Lloydspharmacy parent Celesio is expecting earnings (EBITDA) for 2011 of about £530.5m (€600m), down 14 per cent on £618m (€699m) last year. Celesio said net profits will be hit after the company has had to recognise impairment losses of £102.8 million (€116.3m).

Celesio said the impairment losses would not affect cash flow, but would lead to a reduction in the net profits for the financial year. It stressed that dividends should not be affected and revenue would be in line with current expectations.

"This extraordinary impairment test of all assets was triggered by the fact that the market value of Celesio AG had fallen below the carrying amount of group equity as at June 30, 2011," the company said in a statement.

Celesio added the losses were incurred at its wholesale businesses in Denmark and Portugal, as well as at its outsourcing company Pharmexx. Contract portfolios at Pharmexx had failed to develop according to expectations, a statement from Celesio added.

The company blamed the losses on the weak market environment in Europe that was, "now heavily burdened, both directly and indirectly, by government austerity measures in the healthcare sector". In 2010, Celesio reported a rise in operating profits, with particular gains made in its retail pharmacy division.

Celesio CEO Fritz Oesterle said in March this year that he expected the UK pharmacy business to be affected by government cutbacks over the next two years, but remained confident in the group's performance.