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• Swine flu fears help high street chain• Credit crunch has allowed group to buy back its own debtBoots the Chemist has bucked the high street gloom to report strong first-half sales as consumers bought low-cost "treats" such as lipsticks and face creams as well as bacterial gels, amid worries over swine flu.Like-for-like sales at Boots' UK stores climbed 3.4% in the six months to 30 September.
George Fairweather, finance director at parent company Alliance Boots, said it was selling more own-brand products as consumers sought to cut spending with its No 7 cosmetics, Protect & Perfect face creams as well as Boots branded medicines all selling well.
"Swine flu is making people a lot more health aware," he said.
"But they are also looking for value." Fairweather said the retail and pharmacy divisions were growing at an equal rate once currency effects were taken into account with the retailer outperforming the market.Alliance Boots was acquired by private equity firm Kohlberg Kravis Roberts and its deputy chairman Stefano Pessina two years ago.
The £11.1bn deal was the first time a FTSE 100 company firm had been bought by private equity and there were concerns about the financing structure which loaded the company with £9bn of debt.The buyout was the last mega deal before the credit markets seized up in the summer of 2007 and its new owners initially struggled to find buyers for the debt, which ended up trading at below face value.
Alliance Boots has taken advantage of the situation over the last 18 months and to date has bought back £558m of debt for £324m.
Fairweather said the company was benefiting from low interest rates and was on track to meet its financial targets for the current year.
"We were able to take advantage of a highly disconnected banking market when our debt was being traded on a distressed basis - the market is much more settled now," he said.Since April, Alliance Boots has been operating its manufacturing business Boots Contract Manufacturing (BCM) as a standalone division so as to assess its viability.
BCM - which has factories in Nottingham as well as France, Germany and an assembly plant in Poland - makes own-brand products such as Soltan and Protect & Perfect.
Sales at the division rose £75m to £124m during the period as intra-group sales were included for the first time, with Pessina said to be pleased with the division's progress.This summer Alliance Boots hired disgraced bank boss Andy Hornby - who was in charge of HBOS in the period leading up its near-collapse - as group chief executive.
The City was surprised at the speed of Hornby's rehabilitation and he did not handle today's trading update.
Fairweather said it was a "quick update" and he had handled press surrounding the event last year which seeks to satisfy the company's obligations under the Walker review which set out best practice for the private equity industry.
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