Pharmacy Industry Survey Analysis - March 2011
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AGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY Pharmacy Industry Survey Analysis March 2011 Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.com
AGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY Introduction Christie + Co is the UK’s leading independent business valuers and agents with over 75 years experience in the retail, healthcare, licensed and hospitality sectors. We offer a range of valuation, advisory and brokerage services to independent and corporate clients. Christie + Co has developed a comprehensive offering to the pharmacy sector advising independent, multiple and corporate operators as well as banks and other business intermediaries in the sale and marketing of pharmacies and the valuation for financing and refinancing purposes. In the last 12 months, we have valued and appraised over 450 individual pharmacies for marketing or finance purposes through a specialist team of RICS qualified valuers and agents situated throughout the UK. As part of our commitment to provide insightful advice to the sector, we commissioned a survey of pharmacists and pharmacy owners to understand current market sentiment and the extent that internal and external factors are influencing pharmacy businesses and within the sector. The following presentation highlights some of the key findings of this survey. Our intention is to undertake this survey annually to measure markets trend and the impact of key issues affecting the sector. For further information please contact: Tony Evans Matthew Williamson Director Director T 07719 46 8511 T 0117 946 8528 E tony.evans@christie.com E matthew.williamson@christie.com Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.com
AGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Facts Respondent Profile
Average Number of Prescriptions Dispensed per Month
• With regards to location,
there were two major groups 9% 12%
of respondents - community
Respondents included pharmacists operating businesses
from varying locations and of different sizes and length of 8%
and high street operators –
which together represented ownership. The charts on this page break them down into
85% of all respondents. the following category:
8%
• Size wise, there were three + Location;
major groups of respondents.
• Operators dispensing up to + Size - according to the number of prescriptions
7,500 prescriptions per month dispensed monthly; and, 35%
represented 75% of
respondents. Within this sub- + Length of service – For how long respondents have
group, pharmacists delivering owned their pharmacies
2,500 to 5,000 prescriptions 28%
per month represented the 0-2,500 2,500-5,000 5,000-7,500 7,500-10,000 10,000-12,500 N/A
largest proportion of
respondents (35%). Source: Christie + Co Analysis
• In terms of length of Location of Business Length of Ownership (in Years)
ownership, the majority of
the respondents (77%) have 16%
owned their pharmacies for
4%
up to 30 years. 61% 32%
4% 7%
7%
24% 19%
26%
Community High Street Village Integrated M edical Centre Other
< 10 yrs 10-20 yrs 20-30 yrs > 30 yrs N/A
Source: Christie + Co A nalysis Source: Christie + Co Analysis
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.com
AGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Facts 2009 Business Turnover
• Overall, the question relating
to movements in business
turnover offered a mixed
picture amongst respondents.
The charts below evaluate the question around how operators viewed their business turnover in 2009 compared to the
• Less than a third of
respondents (29%) reported an
previous year as a whole and according to the location of their business.
increase in business turnover
in 2009 versus the previous
year. During 2009, Did the Turnover of Your Business 2009 Business Turnover Variation According to Business Location
100%
• About a third of respondents 2%
reported a decrease in
29%
business turnover (32%), 32% 80%
whilst 37% of respondents
maintained a stable level of
turnover. 60%
• With 48% of respondents
reporting an increase in 40%
business turnover, high street
operators appeared to have
20%
performed better than other
types of operators.
37% 0%
Community High Street Integrated Other Village
Medical Centre
Increased Constant Reduced N/A
Increased Constant Reduced N/A
Source: Christie + Co A nalysis Source: Christie + Co A nalysis
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.com
AGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Facts 2009-2010 Trading Conditions
• Overall, 2010 trading
conditions were uneven across
the respondent sample, with
half of the respondents
reporting a decline in trade
between 2009 and 2010. The survey asked how operators viewed trading conditions between 2009-2010 as a whole and according to the location
of their business.
• Only 15% of respondents
reported an improvement in
trading conditions. During 2009-2010, Do You Think Trading Conditions 2009-2010 Trading Conditions According to Business Location
2%
• About a third of respondents 15% 100%
witnessed stable business
levels during 2010. 80%
• The results vary greatly
depending on the location of 60%
the pharmacies. Over 60% of
community pharmacy
40%
operators reported a decline
51%
in trade, whilst the same
32%
proportion of high street 20%
operators reported improved
or constant trading levels.
