So far this year there has been a decline in first-time buyers acquiring pharmacies in Wales, property company Hutchings Consultants has said, adding that the “oversupply” of corporate branches in 2023– some of which were “problematic” purchases – has eased this year. 

In an update on the Welsh pharmacy market last week, Hutchings associate director Paul Street said that existing pharmacy owners “are currently leading acquisitions” while first-time buyers have acquired a third of the pharmacies whose sales have been handled by the brokerage in 2024, compared to last year when first-time buyers dominated.

Mr Street said pharmacies are selling at an average figure “hovering around” £0.75 per pound of turnover, adding that this is “slightly distorted owing to a higher proportion of pharmacies sold in areas with traditionally low buyer demand affecting goodwill prices achieved”.  

He compared this to last year, when independents in Wales commanded an average price of £0.81 per pound of turnover and, amid a “large oversupply” of corporate branches coming on the market, corporate stores achieved a “lower average pence in pound price” of £0.41.

“While expanding the number of pharmacies on the market, some corporate disposals were problematic and generally considered higher risk in comparison to other well-run independent pharmacies,” said Mr Street, adding that this explained the much higher prices independents were able to command in 2023. 

Hutchings Consultants handled a significant number of sales of LloydsPharmacy branches in 2023, as revealed by Pharmacy Network News last February.

Meanwhile, the average turnover of pharmacies being sold through Hutchings has dropped by 15 per cent compared to last year, falling from £961,696 to £814,224.  

Mr Street said there has been a downward pressure on gross profit margins in recent years due to factors like NHS contract changes and “inadequate drug tariff reimbursement” but added that “so far this year the average profit margin has shown an improvement,” rising from 31.4 per cent last year to 33.4 per cent as of August this year.  

This is “in some part due to sales involving more geographically remote pharmacies,” said Mr Street, explaining that these businesses “frequently benefit from reduced competition and higher profit margins”. 

Mr Street said the “seismic increase in opportunities” sparked by LloydsPharmacy divestments last year “galvanised interest” from a range of prospective buyers, driving up the average number of offers received per sale. 

This year, “on-going buyer activity has helped support and improve the average figure further,” with an average of five offers per sale. “Most interest” is focused on “pharmacies within the smaller to medium sized turnover range,” said Mr Street. 

Commenting on the future outlook, he said: “We now anticipated a steady increase in levels of buyer confidence through the remainder of 2024, with those pharmacies that offer the greatest potential to provide patient services garnering most significant interest from potential buyers. 

“The very real possibility of a reduction in Bank of England base rate in the coming weeks will, if realised, ease borrowing costs for buyers and help support goodwill values.”

Mr Street said that this, “combined with the evident shorter supply and a more favourable political landscape,” could be “good news” for those considering bringing their pharmacy to market “in Q4 of 2024 and into 2025,” commenting”: “Typically we would expect these factors to have a positive influence on prices.”