Day Lewis’s net profits fell by 26 per cent in the 12 months to March 31, its latest accounts reveal – with the company citing rising staff and utility costs as a key driving factor.

The company’s latest Companies House Filing, which was published on September 28, reveals that net profits fell to £9.3m from £12.6m the previous year, while operating profits stood at £16m – down £7m from 2021-22.

This came despite turnover increasing by nine per cent to £474m and what the company described as continued retail sales growth and a market-beating boost to its dispensing business, with scripts dispensed rising by 6.8 per cent to 25.2 million. Across the UK sector as a whole, the number of dispensed prescriptions rose by three per cent.

Profits were hurt in part by the need for increased spending in areas like utility bills and staff wages as well as the Government ending Covid-19 support packages, according to the financial report. Administrative expenses rose by £16.3m to £109.5m – a 17.5 per cent increase.

During 2022-23 the company “continued its policy of limiting bank debt by pausing acquisitions and focusing on enhancing the existing estate”. This included moving branches to “superior locations”, merging several sites and disposing of pharmacies with “exceptionally low footfall”. Despite this, the overall branch count as of March 31 this year was 267, one more than at the same point in 2022.

The report reveals that Day Lewis is making greater use of its Croydon-based hub and spoke dispensing facility, while as of March 58 stores were equipped with a 24/7 prescription collection kiosk.

“The group maximises margin by focusing heavily on its pharmaceutical distribution operations,” the report said. As well as purchasing medicines to dispense through its own chain, Day Lewis distributes to “external channels” including other pharmacy groups and global entities like offshore energy businesses and, after the January 2022 purchase of Bellegrove Medical, cruise ships in North America. Meanwhile, the Day Lewis-owned manufacturer East Midlands Pharma “performed strongly” in 2022-23, with further growth expected.

The company’s stated ambitions include being the “pharmacy destination of choice locally for prescriptions” and growing its international business, as well as diversifying into “other pharmacy-related sectors”.

Plans for improving margin include “improve purchasing mix of medicines between generic and branded products” and boosting income from services.

The company has at its disposal a £110m credit facility, of which £95m had been drawn down by the year and. Additionally, it had cash balances of £26m, up from £4.6m in 2021-22.