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Welcome to the spring edition of our quarterly newsletter Initial reaction to Pharmacy First Recent research conducted by AIMp found that 70.8% of the pharmacy owners do not think there is sufficient funding allocated for the scheme, 20.8% say it is too early to say and just 8.3% responded saying it was adequate. Their #Fight4Pharmacies campaign was also launched on 20 March 2024 outside Parliament which created an extensive amount of interest with the media and politicians. The success of the Pharmacy First scheme will vary and depending on factors such as local implementation, public awareness, pharmacist training etc. To address funding shortfalls, pharmacy owners need to explore other options such as reallocating resources, securing additional funding and enhancing relationships with GPs. Pharmacy contract and funding The old contract has expired, however, there is no news regarding the pharmacy funding negotiations. The negotiations are taking place between Community Pharmacy England (CPE) and the Department of Health and Social Care (DHSC) , supported by NHS England (NHSE) . The reasons for the sale of community pharmacies The sale of community pharmacies can occur for various reasons and under different circumstances as follows: - Retirement - You may choose to sell your business when you reach a retirement age or decide to exit the profession for personal reasons. Selling the pharmacy allows you to liquidate your assets and transition into retirement. Relocation - Changes in your personal circumstances or opportunities in a different location may prompt you to sell and move elsewhere. Relocation could be due to family reasons, lifestyle preferences, or professional opportunities. Financial reasons - Financial challenges or the desire to capitalise on the value of the pharmacy may lead you to consider selling. This could include factors such as declining profitability, changes in reimbursement rates, or the need for additional capital investment. Expansion or consolidation - A multiple may acquire as part of their expansion or consolidation strategies. Selling to a larger entity can provide you with higher value in some cases. Launch of Pharmacy First and providing new services - The running of pharmacies has undergone several changes over the years, particularly with increased automation, digitalisation, and expansion of online services. The model has gone through a complete overhaul. We are seeing lots of our clients for whom we provide accountancy services at Silver Levene who are struggling with Pharmacy First services due to staffing issues which is resulting in decline of their profit margins. Market dynamics - Changes in the healthcare landscape, regulatory environment, or consumer behaviour may influence your decision to sell. Adapting to evolving market conditions or responding to competitive pressures may involve selling the pharmacy to a buyer better positioned to navigate these challenges. Following large corporate disposals, we are now seeing the goodwill value increase compared to last quarter, which makes it an ideal time to exit, if you are looking to sell. With bank interest rates likely to go down from June, affordability becomes easier too. Succession planning - You may sell your pharmacy as part of succession planning efforts, either transferring ownership to family members or grooming internal staff to take over management. Selling the pharmacy ensures a smooth transition of ownership and management responsibilities. The sale of community pharmacy is typically a complex process that involves legal, financial, and regulatory considerations. You as pharmacy owners may work with sales agents, financial advisors, or legal professionals to facilitate the sale and ensure compliance with relevant laws and regulations governing pharmacy ownership and operation. If you are thinking of selling, it is paramount to get your house in order and speak to your accountant well in advance and prior to putting the pharmacy on the market. We can provide accountancy and taxation services through our associated company Silver Levene with a proven track record of over 30 years. Changes in ownership With last year’s corporate disposals, the tide has turned, and more pharmacies are now run by independents compared to corporates. The recent Sigma conference in South Africa highlighted this issue, as shown in the table below courtesy of RWA Pharmacy:

Welcome to the winter edition of our quarterly newsletter The future of community pharmacy Nobody knows the future of community pharmacy and the right time to sell. As always, you should consider selling when there is no threat to your business that will affect its goodwill. You might decide to sell due to retirement, ill health or you are going into a new venture. We have seen goodwill values drop in the last 12 months or so due to corporate disposals and other distressed sales flooding the market. But it’s not all gloom and doom as equally, we have been extremely busy completing many deals over the last quarter. Most of the transactions have been to first time buyers, independents, small and medium size groups with a forward-looking plan to grow while the large multiples downsize. We believe next year will present a good opportunity to exit, if you are looking to sell the business, as interest rates start to fall, cost of living crisis abate, and the banks start to lend proactively again. Pharmacy First service This service will launch on 31 January 2024 which will be a new advanced service and will replace the Community Pharmacist Consultation Service (CPCS). The pharmacies will receive a first initial fixed payment of £2,000 that can be claimed from December 2023 and a monthly fixed payment of £1,000 from February 2024 for pharmacy contractors who reach a minimum number of monthly clinical pathway consultations (from 1 consultation in February 2024 to 30 consultations from October 2024). Community pharmacists should seize the opportunity and provide maximum amount of services that they possibly can, to increase sales and profits to mitigate the cost increases of the last couple of years. This will also increase the value of the business. The Pharmacy Show 2023 The Pharmacy Show returned to the NEC Birmingham on 15th and 16th October 2023. Over the course of two days, there were over 8,500 pharmacy professionals attending the show and over 300 exhibitors. A highlight of the show, an automation system (robotic) whereby even a small pharmacy can invest into one model for hub and spoke which was previously only an option for larger groups. There is a whole host of affordable options that will allow you to automate those everyday tasks such as dispensing medication and managing stock levels etc. Our joint stand with Silver Levene was located next to the Business Theatre where some excellent speakers with thought provoking ideas commented on the future of the pharmacy and new funding. Whilst exhibiting, we had numerous enquiries on selling and buying a pharmacy as well as pharmacists looking for an accountancy and tax advice. The show was a success, and we look forward to exhibiting again next year, our 17th year bar the covid years. Pharmacy Valuations If you are thinking of selling your pharmacy, we advise that you seek professional advice and valuation from a pharmacy expert or pharmacy sales agent. The valuation is determined by several factors to name but a few as a reminder: - EBITDA (Earnings before interest, tax, depreciation, and amortisation) profits – this is a preferred measure to value pharmacies and bank’s valuer will do the same. Financial information – Accounts, FP34s, VAT returns should be up to date. Location – pharmacies located in a health centre or next door to a surgery will still fetch abetter price, if there is more footfall too. Lease and rent – ensure there is at least 10 years left on the lease and is renewable. A very high rent will be a detriment to sale, buyers will account for any future rent and increases. Staff costs – high staff and locum costs will reduce the value of the pharmacy. NHS/OTC/services/wholesale/online/export sales – please ensure that these are analysed separately in the accounts. Growth potential – for example if you are not doing many of the services, the buyer will see this as an opportunity to enhance business and this is an attractive proposition for the buyer. Interest rates and buyers’ appetite The banks have maintained the level of lending appetite despite the rise in interest rates and economic pressures. We are pleased to report that most of our recent completion were to first time buyers which leads us to believe that they have a strong desire to acquire good, solid and profitable businesses. To facilitate their lending, many of the banks that are active in the pharmacy market are seeking increased due diligence, business plans, personal guarantee etc. The table below shows interest rates at their peak, and the prediction for 2024 through to 2027 (source Bank of England ).

In our Summer 2023 newsletter, we report on important matters relating to the pharmacy sector... NHS is 75! We celebrated the 75th birthday of the NHS on 5th July 2023, this milestone makes a perfect opportunity to recognise dedicated staff who make the NHS what it is today. Treating over a million people a day, the NHS touches all our lives. Community pharmacies are an integral part of the NHS, recognised for their hard work, dedication and making a key contribution most recently by administrating new record of 5 million flu jabs.

