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Rowlands attempts to sell 70 pharmacies in bid to reduce network

69 of the pharmacies are located in England and one in Wales
69 of the pharmacies are located in England and one in Wales

Rowlands is attempting to sell 70 branches to focus on a “slightly smaller pharmacy network”.

*This story has been updated to reflect that today's announcement has superseded information in Rowlands' 2018 investor brochure*

Rowlands announced this morning that it has put 70 of its pharmacies up for sale – 69 in England and one in Wales.

Rowlands is the UK’s fourth-largest multiple, with more than 500 branches and 4,800 employees, meaning the pharmacies up for sale represent more than 10% of its network.

Commenting on Rowlands' announcement this morning (February 21), managing director Kenny Black said: “We are committed to investing in the future and changing our dispensing processes in order to deliver sustainable, profitable growth for the business, enable colleagues to spend more time with patients and reinforce the role of Rowlands pharmacies as local healthcare hubs.

“As a result, we need to focus our investment on a slightly smaller Rowlands pharmacy network than we have today,” he added.

“We are confident the branches we are divesting have the potential for future growth to meet emerging healthcare needs and will create an exciting opportunity for first-time buyers and existing independent contractors to develop and expand the range of services offered on a more localised basis.

“Our branch colleagues will be fully informed and supported throughout this process.”

The sale is being overseen by brokers Christie & Co, which said the pharmacies “represent an ideal opportunity for a wide range of buyers to acquire corporately owned pharmacies that are rarely made available, particularly for pharmacies of high quality which require minimal investment”.

Background to the sale

C+D has seen a document, dated October 2018 and titled ‘Project Alpha’, that states 54 pharmacies were initially up for sale. Rowlands has since clarified that these pharmacies do not entirely correspond to the current list of 70 being brokered by Christie & Co.

The news of the potential sales is not a complete surprise. In May 2018, Mr Black warned that the multiple was considering “reducing its branch network” because of the “draconian” cuts to funding in England – although the chain insisted it did not have a target number of branches it planned to close or merge.

The chain also moved the “labour-intensive” preparation of medicine trays from branches to a central location, and reassessed staff levels in its branches. Rowlands employees have told C+D that accuracy checking technicians have been “reprofiled”.

71 Comments
Question: 
Do you work for Rowlands pharmacy?

Jack Daniels, Community pharmacist

Without wishing to divulge too much - let's just say that the NHS items published for these branches include care homes which may not always be transferred to the new owner

S J- Locum, Locum pharmacist

?

Jack Daniels, Community pharmacist

Also be wary of any branches that service care homes - as the other contributors have alluded to this!

Jack Daniels, Community pharmacist

We have had very little in terms of feedback or support from HO except for the promise of such which is yet to materialise - Also I have been to believe that the staff will transfer over with the shop to the new owner - the alternative is to resign and apply to Rowlands IF there are any vacancies

Mike Jones, Locum pharmacist

Hi everyone, very interesting to see the changes in pharmacy and how the multiples are reacting. I think the

pharmacy funding model is very unpredictable which has led to the multiples to divest assets to shore up their balance sheets. Having worked in some of the branches for sale recently one should note that turnover figures will be changing due to mds moving to a hub and spoke model and nursing homes that the pharmacy may no longer be doing included in turn over figures. This would probably account for the estimated prices which I felt were a bit high for the branches I had worked in. Some of the locations had stiff competition as well that would put off many prospective buyers especially if neighbouring pharmacies have a close relationship to the gp surgeries or with late night pharmacies close by. All in all I think if someone is willing to work hard for 15 years and give up a large part of their social and family life and there is a branch with no immediate competition go for it. The rewards will be evident in 15 years, however this is on the basis that the funding model improves. If it gets any worse my suggestion would be to buy under a ltd company as if interest rates go up we could have large numbers of pharmacies going into insolvency due to higher interest rates and plenty of ccj’s to go around if you give personal guarantees your homes could be at risk. Having owned a few pharmacies a few years ago I am glad I sold my branches at the right time. I do not envy new entrants to the market at the cost of market entry these days and wish everyone the best of luck 

 

 

Graham Turner, Non Pharmacist Branch Manager

Very interesting, thanks for the comment.

It was already postulated that the MDS might be moving to hub and spoke, which means that the branches are not good value - knowing that they also have stiff local competition makes things even worse.

15 years of no life to get a profit from one of these branches sounds about right. But in that time you could have studied law or medicine and moved to a respected profession and be earning a much larger salary without all the sleepless nights and harassment from the GPhC.

If modern pharmacy degrees actually included some basic economics, then nobody would be touching these branches, but I'm sure there is some over-confident newly-qualified who thinks they can make it work. Good luck to them I say, but it is not going to be easy.

Not impossible to make one of these branches work, just incredibly demanding time-wise. If you look into the economics of Dominos franchises in the UK, then you would wonder why anybody in their right mind would bother with a pharmacy. That is not a joke - they knock out pizzas by the dozen which cost a few quid and charge £18.99 for them, and for whatever reason the public are happy to pay for pizzas but don't want to spend anything in a pharmacy. You've got people in the UK who set up these franchises with loans from family (no qualifications required) and are now multi-millionaires before the age of 30.

