RNS Number:1378Z
Boots Group PLC
27 May 2004
27th May 2004
PRELIMINARY RESULTS TO 31ST MARCH 2004
Strong Group Performance
*5% increase in sales from continuing operations to #5,326m (#5,087m)
*6% increase in operating profit from continuing operations including
joint ventures to #550.1m (#519.1m). Includes #16m rationalisation costs
brought forward due to acceleration of the head office voluntary redundancy
programme. This is a timing issue which will benefit costs for 2004/05
*3% increase to #544.6m in profit before tax and exceptionals from
continuing operations (#530.4m)
*7% increase in basic earnings per share before exceptionals to 48.2p
(45.0p), 48% increase in basic eps to 52.9p (35.8p)
* 4% increase in full year dividend to 29.8p (28.6p)
*Up to #700m share buyback planned over two years with an ongoing
intention to return surplus cash to shareholders
Strong Sales Growth Continuing
*Boots The Chemists delivers seven consecutive quarters of higher like for
like sales growth all above the BRC average. Like for like growth for the
year was 3.9%
*Boots Healthcare International sales up 8% in local currency with all
major brands delivering strong sales growth
Good Progress at Boots
*Concentration on Retailing Basics to meet customer demand for more
convenience. Progress made on longer opening hours, faster pharmacies,
clearer signage, product availability and shorter queues
*Growth plan for BTC based on additional space in new locations, expert
people, products only available at Boots, value for money and greater
efficiency
Richard Baker, Chief Executive commented:
"We now have in place a clear business plan to make Boots more modern,
competitive and efficient which builds the foundations for a stronger Boots The
Chemists."
Summary of business performance
For the full year ended 31st March 2004 (note a)
Sales Profit before tax
----------------- -------------------- ---------------
------- ------ --- ------ ------ -------
2004 2003 % growth % 2004 2003 % growth
#m #m LFL #m #m
----------------- ------- ------- ------- ------ --- ------ ------ -------
Boots The 4,475.7 4,283.4 +4.5 +3.9 531.1 568.4 -6.6
Chemists
Boots Healthcare 504.6 460.4 +9.6 +7.8 80.6 70.1 +15.0
International
Boots Opticians 241.6 258.6 -6.6 -5.0 (5.1) (30.9) +83.5
and Dentalcare
(note b)
Boots Retail 43.0 37.0 +16.1 +20.8 (10.4) (22.3) +53.4
International
Group and other 91.5 79.8 +14.7 (46.1) (66.2)
(note c)
Inter-segmental (30.0) (31.7)
Continuing 5,326.4 5,087.5 +4.7 550.1 519.1 +6.0
operations
Discontinued - 234.9 -100.0 - 22.5 -100.0
operation ------- ------- ------- ------ --- ------ ------ -------
-----------------
Total 5,326.4 5,322.4 +0.1 550.1 541.6 +1.6
Interest (5.5) 11.3
----------------- ------- ------- ------- ------ --- ------ ------ -------
Profit before tax 544.6 552.9 -1.5
and ------- ------- ------- ------ --- ------ ------ -------
exceptionals
-----------------
Profit from 544.6 530.4 +2.7
continuing
operations before
tax and
exceptionals
----------------- ------- ------- ------- ------ --- ------ ------ -------
Group profit 581.0 492.4 +18.0
before tax (after ------- ------- ------- ------ --- ------ ------ -------
exceptionals)
-----------------
Notes:
a. *Sales and profit growth are based on restated prior year comparatives for
the adoption of FRS 5, Application Note G.
b. *Boots Opticians (BOL) includes LASIK. LASIK sales were #9.5m (2003 #16.0m)
with an operating loss of #(3.8)m (2003 #(1.4)m).
c. *Includes sales of #13.7m (2003 #nil) from the sale of a development property
in the year with a profit of #2.2m.
Boots The Chemists
2003/04 2002/03
#m #m
Sales 4,475.7 4,283.4
Total Growth 4.5% 5.2%
Like for like growth 3.9% 4.8%
Operating Profit 531.1 568.4
Operating Margin 11.9% 13.3%
During the year the Accounting Standards Board issued additional guidance to
FRS5 in the form of Application Note G: Revenue Recognition. The impact of Boots
The Chemists is to reduce sales by #2.6m (2003 #1.0m) and operating profit by
#0.1m (2003 #0.2m)
Sales were up 4.5% or 3.9% on a like for like basis.
Healthcare sales at #1.8bn were up 6.0%. Dispensing benefited from updated
pharmacies and from the rolling introduction of SmartScript. The TV advertising
of our Prescription Collection Service, contributed to a 17% increase in usage
in quarter 4. Over the counter medicine sales were helped by a strong hay fever
season last summer and continued growth in vitamins and supplements where we are
running an ongoing 3 for 2 promotion.
