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Published on December 4, 2007

Author: Elodie

Source: authorstream.com

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Boots Group PLC Annual Results 2002/03:  Boots Group PLC Annual Results 2002/03 John McGrath Chairman & Chief Executive Officer Agenda:  Agenda Group results Driving profitable top line growth Investing for the future Refocusing on 2 core businesses Summary and cost progression Outlook for 03/04 New leadership team:  New leadership team Four new non-executive directors since 1999 Richard Baker Ann Francke Howard Dodd David Kneale Paul Stoneham Paul Bateman David Lister Andy Smith Role CEO Strategic Marketing CFO COO - BTC BHI Supply Chain/Properties IT Personnel Experience Asda/Mars Mars/P&G AstraZeneca/ICI Waterstones Alberto Culver/P&G P&G Diageo/GSK Mars/Pepsi Cola Sep 2003 Feb 2003 Apr 2002 Jan 2002 Aug 2001 Jul 2001 Feb 2001 Jul 1997 Date Appointed Slide5:  Howard Dodd Chief Financial Officer Group results:  Group results Sales Operating profit Pre-tax profit EPS (pre-exceptional) EPS Dividend Share re-purchase - -11% -17% -9% -22% +4% 5,328 609 596 49.9p 45.9p 27.4p 46 5,325 544 495 45.2p 36.0p 28.6p 463 01/02 £m 02/03 £m Profit growth reconciliation:  4,800 609 (54) 8 16 1 580 - - - Sales - continuing operations Operating profit Halfords Pension costs Rationalisation Investment Adjusted profit Exceptional items - Halfords disposal - Wellbeing - Swaps * 5,090 544 (22) 33 40 22 617 (123) (35) 92 01/02 £m 02/03 £m * shown as interest income Profit growth reconciliation -11% +6% +6% Driving profitable top line growth:  Driving profitable top line growth Boots The Chemists Boots The Chemists:  Sales 4,072 4,284 +5% Operating profit 605 569 -6% Operating cashflow after 492 546 +11% capital spend Boots The Chemists 01/02 £m 02/03 £m BTC sales growth:  BTC sales growth -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 01/02 00/01 02/03 97/98 98/99 99/00 +3.8% +6.5% half year growth (%) % Like for like sales growth by quarter:  + 0.8% + 5.7% + 7.5% + 4.1% + 4.8% Q1 Q2 Q3 Q4 Year 02/03 Like for like sales growth by quarter Driving frequency and footfall:  Driving frequency and footfall 450 500 00/01 01/02 02/03 millions p.a. Transactions Driving frequency and footfall:  Driving frequency and footfall 450 500 00/01 01/02 02/03 Transactions Average Transaction Value 8.00 millions p.a. £ 8.50 Driving sales through:  Driving sales through Our store teams Breadth of range New ideas Christmas Driving sales through our store teams:  Driving sales through our store teams Help & Advice 1,100 extra store staff Improved pay rates to attract & retain key staff Increased training Mystery customer measures up 9% On-shelf availability over 98% on all lines including key lines Driving sales through breadth of range:  Driving sales through breadth of range Increased distribution of premium own-label brands Product density increased in larger stores Reinvigorated Baby range with ‘mini mode’ Expanded Christmas offer Increased choice in re-invigorated stores Driving sales through new ideas:  Driving sales through new ideas 31% of lines are new each year Own brand strength - No7 Intelligent Colour Foundation Line extension and promotion drive new brands - TONI&GUY +34% - fcuk® +76% Launch partner of choice for proprietary brands - Gillette Mach III Turbo Proprietary brand sales up 6.7% Own brand and exclusives sales up 2.4% Driving sales at Christmas:  Driving sales at Christmas Major driver of footfall and halo sales Q3 sales up 7.5% like for like Incremental Christmas sales £70m Positive contribution to profit after set-up costs BTC category sales growth analysis:  BTC category sales growth analysis Continued strong market growth in Dispensing OTC +5% Complementary health including vitamins -2% £1,716m Health +5.1% BTC category sales growth analysis:  BTC category sales growth analysis £1,716m Health +5.1% Continued strong market growth in Dispensing OTC +5% Complementary health including vitamins -2% £1,892m Beauty & Toiletries +6.8% Cosmetics & Fragrance +11% No7 +14% Skincare +6% Premium Wash/Bath +12% Sun preparations +14% Haircare - no growth Dental -0.7% BTC category sales growth analysis:  BTC category sales growth analysis £1,892m Beauty & Toiletries £1,716m Health £676m Other +5.1% +6.8% +1.3% Seasonal +29% Baby +5% Food - no growth Photo -8% Continued strong market growth in Dispensing OTC +5% Complementary health including vitamins -2% Cosmetics & Fragrance +11% No7 +14% Skincare +6% Premium Wash/Bath +12% Sun preparations +14% Haircare - no growth Dental -0.7% BTC category sales history:  BTC category sales history Health Beauty & Toiletries Other Total 00/01 01/02 +3.1 +3.5 -11.0 +0.3 +4.6 +4.9 -10.3 +2.0 +5.1 +6.8 +1.3 +5.2 % Growth 02/03 +4.3 +5.1 -6.8 +2.5 cagr Market share held or grown in all counter health & beauty categories Better value for customers:  Better value for customers Sales on promotion up 1pp to 31% Delivering extra value Advantage Card relaunch - 1 million new card holders - 9 million active users 99p offers on key brands Strong events Lower Prices You’ll Love:  Lower Prices You’ll Love Focused on Known Value Items Investing £40m in price cuts Supplier involvement Gross profit neutral Not EDLP BTC sales growth analysis:  BTC sales growth analysis +2.9% +4.7% +5.2% Volume Price Mix Growth 02/03 growth Space -0.3% -2.1% BTC gross profit:  BTC gross profit Gross margin % down 110bp - investment in price - largely offset by cost of goods savings - adverse mix - Pharmacy & Christmas - prior-year stock adjustment Cash gross profit up c.2.5% BTC gross margin history:  BTC gross margin history -20 0 +20 +40 +60 +80 -110bp 00/01 01/02 02/03 +100 Driving profitable top line growth:  Driving profitable top line growth Boots Healthcare International Boots Healthcare International:  Boots Healthcare International Sales 407 460 +13% Operating profit 67 70 +5% Brand investment/sales 25% 28% Operating cashflow after 68 56 -18% capital spend 01/02 £m 02/03 £m BHI 02/03 Highlights:  BHI 02/03 Highlights 12.3% growth at comparable exchange rates Nurofen grew by 22% Clearasil Total Control launched Brand investment up by £27m New product development up 42% Delivery against Feb 2002 commitments:  Delivery against Feb 2002 commitments Sales growth +5-7% +13% NPD spend +30% +42% Brand marketing support +20% +26% 6 - 8 must have brands on track £100m profit by 05/06 on track Commitment 02/03 Actual BHI product sales growth - by brand:  BHI product sales growth - by brand Total 460 +12 Nurofen 118 +22 Clearasil 87 +14 Strepsils 78 +8 Derma-cosmetics 61 +10 Other 116 +7 Sales £m YoY % BHI product sales growth - by region:  BHI product sales growth - by region Total 460 +12 UK 130 +20 USA 42 +22 Europe 202 +4 Other 86 +18 YoY % Sales £m BHI brand investment:  BHI brand investment Total spend £130m 28% of sales +27% growth on 01/02 Main increases - Nurofen line extension - US, UK and Australia ‘blue-line’ Clearasil - Clearasil Total Control launch Investing for the future:  Investing for the future Investing in our stores:  Investing in our stores 239 completed stores - 163 in London Sales uplift - 4 months lag post refit - early stores +0.7% - local destination stores +3.3% 300 stores planned for 03/04 New Edge of Town stores add 15,000 sq.m 5,000 touch screen tills in 360 stores by end 03/04 Investing in our stores:  Investing in our stores Liverpool Street Station Space doubled to 1,200 sq.m Key elements - Broader product range incl. premium cosmetics & fragrance - Product Beacons - Linear cash-taking - Carousel pharmacy - Improved environment Sales up 43% to £400k per week Now top 10 store Investing in pharmacy:  Investing in pharmacy OFT enquiry Government rejected complete deregulation Update expected June/July ‘balanced package to promote competition, new entry & increased choice’ Investing in pharmacy 02/03 39 new style pharmacies 41 Smartscript systems 03/04 220 new style pharmacies 520 Smartscript systems Major review of healthcare market Investing for the future:  Investing for the future Investing in Stores Refits Edge of Town Portfolio development Tills Investing in Pharmacy Refits Systems Infrastructure Backbone Total investment of which: Revenue Capital Group total capital spend 02/03 £m 03/04 £m 32 2 11 2 47 3 6 9 12 68 22 46 149 55 33 40 6 134 10 15 25 79 238 65 173 250 Refocusing on 2 core businesses:  Refocusing on 2 core businesses Boots The Chemists Boots Healthcare International Refocusing on 2 core businesses:  Refocusing on 2 core businesses Sold Halfords for £396m Exiting Wellbeing Services except Dentalcare & Footcare Closing Pure Beauty stores Ended Digital Wellbeing joint venture £100m ‘Getting in Shape’ cost programme Simplified Group structure Boots The Chemists Boots Healthcare International Focused services offer:  Focused services offer Opticians and Eyecare (includes Lasik) Wellbeing Services Dentalcare/Footcare 218 16 14 31 Profit/(Loss) before rationalisation costs £m Sales £m 8 (1) (15) (21) Rationalisation costs £m (35)* (1) +6% +84% +116% + 57% *rationalisation costs of £35m charged as exceptional item Simple export model:  Simple export model Boots Retail International 37 Profit/(Loss) before rationalisation costs £m Sales £m (16) Rationalisation costs £m (6) -8% 30% reduction in losses net of £6m rationalisation costs +7% LFL growth in Thailand 51 new implants in Taiwan 8 implants in Hong Kong Summary & cost progression:  Summary & cost progression Summary:  Summary Turnover Operating profit Operating cashflow after capital spend Investment costs Rationalisation 4,284 569 546 (22) (12) 460 70 56 263 (29) (7) (1) 37 (22) (10) (6) 48 (66) (71) (21) BTC BHI Wellbeing BRI Group/ Other 235 22 32 Halfords Total 5,327 544 546 (22) (40) £m £m £m £m £m £m £m ‘Getting in Shape’ cost programme:  ‘Getting in Shape’ cost programme £100+m savings by 05/06 02/03 03/04 04/05 05/06 -50 0 50 £m 100 £40m £60m £40m £70m £100m ‘Getting in Shape’ cost programme:  ‘Getting in Shape’ cost programme £100+m savings by 05/06 Progress on track 02/03 03/04 04/05 05/06 -50 0 50 £m 100 £22m £23m £33m £31m £92m £100m+ Transforming our supply chain:  Transforming our supply chain Availability Supply chain Store friendly Year 1 Year 2 Year 3 98% achieved manufacturing warehousing transport lower cost less stock ‘best in class’ OSA Rationalisation costs:  Rationalisation costs Business closure & restructuring 02/03 03/04 Operating Cost Exceptional Cost (18) (22) (40) Getting in Shape (35) - (35) (7) (23) (30) (60) n/a 42 31 73 Total Cost 03/04 P&L improvement vs 02/03 £m Operating Cost Group Operating Profit Movement:  Group Operating Profit Movement *Continuing operations £m Movement in Operating Profit * -33 Cost Savings +50 BTC Investment -21 -32 BTC Store Payroll BHI Brand Investment -27 -25 Pensions Other incl. Inflation Gross Profit -24 Rationalisation +102 -36 Other Retailing Excellence -20 2003/04 outlook :  2003/04 outlook Continuing to drive top line growth Margins held steady Losses reduced in non-core areas Investing for the future - continuing to invest in BTC - higher investment in BHI brands Investment first half loaded Shareholder returns:  Shareholder returns Strong free cashflow £353m* Dividend up 4.4% 1.6x dividend cover (pre-exceptional) Ongoing share repurchase programme £300m £209m £191 m £700 m Feb 02 programme completed Halfords proceeds completed Halfords repurchases to come Total Dividends *excluding Halfords net cash consideration on sale Conclusion:  Conclusion Profitable sales growth Investment to secure future growth Refocused on 2 core businesses £463m cash returned to shareholders New leadership team

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