Boots on track with £249m

HIGH STREET giant Boots delivered an upbeat message to stakeholders, saying customers are continuing to spend money in its shops and early response to Christmas offers has been enthusiastic.

Only London and the airport outlets have suffered a slight downturn in sales in recent weeks, thanks to a slump in tourist trade. 'We are looking pretty strong and the initial uptake of the Christmas range has been strong too,' said chief executive Steve Russell.

Half-year results were slightly ahead of forecasts and the group is confident of meeting City expectations for the full year. The group, whose businesses include Boots the Chemist, Halfords and Nurofen painkillers, unveiled a rise in pre-tax profits of 7.8% to £248.9m for the six months to 30 September. There is an interim dividend of 8.1p, up 3.8%, well covered by earnings per share of 22.8p, up 8.6%.

Group turnover rose 2% to £2.5bn and underlying sales at Boots the Chemist were 0.5% ahead. Within that, health and beauty sales, where the company is trying to focus growth, grew 2.5%. 'I would have liked sales to be higher, particularly in Boots the Chemist. Health and beauty performed pretty well though and gained market share,' said Russell.

The company has embarked on an intensive programme to reduce expenses and is on target to deliver £250m of annual cost savings by the year end. New store formats are being trialled, mini-Boots have been set up at six Sainsbury's stores and five dedicated health and beauty experience stores have been opened.

Russell scorned suggestions of a full merger with Sainsbury's. 'It doesn't make strategic sense. It is not on the agenda,' he said. The company is still exiting the leisure market and expects this will take another year to 18 months. The gross margin rose 0.3%, even though the price of goods did not increase.

The company expects the abolition of resale price maintenance - the fixing of drugs prices - will cost less than the £15m it originally anticipated. Boots suffered from exceptional costs of £38m in the half year, thanks to losses on joint ventures and business disposals. It remains committed to the international market.