Boots profits take a dive

BOOTS chief executive Richard Baker today warned that the recovery of Britain's leading health and beauty retailer will be delayed by tough trading conditions on the High Street.

But he is confident shareholders will give him time to turn the group round and highlighted 'encouraging' early signs.

'We remain a very profitable company and, although we might have been one of the first to warn on sales last month, our caution has been completely vindicated by some much uglier figures from others in recent weeks,' he said. 'Shareholders understand completely what we are doing.'

Boots shocked the market last month with a second profits alert in five weeks and today confirmed pre-exceptional profits for the year to the end of March had fallen 11.4% to £481m.

Closure and disposal costs were more than £50m, covering the group's exit from services such as laser hair removal and chiropody.

Baker said trading in the first few weeks of the new financial year confirmed subdued demand and is sticking to his forecast of underlying sales growth of between 0% and 2% this year, against 2.4% last year. 'Against this background, further progress will take time,' he said.

The proposed sale of its over-the-counter medicines arm, Boots Healthcare International, is on track and information memoranda will be circulated to potential buyers in early July. The business is expected to raise more than £1bn, the bulk of which Baker has promised will be returned to shareholders.

Prices have been cut on 2,000 items over the past year and further reductions will be pushed through. Baker highlighted the best performance on the pharmacy side in five years as the group put the 'chemist back into Boots'.

In health and beauty, there was strong growth in premium cosmetics and fragrances, while the No 7 range has seen sales shoot ahead by 18% in the seven weeks since its relaunch.

Mothercare, now two years into a three-year recovery programme, reported further good progress and is confident the strength of its brand will help it withstand the High Street slowdown. Profits for the year to 26 March jumped almost 19%, to £19.6m. UK like-for-like sales were up 1.4%.