Home Retail Group news

Preliminary Results

02 May 2007

Home Retail Group, the UK’s leading home and general merchandise retailer, today announces its Preliminary Results for the financial period ended 3 March 2007. The financial period is shorter than a full year due to the change in year-end and it also includes certain financial impacts of GUS plc’s ownership of Home Retail Group up to the point of demerger¹. To assist with analysis and comparison, certain pro forma information has therefore been provided to eliminate the distortions of these two impacts on the performance of Home Retail Group.

Operating highlights

• Delivered on each element of the strategy for growth
• Expanded choice, improved ranges and enhanced the customer offer
• Extended our leading market share in UK home and general merchandise
• Driven gross margin benefits through leverage of purchasing scale and ongoing supply chain initiatives
• Enlarged the combined portfolio by 38 stores to reach 990
• Capitalised on clear multi-channel leadership
• Established further initiatives and operational improvements to continue driving sustainable growth

Financial highlights

• Pro forma sales² up 6% in total to £5,851m (2006: £5,510m) with like-for-like sales up 2.4% at Argos and down 1.4% at Homebase; reported sales of £5,607m
• Pro forma benchmark operating profit³ up 8% to £359.4m (2006: £331.8m) with growth at both Argos and Homebase; reported operating profit of £305.2m
• Pro forma benchmark profit before tax⁴ up 12% to £376.7m (2006: £337.1m); reported profit before tax of £296.9m
• Pro forma basic benchmark earnings per share⁵ up 14% to 29.3p (2006: 25.6p); reported basic earnings per share of 21.6p
• Benchmark pre-tax return on invested capital⁶ up 150 basis points to 12.0%
• Final dividend of 9.0p recommended, making 13.0p for the year

Oliver Stocken, Chairman of Home Retail Group, commented:

“These results represent a strong start to Home Retail Group’s new life as an independent company. They are particularly pleasing in a year during which we achieved the successful demerger from GUS and were faced with some difficult conditions in our markets.”

Terry Duddy, Chief Executive of Home Retail Group, added:

“We are pleased to report that both Argos and Homebase have performed well, benefiting from the shared infrastructure and capabilities of the Group while continuing to invest for future growth. The combination of a strong operational performance, together with a clear strategy for growth, means we are well positioned and confident of making further progress in what we expect to be another challenging year for UK consumer spending.”

1. The change in both the year-end and the Group’s capital structure on demerger result in statutory reported results that are non-comparable. The statutory reported results for the most recent financial period include the results for Homebase from 1 March 2006 (approximately 12 months) and the results for the rest of the Group from 1 April 2006 (approximately 11 months). The statutory reported results also reflect certain financial impacts that are a result of the fact that Home Retail Group was wholly owned by its former parent company, GUS plc, until the demerger became effective on 10 October 2006. These results are not therefore representative of a financial period length comparable to the prior year, nor do they reflect the capital structure that Home Retail Group operated under from the date the demerger occurred.

2. Pro forma sales are calculated on a 52-week basis. This represents the 52 weeks to 3 March 2007 and the comparable 52 weeks to 4 March 2006.

3. Pro forma benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, store impairment charges, exceptional items and costs related to demerger incentive schemes. It is calculated on a 52-week basis.

4. Pro forma benchmark profit before tax (“PBT”) is defined as profit before amortisation of acquisition intangibles, store impairment charges, exceptional items, costs related to demerger incentive schemes, financing fair value remeasurements, financing impact on retirement benefit balances and taxation. Net interest income within pro forma benchmark PBT is calculated to illustrate the Group’s financial performance as if the demerger capital structure had existed at 31 March 2006 and had been achieved based on underlying cash flows prior to 31 March 2006. Benchmark PBT also includes Home Retail Group’s share of post-tax results of associates. It is calculated on a 52-week basis.

5. Pro forma basic benchmark earnings per share (“EPS”) is defined as benchmark PBT less taxation attributable to benchmark PBT, divided by the weighted average number of shares in issue from the date of demerger (excluding Home Retail Group shares held in its Employee Share Ownership Trust (“ESOT”)). It is calculated on a 52-week basis.

6. Benchmark pre-tax return on invested capital is defined as benchmark operating profit plus share of post-tax results of associates, divided by pro forma net assets excluding retirement benefit balances, tax balances and net cash/debt.

Enquiries

Analysts and investors (Home Retail Group)
Richard Ashton	Finance Director	01908 600 291
Stuart Ford	Head of Investor Relations

Media (Finsbury)
Rollo Head		020 7251 3801

View the full PDF version of the results statement

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