Alliance Boots posts higher profits

Sales rose by 15 per cent to £20.2 billion in the year to March 31 with underlying profits up by 14 per cent to £1.05 billion, though most of the gains came from the pharmaceutical distribution side, where profits jumped by more a third to £320 million.

Boots UK had a more difficult time as like-for-like revenues rose by 0.5 per cent. Cosmetics sales dipped and lifestyle, which includes photography, also saw sales fall slightly. Higher volumes offset lower prescription charges to lift dispensing revenues by 2.4 per cent.

The UK was still the best performer in the health and beauty division overall, with all other countries seeing lower like-for like sales. Trading profits were 5.5 per cent higher at £767 million.

Acquisitions boosted the pharmaceutical division’s contribution as growth in both sales and profits was 1.7 per cent on an underlying basis, though UK sales rose by more than 5 per cent despite more direct sales to chemists slowing its progress.

The company, which was taken private in an £11.1 billion takeover in 2007, last year became the third UK retailer to post profits of more than £1 billion behind Tesco and Marks & Spencer.

The group employs around 75,000 staff in the UK, with 2,500 health and beauty stores and 670 opticians. In October, it announced it was cutting more than 900 non-store UK jobs over the next three years.

Executive chairman Stefano Pessina, who led the buyout of the business with private equity firm KKR, cautioned that the pressures seen over the past 12 months were expected to continue.

“We are planning for consumer demand to be subdued and expect governments to continue to seek ways to contain growth in healthcare expenditure,” he said.

Mr Pessina took back overall executive control of the company in March when former HBOS chief Andy Hornby stepped down unexpectedly as group chief executive. Pessina has denied there was a rift between the pair though no replacement has been appointed.

Bottom-line pre-tax profits rose from £460 million to £637 million, while strong cash generation cut borrowings by £546 million to under £8 billion.

There have been suggestions that the firm may try to float next year to cut debts further and to enable KKR to realise some of its investment after five years.