She was a star of RTE’s Dragons Den and the Secret Millionaire television series. Hailing from Arboe in Co Tyrone, Ramona Nicholas co-founded Cara Pharmacy Group along with her husband Canice. Both are trained pharmacists who, as joint chief executives, expanded the group increasingly quickly from humble origins in Donegal. 

Now, the largest creditor of Cara Pharmacy Group has moved to put the business into examinership. Debt financier DunPort, which is owed €14 million by the healthcare group, applied to the High Court to appoint accountant Ken Tyrell of PWC as an interim examiner though a High Court application.

Cara Pharmacy was already under some pressure, after expanding quickly since 2017, but the onset of Covid-19 has caused a sharp fall in the company’s performance. Cara has 12 pharmacies as well as a subscription medicine provision business and at its peak employed about 245 people.

The business specialised in selling non-medicinal products like perfumes, beauty products, vitamins and so on. But these types of sales have been badly impacted by Covid-19 as consumers switch to buying those types of products online or in supermarkets.

DunPort has been reviewing the future of the business for some time with Cara management. In July Cara put one of its many subsidiaries, a company called Cara Pharmacies (Galway), into liquidation. The business has also been trying to reduce its cash burn and grow online sales.

Karl Cleere, a former corporate debt restructuring banker with IBRC who now works in corporate finance is thought to have been involved in helping the business review its operations. Canice Nicholas has been actively engaged with DunPort for some time to try and limit Cara’s problems.

The decision by DunPort to try and put the business into examinership will, if it receives the backing of the courts, give the business at least 100 days to prepare a rescue plan. This could see a new outside investor come into the company while creditors will most likely be asked to write down debts.

Pharmacies nationwide – like all main high street retailers – are under huge pressure at the moment, so it is possible DunPort will use the examinership process to invest more in Cara itself. In addition, it could attempt to restructure its debt and renegotiate rents with landlords. Cara has three stores in Donegal, two in Sligo, two in Leitrim, one in Longford, three in Cavan, one in Dun Laoghaire in Dublin, and one in Douglas in Cork.

Up until now Ramona Nicholas and Canice Nicholas have controlled Cara entirely themselves. Companies office filings relating to the various companies which control individual pharmacies in the group show however that Elm Corporate Credit DAC, a DunPort vehicle, has a charge over key assets.

The main holding company behind Cara is called Cara Pharmacy Unlimited, which in turn is owned by two Isle of Man Companies. As a result of Cara’s unlimited status it does not have to file publicly available financial accounts. So, when did all begin to go wrong for Cara?

*****

In 2017 Ramona Nicholas was shortlisted in the EY Entrepreneur of the Year Awards. Nicholas didn’t win, but it was only a month before the awards that Cara took a big step up in terms of borrowing and expansion. In September 2017, Cara Pharmacy Group bought Abbey Healthcare, bringing them into the competitive markets of Dublin and Cork.

Cara didn’t disclose the terms of the deal, but the company said it brought its revenues to €40 million, and employee numbers shot up from 160 to 245. “The deal means we have a nationwide presence for the first time, making us the only indigenous pharmacy in Ireland that is in the four provinces,” Ramona Nicholas said afterwards. Abbey’s main business was providing prescription drugs to the long term care market, but it also had two pharmacies. Post the Abbey deal, Cara had 16 pharmacies.

Cara financed its expansion using debt finance from DunPort, one of the last deals it did while still called by its former entity called Blue Bay. On its website DunPort said it “provided debt capital to refinance existing indebtedness and fund the acquisition of Abbey Healthcare.”

No numbers were disclosed publicly, but the total borrowed from DunPort prior to the examinership process had reached €14 million.

Debt finance can be a good way for entrepreneurs to fund their growth without giving up equity. The risk however comes if entrepreneurs fail to meet projections anticipated in the business plans. High interest rates can weigh on a business if sales start to sag, and this was already impacting Cara even before March of this year. But then add in a devastating external shock like Covid-19. Interest bills that were previously manageable can mount up quickly, and founders can get ousted or diluted, or they can bring in new investors and help turn things around.

*****

Ramona Nicholas grew up on a small farm in Co Tyrone. In a 2019 interview with The Sunday Independent she said she had long wanted to be a pharmacist. “I was lucky, I knew from the age of about 11 that I wanted to be a pharmacist. I don’t know if it’s because I loved the smell of chemists’ shops, or if it was the idea of having a shop,” she explained.

“I love being a pharmacist, but it’s actually the retail end of it I love now.” She met her husband Canice when she was 16, but it was not until 1996 when she was in college that they started going out. Canice had a pharmacy in Bundoran, and Ramona started with a pharmacy in Donegal town. They were by then going out, so they decided to combine the business and call them Cara. They married in 2005 and the business grew quickly in locations outside Dublin and Cork, and soon had seven pharmacies.  “I think in those days, we were so young we had no fear. We never had a sleepless night,” Nicholas explained. Cara grew steadily with financing from ACC which lent it €13 million. In 2009 it weathered the financial crisis, as well as a strike after the HSE cut pharmacy fees.

As the business grew, so too did the plaudits. The Irish Times interviewed her in 2017 on an EY bus “hurtling” from Palo Alto to San Francisco packed full of gung-ho entrepreneurs of the year. Ramona Nicholas said that Cara was beefing up its management team and finance capabilities to allow it grow.

“We’re looking at big structural changes, getting store managers to do more of the day-to-day stuff and ultimately only having a few people reporting into us rather than everyone,” she said. “The plan is to free Canice and I up so that we’re not constantly firefighting.”

Nicholas said Cara’s business model was “basically to acquire underperforming pharmacies and turn them around.” She said she hoped to open seven pharmacies in Dublin and eventually go to Britain.

“We always joke about being on Fifth Avenue as well at some point and have high conversion rates online from the US. But we’ll have to wait and see on that,” she added. The prospect of going overseas any time soon is dead in the water, the battle now is at home.