Bottom Line: On the right footing

BOOTS is clearly giving much thought to how it should invest its cash pile, but - perhaps chastened by its Ward White nightmare - it seems unlikely it will do anything rash. It is already trying to squeeze every last drop out of the Boots the Chemist formula, by opening smaller stores in secondary locations. The plans to expand its healthcare division through Europe, widened in yesterday's presentation, follow a similar tack.

Whether it will succeed in making the division one of the main engines of Boots' growth into the next century, as finance director David Thompson promised, remains to be seen. Boots' estimate of a 50 per cent rise in the European over-the-counter market, to pounds 12bn, by the year 2000 may even prove conservative given the pressure on governments to cut their healthcare costs. But, as the rash of alliances between drug and consumer medicine companies demonstrates, Boots is not the only company to spot the potential.

It is optimistic that it will manage to persuade drug companies to use its marketing skills to sell their drugs over the counter. But it admits that its distribution networks through much of Europe are incomplete - and acquisition prospects are thin on the ground - and it can offer no coverage in the US. The ability to grow its own products will be hampered by the same problem.

That does not make the strategy any less sensible, however. Indeed, it could be good news for shareholders if it means more of the cash comes back to them as dividends.