Fragmented landscape 48% of pharmacies are independently owned - - PowerPoint PPT Presentation

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Source: GPhC, Christie & Co Analytics

Fragmented landscape

48% of pharmacies are independently owned

3, 192 2, 024 667 282 188 1, 347 799 92 23 11 26 Independent 2 to 5 6 to 10 11 to 15 16 to 20 21 to 300

Breakdown of Pharmacy Owners hip by Group Size

P harmacies O wners 2, 350 1, 799 756 527 379 255 226 217 206 119 B

• ots

Lloyds W ell R

• wlands

Tesco Asda Day Lewis C

• hens

S uperdrug Morrisons

Corporate and Supermarket Pharmacy Count

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Multiple operator Independent operator/ first time buyer Corporate operator We have a database

• f 5,619 first time and

independent buyers looking for pharmacies. Multiple operators are flexible and invariably being well- funded, are able to react decisively in making

• acquisitions. Approximately 587
• f our applicant database, fall

within this category. Whilst corporate operators are well-funded they fall behind independent and multiple

• perators in the speed at which

they react to opportunities. At present none have aggressive acquisition strategies. Private Equity Private equity investment in the pharmacy sector has been relatively light in recent years. However, there is a number currently eyeing up the sector.

Who’s buying now?

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Increasing concern from contractors over cash flow issues following DoH funding cuts, Cat M claw back and Drug Supply Not impacting values or appetite yet? Bank funding still strong although more discerning Cash flow challenges leading some operators to accelerate their exit/retirement plans – GP Margins reducing in some cases significantly Continued competitive appetite despite increased stock in the market

Cuts, claw backs and shortages . . .

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− Average of 7 offers per pharmacy sold − Average sale prices 110% of initial guide prices − 12.5% increase in registered applicants

2016 2017 2018

− Strong start to year − Forecast an increase in number of pharmacies coming to market − To date deal activity and enquiry levels remain strong − 50% increase in instructions PYTD − 40 sales already agreed in excess £56 million − Increase applicant activity − 93 pharmacies SOLD in 2017 − Average of 6 offers per pharmacy sold − £933K Average sale price − Average price 106% of quoted asking prices − Additional 18% increase in registered applicants

Still no change?

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Key trading performance benchmarks (FY16-17)

A snapshot of average trading metrics for individual pharmacies across the UK

These benchmarks are based on actual historic account information gathered for our valuation reports and transactional projects over the last two years

12.8%

EB ITD A margin

33.2%

G ross profit margin

14.6%

Staff cos ts margin

7,987

Average Monthly Items Dis pens ed

christie.com 30.6% 34.7% 37.4% Integrated Community Health Centre Adjacent

GP Margin by Pharmacy Type

8.6% 11.6% 15.9% Health Centre Adjacent Integrated Community

EBITDA Margin by Pharmacy Type

13.6% 15.1% 100 Hours Standard

EBITDA Margin by Pharmacy Contract Type

KPIs

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Pharmacy EBITDA multiples (FY16-17)

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8.5 10 7.5 9 5 6.5

Minimum E BITDAx Maximum E BITDAx Integrated Pharmacies C

• mmunity and High S

treet Pharmacies 100 Hours (8,000+ items) Range of multiples by pharmacy type

Pharmacy EBITDA multiples 2017 - 2018

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2010 - 2017 2018 - Onwards

Sale Expand Invest SALE Invest

No holding back

Hold Expand

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Tony Evans Director - Head of Pharmacy T: 020 7 227 0729 M: 07721 884 386 E: tony.evans@christie.com Chris Vowles Head of Valuation – Medical T: 0121 452 3703 M: 07791 183 966 E: christopher.vowles@christie.com

Thank you