RNS Number:9600G
Alliance Boots plc
31 July 2006
31 July 2006
MERGER COMPLETION AND TRADING STATEMENT
Alliance Boots plc today confirms the successful completion of the merger
between Boots Group PLC and Alliance UniChem Plc to form a new international
pharmacy-led health and beauty group.
The Company is also issuing today, as a matter of record, a trading update for
Boots The Chemists for the three months ended 30 June 2006 (see Appendix 1), and
the financial results for Alliance UniChem for the six months ended 30 June 2006
(see Appendix 2), which had originally been scheduled by Alliance UniChem to be
issued on 1 August 2006.
These announcements demonstrate that both businesses are on track. The interim
results for the newly merged Alliance Boots will be announced in November 2006.
Richard Baker, Chief Executive of Alliance Boots, commented:
"I am delighted that we are able to announce the completion of the merger
between Alliance UniChem and Boots to create Europe's foremost international
pharmacy-led health and beauty group. The union of these two great businesses
also establishes a new market leader in UK pharmacy and provides exciting
opportunities for international growth.
"Looking ahead our immediate focus is to commence the delivery of the identified
cost synergies of at least #100 million per annum by the fourth full year. The
first stage of this work has already started and we are confident of delivering
#60 million of annualised savings by the end of the second year.
"The merger will enable us to improve the offering for both our wholesale and
retail customers. While there is a lot of hard work ahead and it will take time
to deliver the full benefits of this merger, we are already making changes for
our customers in the UK with a range of popular Boots products available in 500
Alliance Pharmacies from today.
"I would like to thank everybody involved in the successful completion of the
transaction. Despite the huge additional effort inevitably required by this
process our businesses have remained focused and delivered solid results that
keep us on track for the year.
"We have a firm foundation for our future success and we are determined to
deliver the benefits of this to our enlarged group of shareholders in the years
to come."
- Ends -
Richard Baker, Chief Executive and George Fairweather, Group Finance Director,
will host a conference call for analysts at 09.15 BST.
UK dial in number 020 7190 1596
International dial in number +44 20 7190 1596
Quote conference title - Alliance Boots Trading Update
A replay facility will be available for seven days:
UK dial in number 020 8515 2499
International dial in number +44 20 8515 2499
Access number 354854#
For further information, please contact:
Investor Relations Media
Gerald Gradwell/Chris Laud Donal McCabe
Tel: +44 (0)20 7797 1700 (until 12.00 pm) Tel: +44 (0)20 7797 1700 (until 12.00 pm)
Tel: +44 (0)20 7495 8880 (after 12.00 pm) Tel: +44 (0)20 7495 8880 (after 12.00 pm)
Gavin Anderson, Tel: +44 (0)20 7554 1400
Finsbury, Tel +44 (0)20 7251 3801
Notes to Editors:
1. Alliance Boots is Europe's foremost international pharmacy-led health
and beauty group.
Geographical coverage:
* Alliance Boots pharmaceutical wholesaling businesses:
Czech Republic, France, Italy, The Netherlands, Norway, Russia, Spain and
the UK.
* Associate pharmaceutical wholesaling interests:
Egypt, Germany, Portugal, Romania, Switzerland and Turkey.
* Alliance Boots retail healthcare outlets:
Republic of Ireland, Italy, The Netherlands, Norway, Thailand, and the UK
* Associate retail healthcare outlets:
Italy and Switzerland.
* Alliance Boots own brand products sold through wholesale and to
selected retail partners:
Canada, Czech Republic, Dubai, Finland, France, Hong Kong, Indonesia, Italy,
Kuwait, The Netherlands, New Zealand, Norway, Portugal, Romania, Russia,
Spain, Switzerland, Taiwan, the UK and the USA.
Scale of business:
* A full-line wholesale and distribution network serving over 125,000*+
outlets in 14 countries from over 380*+ depots
* 3,000*+++ retail outlets (2,700*+++ of which have a pharmacy)
o 2,600*++ healthcare outlets in the UK of which:
1,500*++ community pharmacies
800* destination health and beauty stores
300* other retail outlets, including free standing Boots Opticians
practices
o 400*+ pharmacies operating outside the UK
* Market-leading own brand products including "No 7", "Soltan", "Botanics"
and "Almus"
* Over 100,000*+ employees
* approximate numbers
+ including associates where applicable.
++ prior to the disposal of 96 pharmacies required by the Office of Fair
Trading as a condition of the merger.
2. Alliance Boots' management team offers a strong combination of retail
pharmacy, pharmaceutical wholesale distribution, acquisition and brand
management experience.
3. The "Boots" brand is expected to increase the Group's appeal to
potential partners, customers and pharmacists. In addition, the sale of
Alliance Boots' extensive proprietary product range (e.g. "No 7", "Soltan",
"Botanics" and "Almus") in international markets is expected to provide
incremental benefits.
4. Alliance Boots has a pipeline of attractive opportunities in new
geographical markets for the expansion of both our retail pharmacy network and
our wholesale and distribution activities. The Group's ability to access new
markets and its attractiveness to potential partners are expected to be enhanced
significantly by the management expertise, internationally recognised brands and
balance sheet strength.
5. For further information please see the Company's new website
www.allianceboots.com which is launched today.
Boots The Chemists
Trading performance for the three months to 30th June 2006
Revenue growth Actual % Like for Like %
Boots The Chemists 3.9% 3.0%
- Health 5.9%
- Beauty & Toiletries 3.7%
- Lifestyle -1.2%
Sales growth in our Boots The Chemists business in the quarter was 3.9%, 3.0%
like for like. Strong early season sales of sun and hay-fever related products
in June contributed around 1.0% of the growth in the quarter.
Our core health and beauty businesses have continued recent performance trends
with Dispensing items up 5.4% and Beauty up 7.8%.
Gross margin and operating cost performance is in line with plan.
We have introduced the Midnight Pharmacy offer into 13 stores during the quarter
and plans are on track to have 60 stores providing this service by the end of
the calendar year. Our programme to open more stores where customers want to
shop continues with 13 new stores opened over the quarter, including 9 on the
edge of town and 3 new healthcentres. Our small stores investment programme is
underway with work in the first 50 stores completed by the end of June.
Boots launched the Boots Health Club in April to bring more of its healthcare
expertise directly to customers and already a million people have signed up,
significantly ahead of initial expectations.
Trading update - Alliance UniChem
Overview
In the six months ended 30 June 2006 Alliance UniChem continued to perform
strongly, extending its long established track record of delivering excellent
financial performance, with increased profitability in pharmaceutical
wholesaling, retail pharmacy and associate contribution compared to the first
half of last year. This was again achieved largely through the continuation of
organic sales growth and an ongoing focus on margin management, cost control and
working capital efficiency.
