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Boots Group PLC Interim Results 2005/06 27 th October 2005.

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Presentation on theme: "Boots Group PLC Interim Results 2005/06 27 th October 2005."— Presentation transcript:

1 Boots Group PLC Interim Results 2005/06 27 th October 2005

2 Sir Nigel Rudd Chairman

3 Richard Baker Chief Executive

4 Agenda OverviewRichard Baker Financial Review Jim Smart Operational ReviewRichard Baker

5 Performance headlines Continued sales growth in a tough retail market –BTC sales +1.1% –Continued progress in key health and beauty markets Dispensing volumes +5% Beauty sales +7% Delivered against targets for margin, cost and working capital Group trading profit £163m, down 9.6% reflecting the cost of continued investment Interim dividend agreed at 9.1p

6 2 years of progress Strong retail brand operating in growth markets Significant progress towards a modern, competitive and efficient business –Prices re-positioned –40 more stores EoT –Extended opening hours –New tills in all stores –Store friendly supply chain –One third less jobs in head office Building a Better Boots The Health & Beauty Expert

7 Transforming the Group Proposed sale of BHI enables full focus on core chemist chain –Delivered full proceeds of £1.926bn –Stronger balance sheet –200p special dividend for shareholders Proposed merger with Alliance UniChem accelerates our plans –Creates Europes leading pharmacy-led healthcare group Step change in UK pharmacy presence with 2,600 outlets Pan-European buying scale –Enhances international growth opportunities –Delivers substantial cost savings

8 Jim Smart Chief Financial Officer

9 Group results 6 months to 30 th September 2005 (£m)Sales Trading Profit Boots The Chemists2, % % Boots Opticians % (5) Boots Retail International % (2) Boots Healthcare International % % Group & other % (24) Group sales and trading profit2, % % Net financing costs(17) Trading profit after financing costs %

10 Group results 6 months to 30 th September Other operating income and expenses£1m£147m Effective tax rate32%9% EPS - Underlying17.1p16.1p - 5.8% Dividend per share9.1p Share repurchase£178m£50m

11 Boots The Chemists -18.6% Trading profit -30bpGross margin movement -1.3%+1.1% 2,1962,171Sales Like for Like 2005 £m 2004 £m 6 months to 30 th September -180bp PPRS deflation reduces reported BTC sales growth by 1.3% +6%+12%Operating costs

12 BTC transaction numbers £8.83Average Transaction Value +3.1% Growth +0.5% Total -1.8% 2005 Like for like stores Counter Transactions growth 6 months to 30 th September Footfall -2.9%

13 Continued progress in Health Sales up 0.6% to £936m Dispensing volume +5.1%, in line with the market Dispensing sales value +0.3% –Price deflation PPRS reduces sales by 4.7%, annualises in Feb 06 Generics reduces sales by 1.2%, annualised in Sept 05 –New contract neutral in H1 OTC healthcare sales +1.0% –Good growth in vitamins offset by lower hayfever sales

14 Continued progress in Beauty Beauty and Toiletries sales up 3.3% to £923m Beauty sales up 7.3% –Successful investment in own brands and new beauty halls –Premium brands +9% –N o 7 +12% Toiletries sales up 2.9% –Successful investment in own brands and strong promotional support –Suncare +16%, –Skincare and Dental strong Electrical products down 5.9%

15 Difficult H1 for Lifestyle Sales down 2.8% to £337m Baby sales +5.3% –More space –Extended ranges Food sales -3.9% –Atkins launch in the comparative –Q2 London disruption Photo sales -10.2% –Gaining share in declining market –Continued growth in digital

16 Major changes in Boots Opticians Sales down 10.5% to £83m Driving efficiency through integration into BTC –Short term disruption Difficult market conditions –Affected by slower consumer spending Market expected to remain tough in H2 –Contact lens deregulation

17 Group cash flow 6 months to 30 th September2004 £m BTC stock cover (wks) 2005 £m BTC stock cover (wks) Trading profit (before financing costs) Working capital(280) 14.7 (29) 12.6 Capital expenditure(140)(100) Depreciation7992 Taxation and other items(59) (203)84 Disposal of fixed assets -296 Net cash flow after investing activities(203)380

