Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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Alliance Boots plc 2006/07 Interim Results 14 November 2006

Transcript of Alliance Boots plc 2006/07 Interim Results 14 November 2006.

Page 1: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

Alliance Boots plc

2006/07 Interim Results 14 November 2006

Page 2: 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.

Page 3: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

Richard Baker

Chief Executive

Page 4: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 5: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 6: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

George Fairweather

Group Finance Director

Page 7: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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.

Page 8: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 9: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 10: Alliance Boots plc 2006/07 Interim Results 14 November 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

Page 11: Alliance Boots plc 2006/07 Interim Results 14 November 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%

Page 12: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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%

Page 13: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 14: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 15: Alliance Boots plc 2006/07 Interim Results 14 November 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

Page 16: Alliance Boots plc 2006/07 Interim Results 14 November 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

Page 17: Alliance Boots plc 2006/07 Interim Results 14 November 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

Page 18: Alliance Boots plc 2006/07 Interim Results 14 November 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%

Page 19: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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)

Page 20: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 21: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 22: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

Richard Baker

Chief Executive

Page 23: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 24: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 25: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 26: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 27: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 28: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 29: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

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

Page 30: Alliance Boots plc 2006/07 Interim Results 14 November 2006.

Alliance Boots plc

2006/07 Interim Results

14 November 2006