Boots pays investors pounds 400m special dividend

Boots, the chemists to car accessories group, yesterday unveiled a bonanza for both shareholders and future employees with news of a pounds 400m special dividend and plans for the creation of 5,000 jobs over the next three years.

The 44.2p a share payment, which brings to over pounds 1.7bn the amount handed back in dividends and share buy-backs over the past three years, was well received by the stock market. The shares fell just 2.5p to 692p, despite going ex the special dividend immediately.

For tax-exempt institutions, the payment, which will be made on Friday 13 June, will bring an additional windfall of pounds 100m from the advance corporation tax repayable by the Inland Revenue. Lord Blyth, the chief executive, refused to comment on suggestions the dividend was being rushed out to beat the reduction in ACT expected to be announced in Labour's first Budget on 2 July.

"We have consistently returned money to shareholders. Indeed, last year we did a very large share buy-back. So there is no alteration in the pattern," he said. The decision to change the policy on handing back cash from share buy-backs to special dividends was because it had become more tax efficient after the last chancellor's abolition of ACT on buy-backs. It would "interesting" to see what the Budget contained, he said.

Analysts reacted enthusiastically to the dividend, which, for the first time since the beginning of the policy to pay excess cash back to shareholders, will push Boots into a modest net borrowing position. One observer said: "The response from institutions has been very positive. They're always happy to receive cash. They're very happy this is the third time Boots has handed cash back to shareholders. In this respect, Boots leads the pack among UK companies."

The company played down the job creation moves, which will mainly affect the Boots the Chemists chain, Halfords and Boots Opticians, as in line with levels typical of the past five years. But plans to spend up to pounds 225m on opening 40 stores a year in both the chemists and Halfords businesses appear to represent a step up on last year's opening programme.

News of the jobs and dividend came as Boots unveiled a 12.5 per cent rise in pre-tax profits to pounds 571m in the year to March, including a pounds 34.9m exceptional gain as a result of a VAT refund, profit on last year's disposal of Children's World and gains on property sales. A 14.3p final dividend raises the total for the year 11 per cent to 20.5p, payable from earnings per share up 20 per cent at 42.9p.

Lord Blyth warned the costs of coping with dual currencies and other matters in the wake of economic and monetary union could amount to some pounds 20m for Boots, around double the level it expects to pay adapting its computers to deal with the date change in 2000, the so-called millennium "time bomb".

Boots said it would launch its Advantage loyalty card nationally later this year, following successful trials in Norwich and Plymouth in which extra sales had covered the additional costs. The card, expected by analysts to be unveiled in September or October, will be the first in the UK to incorporate a "smart" computer chip.

Investment Column, page 25