Boots extracts itself from loss-making dentistry

Damian Reece
Wednesday 15 September 2004 00:00
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Boots axed its dentistry and other well-being services yesterday, ending a disastrous dalliance with non-core businesses that have racked up losses of £95m in the past five years.

Boots axed its dentistry and other well-being services yesterday, ending a disastrous dalliance with non-core businesses that have racked up losses of £95m in the past five years.

Shareholders will also have to stomach the £55m cost of closing down the operations and converting 15,000 square feet of store space back to retail use. These costs include a £29m asset write-down on redundant equipment, some of which will be sold off.

About 850 workers are affected by the decision but the company could not say how many would be laid off. It said it hoped to "re-deploy as many people as possible".

Howard Dodd, the finance director of Boots, said the economics of dentistry had simply never stacked up but the company had wanted to give the business as long as possible before shutting it, given how much money had been invested.

"The economic value lies with the practising dentist. You can't take on thousands of dentists and get economies of scale," Mr Dodd said. He added that the best business model for dentistry was sole practitioners or groups of practitioners in partnerships.

The services to be closed in addition to the dentistry business, which was opened in 1999 and operated from 54 locations, include the company's nine laser eye clinics and its 52 chiropody clinics, along with 14 laser hair-removal locations.

It said losses in 2003-04 for dentistry, chiropody and laser hair removal were £16.3m on sales of £28.9m. Laser eye-correction sales were £19.4m with a loss of £3.8m.

The move comes as part of an ongoing effort by Richard Baker, the new chief executive, to refocus the group on its Boots The Chemists trading model which will now include the profitable Boots Opticians business. Steve Russell, Mr Baker's predecessor who left in May 2003, had taken Boots into the new businesses after detecting a slowdown in the market for health and beauty products. However, the company has since recognised that these areas are still growing strongly.

In a statement, Boots said: "Despite improvements in productivity there is no prospect of the businesses [being exited] making acceptable returns for the group going forward."

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