Sales in Beauty and Toiletries, just short of #2bn were up 4.7% with premium
cosmetics up 10% on the back of strong seasonal gift sales and wider
distribution through the chain. Fragrance sales benefited from major new
launches. Toiletries shows very modest growth over the year. However, many of
the reductions in Lower Prices You'll Love were in this category. There have
been good volume increases from lower prices but overall a neutral sales impact.
Sunshop had a particularly strong year with sales up 17%.
Lifestyle sales of #677m were the same as last year, which is substantially
better than recent years' performance. The photography market continues to
evolve and traditional development business was down 12% and overall down 6%.
Actions on many fronts aimed at converting customers to digital cameras and
processing are beginning to bear fruit. Baby performed well with bigger ranges
in larger stores and good growth in baby food and milk where prices were
reduced. Food sales benefited from the Shapers relaunch in quarter 4, which has
gone well.
Progress in modernising Boots The Chemists
Modern
Continued work on the retail basics saw convenience for customers improved with
the introduction of longer opening hours and Sunday opening in a further 190
stores since Christmas.
Work continued to improve the convenience of the pharmacy dispensing business
for both walk in and repeat customers. 192 dispensaries were modernised in the
year. This speeds up the time it takes to dispense a prescription and allows the
pharmacist to spend more time with each customer.
Clearer signage was introduced in February to help customers navigate the wide
range of products found in store. The roll-out of new tills now sees 6,500 in
500 stores to make it easier for people to pay and help reduce queue lengths.
19 new Edge of Town stores were opened in the year and plans agreed to open
another 40 in the current year. Boots also plans for 10 additional stores in
health centres and 10 in other locations. Existing large stores will see work to
extend ranges and intensify the offer including new beauty halls and bigger baby
ranges.
Competitive
Making Boots more competitive continues to be addressed with more planned for
the current year. To maintain the competitive advantage held through having
expert people who know how to meet the needs of customers, stores were given a
#3m fund in quarter 3 to help them increase resource in the stores and this was
rolled through into this year.
The opportunity offered by products only available at Boots was demonstrated in
the year through the successful relaunch of own brands such as Shapers and the
introduction of the Atkins range of foods. Improved 5* protection ranges in
Soltan and a new deal to provide new and exclusive Hackett toiletries are
growing evidence of Boots innovating and building on exclusive areas.
Improving the value for money offered by Boots saw Lower Prices You'll Love
accelerated and extended to around 2,000 products which were reduced in price by
an average of 18%. Gross margins were down by 30 bps in the year, in line with
guidance given in the second half of the year, as a result of the acceleration
of lower prices and the change in the reimbursement price of four generic
prescription medicines. The full year effect in 2004/05 of these elements is
anticipated to be 60 bps with extension of Lower Prices You'll Love expected to
have a further effect next year of around 50 bps. The Advantage Card continued
to prove attractive to customers with over 9.8m active cardholders.
The work to improve efficiency continues to help build on the growth delivered
by meeting the customer demands for convenience and value. Getting in Shape
underpins all of Boots The Chemists initiatives and continues to make good
progress towards a head office of half its original size. Around 1,000 people
have volunteered for redundancy under the January reorganisation which is more
than expected. This has resulted in #16m rationalisation costs brought forward
due to acceleration of voluntary redundancy. This is a timing issue which will
benefit costs for 2004/05.
Planned systems upgrade are progressing well under the Making IT Easy programme
which will impact all parts of the business. It will enable new financial
systems to provide better management information and replacement of our
merchandise planning and management systems will help with space and range
planning and the tailoring of inventories by store. This programme will take two
more years to complete with the high point of change in this year.
Supply chain changes are also under way with the year seeing a deal agreed with
Unipart to outsource the operations of one of the major warehouses. This is part
of the wider work on improving supply chain which continue in the coming year.
This will allow us to maintain availability and reduce inventory. Stock will
arrive sorted by category and ready to go to shelf, improving store
productivity.
2004/05 Investment
Boots The Chemists intends to continue its investment programme to make it more
modern, competitive and efficient. In total it expects to invest #390m in this
programme in 2004/05:
2004/05
Revenue Capital
#m #m
Modern
Convenience 19 7
Faster Pharmacy 12 21
Right Places 31 69
Right Stores 38 71
-------- --------
100 168
Competitive
Only at Boots 10 26
Efficient
Making IT Easy 26 45
Store Friendly Supply Chain 4 11
-------- --------
30 56
-------- --------
140 250
-------- --------
This investment will result in a full year recurring cost of #130m.
