McKesson reports 16% year-on-year increase in profit from European business

The increase in McKesson’s operating profits is attributed to lower operating expenses as a result of store and back-office efficiencies.

McKesson headquarters

McKesson’s European business has reported a 16% year-on-year increase in its adjusted operating profit.

In its third quarter financial report, published on 4 February 2019, the European Pharmaceutical Solutions segment of McKesson was reported to have accrued US$80m in adjusted operating profit in the third quarter of the 2019/2020 financial year (October to December), compared to US$69m in the same quarter of the 2018/2019 financial year. 

The figures come after its second financial quarter results (July to September) of 2019/2020, published on 30 October 2019, showed a 19% drop in adjusted operating profit compared to the same period the year before.

Britt Vitalone, chief financial officer at McKesson Corporation, said the increase was “driven in part by lower operating expenses as a result of actions previously taken to rationalise store footprint and streamline back-office functions”.

A spokesperson for the corporation told The Pharmaceutical Journal that it continues ”to implement centralisation of certain functions and outsourcing” of some functions to save money.

They added that efforts to cut costs “also include reorganisation and consolidation of our business operations and related headcount reductions, as well as the further closures of retail pharmacy stores in Europe and closure of other facilities”.

“We anticipate these additional programmes will be substantially completed by the end of 2021.”

In October 2017, LloydsPharmacy — which is owned by McKesson Corporation — announced plans to close nearly 200 pharmacies because clawbacks and changes to government policy on reimbursement had made them “commercially unviable”. It later warned in May 2019 of potential “further closures” as part of its continued “restructuring” of the European business.

Presenting the figures in an online livestream, Brian Tyler, chief executive at McKesson Corporation, said that the company was monitoring retail pharmacy funding dynamics in the UK, referring to what he described as underfunding by the NHS in the first three months of the 2019/2020 financial year.

He said there had been a “modest improvement” in this regard in the following three months, but added that the company would continue to monitor the situation closely and engage in “active dialogue” with the NHS.

Later in the presentation, Tyler said he was pleased about the new five-year funding agreement but said that McKesson would have to monitor and evaluate the situation.

Tyler said McKesson was “pleased to report third quarter adjusted earnings results ahead of our expectations”, adding that the figures demonstrated the company’s “unwavering focus on strategic and operational execution”.

On 5 January 2020, LloydsPharmacy reported a loss of £165m in the 2018/2019 financial year. At the time, Marcus Hilger, board member responsible for finance at McKesson UK, said that the year had been “exceptionally challenging”, in part because of “continued reductions to the remuneration available for pharmacies in England”.

Speaking to The Pharmaceutical Journal on 21 January 2020, Toby Anderson, chief executive of McKesson UK, said that while the company welcomed the certainty offered by the community pharmacy contract, “the harsh economic reality is that we had three years of funding cuts and then a zero-inflation funding settlement”.

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Citation
The Pharmaceutical Journal, February 2020;Online:DOI:10.1211/PJ.2020.20207662