Financial highlights - six months ended 30 June 2006
Revenue up 2.2% to #4,718.7 million
Revenue including share of associates' revenue up 4.3% to #5,786.7 million
Operating profit(1) up 11.4% to #135.8 million
Operating profit(1) including share of associates' operating profit up 11.1% to #169.4 million
Adjusted profit for the period attributable to equity shareholders(2) up 14.1% to #100.5 million
Adjusted diluted earnings per share(2) up 14.3% to 27.9 pence
Diluted earnings per share(3) down 8.3% to 26.6 pence
(1) Operating profit comprises profit from operations before share of associates' post tax
earnings and exceptional items as classified by Alliance UniChem (comprising costs in relation to the
merger, profit on disposal of businesses and profit on disposal of investments)
(2) Excludes exceptional items and IAS 39 timing differences
(3) Includes exceptional items and IAS 39 timing differences - in the current period exceptional costs in
relation to the merger were #4.1 million net of tax and IAS 39 timing differences were a cost of #0.9
million net of tax, in the prior period exceptional gains on the disposal of businesses and investments
totalled #14.1 million net of tax, and IAS 39 timing differences were an income of
#2.4 million net of tax
A glossary of key terms is provided at the end of this announcement
Markets
Alliance UniChem estimates that its wholesale markets grew, by around 3.5% in
value on a constant currency basis compared to the first half of last year, this
growth being weighted on the basis of Alliance UniChem's wholesale revenue.
This compares with Alliance UniChem's previously published overall estimated
market growth of 2.5% for the full year. Alliance UniChem is now forecasting
growth of around 2% for the full year, higher first half growth being expected
to be more than offset by lower growth in the second half in the UK and in
Alliance UniChem's Southern European markets.
The growth in the market from the introduction of higher priced new
pharmaceuticals has continued to be partially offset by growth in market
penetration of lower priced generic drugs. In the first half of the year
Alliance UniChem has estimated that generics comprised around 22% of its total
wholesale market in volume terms, weighted on the basis of its wholesale
volumes, this percentage typically being significantly higher in its markets in
Northern Europe than in Southern Europe. Compared to the first half of last
year, penetration of generics grew in all markets in which Alliance UniChem
operates.
Alliance UniChem estimates that the overall level of parallel trade in Europe
was broadly in line with the level in the first half of last year with
manufacturers continuing to seek ways to curtail these activities.
Retail pharmacy markets, weighted on the basis of Alliance UniChem's retail
revenue, grew, Alliance UniChem estimated, by around 4% in value on a constant
currency basis compared with the first half of last year. This is in line with
Alliance UniChem's previously published and current forecast for overall retail
market growth for the full year.
Corporate developments
In March Alliance UniChem entered the Russian market through the acquisition of
a 96% controlling stake in the parent company of Apteka Holding ZAO, the fifth
largest pharmaceutical wholesaler in Russia. Apteka reported sales of
approximately #115 million in the year ended 31 March 2005 and operates a
network of 20 depots across the country. The consideration for the stake was
approximately #18 million with, in addition, approximately #10 million of net
debt assumed.
In April Hedef Alliance, Alliance UniChem's Turkish-based associate, exercised
its option to acquire control and majority ownership of its associate, UCP, a
leading pharmaceutical wholesaler in Egypt. UCP's sales in the year ended 30
June 2006 were approximately #192 million. In June, ANZAG, Alliance UniChem's
German-based associate, acquired 60% of Farmexpert, the third largest
pharmaceutical wholesaler in Romania.
Following these three transactions, at 30 June 2006 Alliance UniChem had owned
or associate wholesaling interests in 14 countries.
In July Alliance UniChem reached an agreement to acquire the UK short-line
pharmaceutical wholesale business of Cardinal Health for approximately #43
million. The business, which operates under a number of trading names,
generated sales of #205 million in the year ended 30 June 2005 and employs
around 440 people. This transaction, which is conditional upon receiving
regulatory approval, is expected to be completed by the end of the year.
During the first half of 2006 Alliance UniChem also added a net 15 pharmacies to
its portfolio. This brought Alliance UniChem's retail portfolio to 1,303
pharmacies at 30 June 2006, including 123 operated by associates.
Divisional highlights
for the six months ended 30 June 2006
Growth over first
half of last year
Operating Operating
Revenue profit* Revenue profit*
#million #million % %
Wholesale - Northern Europe 1,552.9 49.3 +9.0 +9.6
- Southern Europe 2,922.3 35.1 -2.5 +0.6
Intra-segment (34.6) - n/a -
Wholesale 4,440.6 84.4 +0.9 +5.6
Retail 706.5 62.2 +11.5 +16.7
Corporate - (10.8) - n/a
Intra-group (428.4) - n/a -
Group 4,718.7 135.8 +2.2 +11.4
Share of associates' revenue and
operating profit 1,068.0 33.6 +15.1 +9.8
Total 5,786.7 169.4 +4.3 +11.1
* Operating profit for the Group comprises profit from operations before share of
associates' post tax earnings and exceptional items as classified by Alliance UniChem (comprising
costs in relation to the merger, profit on disposal of businesses and profit on disposal of
investments)
Wholesale
Alliance UniChem's wholesale division performed well in the first half of the
year.
Revenue totalled #4,440.6 million, an increase of 0.9% on the first half of last
year, operating profits increasing by 5.6% to #84.4 million. Overall operating
margins increased by eight basis points. Adjusting for acquisitions and
disposals, on a constant currency basis, like for like sales increased by 1.4%,
like for like operating profits increased by 9.0% and like for like operating
margins increased by 13 basis points.
Wholesale - Northern Europe
Operating profit in the Northern Europe geographical area of Alliance UniChem's
wholesale division totalled #49.3 million, an increase of 9.6% on the first half
of last year, on revenue up 9.0% to #1,552.9 million. Operating margins
increased by one basis point to 3.17%. Adjusting for acquisitions and
disposals, on a constant currency basis, like for like sales increased by 4.9%,
like for like operating profits increased by 8.2% and like for like operating
margins increased by ten basis points.
In the UK revenue increased by 2.1% to #912.1 million, like for like sales
increasing by the same percentage, sales growth being held back by the loss of a
large customer following its purchase by a competitor. This compared to a
market which Alliance UniChem estimated increased in value by around 2.5%,
growth being higher than the full year forecast previously published due to the
timing of regulatory changes.
During the first half of the year a minor restructuring was carried out,
principally in the UK wholesale head office at Chessington where headcount was
reduced by 14%. This has led to greater efficiencies, functional best practice
and an even greater focus on core activities within the business.
The continued growth of "Almus", the Group's exclusive range of generic drugs,
is providing sourcing benefits aimed at offsetting the impact of patent
expiries. Sales volumes were up by nearly 30% compared to the first half of
last year, the Almus range in the UK comprising around 150 products at 30 June
2006. Alliance UniChem's full year forecast for market growth in the UK in
value terms in 2006 is around 2%, which is higher than previously forecast due
to delays in certain generic product availability following patent expiries.
In The Netherlands revenue increased by 10.8% to #358.3 million, sales
increasing by 10.4% on a like for like constant currency basis. This compares
to a market which Alliance UniChem estimated grew in value by around 6.5%. The
development of the Kring branded virtual chain of pharmacies operated by
independent customers and Alliance Apotheek, our own pharmacy chain, has
continued during the first half of the year. Just under 300 pharmacies are now
members of the Kring programme. A customer loyalty card programme will be
introduced in Kring in the autumn. Operating profits increased on the first
half of last year due to enhanced trading activities, while margins declined as
a result of higher customer discounts. Alliance UniChem's full year forecast
for market growth in The Netherlands in 2006 in value terms is around 6%.