Operating Profit
Operating profit declined by 6.6% to #531.1m which is more than fully accounted
for in the charge of #59m relating to Head Office reorganisation costs within
the Getting in Shape programme.
Outlook
2004/05 is a year of high activity across many areas of the business. Although
not without significant implementation risk, Boots The Chemists is confident it
will continue to build the foundation for profitable growth.
Sales growth is expected to be at a similar level to 2003/04 but to improve
during the year as space expands. The work on providing value at Boots will
impact gross margin percentages by around one percent. Underlying costs are
expected to be flat on 2003/04 but higher costs are likely to be incurred due to
expansion and increased pension contributions.
It is anticipated the overall impact will be to reduce operating margins by
around one percent.
In 2005/06 markets are expected to continue to grow and that Boots The Chemists
will continue to improve its competitive position. Faster sales growth is
expected and although the impact of price reductions in 2004/05 will roll
through into the year it is too early to predict with certainty but gross
margins are expected to stabilise. Getting in Shape and other work will improve
cost efficiency. Strong recovery is anticipated as Boots The Chemists begins to
get operating leverage back into the business.
Boots Healthcare International
2004 2003
#m #m
Sales 504.6 460.4
Total Growth 9.6% 13.0%
Comparable Growth 7.8% 12.3%
Operating Profit 80.6 70.1
Operating Margin 16.0% 15.2%
Sales in Boots Healthcare International grew by 9.6% (7.8% in local currency)
with all major brands delivering sales growth.
On a local currency basis Nurofen sales up 15% with strong growth in Australia,
up over 50%. UK pharmacy and grocery market share grew by 160 bps from
successful launches of Nurofen Migraine and continued good performance from
other new products.
Clearasil was up 6% ahead in the year but in the US, its biggest market, sales
were down 3%. This was due to substantial pipeline fill in 2002/03 and in fact
brand share is up 100 bps. In the UK, the Total Control launch helped sales to
increase by 7%.
Strepsils sales increased by 9% with good performances across its many
territories.
Dermo-cosmetics was up 6% in the year driven by good growth in the UK and Spain.
Operating profit increased by 15% to #80.6m.
Boots Opticians and Dentalcare
2004 2003
#m #m
Sales 241.6 258.6
Total Growth -6.6% 13.0%
Like for like growth -5.0% 3.4%
Operating Loss (5.1) (30.9)
Operating Margin -2.1% -11.9%
Included in the above are the following results for Dentalcare:
2004 2003
#m #m
Sales 23.7 21.6
Total Growth 9.7% 63.6%
Operating Loss (16.1) (23.2)
Sales in Boots Opticians were affected by the very competitive markets in core
optics with LASIK still suffering from the effects of negative publicity on the
effects of laser treatment.
Operating profit in core optics grew by 65% to #12.8m through improved cost
management.
Sales in Dentalcare were up 9.7% following the changes to the operating model
introduced in 2003. Patient numbers increased by over 50% and revenue per
dentist by over 55%. Operating losses overall reduced by 30.7% to #16.1m.
Boots Retail International
2004 2003
#m #m
Sales 43.0 37.0
Total Growth 16.1% -8.2%
Comparable Growth 20.8% -5.4%
Operating Loss (10.4) (22.3)
Operating Margin -24.2% -60.3%
Sales in Boots Retail International rose by 16.1% (20.8% in local currency) to
#43.0m. 17 new implants were opened in Taiwan and 15 in Hong Kong. Like for like
sales in Thailand were up 16%.
Operating losses halved to #10.4m, and the Far East region is now at break even.
The business recently began small implant trials in the US with two retail
partners.
Group & Other
2004 2003
#m #m
Sales 91.5 79.8
Sales Growth 14.7% 6.7%
Operating loss (46.1) (66.2)
Sales growth of #11.7m is attributable to the sale of the group's last
development property in the year.
Operating loss fell by #20.1m. The process of running down the Airdrie
manufacturing plant and of transferring production to other factories continued
in the year. The costs were #5m compared with #12m in the previous year. Other
corporate costs fell by #13m in the year.
Cost Reduction Programme
The Getting in Shape programme is delivering ahead of the #100m target of
savings with an expectation of delivering #130m of savings in 2005/06 from
actions already announced and 2,700 people will leave the business by then.
The Head Office reorganisation announced in January has proceeded faster than
expected and has seen the transfer of #16m of cost from 2004/05 to 2003/04.
The company is committed to continuing to improve efficiency and will continue
to explore other ways of reducing costs. This is likely to result in further
head count reductions.
Financing and Share Buyback Programme
The Company is committed to maintaining a strong balance sheet and a review of
the efficiency of the balance sheet has been completed and has identified some
clear steps forward.
