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Half-Year Results

21 October 2009

Home Retail Group, the UK’s leading home and general merchandise retailer, today announces its results for the 26 weeks to 29 August 2009.

Operating highlights
  • Strength of the operating model and excellent cost management helped to offset further challenges in the market environment
  • Growth in market share at both Argos and Homebase
  • Remaining highly price competitive while maintaining a focus on absolute cash gross margin
  • Leadership in multi-channel convenience, with the internet now accounting for 28% of total Argos sales and online Check & Reserve growing nearly 50%
  • More choice at Argos with over 15,000 lines available for immediate store collection and the expansion of online home delivery ranges
  • Successful peak trading season at Homebase, with a strong operational performance and tight cost control
  • Continuing development of the overall customer offers at Argos and Homebase to meet changing consumer needs

Financial highlights

  • Sales up 3% to £2,805m (2008: £2,736m); like-for-like sales down 2% at Argos and up 3% at Homebase
  • Cash gross margin down 2% to £1,107m (2008: £1,124m); gross margin rate down approximately 100 basis points at Argos and approximately 325 basis points at Homebase
  • Operating and distribution costs reduced by £32m or 3% to £986m (2008: £1,018m), as cost management actions more than offset volume related growth and underlying inflation
  • Benchmark operating profit1 up 14% to £121m (2008: £106m), with a decline of £6m or 7% at Argos and an increase of £19m or 66% at Homebase
  • Net interest income reduced by £14m to £3m (2008: £17m), with an improved net cash position more than offset by lower interest rates
  • Benchmark profit before tax2 up 1% to £123m (2008: £121m)
  • Basic benchmark earnings per share3 up 1% to 9.7p (2008: 9.6p)
  • Reported profit before tax of £116.8m; reported earnings per share of 9.0p
  • Cash generation of £68m; closing net cash position of £352m
  • Interim dividend maintained at 4.7p (2008: 4.7p)

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

“The trading performance at both Argos and Homebase exceeded our expectations. Whilst the consumer environment proved challenging, we have adapted well and maximised the benefit from more favourable weather conditions for Homebase. Our focus on cash margin and an extremely tight control of costs have been the clear drivers of a successful first half performance.

“We continue to plan cautiously for consumer demand over the remainder of the financial year, and there will also be a more significant impact from adverse currency movements during this period. The Group’s operational and financial strength will continue to sustain our competitive advantage in the market place.”

1. Benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, store impairment and onerous lease 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 and onerous lease charges, exceptional items, costs related to demerger incentive schemes, financing fair value remeasurements, financing impact on retirement benefit balances, the discount unwind on non-benchmark items 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 shares held in Home Retail Group’s share trusts net of vested but unexercised options and share awards).

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 30 August 2009 to 2 January 2010, will be announced by Home Retail Group on Thursday 14 January 2010.

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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