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Lloydspharmacy: ‘Challenging’ funding model led to divestment of 76 branches

Lloydspharmacy decided to close, merge, or sell 76 branches in 2020/21 as part of a “rationalisation programme” it started as a consequence of the “challenging” government funding model, it has said.

The multiple saw a fall in turnover for the year up to March 2021, which stood at £1.76 billion –  9.6% down on the £1.95bn it reported for 2019/20, it said in its financial report for 2020/21, uploaded to Companies House earlier this week (April 5).

However, following the decision to divest 76 branches in the 2020/21 financial year, Lloydspharmacy said that “despite the reduction in turnover”, its operating loss had “reduced by 69.6% to £35.1 million, representing a significant improvement over the prior fiscal year”.

As of March 31 2021, the multiple, had 1,351 pharmacies.


Read more: Lloydspharmacy superintendent: Roles in community not currently pharmacists' first choice


However, Lloydspharmacy stressed that its “bricks and mortar community pharmacy estate remains central to our omni-channel strategy”.

In 2020, the multiple told C+D it would begin to close a “small number” of community pharmacies that it identified at the time as “no longer commercially viable”.

The company saw its overall loss for the 2020/21 financial year hit £100m. However, the loss reported represents a 42% reduction compared to the year ending March 31, 2020, when losses of £174.8m were incurred.


COVID-19's impact on business


A reduction in footfall to pharmacies due to COVID-19 national lockdowns placed “great strain” on Lloydspharmacy, it said. This, along with the divestment of some branches and “changes to government reimbursement”, contributed to driving “the fall in revenue”, according to the report.

But the report did acknowledge the support provided by the UK government, including “reimbursement for opening on bank holidays”, the furlough scheme and “business rates relief for retail businesses”, which it said had helped to “alleviate the additional cost of the pandemic”.


Read more: Aurelius Group takeover: the latest chapter in the Lloydspharmacy saga


Lloydspharmacy also received NHS advanced funding from each of the UK nations "proportionate to the number of pharmacies in each domicile, which we used to mitigate cashflow impact created by COVID-19”, the report added.

While the multiple began to repay advances for Scotland and Wales during the last financial year, “all advances will be paid back by March 31, 2022”, according to the report.


731% growth for Lloydsdirect


The multiple’s digital offering fared well in the 2020/21 financial year, according to the report. The Lloydsdirect service, which allows patients to order and receive repeat and acute prescriptions via an app, grew by 731% in the year. Lloydspharmacy's online doctor service also grew by 10%.

Last year, Lloyds Echo rebranded to Lloydsdirect “to reflect how the business has evolved”.

Meanwhile, Lloydspharmacy’s website, which was “re-platformed to improve efficiency and customer experience”, saw growth of 237%.


Read more: Lloydsdirect’s 24-hour Royal Mail delivery service now available across England


“This transformation strategy, to turn Lloydspharmacy into an omnichannel business that provides choice in healthcare to patients and consumers, has continued to resonate well with our patients and customers and we are particularly pleased with our delivery in digital revenue this year,” the report added.

It comes as Lloydspharmacy’s parent company McKesson UK announced yesterday that it had completed the £477m sale of Lloydspharmacy and AAH to private equity firm Aurelius Group.

McKesson UK CEO Toby Anderson said the acquisition will allow the company to be “more agile” and build on the progress it has already made in “delivering our business strategy”.


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