Alliance Boots plc
2006/07 Interim Results 14 November 2006
Regulatory statement
Origination of informationUnless otherwise stated, the information contained in this presentation is derived from Alliance Boots own internal resources or research, or are the Company’s estimates based on its existing knowledge and experience.
Forward looking statementsCertain statements included in this presentation, or made in response to questions during Questions & Answers, which are not historical facts are forward looking statements. Such forward looking statements are made pursuant to the safe harbour provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements involve certain risks and uncertainties including, but not limited to, changes in interest rates, competitive pressures, changes in customer mix, financial stability of major customers, investment procurement opportunities, acquisitions, industry consolidation, asserted and unasserted claims, and changes in government regulations or the interpretation thereof, which could cause actual results to differ from those in the forward looking statements.
Article 49 Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 This presentation is directed only at persons who (i) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or (ii) have professional experience in matters relating to investments or (iii) are outside the United Kingdom (all such persons together being referred to as “relevant persons”). This presentation must not be acted on, or relied on, by persons who are not relevant persons.
Section 21 of the Financial Services and Markets Act 2000This presentation does not constitute an invitation or inducement to engage in investment activity in the ordinary shares of the Company nor does it purport to contain information that shall form the basis of, or be relied upon in making such investment decisions. No representation or warranty, express or implied, is made or given by the Company as to the accuracy or completeness of the information or the opinions contained in this presentation and no liability accepted for any such information or opinions. Past performance cannot be relied on as a guide for future performance.
US Securities ActThis presentation is not an offer of securities for sale in the United States. The securities to which this presentation relates have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act. There will be no public offering of the securities in the United States.
Richard Baker
Chief Executive
An international pharmacy-led health and beauty group
• Retail- Market leader in the UK- Businesses in five other countries
• Wholesale - One of Europe’s leading pharmaceutical wholesalers- Europe’s biggest buyer of generic medicines
• A strong balance sheet with stable cash flows- Organic and acquisition growth opportunities
• The opportunity to deliver substantial mid-term cost savings
Delivering against our priorities
• Trading performance in line with expectations- ‘Business as usual’ for retail and wholesale through merger completion - Pro forma Group revenue +2.9%- Pro forma underlying trading profit* +5.1%- Pro forma adjusted earnings per share** +10.4%
• Integration of management team well underway- Excellent collaborative working in key areas across the Group
• Hard work continues on delivery of cost synergies- Confident in plans and timescales to delivery
* Underlying trading profit is after adjusting the trading profit for the six months ended 30 September 2005 to include a full six months rental charge on the 312 retail outlets which were sold and leased back in July 2005, so that the trading profits for both accounting periods are on a comparable basis
** Adjusted earnings per share comprises adjusted earnings divided by the pro forma weighted average number of shares in issue during the period of 962 million
George Fairweather
Group Finance Director
Basis of reporting
Pro forma• Prepared on a pro forma basis to show the results from continuing
operations as if the two groups had been always been combined.
Statutory• Comprising six months’ results for the former Boots Group PLC businesses
and two months’ results for the former Alliance UniChem Plc businesses.
Pro forma Group highlights – continuing operations
* Trading profit comprises profit from operations before non trading items, amortisation of certain acquired intangible assets and share of associates’ post tax earnings
** Underlying trading profit is after adjusting the trading profit for the six months ended 30 September 2005 to include a full six months rental charge on the 312 retail outlets which were sold and leased back in July 2005, so that the trading profits for both accounting periods are on a comparable basis
*** Adjusted earnings comprises profit for the period attributable to equity shareholders before non trading items, amortisation of certain acquired intangible assets and IAS 39 timing differences, all net of tax and before exceptional tax credits
**** Adjusted earnings per share comprises adjusted earnings divided by the pro forma weighted average number of shares in issue during the period of 962 million
Adjusted earnings per share**** 20.1p 18.2p +10.4%
Adjusted earnings*** 193 175 +10.3%
Revenue 7,039 6,839 +2.9%
Underlying trading profit** 267 254** +5.1%
Trading profit* 267 260 +2.7%
Six months ended 30 September
2006£million Growth
2005£million
Pro forma divisional highlights – continuing operations
* Group trading profit comprises profit from operations before non trading items, amortisation of certain acquired intangible assets and share of associates’ post tax earnings
TradingRevenue profit Trading
£million £million Revenue profit
Retail 3,125 208 +5.7% +4.0%
Growth over firsthalf of last year
Other Commercial Activities& Corporate Costs 47 (26) +6.8%
Group* 7,039 267 +2.9% +2.7%
Wholesale 4,388 85 +1.0% +6.3%
Intra-group (521) -
WholesaleLike for like revenue –0.8%Like for like trading profit +8.0%
Retail Like for like revenue +4.1%Underlying trading profit*+7.2%
Six months ended 30 September 2006
Pro forma Retail Division highlights - UK
+5.6%+4.5%
Revenue £2.8bn
Total LFL
* Underlying trading profit is after adjusting the trading profit for the six months ended 30 September 2005 to include a full six months rental charge on the 312 retail outlets which were sold and leased back in July 2005, so that the trading profits for both accounting periods are on a comparable basis
Trading profit £192m
Underlyingmargin
+7.3%*
+0.1%p
Underlying
Six months ended 30 September 2006
Pro forma Retail Division - UK
Health£1,549m
Lifestyle£482m
Beauty & Toiletries
£792m
Revenue by category
Six months ended 30 September 2006
+8.4%
+5.0%
-1.8%
Health & Beauty£2,316m
Community Pharmacy
£507m
Pro forma Retail Division - UK
Revenue by format
Six months ended 30 September 2006
Total growth Like for like
Total growth Like for like
+4.7%+4.1%
+9.5%+6.3%
Pro forma Retail Division highlights - International
Revenue £302m Trading profit £16m
Margin
+6.7%+7.1%
0.0%
Total LFL Profit
Six months ended 30 September 2006
0.0%p
Pro forma Wholesale Division highlights – N. Europe
Revenue £1.6bnTrading profit £49mTrading margin 3.1%
+8.8%
2.1%
Total LFL Margin
+8.9%
0.0%p
Profit
Six months ended 30 September 2006
Pro forma Wholesale Division highlights – S. Europe
Revenue £2.8bnTrading profit £36mTrading margin 1.3%
-2.3% -1.7%
Total LFL Margin
+2.9%
+0.1%p
Profit
Six months ended 30 September 2006
Pro forma Other Commercial Activities & Corporate Costs
Trading profit
Total£million
Other Commercial Activities (8) (6)
Corporate Costs (18) -
Revenue
Contract manufacturing 38 7
(26) (6)
Better/(worse)than first half
of last year£million
Own brand exports 9 (4)
Other Commercial Activities 47 3
Six months ended 30 September 2006
Pro forma Associates
Revenue 1,048 +7.2% +5.0%
Trading profit 33 - +3.6%
AllianceBootsshare
£million Total Like for like
Growth over firsthalf of last year
Earnings 23 +9.5% +11.5%
Six months ended 30 September 2006
Pro forma underlying net finance costs and tax – continuing operations
2006£million
Trading profit*
Share of associates’ post tax earnings
Underlying net finance costs
Underlying tax
Adjusted profit for the period
Minority interests
Adjusted earnings**
2005£million
260
21
175
-
175
267
23
193
-
193
Underlying tax rate
• Trading profit comprises profit from operations before non trading items, amortisation of certain acquired intangible assets and share of associates’ post tax earnings
** Adjusted earnings comprises profit for the period attributable to equity shareholders before non trading items, amortisation of certain acquired intangible assets and IAS 39 timing differences, all net of tax and before exceptional tax credits
Six months ended 30 September
Underlying tax rate
(37)
(69)
(18)
(79) 31.7% 30.9%
Pro forma cash flow – continuing operations
Acquisitions and disposals (23) (8)
Net capital expenditure (110) 163*
Other 10 (62)
Cash generated by operations 471 320
Net borrowings** 1,169
* Includes proceeds of £298 million from sale and leaseback transaction** Defined as borrowings net of cash and cash equivalents and derivative financial instruments
Six months ended 30 September
2006 2005£million £million
Tax and interest (53) (113)
Total cash inflow 151 142
Dividends (net) (144) (158)
Statutory accounts – non trading items
(19) 149
Restructuring (10) -
Costs in relation to merger synergies (9) -
Profit/(loss) on sale of property, plant and equipment 1 (2)
Profit on sale and leaseback - 151
Other (1) -
Six months ended 30 September
2006 2005£million £million
Financial summary
• Performance on track for the full year- Good trading in H1, in line with expectations- Businesses in good shape to meet the challenges in H2
• Good cash flows- Cash generative businesses- Prudent financial stewardship
• Robust balance sheet
• Strong financial position to fund future growth
Richard Baker
Chief Executive
UK Retail – The opportunity in healthcare
• Market leader in growing Healthcare market- More pharmacies than anyone else
• A common heritage- Developing the best of both
• The role of Pharmacy ... moving from dispensing to Healthcare- New services
• Profitable operation with scope to expand
UK Retail – The power of brands
• Market leader in the growing Beauty market
• Brands provide differentiation- Market leading products available
only at Boots
• Brands drive profitability- Natural Collection relaunch
• Extending the reach of our brands
Retail – International growth opportunities
• Established credentials- 372 retail outlets across the Republic of Ireland, Norway,
Russia, The Netherlands, Italy and Thailand
• Profitable markets with growth potential
• Natural area for expansion- Potential deregulation in Western Europe- Developing markets- Financial resources and expertise in place
• Good synergies with pharmaceutical wholesale
• Wider distribution for own brands
Wholesale markets
• Healthcare led - Growth markets
• Regulated environment- Diverse portfolio delivers stability
• Changing product mix- Generics drive cost savings for government- Development of consumer healthcare offering
• Driven by service and efficiency- Competitive market place
Driving growth in Wholesale
• Potential expansion- Geographic and commercial
• Core service level- Optimum network shape
e.g restructuring in France
• Commercial/loyalty offerings - Virtual chains: Pharmacy Alliance, Alphega and Kring
• Differentiated product offer- Almus in Boots stores and rolling out in Europe- Potential distribution of own brands
• Manufacturer services- Pfizer contract
Progress on integration
• Leadership team in place
• Cost synergies- Confident in £100 million by fourth full year- Key focus in first two years
• UK retail offer- Best of both pharmacy service- Ad Card technology developed- Key focus in years two and three
• Product offer for European pharmacy- Key focus in years three and four
Summary
• Good performance in H1, on track for the full year- Pro forma Group revenue +2.9%
- Pro forma underlying trading profit* +5.1%
- Pro forma adjusted earnings per share** +10.4%
• Confident in plans to deliver cost synergies
• Growth opportunities in existing markets and acquisition pipeline
• An encouraging start .......... still much to do
* Underlying trading profit is after adjusting the trading profit for the six months ended 30 September 2005 to include a full six months rental charge on the 312 retail outlets which were sold and leased back in July 2005, so that the trading profits for both accounting periods are on a comparable basis
** Adjusted earnings per share comprises adjusted earnings divided by the pro forma weighted average number of shares in issue during the period of 962 million
Alliance Boots plc
2006/07 Interim Results
14 November 2006
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