Market update | Community pharmacy 2020 into 2021
26 February 2021
The state of the Community Pharmacy market during 2020
Main events during 2020
The most major event to take place in 2020 was the outbreak of the COVID pandemic which first broke in March 2020. In the early days of the pandemic pharmacies were overrun with demand for face masks, surgical gloves and sanitiser. In addition, most GP surgeries closed their doors leaving community pharmacies to cope with waves of sick patients without the PPE to protect themselves.
At the very time when demand was at its peak, pharmacy owners had staff reporting sick and also had to cope with medicine shortages, price changes and great uncertainty.
During the first few months of the pandemic sale of pharmacies slowed down and change of ownership and fitness to practice applications weren’t being processed. Since the autumn sales activity has come back to previous levels and the administrative applications are being processed once again.
Other challenges created by the pandemic are the fact that banks have furloughed many staff and those that remain working are preoccupied processing CBILS and other government backed loans.
Another major trend from 2020 is the major pharmacy chains such as Boots, Lloyds, Well and Rowlands selling their smaller units and up scaling their offering. The general consensus is that these chains are looking to retain pharmacies around dispensing 10,000 items per month or more, combined with minimal competition and with well controlled overheads particularly property costs.
Centralised dispensing hubs
These have become more of a feature in the last year. Pharmacy 2 You, Echo (Lloyds) and Co-op all have offerings in this field and this space is likely to become increasingly crowded.
Observations from the marketplace
The number of registered purchasers continued to increase in 2020 with the majority of new registrations being from first time buyers.
Consolidations are still proving to be very popular and make good economic sense where the turnover can be retained, and a set of overheads can be jettisoned.
Pharmacy owners are looking at their leases particularly carefully especially when renewals fall due. Long leases, of say 15 years or more, may be useful for lending purposes but should be backed up with tenant only break clauses. High street rents are now dropping, and it is vital that owners take advice before committing to a lease at and out of date rent level.
Health centre pharmacies have suffered badly during the pandemic, particularly those that do not have their own street entrance and may have ended up behind locked surgery doors. Rents for these pharmacies have dropped very sharply and caution should be taken with rent reviews or lease renewals.
Demand in the last quarter of 2020 increased significantly driven predominantly by existing owners/small groups who were largely absent in 2020.
Services are seen as a very important feature of the future community pharmacy. Future trends are likely to include pharmacies having multiple consultation rooms, more screening and the likelihood of pharmacies being used for future flu jabs and COVID jabs.
> 75% of transactions were first time buyers
> 32.5% Average Gross Margin
> 0.96p in £ Goodwill/Sale Price
> EBITDA/Adjusted Net Profit multiple 7.17x
> £587,000 average sale price
> 7.2 months – the average length of time taken to completion from signing Heads of Terms
Work with the pharmacy specialists
Pharmacy Seekers are the community pharmacy specialists.
If you need some informal advice now about buying or selling a pharmacy in the current market and what changes you might anticipate over the coming months contact us at firstname.lastname@example.org.