Surplus share capital has been identified and a #700m return of surplus cash to
shareholders over the next two years through share buybacks is planned. This is
viewed as a prudent and demonstrates the determination to deliver the growth
plans for Boots in a focussed and disciplined way.
#350m will be returned in 2004/05 but clearly the second tranche will depend
upon the performance of the business and its generation of net cash flow.
A 4.2% dividend increase for the year to 29.8p and the company confirms its
commitment to maintain progressive dividend returns and to continue to return
surplus cash to shareholders
Group free cashflow was #427m in the year after funding #194m of fixed asset
purchases and a #48m increase in working capital, principally to fund extra
stock supporting new stores and higher sales in Boots The Chemists.
Net debt at the end of the year has risen by #97m to #149m after the return of a
further #260m to shareholders through the share buyback programme.
Exceptional Items
Exceptional items for 2003/04 were:
2004 2003
#m #m
Profit on disposal of fixed assets 32.5 5.1
Provision for closure of operations 3.9 (34.5)
Disposal of Halfords business - (123.2)
-------- --------
36.4 (152.6)
Exceptional Interest - closure of interest rate - 92.1
swaps -------- --------
36.4 (60.5)
-------- --------
Pension Fund
The P&L cost of the pension fund is expected to increase by #40m in 2004/05, in
line with the guidance given in March. This is principally as a result of the
roll-off of the amortisation of previous surpluses, and the movement in real
bond yields in the three years since the last actuarial valuation.
The pension fund remains strong, but to better match long term liabilities, the
Pension Fund Trustees have decided to switch a small proportion, around 15%, of
the fund's assets into asset classes other than bonds.
BOOTS GROUP PLC
PRELIMINARY RESULTS
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31ST MARCH 2004
---------------------------------- ------ -------- --------
Total Total1
2004 2003
Notes #m #m
---------------------------------- ------ -------- --------
Turnover
Turnover from continuing operations 5,326.4 5,087.5
Discontinued operation - 234.9
---------------------------------- ------ -------- --------
Turnover: group and share of joint 1 5,326.4 5,322.4
ventures
Less: share of joint ventures' turnover (1.4) (2.1)
---------------------------------- ------ -------- --------
Group turnover 5,325.0 5,320.3
---------------------------------- ------ -------- --------
Operating Profit
Operating profit from continuing 551.2 532.3
operations
Discontinued operation - 22.5
---------------------------------- ------ -------- --------
Group operating profit 551.2 554.8
Share of operating loss of joint (1.1) (13.2)
ventures ------ -------- --------
----------------------------------
Total operating profit including share of 2 550.1 541.6
joint ventures
Profit on disposal of fixed assets 3 32.5 5.1
Provision for loss on closure of 3 3.9 (34.5)
operations
Loss on disposal of business 3 - (123.2)
---------------------------------- ------ -------- --------
Profit on ordinary activities before 2 586.5 389.0
interest and taxation
Net interest (payable) / receivable and 4 (5.5) 103.4
similar items2 ------ -------- --------
----------------------------------
Profit on ordinary activities before 581.0 492.4
taxation
Tax on profit on ordinary activities 5 (167.7) (191.9)
---------------------------------- ------ -------- --------
Profit on ordinary activities after 413.3 300.5
taxation
Equity minority interests (0.7) (0.5)
---------------------------------- ------ -------- --------
Profit for the financial year 412.6 300.0
attributable to shareholders
Dividends paid and proposed 6 (226.3) (230.7)