In the Czech Republic revenue increased by 18.5% to #124.9 million, sales
increasing by 12.2% on a constant currency basis compared to a market which
Alliance UniChem estimated declined by around 1%. The market was weaker than
Alliance UniChem had previously forecast due to further action by the Ministry
of Health to cap total healthcare expenditure on prescriptions which caused
uncertainty amongst doctors as to what quantity of drugs they could prescribe.
Further market share gains were made in the independent retail pharmacy sector,
reflecting the business's strong positioning in this part of the market. Market
share in the hospital sector also recovered. Operating margins and profits
increased in the business due to the increase in sales and tight cost control.
Alliance UniChem's full year forecast for market growth in the Czech Republic in
value terms in 2006 is around 3%, expected growth being higher in the second
half of the year mainly due to an increase in the cap on prescription
expenditure.
In Norway revenue increased by 7.7% to #110.3 million, sales increasing by 4.9%
on a constant currency basis which compares to a market which Alliance UniChem
estimated grew in value by around 3%. Increased synergies from running the
Norwegian retail and wholesale businesses more closely resulted in higher gross
margins, costs being held at the same level as in the first half of last year.
These factors led to increased operating margins and profits. Alliance
UniChem's full year forecast for market growth in Norway in value terms in 2006
remains unchanged at around 4%.
In Russia revenue totalled #47.3 million from the date of acquisition in late
March, sales in the second quarter increasing by 34% compared with the second
quarter of last year. Market growth compared with the second quarter of last
year is estimated by Alliance UniChem to be around 12%. The head office and
adjacent warehouses of Apteka are in the process of being relocated to larger,
more modern facilities in Moscow. This will enable the business to increase
productivity and provide extra capacity to meet increasing demand for medicines.
Operating margins were lower by comparison to other Alliance UniChem
businesses in Northern Europe reflecting local market conditions.
Wholesale - Southern Europe
Operating profit in the Southern Europe geographical area of Alliance UniChem's
wholesale division totalled #35.1 million, an increase of 0.6% on the first half
of last year on revenue down 2.5% to #2,922.3 million. Operating margins
increased by four basis points to 1.20%. Adjusting for acquisitions and
disposals, including Alliance Farmaceutica in Portugal as an associate from the
end of June 2005, on a constant currency basis like for like sales increased by
0.1%, like for like operating profit increased by 10.2% and like for like
margins increased by 11 basis points.
In France revenue decreased by 0.2% to #1,904.5 million. Sales declined by 0.2%
on a like for like constant currency basis which was lower than Alliance
UniChem's estimate of market growth of around 0.5% in the wholesaling sector.
Alliance UniChem estimated that the total market grew in value by around 3%, the
proportion of products which manufacturers sell and distribute direct to
pharmacies continuing to increase other than for generics where
wholesalers are winning market share.
As previously highlighted, regulatory changes were implemented in the first
quarter of the year which targeted a reduction in overall healthcare expenditure
of approximately #3.7 billion over a three year forward period on a cumulative
basis. The pharmaceutical wholesaling market is being impacted by a 15 - 19%
reduction in the price of all generics and branded pharmaceuticals for which a
generic exists, the delisting of products, lower reimbursement rates for certain
products and larger pack sizes with lower percentage margins. Other than the
larger pack sizes, these measures have now all been implemented. As a result,
Alliance UniChem's full year forecast for market growth in France in value terms
in 2006 will be around 1%, which is lower than previously anticipated as some of
these price reductions were implemented earlier than expected.
In January 2006 the French government implemented a new law which limits the
amount of "off invoice" discounts that businesses can give to customers. The
effect of this general law on the pharmaceutical industry has been to cap
unofficial discounts manufacturers give to pharmacies on direct sales at a
maximum of 20% of the invoice net price. This has held back the rate of growth
in direct sales with direct sales of generics declining during the period.
Direct sales are continuing to play an increasing role in the French market. To
counter the increase of direct sales, a number of actions have been taken
including the roll out of a more competitive generics offer developed in
partnership with key suppliers and the launch in France in April of "Almus",
Alliance UniChem's exclusive range of generic drugs. As a result, generics
sales increased by over 20% on the first half of last year at a time when growth
in the generic share of the total market was modest. New commercial terms were
introduced which are designed to incentivise customers to buy a greater
proportion of their requirements from their full line wholesaler while giving
the wholesaler a better margin mix and thus enabling the business to be more
competitive when compared to direct sales offerings. During the first half a
number of additional services were offered to pharmacy members of the Alphega
virtual chain, including the development of the Alphega buying platform. Other
actions included the continuous development of services offered to
manufacturers, including pre-wholesaling, transfer order facilities and contract
sales forces.
Like for like operating profit in France increased mainly as a result of gross
margin improvements. As the impact of the various regulatory changes has become
clearer, a review has been carried out to determine what changes should be made
to the services offered to customers to ensure that the business remains
competitive at a time of relatively modest market growth. This review, which is
in the process of being finalised, is likely to result in some restructuring of
the warehouse and distribution network which may commence in the latter part of
the year.
In Italy revenue increased by 3.7% to #481.5 million, sales increasing by 1.7%
on a like for like constant currency basis. This compares with a market which
Alliance UniChem estimated increased by around 4.5% in value. Operating margins
and profits were lower than in the first half of last year mainly as a result of
strong competition in certain regions. Good progress continues to be made in
establishing the virtual chain of pharmacies in Italy. By the half year end 143
pharmacies had joined, with a further 60 signed up to join shortly. In May "
Almus" was also launched in the Italian market which was ahead of schedule.
During the first half of the year one new depot was opened, replacing two
existing depots in the same region. These changes are part of an ongoing
programme to improve efficiency and enhance our commercial offering.
At the end of June the Italian government put forward to parliament a bill
containing various regulations relating to the distribution and pricing of drugs
and the ownership and operation of retail pharmacies. This potentially could
result in some withdrawal of restrictions on the ownership of retail pharmacies.
Alliance UniChem's full year forecast for market growth in Italy in value
terms in 2006 is around 2.5%, growth in the second half of the year being
expected to be much lower due to further price cuts in July.
In Spain total revenue increased by 23.2% to #534.7 million, a decrease of 0.4%
on a like for like constant currency basis. This compares with a market which
Alliance UniChem estimated grew by around 5.5% in value, Alliance UniChem's
growth being lower mainly due to aggressive local competition from wholesalers
seeking to compensate for lower export profit opportunities. Overall, operating
margins and profits increased compared to the first half of last year on a like
for like basis, mainly as a result of improved domestic gross margins. During
the half year the integration of Farmacen and CERFC was largely completed, two
depots being closed, common IT systems being introduced and administration
centralised. Alliance UniChem continues to work closely with a number of major
manufacturers to develop a range of specific services in Spain designed to meet
their respective objectives. Alliance UniChem's full year forecast for market
growth in Spain in value terms in 2006 is around 1.5%, the market being expected
to decline in the second half of the year mainly due to the full impact of price
reductions in the first half of the year. In July the new "Medicine Act" was
approved by parliament. This comprehensive act contains a number of measures
relating to the distribution and pricing of medicines as previously reported.