As Easter 2023 is approaching, what does the next quarter have in store for pharmacy? Challenges for pharmacy in 2023 2023 started with shocking news of large corporate multiples announcing closures to their branch numbers - Lloyds Pharmacy to close all its 237 branches in Sainsbury’s , Asda closing 7 pharmacies and Tesco closing 8 pharmacies. To top this, there was a further leak in the national press in early March that Aurelius , parent company of Lloyds Pharmacy , has put all of its 1,300 branches at risk of closure. In addition, a recent RPS survey found that three quarters of pharmacists are so stressed and were thinking about quitting. The Pharmaceutical Services Negotiating Committee (PSNC) met for a full committee meeting early in February 2023 to consider the urgent funding and capacity crisis, as well as proposals from the Department of Health and Social Care (DHSC) and NHS England on price concessions reform and relief measures to ease pressure on pharmacies. Surely, this should be a wake-up call for the Government to support the pharmacy sector. The rest of 2023 is likely to be a challenging year for the sector with the UK likely to experience a shallow recession, high interest rates, taxes, inflation, energy costs and rising cost of living which has hit everybody hard. The Government urgently needs to decide whether they want to build community pharmacy into their plans to improve access to primary care or stand by and see the sector continue to dwindle in numbers. How will this impact pharmacy sales? Pharmacy owners contemplating a sale in the next 6 to 12 months, should bring forward their plans and consider a sale sooner rather than later to maximise the value of the business. With the banking crisis upon us again, there is a fear that the banks will tighten their lending policies even further. They are currently lending 70% for the goodwill of the pharmacy compared to up to 90% in 2021/22. This will have an impact on valuations. There will be further divestments in the coming months, with more multiples and small turnover pharmacies sold off and despite more stock coming to the market, the pharmacy business remains attractive. It will be a buyer’s market for a while, and they are being more selective in what they purchase. It is not all doom and gloom! On a more positive note, we have had more first-time and independent groups register with us and are looking to acquire a pharmacy or pharmacies. First-time buyers are bridging the funding gap with the assistance of mum and dad. Small and medium sized independent groups with a good track record and funding support, are proactively looking to grow their estate. We have also seen an increase in enquiries from investors and those looking to buy a DSP and / or an online pharmacy, with existing contractors looking to operate it alongside their pharmacy. If you are looking to sell, you need to get your ducks in row and initially provide the following for a desktop valuation: + 3 years accounts. + If selling branches, provide turnover figure per branch and a split of NHS and OTC sales. + FP34s for the last 3 months. + VAT returns for the last 3 months. + A summary of staffing schedule. + Details of the lease and rent. Selling your pharmacy is one of the most important decisions you will have to make, it pays to have experience on your side. On the other hand, if you are located within proximity of a Lloyds Pharmac y, you may want to consider acquiring that branch which in return will protect your business, increase your item number, turnover and profit and you will dominate the area. An owner managed pharmacy can offer a far better and more consistent service to their patients rather than a large multiple. We can assist you through our associated company Silver Levene and advise you on a purchase of a Lloyds Pharmacy . We have seen an increase in enquiries from prospective buyers and existing clients looking to acquire those branches and it pays to have an expert advice for guidance on accounts, making an offer etc. We specialise in community pharmacy sector and have done so for over 30 years helping many pharmacists acquire their first pharmacy or expand their existing portfolio. Other news We also look forward to participating together with our associated company Silver Levene in our annual 10km London Legal Walk through the Royal Parks on 13th June 2023. The money raised is to provide much needed free legal advice to the poorest and most vulnerable people in our community from families living in terrible housing conditions to women and children who have been trafficked to the UK. If you would like to sponsor us and make donations, please go to the following webpage: - https://londonlegalsupporttrust.enthuse.com/pf/silver-levene-2023 Thinking of selling or buying? If you would like a free valuation or talk about how you could achieve a fantastic price for your pharmacy, please do contact us on 020 7380 3446 or 020 7380 3424 and ask for Sanja or Diana in the first instance. We would welcome the opportunity to have a chat with you. Alternatively, if you would like to buy a pharmacy, need accounting, or tax advice through our associated company Silver Levene , please also contact us on the same numbers. Your query will be directed to the right person. We wish you a happy Easter break and look forward to hearing from you. This article is based on current legislation and practice and is for guidance only. Specific professional advice should be taken before acting on matters mentioned here. Should you require any advice please do not hesitate to contact us .

