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Pharmacy News | July 2023

Modiplus • July 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.

Pharmacy News | February 2025

By Modiplus • February 26, 2025
Welcome to our Winter Newsletter! Pharmacy market trend and buyers’ appetite If you are thinking of selling your pharmacy, there is still a demand for pharmacies across the country as the market remains buoyant. The pharmacy market has seen an increase in the number of pharmacies entering the market and completed sales. This is driven by economic pressures, fiscal policies, lack of funding, and exit of larger multiples from the market, such as Lloyds Pharmacy and Boots, which has led to the rise of independents and consolidations. The appetite remains strong from the first-time buyers, with independent and smaller chains the most active in the pharmacy acquisitions. Valuation calculations We have also seen the valuation of pharmacies improving, and on average we are achieving a goodwill price of 85p to 90p in £1 of turnover for standard hour contracts. Demand for pharmacies with a turnover of more than £750k to £1.5m with healthy profits is particularly attractive for the first-time acquisitions or an existing independent operator looking to expand. Below is a range of estimated valuations, if you are looking to sell: -

Pharmacy News | August 2024

By Modiplus • August 29, 2024
Welcome to our Summer Newsletter and we trust that you are enjoying the late summer weather! This summer has been extraordinary so far, full of sporting events such as football, tennis, cricket and the Olympic games! We have been very busy in the last quarter, whereby we have seen the first-time buyer appetite remain strong. Similarly, we have seen an increase in the number of sales enquiries of smaller pharmacies while others are holding off awaiting the outcome of the new funding and success of Pharmacy First scheme. On average we are achieving goodwill price of between 85p to 90p in £1 of turnover at present. The average profit margin has shown an improvement to 32% despite medicine shortages. Data from Pharmacy First (NHSBSA) The launch of the Pharmacy First has gone off with a positive start, it has been very encouraging to see so many patients benefiting from this scheme, and your exceptional efforts in delivering these services have been commendable. However, we note that monthly payments are still critical, and concur that it is completely unreasonable for pharmacy to be penalised financially for the NHS’ failure to drive public and GP referrals. The NHS Business Services Authority (NHSBSA) has released figures for the Pharmacy First Service covering the period of February to April 2024 as follows: -

Pharmacy News | April 2024

By Modiplus • April 16, 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:
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