Rowlands Pharmacy made a loss of almost £220 million in the 12 months to January 31 this year, its latest accounts reveal.

The multiple posted an overall loss of £219.3m in its 2022-23 Companies House report, which was prepared in July by an Ernst and Young auditor and published on Friday November 3. This was over six times the loss it made in the previous year (£34.6m).

The operating loss of £265m (2021-22: 21.2m) includes impairment of £216m, which was “necessary due to the reduced profitability and the impact on future predicted cash flows arising in the business driven by the uncertainty of future pharmacy funding ”. 

These losses were despite a 0.6 per cent year-on-year turnover increase to £406m – which was driven by ‘higher NHS commissioned service” and improved OTC sales – and cost reductions such as store divestments and a 4.3 per cent reduction in employee numbers. 

There were 3,211 staff members as of January this year, with the company attributing the 146 job losses to branch closures and mergers, unfilled vacancies and the “full year effect” of Project Magnet, an automated dispensing initiative. The report describes staffing costs as a “key expense” that continue to be “closely managed”.

“The company places considerable value on the involvement of its employees and has continued to keep them informed on matter affecting them as employees and on the various factors affecting the performance of the company,” says the annual report, which explains that there are regular staff meetings and an increasing number of channels for employee engagement through the use of digital technology.

Gross margin for the 12-month review period was 24.76 per cent, down from 30.3 per cent in 2022. This was attributed to “the impact of Category M funding cuts within the industry”.

The report explains that the directors of Rowlands – which as a part of Phoenix UK is wholly owned by German parent company Phoenix – are “currently undertaking a retail transformation programme as part of a strategy to return the business to profitable growth”.

It adds: “The company strategy is to concentrate on what Phoenix can influence for promoting both sustainable long-term growth and profitability. At the heart of the strategy are the steps being made in order to achieve a high quality, innovative and competitive service. This is clearly articulated through various means to the entire organisation so that everyone is aware of the role they have to play and the different they can make.” 

Inflation is cited as a key risk, with the auditors stating: “The current high inflationary environment has a significant impact on costs for the company impacting profitability due to a fixed pharmacy funding agreement until 2024. However, management are focused on cost control to mitigate the effect as much as possible.”