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Weldricks posts £1.4m loss amid funding ‘war of attrition’

Weldricks’ operations director has said that its 2023 losses were caused by inflation “running ahead of the rate” that the pharmacy was getting paid, in an exclusive interview with C+D.

Independent multiple pharmacy business H. I. Weldrick posted a £1.4 million loss after tax in the last financial year – up from £893,000 in 2022 – according to its strategic report for the financial year ending April 30 2023 published earlier this month (March 8).

But with the funding crisis afflicting the whole sector, its operations director David Vanns told C+D that the 64-pharmacy chain can “survive the war of attrition longer than most”.

Weldricks’ strategic report showed that the independent multiple increased its turnover by 7%, from £69.4m in 2022 to £74.4m in 2023. 

Read more: Cuts, overdrafts and closures: Business becoming ‘impossible’ for contractors

But the report also noted that Weldricks’ gross profit percentage decreased from 31% to 29% over the year “despite all sensible cost savings”, including reducing staff costs as a share of turnover from 21% in 2022 to 19% in 2023.

Its declining performance is a “direct result” of the five-year community pharmacy contractual framework, according to the strategic report.

And Vanns told C+D that the accounts of pharmacy businesses across the sector were “clearly showing” the effects of “poor funding”.

Read more: ‘It's time we did something different’: AIMp rallies at Westminster

He said the sector was underfunded by “a minimum of £1.2 billion” in core funding.

Community pharmacy is in a “very unusual and difficult place” during a period of cost price inflation, as it cannot increase the price it charges its dominant customer, the NHS, he added.

 

“Unacceptable amount of guesswork”

 

In its report, Weldricks said that its operating results reflected financial pressures including “pharmacist shortages and higher locum charges, shortages of dispensing stock and price increases”.

Vanns said that Weldricks’ loss was “essentially” caused by inflation “running ahead of the rate that [the pharmacy is] getting paid”.

He told C+D that it took the independent multiple “up to nine months” for its payments to be resolved and for it to receive the margin due to it.

Read more: Paydens ‘focused’ on meeting sector challenges amid £6m loss in 2023

Vanns said that the accounts reflected “a very prudent view” that he does not expect that the business will receive “all of that margin that we believe we're due”. 

He added that anticipating future earnings involved “a highly unacceptable amount of guesswork”, even as a structured business that does an “awful lot of analytics”.

 

Hub hopes

 

Vanns said that Weldricks’ hub, which is “one of the top ten volume pharmacies in the country”, added value to the business but “not as much as it could”.

According to the report, the business had invested in “automated dispensing systems to enhance [the] central dispensing hub”.

Read more: Avicenna pharmacies ‘feel the squeeze’ amid branch disposal plans

Vanns said that the hub had “reduced the cost of assembling NHS prescriptions” and “increased the headroom” available to pharmacists, freeing them up to provide services.

But he added that the hub came with a “huge upfront cost” that would be dispersed over nine to 12 years, as well as requiring the retraining of staff who found the automated production process “alien”. 

 

Four-pharmacy expansion

 

Weldricks revealed that the group acquired four pharmacies “from a competitor in South Yorkshire and Lincolnshire” after the reporting period covered by its annual accounts. 

Its report said that the pharmacies were a “good geographical fit” as the company “consolidates its presence in its core markets” and would account for “approximately 4%” of sales.

Vanns told C+D that despite the group making a loss in the year, the decision to purchase further pharmacies was a “fairly limited” gamble because the business could access funding and because pharmacies were “historically low priced”. 

Read more: Rowlands sets out ‘close, merge, dispose’ strategy amid £219m loss in 2022/23

He said that if the funding situation does improve, the pharmacies would “add in value” to the business as a whole.

However, he added that if the situation remains poor, he “can just close them” and “consolidate the volume into [his] existing businesses”.

It comes as C+D’s annual Salary Survey revealed that contractors were struggling to "make ends meet" last year, with 43% reporting that their monthly wholesaler bills were “regularly” more than their NHS payments.

Read more: Pharmacies treated as an ‘afterthought’ by government, says MP

Last week, the Association of Independent Multiple Pharmacies (AIMp) launched its “Fight4Pharmacy” campaign. At the launch, AIMp’s chief executive Dr Leyla Hannbeck said that “the rotten funding and contract has been dragging on for so long that a lot of people are feeling at the moment that is just impossible to operate”.

Weldricks is one of many independent multiples that have posted losses. Earlier this month, C+D reported that Paydens Pharmacy had experienced a sudden drop in earnings “directly caused by the flat rate of pharmacy funding”.

And in January, Avicenna Retail revealed that its gross margin declined by 2.5 percentage points from 29.1% to 26.6% due to “higher drug costs”.

Sales director for the Avicenna Group Brij Valla told C+D that pharmacies were being hit by a “triple whammy” of increased costs from inflation, the national living wage increase and continued clawbacks, alongside the ongoing impact of the fixed five-year deal that doesn’t take into account increased items and drug costs.

“I don’t think independents can handle another 12 months in the way the current model works”, Valla said at the time.

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