Wholesale revenue of #1.6 million in Portugal was from Alliance UniChem's wholly
owned Portuguese Alloga business.
Retail
Alliance UniChem's retail pharmacy division continued to perform strongly during
the first half of the year. Revenues totalled #706.5 million, an increase of
11.5% on the first half of last year, operating profits increasing by 16.7% to
#62.2 million. Operating margins increased by 39 basis points to 8.80% as a
result of further improvements in Norway and The Netherlands. On a constant
currency basis, revenue increased by 11.0% and operating profits by 16.5%, like
for like sales increasing by 4.5%.
In the UK revenue increased by 12.2% to #499.2 million. Like for like sales
increased by 5.8% in value compared to a market which Alliance UniChem estimated
grew by around 3.5%. Total National Health Service income increased by 13.0%,
total dispensing volume increasing by 9.2%. This compares with a prescription
market which Alliance UniChem estimated grew in volume terms by around 4.5%.
Operating margins were in line with the first half of last year, increased gross
margins from further growth in income from patient and manufacturer services
being offset by higher pharmacy and head office payroll costs which were mainly
for administering these services.
Increased patient service income resulted from the pharmacy contract in England
and Wales which began in April 2005 and introduced a change in remuneration from
purely dispensing based fees to include remuneration for Essential and Advanced
services. The principal Advanced service has continued to be Medicine Use
Reviews designed to help patients use medicines more effectively and improve the
clinical and cost effectiveness of prescribed medicines. During the first half
of the year, Alliance Pharmacy carried out approximately 25,400 Medicine Use
Reviews in England and Wales which equates to around 35 per pharmacy. This
compared with just over 9,000 reviews in the last nine months of 2005 following
their introduction in April 2005. The Department of Health raised the upper
limit for the provision of this service in England from the beginning of January
2006 from 200 to 250 reviews per pharmacy per annum.
The new contract for Scotland which came into effect in April 2006 is being
introduced in phases as previously expected but is formulated differently to the
one for England and Wales. The contract in Scotland, when fully implemented,
will comprise four services. The Minor Ailment Service which became fully
operational at the beginning of July enables patients who do not pay for
prescriptions and who have registered at their community pharmacy for this
service to have common minor ailments treated by their pharmacist with a
prescription for OTC medicines on the National Health Service without the need
for them to visit their doctor. Up until the end of June Alliance Pharmacy,
which has 166 pharmacies in Scotland, had just under 45,000 patients registered
with them for this service. Funding is in the form of a fee per pharmacy based
on the number of registered patients. Additional funding is also paid on an
annual fee basis for a Public Health Service. The additional two services,
which are expected to be introduced possibly some time next year, are an Acute
Medication Service for the dispensing of acute prescriptions and a Chronic
Medication Service comprising medicine use reviews. No date for implementation
of a new contract in Northern Ireland has yet been announced although
negotiations over this contract have now commenced.
Four central dispensaries were opened by Alliance Pharmacy in the UK in the
first half of the year bringing the total to 12 at 30 June 2006, three of which
dispense high volumes of acute and repeat prescriptions in a highly efficient
way to local pharmacies. The changes being introduced by the Department of
Health, including the introduction of electronic prescriptions, mean that
Alliance UniChem sees an increasing role for such central dispensaries over the
coming years, thereby freeing up community-based pharmacists to spend an
increasing proportion of time providing services and advice to their patients,
in addition to dispensing acute prescriptions.
In addition during the first half of the year Alliance Pharmacy established
three pilot sites to test the introduction of electronic prescriptions. This
links with the new dispensing systems which were installed in a further 251
pharmacies during the first half of the year, bringing the total to 294 with the
new software at 30 June 2006. Full roll out of this NHS funded programme is on
schedule for completion by the end of 2006. The National Health Service is
planning for electronic prescriptions to be fully operational across all
pharmacies in England by the end of 2007, the introduction being planned in
phases. The initial service, which Alliance Pharmacy intends to have approved
and deployed into all its pharmacies in England in the second half of this
year, will enable pharmacies to scan barcodes on paper prescriptions printed by
doctors. This service, coupled with smart cards issued by Primary Care Trusts
to individual pharmacists who are registered users of the new system, will
enable pharmacies to claim an allowance of #200 per month for running the
system. Once the vast majority of doctors and pharmacies have the new system
operational, printed bar-coded prescriptions will be superseded by
electronically transferred prescriptions from the doctor to the patient's
nominated pharmacy.
During the first half of the year, nine pharmacies were refitted, seven of which
included consultation areas for the first time, and nine were relocated, of
which two were into health centre developments. This refit programme has been
put on hold temporarily while further retail format development work is carried
out to refine the community pharmacy concept. Private consultation areas were
installed into a further 62 pharmacies on a standalone basis, the number of
pharmacies with private consultation areas totalling 581 at 30 June 2006. A net
ten pharmacies were added in the first half, of which one was a new opening in
Blyth, Northumberland where the licence was granted on the basis that the
pharmacy operates for a minimum of 100 hours per week. The total UK chain, as
at 30 June 2006, comprised 964 pharmacies and 52 other healthcare related retail
outlets.
Alliance UniChem's full year forecast for retail pharmacy market growth in value
terms in the UK in 2006 is around 4% which is unchanged from its previously
published forecast.
In Norway revenue increased by 8.4% to #128.0 million, an increase of 5.6% on a
constant currency basis. Like for like constant currency sales increased by
1.0%. This compares with a market which Alliance UniChem estimated grew in
value by around 4%. The total number of pharmacies in Norway has continued to
increase, newer openings taking market share from existing outlets. During the
first half of the year three pharmacies were opened and four relocated, which
brought the pharmacy chain to 123 at 30 June 2006. In addition, four pharmacies
were refitted and a further two retail outlets which sell specialist surgical
products were acquired, bringing the total number of other healthcare related
retail outlets to seven. In March Alliance Apotek's hard work and dedication to
customer service was recognised once again as it was voted the top pharmacy
chain in Norway in a national customer loyalty survey by the Norwegian School of
Management for the second year running.
Operating margins and profits increased compared to the first half of last year
as a result of a further strengthening of commercial activities and increasing
synergies from running the retail and wholesale businesses together. Alliance
UniChem's full year forecast for retail pharmacy market growth in Norway in
value terms in 2006 is around 4.5%.
In The Netherlands revenue increased by 14.7% to #67.1 million, an increase of
14.9% on a constant currency basis. Like for like constant currency sales
increased by 2.7%. This compares with a market which we estimate grew in value
by around 6.5%. The total number of pharmacies in The Netherlands continued to
increase. During the first half of the year two pharmacies were acquired and
one relocated, taking the chain size to 73 at 30 June 2006. Operating margins
increased compared to the first half of last year, mainly as a result of
improved gross margins. Alliance UniChem's full year forecast for retail
pharmacy market growth in The Netherlands in value terms in 2006 is around 4%.