As we wind down 2022, what does 2023 have in store for businesses and pharmacies in particular? 2022 was expected to be a year where growth would accelerate coming out of Covid lockdowns. People were looking to go out more, shop in retail malls (rather than online), travel, catch up with family & friends and do everything else they missed since the start of Covid. How different has it turned out! Government in chaos, war in Ukraine, high energy prices, high inflation, cost-of-living crisis, and high interest rate. Community pharmacists were also extremely optimistic as incomes had gone up due to all the Covid services. Those who sold in late 2020, 2021 and to September 2022 enjoyed the best prices for their pharmacies. However, since then, the market has turned slightly especially after the “mini” budget which was disastrous for many would be sellers & buyers. The banks got cautious and started pulling their lower interest rate offers. To add insult to injury The Bank of England has forecast that the current recession is likely to last to the end of 2023. The constant drip feed of negative news makes people nervous. Pharmacists fear a lack of access to walk-in healthcare on the high street will drive patients to NHS services such as A&E, adding to pressure there. The trend also jeopardises government plans to shift more work from GPs to pharmacists. NHS data shows 34.1 per cent of pharmacies in England reported at least one unplanned closure since October 2021. The most common reason was staff shortages. PSNC reported they are discussing a series of measures with the Department for Health and NHS England and seeking additional funding for pharmacies who are facing staff shortages while other costs continue to rise. Rising costs of medicines and supply issues without commensurate funding adds to ever mounting workload for contractors. Nurses planning to go on strike this month will no doubt add to workload pressures. Nevertheless, despite all the turmoil, the demand for pharmacies remains buoyant. What we have noticed is that since the appointment of the new Prime Minster and the Chancellor, the market has settled down and interest rate expectations have anchored at around 4% rather than 5 or 6. New enquiries have picked up and demand for good pharmacies is remarkably high. There are many first-time buyers, small and medium sized groups with healthy appetite and are looking to grow their estate. Pharmacies with turnover of more than £750,000, 5,000 or more items, in the community or high street, with sensible rent and other overheads are sought after. The first-time buyers are looking for bigger shop fronts giving them an opportunity to provide services too. We have many buyers on our database looking to buy throughout the UK. With the recent acquisitions by Well and Avicenna, there is an appetite for larger group opportunities. We have also witnessed an increase in enquiries looking to sell their pharmacy by 29% this year compared to last year. Our findings show the reasons for sale apart from retirement is also due to the staff shortages, leading to additional stress and delays in hundreds of thousands of prescriptions. At Modiplus, we have had an extremely busy year. These are samples of pharmacies that we sold this year:

Finance experts Umesh Modi and Vinku Shah advise first-time buyers on the steps they should take to make the acquisition a smooth process… We have been specialising in the community pharmacy sector for over 30 years and have helped many pharmacists acquire their first pharmacy. Several of our clients have also transitioned into multiple pharmacy owners under our specialist guidance and support through the years. Acquiring the first pharmacy can be a challenge to most pharmacists especially when they do not have the necessary skill in reading the numbers presented in terms of the target pharmacy’s performance and how to interpret these in order to arrive at a valuation for the purpose of submitting an offer. Without the guidance of a specialist accountant in community pharmacy, one of the major risks is that one could end up paying more than what the pharmacy is worth. Once the offer is accepted, there are other challenges to overcome to get the deal over the line. Our sister company Silver Levene LLP , a chartered accountancy firm with a specialist community pharmacy department, can help make the acquisition a smooth process for you: 1) Assessing the risk Once the target pharmacy has been identified, we can assist with assessing the risks and advise if it would be a viable investment so that you are able to make an informed decision. At this point, we will gain an understanding of your knowledge of the target pharmacy and be able to provide you with further guidance on income/profit generation and growth potential. 