Broker update: State of the pharmacy market FY21

FY21 is over already? Are you sure? It’s hard to believe yet another financial year has passed us by.

Just like Christmas, it sneaks up on us every year, yet still seems to come as a surprise.

While COVID and the restrictions that came with it were a huge shock last year, the same conditions have fast become the norm in 2021. Thankfully, our industry has largely been unaffected or positively affected by the pandemic to date. This is with the exception of CBD and Shopping Centre businesses, particularly in the south-eastern states.

While AP Group have seen several sales in shopping centres through FY21, we’ve seen most CBD owners (where they can) look to hold their businesses, with high confidence the business districts will bounce back. Now, two years into the pandemic, we all hope this is sooner rather than later.

AP Group had its biggest year on record once again, on the back of a record breaking FY20, FY19 and FY18 – a trend we’re looking to continue into FY22. These great results were driven by a strong appetite for high value businesses which kept the average sale price at ~$2,500,000 and the highest single store sale price at $7,550,000. What’s almost as interesting is the average price above valuation, which held at 11.71% – which may not sound too high until you consider there are still plenty of underperforming businesses which sell for below valuation.

While many of the higher value business sales were driven by groups with wholesaler backing to support their offers, these groups still made up only ~25% of total pharmacy sales. Independent buyers are still the most accurate in the marketplace representing ~75% of total pharmacy sales within AP Group. On the whole, independent pharmacists are also faster to settle businesses than the groups, as they avoid internal approvals and signoffs which can delay settlement processes.

One of the most reliable indicators of market strength is always the average ‘time on market’. This is measured from the moment the listing goes live on AP Group website to the moment a ‘Heads of Agreement’ is signed. In softer markets, people offer slower and lower, which pushes this time out. The average ‘time on market’ for FY21 was 32 days!

So in short, FY21 saw $2,500,000 average sale at 11.71% average premium in 32 days on market – a sensational year for retail pharmacy once again.

We can expect similar (if not better) results from FY22. The year has already started off stronger, with lockdowns set to ease and greater travel freedoms will allow us to inspect interstate pharmacies. Should Wesfarmers or Sigma’s bids for API be successful, we can also expect increased wholesaler competition. As a result, AP Group are already excited to provide our FY22 update.

If you would like to talk about anything specific, please do not hesitate to contact any of the team at AP Group. Finally, good luck for your FY22.

– Robert Whelan, Managing Director at AP Group

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