0%
Community High Street Integrated Other Village
Improved Remained Constant Declined N/A M edical Centre
Improved Constant Dec lined N/A
Source: Christie + Co A nalysis Source: Christie + Co A nalysis
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.com
AGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Facts Prospects For 2011
• Results across respondents
were divided when
considering prospects for
2011 with nearly half of
Pharmacists we asked for their view for trading prospects of their businesses for 2011.
respondents expecting
improved or stable trading
prospects in 2011 versus 2010.
2011 Trading Prospects
• However, the other half was
less optimistic. 2%
13%
• Industry factors including NHS
funding reform, Category M
claw back, control of entry
regulations and supply issues
weighed heavily as concerns
for this year.
49%
36%
M ore confident About the same Less confident N/A
Source: Christie + Co A nalysis
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.com
AGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Facts Prospects For 2011 in Relation to Location
• High street operators appear
to be more confident about
the trading prospects for
2011.
The charts below evaluates the question around how operators view trading prospects for 2011 in relation to location.
• Comparatively, pharmacies
based in Medical Centres are
2011 Trading Prospects According to Pharmacy Location
the least confident in the
trading prospects for 2011.
100%
80%
60%
40%
20%
0%
Community High Street Integrated Medical Other Village
Centre
M ore confident Less confident About the same N/A
Source: Christie + Co Analysis
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.com
AGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Facts Prospects For 2011 In Relation to Size
• Operators dispensing between
7,500 and 10,000
prescriptions per month are
the most confident with The charts below evaluates the question around how operators view trading prospects for 2011 according to the size
regards to prospects for 2011, of their pharmacies.
with 75% anticipating
improving or stable business
levels. Prospects for 2011 in Relation to Size of Pharmacy
• Comparatively, operators 100%
dispensing larger amounts of
prescriptions (in excess of
10,000 per month) are the 80%
least confident about the
prospects for 2011.
60%
40%
20%
0%
0-2,500 2,500-5,000 5,000-7,500 7,500-10,000 10,000-12,500 N/A
M ore confident About the same Less confident N/A
Source: Christie + Co A nalysis
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.comAGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Impacting Factors
The top six factors raised by respondents in our survey of which they consider could have a negative impact on the sector over the next
three years are as follows:
Product availability
+ Concern was expressed by pharmacists from all location types and from all script size categories, with the majority
indicating that product availability will continue to impact pharmacies during 2011. Some pharmacists responded that
supply shortages are largely to blame for customer dissatisfaction, where prescriptions can’t be dispensed within a
reasonable timeframe.
Category M pricing and claw back
+ Over 55% of respondents cited the current claw back as a particular issue affecting the pharmacy sector. Since its
announcement in the summer of 2010 and commencement in October, pharmacists from all sizes of business,
(regardless of whether they are independents or multiples) are all assessing the impact the claw back will have on
their businesses.
+ Our own initial analysis suggests that the average gross profit margin will decrease by between 1 and 1½ % over the
course of the claw back period. Respondents suggested that as a consequence of Category M claw back there will be a
fall in investment in their pharmacy businesses, and more significantly, a reduction in ongoing staff training.
Furthermore, this is also likely to inhibit salary reviews over the forthcoming year.
Abolition of PCTs, creation of GP Consortia
+ Another issue raised by the survey was the potential impact of the coalition Government’s proposed changes to NHS
funding, which include the abolition of Primary Care Trusts.
+ The overwhelming opinion is that this will heavily impact pharmacy businesses, with many voicing concerns over the
potential conflict of interest, should GP consortia be allowed to take control of service commissioning. This issue raises
the question as to how services can be effectively allocated where GPs offer competing services. Pharmacists believe
that the appointment of a practicing pharmacist to every commissioning board is the only way to ensure equal
representation and a full understanding of pharmacy services.
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.comAGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Impacting Factors (Cont.)
Control of entry rules – 100 hours
+ Many pharmacists continue to express concerns about the control of entry regulations and the issue surrounding
100 hours exemptions. Currently, certain categories of pharmacy, including 100-hour pharmacies, are exempt
from control-of-entry tests.
