Boots defends tax move to Switzerland
Alliance Boots put up a spirited defence against charges that it pays up to £100m less in UK tax a year since it moved corporate headquarters to Switzerland.
Shock exit: Boots lost its chief executive Andy Hornby in March
The High Street chemist, which was bought by executive chairman Stefano Pessina and US private equity house Kohlberg Kravis Roberts (KKR) in 2007 for £11bn, said it paid £240m in UK taxes last year.
But the chain admitted this bill would have been £50m higher if it had not made additional pension contributions, set up a new tax deductible pension partnership scheme with its trustees and made £546m of interest payments on its £7.8bn debt pile.
Tax experts said since the firm's move to the Swiss tax haven of Zug it on average pays £100m less in UK tax a year.
But Pessina countered, saying: 'We have invested a little less than £1bn over the last four years in Alliance Boots. I and KKR have taken no dividends out of the business.
'We invest the cash the business makes. This has allowed us to employ an extra 1,000 people worldwide last year, even in these difficult times.'
The retailer, which employs 115,000 staff in over 3,000 stores, added it was in no hurry to float itself back on the stock market. Pessina said he was a 'long term investor'.
And he added that KKR was unlikely to press for a float for the next 'two to three years' because there was more growth in the business.
Boots said its full-year trading profit rose 14.2% to £1.05bn on sales up 15.1% at £20.2bn, on a strong showing from its wholesale drugs unit, which bought rivals in Turkey and Germany and growth at its core UK health and beauty shops. But the retailer found the High Street tough, with like-for-like growth of only 1.2% at its stores.
Britain's retailers are battling for consumers' money as shoppers tighten their belts amid restricted bank lending, high inflation and the prospect of interest rate rises. Boots said it would look toward international expansion and acquisitions for growth.
Verdict Research consulting director Neil Saunders said: 'These figures show Boots still has a place on the High Street.
'But it will have to protect its share of the premium drugs and cosmetics lines from the major supermarkets.'
Pessina also denied he had fallen out with former chief executive Andy Hornby who left the business suddenly in March after less than two years. He said Hornby found the job 'stressful', and added the business would appoint a new head 'in due course'.
• US private equity house KKR and Italian entrepreneur Stefano Pessina buy Alliance Boots for £11.1bn in 2007
• Alliance Boots moves to Zug, Switzerland in 2008 from Nottingham, where it was founded in 1849
• Buys controlling stakes in Turkish rival Hedef Alliance and German player ANZAG in 2010
• Chief executive Andy Hornby left in March after less than two years at the business.
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