News and media Home Retail Group

Half-Year Results

Home Retail Group  |  Financial news

Home Retail Group, the UK's leading home and general merchandise retailer, today announces its results for the 26 weeks to 1 September 2012 and also outlines its transformation plan for Argos following the completion of a comprehensive business review.

Operating highlights

  • Ongoing investment initiatives in both businesses to maintain leadership in multi-channel retailing:
    • Argos multi-channel sales penetration increased to 51% of total sales. Online Check & Reserve, at 30% of total sales, remains the fastest growing channel
    • Argos is the second most visited internet retailer in the UK with over 440 million site visits in the last 12 months
    • Argos mobile shopping represented 7% of total sales, contributing in excess of £100m of sales in the period
    • Homebase multi-channel sales penetration increased to 5% of total sales with Reserve and Collect sales growing by 31%
  • Ongoing growth and development in both exclusive and own-brand products, including the introduction of Habitat product

Financial highlights

  • Sales down 1% to £2,531m 
  • Cash gross margin down 2% to £952m
  • Robust management of costs with operating and distribution costs reduced by £11m to £933m
  • Benchmark operating profit1 down 29% to £19m
  • Benchmark profit before tax2 down 37% to £18m
  • Basic benchmark earnings per share3 down 44% to 1.4p
  • Reported profit before tax of £51m; reported basic earnings per share of 4.6p
  • Strong cash generation in the period of £122m with closing net cash position of £316m
  • Interim dividend of 1.0p (2011: 4.7p)

Argos business review

  • Comprehensive business review undertaken over the last six months, looking at all aspects of the Argos business
  • Review identified considerable strengths and strong customer franchise but a need to invest to restore Argos to sustainable growth
  • The transformation plan which will reinvent Argos as a digital retail leader and reposition it from a catalogue-led business to a digitally-led business has four key elements:
    • Reposition Argos' channels for a digital future
    • Provide more product choice, available to customers faster
    • Develop a customer offer that has universal appeal
    • Operate a leaner and more flexible cost base
  • Five-year plan is underpinned by a three-year investment programme, targeting £4.5 billion of sales by FY18
  • The plan results in a total capital investment in Argos of c.£100 million per annum which in turn leads to a total Group capital investment of c.£175 million per annum over the next three financial years
  • The Group aims to maintain a positive net cash position throughout the three-year investment phase of the plan

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

"Against a challenging consumer backdrop, Argos has had a solid first half of the year supported by its multi-channel performance, with sales growth driven most notably by an improvement in consumer electronics.  Homebase delivered a creditable performance in its peak trading period, given the adverse impact of poor weather conditions on its seasonal product sales and the difficult market conditions in big ticket categories.

"During the first half of the year we took additional action to control costs, tightly managed our working capital and delivered a strong cash performance which has strengthened the Group's financial position.  Market conditions remain fragile and hence we will continue to plan cautiously, however we are in good operational shape as we approach our peak trading period.

"We continue to strengthen our customer propositions in an environment where customer shopping behaviours are changing rapidly, with both businesses improving product choice and delivering further value for our customers.

"We have also concluded a comprehensive business review of Argos which highlighted a clear opportunity to transform the business through increased investment in digital technologies.  The transformation plan aims to deliver growth by repositioning Argos as a digitally-led business from a catalogue-led business, leading the market growth of digital commerce through online, mobile and tablet, and offering customers more products with the fastest, most convenient fulfilment options.  This plan provides the right approach for Argos to achieve a long-term sustainable performance and profit recovery."

1. Benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases and exceptional items.

2. Benchmark profit before tax (benchmark PBT) is defined as profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases, exceptional items, financing fair value remeasurements, financing impact on retirement benefit obligations, 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 share awards).

There will be a presentation today at 9.30am to analysts and investors at 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  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 from 2 September 2012 to 5 January 2013, will be announced by Home Retail Group on Thursday 17 January 2013.

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.

To view the announcement in PDF, click here.

To listen to the conference call, click here.

Download press release [PDF 375 KB]

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