NHS pharmacy chain owed £40m before it was bought out of administration
An estimated £40m was owed by NHS pharmacy chain Medipharmacy before it collapsed into administration and was rescued, it has been revealed.
Last week, the pharmacy company was bought out by rival Enimed in a deal that saved 150 jobs and 25 sites in London and the surrounding counties.
Medipharmacy has 25 total locations, including eight in Greater London, with its other operations based in Kent, Surrey and West Sussex.
Now, a new report from administrator FRP has revealed the events that led up to Medipharmacy collapsing and exactly how much it owed to its creditors before the rescue deal was secured.
What is Medipharmacy?
The pharmacy business was founded in 2004 and headquartered in East Grinstead, West Sussex.
Its three directors were Naveen Khosla, Sadhna Kosia and Sandeep Krishen Khosla.
According to FRP’s document, the pharmacy company’s turnover for the year to March 31, 2022, totalled £27.6m while its profits were £183,502. However, FRP added that its turnover had jumped to £69m during its latest financial year after a ramp up in wholesaling.
However, the increased turnover did not lead to a corresponding improvement in its profits, with EBITDA falling from £1.7m in FY22 to a loss of £5.8m in FY23. FRP said the decrease was due to wholesaling losses of 12 per cent at gross profit level in FY23.
How did the pharmacy business enter administration?
FRP said: “In August 2023, the company’s wholesale operation was wound down while management investigated how recent losses had accumulated.
“In doing so it became apparent that stock realisations did not generate sufficient cash to meet creditor arrears totalling approx. £19.9m.
“The contractor managing the wholesale division of the company left the business in June 2023 and has been uncontactable since.
“Creditor arrears have resulted in significant cashflow pressure and the positioned worsened due to RX seeking to minimise their exposure due to concerns regarding unquantified accumulated losses and mounting creditor pressure, by restricting the company’s drawdowns.”
FRP added that in December 2023, Santander provided the pharmacy company with a further £550,000 for paying employees and suppliers.
Naveen Khosla, Sadhna Kosia steped back from the day-to-day operations of the business for “personal reasons” while their son, Sandep Khosla, took over until FRP was appointed.
FRP said: “Noting the increased creditor and cashflow pressures as a result of the wholesale losses, Sandeep took legal advice regards the current company position and his own director duties which lead to him being referred to FRP to provide advice.”
How much did Medipharmacy owe?
According to FRP’s report, Santander was owed £5.5m across three term loans and £6.5m in a revolving credit facility on top of the extra £550,000 it provided in December 2023.
RX was also owed £3.4m through a debt purchasing facility and £2.6m was owed to HMRC in VAT payments.
FRP added that it is understood that Medipharmacy had “significant” trade creditors totalling an estimated £21.5m as a result of the “closure of its wholesaling division and the restriction of working capital required to trade and pay down historic creditors”.
FRP has said it is expected that Santander will suffer a shortfall and that it is uncertain whether there will be enough funds to pay back HMRC. The firm added that it is also uncertain whether the unsecured creditors will receive any money at all.