‘Security’ of pharmacy’s NHS income attracting investors, say brokers

The ‘relative security’ of the pharmacy sector is attracting investors to the market, according to a report released yesterday (21 August) by the brokers Christie & Co.

The report shows that healthcare businesses like pharmacies are more secure for investors than other sectors like retail and hotels.

A Christie & Co spokesperson said: ‘The medical sector has continued to offer a secure option as a needs-based market but with high competition and limited supply across the dental, pharmacy and GP surgery spaces.’

There is a 'ready market' for independent investments in pharmacies due to their 'relatively secure' NHS income, the report said.

It said: ‘The principle income driver within the pharmacy sector is that of NHS dispensing, thereby providing a relatively secure income base.’

‘Low risk’

The pharmacy market, which Christie & Co said is 50% controlled by independents, offers average yields of 5.5% to 7.5% and 8% to 10% for prime and secondary investments respectively, according to the report.

Simon Hughes, managing director - medical at Christie & Co, said: ‘The pharmacy and dentistry sectors are highly fragmented and relatively immature investment markets, made attractive by the relatively low risk of the trading businesses.’

The report added that while the first quarter of 2019 saw a reduction in M&A activity due to ‘challenges’ such as the volatility of the pound thanks to ‘political turmoil over Brexit’, the second quarter saw returned activity with investors ‘generally optimistic’ about the UK.

Last month, Christie & Co announced that the number of independents and first-time buyers are on the up as the number of pharmacy sales increases.

Meanwhile, the Government has committed to make it easier for contractors to merge with other pharmacies as part of the new English community pharmacy contract.