---------------------------------- ------ -------- --------
Retained profit for the financial year 186.3 69.3
---------------------------------- ------ -------- --------
Basic earnings per share 7 52.9p 35.8p
Basic earnings per share before 7 48.2p 45.0p
exceptionals
Diluted earnings per share 7 52.8p 35.7p
Diluted earnings per share before 7 48.0p 44.9p
exceptionals ------ -------- --------
----------------------------------
Dividends per share 6 29.8p 28.6p
---------------------------------- ------ -------- --------
1 Restated on adoption of FRS5 application note G on Revenue Recognition
2 Includes exceptional items - see notes 3 and 4 for details.
BOOTS GROUP PLC
PRELIMINARY RESULTS
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31ST MARCH 2004
------------------------------------- -------- --------
2004 20031
#m #m
------------------------------------- -------- --------
Profit for the financial year attributable to 412.6 300.0
shareholders
Revaluation of investment properties - 17.1
Currency translation differences on foreign currency (14.8) 7.5
net investments -------- --------
-------------------------------------
Total recognised gains and losses for the year 397.8 324.6
------------------------------------- -------- --------
Prior Year Adjustment in respect of adoption of FRS5
application note G on revenue recognition (30.0)
------------------------------------- --------
Total recognised gains and losses since the last 367.8
annual report --------
-------------------------------------
NOTE ON HISTORICAL COST PROFITS AND LOSSES
FOR THE YEAR ENDED 31ST MARCH 2004
------------------------------------- -------- --------
2004 20031
#m #m
------------------------------------- -------- --------
Reported profit on ordinary activities before 581.0 492.4
taxation
Realisation of property revaluation surpluses 15.0 10.2
Difference between historical cost depreciation
charge and actual charge for the year calculated on
revalued amounts
1.1 1.0
------------------------------------- -------- --------
Historical cost profit on ordinary activities before 597.1 503.6
taxation -------- --------
-------------------------------------
Historical cost profit retained 202.4 80.5
------------------------------------- -------- --------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31ST MARCH 2004
------------------------------------- -------- --------
2004 20031
#m #m
------------------------------------- -------- --------
Total recognised gains and losses for the year 397.8 324.6
Dividends (226.3) (230.7)
New share capital issued (net of expenses) 0.3 (0.3)
Repurchase of shares (259.9) (462.8)
Goodwill released on disposal of businesses - 349.3
------------------------------------- -------- --------
Net decrease in shareholders' funds (88.1) (19.9)
Opening shareholders' funds 1,969.4 1,989.3
------------------------------------- -------- --------
Closing shareholders' funds 1,881.3 1,969.4
------------------------------------- -------- --------
1 Restated on adoption of FRS5 application note G on Revenue Recognition
BOOTS GROUP PLC
PRELIMINARY RESULTS
GROUP BALANCE SHEET
31ST MARCH 2004
-------------------------------------- -------- --------
2004 20031
#m #m
-------------------------------------- -------- --------
Fixed assets
Intangible assets 281.5 301.3
Tangible assets 1,499.4 1,516.5
Other investments 74.7 84.7
-------------------------------------- -------- --------
1,855.6 1,902.5
-------------------------------------- -------- --------
Current assets
Stocks 690.8 638.6
Debtors falling due within one year 516.0 536.6
Debtors falling due after more than one year 165.9 114.0
Current asset investments and deposits 239.1 293.1
Cash at bank and in hand 110.5 203.4
-------------------------------------- -------- --------
1,722.3 1,785.7
Creditors: Amounts falling due within one year (1,135.3) (1,155.6)
-------------------------------------- -------- --------
Net current assets 587.0 630.1
-------------------------------------- -------- --------
Total assets less current liabilities 2,442.6 2,532.6
Creditors: Amounts falling due after more than (382.9) (401.8)
one year
Provisions for liabilities and charges (177.2) (160.9)
-------------------------------------- -------- --------
Net assets 1,882.5 1,969.9
-------------------------------------- -------- --------
Capital and reserves
Called up share capital 193.9 203.5
Share premium account 0.3 -
Revaluation reserve 244.2 260.3
Capital redemption reserve 15.2 5.6
Merger reserve 310.8 310.8
Profit and loss account 1,116.9 1,189.2
-------------------------------------- -------- --------
Equity shareholders' funds 1,881.3 1,969.4
Equity minority interests 1.2 0.5
-------------------------------------- -------- --------
1,882.5 1,969.9
-------------------------------------- -------- --------
1 Restated on adoption of FRS5 application note G on Revenue Recognition
BOOTS GROUP PLC
PRELIMINARY RESULTS
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31ST MARCH 2004
---------------------------------- ------ -------- --------
2004 2003
Notes #m #m
---------------------------------- ------ -------- --------
Cash inflow from operating activities 8 637.8 582.3
Returns on investment and servicing of (22.6) 75.0
finance (#)
Taxation (166.2) (196.7)
Purchase of fixed assets (194.2) (145.8)
Disposal of fixed assets 149.6 118.6
Disposal of own shares 2.3 3.1
Acquisitions and disposals 8 (2.2) 358.1
Equity dividends paid (229.1) (238.3)
---------------------------------- ------ -------- --------
Cash inflow before use of liquid resources 175.4 556.3
and financing
Management of liquid resources 53.5 15.8
Financing 8 (281.2) (511.8)
---------------------------------- ------ -------- --------
(Decrease) / increase in cash in the year (52.3) 60.3
---------------------------------- ------ -------- --------
Cash is defined as cash in hand and deposits repayable on demand, less
overdrafts repayable on demand.
