Excessive rents a ‘threat’ to pharmacies

The directors of Hickey’s Pharmacies, one of the country’s largest pharmacy retail groups, have stated that excessive rents on several properties represent a threat to their business.

The directors of the family-owned firm, which operates 30 pharmacies, made the claim in accounts filed by Drishlawn Ltd to the companies office.

Operating profits at the group fell 1%, from €7.52m to €7.43m, and revenues decreased from €46.65m to €46.31m in the 12 months to Feb 28, 2013.

The group sustained a minor drop in pre-tax profits to €1.12m after non-cash amortisation costs of €3.2m, interest payments of €1.1m, and a writeoff of a loan to a subsidiary totalling €1.98m were taken into account.

In the directors’ report, it is stated that several of the group’s leases on retail properties “are upward-only in nature and are currently at excessive and unviable rent levels, which will need to be normalised to a sustainable rent”.

“These excessive rents represent a threat to the business as it is currently structured. The company is engaging with landlords and with its advisers to achieve the necessary restructuring of excessive lease costs, and it is optimistic that this will be successful.”

The directors state that to mitigate against the risk to the business brought about by repeated reductions in payments by the HSE under the State-funded drug scheme and several price reductions between pharmaceutical manufacturers and the State, “management continue to focus on cost reduction and to seek to grow other parts of the business”.

Numbers employed at Hickey’s Pharmacies last year increased from 294 to 298. Staff costs increased from €7.3m to €7.7m.

The directors are listed as Patrick Hickey, John Lanigan, and Stephen Butler, with aggregate directors’ remuneration last year increasing 25%, from €348,252 to €436,455, made up of salaries of €411,038 and pension costs of €25,417.

The accounts show the group recorded gross profit of €20.8m after cost of sales of €25.48m are taken into account. A tax charge of €807,193 led to post-tax profits of €321,603.

This profit takes into account non-cash depreciation costs of €351,560. The group’s bank loans reduced during the year from €27.6m to €24.8m.

Shareholder funds stood at €9.8m, which included a shareholders’ deficit of €1.59m and called up share capital of €11.42m.

The group’s cash increased from €2.23m to €6.1m during the year.