May 23, 2023 | Pharmacy
“Pharmacies contracted to open for 100 hours a week will be allowed to reduce their core hours under new regulatory easements introduced by the Department of Health and Social Care (DHSC) and NHS England (NHSE). 100-hour pharmacies allowed to reduce to 72 hours” – The Pharmacist
Described by PSNC as “divisive” new policy.
I suppose it depends which side of the fence you sit on! It’s easy enough to see how those who own or work in 40-hour pharmacies could feel some frustration in the absence of any additional support for them, despite the fact they work just as hard and face the same challenges in the current economy. On the other hand, I know many 100-hour pharmacy owners who have been worried about the future of their business and the service they provide to patients, who can now rejoice in the fact that they can improve the profitability of their business and maintain the standard of service they offer to their local community.
How does this recent announcement affect the value of pharmacy businesses?
The recent change to the 100-hour pharmacy contracts has created an unprecedented opportunity for pharmacy businesses to improve their profitability and increase their business valuation. By reducing the required hours of operation from 100 hours to a minimum of 72 hours per week, pharmacies can now operate more efficiently and reduce their overhead costs. There’s a possible 28 hours per each staffing level to save, meaning those with 100hr pharmacies will be almost guaranteed a significant increase in their pre-tax profits.
The other consideration here is, up until now, a high percentage of pro-active acquirers in the pharmacy market wouldn’t have offered on 100hr pharmacies, due to their higher demand for manpower and, generally speaking, their lower profitability. Within 72 hours of the recent announcement, I’ve already been contacted by a number of my pro-active buying clients who have changed tact and decided to start considering longer hours pharmacies.
In essence, improved net profit margins and increased buying appetite will only have a positive impact on the value of 100hr pharmacies!
In the last week, we’ve had to re-value a number of pharmacies that have instructed us, and in some cases, the expected overall value of goodwill has increase by as much as 30%.
It’s not all doom and gloom for those with 40-hour pharmacies either. The long-anticipated recognition of need for change from government and NHS England, suggests that there may be another announcement on the horizon that benefits ALL pharmacies and pharmacy business owners. Some buyers will be encouraged by the fact that there’s likely future opportunity to improve profits and return on investment. Again, there’s a good chance that buyers might start to improve the multiples that their prepared to pay on both 40 hour and 100-hour pharmacies.
The upshot is that any positive change introduced by government and NHS England, historically has increased buying appetite and buyer confidence across the board.
Prospect Estates provide a free valuation service for pharmacy business owners with half an eye on an exit – get your updated valuation via the button below and find out what your pharmacy could be worth after the recent announcements.
May 23, 2023 | Pharmacy