18 Disposal of BHI Proposed sale to Reckitt Benckiser plc for £1.926bn, to be completed during early 2006 £1.43bn (200p per share) to be returned to shareholders by special dividend Consolidation of shares to maintain comparability of share price and EPS EPS enhanced by the disposal £400m to be retained to strengthen the balance sheet and for future investment Long-term commitment to manufacturing in Nottingham –No adverse impact on Group costs

19 Balance Sheet Financial objectives –Strong investment grade debt rating –Adequate cash and earnings cover to dividend Position at 30 th September 2005 –713m shares ranking for dividend –Net debt £500m, a decrease of £143m Position post BHI disposal –Zero year end net debt on balance sheet –Ongoing financing charge still expected –Capitalised operating leases of £1.5bn Property position post sale & leaseback –Remaining freeholds prime retail sites plus non retail property –NBV £400m, estimated market value at 31 st March 2005 £650m

20 Richard Baker Chief Executive

21 Clear priorities for BTC Expert Customer Care Right Stores, Right Places Boots for Value Only at Boots Healthcare First

22 Healthcare First Our biggest business –40% of sales, 50% of profits –100m scripts p.a. –The biggest category all year round A strong and growing market A key focus for investment –Smartscript in all stores –Additional capacity to serve care homes –Dispensing sales volume +5% Healthcare First

23 A strong and growing market Demographic trends –Greater life expectancy, people older for longer Healthcare First Source: ONS Population 1976 =100 Total populationOver retirement ageForecast

24 A strong and growing market Demographic trends –Greater life expectancy, people older for longer Continual advances in treatment –Significant area of investment A priority for government –Healthcare spending as % of GDP 1997/98 4.2% 2006/07 6.5% (Plan) –New contract Healthcare First Source: ONS Population 1976 =100 Total populationOver retirement age Forecast

25 Growing our pharmacy business Improving convenience –31 new pharmacy contracts – Improving service –PCS –Care homes service –New contract services Improving efficiency –New pharmacy operating model –Professional time freed up for patients Healthcare First

26 A changing role… New pharmacy contract –Funding shift to fees and services Enhanced services –Incremental funding from new sources –E.g Chlamydia testing Patient Group Directions –Private dispensing unique to Boots –E.g. Boots Weight Loss Programme Electronic Transfer of Prescriptions Significant change…significant opportunity Healthcare First

27 Building differentiation Major own brands relaunched –N o 7, No1 cosmetic brand, +12% in H1 –17 +13% since relaunch Soltan 5* is the market leader New exclusive brands in store –Elle McPherson –Ted Baker Only at Boots

28 Strong growth in Beauty Growing and attractive market –selected distribution –high service element Key area for investment –28 new premium brands in 20 stores –10 new beauty halls –new fragrance cabinets in 40 stores Beauty +7% –Cosmetics +13% –Fragrance +3% Only at Boots

29 Committed to value for money Continual focus on fair prices –700 lines reduced by 11% –200 new price reductions in Baby Promotions to inspire impulse purchases –Xmas Mixnmatch 3for2 Full range of price points –Gifts for all –More Xmas gifts at lower price points Biggest and most generous loyalty card –Baby club Boots for Value

30 Clear property priorities Continue to add space on edge of town –7 new Edge of Town stores –New stores +2.4% sales in H1 Drive large store profit intensity –Reduce cost of unproductive space –Property solutions where possible eg. Brent Cross –Long term planning Bring small stores up to standard Right Stores, Right Places

31 Expert customer care New uniforms for all Boots people in store Professional care and advice –2,000 pharmacists in training for Medicine Usage Review –150 Accuracy Checking Technicians –300 more trained Healthcare Assistants Trust based advertising Expert Customer Care

32 Driving efficiency Delivering against £70m productivity target –Store friendly supply chain –Continued benefit of Head Office reductions Better in store operations –New till based management information Further buying gains supporting margin –More Far East sourcing for Xmas –eAuctions for own brand products –Advanced negotiation training

33 Summary Two major transactions to transform the business Health and Beauty focus continues to deliver strong results Delivery against gross margin, productivity and working capital targets Good progress against clear priorities to build a better Boots Commitment, discipline and focus

34 Boots Group PLC Interim Results 2005/06

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