Weakening financial performance in the pharma sector saw 1,212 pharmacies taken over in the 12 months to June 30 last year – up 50% from 809 in 2023.
Given that there are only 13,280 in the UK, that means 9% were acquired as part of an M&A deal.
The transactions would have included at least part of the sale by Lloyds Pharmacies of all its 1,054 community pharmacies in a series of sales of regional groups of pharmacies.
The figures were obtained by national accountancy group UHY Hacker Young.
Partner John Ierston, suggested this was partly driven by the financial pressures including less favourable NHS contracts and the cost-of-living crisis driving up costs.
Their benchmarking research shows there’s been a 10% decrease in gross profits per pharmacy, now down to £382,468 per year from £419,598.
It looks likely that the consolidation, that the sector has seen over recent years, will continue
Multiplied across the entire sector, the retail pharmacy industry has taken a hit of approximately £500mn to their profits in the last year.
Ierston says that the pace of M&A in the industry is likely to continue as financial pressures continue. Whilst some business owners are looking to exit the sector, others are looking to improve their profitability by acquiring more sites to create greater economies of scale. Merging with other pharmacies allows them to strip out duplicated back-office functions and improves their negotiating powers when making purchases.
“It has been an increasingly tough year for retail pharmacies and their patients as profits fall and sites are forced to close. It looks likely that the consolidation, that the sector has seen over recent years, will continue,” he said.
“This rise in M&A activity shows that being an independent pharmacy is increasingly difficult. Lower gross margins under the NHS contract and rising wage costs due to the cost-of-living crisis, changes in Minimum Wages and National Insurance rates are squeezing margins.”
Related
Online retail sales checkout slower
What the latest inflation figures mean for business
