pharmacies. First-time buyers are bridging the funding gap with the assistance of mum and dad. Small and medium sized independent groups with a good track record and funding support, are proactively looking to grow their estate. We have also seen an increase in enquiries from investors and those looking to buy a DSP and / or an online pharmacy, with existing contractors looking to operate it alongside their pharmacy. If you are looking to sell, you need to get your ducks in row and initially provide the following for a desktop valuation: + 3 years accounts. + If selling branches, provide turnover figure per branch and a split of NHS and OTC sales. + FP34s for the last 3 months. + VAT returns for the last 3 months. + A summary of staffing schedule. + Details of the lease and rent. Selling your pharmacy is one of the most important decisions you will have to make, it pays to have experience on your side. On the other hand, if you are located within proximity of a Lloyds Pharmac y, you may want to consider acquiring that branch which in return will protect your business, increase your item number, turnover and profit and you will dominate the area. An owner managed pharmacy can offer a far better and more consistent service to their patients rather than a large multiple. We can assist you through our associated company Silver Levene and advise you on a purchase of a Lloyds Pharmacy . We have seen an increase in enquiries from prospective buyers and existing clients looking to acquire those branches and it pays to have an expert advice for guidance on accounts, making an offer etc. We specialise in community pharmacy sector and have done so for over 30 years helping many pharmacists acquire their first pharmacy or expand their existing portfolio. Other news We also look forward to participating together with our associated company Silver Levene in our annual 10km London Legal Walk through the Royal Parks on 13th June 2023. The money raised is to provide much needed free legal advice to the poorest and most vulnerable people in our community from families living in terrible housing conditions to women and children who have been trafficked to the UK. If you would like to sponsor us and make donations, please go to the following webpage: - https://londonlegalsupporttrust.enthuse.com/pf/silver-levene-2023 Thinking of selling or buying? If you would like a free valuation or talk about how you could achieve a fantastic price for your pharmacy, please do contact us on 020 7380 3446 or 020 7380 3424 and ask for Sanja or Diana in the first instance. We would welcome the opportunity to have a chat with you. Alternatively, if you would like to buy a pharmacy, need accounting, or tax advice through our associated company Silver Levene , please also contact us on the same numbers. Your query will be directed to the right person. We wish you a happy Easter break and look forward to hearing from you. This article is based on current legislation and practice and is for guidance only. Specific professional advice should be taken before acting on matters mentioned here. Should you require any advice please do not hesitate to contact us .
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