Suppliers' policy hits Norchem profitability

County Durham-based pharmacy business Norchem has reported "disappointing" results for the year ended May 31, 2013

Norchem
Norchem

County Durham-based pharmacy business Norchem has reported "disappointing" results for the year ended May 31, 2013.

The period saw the company’s turnover drop from around £30.6m to around £26.5m.

Profit, meanwhile, fell from £684,181 to £308,130.

In a directors’ report, Norchem said: “The directors are disappointed with the performance for the year and have taken steps to ensure an improvement in profitability in the future.

“The group’s wholesale operation has continued to see a reduction in its turnover as its ability to provide products has been further affected by suppliers’ ‘Direct to Pharmacy’ policy.

“A group operating margin of 2.2% (4.5% in 2012) was achieved, despite a fall in turnover of 13% and significant exceptional costs being incurred as a result of the decision to bring the group’s purchasing function back in house.

“The directors anticipate that, in the foreseeable future, the group will remain profitable.”

Norchem Limited was formed in May 1960 as a buying group by six independent pharmacists, its prime purpose being to benefit independent pharmacists.

The company became a full line wholesaler in 1975, while supplying to a restricted list of customers.

It progressed for 30 years as a members-only organisation before beginning to supply to non-shareholders as competition consolidated and intensified in the early 1990s.

The wholesaler operation grew year-on-year to 2007, at which time a number of manufacturers cut out independent wholesalers.

The retail side today has 20 pharmacies.

Earlier this year, the business launched Thrive, an online vitamins business tailored to individual customers, designed to keep it one step ahead in the wake of Government efforts to cut health service costs.

It is also acquired a 25% minority interest holding in Quality Compliance Solutions Limited.

The latest directors’ report shows the company employed an average of 260 people in the year ended May 31, compared to 251 in 2012, the aggregate payroll costs going from around £4.08m to £4.48m.

“The principal risks and uncertainties facing the group are the continuing reduction in wholesale product availability and Government intervention into the UK dispensing market,” it added.

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