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A pair of pharmacies in the south-west of Wales are to come under new ownership after the company that ran them fell into arrears with medicine wholesalers.

Administrators were appointed earlier this month to facilitate a pre-packaged sale of The Health Dispensary Limited in Neath, which began operations in 2000 and has had co-founder Ali Sparkes as its sole director since 2016. 

The sale also included nearby business Neath Pharmacy Limited, which was a separate entity but whose finances and staff were managed by The Health Dispensary. 

Administrators Chris Latos and Tom D’Arcy of BTG Begbies Traynor reported that the company was “well established in the area” and employed 17 staff members, but “began to experience financial difficulties as a consequence of a reduction in working capital”.

Its main source of income was reimbursement for dispensing NHS medicines, but after falling into arrears with some suppliers it became “unable to maintain the necessary stock levels to continue operating at full capacity”.

“The receipts being generated under its ODS code were insufficient to cover all operating costs for the business, and the company started to accrue further arrears to trade suppliers and HMRC,” said the administrators, adding that debts went unpaid as the company could not “generate sufficient sales due to reduced stock levels”.

Advisors from BTG Advisory were instructed jointly by the company and its largest creditor, HTB Leasing & Finance, on April 22 this year to establish the best way forward for the business, quickly establishing that it was “in a very distressed state”.

Consultants from Pharmacy Seekers were brought in to start marketing the pharmacies, leading to multiple offers being made and the highest offer accepted.

However, on May 5 a creditor issued a winding up petition, following which it was concluded that a pre-packaged sale of the business and assets was necessary. 

Administrators appointed on July 1 and “immediately afterwards” completed the pre-packaged sale to Overdrake Limited, which owns 11 NHS pharmacies in the nearby region. Overdrake made an offer of £740,000 for the business and assets and £200,000 for freehold, plus stock.

Staff were transferred over to the new owners under TUPE regulations, meaning the only expected preferential claims relate to unpaid pension contributions, which are estimated at £3,578.

Lenders HTB and Castlebridge Finance, which hold fixed charges over The Health Dispensary, were owed £1.04m and £602,000 respectively, and are not expected to recover their claims in full. 

Unsecured creditors, which include wholesalers AAH Pharmaceuticals (owed £100,000), Sigma Healthcare (£44,000) and Phoenix (£13,600), have claims estimated at a total of £572,147. However, there will be “insufficient funds” available to pay them a dividend from the pre-packaged sale, said the administrators. 

The administrators will seek recovery of pre-administration costs amounting to £104,000, the majority of which “will be paid by HTB directly from fixed charge asset realisations”.

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