Profit gap widening between highest and lowest performing pharmacies, analysts warn
Business The gulf between the profits of the highest and lowest performing pharmacies is widening, market intelligence company Plimsoll has warned.
The gulf between the profits of the highest and lowest performing pharmacies is widening, market intelligence company Plimsoll has warned.
An analysis of the 1,000 UK pharmacies with the highest turnover, published in June, found vast differences between those at the top and bottom ends of the scale.
The top 134 had an average profit margin of nearly 13 per cent and more than 60 per cent of those companies had no debts, Plimsoll said. The average sales per employee at these pharmacies was £137,800.
Of the 1,000 UK pharmacies with the highest turnover, the bottom 230 companies made an average 2 per cent loss on every sale, analysts found |
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By contrast, the 230 companies at the bottom of the scale made an average 2 per cent loss on every sale, according to the ongoing analysis, last updated in June. For 108 of those businesses, it was the second year they had made a loss, and 94 were considered to be at high financial risk. Plimsoll did not identify any of the pharmacies. |
"The analysis highlights that the industry is being split into two types of company and the gap between the rich and the poor is getting bigger and bigger," said Plimsoll senior analyst David Pattison. "For the companies that are falling behind, they need to re-evaluate their strategy and retain profit in order to improve their financial strength."
Silver Levene accountant Umesh Modi said that independent pharmacies were struggling the most. Mr Modi explained that the latest funding arrangements, which included category M clawbacks of £72.5 million per quarter, had hit some businesses hard. Since they were introduced last autumn, many of his pharmacy clients had seen an approximate 4 per cent decrease in turnover and 10 per cent fall in net profits, despite an increase in prescription volumes, he said.
Andy Harwood, director of business development at finance company Pharmacy Partners, agreed that smaller businesses were suffering the most. "Those at the lower end, with turnover of below £400,000 or £500,000 a year, are beginning to struggle – I think because overheads and rents are so high," he told C+D.
But Mr Harwood stressed there was still "a lot of confidence" in pharmacy and appetite to buy the right businesses.
Earlier this week, Alliance Boots topped the Sunday Times top 100 British companies list, which ranked businesses by sales.
How can pharmacies at the lower end of the profit scale close the gap? Comment below or email us at [email protected] You can also find C+D on Twitter, LinkedIn and Facebook |