In Italy revenue increased by 0.8% to #12.2 million, like for like sales
increasing by 0.8% on a constant currency basis. This compares with a national
market which Alliance UniChem estimated increased in value by around 3%, growth
in the regions in which Alliance UniChem's pharmacies operate being estimated to
be more in line with the growth in like for like sales. No pharmacies were
acquired during the first half of the year, leaving a total of 28 at 30 June
2006, including eight in associate businesses. During the first half of the
year one pharmacy was refitted. Operating profit was lower than in the first
half of last year due to lower gross margins following various regulatory
changes. Alliance UniChem's full year forecast for retail pharmacy market
growth in Italy in value terms in 2006 is around 2.5%.
Through other associate retail businesses, Alliance UniChem operated 123
pharmacies and five other healthcare related retail outlets at 30 June 2006, the
net number of pharmacies being the same as at the beginning of the year.
Corporate
Alliance UniChem's corporate costs totalled #10.8 million, a #0.5 million
decrease on the first half of last year due to a lower level of non-recurring
costs.
Associates
Overall performance from Alliance UniChem's associate businesses continued to be
strong throughout the first half of the year.
Alliance UniChem's share of associates' post tax earnings was #22.7 million, a
20.1% increase on the first half of last year, its share of profits from
operations increasing by 9.8% to #33.6 million and its share of revenue by 15.1%
to #1,068.0 million. Adjusting for changes in associate interests, including
Alliance Farmaceutica in Portugal as an associate from the end of June 2005,on a
constant currency basis like for like earnings increased by 9.1%, like for like
operating profits by 2.3% and like for like revenues by 5.5%. The underlying
tax rate on associates' earnings was 21.2%, a decrease of 12.1 percentage points
on the first half of last year. This was mainly due to a retrospective
reduction in the Turkish corporate tax rate from 30% to 20% from 1 January 2006
which favourably impacted Hedef Alliance's earnings by around #1.5 million, this
being offset by a corresponding increase in the Group's UK deferred tax charge
in respect of unremitted associate's earnings taxed at below the standard UK tax
rate.
Hedef Alliance contributed #12.2 million to Alliance UniChem's earnings, an
increase of 13.6% on the first half of last year on a constant currency basis.
Excluding the reduction in the Turkish corporate tax rate, underlying earnings
were at the same level as in the first half of last year, higher sales and the
benefit of having no inflation accounting monetary loss adjustment being offset
by increased interest costs mainly due to higher trade debtor levels. During
the first half there was a net reduction of one depot in Turkey, bringing the
total number of depots at the half year end to 98, of which 67 are satellites.
In April Hedef Alliance exercised its option to acquire control and majority
ownership of its associate, UCP in Egypt.
Alliance UniChem's share of earnings from associates other than Hedef increased
by 25.0% in total to #10.5 million. These include its share of earnings from
Galenica in Switzerland and ANZAG in Germany, both of which are quoted
companies, and its wholesale associate in Portugal. Adjusting for changes in
associate interests, on a constant currency basis like for like earnings from
these other associates increased by 3.6%. In June, ANZAG acquired 60% of
Farmexpert, the third largest pharmaceutical wholesaler in Romania.
Exceptional items
Exceptional items, which are items classified by Alliance UniChem as exceptional
in nature, totalled #4.1 million of charges net of tax, compared to #14.1
million of net gains after tax in the first half of last year. In the first
half the exceptional items related to costs associated with Alliance UniChem's
merger with Boots. In the first half of the previous year the exceptional items
related to profits on disposal of businesses and investments.
Net finance costs
Alliance UniChem's net finance costs were #23.0 million in the first half of
2006. Excluding IAS 39 timing differences from hedging interest rate and
currency exposures (comprising
#1.3 million of losses which were mainly due to the weakening of the US Dollar
versus the Euro), underlying net finance costs were #21.7 million, a 19.2%
increase on the comparable figure for the first half of last year. The
underlying increase was almost all due to higher Euro interest rates. Interest
cover, which Alliance UniChem defines as operating profit before exceptional
items divided by underlying net finance costs, was 6.3 times, compared to 6.7
times in the first half of last year.
Tax
Alliance UniChem's underlying rate of tax, defined as the underlying tax charge
(i.e. excluding tax on exceptional items and IAS 39 timing differences),
expressed as a percentage of operating profit net of underlying net finance
costs, was 31.6%. This was 1.4 percentage points lower than in the first half
of last year, mainly as a result of recognition of foreign tax credits. This
was partially offset by an increase in Alliance UniChem's deferred tax charge in
respect of unremitted associates' earnings from Hedef Alliance following the
reduction in the Turkish corporate tax rate where there is a compensatory
benefit in the associates' results.
Cash flow
Alliance UniChem has continued its well established track record of generating
free cash flow to fund investment in growth.
Net cash generated by operations was #222.4 million compared to #48.5 million in
the first half of last year. Working capital net inflow was #79.6 million,
which compares with an outflow of #93.3 million in the first half of last year.
#54.2 million of this relative improvement was a timing difference on UK
prescription receipts, as a result of 1 July falling on a weekend this year in
which case the payment is made on the previous working day. Adjusting for this
timing difference, underlying year on year trade working capital efficiency
improvements, on a 30 June balance sheet basis, totalled approximately
#80 million.
Cash inflow from lower inventories in the first half was #13.1 million,
inventory levels at 30 June increasing year on year by 0.6 days. Cash inflow
from lower receivables was #54.0 million, trade receivables at 30 June reducing
year on year by 4.3 days, of which 1.9 days was the timing difference in UK
prescription receipts. Cash inflow from higher payables was #12.5 million,
trade payable days increasing year on year by 1.0 day.
The net cash outflow on acquisitions and disposals of businesses and associates
was
#52.0 million, including #13.8 million of borrowings acquired with businesses.
The principal cash outflow within this net number was #29.0 million, including
borrowings acquired and expenses, for the acquisition of a 96% controlling stake
in the parent company of Apteka Holding ZAO, the fifth largest pharmaceutical
wholesaler in Russia.
Net capital expenditure was #33.3 million of which #23.4 million was for growth
and efficiency projects. These included investment in wholesale and retail
systems, and relocating, re-fitting and upgrading of retail pharmacies.
Other investments (net) of #20.8 million mainly comprised #22.1 million of net
expenditure on acquiring shares in Alliance UniChem Plc for the 1992 Employee
Trust.
Shareholders' equity
Alliance UniChem shareholders' equity at 30 June 2006 totalled #1,199.3 million,
compared to #1,173.8 million at the end of last year and #1,114.4 million at 30
June 2005.
Financial position
At 30 June 2006 net borrowings (which Alliance UniChem defines as borrowings,
net of cash and cash equivalents and derivative financial instruments) were
#752.4 million, which was #27.2 million lower than at the beginning of the year.
