8 Mark Churchill, Managing Director, Allfin Financial Services Pty Ltd

Specialising in the struggling pharmacies sector means Churchill’s brokerage, Allfin Finance, has had to work harder than ever before

Mark Churchill is in his third Top 10 report, having first entered the list in 2015, and he continues to stand out as a different type of business broker. Allfin Finance, based in South Melbourne, specialises in pharmacies and their owners. “It’s goodwill lending, and that rolls into personal home loans and refinancing.” Churchill makes it his job to stand out in this niche, and was talking to MPA just after returning from a pharmaceuticals conference in Europe, one of many industry events he attends.

Specialising in one industry can be a major disadvantage, as Churchill has experienced over the past two years. Partly driven by government regulations, the pharmacies sector is struggling, he explains. “In our industry there’s been a pretty large drop in gross profit. We’ve seen in year-on-year financials that returns are diminishing, therefore we’ve had to put in a lot more work on how we’re going to move the business forward … it’s a lot easier to do work around businesses that are going up, but that’s just an industry norm.”

Changing bank appetites
Lending against falling profits would be difficult at the best of times, but banks are also tightening up their lending to pharmacies. “They’ve probably become more diligent in what they’re lending, too – which means a lot more details, a lot more work around doing a submission,” Churchill says. “Before they probably would have let some things go.”

Looking elsewhere for finance 
Allfin is looking at the Australian non-banks to provide new options for pharmacies. “You deleverage the current lender by bringing in other parties, so there are fewer restrictions around covenants, etc,” says Churchill, who points out that these deals aren’t necessarily more expensive. “I look at the big construction guys and at what they’re doing; if it’s easier to bring in the unsecured guys and have a reasonably blended rate, the borrowers are more likely to do that as it’s easier to do.” Churchill has been approached by other offshore funders but has yet to use any, although he continues to consider new ways of funding his clients.

Outlook for 2017/18
Conditions could get even tougher for pharmacies over the coming year, Churchill believes, although this will be mainly driven by the sector’s own economics, not by the lenders. Pharmacies are in a similar situation to embattled property developers, he explains. “The banks aren’t lending to property because they’re worrying the bubble’s going to burst, so they’re deleveraging themselves. It’s probably a similar case with pharmacies.”

“We’ve seen in year-on-year financials that returns are diminishing, therefore we’ve had to put in a lot more work”