Boots shrugs off price-fixing move

Boots moved yesterday to defuse worries that the OFT's recent challenge to retail price maintenance in non-prescription drugs might lead to a damaging price war.

Sir Michael Angus, chairman, said the decision to refer Britain's last legal price-fixing arrangement to the Restrictive Practices Court was disappointing but he said Boots the Chemists was well placed whatever its conclusion.

He added: "The company believes that retail price maintenance on over- the-counter medicines should remain in force because consumer interests are best served by retaining the service to local communities currently provided by pharmacists. Only a small proportion of Boots the Chemists sales would be affected and past experience suggests that the business would emerge with increased market share."

John Bridgeman, the OFT's director general, said three weeks ago that a 26-year-old agreement which allows manufacturers to set prices on over- the-counter treatments such as painkillers and vitamins had cost consumers pounds 180m a year on average through artificially high prices.

The move, which some analysts believe could lead to price reductions of up to 15 per cent and cut Boots' overall profits by as much as 6 per cent, was a victory for Asda, the supermarket chain, which has led a campaign to scrap the arrangement.

Sir Michael Angus was speaking as Boots reported a 9 per cent rise in profits before exceptional items in the six months to September. He described the half year as extremely busy for the company. During the six months, Boots sold its Childrens World subsidiary to Storehouse for pounds 62.5m, acquired the 50 per cent of DIY chain Do It All it did not already own from WH Smith, executed a pounds 300m share buy-back and acquired Lutsia, a French skincare group, for pounds 115m.

There were profits improvements across the board, although AG Stanley, the Fads and Homestyle DIY group, remained pounds 6.9m in the red (pounds 7.6m loss in 1995). Boots the Chemists, the core pharmacy chain, saw profits rise from pounds 164.3m to pounds 184m, Halfords increased profits from pounds 9.2m to pounds 11.9m and Boots Opticians' contribution rose from pounds 4.1m to pounds 4.5m.

Do It All reduced its loss sharply thanks to an 8 per cent rise in sales from ongoing stores, but because Boots assumed full responsibility for the company in June its share of the loss only fell from pounds 4.8m to pounds 3.7m.

Investment column, page 22