Rowlands sets out ‘close, merge, dispose’ strategy amid £219m loss in 2022/23
Rowlands has posted a 500% increase in losses for the financial year ending January 31 2023, according to its latest financial statements.
L.Rowland and Company, the holding company for large multiple Rowlands Pharmacy, incurred a £219 million loss for the year ending January 31, 2023, according to financial statements published on Companies House last week (November 3).
Rowlands’ loss is up more than 500% from 2022, when the multiple posted a loss of £35m, the documents showed.
A spokesperson for Rowlands told C+D yesterday (November 9) that the “vast majority of the loss” was due to “impairments” caused by “reduced profitability arising from the uncertainty of future pharmacy funding in England”.
The statements showed that the net licence impairment for the year ending in January 31 was £139m, up more than 2,000% from £6.5m in the previous financial statement.
“Close and merge and disposal”
The documents described the multiple’s “ongoing portfolio strategy” as “close and merge and disposal of branches”, adding that its “estate strategy” had led to its divestment of “a number of pharmacies” over the year.
However, the multiple acquired 30 pharmacies in Scotland from the Lloydspharmacy group after its financial statements were finalised.
The Rowlands spokesperson told C+D that Scotland’s funding arrangement was “different” to England’s in that the country recognises that investing in community pharmacy improves “patient outcomes” and relieves pressure on the NHS.
Meanwhile, the documents said that the multiple expects England’s market for bricks and mortar pharmacies “will reduce” year-on-year but that it will maintain its market share in dispensing prescriptions with “a positive shift in distance selling pharmacy items” through its “digital strategy”.
Staff costs rise as employees fall
The financial statements also showed that staff costs rose from £67m in 2022 to £69m in 2023, despite “a reduction of employees within branches”.
They said that average staff numbers decreased by 4.3% during the year due to a reduction in branches, efficiency savings, “increased attrition” and “the rollout of…automated dispensing solutions”.
The Rowlands spokesperson also told C+D that “increased costs relating to locum rates” were among the contributing factors to its loss for the year.
As of the end of January, the multiple had £101m in gross profit, down from £122m in 2022, according to the documents.
Its revenue was £406m, up from £404m the previous year, with this meagre rise driven by NHS services and over-the-counter (OTC) sales.
However, prescription dispensing – responsible for 88% of its revenue as of January 31 – dropped from £366m to £358m.
The multiple said that the government’s pharmacy remuneration structure, particularly the Category M mechanism and adjustments to dispensing fees, had a “direct impact” on its profitability.
And it added that the current high rates of inflation had a “significant impact on costs”.
Working to restore profitability
The Rowlands spokesperson told C+D that its financial statements showed the “impact of government underfunding” on the sector in England.
They added that the “massive” inflationary pressures faced by community pharmacy are “simply being ignored by the government”.
The spokesperson called for “funding uncertainty for the core contract” to end if the tide of pharmacy closures is to be stemmed and the sector is to “successfully” deliver the upcoming national Pharmacy First service in England.
A spokesperson for the Department of Health and Social Care (DH) told C+D that “community pharmacies play a vital role in the NHS and provide healthcare advice and support”.
“We have already announced up to £645m in additional funding and thousands more training places for pharmacists as part of the long term workforce plan, on top of the £2.6 billion we provide every year to the sector,” they said.
Nevertheless, the Rowlands spokesperson said that the multiple was “taking necessary measures” to restore profitability – including an in-house OTC brand, increasing footfall by refurbishing branches and a “significant capital investment” in centralised dispensing.
Despite the large loss, the company said it had “a reasonable expectation” that it would be able to continue as a going concern, with its parent company providing assurances that it had the “necessary funds” to meet Rowlands’ liabilities.