2) The valuation of the business Based on the information already provided by the seller’s agents, we may request further data in order to work out a valuation for the pharmacy and provide you with a range of offer to submit. This is to ensure that you are not overpaying for the target pharmacy and bidding within sensible parameters. 3) The negotiation process Sometimes when the initial offer is not accepted, a negotiation may take place and we would provide guidance on how to go about it with a view to successfully bidding for the target pharmacy. 4) Financial and tax advice whether an asset purchase or a company purchase The target pharmacy may be sold as an asset sale which usually happens when a chain is selling one of its pharmacies or it could be a company sale whereby the vendor(s) may own only one pharmacy and are selling the company’s shares (this is common when the vendor(s) are retiring pharmacists). Each of these transactions will have their own financial and tax implications that will need to be considered at the time of acquisition and we will provide sound advice in either case with a view to maximising your tax benefit and protecting you from over-paying through inadequate due diligence. 5) Accounts and tax due diligence This is the crux of the whole transaction and we advise all our clients (first time buyers as well as those expanding) not to compromise on this. We carry out a thorough and an in-depth review of the accounting records and information provided by the vendors, conduct our own independent checks to support the figures presented and liaise with our client throughout highlighting areas of concern. One of the major risks, for example, in a company purchase is that there may be undisclosed liabilities or overstated assets and if this is not accurately verified, you could end up paying a lot more to the vendors potentially leading to long standing disputes to recover sums overpaid. Litigation could take years, is a distraction and very costly indeed. It is far better to seek professional advice from the outset from an experienced firm then to have to face a dispute after the acquisition. 6) Financial and tax aspects of the asset/share purchase agreement The asset/share purchase agreement is a binding agreement between the parties encapsulating the mechanism of the sale price, payment terms, financial and tax warranties, indemnities and tax covenant etc. We review these agreements in detail, particularly to the financial and tax matters to ensure that and any risks are identified and mitigated through requesting relevant clauses be inserted/removed in the agreement. 7) Loan to finance the purchase The acquisition is most likely to be financed by borrowing from lenders and we have a panel of pharmacy specialist lenders that we introduce our clients to. The lenders understand the community pharmacy business and are willing to work with ambitious pharmacists/entrepreneurs and to help them grow. As we conduct considerable business with many of these lenders, we are often able to negotiate better terms for our clients. The lending fee or interest saving can sometimes more than cover the cost of our services to you. Each case is judged on the creditworthiness/security of the borrower. 8) Business plans, cashflow and profit forecasts As part of our complete due diligence package, we assist in drawing up the business plans, cashflow and profit forecasts which will be required by the lenders to secure the finance for the acquisition. 9) VAT/PAYE registrations Within 4 weeks of completion date, we will assist you with registration with the relevant authorities for all taxes for example VAT, PAYE, Self-assessment, etc. 10) On-going accounting/tax services Post completion, we offer a range of compliance services like bookkeeping, MTD compliant VAT returns, payroll, management accounts, annual accounts, corporation tax, personal tax, tax planning, financial services etc. You will have a dedicated and well-trained team dealing with your all your accounting and tax requirements. 11) Recommending pharmacy specialist service providers We deal with several pharmacy specialist service providers such as solicitors, lenders, stock takers, etc that we introduce to our clients. We recommend using professionals that specialise in community pharmacy as they understand the business and its requirements thereby saving valuable time and costs. As daunting as it may sound, buying your first pharmacy need not be a complicated affair as long as you use the right professionals who may seem slightly more expensive at the outset but will save you a lot of time and cost in the long run as they will be able to deal with any complications of the transaction efficiently. This article is based on current legislation and practice and is for guidance only. Specific professional advice should be taken before acting on matters mentioned here. Should you require any advice please do not hesitate to contact us .