Alliance UniChem warns on markets

Alliance UniChem, which is awaiting regulatory clearance for its controversial merger with Boots, warned yesterday that it was facing tough markets in Britain and Spain.

The pan-European chemist, which operates as a wholesaler as well as a retailer of medicines, said growth had been weaker than expected in wholesale and retail markets in the two countries in the second half but that it still expected to meet its targets.

The drug distributor predicted the British wholesale market would return to growth next year once the impact of government-imposed price cuts on medicines, implemented last January, had worked through. In a five-yearly review, the government imposes price cuts on drug manufacturers which this year amounted to 7 per cent.

While the retail division is still performing strongly, it too has been affected by the price cuts but trading should return to more normal levels next year. Alliance UniChem added a net 101 new pharmacies in the past year, taking the total to 1,283.

The group said in a trading statement: "Overall, the strength and diversity of the group means that, despite some relatively difficult market conditions during the year, we remain confident that Alliance UniChem will deliver the strong financial performance for the year, as anticipated at the interim stage."

Alliance UniChem and Boots are facing opposition from some investors to their £7bn merger. Boots has been hit hard by the consumer downturn and growing competition from supermarkets.

The merger has been referred to the Office of Fair Trading, which will decide whether to pass it on to the Competition Commission in early February.