# Prior year includes exceptional interest received of #53.8m.
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
FOR THE YEAR ENDED 31ST MARCH 2004
---------------------------------- ------ -------- --------
2004 2003
Notes #m #m
---------------------------------- ------ -------- --------
(Decrease)/increase in cash in the year (52.3) 60.3
Cash (inflow) from change in liquid (53.5) (15.8)
resources
Cash outflow from change in borrowings and 8 16.9 46.0
lease financing ------ -------- --------
----------------------------------
Movement in net debt resulting from cash (88.9) 90.5
flows
Finance lease additions (4.2) (1.8)
Increase in value of investment in 10.125% - 5.8
bond 2017
Currency and other non-cash adjustments (3.9) 0.3
---------------------------------- ------ -------- --------
Movement in net debt during the year (97.0) 94.8
Opening net debt (51.5) (146.3)
---------------------------------- ------ -------- --------
Closing net debt (148.5) (51.5)
---------------------------------- ------ -------- --------
Net debt comprises cash, liquid resources, finance leases and all other
borrowings.
NOTES ON RESULTS
1. *Turnover by business segment
--------------------------- ------ ----- ------- -------- --------
2004 20031
Notes #m #m
--------------------------- ------ ----- ------- -------- --------
Continuing operations:
Health 1,806.7 1,704.5
Beauty and Toiletries 1,992.5 1,902.4
Lifestyle 676.5 676.5
--------------------------- ------ ----- ------- -------- --------
Boots The Chemists 4,475.7 4,283.4
Boots Opticians and Dentalcare 241.6 258.6
--------------------------- ------ ----- ------- -------- --------
4,717.3 4,542.0
Boots Healthcare International a 476.0 430.1
Boots Retail International b 41.6 35.6
Group and other c 91.5 79.8
--------------------------- ------ ----- ------- -------- --------
Continuing operations 5,326.4 5,087.5
Discontinued operation - Halfords - 234.9
--------------------------- ------ ----- ------- -------- --------
Turnover: group and share of joint 5,326.4 5,322.4
ventures ------ ----- ------- -------- --------
---------------------------
Notes
a) Boots Healthcare International also made inter-segmental sales of #28.6m (2003
#30.3m)
b) Boots Retail International also made inter-segmental sales of #1.4m (2003 #1.4m)
c) Group and other includes Boots Manufacturing third party sales of #68.4m (2003
#68.1m)
1. Restated on adoption of FRS5 application note G on Revenue Recognition
Impact of FRS5 Changes - Revenue Recognition
During the year, the Accounting Standards Board issued additional guidance
to FRS5 in the form of Application Note G: Revenue Recognition.
The overall impact on the Boots Group PLC is to reduce turnover by #5.0m
(2003 #4.9m) and operating profit by #1.4m (2003 #2.5m). There is a prior
year adjustment of #30.0m to reserves at 31st March 2003 as a result of
these changes. Comparatives have been restated.
2. Profit before interest and taxation by business segment
---------------------- ------ -------- -------- -------- --------
Before Before
exceptional exceptional
items Total items1 Total1
2004 2004 2003 2003
Notes #m #m #m #m
---------------------- ------ -------- -------- -------- --------
Continuing operations:
Boots The Chemists a 531.1 523.8 568.4 566.4
Boots Opticians and (5.1) (1.1) (30.9) (66.3)
Dentalcare ------ -------- -------- -------- --------
----------------------
526.0 522.7 537.5 500.1
Boots Healthcare 80.6 80.6 70.1 70.1
International
Boots Retail (10.4) (10.4) (22.3) (22.3)
International
Group and other b (46.1) (6.4) (66.2) (58.2)
---------------------- ------ -------- -------- -------- --------
Continuing operations c 550.1 586.5 519.1 489.7
Discontinued operation - - - 22.5 (100.7)
Halfords ------ -------- -------- -------- --------
----------------------
Profit before interest and 550.1 586.5 541.6 389.0
taxation ------ -------- -------- -------- --------
----------------------
Notes
a) Boots the Chemist included an operating loss in respect of Digital Wellbeing Ltd of
#3.2m (2003 #14.7m).
b) Group and other includes #12.0m in the comparative year for costs of rationalising
the group's manufacturing facilities.
c) Costs of #66.0m have been included in the current year for the rationalising of
head office, as part of the Getting In Shape programme.
1 Restated on adoption of FRS5 application note G on Revenue Recognition
3. Exceptional items
------------------------------------ -------- --------
2004 2003
#m #m
------------------------------------ -------- --------
Profit on disposal of fixed assets - 32.5 5.1
continuing
Provision for loss on closure of operations 3.9 (34.5)
(continuing)
Loss on disposal of business (discontinued) - (123.2)
------------------------------------ -------- --------
Total exceptional items before interest and 36.4 (152.6)
taxation
Attributable tax credit 0.6 11.1
------------------------------------ -------- --------
37.0 (141.5)
------------------------------------ -------- --------
Provision for loss on closure of operations in the prior year relates to the
withdrawal from certain Wellbeing Services.
As detailed in note 4 an exceptional interest credit of #92.1m arose in the
year to 31st March 2003, the tax on which was #27.6m.
