holland and barrett

Holland & Barrett’s UK retail sales rose 4.6% in the year before its £1.8bn takeover by a Russian billionaire, but profits dropped amid investment in expansion and increasing competition from the supermarkets.

Holland & Barrett Retail, which operates its 715 health stores in the UK and 154 worldwide franchises, saw revenues rise from £424.7m to £444.1m in the year to 30 September 2016. This was driven by the opening of 27 owned stores during the year and the addition of 72 new franchises compared with a combined total of 53 new outlets in the previous year.

However, in its core UK business operating profits fell 11.8% to £108.7m and reported profits dropped 15.8% to £90m.

Staffing costs rose by 9.7% to £67.3m as headcount grew from 4,321 to 4,886 employees.

The accounts state: “There is increasing competition from the national supermarket chains and other retailers such as chemists, drugstores and internet traders.” It said it has “differentiated itself from its mass market competitors by developing a specialist reputation, whilst at the same time offering high quality products at a low, value price.”

On the results, the accounts state: “Both the activity in the year and the year-end financial position of the company are considered to be extremely strong.”

Holland & Barrett  online sales, which are filed seperately , grew 17.8% to £35.9m with the website’s operating profits up 25% to £8.6m.

The chain, which is targeting group-wide sales of £1bn by 2020, was bought by Russian tycoon Mikhail Fridman’s investment fund L1 Retail for £1.8bn last month.

The UK-filed accounts exclude the international operations of Holland & Barrett’s the 1,300-strong portfolio other than the 154 franchise operations. At the time of the 26 June purchase L1 Retail managing partner Stephan DuCharme commented: “Holland & Barrett is a clear market leader in the UK health and wellness retail market, with attractive growth positions in other European and international markets, and growing online presence, with a leading customer loyalty programme and 10 million active cardholders.

“We believe that the company is well positioned to benefit from structural growth in the growing £10bn health and wellness market and has multiple levers for long term growth and value creation.”