Pensions
Alliance UniChem's total retirement benefit obligations, before tax adjustments,
at 30 June 2006 were #39.9 million compared to #69.1 million at 31 December
2005. The decrease in the gross obligations is principally due to increases in
both long dated bond yields used to discount estimates of future pension
obligations and contributions to the scheme. The total pension charge against
profit before tax (excluding associates) was #9.3 million, an increase of #1.1
million on the first half of last year.
Group income statement
for the six months ended 30 June 2006
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31 December
Note #million #million #million
Revenue including share of associates' revenue 5,786.7 5,547.1 11,136.5
Less: share of associates' revenue (1,068.0) (927.8) (1,965.3)
Revenue 3 4,718.7 4,619.3 9,171.2
Operating profit including share of associates' operating profit 169.4 152.5 331.8
Less: share of associates' operating profit (33.6) (30.6) (70.8)
Operating profit 135.8 121.9 261.0
Costs in relation to the merger (4.9) - (3.8)
Share of associates' post tax earnings 4 22.7 18.9 45.3
Profit on disposal of businesses 5 - 9.1 7.8
Profit on disposal of investments 6 - 2.1 2.1
Profit from operations 3 153.6 152.0 312.4
Finance income 4.9 8.2 13.2
Finance costs (27.9) (22.9) (46.7)
Profit before tax 130.6 137.3 278.9
Tax 7 (34.8) (32.4) (67.6)
Profit for the period 95.8 104.9 211.3
Attributable to:
Equity shareholders 95.5 104.6 210.7
Minority interests 0.3 0.3 0.6
95.8 104.9 211.3
Earnings per share 8
Basic 26.9p 29.3p 58.9p
Diluted 26.6p 29.0p 58.3p
Dividends per share - 6.9p 20.5p
All activities relate to continuing operations.
Group statement of recognised income and expense
for the six months ended 30 June 2006
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31 December
#million #million #million
Currency net investments
- currency translation differences (17.1) 1.6 (5.8)
- related deferred tax credit - 0.2 -
- currency translation differences on minority interests - (0.5) (0.1)
Defined benefit pension schemes
- actuarial gain/(loss) 16.7 (18.2) (18.8)
- related deferred tax (charge)/credit (5.5) 5.6 6.0
Net gains on cash flow and net investment hedges
- fair value change deferred in equity 0.5 (3.2) 15.3
- related deferred tax (charge)/credit (0.4) 0.2 0.3
- transferred to income statement (net of tax) 1.2 2.4 4.9
Available-for-sale investments
- (losses)/gains on revaluation deferred in equity (4.9) 5.3 9.7
- related deferred tax credit/(charge) 0.4 (0.8) (0.8)
- transferred to income statement - (2.1) (2.1)
Income and expense recognised directly in equity (9.1) (9.5) 8.6
Profit for the period 95.8 104.9 211.3
Total recognised income and expense for the period 86.7 95.4 219.9
Attributable to:
Equity shareholders 86.4 95.6 219.4
Minority interests 0.3 (0.2) 0.5
86.7 95.4 219.9
Reconciliation of movements in total equity
for the six months ended 30 June 2006
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31 December
#million #million #million
At 1 January 1,184.8 1,038.7 1,038.7
Total recognised income and expense for the period 86.7 95.4 219.9
Share-based compensation
- charged to income statement 2.5 1.8 5.3
- related deferred tax credit 2.8 0.3 -
Utilisation of accrual for long-term incentive plan - 0.3 -
Dividends paid (48.7) (43.5) (68.7)
Shares issued
- share options exercised - 0.8 2.1
- dividends - 22.0 22.0
Fair value of option to acquire minority interests - - (4.3)
Exercise of option to acquire minority interests 4.3 - -
Net (cost)/proceeds of own shares (purchased)/sold (22.1) 8.7 (30.6)
Minority interests acquired (0.5) - -
Minority interests in businesses acquired 0.2 0.4 0.4
Net currency translation recycled on business disposals - 0.1 -
At end of period 1,210.0 1,125.0 1,184.8
Group balance sheet
as at 30 June 2006
2006 2005 2005
30 June 30 June 31
December
#million #million #million
Assets
Non-current assets
Goodwill 257.9 218.5 232.1
Intangible assets 830.1 802.5 819.3
Property, plant and equipment 356.8 324.0 350.0
Investments in associates 391.1 348.9 394.5
Available-for-sale investments 42.9 43.2 48.4
Deferred tax assets 0.7 20.2 9.2
Trade and other receivables 26.9 23.5 27.2
Derivative financial instruments 0.3 - 3.5
1,906.7 1,780.8 1,884.2
Current assets
Inventories 699.2 639.3 670.5
Trade and other receivables 1,410.4 1,416.7 1,424.7
Cash and cash equivalents 339.6 104.1 133.5
Derivative financial instruments 2.0 - 0.6
2,451.2 2,160.1 2,229.3
Non-current assets classified as held for sale - 11.7 -
Total assets 4,357.9 3,952.6 4,113.5
Liabilities
Current liabilities
Financial liabilities
- borrowings (231.7) (204.2) (216.4)
- financing linked to securitisation (393.7) (285.7) (289.4)
Derivative financial instruments (13.1) - (12.2)
Trade and other payables (1,446.6) (1,303.1) (1,383.5)
Current corporate tax liabilities (46.0) (38.6) (42.6)
(2,131.1) (1,831.6) (1,944.1)
Net current assets 320.1 328.5 285.2
Non-current liabilities
Financial liabilities
- borrowings (728.0) (606.3) (605.2)
- financing linked to securitisation - (101.0) (103.3)
Derivative financial instruments (121.5) (89.8) (83.4)
Deferred tax liabilities (127.4) (124.5) (123.6)
Retirement benefit obligations (39.9) (68.9) (69.1)
(1,016.8) (990.5) (984.6)
Liabilities directly associated with non-current - (5.5) -
assets classified as held for sale
Net assets 1,210.0 1,125.0 1,184.8
Equity
Share capital 36.2 36.1 36.2
Share premium 509.4 508.2 509.4
Employee share trusts (63.3) (5.7) (45.1)
Retained earnings 707.8 563.4 648.1
Translation reserve (14.4) 10.3 2.7
Hedging reserve 15.1 (7.3) 13.8
Available-for-sale revaluation reserve 5.8 5.9 10.3
Other reserves 2.7 3.5 (1.6)
Shareholders' equity 1,199.3 1,114.4 1,173.8
Minority interests 10.7 10.6 11.0
Total equity 1,210.0 1,125.0 1,184.8
Group cash flow statement
for the six months ended 30 June 2006
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31
December
Note #million #million #million
Cash generated by operations 9a 222.4 48.5 275.1
Tax paid (24.9) (25.4) (59.2)
Interest paid (25.0) (21.2) (45.2)
Net cash from operating activities 172.5 1.9 170.7
Net cash (used in)/from investing activities 9b (61.3) 34.6 (45.1)
Net cash from/(used in) financing activities 9c 72.8 (89.2) (162.2)
Net increase/(decrease) in cash and cash equivalents in the 184.0 (52.7) (36.6)
period
Cash and cash equivalents at 1 January (10.8) 19.8 19.8
Currency translation differences (0.5) 4.9 6.0
Cash and cash equivalents at end of period 172.7 (28.0) (10.8)
Set out below is a reconciliation of the net increase/(decrease) in cash and
cash equivalents to the (increase)/decrease in net borrowings. Net borrowings
are defined by the Group as borrowings net of cash and cash equivalents and
derivative financial instruments.
