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High Court verdict won't reduce demand for pharmacies

Scott Hayton: Pharmacy market has showed no signs of slowing down
Scott Hayton: Pharmacy market has showed no signs of slowing down

A High Court judge's rejection of pharmacy's case against the funding cuts will not have a “notable effect” on sales, a leading broker has told C+D.

Last week (May 18), Judge Justice Collins rejected "with regret" two cases against the funding cuts, brought by the National Pharmacy Association and the Pharmaceutical Services Negotiating Committee.

Scott Hayton, director of brokers Hutchings Consultants, told C+D today (May 18) that "for the last 15 months" buyers have been operating on the basis that the cuts to pharmacy funding in England would not be derailed.

“Since the cuts were announced in December 2015, the pace of the market has displayed no signs of slowing down,” Mr Hayton said. “Despite a marked increase in activity, demand has remained strong and goodwill values stable.”

Mr Hayton said any deviation in the government’s plans to impose cuts would have been a “fantastic achievement”, with “any level of compromise won, a bonus for pharmacy operators”.

He added that he hopes the sector's “new-found strength” could “continue to be used to positive effect”, as contractors in England employ new strategies to meet the practical challenges of the cuts.

Last month, property adviser Christie & Co predicted that pharmacy sales are set to continue for the remainder of 2017. The broker saw a 75% increase in sales either exchanged or completed in the first three months of 2017, compared with the same period last year, it told C+D at the time.

Read C+D's full coverage and analysis of the pharmacy cuts court case here

Will the High Court result impact on your plans to buy or sell?

Meera Sharma, Community pharmacist

This is a double-edged sword. If the goodwill is on the increase, it could be due to off-loading of pharmacies as pharmacists leave the profession - a short-term demand for long-term decline. A pharmacy is no good without a pharmacist - think this article shoudl be read with a pinch of salt (as also highlighted by D Shah above).

S Morein, Pharmacy Area manager/ Operations Manager

Nothing evil about goodwill. The price of an asset is dependent on the profit generated. So obviously the extra ordinary goodwill values commanded by contracts  is directly proportional to the anticipated forward profits these contracts will reasonably generate. So much for poverty stricken contractors it seems purchasers, their financiers and professional advisers seem to all be in agreement that contractors will continue to generate (even after the so called savage cuts) fabulous profits.

Dave Downham, Manager

No - the price of an asset is wholly dependent on how much someone is willing to pay. Nothing remotely extraordinary about that. Financiers, professional advisors and estate agents ain't gonna talk down the market when there is a pot of cash waiting for them, are they?

Valentine Trodd, Community pharmacist

What exactly does he mean by the sector's “new-found strength”?! 

Dilip Shah, Community pharmacist

Interesting assesment but misleading since the number of Independent Pharmacies(single owned) are around 15-20% of the total number of pharmacies. This reflects in the goodwills obtained. The  fact  is that the level of Pharmacy cuts which have been imposed will have a detrimental effect on the bottom lineof the pharmacy profit and loss account and in a majority of small turnover pharmacies this would make them non viable and possibly closures in the next 5 years. This will also reflect in a lot of small turnover pharmacies coming up for sale in the next 1-2 years.

S Morein, Pharmacy Area manager/ Operations Manager

Savage "cuts" causing an increase in goodwill values....could that be due to the extreme excessive profits gifted to contractors???

Dave Downham, Manager

Your logic is tremendous as always. Clearly, the way to reduce all this evil goodwill is to reverse the cuts which will obviously erode all the perceived value in the businesses.

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