Alliance Boots gets a lift from strong sales of anti-ageing cream

Alliance Boots has posted robust full-year trading profits and sales, as customers seek comfort with its anti-ageing cream during the recession, but the health and beauty giant revealed deep job cuts at its wholesale pharmaceutical division.

Stefano Pessina, the executive chairman of Alliance Boots, which operates the Boots high street stores, said: "We are on track to become the world's leading pharmacy-led health and beauty group."

At Boots UK, total revenues rose by 3.2 per cent and underlying sales grew by 1.3 per cent, boosted by strong sales of its No 7 cosmetics and skincare brand. Boots has benefited from soaring sales of its No7 Protect & Perfect Beauty Serum cream, which led to feverish shopping among female customers when it launched in 2007. Boots said it had sold more than 1 million units of its latest anti-ageing cream, No7 Protect & Perfect Intense Beauty Serum, which is clinically proven to help push back the years, since it was launched two and a half weeks ago.

For the year to 31 March, Alliance Boots – taken private in June 2007 in an £11bn deal with the private equity firm KKR – posted trading profit up by 11.6 per cent to £953m and total revenues higher by 15.5 per cent to £20.5bn. But its pharmaceutical wholesale business will cut 1,500 jobs, equal to 10 per cent of the division's workforce over the coming year, to save £55m. About 200 of the job losses will be in the UK, although a quarter of the cut has already been made. However, Alliance Boots has added 1,700 net jobs over the year, as it invests in its stores and customer service.

Mr Pessina described trading conditions in the pharmaceutical wholesale market as the "most difficult I have ever seen". In addition to regulatory changes, tough competition and currency movements, Alliance Boots has been hit by a growing trend among pharmaceutical companies to sell direct to pharmacies using fewer wholesalers as distributors or selling only through a small number of selected wholesalers.

Despite this, its pharmaceutical division posted a 4.4 per cent increase in trading profit, although this was the lowest among its divisions, in reported currency, but a 0.3 percentage point drop in trading margin.

However, the debt shadow of the deal that took Alliance Boots off the stock market in 2007 still hangs over the group. As of 31 March 2009, the company had net debt of £9bn, and over the year its underlying net finance costs – including interest payments of £646m – came in at £705m.

Alliance Boots posted pre-tax profits of £13m in 2008/09, compared with a £64m loss the year before. By January, the company had delivered £100m of savings – 18 months ahead of schedule – from the merger of Boots and Alliance Unichem in 2006.

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