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31 December
Note #million #million #million
Increase/(decrease) in cash and cash equivalents 184.0 (52.7) (36.6)
Cash and cash equivalents (inflow)/outflow from (increase)/ 10 (142.9) 77.7 87.0
decrease in debt and lease financing
Decrease in net borrowings resulting from cash flows 41.1 25.0 50.4
Borrowings acquired with businesses (13.8) (38.8) (38.8)
27.3 (13.8) 11.6
Currency translation differences and fair value adjustments on (0.1) 45.7 36.9
financial instruments
Decrease in net borrowings in the period 27.2 31.9 48.5
Net borrowings at 1 January (779.6) (828.1) (828.1)
Net borrowings at end of period 11 (752.4) (796.2) (779.6)
Notes to the financial information
for the six months ended 30 June 2006
(1) BASIS OF PREPARATION
The interim financial information of Alliance UniChem Plc was approved by the
directors of Alliance UniChem Plc and Alliance Boots plc on 31 July 2006. This
information has been prepared on the same basis as that included in the Alliance
UniChem Plc 2005 Annual Report. As stated in the Prospectus issued by Boots
Group PLC to its shareholders on 5 June 2006, the accounting policies of
Alliance UniChem Plc are not significantly different from those in the Annual
Report of Boots Group PLC for the year ended 31 March 2006. The interim
financial information does not include costs incurred after 30 June 2006 that
only crystallised on completion of the merger between Boots Group PLC and
Alliance UniChem Plc.
The interim financial information of Alliance UniChem Plc does not constitute
statutory accounts as defined in section 240 Companies Act 1985. The
comparative figures for the year ended 31 December 2005 are not statutory
financial statements for that financial year but have been extracted from them.
The statutory financial statements for the year ended 31 December 2005, which
received an unqualified audit report from the Group's auditors and did not
include a statement under section 237(2) or (3) of the Companies Act 1985, have
been filed with the Registrar of Companies.
(2) EXCHANGE RATES
The significant exchange rates relative to Sterling used in the preparation of
the financial statements are as follows:
Average Period end
2006 2005 2005
Six months Six months Year to 2006 2005 2005
to 30 June to 30 June 31 December 30 June 30 June 31 December
Euro 1.455 1.453 1.460 1.447 1.481 1.452
Czech Koruna 41.48 43.78 43.63 41.27 44.51 42.27
Norwegian Kroner 11.55 11.86 11.71 11.51 11.72 11.60
Swiss Franc 2.274 2.242 2.260 2.266 2.296 2.260
Turkish Lira 2.445 2.938 2.394 2.320
US Dollar 1.781 1.889 1.830 1.850 1.793 1.719
(3) SEGMENTAL ANALYSIS - PRIMARY SEGMENTS
Revenue Profit from operations
2006 2005 2005 2006 2005 2005
Six months Six months Year to Six months Six months Year to
to 30 June to 30 June 31 December to 30 June to 30 June 31
December
#million #million #million #million #million #million
Wholesale - before profit on 4,440.6 4,400.8 8,687.3 84.4 79.9 169.6
disposal of businesses
- profit on - - - - 4.6 2.9
disposal of businesses
Wholesale 4,440.6 4,400.8 8,687.3 84.4 84.5 172.5
Retail - before profit 706.5 633.7 1,337.3 62.2 53.3 112.9
on disposal of businesses
- profit on - - - - - 0.4
disposal of businesses
Retail 706.5 633.7 1,337.3 62.2 53.3 113.3
Corporate - before costs in - - (10.8)
relation to merger
- (11.3) (21.5)
- costs in relation
to the merger - - - (4.9) - (3.8)
Corporate - - - (15.7) (11.3) (25.3)
Intra-group (428.4) (415.2) (853.4) - - -
Share of associates' post tax - - 22.7 18.9 45.3
earnings
Profit on disposal of associate - - - 4.5 4.5
businesses
Profit on disposal of investments - - - 2.1 2.1
4,718.7 4,619.3 9,171.2 153.6 152.0 312.4
(4) ASSOCIATES
An analysis of the Group's share of associates' post tax earnings is shown
below:
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31 December
#million #million #million
Profit from operations 33.6 30.6 70.8
Finance income - 0.3 0.8
Finance costs (4.3) (2.7) (6.6)
Tax (6.2) (9.4) (19.8)
Minority interests (0.4) 0.1 0.1
22.7 18.9 45.3
(5) PROFIT ON DISPOSAL OF BUSINESSES
The profit on disposal of businesses for the year ended 31 December 2005 related
to the disposal of the Group's 50% direct interest in the ordinary share capital
of GaleniCare S.A., its 20% direct interest in the Swiss part of Alloga S.A.,
51% of its interest in Alliance UniChem Farmaceutica S.A. and a number of minor
interests. The net profit on these disposals was #7.8 million before tax.
(6) PROFIT ON DISPOSAL OF INVESTMENTS
The profit on disposal of investments for the year ended 31 December 2005
related to the Group's investment in Sanacorp Pharmahandel A.G..
(7) TAX
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31 December
#million #million #million
UK corporation tax 13.1 17.6 31.8
Overseas tax 14.2 14.5 30.7
Deferred tax 7.5 0.3 5.1
34.8 32.4 67.6
The underlying tax charge, calculated before exceptional items as classified by
Alliance UniChem (comprising costs in relation to the merger, profit on disposal
of businesses and profit on disposal of investments) and IAS 39 timing
differences from hedging interest rate and currency exposures, reconciles to the
tax charge in the period as follows:
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31 December
#million #million #million
Underlying tax 36.0 34.2 69.7
Tax on
- exceptional items (0.8) (2.9) (3.0)
- IAS 39 timing differences (0.4) 1.1 0.9
34.8 32.4 67.6
(8) EARNINGS PER SHARE
Earnings per share is calculated by dividing the profit attributable to equity
shareholders by the weighted average number of shares in issue during the
period. Diluted earnings per share is calculated by dividing the profit
attributable to equity shareholders by the weighted average number of shares in
issue added to the dilutive potential shares assuming they had all converted to
issued shares at the beginning of the period.