4. Net interest (payable)/receivable and similar items
------------------------------------- -------- --------
2004 2003
#m #m
------------------------------------- -------- --------
Interest payable and similar charges:
Bank loans and overdrafts (6.2) (7.9)
Other loans (18.1) (23.9)
Finance lease charges (0.7) (0.9)
Income from interest rate swaps 6.8 22.0
------------------------------------- -------- --------
(18.2) (10.7)
Interest receivable and similar income 13.2 16.6
Increase in value of investment in 10.125% bond - 5.8
2017
Share of interest of joint ventures (0.5) (0.4)
------------------------------------- -------- --------
Net interest (payable)/receivable and similar
items before closure of interest rate swaps
(5.5) 11.3
Exceptional interest on closure of interest rate - 92.1
swaps -------- --------
-------------------------------------
Net interest (payable) / receivable and similar (5.5) 103.4
items -------- --------
-------------------------------------
Interest payable and similar charges includes interest payable on the
10.125% bond 2017 of #nil (2003 #5.8m) and Eurobond of #16.5m (2003 #16.5m).
The 10.125% bond 2017 was redeemed on 25th June 2002. Following redemption
there is no further impact on the profit and loss account.
5* Tax on profit on ordinary activities
------------------------------------ -------- --------
2004 20031
#m #m
------------------------------------ -------- --------
Current tax 116.3 207.3
Relief for overseas taxation (4.1) (6.6)
------------------------------------ -------- --------
112.2 200.7
Overseas taxation 16.7 15.6
------------------------------------ -------- --------
Total current tax charge for the year 128.9 216.3
Deferred taxation 38.8 (24.4)
------------------------------------ -------- --------
167.7 191.9
------------------------------------ -------- --------
Reconciliation of current tax charge
------------------------------------ -------- --------
2004 20031
#m #m
------------------------------------ -------- --------
Profit on ordinary activities before taxation 581.0 492.4
------------------------------------ -------- --------
Tax on profit on ordinary activities at UK 174.3 147.7
standard rate 30%
Factors affecting charge for the year:
Changes in accelerated capital allowances (4.8) 7.0
Changes in pension fund prepayment (6.6) 6.3
Other timing differences (15.6) 4.7
Intangibles amortisation (6.5) (4.5)
Disallowable expenses 3.8 19.4
Exceptional items (11.9) 34.8
Foreign tax charged at higher rates than UK 1.7 2.5
standard rate
Prior year adjustments (5.5) (1.6)
------------------------------------ -------- --------
Total current tax charge for the year 128.9 216.3
------------------------------------ -------- --------
1 Restated on adoption of FRS5 application note G on Revenue Recognition
6. Dividends
The directors have proposed a final dividend of 21.0p per share that amounts
to approximately #158.6m. If approved the total dividends for the year will
be 29.8p per share (2003 28.6p per share). The proposed final dividend if
approved will be paid on 20th August 2004 to shareholders registered on 11th
June 2004. Most shareholders (excluding those in Canada and the USA) will
have the opportunity to reinvest their cash dividend in existing shares
bought on the London Stock Exchange through a dividend reinvestment plan.
The company's registrars must receive all applications to join that plan or
amend existing instructions under it by 17.00 on 23rd July 2004.
7. Earnings per share
2004 20031
------------------------------------- -------- --------
Basic earnings per share before exceptional 48.2p 45.0p
items
Effect of exceptional items 4.7p (9.2)p
------------------------------------- -------- --------
Basic earnings per share 52.9p 35.8p
------------------------------------- -------- --------
Diluted earnings per share before exceptional 48.0p 44.9p
items
Effect of exceptional items 4.8p (9.2)p
------------------------------------- -------- --------
Diluted earnings per share 52.8p 35.7p
------------------------------------- -------- --------
The calculation of basic and diluted earnings per share is based on:
------------------------------------- -------- --------
2004 20031
#m #m
------------------------------------- -------- --------
Earnings
Earnings for basic and diluted earnings per
share calculation before exceptional items
375.6 377.0
Exceptional items (see note 3) 37.0 (77.0)
------------------------------------- -------- --------
Earnings for basic and diluted earnings per 412.6 300.0
share calculation -------- --------
-------------------------------------
1 Restated on adoption of FRS5 application note G on Revenue Recognition
------------------------------------- -------- --------
2004 2003
million million
------------------------------------- -------- --------
Number of Shares
Weighted average number of shares used in
basic earnings per share calculation
780.0 838.1
Dilutive effect of options 1.7 1.6
------------------------------------- -------- --------
Weighted average number of shares used in
diluted earnings per share calculation
781.7 839.7
------------------------------------- -------- --------
The weighted average number of shares used in basic earnings per share
calculation excludes 12.6m (2003 14.6m) shares held by The Boots ESOP Trust,
the QUEST and unappropriated shares held by Boots Share Plan Trustees.
