Lloyds owner: UK’s pandemic policies may affect 2020/21 profits
Lloydspharmacy’s parent company expects a profit decline across its European business this financial year, partly due to “severe social restrictions” in the UK over COVID-19.
McKesson said last week (May 20) that it predicts a 20-25% drop in adjusted operating profit across its European pharmaceutical solutions division – which includes Lloydspharmacy and the wholesaler AAH – in the current financial year (2020-21).
This is “driven by anticipated impacts of the COVID-19 pandemic on customer behaviour patterns over the first half of the fiscal year”, McKesson announced during a conference call last week to discuss the company’s results in the last quarter of the 2019-20 financial year.
The UK, which is McKesson’s largest market in Europe and where it operates more than 1,500 pharmacies under the Lloydspharmacy brand, has been “more severely impacted” by the pandemic “and has had some of the more severe social restrictions applied”, McKesson CEO Brian Tyler said in response to a question about the impact of COVID-19 on its European business. That is “what you're seeing really flow through our numbers”, he added.
There will be “different kinds of challenges” associated with the social distancing policies introduced in each of the 13 European countries where McKesson has business, Mr Tyler added.
“When we look at an aggregate level, it's going to depend a little bit on how these countries open and what their response will be,” he said of the outlook across McKesson’s European markets for the 2020-21 financial year.
Retail traffic impacted
McKesson said is not assuming there will be a second wave of the virus. It expects “pharmacy interactions will begin to gradually resume in our fiscal second quarter and continue to improve in the back half of our fiscal year”, executive vice president and chief financial officer Britt Vitalone said.
Mr Tyler added that retail traffic in Europe has been impacted by social distancing measures and that “our retail pharmacy operations are navigating how to adapt to changing consumer needs”.
No further pharmacy closures
Asked by C+D last week (May 21) whether the effect of COVID-19 on retail traffic in Europe might translate into new pharmacy closures, a McKesson spokesperson said this is not currently part of the company’s “cost mitigation efforts”.
“Our fiscal 2021 outlook expects modest improvement in the retail pharmacy environment, beginning in our fiscal second quarter and continuing through the fiscal year,” they added.
McKesson reported a 9% growth in revenue across its pharmaceutical distribution business in Europe in the three months leading up to March 31, which it attributed in part to demand for pharmaceuticals triggered by COVID-19.
When announcing its financial results a year ago, McKesson said it expected further pharmacy branch closures in Europe.