Boots Group PLC

1
Boots Group PLC

• Trading and corporate development update

7th April 2005
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Sir Nigel Rudd

• Chairman

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Richard Baker

• Chief Executive

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Headlines

• BTC and Group performance for 04/05 expected to
  be in line with revised market forecasts
• Lower consumer spending and infrastructure costs
  expected to lead to lower BTC operating profits
  in 05/06
• Proposed sale of Boots Healthcare International
• Continued return of cash to shareholders

5
04/05 Trading update

• BTC
• Operating profit expected to be in line with
  March update at 470m
• Weak sales in Q4
• Gross margin -80bp for the year
• BHI
• Operating profit slightly ahead of expectations
  at 85m
• Group
• PBT in line with revised market expectations at
  475m

Note All trading results estimated at time of
going to press
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Boots The Chemists

• Tougher retail environment underlines need to
  change
• Improved competitive position in increasingly
  competitive market
• Good progress on renewing operational
  infrastructure
• Moving from unsustainable model to modern,
  competitive and efficient model

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Planning assumptions for 2005/06

• Sales growth expected to remain subdued
• LFL growth 0 2
• New space contribution 2
• Stable gross margin expected
• Continued investment in price
• Cost of Goods improvement
• Costs expected to be up 6 due to new space and
  infrastructure renewal

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BTC cost growth
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Intention to sell BHI

• BHI concluding successful 4 year growth strategy
• Strong organic growth prospects but significant
  investment required
• Focus Group resources on making BTC modern,
  competitive and efficient
• Completion within 05/06 financial year
• Intention to return significant proportion of
  proceeds to shareholders

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Boots Healthcare International

• 2004/05 sales 520m, 5.7 on a comparable basis
• 2004/05 operating profit 85m
• Operating in 130 countries with 2,900 staff
• 5 manufacturing plants Nottingham (3), Germany
  and Thailand

Other 140m
Nurofen 150m
Dermo- Cosmetics 50m
Strepsils 90m
Clearasil 90m
Note All trading results estimated at time of
going to press
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Proposed sale and leaseback

• 300 secondary properties identified
• Expect proceeds in excess of 250m
• Plan completion over the summer
• Broadly EPS neutral
• Proceeds used to pay down short term borrowings

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Capital structure and shareholder returns

• Clear ongoing commitment to return surplus cash
• 1.7bn returned to shareholders over the last
  three years
• Significant proportion of BHI proceeds to be
  returned to shareholders
• 2nd 350m tranche of share buyback to be
  completed over two to three years matched to
  BTC performance
• Dividend key element of delivering shareholder
  returns
• Maintain strong investment grade debt rating

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Summary

• BTC and Group performance for 04/05 expected to
  be in line with revised market forecasts
• Lower consumer spending and infrastructure costs
  expected to lead to lower BTC operating profits
  in 05/06
• Proposed sale of Boots Healthcare International
• Continued return of cash to shareholders

14
Boots Group PLC

• Trading and corporate development update