‘Miracle cream’ helps Boots look good at £1.2bn

Simon English
18 May 2009

An anti-ageing cream hailed by some as a miracle cure for wrinkles helped trigger a recession-busting boost to profits at Boots the Chemists.

Boots launched its No7 Protect and Perfect Serum two years ago, creating a mini-stampede among shoppers including the now-disgraced fraudster Bernie Madoff.

That product helped boost revenues at the Alliance Boots pharmacy and pharmaceuticals group, where underlying profits jumped 11.3% in the year to the end of March to £1.24 billion.

Last month it launched a spin-off product which was clinically proven to stave off the years — a product that Boots hopes will continue driving profits forward this year.

Alliance Boots was bought by private-equity house KKR two years ago in a £12 billion deal led by Italian tycoon Stefano Pessina that loaded the group with massive debts.

At the time of the deal, some feared that a much-loved British institution would be stripped for profit.

Its revenue last year was up 15% to £20 billion. But the greater part of these profits was wiped out by finance costs of £705 million — a legacy of the takeover.

Cost cuts of £100 million, achieved 18 months sooner than planned, helped the bottom line and the company said today that it would be cutting about 1500 jobs at its pharmaceutical wholesaling arm.

Pessina, the chairman who owns 15% of the company, has always insisted that he plans to grow the business by expanding across Europe and by offering better service to customers, rather than strip assets.

Neither he nor KKR, the US private equity firm famed as the original Barbarians at the Gate in the Hollywood film, are taking a dividend payment this year. At the UK arm, sales rose 3.2%, a result few High Street retailers can match since the credit crunch and the recession stifled the economy.

Finance director George Fairweather said: “It's tough out there, we all recognise that. But these are a strong set of results. We are investing for the future, investing in the Boots brand.”

M&S POISED TO DELIVER DIVI CUT BLOW

The board of Marks & Spencer was gathering at the company's Paddington headquarters today to finalise a cut in the dividend sure to disappoint its legion of small shareholders.

Analysts say M&S has little choice but to slash the payout, perhaps by half, after six quarters of falling sales.

The result will be unveiled tomorrow when M&S reports year-end profits of around £620 million. Executive chairman Sir Stuart Rose is expected to offer an upbeat assessment of recent trading, perhaps claiming that an economic turnaround has begun.

Rose is due to step down next year, and the board is working on finding a successor.

M&S is reportedly looking at moving into the banking industry, following rival Tesco.