Cheer for Alliance Boots as group passes the £1bn profits milestone

The group, which was taken private in 2007, struck a note of caution over consumer confidence but insisted it can continue to grow despite the tough economic environment.

The group, which trades on the UK high street via 2,500 Boots stores and 670 opticians, said it continues to look for expansion opportunities, particularly via joint ventures and partnerships abroad.

"Consumer demand will continue to stay quite subdued," said chief executive Andy Hornby. "The governments in all of our core countries are going to have to take some tough choices that's likely to mean tax increases and reductions in expenditure. That's likely to have a reduction in consumer demand."

But Mr Hornby, who led Halifax Bank of Scotland before it was rescued by Lloyds Banking Group, added: "Provided we get our product development right... then we can continue to have revenue growth even in a tougher economic environment."

Boots was bought in 2007 for about 11bn by private equity firm KKR and billionaire executive chairman Stefano Pessina.

Including earnings from partnerships and joint ventures, the group reported a 12.7 per cent increase in trading profits to 1.07bn for the year to the end of March. Along with Marks & Spencer and Tesco, Boots is the only other UK retailer to have reported annual profits of more than 1bn.

The group, which employs 115,000 people, said revenues grew almost 10 per cent to 22.5bn.

Mr Pessina also ruled out an imminent return to stock market.

"I believe that we will continue to stay private for some years," he said. "When we did this deal we agreed with KKR that this would be a long-term investment for them. So they are not in a hurry.

"For sure we are not talking one or two years."

Mr Pessina added the group has a number of options on where an eventual stock market listing might take place.

The group's health and beauty arm grew profits 8.5 per cent to 730m. Its pharmaceutical wholesale division saw profits soar 17.2 per cent to 252m.

In the UK, health and beauty profits were up 7.8 per cent to 677m. Highlights included pharmacists dispensing more than 212m items – up four per cent on a year ago. Its advantage card, which rewards customers for spending, now has 16.7m active members.

A year ago Boots merged with Dollond & Aitchison to create the UK's second-largest chain of opticians. The group said this has helped lift Boots Opticians' revenues by almost 77 per cent, and the integration is progressing well.

The group's debts fell 645m to 8.39bn, and Mr Hornby said while it would continue to pay down debt thanks to strong cash generation, the group may also invest. "We're not going to lock ourselves into a lack of flexibility," said Mr Hornby.

Profits from Boots' share of associates and joint ventures grew almost 20 per cent to 134m. Mr Pessina said the group increasingly intends to use this approach, through tie-ups such as working with Procter & Gamble to distribute and promote the Boots Laboratories' skincare range in Italy, and in-store pharmacies in Waitrose supermarkets.

He added: "We have many ideas and many contacts and hope that sooner or later we will be able to crystallise some of these ideas."

Despite making 30m efficiency savings over the past year, the group said it has focused on investment, which has totalled more than 1bn over the past three years. This included recruiting more than 1,800 pharmacists and a new wholesale warehouse in Exeter.

Health of the nation

Boots launched a health portal, BootsWebMD, last year, to give consumers "compelling and credible" health information.

It aims for the site to become the most trusted source of consumer health information on the internet.

Health and beauty chief executive Alex Gourlay said the site capitalises on an increasing thirst for knowledge around health and wellbeing. "People are giving more attention to health issues," he said.

"We are getting roughly the level of people we expected but they are spending more time on the site."

The site includes medical imagery, video and graphics. Boots said all its content is subject to "rigorous" review and approval by doctors.