2006 2005
Profit Weighted Earnings Profit six Weighted Earnings
average months average
six months number per number per share
to 30 June share six to 30 June
of shares months to of shares six months
30 June
six months six months to 30 June
to 30 June to 30 June
#million million pence #million million pence
Basic 95.5 354.7 26.9 104.6 356.7 29.3
Potentially dilutive share - 4.9 (0.3) - 4.1 (0.3)
options
Diluted 95.5 359.6 26.6 104.6 360.8 29.0
To assist investors in understanding the underlying performance, adjusted
earnings per share amounts are calculated excluding exceptional items as
classified by Alliance UniChem (comprising costs in relation to the merger,
profit on disposal of businesses and profit on disposal of investments) and IAS
39 timing differences from hedging interest rate and currency exposures as
follows:
2006 2005
Profit Weighted Earnings Profit six Weighted Earnings
average months average
six months number per number per share
to 30 June share six to 30 June
of shares months to of shares six months
30 June
six months six months to 30 June
to 30 June to 30 June
#million million pence #million million pence
Basic 95.5 354.7 26.9 104.6 356.7 29.3
Exceptional items net of tax 4.1 - 1.1 (14.1) - (3.9)
IAS 39 timing differences 0.9 - 0.3 (2.4) - (0.7)
net of tax
Adjusted basic 100.5 354.7 28.3 88.1 356.7 24.7
Potentially dilutive share - 4.9 (0.4) - 4.1 (0.3)
options
Adjusted diluted 100.5 359.6 27.9 88.1 360.8 24.4
(9) Cash flow STATEMENT
2006 2005 2005
Six months Six months Year to
(a) Cash generated by operations to 30 June to 30 June 31 December
#million #million #million
Continuing operations
Profit from operations 153.6 152.0 312.4
Share of associates' post tax earnings (22.7) (18.9) (45.3)
Profit on disposal of businesses - (9.1) (7.8)
Profit on disposal of investments - (2.1) (2.1)
Depreciation and amortisation 22.5 21.6 41.6
Share-based compensation charge 2.5 1.8 5.3
Profit on disposal of property, plant and equipment - (0.9) (1.0)
Decrease in inventories 13.1 31.9 17.3
Decrease/(increase) in receivables 54.0 (54.2) (11.6)
Increase/(decrease) in payables 12.5 (71.0) (30.2)
Decrease in retirement benefit obligations (13.1) (2.6) (3.5)
222.4 48.5 275.1
(b) Net cash (used in)/from investing activities
Acquisition of businesses (44.0) (98.4) (136.7)
Net cash/(overdrafts) of businesses acquired 4.2 (11.6) (15.0)
Disposal of businesses 5.4 48.2 44.5
Net (cash)/overdrafts of businesses disposed (2.6) 67.0 66.2
Purchase of investments in associates (1.2) (10.0) (11.8)
Disposal of investments in associates - 8.6 8.7
Repayment of capital by associate - - 2.8
Loans repaid by associates - 41.4 41.4
Dividends from associates 6.8 15.9 16.1
Purchase of property, plant and equipment and intangible assets (36.0) (39.5) (82.5)
Disposal of property, plant and equipment 2.7 2.0 6.7
Interest received 3.4 4.4 7.1
Proceeds from available-for-sale investments - 6.6 7.4
(61.3) 34.6 (45.1)
(c) Net cash from/(used in) financing activities
Interest element of finance lease obligations (0.6) (0.6) (1.0)
Dividend paid to equity shareholders (48.4) (21.5) (46.4)
Dividends paid to minority interests (0.3) - (0.3)
Proceeds from borrowings 154.2 15.3 17.1
Repayment of borrowings (10.6) (92.1) (102.2)
Repayment of capital element of finance lease obligations (0.7) (0.9) (1.9)
Proceeds from shares issued - 1.1 2.1
Other investments (net) (20.8) 9.5 (29.6)
72.8 (89.2) (162.2)
(10) ANALYSIS OF NET BORROWINGS
Cash and cash equivalents (inflow)/outflow from (increase)/decrease 2006 2005 2005
in debt and lease financing
Six months Six months Year to
to 30 June to 30 June 31 December
#million #million #million
Proceeds from borrowings (154.2) (15.3) (17.1)
Repayment of borrowings 10.6 92.1 102.2
Repayment of capital element of finance lease obligations 0.7 0.9 1.9
(142.9) 77.7 87.0
(11) ANALYSIS OF MOVEMENT IN NET BORROWINGS
Cash Borrowings Borrowings Derivative
and cash within within financial Net
equivalents current non-current instruments
liabilities borrowings
#million liabilities #million
#million #million
#million
At 1 January 2006 133.5 (216.4) (605.2) (91.5) (779.6)
Increase/(decrease) in cash and cash 206.3 (22.3) - - 184.0
equivalents
(Increase)/decrease in borrowings - 11.3 (154.2) - (142.9)
Borrowings acquired with businesses - - (13.8) - (13.8)
Other non-cash movements - (3.4) 3.4 - -
Currency translation differences and fair (0.2) (0.9) 41.8 (40.8) (0.1)
value adjustments on financial instruments
At 30 June 2006 339.6 (231.7) (728.0) (132.3) (752.4)
In the cash flow statement, cash and cash equivalents include bank overdrafts
which are classified within borrowings within current liabilities in the balance
sheet and amounted to #166.9 million compared to #144.3 million as at 31
December 2005.
(12) NET CASH (OUTFLOW)/INFLOW ON ACQUISITIONS AND DISPOSALS
An analysis of the net cash (outflow)/inflow on acquisitions and disposals of
businesses, associates and available-for-sale investments in the period is shown
below:
2006 2005 2005
Six months Six months Year to
to 30 June to 30 June 31 December
#million #million #million
Acquisition of businesses (44.0) (98.4) (136.7)
Net cash/(overdrafts) of businesses acquired 4.2 (11.6) (15.0)
Disposal of businesses 5.4 48.2 44.5
Net (cash)/overdrafts of businesses disposed (2.6) 67.0 66.2
Purchase of investments in associates (1.2) (10.0) (11.8)
Disposal of investments in associates - 8.6 8.7
Loans repaid by associates - 41.4 41.4
Proceeds from available-for-sale investments - 6.6 7.4
Borrowings acquired with businesses (13.8) (38.8) (38.8)
(52.0) 13.0 (34.1)
Glossary of key terms
Adjusted diluted earnings per share
Diluted earnings per share adjusted to exclude exceptional items and IAS 39
timing differences, both net of tax.
Adjusted profit for the period
Profit for the period adjusted to exclude exceptional items and IAS 39 timing
differences, both net of tax.
Exceptional items
Items classified by Alliance UniChem as exceptional in nature. In the reporting
periods these comprise costs in relation to the merger, profit on disposal of
businesses and profit on disposal of investments.
IAS 39 timing differences
Derivative financial instruments are used to hedge interest rate and currency
exposures. IAS 39 dictates whether changes in the fair value of these
instruments can be matched in the income statement by changes in the fair value
of the item being hedged. Where they cannot be matched, or do not fully match,
the unmatched amount represents a timing difference that will reverse over the
life of the financial instruments.
Net borrowings
Borrowings, net of cash and cash equivalents and derivative financial
instruments.
Net finance costs
Finance costs net of finance income.
Operating margins
Operating profit expressed as a percentage of revenue.
Operating profit
Profit from operations before share of associates' post tax earnings and
exceptional items.
Trade working capital efficiency
The movement in monetary terms of improvements in working capital days over a
period.
Underlying net finance costs
Net finance costs adjusted to exclude IAS 39 timing differences.
Underlying rate of tax
The underlying tax charge expressed as a percentage of operating profit net of
underlying net finance costs.
Underlying tax charge
The tax charge excluding tax on exceptional items and IAS 39 timing differences.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MERAKDKDFBKKQON
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