Boots handing back £700m

BOOTS plans to return £700m to its shareholders over the next two years, even though its profits will be hit by a costly investment programme.

New chief executive Richard Baker said the current year will be one of 'high activity' across the group, adding: 'Although not without significant implementation risk, Boots the Chemists is confident it will continue to build the foundation for profitable growth.'

He said the move to return cash to investors was a 'prudent' one, and 'demonstrates the determination to deliver the growth plans for Boots in a focused and disciplined way'.

Half the £700m will be returned in the current year but the second tranche will depend on performance.

Profits for the year to 31 March were 3% ahead at £544.6m, but would have been £16m higher, as expected, had it not been for a bigger-than-expected redundancy bill.

As many as 1,000 people volunteered for redundancy at Boots' Nottingham headquarters, against planned cuts of 900. The redundancy programme has been brought forward and, by 2005-2006, some 2,700 will have been taken off the payroll. Cost savings will rise from £100m to £130m.

Baker, who joined from Asda last year, said the drive to reduce costs means further jobs are likely to go.

Making Boots more competitive remains the priority and volumes have been boosted by price cuts, although at the expense of margins.