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Case study: Pharmacy One's prescription for success

Ups and downs are a part of business, especially given recent economic events. Over the past year, one of New Zealand’s largest specialist pharmacy groups, the Pharmacy One Group, has encountered its fair share of challenges and triumphs.

Ups and downs are a part of business, especially given recent economic events. One of New Zealand’s largest specialist pharmacy groups, the Pharmacy One Group, has encountered its fair share of challenges and triumphs.

The group comprises three businesses: Medication Packaging Services (MPS NZ Ltd) is a robotic pharmaceutical packaging and technology company; Pharmacy One Ltd supplies packaged medicines to Residential Care facilities and special needs patients in Auckland; and Pharmacy Direct is New Zealand’s number one online pharmacy providing both retail products and prescription medication. Although they were started at different times, all have been trading for well over a decade.

In July 2009, Steve Murray became the group’s new CEO, having bought into the company with Paul Taylor to join the existing majority shareholder, pharmacist Greg MacPherson.

What began as a casual conversation earlier that year between Greg and Steve turned into a full-blown due diligence process on the Pharmacy One Group of companies, says Steve.

“What I found was a group that was nowhere near exploiting its full potential for various reasons, so I decided to take up the challenge by taking a stake in the business and becoming CEO for group.”

Greg MacPherson was impressed by Steve’s business and technology background, aspects that Pharmacy One Group was lacking. Together they could combine sound business and technology strategies with a sound healthcare vision for pharmacy and medication management services.

It was clear that financial management was a major issue within the group and Steve decided to make sweeping changes and “raise the bar a bit”.

“I wanted more of a business advisor/partner service rather than just someone who could crunch numbers and do my accounts,” he says. “We needed someone who would be interested in the business in a more holistic way and that I could call on for advice and guidance.”

Steve had already investigated possible options as part of the due diligence process and says that

Hayes Knight always seemed to come out on top. He’d also heard good things about the company.

“I met with Tristan Dean before the deal was complete and effectively appointed Hayes Knight well before day one. To this day, I commend myself for making an excellent decision!”

But the hard work had just begun. A formal governance structure was needed and a proper board structure was also put in place, with Tristan Dean appointed to the board from the very beginning.

“The first thing we did was to look at the cashflow situation and it was not a good story,” says Tristan. “In fact, it was serious. They had just a few weeks before they’d be out of cash. Our advice was to downsize the roles in the company and reduce management salaries. It wasn’t great news to deliver, but it has saved their business.”

Steve admits it was a challenging and stressful time for everyone at Pharmacy One Group. “A lot of people lost their positions as a result,” he says. “It’s never something to enter into lightly but something you must not shy away from, and Hayes Knight helped every step of the way – through   the challenging times of dealing to the cash shortfall and restructures necessary to make the business work. They kept me honest by establishing some clarity and accuracy around the situation and advising on what needed to be done.”

The relationship has grown from there. Hayes Knight has become an integrated part of Pharmacy One Group’s business, providing support to its in-house accountant with the preparation and review of monthly figures, and reporting requirements for the bank.

Steve says Hayes Knight takes an active interest in the business and continues to proactively monitor it, providing guidance and advice on all matters from gaining new contracts to looking at potential acquisitions. A business valuation was also carried out for the group so the shareholders could track the value of their investment on a quarterly basis. Hayes Knight provided a template that Pharmacy One Group could complete themselves.

“In effect, they are more like another business partner than our accountants and that’s the value I was looking for,” he says. “They don’t sugar coat things – they do the research, do the analysis and give you a very clear and well-articulated statement of position.

“The quality of work, the level of interest shown and the overall commitment to my business have been outstanding. Overall, I’m extremely happy with how things are working out.”

Originally published in Beyond the Numbers, issue 4