Alliance Boots Profit Tops £1 Billion

LONDON (Reuters) – Alliance Boots, Britain’s biggest pharmacy chain, posted annual profit of over 1 billion pounds ($1.5 billion) on Monday, becoming only the third UK retailer to pass that milestone.

The group, taken private in 2007 in Europe’s biggest leveraged buyout, also said strong growth in own-brand products like No7 cosmetics and in its international wholesale operations would help it to cope with tough markets across Europe.

“We’re certainly not expecting the economy to improve at all. We’re budgeting for a subdued environment,” Chief Executive Andy Hornby told Reuters in a telephone interview.

“Nevertheless, we believe we’re competing in attractive markets and our formula is working.”

Retailers across Europe are struggling in a sluggish economic recovery and fear that steps to rein in government borrowing could hit consumer demand in the months ahead.

Also on Monday, Swedish fashion group Hennes & Mauritz (HMb.ST) reported a drop in underlying April sales, while Britain’s Travis Perkins (TPK.L) said the home-improvement market was fragile.

Alliance Boots, bought in 2007 for about 11 billion pounds by private equity firm KKR and billionaire executive chairman Stefano Pessina, said trading profit rose 12.7 percent to 1.07 billion pounds in the year ended March 31.

Supermarket group Tesco (TSCO.L) and clothing-to-foods chain Marks & Spencer (MKS.L) are the only other British retailers to have produced annual profits of over 1 billion pounds.

Hornby, who led mortgage bank HBOS before it was eventually bought by Lloyds (LLOY.L) in a government-brokered rescue, declined to say when Alliance Boots might return to the stock market.

He also signalled he was happy with the pace at which the group is paying off its debts, which fell 645 million pounds to 8.39 billion. 

PROTECT & PERFECT

Alliance Boots, which employs around 115,000 people and traces its roots to a single shop selling herbal remedies that opened in Nottingham, central England, in 1849, said revenue rose 9.6 percent to 22.5 billion pounds.

That included a 3 percent increase in like-for-like sales at the core Boots UK health and beauty business.

Hornby was confident the firm could continue to fight off competition from supermarkets by innovating new own-brand products, like the successful No7 Protect & Perfect skincare range, and expanding in pharmacy services.

In October, the group launched the BootsWebMD healthcare information portal. It has also developed the Boots Employee Wellbeing Service, which allows businesses to combine online health assessments of staff with pharmacy-based services like blood pressure monitoring, cholesterol testing and advice.

Wholesale revenue rose 10.3 percent, helped by strong performances in Russia and the group’s Chinese joint venture. ($1=.6859 Pound)

By Mark Potter
(Editing by Hans Peters and Erica Billingham)