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Half-Year Results

22 October 2008

Home Retail Group, the UK's leading home and general merchandise retailer, today announces its results for the 26 weeks to 30 August 2008.

Operating highlights

  • The strength of the operating model and good cost control helped to mitigate the impact of a difficult sales environment
  • The Group's sourcing scale and supply chain initiatives contributed to further successful gross margin management
  • Another period of successful cash generation
  • Ongoing developments to the overall customer offer, adapting to their changing needs in challenging times
  • The latest Argos catalogue - celebrating its 35th year - expanded to 18,800 lines with stores now carrying up to 14,900 lines for immediate collection
  • Further enhancements to multi-channel convenience saw the internet grow to 22% of Argos' sales and over 250,000 products a week sold via Check & Reserve
  • Homebase's relaunch of 21 former Focus stores completed

Financial highlights

  • Total sales held level at £2,736m (2007: £2,737m), with like-for-like sales down 3.0% at Argos and down 10.3% at Homebase
  • Gross margin held approximately level in total, down by 75 basis points at Argos and ahead by 125 basis points at Homebase
  • Operating expenses up 3%, driven by underlying inflation of approximately 4% at Argos and 3% at Homebase, with all other operating expenses held level
  • Benchmark operating profit1 down 22% to £106m (2007: £136m), with a decline of 14% at Argos and 37% at Homebase
  • Reported operating loss of £450m after exceptional charges including Homebase non-cash asset write downs and onerous lease provisions of £542m
  • Benchmark profit before tax2 down 19% to £121m (2007: £150m); reported loss before tax of £437m
  • Basic benchmark earnings per share3 down 18% to 9.6p (2007: 11.7p); reported basic loss per share of 51.3p
  • Cash generation of £101m, benefiting principally from further improvement in working capital management
  • Closing financing net cash position of £275m versus year-end of £174m
  • Interim dividend maintained at 4.7p (2007: 4.7p)

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

"Against a backdrop of a difficult trading environment, we delivered an operating result for the half which demonstrated further success on both cost control and cash generation. The challenging conditions look set to remain for some time, and indeed have worsened in the turbulent recent weeks. If these conditions continue through our peak trading months of November and December, the profit outcome for the year would likely be around the bottom of current market expectations. The Group continues to adapt to this backdrop, and our operating model and financial strength will be key drivers of competitive advantage."

  1. 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.

  2. Benchmark profit before tax (benchmark 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.

  3. Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to benchmark PBT, divided by the weighted average number of shares in issue (excluding Home Retail Group shares held in its Employee Share Trust (EST)).

There will be a presentation today at 9.30 am to analysts and investors at the King Edward Hall, Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ. The presentation can be viewed live on the Home Retail Group website www.homeretailgroup.com. The supporting slides and an indexed replay will also be available on the website later in the day.

An Interim Management Statement, covering the 18 weeks of 31 August 2008 to 3 January 2009, will be announced by Home Retail Group on 15 January 2009.

Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements.

View the full PDF version of the Half-Year Results

View the full Half-Year Results online

Click here to view the webcast

 

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