+ The rules for ‘control of entry’ are currently under review and changes will be introduced under the proposed
Health and Social Care Act but it is anticipated that they will be based on pharmaceutical needs assessments as
set out in the Pharmaceutical Services and Local Pharmaceutical Services Regulations of the National Health
Service Act 2006. It is expected that once new arrangements come into effect, no new 100-hour contracts will be
granted, and existing 100-hour pharmacies will have to continue to open for 100 hours per week. Exemptions for
mail order and internet pharmacies are also expected to be abolished.
Direct To Pharmacy (DTP) supply model
+ In a similar vein to general supply shortages, it is considered that the DTP model being adopted by many
pharmaceutical manufacturers may exacerbate the lack of supply through traditional wholesalers where the
manufacturer seeks to limit its product distribution to a limited number of key suppliers.
Other factors mentioned by respondents included:
Macro economic factors including VAT increase and taxation issues, strength of the £ currency etc.;
NHS cutbacks and lack of funding;
Competition from GPs, internet pharmacies etc.;
Increased workload/decrease profit margins; and,
Industry schemes such as the ESP schemes, and ETP phase 2.
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.comAGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Key Findings
Summary
From our own experience in undertaking valuation and advisory work across the sector, general sentiment coincides with the key findings of this
survey.
Whilst the sector faces challenging times with a number of factors set to influence the shape in which pharmacy services are delivered in years to
come, the overwhelming view we receive from operators outside of this survey is one of confidence. Our experience at the Pharmacy Show 2010,
which demonstrated the continued appetite from existing operators as well as new entrants and first time buyers to acquire, would suggest that
the market will continue to develop.
One of the key issues we are experiencing is that the market is inhibited by the lack of stock being openly marketed. With nearly 45% of
respondents suggested that they would like to acquire an additional pharmacy business, or develop/enhance their existing business over the next
year when businesses are placed on the market, interest is readily achievable.
In our opinion, the pharmacy sector will continue to have a bright and healthy future as long as operators continue to adapt and evolve their
businesses.
Thank you to all those who completed and returned questionnaires. In response Christie + Co has made a donation to Pharmacist Support
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.comAGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Christie + Co’s Pharmacy Team
Please don’t hesitate to contact one of our specialist Pharmacy Team members for further information or should you wish to
understand how the market relates to your business.
We offer a strictly confidential market appraisal service without cost or obligation to you.
Tony Evans Steve Rodell MRICS
Director Director
T 0207 2270700 T 01908 350 639
M 07721 884386 M 07738 182407
E tony.evans@christie.com E steve.rodell@christie.com
Matthew Williamson MRICS Darren Bond MRICS
Director Director
T 0117 946 8500 T 0207 227 0771
M o7917 168492 M 07764 378685
E matthew.williamson@christie.com E darren.bond@christie.com
Allen Shepherd David Higgins
Director Associate Director
T 0113 389 2715 T 0131 524 3417
M 07764 241326 M 07917 630 318
E allen.shepherd@christie.com E david.higgins@christie.com
Jonathan Board Andrew Evangelou
Associate Director Associate Director
T 0117 946 8527 T 0208 270 3144
M 07775 807071 M 07917 372426
E jonathan.board@christie.com E andrew.evangelou@christie.com
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.comAGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY
Background to Christie + Co
A Member of Christie Group Plc:
Christie + Co UK Offices
+ Partnership founded in 1935
+ Publicly listed on Alternative Investment Market (AIM)
+ Regulated by RICS
Specialists in:
+ Pharmacy
+ Dental Practices
+ Convenience Retailing
+ Forecourt Convenience Sector
+ Off Licences
+ Post Offices
+ Leisure and Licensed sectors
+ Hotels, Restaurants, Public Houses, Bars
+ Care and Nursing homes
+ Childrens Day Nurseries and Education
15 Offices in the UK
+ Birmingham, Bristol, Edinburgh, Enfield, Exeter, Glasgow, Ipswich, Leeds, London,
Maidstone, Manchester, Milton Keynes, Newcastle, Nottingham, Winchester
12 International Offices
+ Barcelona, Berlin, Dubai, Frankfurt, Helsinki, London, Lyon, Marseille, Munich,
Paris, Rennes and Vienna
Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.comAGENCY | VALUATION SERVICES | INVESTMENT | CONSULTANCY Pharmacy Industry Survey Analysis – March 2011 www.christiecorporate.com
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