AAH to axe jobs in cost-cutting

AAH Holdings, the pharmaceutical distributor and retailer, plans to make redundancies at its core wholesale division to cut costs. Bill Revell, chief executive, would not say how many of the 2,500 staff employed at the 21 wholesale outlets would lose their jobs.

'We need to speak to the people first. But in the rationalisation of branches we will be looking for significant savings, which will involve job losses,' he said.

Wholesale profit margins, which are traditionally low, were coming under pressure. 'When sales growth slows, the impact of this decline in margins becomes more significant and, accordingly, there is unrelenting pressure to drive down operating costs.'

The news of job losses came as AAH reported results for the year to 31 March. Overall turnover rose 14 per cent to pounds 1.6bn, while pre-tax profits rose 12.6 per cent to pounds 42m.

The wholesale business in the UK increased sales by slightly less than 5.4 per cent. Operating profits rose from pounds 22m to pounds 24.8m, representing a margin of 2.3 per cent, up from 2.1 per cent.

The margin improvement reflected a decision to automate some assembly processes for drugs.

Profit margins also declined from 9.5 to 7 per cent in AAH'S 288 retail pharmacies. Mr Revell said the rise in drug prices from manufacturers was oustripping the increase in prescription fees paid by the Department of Health.

Pharmacies lifted sales from pounds 58.9m to pounds 104.6m. Operating profits were pounds 7.3m, against pounds 5.6m.

Elsewhere, healthcare computer services saw operating profits decline from pounds 2.2m to pounds 100,000, and the soaps and toiletries manufacturing business saw losses edge up from pounds 200,000 to pounds 300,000.

The final dividend is being lifted 3.5 per cent to 11.9p, making a total of 17.9p, up from 17.3p.