Medici Capital Pharmacy Financial Situation
Mon, 27 October 2008 AEST
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PrintFrank Sirianni
While we are in the midst of an extra-ordinary financial melt down, pharmacy is financially robust and remains a good area for investment. Whether you are a buyer looking to buy a pharmacy, a current owner, or bank wishing to lend to the sector; pharmacy is and remains a solid investment.
Medici Capital has worked closely with most of the banks that have a pharmacy lending policy. Medici Capital formally commenced completing valuations for banks in 1995. In early 1993, we assisted a couple of banks to develop their pharmacy lending policies which no longer relied on wholesaler guarantees. Arising from working closely with those banks to develop their pharmacy policy, a valuation protocol was required and we developed it.
In the context of the global financial and economic environment, many have come to realise that:
- pharmacy is a key and stable sector in the economy;
- pharmacy is perhaps counter cyclical anecdotal evidence suggests that in a declining economy consumers move to manage health and are often dependent on pharmacies for health and beauty self management; and
- pharmacy returns (currently estimated to be between 20 and 25% per annum including capital gains) are very good when compared to returns from shares and property.
It is understandable; however, that many banks have reviewed their pharmacy lending policy. Access to capital for some banks with smaller balance sheets and losses in other sectors (perhaps arising from the sub-prime issues) has meant that some banks have reduced their lending appetite for pharmacy.
Nevertheless it varies across the banks. Many have a 'watch' position for pharmacy. Others are positive and looking to building their book. The flight to quality and risk pricing has been adopted by all.
The banks have become selective the deals they will fund. Information requirements are strictly adhered to, onerous reporting requirements are being set, and cash flow / serviceability are critical to obtaining finance.
Medici Capital is an established provider of financial services to the pharmacy industry.
Our aim is simple: To provide business owners with an independent range of integrated financial and business services which help them to achieve goals and build a rewarding and prosperous future.
For more information about pharmacy valuations or pharmacy finance, please contact us. With offices in Brisbane, Melbourne and Sydney, Medici Capital can assist you in achieving your financial goals in pharmacy.
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