Takeover bids for Lloyds Chemists blight profits

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The Independent Online
Lloyds Chemists yesterday warned that profits for last year would be hit by uncertainty over the outcome of the twin pounds 650m takeover bids for the company. Both offers, from British rivals UniChem and Germany's Gehe, are on hold pending the outcome of an investigation by the Monopolies and Mergers Commission and a ruling by Trade and Industry Secretary Ian Lang. The company said it expected him to announce his decision by 22 July.

The warning on trading caused analysts to slice around pounds 5m to pounds 7m from forecasts of profits for the year ending in June, leaving an outcome of around pounds 50m to pounds 52m. The shares slipped 8p to 469p yesterday, still above the 450p price at which Marilyn Lloyd, the wife of the chairman Allen Lloyd, netted pounds 13.5m from a share sale in May.

The latest announcement comes after a profits warning by the company in April, when it announced a dip in interim profits from pounds 26.6m to pounds 25.8m. Although sales and operating profits edged up, Lloyds warned then that the full-year figures would be hit by pounds 4m to pounds 5m of bid-related costs and further losses in some of its drug store outlets, where morale had been sapped by the prospect of being sold off after takeover.

In a statement yesterday, the company said further progress had been made in the second half, with overall like-for-like sales increases. However, uncertainty over the bids, their associated costs and the MMC referral meant profit in the period would be "lower than that achieved in the first half, although not by a significant amount".

Michael Ward, managing director, explained: "Putting the business through six months of uncertainty when public statements are made about what will happen to various parts of the business leads to extra costs which affects the profitability of the business."

One of the bidders has said it would close depots in the wholesaling business after a takeover. Inevitably, this will lead to the loss of the best people "because they have wives and mortgages and children", he claimed.