Before tax and exceptional items profits rose to £553.2m ($905m) (1997: £536.2m). However, the group's earnings were hit by an exceptional loss of £173.9m on the disposal of home improvement unit AG Stanley.

Boots will raise its dividend by 8.8% to 22.3p (20.5p).

The retailer admitted that "the UK retail economy is slowing down", but said it was optimistic of the future and confident of maximising shareholder value.

Taking advantage of the advantage card

During the last year Boots joined the stampede of British retailers who are introducing loyalty card shemes. In September 1997 the group launched the Advantage Card, with eight million cards now in issue.

The company claims that the sheme contributed an estimated 1.8% of the counter sales growth over the full year, well in line with expectations.

In the last quarter, 34% of counter sales were linked to the card and sales overall increased by 9.8%. The card is now generating profit.