Boots Group PLCTrading and corporate development update

7th April 2005

Sir Nigel RuddChairman

Richard BakerChief Executive

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

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

Q4 Full Year

Sales - Total +1.1% +3.8%

Sales - LFL -0.9% +2.3%

Underlying LFL +0.7%

Note: All trading results estimated at time of going to press

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

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

BTC cost growth

£m YoY cost increase

04/05 05/06 Total

Inflation 40 50 90

Volume 20 10 30

GiS/Productivity (90) (70) (160)

(30) (10) (40)

Pension 15 15 30

Existing stores/trading

45 40 85

IT Infrastructure/tills 35 25 60

New space 35 30 65

100 100 200

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

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

Note: All trading results estimated at time of going to press

Nurofen £150m

Strepsils £90mClearasil £90m

Dermo-Cosmetics

£50m

Other £140m

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

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

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

Boots Group PLCTrading and corporate development update