Alliance Boots has reported its financials for the 2011/2012, marking double-digit growth in trading profit through a combination of organic growth and the benefits from the previous year’s acquisitions.
Revenue increased year on year by 18.4% to £23,009 million, and trading profit increased by 12.4% to £1,195 million while was EBITDA on the same basis by 10.2% to £1,443 million. On a constant currency basis, revenue increased by 19%, an increase of 0.6% on a like-for-like basis. Revenue, including Alliance Boots’ share of revenue of associates and joint ventures, increased by 12.5% to £25,383 million. On the same basis, EBITDA increased by 8% to £1,568 million and trading profit by 10.5% to £1,300 million. Underlying profit increased year on year by 10.2% to £693 million.
Commenting on the results, executive chairman Stefano Pessina said, “I am pleased to report that Alliance Boots continues to perform very well. In 2011/12 Alliance Boots has again delivered double-digit growth in trading profit while at the same time generating a strong operating cash flow to fund investment in growth and substantially reduce net borrowings. This performance, which has been achieved through a combination of organic growth and benefits from the previous year’s acquisitions, is particularly encouraging given the challenging economic environment.
“We remain focused on becoming the world’s leading pharmacy-led health and beauty group. In recent years, we have significantly expanded our international presence and now operate, together with our associates and joint ventures, in more than 25 countries. At the same time, we have made substantial capital investments, particularly in our Boots stores and supporting infrastructure. As a result, we have a strong platform for continuing growth in our core businesses and on which to build our next phase of development, focused on further international expansion,” Pessina commented.
The company’s health and beauty division delivered a good overall performance in the context of regulatory pressures, which particularly impacted dispensing profitability in the U.K., and difficult retail markets. The results outside the U.K. were particularly notable, achieved through new store openings and expanding product sales in key markets such as the U.S. The division’s revenue increased year-on-year by 0.6% to £7,671 million, trading profit increased by 6.0% to £813 million and trading margin increased by 0.5 percentage points to 10.6%.
Specifically for the U.K. health and beauty division, trading profit increased by 5.2% to £750 million, trading margin increasing by 0.6 percentage points to 11.2%. Revenue was 0.2% lower at £6,706 million due to lower dispensing reimbursement rates. Revenue in the beauty and toiletries category, where Alliance Boots has leading market positions and exclusive product brands, increased by 2% to £2,151 million. Within beauty, sales of cosmetics, fragrances and accessories all grew year on year. In the toiletries sub-category, the company strengthened its value proposition, sales similarly increasing. Growth was particularly strong in indulgent bathing, which was largely due to the April 2011 launch of the new Champneys range, which is exclusive to Boots, with hair care and personal care sales also up year on year.
Internationally, the company’s health and beauty division saw total revenue in countries outside the U.K. increase year-on-year by 6.9% to £965 million. Trading profit increased by 16.7% to £63 million, with increased profitability in Norway, the Republic of Ireland and Thailand. Trading margin increased by 0.5 percentage points, mainly as a result of faster growth rates in the more profitable countries. On a constant currency basis, revenue increased by 4.3%, like-for-like revenue increased by 0.8% and trading profit increased by 14.5%. A net 40 stores were added during the year, all with pharmacies, bringing the year end total to 528.
Notably, product sales in the U.S. increased year on year by more than 25%, helped by No7 again winning a number of accolades. Boots beauty brands, including No7, are sold in more than 1,750 Target stores, 330 of which have a Boots beauty advisor, and online on target.com, drugstore.com, Beauty.com and on the company’s own direct to consumer website ShopBootsUSA.com. In addition, No7 is now sold in just under 450 Ulta beauty stores across the U.S. and on ulta.com.
Looking to the future, the executive chairman emphasized opportunities and challenges for the company. “In the coming year, we expect the economic environment to remain difficult with continuing pressure on both consumer and governmental expenditure. This will generate both challenges and new opportunities for us. We are confident about our future prospects and ability to pursue profitable growth, both organically and through further international expansion. This will be supported by our strong operating cash flow and secure funding arrangements, which will enable us to continue to invest while at the same time reducing net borrowings. The development of new and existing partnerships will be a key component of our future growth. Our mission is to become the world’s leading pharmacy-led health and beauty group. In a world where globalization is increasing at pace across many business sectors, I believe that we have the brands, intellectual capital and management expertise to play a major role in the global development of our industry in the coming years,” Pessina concluded.