Sad, sad times for the pharmacy profession in the UK. But then look at the chief pharmaceutical officer, the PSNC, the previous heads of the RPSGB, the RPS, and the greedy conglomerates controlling UK pharmacy, not surprising that pharmacy is completely dead. All of the blood has been sucked out of the industry by some of the greediest people in the world.

Anyone thinking of a buying a pharmacy in the current environment where the government is hell-bent of cutting things down to the bone would be strongly advised to see a good financial advisor - thousands of good ways to earn a return on your capital, pharmacy is not one of them.

If my son told me that he was considering investing the best part of a million in a pharmacy, I would be devastated and spend as much time as it takes to show him how much of a disastrous investment it would be. I can't imagine how it would feel investing that kind of money, whilst working yourself to the bone every day for years, only to discover that you are in negative equity on your purchase - an absolute nightmare.

Putting 933k on red in a Las Vegas casino would be a much better investment, without the years of sleepless night and anguish, and that should tell you everything you know about this "industry". You'll either end up rich, or poor but still young enough to make a fresh start, you won't get either of those outcomes if you buy a pharmacy - you'll be poor, old, and too tired to start again.

R A, Community pharmacist

Hi Graham, 

I think you show far more wisdom compared to the individuals who have decided to take a plunge and swim against the tide by buying a pharmacy!

"Not impossible to make one of these branches work, just incredibly demanding time-wise. If you look into the economics of Dominos franchises in the UK, then you would wonder why anybody in their right mind would bother with a pharmacy."

An investment in a franchise such as McDonald's, Burger King and Dominos Pizza is definitely a more prudent investment compared to buying a pharmacy. All these franchise have great pricing power for their products which offer fantastic margins, standardised preparation procedure which any fool can be taught and no incompetent regulator to contend with! Also not sure if you are aware a lot of the franchise companies give their franchisee plenty of support to build the business. Compared that to the business of operating a pharmacy which is a potent formulation to develop illness. 

Medicine Man , Community pharmacist

Good luck to anyone who buys Jenny the Dispenser’s branch. Even Rowlands couldn’t wait to get rid 

R A, Community pharmacist

I think the situation is slightly more complex. 

These pharmacies do generate a profit BUT the question is for how long? In 2005 the foolish contractors agreed to an empty promise that the NHS WILL COMMISSION clinical service for clawing back dispensing fees.

Fast forward to 2019, all NHS has done is reduce reimbursement fees and cost has shot up due to a complex wholesale arrangement which was non-existent in 2005 due to multiple wholesalers.  Last but not least no clinical services have been commissioned as they promised and with Brexit thrown into the mix do you blame them for wanting out? 

Richard Binns, Primary care pharmacist

Can I just check my understanding with everyone here, is numark still a division of phoenix?

Just thinking about phoenix selling these branches to indies, if the indies then pay for numark support, surely phoenix are quids in?

I'm a bit rusty on the workings of community pharmacy so if I'm wide of the mark please correct me

RS Pharmacist, Primary care pharmacist

This is a shame, looks like I have missed the entire furore now that C+D have edited the saucy bits! I would like to think an independent pharmacy owner/pharmacist could make a go of these branches, but the cynic in me keeps saying if the big boys can’t do it then how can the independent?

Graham Turner, Non Pharmacist Branch Manager

You've hit the nail on the head. But there weren't any saucy bits, just an assistant (who now claims to be a dispensary manager) swearing at someone who questioned her over how she knew that the branch she worked at was "very profitable".

So some friendly advice would be to run a mile if you are considering buying a pharmacy with someone called "Jenny Smyth" working there, because it may not be long until she is posting all over the internet about how you are "the pits".

N O, Pharmaceutical Adviser

A first look at the list makes me feel bit worried. 

1. Many pharmacies are for offer under 50% of the turnover!!! (Something is not alright even in the funding cut situation)

2. Except for few Pharmacies, there is no mention of continuity of care homes or MDS patients (leave alone any delivery patients)

3. Very high staff cost.

4. Very high rents in most cases with very short Lease period.

5. Very low AIV, except some pharmacies in the GP practices.

Having said that, as these are all standard hour pharmacies, it would make a real sense for a owner run set up if any individual Pharmacist is looking to invest (at least £50k - £70k will be saved straight away) In my personal opinion there would be various ways a owner pharmacist can make changes to the business model to make a good profit.

Barry Pharmacist, Community pharmacist

Yeah - go on then - be our guest.

There are quite a few better ways to invest £50K where the risk is much less, the stress far less and the return way better.

Graham Turner, Non Pharmacist Branch Manager

If you went to a financial advisor with a large sum of cash to invest (more than £50k, by the way), they can show you a lot of ways to make a decent income from it, buying a pharmacy would be somewhere down the list, roughly equal to spending the money on magic beans and hoping for a magic beanstalk.

