Boots boosts profits with modernising programme

RETAILER Boots hailed the success of its modernising and cost-cutting drive yesterday as it posted a 2.7% rise in annual profits to £544.6 million.

The health and beauty chain said it had been encouraged by trading after its core Boots the Chemist chain saw like-for-like sales growth of 3.9%, marking the seventh consecutive quarter it has delivered good growth.

Yesterday's results follow the group's announcement in January that it would axe jobs as part of cost-cutting plans. In March Boots embarked on a £390 million expansion drive in a bid to modernise the business.

It said around 1,000 staff had volunteered for redundancy since its January restructuring a higher number than had been expected and a move that will benefit the group in this financial year.

Chief executive Richard Baker, who took the helm last September, said: "We now have in place a clear business plan to make Boots more modern, competitive and efficient, which builds the foundations for a stronger Boots the Chemist."

The group said it planned to spend up to £700m buying back shares over the next two years after identifying surplus share capital.

Some £350m of this would be returned in the current financial year, while the remainder would depend on the performance of the business.

Operating profits at Boots the Chemist fell by 6.6%, which was more than accounted for by reorganisation costs.

Boots has come under pressure in recent months as rivals such as Tesco slash health and beauty product prices to gain a greater slice of the market.

The group admitted in March that it faced "substantial challenges" to modernise its stores in the face of this increased competition. Boots said it had introduced longer opening hours, extended Sunday openings, modernised 192 pharmacies and introduced clearer signs in stores.

It opened 19 new out-of-town stores during the year and planned to open another 40 this year. There were plans for another 10 outlets in health centres and 10 in other locations.

The group's Lower Prices You'll Love campaign was extended to around 2,000 products which were reduced in price by an average of 18%.

A 6% increase in group operating profits to £550.1m included £16m of rationalisation costs brought forward due to the acceleration of voluntary redundancies.

Overall sales at the group increased by 5% to £5.33 billion.