Boots seeks further £100m cost savings

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The Independent Online

Boots, the pharmacy chain, yesterday said it would target £100m cost savings, on top of £160m already identified, to bolster profits as it accelerates progress as "a business in transition".

Boots, the pharmacy chain, yesterday said it would target £100m cost savings, on top of £160m already identified, to bolster profits as it accelerates progress as "a business in transition".

The group is expanding into services such as chiropody and manicure bars in an attempt to fight off competition from rivals such as Wal-Mart's Asda chain. Pre-tax profits for the half-year had been adversely affected by the reorganisation, it said; £7.5m was spent on remodelling outlets and £8.3m on internet-related investments. It also forfeited about 2 per cent of group sales by selling fewer so-called "leisure" items such as compact discs, books and videos.

John McGrath, Boots' chairman, said: "The first-half outcome ... reflects the near-term impact of our strategy, with profits growing faster than sales." But he said: "We remain confident about the results for the year as a whole."

Boots confirmed that part of the £100m extra cost savings,scheduled to come on stream in 2002, would come from administrative job cuts, but did not put an exact figure on redundancies. The workforce has alreadybeen reduced by 1,000 since March as a result of the programme to lop £160m from costs by 2004.

Pre-tax, pre-exceptional profits for the half year to 30 September rose by 2.3 per cent to £271.3m. Turnover was up marginally on the previous year, at £2.5bn compared to £2.47bn.

The shares closed down 24.5p at 536.5p, having previously outperformed the sector by 22 per cent in the past three months. Eithne O'Leary, an analyst at ABN Amro, said: "It could have been a lot worse.... I think it was a worthy performance in the circumstances. "

Nick Bubb at SG Securities said there was potential for Boots to be broken up by a bidder, but a spokesman for the company said: "We haven't been in talks with anybody and we are not in talks with anybody."

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