J RP, Community pharmacist

Actually today it is getting much harder to get decent income from anything. Property prices arent rising like they used to and a barrage of taxes and charges from the govt have made it a lot less appealing. The stock market is set for a slowdown after 9 years of strong gains - that once appealing passive income stream is risky today. That leaves people to businesses. I've seen branches for sale here and by medipharmacy giving net profits over 100k. Throw in owner operated with some efficiences and you are making good money. Your only problem is being able to sell the pharmacy again for the price you buy it for, a few years down the line should you want/need to.

Graham Turner, Non Pharmacist Branch Manager

You may have seen pharmacies for sale advertising a 100k profit, but I can guarantee you that after you buy the place and the dust has setlled, you will realise that that figure was pie in the sky at best, and downright fraudulent at worst.

Have you not seen those adverts telling you that you can make £1000 a day from home? At least with those swindles you will figure the situation out quickly, and won't have invested hundreds of thousands of pounds that you will never be able to pay back.

J RP, Community pharmacist

The big factor that changes your 100k profit is reimbursement. The shops with that level of profit do so because they get roughly £11 per item and have low overheads - staff, rent and rates are reasonable. Now of course the overheads won't change much but reimbursement well could, which will see your profits drop heavily and make a 700k investment no longer worthwhile. Of course by that point it will be too late but my question to you is, if reimbursement continues to get squeezed, who will provide the supply service of medications? Someone has to do it and someone has to be paid for it. If hub and spoke was as easy as some say wouldn't the poster boy for capitalism, America, have already done it successfully? Even hub and spoke models here are struggling to be profitable compared to the brick and mortar model, dispensing robots cost a fortune as does their maintenance, even still they usually still need some staff to operate them.

You speak a lot about better alternatives without offering genuine ideas. My only opinion is high dividend yielding stocks are any what a good bet today and even then not for such large investments as companies can go bust. Maybe a diversified portfolio of these stocks or dollar cost averaging across mutual/index funds during this period of global economic slowdown may see you make some good money in 10 years time.

Any ideas would be much appreciated as I am almost being roped into going after a shop with a healthy net profit (100k plus employed pharmacist operated) next to a GP practice and with such little neighbouring competition that it is on the pharmacy access scheme. In addition the shop is mostly 84 day scripts so I can't even see the item count going down much further given the distance to the nearest pharmacy.

Benie I, Locum pharmacist

Any business where 90% of your profit is from one source has to be precarious. Now consider that the source is the government(LIARS) and you will have a problem sooner or later. Good luck.

J RP, Community pharmacist

This is what I want to know, if the government keep cutting reimbursement then who will provide these services? Hub and spoke is not so much more efficient that it can absorb further cuts.

Paul Guest, Manager

Do your due diligence and go for it. Ignore the trolls on C&D who speak with incorrect information and little experience and assume that the thousands of contractors in the UK and the banks who support them are all clueless. 

Graham Turner, Non Pharmacist Branch Manager

Not all contractors in the UK are clueless - some of them have sold their pharmacies and moved onto better things. Good for them, at least they could see what is coming.

Barry Pharmacist, Community pharmacist

I wouldn't invest in any of these sites. 

I sense that the jobs market is changing. After years of being paid peanuts there are now many more good positions out there for pharmacists of all shapes and sizes. You would need to have your brain examined to invest in a declining market.

Benie I, Locum pharmacist

Starbucks pay their staff more than Dispensers. Which job would you choose for a peaceful life?

J RP, Community pharmacist

Disagree with this. Locums or store managers make more or the same as most clinical, GP, care home or medicines management pharmacists for a fraction of the intellectual work and training. That avenue usually requires years of training at awful hospital band 6 pay to get to as well.

A LOCUM, Community pharmacist

'buyer beware' i've heard for a while they are transfering all trays to hubs and collection and deliveries to neighbouring branches , as part of their cost cutting plans , all perfectly legal of course ????

Graham Turner, Non Pharmacist Branch Manager

If they are including the trays in the breakdown to keep the figures looking healthy, and then planning to transfer them to another branch before sale, that is not legal.

Richard Binns, Primary care pharmacist

I worked in a couple of these branches around 8 year ago, they were doing 15-20k a month, when I've looked at Christies site their listed as <10k.

Is it correct to assume trays, deliveries etc have been syphoned off to hubs?

R A, Community pharmacist

I don't think the branches are currently unviable but THEY will be. For this reason, Pheonix is trying to ditch these endangered assets to reduce its liabilities for the future. 

Part of the reason is that this sector is full of gullible fools. After all many of us including myself was silly enough to do a pharmacy degree so we might be silly enough to buy a pharmacy. In my defence, I did start the degree when few thought things will end up so badly in 2006 as Pharmacy schools failed to mention anything about the poor pharmacy contract agreed back in 2005 or how the job market is being saturated due to openings of new pharmacy school and EU pharmacists. ​

But I will no longer fall for this con. I end my comment with the following quote:

"fool me onceshame on youfool me twiceshame on me"

Super Locum,

According to Christie the branches are doing between 3k to 24k items each. So you have to wonder why the higher volume branches are up for sale. If Phoenix cannot make a profit how can an independent ?

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