The dilutive effect relates to options under an employee savings related
scheme and executive option schemes.
Basic and diluted earnings per share before exceptional items are disclosed
to reflect the underlying performance of the group.
8. Notes to the Group Cash Flow Statement
------------------------------------- -------- --------
2004 20031
#m #m
------------------------------------- -------- --------
Reconciliation of operating profit to operating
cash flows
Group operating profit 551.2 554.8
Depreciation, amortisation and impairments of 136.7 162.8
fixed assets
Loss on disposal of fixed assets 3.4 5.5
Increase in working capital (47.5) (130.3)
Other non-cash movements 11.3 (2.4)
------------------------------------- -------- --------
Net cash inflow before expenditure relating to 655.1 590.4
exceptional items
Exceptional operating cash flows (see below) (17.3) (8.1)
------------------------------------- -------- --------
Cash inflow from operating activities 637.8 582.3
------------------------------------- -------- --------
Exceptional operating cash flows
Restructuring and integration costs paid (17.3) (8.1)
------------------------------------- -------- --------
(17.3) (8.1)
------------------------------------- -------- --------
Financing
Capital element of finance lease rental (5.9) (8.1)
agreements
Decrease in other borrowings (11.0) (37.9)
------------------------------------- -------- --------
Cash outflow from change in borrowings and lease (16.9) (46.0)
financing
Issue of ordinary share capital (net of 0.3 (0.3)
expenses)
Repurchase of shares (264.6) (465.5)
------------------------------------- -------- --------
(281.2) (511.8)
------------------------------------- -------- --------
1 Restated on adoption of FRS5 application note G on Revenue Recognition
Acquisitions and disposals
Acquisition of businesses (1.1) (1.2)
Disposal of businesses - 396.0
Cash balances sold with business - (21.5)
Cash balance acquired with businesses - 1.0
Deferred consideration in respect of prior year - 0.6
acquisitions and disposals
Costs of disposals paid - (8.6)
Investment in joint ventures (1.1) (9.3)
Repayment of loan by joint venture - 1.1
------------------------------------- -------- --------
(2.2) 358.1
------------------------------------- -------- --------
9. Pensions
Following the Accounting Standards Board proposal in July 2002 to extend the
transitional regime of FRS17, given the move towards compliance with
international standards, the group has decided that it will continue to
account for pensions under SSAP24. The pension costs for the Boots Pension
Scheme for the year under SSAP24 was #28m (2003 #31m). Total pension costs
including other UK schemes and overseas arrangements are #34m (2003 #36m).
The scheme surplus under SSAP24 at the last valuation in 2001 was #0.3bn.
The triennial actuarial valuation, as at April 2004, is in progress.
FRS17, the UK pensions standard, discounts pension commitments, including
salary growth, at an AA bond yield. The value of liabilities at 31st March
2004 was #2,894m (2003 #2,540m) and the market value of assets was #2,836m
(2003 #2,694m), giving a pension scheme deficit of #58m (2003 #154m
surplus), before tax.
The service or operating cost of the scheme for the current year under FRS17
is #88m (2003 #78m). The cost after finance income is #98m (2003 #83m).
10. Other information
The preliminary figures for the financial year ended 31st March 2004
together with the corresponding amounts for 2003 are not the statutory
accounts of the company for these financial years. Statutory accounts for
the previous year have been delivered to the Registrar of Companies, whereas
those for the financial year ended 31st March 2004 will be delivered to the
Registrar of Companies in July 2004. The auditors have reported on the
statutory accounts for both financial years; these reports were unqualified
and did not contain a statement under section 237 of the Companies Act 1985.
The full report and accounts to which the auditors have issued an
unqualified report or the summary financial statement will be posted to
shareholders by Friday 18th June 2004. Copies will be available from The
Secretary, Boots Group PLC, 1 Thane Road West, Nottingham, NG2 3AA.
The annual general meeting will be held at the Queen Elizabeth II Conference
Centre, Broad Sanctuary, Westminster, London at 11.00 hours on Thursday,
22nd July 2004.
Issued by Boots Group PLC
For further information please contact:
Investor Relations - Peter Baguley
Tel: 020 7995 9617 Between 07.00 am and 1.30 pm
Mobile: 07770 440690 After 1.300 pm
Media - Donal McCabe or Matt Dransfield
Tel: 020 7995 9617 Between 07.00 am and 1.30 pm
Mobile: Donal 07769 690618 After 1.30 pm
Matt 07973 844612 After 1.30 pm
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PUURGAUPCUUM
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