A modernising and cost-cutting drive at Boots has helped it to post a 2.7 per cent rise in annual profits to £544.6m.

The health and beauty chain said it had been encouraged by trading after its core Boots The Chemist chain saw like-for-like sales growth of 3.9 per cent, marking the seventh consecutive quarter it has delivered good growth.

The results follow the group's announcement in January that it would shed jobs as part of cost-cutting plans. In March, Boots began a £390m expansion drive to modernise the business.

It said about 1,000 staff had volunteered for redundancy since its January restructuring - a higher number than had been expected and a move that would benefit the group in this financial year.

Chief executive Richard Baker, who took the helm last September, said: "We now have in place a clear business plan to make Boots more modern, competitive and efficient, which builds the foundations for a stronger Boots the Chemist."

The group said it planned to spend up to £700m buying back shares during the next two years after identifying surplus share capital.

About £350m would be returned in the current financial year, while the remainder would depend on the performance of the business.

Operating profits at Boots the Chemist fell by 6.6 per cent, which was more than accounted for by reorganisation costs.