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Lloydspharmacy finances fall 'significantly' due to cuts

Celesio does not expect the number of its pharmacies to change significantly
Celesio does not expect the number of its pharmacies to change significantly

Lloydspharmacy’s parent company has blamed the category M clawback and funding cuts in England for its "significant" drop in earnings.

The Celesio Group’s earnings before interest and taxes fell by 29.1% to £265.8 million (€302.6m) between April 2016 and March 2017, compared with the same period the previous year, it said in a statement last Friday (June 23).

The "new funding structure" in England, along with the "reimbursement price cuts on prescription products", contributed to "a significantly worse than expected performance, as well as a lower outlook for [the] UK retail pharmacy business", the group said in its annual report.

In November 2016, Celesio predicted the group’s annual earnings for 2016-17 would fall "slightly below" the previous year's figures, after the Department of Health (DH) reduced category M payments by a total of £48m between June and September 2016.

The Germany-based company’s overall group revenue for 2016-17 was £18.1 billion (€20.6bn), a 2.6% drop on the previous year, which Celesio partly attributed to "devaluation of the British pound" and the sale of its Norwegian and Swedish businesses to its US-based parent company McKesson.

Long-term impact

Celesio warned that "earnings will continue to be burdened" as the UK government implements its "second phase" of funding cuts in England – which will amount to a £95m drop across the sector in 2017-18.

The impact is expected to "carry on medium to long-term", the group added.

Celesio noted that the "ongoing optimisation of [its] portfolio" – including its acquisition of Sainsbury’s pharmacy business and its sale of 43 pharmacies last year – led to a "net increase of 227 pharmacies" across the group by March 2017.

Celesio now operates 2,140 retail pharmacies – over 1,800 of them in the UK – and this is not expected to "change significantly in fiscal year 2018", the group said in its report.

Impact on staff

Despite the funding drop in England, staff "headcount is expected to slightly increase" across the Celesio Group over 2017-18, it added in the report.

Speaking exclusively to C+D in February, Celesio UK managing director Cormac Tobin said he “won't make any commitments” on whether all of the company’s staff will keep their jobs as the funding cuts start to bite.

In response to a question last Friday on whether the latest financial results make it more likely any Lloydspharmacy staff will lose their jobs, the group told C+D: "The impact of the funding cuts is still being felt in the UK, but through Lloydspharmacy, Celesio UK continues to put the patient at the heart of everything we do."

9 Comments
Question: 
What impact has the category M clawback had on your pharmacy?

david williams, Community pharmacist

Forget the politics, I know peolple are polarised in their veiw, and probably understandably. However, these are real people with mortgages and families to feed. My main thoughts are with these people. I hope most pharmacies are sold and therefore give these staff a chance of long term employment. Time will tell on Celsio's intentions .

Kyle Fowler, Dispenser Manager/ Dispensing Assistant

Perhaps the problem is with the way Lloyds pharmacy is run? Celesio does not have a clue how to run a pharmacy successfully

Bob Wilson, Manager

Badly run business is only reason why it’s failing....everything is just an excuse

Pharmacist Pharmacist, Community pharmacist

"The impact of the funding cuts is still being felt in the UK, but through Lloydspharmacy, Celesio UK continues to put the patient at the heart of everything we do."

Lol. Patient at the centre of all we do. Hahaha. Dont make me laugh

Anon E Mouse, Pharmaceutical Adviser

                

Z ZZzzzz, Information Technology

Not to worry. When the majority of less well financed smaller pharmacies eventually close, the remaining global sum pie will be left to be shared between the big two. Celesio and other large players are playing the long (waiting) game; don't let anyone kid you differently.

Brian Austen, Senior Management

Some people will still argue that falling profits doesn't mean that pharmacies should reduce in value when of course they should!
 

Ilove Pharmacy, Non Pharmacist Branch Manager

That fallacy keeps being perpetuted by the beneficiaries.

Anon E Mouse, Pharmaceutical Adviser

            

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