Healthcare group Alliance UniChem yesterday predicted that growth in the UK pharmacy market would bounce back this year as it prepares to merge with rival Boots.
The forecast came as Alliance turned in a pretax profit of £278.9 million for the year to December 31, up from £253 million a year earlier as revenues rose 3.1 per cent to £9.171 billion.
Alliance is looking forward to the market growing by four per cent this year after the impact of an agreement between healthcare providers and the Government in November 2004 to lower medicines prices worked its way out.
That agreement - driven by the Government's desire to lower the NHS drugs bill by around £1.8 billion over the next five years - capped market growth at 1.5 per cent in 2005.
Alliance said it was disproportionately hit by the move because many of its pharmacies were located close to doctors' surgeries and sell more prescription medicines.
Like-for-like sales at Alliance fell 0.2 per cent in value last year, but the company said its UK retail business would have grown by 3.5 per cent if the price cuts had not been made.
Confidence about an acceleration in the growth of the UK pharmacy market will help Alliance with its charm offensive to bring investors and regulators around to the merits of its £6.64 billion merger with Boots, which was announced in October.
The new company - to be called Alliance Boots - will have more than 2,500 stores in the UK and £13 billion of sales as well as becoming the country's largest wholesaler of drugs.
Despite the fall in like-for-like sales in the UK last year, Alliance said operating margins were lifted by providing
more specialist services to patients and manufacturers.
Alliance and Boots are currently working with the Office of Fair Trading to agree appropriate undertakings that will allow the landmark merger to proceed.
Discussions revolve around pharmacies in 100 areas of the UK where competition could be damaged and Alliance said it has stopped rebranding and refitting any store that may not form part of the enlarged group.
The deal, which will generate at least £100 million of savings, has already been cleared by the European Commission.
Yesterday's statement revealed that wholesale revenues rose 1.8 per cent to £8.69 billion - although they fell by 2.7 per cent in the UK following the implementation of the price cuts for medicines.
Chairman Paolo Scaroni said: "Anticipated growth in the UK market in 2006 should continue to counter the effects on the group of regulatory reviews, particularly in France, as governments continually strive to contain costs at manageable levels."
Alliance UniChem has around 33,000 staff and supplies 100,000 pharmacies, hospitals and health centres with medicines.
It also owns more than 1,200 pharmacies in the UK, Norway, the Netherlands and Italy.
On the back of the strong results, the board raised the final dividend to 13.6 pence for a 10.8 per cent increase in the total payout for the year to 20.5 pence per share.
Chief executive Ian Meakins said: "Our focus on improving the performance of all our businesses, together with the initiatives that we are taking to drive growth and our opportunities for expansion both organically and through acquisition, make us confident about our commercial and financial prospects." ..SUPL: