Interim Results

GUS PLC 17 November 2005 17 November 2005 GUS plc Interim Results for the Six Months Ended 30 September 2005 under IFRS Highlights â€¢ Benchmark PBT1 of Â£376m (2004: Â£407m) - Record profit at Experian, up Â£52m - Profit at ARG down by Â£59m, affected by Â£20m of one-off and IFRS-related charges - Disposal of Lewis reduces profit by Â£12m â€¢ Profit before tax Â£348m (2004: Â£365m) â€¢ Benchmark earnings per share2 25.5p (2004: 28.0p) â€¢ Basic earnings per share 28.0p (2004: 29.7p) â€¢ Interim dividend 9.6p per new consolidated GUS share (2004: 9.0p per existing share) â€¢ ARG: sales up 2%; gaining share in a very challenging retail market; gross margin maintained at Argos and slightly ahead at Homebase â€¢ Experian: sales up 29% and profit up 36% for continuing activities at constant exchange rates; seventh half year of double-digit sales and profit growth â€¢ Burberry: sales up 3% underlying and profit down 2% at constant exchange rates; period of transition for business â€¢ Burberry demerger confirmed for 13 December 2005, subject to shareholder approval Sir Victor Blank, Chairman of GUS, commented: 'We have made very significant strategic and operational progress in the first half. The sale of the remaining stake in Lewis, the agreement to sell Wehkamp and today's timetable for the full demerger of Burberry means we are now focused solely on ARG and Experian. Operationally, we are investing in our people and our infrastructure and this will continue to position each business well in its chosen markets.' John Peace, Chief Executive of GUS, commented: 'I am delighted with the performance of Experian which earned Â£200m profit for the first time in a half year. Experian has delivered its seventh consecutive six-month period of double-digit sales and profit growth, reflecting its unique global reach and broad product offer. Although profit at ARG has been impacted, as expected, by the tough UK retail environment, we have gained share and maintained or improved gross margin in the first half. We continue to invest in both Argos and Homebase ensuring that they will be among the long-term winners in UK retailing.' These results have been prepared in accordance with the basis of preparation set out in note 1 to the interim financial statements. The reconciliation of results for the year to 31 March 2005 under UK GAAP to International Financial Reporting Standards (IFRS) was released on 14 June 2005 and is available on the GUS website. This includes the restatement of the results for the six months to 30 September 2004, which are used as the comparatives throughout this announcement. The financial information in this announcement is unaudited. It is also subject to possible change as the definition and interpretation of IFRS continues to evolve and be amended by the relevant authorities. 1 Benchmark PBT is defined as profit before amortisation of acquisition intangibles, exceptional items (i.e. gains or losses on disposal or closure of businesses and goodwill impairment charges), financing fair value remeasurements and taxation. It includes the Group's share of associates' pre-tax profit and the profits or losses of discontinued operations up to the date of disposal or closure. 2 Benchmark EPS takes Benchmark PBT less taxation (attributable to Benchmark PBT) and minority interests, divided by the weighted average number of shares in issue (excluding own shares held in Treasury and in the ESOP Trust). Enquiries GUS John Peace Group Chief Executive 020 7495 0070 David Tyler Group Finance Director Fay Dodds Director of Investor Relations Finsbury Rupert Younger 020 7251 3801 Rollo Head There will be a presentation today at 9.30am to analysts and investors at the Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ. The presentation can be viewed live on the GUS website at www.gusplc.com and can also be accessed live via a dial-in facility on 44 (0)208 322 2180. The supporting slides and an indexed replay will also be available on the website later in the day. There will be a conference call to discuss the results at 3.00pm today with a recording available later on the website. All relevant GUS and Burberry announcements are also available on www.gusplc.com. GUS will issue its Third Quarter Trading Update on 12 January 2006. Its Preliminary Results for the year to 31 March 2006 will be announced on 24 May 2006. 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. Burberry Ordinary Shares are listed on the Official List and traded on the London Stock Exchange. The Burberry Ordinary Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the 'Securities Act'), and may not be offered or sold unless pursuant to a transaction that is registered under the Securities Act, or not required to be registered thereunder, or pursuant to an exemption from the registration requirements thereof. The Burberry Ordinary Shares referred to in this announcement have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any other US regulatory authority, nor have such authorities passed upon or determined the adequacy or accuracy of this announcement. Any representation to the contrary is a criminal offence in the United States. GROUP STRATEGY GUS has continued to deliver strong strategic and operational progress since the start of the financial year. We have continued the transformation of the Group, by focusing on fewer activities. In May 2005, we sold our remaining 50% stake in Lewis, raising Â£140m; in October 2005, we agreed to dispose of Wehkamp, our Dutch home shopping business, for Â£265m. We are today providing the details of the Burberry demerger. As outlined in a separate announcement, subject to shareholder approval, we intend to demerge the remaining 65% stake in Burberry to GUS shareholders by way of a dividend in specie on 13 December 2005. This will be accompanied by a consolidation of GUS shares which is designed to keep the GUS share price at approximately the same level, subject to normal market movements, before and after the demerger. For every 1,000 existing GUS shares held at 0700 on 13 December 2005 (the record time), GUS shareholders will receive 305 Burberry shares and approximately 859 new GUS shares. The latter is for illustrative purposes only and is based on share prices at the close of business on 15 November 2005. The exact consolidation ratio will be based on the average closing prices for the four days up to and including 17 November 2005. The Board of GUS remains committed to the separation of ARG and Experian, at the right time, as it believes that this is likely to enhance shareholder value further. We continue to review the timing and method of separation and will update shareholders when any further decisions are made. In the meantime, we continue to focus on driving sustainable growth in ARG and Experian, as we have in recent years: â€¢ in the first half, Experian delivered exceptional sales and profit growth, driven by the strength of its growing portfolio of products and services which are sold in over 60 countries around the world; â€¢ Argos and Homebase both continued to take share in their markets in a very difficult UK retail environment. Supply chain gains from joint sourcing, a key strategic initiative, enabled Argos to maintain and Homebase to increase slightly gross margin in the first half; â€¢ there was considerable operational progress across all our businesses. This included the roll-out of Argos Extra, the co-location of about 500 Homebase roles alongside Argos and the launch of numerous new products and solutions in Experian; â€¢ we continued to invest in our businesses. Capital expenditure was Â£208m (2004: Â£161m), with major projects including new stores and warehouses at ARG and new facilities and database platforms at Experian; and â€¢ we also spent about Â£400m on acquisitions in the first half, predominantly in Experian to complement existing activities. The integration of these companies is on track, with nearly 700 people joining ARG from Index and about 500 people joining Experian through acquisitions. GROUP FINANCIAL HIGHLIGHTS Total sales up 4% to Â£3.9bn (up 6% from continuing operations). Benchmark PBT down 7% to Â£376m (2004: Â£407m), reflecting record profit at Experian (up Â£52m), offset by a decline in profits at ARG (down Â£59m). The net impact of the disposal of Lewis was to reduce Benchmark PBT by Â£12m or 3%. An effective tax rate of 27.7%, based on Benchmark PBT, compared to 26.5% in the last financial year. This reflects our latest estimate for the effective tax rate for the 12 months to 31 March 2006. Benchmark EPS of 25.5p (2004: 28.0p). Net debt increased to Â£1.77bn at 30 September 2005, up from Â£1.43bn six months ago, largely reflecting spending on acquisitions. Interim dividend of 9.6p per new GUS share announced. Combined with the Burberry dividend that GUS shareholders will be entitled to receive after the demerger (2.5p per Burberry share), this is equivalent to 9.0p per existing GUS share (2004: 9.0p). 6 months to 30 September Sales Profit --------------------- ---------------------- 2005 2004 2005 2004 Â£m Â£m Â£m Â£m --------- --------- --------- --------- Argos Retail Group 2,618 2,568 108.9 167.5 Experian 808 645 200.4 148.8 Burberry 355 348 75.8 77.6 Central activities (6) (5) (13.2) (13.5) --------- --------- --------- --------- Continuing operations 3,775 3,556 371.9 380.4 Discontinued operations1 131 193 18.0 37.2 --------- --------- --------- --------- Total 3,906 3,749 389.9 417.6 --------- --------- --------- --------- Net interest (13.5) (10.7) --------- --------- Benchmark PBT 376.4 406.9 Amortisation of acquisition intangibles (9.4) (0.1) Exceptional items 35.7 21.1 Fair value remeasurements (1.2) - --------- --------- 401.5 427.9 Taxation (104.0) (112.4) Equity minority interests (21.0) (18.6) --------- --------- Profit attributable to equity shareholders 276.5 296.9 ----------------------------------- --------- --------- Benchmark EPS 25.5p 28.0p Basic EPS 28.0p 29.7p Weighted average number of Ordinary shares 986.5m 1001.1m ----------------------------------- --------- --------- The profit figure shown against each business above and used throughout this announcement is earnings before interest and taxation (EBIT), defined as profit before interest, amortisation of acquisition intangibles, exceptional items (i.e. gains or losses on disposal or closure of businesses and goodwill impairment charges), financing fair value remeasurements and taxation. It also includes the Group's share of associates' pre-tax profit. The same definition of EBIT is used in each table in this announcement 1 Discontinued operations are Wehkamp and Lewis ARGOS RETAIL GROUP (ARG) â€¢ Sales up 2% to Â£2.6bn â€¢ EBIT of Â£109m reflecting continued investment and a challenging UK retail environment â€¢ Both Argos and Homebase outperformed their markets â€¢ Gross margin maintained at Argos and slightly ahead at Homebase â€¢ Significant operational progress throughout ARG in first half â€¢ Cautious outlook for retail market demand over next 12 months 6 months to 30 September Sales EBIT --------------------- ----------------------- ------------------- 2005 2004 2005 2004 Â£m Â£m Â£m Â£m --------------------- --------- --------- --------- --------- Argos1 1,609 1,552 57.3 91.7 Homebase2 966 981 48.1 75.4 Financial Services 43 35 3.5 0.4 --------------------- --------- --------- --------- --------- Total 2,618 2,568 108.9 167.5 --------------------- --------- --------- --------- --------- EBIT margin 4.2% 6.5% --------------------- --------- --------- --------- --------- 1 2005 EBIT after Â£20m of charges relating to transitional costs for the Index stores, restructuring costs associated with changing staffing arrangements in-store and higher IFRS catalogue and payroll-related costs 2 Homebase sales and EBIT for 7 months to 30 September Following the recent agreement to dispose of Wehkamp, ARG is now focused on selling general merchandise in the UK and Ireland. It has a multi-brand, multi-channel offer, supported where appropriate by a central infrastructure in areas such as sourcing and supplier management, multi-channel ordering, home delivery and financial services. Against a background of continued weak retail spending, ARG made significant operational progress during the first half. Sales in the non-food, non-clothing market in the UK declined in the period on a like-for-like basis. However, both Argos and Homebase outperformed their markets, while Argos maintained and Homebase slightly improved gross margin. UK retailers are currently facing higher cost inflation which is adversely affecting Argos and, to a greater extent, Homebase, where operating costs are a higher proportion of sales. Underlying cost inflation across ARG is around 4% and ARG is managing its cost base carefully to help offset this. However, ARG believes that the most appropriate strategy, despite the current weak economic environment, is for both retail businesses to continue to invest to strengthen their long-term competitive position. This was evidenced by the extent of operational progress in the first half throughout ARG: Argos â€¢ successfully launched Argos Extra offering 17,700 lines in all stores; â€¢ refitted and reopened 30 of the 33 acquired Index stores; â€¢ opened a further 14 new stores; â€¢ added about 20% to its warehousing space to support Argos Direct, Argos Extra and direct importing; and â€¢ introduced a number of changes to staffing within stores to serve customers more effectively. Homebase â€¢ moved around 500 roles in buying, merchandising and other functions to Milton Keynes to enable them to operate more efficiently alongside Argos; â€¢ opened six new stores; â€¢ added 19 mezzanine floors to existing stores; and â€¢ commenced the roll-out of Furniture Extra into all stores. ARG is planning on the assumption that like-for-like sales will remain in decline for the non-food, non-clothing market as a whole for the next 12 months. However, it believes that the initiatives outlined above will enable ARG to emerge from this downturn in a stronger competitive position. Argos 6 months to 30 September 2005 2004 Change Â£m Â£m ------------------------- ------- ------- ------- Sales 1,609 1,552 4% Total change 4% 13% Like-for-like change (3%) 7% EBIT1 57.3 91.7 (38%) EBIT margin 3.6% 5.9% ------------------------- ------- ------- ------- At 30 September Number of stores 636 570 Of which: Argos Extra stocked-in 167 87 ------------------------- ------- ------- ------- 1 2005 EBIT after Â£20m of charges relating to transitional costs for the Index stores, restructuring costs associated with changing staffing arrangements in-store and higher IFRS catalogue and payroll-related costs In an increasingly competitive general merchandise market, Argos continues to grow share by winning a higher proportion of customers' spend by offering them the most compelling combination of choice, value and convenience. Operational review Argos Extra was successfully launched in all stores in July 2005, offering all Argos customers more choice (17,700 lines - up from 13,200 a year ago). This necessitated a great deal of operational change in store stockroom layouts and systems, as well as investment in staff training and new transport and distribution processes. At 30 September 2005, 167 stores stocked in the additional lines, with all remaining stores offering the order-in facility, where purchases can be collected in-store within three to four days or delivered to home. The performance of Argos Extra is in line with expectations and its national roll-out is expected to add 2-3% to sales in its first full year as consumers become more aware of the extended ranges. Argos continues to invest in lower prices for its customers. Prices on re-included lines in the Autumn/Winter catalogue are about 5% lower than last year. The proportion of directly imported goods in the current catalogue is 27%, up from 21% a year ago. Argos continues to reinforce its commitment to reduce prices during the life of the catalogue under its 'non stop price drop' campaign. Argos refitted and reopened 30 of the 33 stores purchased from Index in the first half, with the balance open by the end of October. Argos acquired these stores and the Index brand for Â£44m in July 2005. The transitional costs relating to the acquired stores were about Â£7m in the first half, covering staff training, launch costs and store costs incurred prior to commencing trading. Argos expects these stores to add 2-3% to total Argos sales in their first full year of operation. At 30 September 2005, Argos operated 636 stores, having opened a net 14 new stores in the period in addition to the Index stores. It plans to open over 20 stores in the second half. The return on capital on new stores continues to exceed the investment hurdle rate. Argos' customers continued to increase their use of its unique multi-channel capabilities. These allow customers to order or reserve goods in-store, by phone or on the Internet, for delivery to store or to home. In the first half, Argos Direct, the delivery to home operation, grew its sales by 6% and accounted for 25% of Argos' revenue. Sales via the Internet increased by 30%, representing 7% of total revenue. A further 7% of total sales were made via 'Check and Reserve', up 26% year-on-year. Quick pay kiosks are now in 320 stores and processed over 8% of sales in those stores in the first half. Argos increased its distribution space by around 20%, successfully opening two warehouses in the first half. In May, a 500,000 square foot warehouse was opened in Corby to support Argos Extra and increased direct importing. In July, a 730,000 square foot warehouse was opened in Faverdale, near Darlington, being the third site to service the home delivery of large products for Argos Direct. Although, as expected when first opened, these warehouses are currently running below capacity, this investment will support future growth in Argos. Financial review In the first half, Argos increased its sales by 4% in total. Of this, new stores contributed nearly 7%. Like-for-like sales declined by 3%, a better performance than the non-food, non-clothing market. Compared to the same period last year, there were good performances from consumer electronics, white goods, leisure and toys. Jewellery and housewares remained difficult. Despite an adverse product and promotional mix, gross margin was in line with last year, driven by further supply chain gains and the weaker dollar. As previously announced, first half profit at Argos has been affected by the transitional costs for the Index stores (Â£7m), the restructuring costs associated with changing staffing arrangements in-store (Â£4m) and an increase in share-based payment and pensions costs year-on-year under IFRS (Â£4m). In addition, under IFRS, the phasing of catalogue costs reduced first half profits by Â£5m, although this largely reverses in the second half. These factors contributed to EBIT at Argos in the first half being Â£57.3m (2004: Â£91.7m). This performance also reflects underlying cost inflation and continued investment in growth initiatives including Argos Extra, new space and distribution capacity. Homebase 7 months to 30 September 2005 2004 Change Â£m Â£m ------------------------- ------- ------- ------- Sales 966 981 (2%) Total change1 (1%) 6% Like-for-like change1 ( 4%) 4% EBIT 48.1 75.4 (36%) EBIT margin 5.0% 7.7% ------------------------- ------- ------- ------- At 30 September Number of stores 293 283 Of which: number with mezzanine floor 134 88 ------------------------- ------- ------- ------- 1 Total and like-for-like change for 2004 and 2005 excludes 29 February 2004 The strategy for Homebase remains unchanged despite an increasingly competitive and promotional DIY market. It aims to differentiate itself from other players by becoming the UK's leading home enhancement retailer through: â€¢ improving the existing core DIY business; â€¢ enhancing and extending its home furnishings offer; and â€¢ delivering synergies by leveraging the scale and expertise of ARG. Operational review Homebase increased share in a difficult DIY market in the first half, driven by effective execution of its strategic initiatives. Homebase continued to improve the shopping experience for its customers by raising in-store standards and offering better customer service. Homebase also introduced several new ranges in the first half including lighting, bathroom accessories and laminate flooring. This is part of a programme which has seen Homebase review and change the vast majority of its major product groups since it was acquired in December 2002. Homebase is on schedule with relocating certain functions, including buying and merchandising, to Milton Keynes which will enable them to operate more efficiently alongside Argos. As announced, the move affected about 500 roles. Nearly 40% of employees have chosen to relocate with the business and the majority of vacancies have also been filled. Costs of Â£18.3m were charged to Homebase's profit in the second half of the last financial year. Homebase continued to add new space, extending its reach into new catchments by opening stores and improving its offer in existing stores by adding mezzanines. In the first half, Homebase opened six new stores, bringing the total at 30 September 2005 to 293. A further seven openings are planned for the second half. Mezzanine floors were added to 19 existing stores in the period, with another four expected in the remainder of the year. The sales uplift for the latest mezzanines continues to track ahead of target. Homebase continued to differentiate itself from other players by emphasising home enhancement. This is being achieved by a combination of measures including the mezzanine roll-out, introducing new ranges and better use of ARG expertise. Furniture Extra, a catalogue offering 710 lines, is now available in all stores, with product displays in 126 stores. Appliances Extra, offering 400 lines sourced via Argos, was rolled out nationally in late October. Both of these initiatives have been accelerated by the existing supply chain capabilities of Argos. Financial review Sales at Homebase fell by 1% in total for the seven months to 30 September 2005. New stores contributed 3% growth while like-for-like sales declined by 4%, reflecting lower footfall but a further increase in average basket size, supported by growth in big ticket items. There were strong performances from horticulture (new ranges and merchandising) and from big ticket items, especially in kitchens and Furniture Extra, which benefited from new ranges and additional mezzanine space. Tools, building and seasonal gardening lines were weaker. Gross margin at Homebase in the first half was slightly ahead of last year driven by supply chain gains and the weaker dollar. EBIT in the first half was Â£48.1m (2004: Â£75.4m). This largely reflects the impact of a 1% decline in total sales, exacerbated by underlying cost inflation in the first half of around 4% on a business where operating costs account for a relatively high proportion of sales. Additional investment in new stores and mezzanines was only partly funded by cost savings and productivity improvements. As previously highlighted, Homebase is cautious about the immediate outlook for the DIY market which deteriorated over the course of the first half, especially in big ticket items. Looking forward, Homebase also expects increased promotional activity in the market. Although these factors will continue to affect sales and profit in the short term, Homebase remains confident that its strategy will ensure share gains over the longer term. ARG Financial Services (ARG FS) 6 months to 30 September 2005 2004 Â£m Â£m ---------------------------------------------- ------- ------- Sales 43 35 Earnings before funding costs 12.5 9.0 Funding costs (9.0) (8.6) ------- ------- 3.5 0.4 ---------------------------------------------- ------- ------- At 30 September Gross loan book 434 431 Number of active store card holders (000s) 914 839 ---------------------------------------------- ------- ------- ARG FS works in conjunction with Argos and Homebase to provide their customers with the most appropriate credit offers to drive product sales, while retaining the maximum possible profit from the transaction within ARG. It offers store cards (providing both revolving and promotional credit) and a range of insurance products. At 30 September 2005, the gross loan book was in line with that of a year ago. The store card loan book increased by about 20% year-on-year although growth was much slower in the first six months of this financial year, driven by the downturn in retail spending. Growth in the store card loan book was offset by the withdrawal of ARG FS from the very competitive market in new personal loans. Combined, these factors are now expected to lead to little change in the total loan book by the end of the financial year. Profit after funding costs increased to Â£3.5m, largely reflecting increasing maturity in the store card loan book. EXPERIAN â€¢ Sales up 29% and profit up 36% for continuing activities at constant exchange rates â€¢ Seventh consecutive six-month period of double-digit sales and profit growth â€¢ Good growth across many core businesses, helped by strong market demand â€¢ Experian Interactive now one-third of US sales - enhancing the growth profile â€¢ Acquisitions delivering returns ahead of hurdle rates 6 months to 30 September Sales EBIT --------------------- ---------------------- ---------------------- 2005 2004 2005 2004 Â£m Â£m Â£m Â£m --------- ---------- --------- --------- Experian North America 465 341 127.7 89.5 Experian International 341 283 72.6 58.1 --------- ---------- --------- --------- Total continuing activities 806 624 200.3 147.6 % growth at constant FX 29% 15% 36% 13% Discontinued activities 2 21 0.1 1.2 --------- ---------- --------- --------- Total reported 808 645 200.4 148.8 --------------------- --------- ---------- --------- --------- EBIT margin - excluding FARES 22.3% 20.8% - including FARES 24.9% 23.7% ----------------------------------- --------- --------- Notes (relevant to all Experian tables): Additional information on Experian is given in Appendix 1 EBIT margin is for continuing activities only. For FARES, the 20%-owned real estate information associate, Experian reports its share of profits but not sales. FARES is an integral part of Experian's business. Experian is a global leader in providing information solutions to organisations and consumers. It helps organisations find, develop and manage profitable customer relationships by providing information, decision-making solutions and processing services. It has over 50,000 clients in more than 60 countries. Experian is uniquely positioned to benefit from the key drivers of long-term growth, including expansion in: â€¢ the direct-to-consumer market and online advertising; â€¢ consumer credit and card usage; â€¢ multi-channel marketing; â€¢ fraud prevention; â€¢ vertical markets such as automotive and government; and â€¢ emerging markets such as Eastern Europe and Asia Pacific. Experian has a clear strategy to capitalise on these opportunities by building on its core businesses, selling value-added solutions and growing by targeted acquisitions. Experian has achieved an exceptional increase in sales and profit in the first half, through a combination of organic growth and acquisition. Excluding acquisitions, sales in the first half increased by 12% at constant exchange rates, with strong performances in most of the core businesses. Experian continues to improve sales execution, invest in new products, take share in non-traditional verticals and win contracts in many sectors. This has been supported by continuing investment in the infrastructure, such as developing new database platforms and improving information security. Through Interactive, Experian is well positioned to capitalise on the rapid growth in Internet usage by consumers and in spend on online advertising. Not only does Experian Interactive have strong positions in their markets, but they are now starting to benefit from sharing Experian's existing data, analytical skills and access to large clients. The skills in Experian Interactive have been successfully transferred to the UK where there is high growth in the emerging CreditExpert business. Building on a small but fast growing business, Experian continues to develop its presence in the new markets of Asia Pacific and Eastern Europe, where strong growth in consumer spending, consumer credit and Internet adoption is creating demand for Experian's products and solutions. Experian recently signed its first contract in Japan to sell decision solutions to JCB, the largest card issuer in Japan. During the first half, local management teams have been strengthened in all regions, especially Asia Pacific. In the first half, Experian acquired ten companies costing about Â£340m in total. These acquisitions complement existing activities and include LowerMyBills.com (online lead generation in the US mortgage sector), the Florida-based credit bureau affiliate, ClassesUSA and Affiliate Fuel (online lead generation in US education), Baker Hill (strengthening the business-to-business operation) and Vente (strengthening the online market research expertise), as well as Future Foundation and Prediction Analytics (to complement Experian Business Strategies). Acquisitions are a key part of Experian's strategy for growth. All acquisitions are sponsored and led by the operational management teams who have responsibility for integrating and running them once they become part of Experian. This process often enables Experian to accelerate the rate of growth of acquired companies by sharing expertise across the business. Acquisitions made in the last three full financial years are together generating double-digit post-tax returns, satisfying the Group's required investment hurdle rate. Experian North America 6 months to 30 September 2005 2004 Growth at Â£m Â£m constant FX -------------------------------- ------- ------- ------- Sales - Continuing activities 465 341 37% - Discontinued activities 1 7 na - Total reported 466 348 35% -------------------------------- ------- ------- ------- EBIT - Direct business 107.4 71.4 51% - FARES 20.3 18.1 13% ------- ------- ------- - Continuing activities 127.7 89.5 43% - Discontinued activities 0.2 (0.2) na - Total reported 127.9 89.3 44% -------------------------------- ------- ------- ------- EBIT margin - excluding FARES 23.1% 20.9% - including FARES 27.5% 26.2% -------------------------------- ------- ------- ------- Discontinued activities in 2005 include the two small businesses (NuEdge and Real Estate Solutions) that were sold during the second half of last year, together with a small part of the Florida affiliate that was sold in October 2005 Experian North America delivered an excellent performance in the period with strength across many business units. Although the first half was boosted by certain factors, Experian North America is executing well on the growth opportunities available to it. Operational review Sales from continuing activities increased by 37% in dollars in the first half. Corporate acquisitions contributed 19% to sales growth, with the largest being LowerMyBills.com which was purchased in May 2005. A similar contribution from acquisitions is currently expected in the second half of the financial year. Excluding corporate acquisitions, sales grew by an exceptional 18% in the first half. Experian North America faces much stronger comparatives in the second half (organic sales growth in H1 2004/5: +7%; H2 2004/5: +14%). Credit Information and Solutions together grew dollar sales by 18% excluding corporate acquisitions. Of this, 5% came from the FACT Act cost recovery charge which annualises from October 2005. Sales benefited from strong demand in the market, especially as credit card issuers acquired new customers more aggressively, driving strong prescreen sales. Experian also continued to win contracts for its value-added solutions such as event triggers, with accelerated adoption in the mortgage and bank sectors. Fraud and decision solutions also showed strong growth. Experian has now purchased 34 of its affiliate bureaux, the great majority of those available, for a total cost of about $300m. The integration of these bureaux, which continues to go well, initially improves Experian's cost structure, but more importantly enhances its ability to sell value-added products directly to clients in the regions previously controlled by the affiliates. Marketing Information and Solutions together increased dollar sales by 8% excluding acquisitions, as the benefits of the repositioning of the business came through. Experian saw good growth in database management, business marketing and in the automotive sector in the first half, although sales to the traditional catalogue sector remained weak. Email delivery via CheetahMail grew by more than 50% in the first half, reflecting the growth in email as an advertising and retention tool, the technical strength of the platform acquired with this business in March 2004 and the assistance given by Experian's other businesses in selling Cheetahmail's services. About two-thirds of the growth in CheetahMail in the first six months of the year came from existing clients with the remainder from new clients, many of whom were introduced by other parts of Experian. Experian Interactive accounted for about one-third of Experian North America's sales in the first half, reflecting a first time contribution from recent acquisitions, which are all trading to plan, as well as growth of nearly 40% in businesses owned for more than a year (Consumer Direct and MetaReward). Consumer Direct growth was driven by product innovation (Triple Advantage), by new members and by strengthened relationships with partners. MetaReward saw strong growth in the first half, although this is anticipated to slow significantly in the second half as it anniversaries some large one-off campaigns last year. Financial review In dollars, sales from continuing activities were $847m, up 37% compared to the same period last year. EBIT from direct businesses was $196m (2004: $130m), giving an EBIT margin of 23.1%. The margin advanced due to recovery of FACTA-related set-up costs incurred last year, a favourable mix and operational leverage from the underlying sales growth. There is, however, continued investment in new products, new platforms and information security. Recent legislation, such as the FACT Act, has introduced permanent changes to Experian's cost structure which will continue to be recovered through surcharges. FARES, the 20%-owned real estate information associate, increased profit year-on-year in dollars ($37m versus $33m) as it reduced costs and benefited from a better mortgage market. Experian International 6 months to 30 September 2005 2004 Growth at Â£m Â£m constant FX ----------------------------- ------- ------- ------- Sales - Continuing activities 341 283 19% - Discontinued activities 1 14 na ------- ------- ------- - Total reported 342 297 15% EBIT - Continuing activities 72.6 58.1 24% - Discontinued activities (0.1) 1.4 na ------- ------- ------- - Total reported 72.5 59.5 22% ----------------------------- ------- ------- ------- EBIT margin 21.3% 20.5% ----------------------------- ------- ------- ------- Experian International, which accounts for over 40% of Experian's worldwide revenue, had another strong half year, continuing its long record of double-digit sales and profit growth. Operational review At constant exchange rates, sales from continuing activities grew by 19% in the first half. Of this, 14% came from acquisitions, mainly QAS, a leading supplier of address management software. This business, which was acquired in October 2004, is trading ahead of plan, with much success in the public sector in particular. The contribution to sales from acquisitions in the second half is currently expected to be minimal. Excluding acquisitions, sales grew by 5%. Credit Information and Solutions together increased sales by 5% at constant exchange rates excluding acquisitions. The rate of growth in gross lending in the UK slowed in the first half, resulting in clients shifting their spending from customer acquisition to cross-selling to existing customers and to risk management. Despite this, Experian delivered growth in the UK, driven by value-added products and new wins in the telecommunication and public sectors. Underlying double-digit growth continued in the credit operations in Spain, Italy and Eastern Europe. Experian-Scorex, the credit solutions operation, saw continuing double-digit underlying growth and is investing in its consultancy services to help sell more complex solutions to clients. Marketing Information and Solutions together grew sales by 7% at constant exchange rates excluding acquisitions. Although there was some slowdown in marketing spend by UK financial services clients, this was more than compensated for by strong performances from the automotive and insurance verticals and by Business Strategies. From a small presence in the UK before acquisition, CheetahMail now manages email marketing campaigns on behalf of more than 100 major clients in the UK, especially in the financial services, retail and travel sectors. In euros, sales in Outsourcing grew by 4% excluding acquisitions. Strong growth in business process outsourcing is being driven by increased activity and new contract wins predominantly in the banking, utilities and telecommunications sectors. Cheque processing remains a mature market but Experian has won some significant contract extensions in this area as well as continuing to drive operational efficiency. Financial review Excluding discontinued activities, sales at Experian International increased by 19% at constant exchange rates. EBIT increased by 24%, delivering an 80 basis point improvement in the EBIT margin. This reflects a favourable mix, tight cost control and gaining critical mass in certain European markets. The level of revenue investment in building the operating teams in emerging markets will increase in the second half. BURBERRY GUS has a 65% stake in Burberry Group plc. The following summarises the latter's interim announcement released on 15 November 2005. 6 months to 30 September 2005 2004 Change at Â£m Â£m constant FX ---------------------------- ------- ------- ------- Sales 355 348 3%1 EBIT 75.8 77.6 (2%) EBIT margin 21.4% 22.3% ---------------------------- ------- ------- ------- At 30 September Number of retail locations 177 151 ---------------------------- ------- ------- ------- 1 Underlying change also excludes the financial effect of the acquisition of Burberry's Taiwan-related business In the context of a period marked by strategic investment and transition, Burberry delivered a solid performance in the first half. Sales increased by 3% on an underlying basis and EBIT increased by 2%, before the costs of Project Atlas, its infrastructure redesign initiative, which is progressing as planned. Burberry continued to execute on its core retail, wholesale and licensing strategies. Retail sales increased by 9% on an underlying basis, driven by contributions from new and refurbished stores. During the half, Burberry opened four stores, six concessions and completed seven store refurbishments, adding 8% new space on average in the first half. Underlying wholesale revenues declined by 1%, reflecting weak demand in some regions and the ongoing adjustment of the brand's wholesale/retail balance in the United States. Continental Europe, Asia and emerging markets achieved strong gains. On the basis of Spring/Summer 2006 merchandise orders received to date, Burberry anticipates a moderate underlying decline in wholesale revenues for the second half of the year. Licensing revenue in the first half increased by 3% on an underlying basis, or 6% excluding the effect of licenses cancelled in Japan as part of the programme to restrict selectively the distribution of certain products. Fragrance-related royalty growth slowed reflecting strong comparatives resulting from the Burberry Brit for men launch in the previous year. Excluding Â£3m of costs associated with Project Atlas, EBIT was Â£78.8m, slightly up on last year. Gross profit margin was 57.8% against 58.6% in the comparable period last year, largely resulting from increased levels of seasonal clearance activity. OTHER Discontinued operations 6 months to 30 September Sales EBIT ----------------------- -------------------- ------------------- 2005 2004 2005 2004 Â£m Â£m Â£m Â£m --------- --------- --------- --------- ----------------------- Lewis 20 86 5.2 24.8 Wehkamp 111 107 12.8 12.4 --------- --------- --------- --------- Total 131 193 18.0 37.2 ----------------------- --------- --------- --------- --------- A placing of GUS' remaining 50% stake in Lewis took place successfully in May 2005. As announced in October 2005, Wehkamp will be sold for about â‚¬390m (Â£265m) to Industri Kapital, a private equity firm, with completion expected in December, subject to European Union regulatory approval. As a result, Lewis and Wehkamp have both been treated as discontinued operations in the first half. Net interest At Â£14m, net interest costs were Â£3m higher than last year. This principally reflects higher net debt which arose largely as a result of acquisition spend, together with higher US dollar borrowing costs. This was partially offset by an increased net pension scheme credit due mainly to the effect of the Â£76m special pension contributions made in March 2005. Interest expense in the second half is expected to be ahead of the first half, mainly because of a full six-month impact of increased interest rates and the removal of the Burberry interest income, offset to some extent by the interest benefit arising on the proceeds of the sales of Lewis and Wehkamp. Amortisation of acquisition intangibles IFRS requires that, on acquisition, specific intangible assets are identified and recognised and then amortised over their useful economic lives. These include items such as brand names and customer lists, to which value is first attributed at the time of acquisition. In the first half of the year, this amortisation amounted to Â£9m which relates to Experian acquisitions undertaken since the Transition Date to IFRS of 1 April 2004. Exceptional items 6 months to 30 September 2005 2004 Â£m Â£m ---------------------------------------- ------- ------- Profit on disposal of Lewis shares 36 24 Profit on disposal of Burberry shares - 1 Loss on sale of other businesses - (4) ------- ------- Total 36 21 ---------------------------------------- ------- ------- The only costs treated as exceptional items are those associated with the disposal or closure of businesses. All other restructuring costs have been charged against EBIT in the divisions in which they were incurred. The exceptional item in the first half was a profit of Â£36m recorded on the placing of GUS' remaining 50% stake in Lewis in May 2005. A profit of Â£24m was recorded in the first half of last year on the sale of shares in Lewis via the Initial Public Offering. GUS expects to realise a gain, after costs, on the disposal of Wehkamp of about Â£25m on the transaction which will be taken in the second half of the current financial year. Fair value remeasurements A small proportion of the Group's derivatives do not qualify for hedge accounting under IFRS. Gains or losses on these arising from market movements are now charged or credited to the income statement. In the six months to 30 September 2005, this amounted to a charge of Â£1m (with no comparable credit or charge as the Group had previously elected to defer implementation of IAS 39). APPENDIX 1. Additional unaudited information on Experian Reported sales for Experian North America 6 months to 30 September 2005 2004 Underlying $m $m growth1 -------------------------------- -------- ------- ------- Credit - Information 308 262 18% - Solutions 76 62 15% ------- ------- ------- Total 384 324 18% Marketing - Information 83 76 7% - Solutions 107 88 9% ------- ------- ------- Total 190 164 8% Interactive 273 130 39% ------- ------- ------- Continuing activities 847 618 18% Discontinued activities 2 13 ------- ------- ------- Total reported sales 849 631 -------------------------------- -------- ------- ------- 1 Excluding corporate acquisitions Reported sales for Experian International 6 months to 30 September 2005 2004 Underlying Â£m Â£m growth1 ------------------------------- ------- ------- ------- Credit - Information 83 75 7% - Solutions 100 95 4% ------- ------- ------- Total 183 170 5% Marketing - Information 40 33 5% - Solutions 52 17 10% ------- ------- ------- Total 92 50 7% Outsourcing 68 65 4% Eliminations (2) (2) ------- ------- ------- Continuing activities 341 283 5% Discontinued activities 1 14 ------- ------- ------- Total reported sales 342 297 ------------------------------- ------- ------- ------- 1 Excluding acquisitions and at constant exchange rates 2. Unaudited reconciliation of Benchmark PBT to interim income statement Six months to 30 September 2005 2004 Â£m Â£m ------------------------------------------------- ------- ------- Benchmark PBT 376.4 406.9 Include: amortisation of acquisition intangibles (9.4) (0.1) Include: exceptional items relating to continuing activities: - Net profit on disposal of shares in Burberry - 1.4 - Loss on sale of other businesses - (5.7) ------ ------ - (4.3) Include: financing fair value remeasurements (1.2) - Include: tax expense on share of profits of associates - (0.8) Exclude: EBIT of discontinued operations (18.0) (37.2) Exclude: interest expense of discontinued operations 0.1 (0.2) ------- ------- Reported profit before tax1 347.9 364.3 Group tax expense1 (98.6) (102.2) ------- ------- Profit after tax1 249.3 262.1 Include: profit for the period from discontinued operations: - EBIT of discontinued operations 18.0 37.2 - Interest expense of discontinued operations (0.1) 0.2 - Exceptional items relating to discontinued operations: - Net profit on disposal of shares in Lewis 35.7 23.6 - Loss on sale of other businesses - 1.8 - Tax expense on discontinued operations (5.4) (9.4) ------ ------ 48.2 53.4 ------- ------- Profit for the financial period 297.5 315.5 Equity minority interests (21.0) (18.6) ------- ------- Profit attributable to equity shareholders 276.5 296.9 ------------------------------------------------ ------- ------- 1 As per Group income statement, for continuing operations only 3. Unaudited interim results IFRS restatement as released on 14 June 2005 Adjustments to Benchmark PBT by business for H1 2004/5 Six months to UK GAAP Share-based Pensions Other IFRS 30 Sept 2004 payments adjustments1 Â£m -------------- ------- ------- ------- ------- ------- Argos 85.7 (1.0) - 7.0 91.7 Homebase 76.3 (0.7) - (0.2) 75.4 ARG FS 0.4 - - - 0.4 ------- ------- ------- ------- ------- Total ARG 162.4 (1.7) - 6.8 167.5 Experian 90.7 (1.4) - - 89.3 North America International 62.0 (1.9) (1.0) 0.4 59.5 ------- ------- ------- ------- ------- Total Experian 152.7 (3.3) (1.0) 0.4 148.8 Burberry 78.8 (1.3) (0.1) 0.2 77.6 Central activities (10.8) (2.7) 0.3 (0.3) (13.5) ------- ------- ------- ------- ------- Continuing operations 383.1 (9.0) (0.8) 7.1 380.4 Discontinued operations Wehkamp 10.3 - 0.9 1.2 12.4 Lewis 24.8 - - - 24.8 ------- ------- ------- ------- ------- Total 418.2 (9.0) 0.1 8.3 417.6 Net interest (12.4) - 1.0 0.7 (10.7) ------- ------- ------- ------- ------- Benchmark PBT 405.8 (9.0) 1.1 9.0 406.9 -------------- ------- ------- ------- ------- ------- 1 These include catalogue costs, lease incentives and other adjustments that are not individually significant 4. Unaudited GUS pro forma results adjusting for Burberry, Wehkamp and Lewis Six months to 30 September 2005 Â£m As reported Exclude: Pro forma --------- --------- -------- Burberry Wehkamp Lewis -------------------- ------- ------- ------- ------- ------- Continuing operations 371.9 (75.8) - - 296.1 Discontinued operations 18.0 - (12.8) (5.2) - Net interest (13.5) (2.1) -1 0.21 (15.4) Pro forma interest on disposal proceeds - - 3.8 4.1 7.9 ------- ------- ------- ------- ------- Benchmark PBT 376.4 (77.9) (9.0) (0.9) 288.6 Amortisation of acquisition intangibles (9.4) - - - (9.4) Exceptional items 35.7 - - (35.7) - Fair value remeasurements (1.2) (0.2) - - (1.4) ------- ------- ------- ------- ------- 401.5 (78.1) (9.0) (36.6) 277.8 Taxation (104.0) 25.0 3.9 1.4 (73.7) Tax on pro forma interest on disposal proceeds - - (1.2) (1.2) (2.4) Equity minority (21.0) 18.9 - 1.7 (0.4) interests ------- ------- ------- ------- ------- Profit attributable to equity shareholders 276.5 (34.2) (6.3) (34.7) 201.3 Benchmark EPS 25.5p 25.0p Reported basic EPS 28.0p 23.7p Weighted average number of Ordinary 986.5 8483 shares (m) Net debt (1,768) (85) 2552 - (1,598) Net assets 3,376 (462) (222) - 2,692 -------------------- ------- ------- ------- ------- ------- 12 months to 31 March 2005 Â£m As reported Exclude: Pro forma --------- --------- -------- Burberry Wehkamp Lewis -------------------- ------- ------- ------- ------- ------- Continuing operations 852.0 (161.3) - - 690.7 Discontinued operations 77.7 - (22.5) (55.2) - Net interest (23.7) (4.9) -1 1.21 (27.4) Pro forma interest on disposal proceeds - - 7.7 13.6 21.3 ------- ------- ------- ------- ------- Benchmark PBT 906.0 (166.2) (14.8) (40.4) 684.6 Amortisation of acquisition intangibles (4.1) - - - (4.1) Exceptional items (3.5) (3.2) - (23.6) (30.3) Fair value remeasurements - - - - - ------- ------- ------- ------- ------- 898.4 (169.4) (14.8) (64.0) 650.2 Taxation (250.2) 53.4 3.6 16.1 (177.1) Tax on pro forma interest on disposal proceeds - - (2.3) (4.1) (6.4) Equity minority interests (49.4) 38.8 - 10.1 (0.5) ------- ------- ------- ------- ------- Profit attributable to equity shareholders 598.8 (77.2) (13.5) (41.9) 466.2 Benchmark EPS 61.5p 60.2p Reported basic EPS 59.9p 55.0p Weighted average number of Ordinary shares (m) 1000.1 8483 -------------------- ------- ------- ------- ------- ------- 1 Before adjusting for interest income on disposal proceeds 2 Represents expected proceeds net of costs 3 Current shares in issue (excluding own shares held in Treasury and in the ESOP Trust) multiplied by the illustrative consolidation ratio of 85.9% GUS plc UNAUDITED GROUP INCOME STATEMENT for the six months ended 30 September 2005 Six months to Six months to Year to 30.9.05 30.9.04 31.3.05 Continuing operations: Notes Â£m Â£m Â£m -------------------------- ------ ---------- --------- ------ Sales 4 3,775 3,556 7,378 Cost of sales (2,053) (2,010) (4,169) -------------------------- ------ ---------- --------- ------ Gross profit 1,722 1,546 3,209 Net operating expenses (1,381) (1,192) (2,407) -------------------------- ------ ---------- --------- ------ Operating profit 341 354 802 ---------- --------- ------ Interest income 16 19 35 Interest expense (30) (30) (58) Financing fair value remeasurements (1) - - ---------- --------- ------ Net financing costs (15) (11) (23) Share of post tax profits of associates 22 22 41 -------------------------- ------ ---------- --------- ------ Profit before tax 4 348 365 820 Group tax expense ---------- --------- ------ - UK (92) (88) (195) - Overseas (7) (14) (34) ---------- --------- ------ (99) (102) (229) -------------------------- ------ ---------- --------- ------ Profit after tax 249 263 591 Profit for the period from discontinued operations 6 49 53 57 -------------------------- ------ ---------- --------- ------ Profit for the financial period 298 316 648 -------------------------- ------ ---------- --------- ------ Attributable to Equity shareholders in the parent company 277 297 599 Minority interests 21 19 49 -------------------------- ------ ---------- --------- ------ Profit for the financial period 298 316 648 -------------------------- ------ ---------- --------- ------ Dividend for the period 10 83 90 293 -------------------------- ------ ---------- --------- ------ Earnings per share 9 Continuing operations - Basic 23.1p 24.4p 54.2p - Diluted 22.8p 24.1p 53.5p Continuing and discontinued operations - Basic 28.0p 29.7p 59.9p - Diluted 27.6p 29.3p 59.1p Dividend per share 10 9.6p 9.0p 29.5p -------------------------- ------ ---------- --------- ------ Non-GAAP measures Reconciliation of profit before tax to Benchmark PBT Profit before tax 4 348 365 820 exclude: amortisation of acquisition intangibles 5 9 - 4 exclude: exceptional items relating to continuing operations 5 - 4 4 exclude: financing fair value remeasurements 5 1 - - exclude: tax expense on continuing operations' share of profit of associates 4 - 1 1 include: EBIT of discontinued operations 6 18 37 78 include: interest expense of discontinued operations 6 - - (1) -------------------------- ------ ---------- --------- ------ Benchmark PBT 4 376 407 906 -------------------------- ------ ---------- --------- ------ Benchmark earnings per share 9 - Basic 25.5p 28.0p 61.5p - Diluted 25.1p 27.6p 60.7p -------------------------- ------ ---------- --------- ------ GUS plc UNAUDITED GROUP BALANCE SHEET at 30 September 2005 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m ----------------------------------- --------- -------- -------- ASSETS Non-current assets Goodwill 2,822 2,367 2,477 Other intangible assets 425 261 312 Property, plant and equipment 1,117 989 1,070 Investment in associates 127 109 110 Other investments 4 12 8 Deferred tax assets 278 284 279 Trade and other receivables 86 488 454 ----------------------------------- --------- -------- -------- 4,859 4,510 4,710 Current assets Inventories 1,015 950 1,017 Trade and other receivables 1,130 1,229 1,138 Other financial assets and investments 69 31 31 Cash and cash equivalents 309 469 347 ----------------------------------- --------- -------- -------- 2,523 2,679 2,533 Assets of discontinued operations classified as held for sale 281 - - ----------------------------------- --------- -------- -------- Total assets 7,663 7,189 7,243 ----------------------------------- --------- -------- -------- LIABILITIES Non-current liabilities Trade and other payables (135) (118) (97) Loans and borrowings (1,653) (1,318) (1,676) Deferred tax liabilities (190) (157) (182) Retirement benefit obligations (102) (199) (112) ----------------------------------- --------- -------- -------- (2,080) (1,792) (2,067) Current liabilities Trade and other payables (1,624) (1,606) (1,597) Loans and borrowings (455) (440) (129) Other financial liabilities (9) - - Current tax liabilities (60) (82) (66) ----------------------------------- --------- -------- -------- (2,148) (2,128) (1,792) Liabilities of discontinued operations classified as held for sale (59) - - ----------------------------------- --------- -------- -------- Total liabilities (4,287) (3,920) (3,859) ----------------------------------- --------- -------- -------- Net assets 3,376 3,269 3,384 ----------------------------------- --------- -------- -------- EQUITY Capital and reserves Called up share capital 255 254 254 Other reserves including retained earnings 2,954 2,758 2,874 ----------------------------------- --------- -------- -------- Total equity shareholders' funds 3,209 3,012 3,128 Equity minority interests 167 257 256 ----------------------------------- --------- -------- -------- Total equity 3,376 3,269 3,384 ----------------------------------- --------- -------- -------- GUS plc UNAUDITED GROUP CASH FLOW STATEMENT for the six months ended 30 September 2005 Six months to Six months to Year to 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m -------------------------------------- --------- --------- --------- Continuing operations Cash flows from operating activities Operating profit 341 354 802 Less: profit on disposal of shares in Burberry (Note 5) - (1) (3) Less: loss on sale of other businesses (Note 5) - 5 7 Depreciation and amortisation 152 126 264 Credit in respect of share incentive schemes 12 19 47 Change in working capital (60) 7 (189) Interest paid (22) (12) (61) Interest received 12 11 31 Dividends received from associates 17 14 26 Tax paid (54) (108) (219) -------------------------------------- --------- --------- --------- Net cash inflow from operating activities 398 415 705 -------------------------------------- --------- --------- --------- Continuing operations Cash flows from investing activities Purchase of property, plant and equipment (164) (130) (300) Sale of property, plant and equipment 5 10 21 Purchase of intangible assets (50) (41) (110) Sale of intangible assets 1 - 5 Purchase of shares in Burberry - - (8) Buy-back of shares in Burberry (21) - (22) Sale of shares in Burberry 2 - 2 Purchase of fixed asset investments (7) (14) (5) Acquisition of subsidiaries, net of cash acquired (388) (29) (176) Disposal of subsidiaries 127 5 106 -------------------------------------- --------- --------- --------- Net cash flows used in investing activities (495) (199) (487) -------------------------------------- --------- --------- --------- Continuing operations Cash flows from financing activities Purchase of own shares (33) (78) (222) Issue of Ordinary shares 16 28 35 Sale of own shares - - 16 New borrowings 226 - 473 Repayment of borrowings - (33) (355) Capital element of finance lease rental payments (2) (3) (5) Equity dividends paid (202) (191) (281) Dividends paid to minority interests (7) (5) (8) -------------------------------------- --------- --------- --------- Net cash flows used in financing activities (2) (282) (347) -------------------------------------- --------- --------- --------- Net decrease in cash and cash equivalents - continuing operations (99) (66) (129) Net increase/(decrease) in cash and cash equivalents - discontinued operations 11 (46) (41) -------------------------------------- --------- --------- --------- Net decrease in cash and cash equivalents (88) (112) (170) -------------------------------------- --------- --------- --------- Movement in cash and cash equivalents from continuing operations Cash and cash equivalents at 1 April - continuing operations 254 383 383 Net decrease in cash and cash equivalents (99) (66) (129) -------------------------------------- --------- --------- --------- Cash and cash equivalents at end of period - continuing operations 155 317 254 -------------------------------------- --------- --------- --------- Reconciliation of net increase in cash and cash equivalents to movement in net debt Net debt at 1 April - as reported (1,427) (1,200) (1,200) Cash and cash equivalents at 1 April - discontinued operations (3) (44) (44) Other financial assets at 1 April - discontinued operations (31) (31) (31) -------------------------------------- --------- --------- --------- Net debt at 1 April - continuing operations (1,461) (1,275) (1,275) Net decrease in cash and cash equivalents (99) (66) (129) (Increase)/decrease in debt (226) 33 (113) Exchange and other movements 2 19 56 -------------------------------------- --------- --------- --------- Net debt at end of period - continuing operations (1,784) (1,289) (1,461) -------------------------------------- --------- --------- --------- GUS plc UNAUDITED GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE for the six months ended 30 September 2005 Six months to Six months to Year to 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m -------------------------------------- --------- --------- --------- Net income/(expense) recognised directly in equity: Cash flow hedges 4 - - Net investment hedge 5 - - Fair value (losses)/gains in the period (3) - 6 Actuarial losses in respect of defined benefit pension schemes (8) - (5) Currency translation differences 3 10 3 -------------------------------------- --------- --------- --------- Net income recognised directly in equity for the period 1 10 4 Cumulative adjustment for the implementation of IAS 39 (Note 11) 11 - - -------------------------------------- --------- --------- --------- Net income recognised directly in equity 12 10 4 Profit for the financial period 298 316 648 -------------------------------------- --------- --------- --------- Total recognised income for the period 310 326 652 -------------------------------------- --------- --------- --------- Attributable to: Equity shareholders in the parent company 289 303 603 Minority interests 21 23 49 -------------------------------------- --------- --------- --------- Total recognised income for the period 310 326 652 -------------------------------------- --------- --------- --------- UNAUDITED GROUP RECONCILIATION OF MOVEMENTS IN EQUITY for the six months ended 30 September 2005 Six months to Six months to Year to 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m -------------------------------------- --------- --------- --------- Total equity at 1 April 3,384 3,089 3,089 Cumulative adjustment for the implementation of IAS 39 (Note 11) 11 - - -------------------------------------- --------- --------- --------- Total equity at 1 April, as restated for the adoption of IAS 39 3,395 3,089 3,089 Profit for the financial period 298 316 648 Net income recognised directly in equity for the period 1 10 4 Employees share option scheme: - value of employee services 12 10 35 - proceeds from shares issued 16 28 34 (Decrease)/increase in minority interests arising due to corporate transactions (108) 85 62 Shares cancelled on purchase - (30) (30) Purchase of own shares (33) (48) (176) Equity dividends paid during the period (202) (191) (281) Dividends paid to minority shareholders (7) (5) (11) Recycled cumulative exchange loss in respect of divestment 3 3 3 Tax credit in respect of items taken directly to equity 1 2 7 -------------------------------------- --------- --------- --------- Total equity at end of period 3,376 3,269 3,384 -------------------------------------- --------- --------- --------- Attributable to: Equity shareholders in the parent company 3,209 3,012 3,128 Minority interests 167 257 256 -------------------------------------- --------- --------- --------- Total equity at end of period 3,376 3,269 3,384 -------------------------------------- --------- --------- --------- GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS for the six months ended 30 September 2005 1. Basis of preparation For the year ending 31 March 2006, the Group will prepare its financial statements under International Financial Reporting Standards ('IFRS') adopted for use in the European Union. These will be those Standards, subsequent amendments, future Standards and related interpretations issued and adopted by the International Accounting Standards Board ('IASB') that have been endorsed by the European Commission. This interim report has been prepared in accordance with the Listing Rules of the Financial Services Authority, and with IFRS compliant accounting policies that will be followed in preparing the Group's financial statements for the year ending 31 March 2006, which were published in full on 14 June 2005 and are available on the Group's website, at www.gusplc.com/gus/investors/ifrs. In developing its accounting policies, the Group has anticipated that the amendments to IAS 19 'Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosure' and IAS 39 'Financial Instruments: Recognition and Measurement - The Fair Value Option' will be endorsed for use in the EU. This endorsement process is ongoing, such that applicable IFRS, the Group's accounting policies and the presentation of its results are therefore subject to change. As permitted by IFRS 1 'First-time Adoption of International Financial Reporting Standards', the Group elected to defer implementation of IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement' until the year ending 31 March 2006. The adjustment required as at 1 April 2005 is set out in note 11 below. The interim financial statements comprise the results for the six months ended 30 September 2005 and 30 September 2004 and the year ended 31 March 2005. The results for the six months ended 30 September 2004 have been extracted from the Group's interim report for that period, and the results for the year ended 31 March 2005 have been extracted from the Group's statutory financial statements for that year, both having been adjusted for the effects of changes in accounting policy on transition to IFRS. These adjustments, which are set out in detail on the Group's website, are summarised on pages 91 to 94 of the Group's statutory financial statements for the year ended 31 March 2005, and have been adjusted to reflect the reclassification of Wehkamp as a discontinued operation. The financial information shown for the year ended 31 March 2005 does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The Group's statutory financial statements prepared under UK GAAP for that period have been delivered to the Registrar of Companies. The report of the auditors on those financial statements was unqualified and did not contain a statement under either section 237(2) or (3) of the Companies Act 1985. The preparation of interim financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are based on management's best judgment at the date of the interim financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The interim financial statements are unaudited but have been reviewed by the auditors. Their report is set out on page 33. 2. Taxation The effective rate of tax of 27.7% (2005: 26.5%) is based on the estimated tax charge for the full year on Benchmark PBT. Benchmark PBT is defined as profit before amortisation of acquisition intangibles, exceptional items, financing fair value remeasurements and taxation. It includes the Group's share of associates' pre-tax profit and the profits or losses of discontinued operations up to the date of disposal or closure. 3. Foreign currency Average Closing --------------- --------------- Six months to Year to 30.9.05 30.9.04 31.3.05 30.9.05 30.9.04 31.3.05 ------- ------- ------- ------- ------- ------- The principal exchange rates used were as follows: US dollar 1.82 1.81 1.85 1.76 1.80 1.88 Euro 1.47 1.49 1.47 1.47 1.46 1.45 South African rand 11.80 11.72 11.47 n/a 11.59 11.76 ----------------------------- ------- ------- ------- ------- ------- ------- Assets and liabilities of overseas undertakings are translated into sterling at the rates of exchange ruling at the balance sheet date and the income statement is translated into sterling at average rates of exchange. The average rate used in the current period for the South African rand is that for the period to 19 May 2005, the date on which the Group's remaining interest in Lewis Group was sold. GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED) for the six months ended 30 September 2005 4. Segmental information (continued) Six months ended 30 September 2005 Continuing Operations ---------------------------- Financial ARG Discontinued Argos Homebase Services Total Experian Burberry Other Total Operations Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Sales Sales to external customers 1,609 966 43 2,618 802 355 - 3,775 131 3,906 Inter-segment sales - - - - 6 - (6) - - - ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Total sales 1,609 966 43 2,618 808 355 (6) 3,775 131 3,906 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit EBIT* 57 48 4 109 200 76 (13) 372 18 390 Net interest - - - - - - (14) (14) - (14) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Benchmark PBT** 57 48 4 109 200 76 (27) 358 18 376 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Exceptional items - - - - - - - - 36 36 Amortisation of acquisition intangibles - - - - (9) - - (9) - (9) Financing fair value remeasurements - - - - - - (1) (1) - (1) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Exceptional and other adjustment items (note 5) - - - - (9) - (1) (10) 36 26 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Tax expense on share of profit of associates - - - - - - - - - - ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit before tax 57 48 4 109 191 76 (28) 348 54 402 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Group tax expense (99) (5) (104) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit for the financial period 249 49 298 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- * EBIT is defined as profit before amortisation of acquisition intangibles, exceptional items, net financing costs and taxation and includes the Group's share of pre-tax profits of associates. ** The Group regards 'Benchmark PBT' as the best measure of performance and as such it is disclosed above as the segment result. Benchmark PBT is defined as profit before amortisation of acquisition intangibles, exceptional items, financing fair value remeasurements and taxation. It includes the Group's share of associates' pre-tax profit and the profits or losses of discontinued operations up to the date of disposal or closure. Six months ended 30 September 2004 Continuing Operations ---------------------------- Financial ARG Discontinued Argos Homebase Services Total Experian Burberry Other Total Operations Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Sales Sales to external customers 1,552 981 35 2,568 640 348 - 3,556 193 3,749 Inter-segment sales - - - - 5 - (5) - - - ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Total sales 1,552 981 35 2,568 645 348 (5) 3,556 193 3,749 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit EBIT* 92 75 - 167 149 78 (13) 381 37 418 Net interest - - - - - - (11) (11) - (11) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Benchmark PBT** 92 75 - 167 149 78 (24) 370 37 407 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Exceptional items - - - - (5) 1 - (4) 25 21 Amortisation of acquisition intangibles - - - - - - - - - - ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Exceptional and other adjustment items (note 5) - - - - (5) 1 - (4) 25 21 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Tax expense on share of profit of associates - - - - (1) - - (1) - (1) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit before tax 92 75 - 167 143 79 (24) 365 62 427 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Group tax expense (102) (9) (111) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit for the financial period 263 53 316 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- * EBIT is defined as profit before amortisation of acquisition intangibles, exceptional items, net financing costs and taxation and includes the Group's share of pre-tax profits of associates. ** The Group regards 'Benchmark PBT' as the best measure of performance and as such it is disclosed above as the segment result. Benchmark PBT is defined as profit before amortisation of acquisition intangibles, exceptional items, financing fair value remeasurements and taxation. It includes the Group's share of associates' pre-tax profit and the profits or losses of discontinued operations up to the date of disposal or closure. GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED) for the six months ended 30 September 2005 4. Segmental information Year ended 31 March 2005 Continuing Operations ---------------------------- Financial ARG Discontinued Argos Homebase Services Total Experian Burberry Other Total Operations Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Sales Sales to external customers 3,652 1,580 81 5,313 1,350 715 - 7,378 409 7,787 Inter-segment sales - - - - 12 - (12) - - - ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Total sales 3,652 1,580 81 5,313 1,362 715 (12) 7,378 409 7,787 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit EBIT* 305 90 - 395 317 161 (21) 852 78 930 Net interest - - - - - - (23) (23) (1) (24) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Benchmark PBT** 305 90 - 395 317 161 (44) 829 77 906 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Exceptional items - - - - (7) 3 - (4) - (4) Amortisation of acquisition intangibles - - - - (4) - - (4) - (4) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Exceptional and other adjustment items (note 5) - - - - (11) 3 - (8) - (8) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Tax expense on share of profit of associates - - - - (1) - - (1) - (1) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit before tax 305 90 - 395 305 164 (44) 820 77 897 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Group tax expense (229) (20) (249) ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- Profit for the financial period 591 57 648 ---------------- ----- ------ ------ ----- ------ ------ ----- ----- ------ ------- * EBIT is defined as profit before amortisation of acquisition intangibles, exceptional items, net financing costs and taxation and includes the Group's share of pre-tax profits of associates. ** The Group regards 'Benchmark PBT' as the best measure of performance and as such it is disclosed above as the segment result. Benchmark PBT is defined as profit before amortisation of acquisition intangibles, exceptional items, financing fair value remeasurements and taxation. It includes the Group's share of associates' pre-tax profit and the profits or losses of discontinued operations up to the date of disposal or closure. 5. Exceptional and other adjustment items Six months to Year to -------------------- 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m ---------------------------------- -------- ------- -------- Exceptional items Continuing operations: Disposal of shares in Burberry - 1 3 Loss on sale of other businesses - (5) (7) ---------------------------------- -------- ------- -------- - (4) (4) ---------------------------------- -------- ------- -------- Discontinued operations (note 6): Profit on disposal of Lewis Group 36 24 24 Profit/(loss) on disposal of other discontinued operations - 1 (24) ---------------------------------- -------- ------- -------- 36 25 - ---------------------------------- -------- ------- -------- Total exceptional items 36 21 (4) ---------------------------------- -------- ------- -------- Other adjustment items Continuing operations: Amortisation of acquisition intangibles (9) - (4) Financing fair value remeasurements (1) - - ---------------------------------- -------- ------- -------- Total other adjustment items (10) - (4) ---------------------------------- -------- ------- -------- Total exceptional and other adjustment items 26 21 (8) ---------------------------------- -------- ------- -------- The only costs treated as exceptional items are those associated with the disposal or closure of businesses. All other restructuring costs are charged against EBIT in the divisions in which they are incurred. The loss on sale of other businesses in the prior period was principally in respect of the sales by Experian of two small non-core businesses. The income in respect of Burberry shares in the prior period arose from the exercise or lapse of awards under executive share schemes. The profit on the disposal of Lewis Group relates to the placing of GUS' remaining 50% stake in May 2005. The profit in the prior period relates to the Initial Public Offering of Lewis Group in September 2004. IFRS requires that, on acquisition, specific intangible assets are identified and recognised separately from goodwill and then amortised over their useful economic lives. These include items such as brand names and customer lists, to which value is first attributed at the time of acquisition. As permitted by IFRS, acquisitions prior to 1 April 2004 have not been restated. As it did with goodwill under UK GAAP, the Group has excluded amortisation of these acquisition intangibles from its definition of Benchmark PBT because such a charge is based on uncertain judgments about the value and economic life of such items. A small proportion of the Group's derivatives do not qualify for hedge accounting under IFRS. Gains or losses on these derivatives arising from market movements are credited or charged to the income statement. GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED) for the six months ended 30 September 2005 6. Discontinued operations The results for discontinued operations were as follows: Six months to Year to ------------------ 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m ---------------------------------- -------- ------- -------- Sales Lewis Group 20 86 187 Wehkamp 111 107 222 ---------------------------------- -------- ------- -------- 131 193 409 ---------------------------------- -------- ------- -------- EBIT Lewis Group 5 25 55 Wehkamp 13 12 23 ---------------------------------- -------- ------- -------- 18 37 78 Exceptional item - profit on Initial Public Offering of Lewis Group - 24 24 Net interest - - (1) ---------------------------------- -------- ------- -------- Pre-tax profit of discontinued operations 18 61 101 Tax charge in respect of pre-tax profit (5) (9) (20) ---------------------------------- -------- ------- -------- Post-tax profit of discontinued operations 13 52 81 ---------------------------------- -------- ------- -------- Profit/(loss) on disposal of discontinued operations Lewis Group 36 - - Home shopping and Reality businesses - 1 (24) ---------------------------------- -------- ------- -------- 36 1 (24) Tax charge in respect of profit/ (loss) on disposal - - - ---------------------------------- -------- ------- -------- Post-tax profit/(loss) on disposal 36 1 (24) ---------------------------------- -------- ------- -------- Profit for the period from discontinued operations 49 53 57 ---------------------------------- -------- ------- -------- On 19 May 2005, the Group announced the sale of its remaining interest in Lewis Group Limited. On 28 October 2005, the Group announced an agreement to sell Wehkamp, the leading home shopping brand in the Netherlands. As a result, these operations have been reclassified as discontinued. The disposal of the home shopping and Reality businesses took place in May 2003, and provision for the loss on disposal was made in the financial statements for the year ended 31 March 2003, with a further charge relating to professional fees and other costs associated with the transaction being made the following year. Following agreement of the completion statements and the settlement of certain warranty claims, a further charge was made in the year ended 31 March 2005 reflecting full and final settlement of all claims that have arisen from the disposal of these businesses. The cash flows attributable to discontinued operations comprise: Six months to Year to ------------------ 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m ---------------------------------- -------- ------- -------- From operating activities 13 (42) (32) From investing activities (2) (4) (6) From financing activities - - (3) ---------------------------------- -------- ------- -------- Net increase in cash and cash equivalents in discontinued operations 11 (46) (41) ---------------------------------- -------- ------- -------- GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2005 7. Business combinations During the six months ended 30 September 2005, the Group has made several acquisitions, none of which are considered individually material to the Group. Most of these were made by Experian in North America, including LowerMyBills.com, the Florida-based affiliate credit bureau, ClassesUSA, Baker Hill and Vente. In the UK, Argos acquired 33 former Index stores and the Index brand from Littlewoods Limited. In aggregate, it is estimated that these acquired businesses contributed revenues of Â£64m and profit after tax of Â£12m to the Group for the periods from their respective acquisition dates to 30 September 2005. Due to the acquired entities using different accounting policies prior to acquisition and previously reporting to different period ends it has not been possible to estimate the impact on Group turnover or results, as if those acquisitions had been completed on 1 April 2005. Details of the net assets acquired and the provisional goodwill are as follows: Book value Fair value Â£m Â£m -------------------------------------- -------- -------- Intangible assets 1 96 Tangible assets 4 4 Deferred tax assets 1 1 Inventories 1 1 Trade and other receivables 20 20 Current tax recoverable 16 16 Cash and cash equivalents 6 6 Trade and other payables (26) (26) -------------------------------------- -------- -------- 23 118 -------- Goodwill 322 -------------------------------------- -------- -------- 440 -------------------------------------- -------- -------- Satisfied by: Cash 388 Acquisition expenses 6 Deferred consideration 46 -------------------------------------- -------- -------- 440 -------------------------------------- -------- -------- The fair values set out above contain certain provisional amounts which will be finalised no later than one year after the date of acquisition. Goodwill represents the synergies, assembled workforce and future growth potential of the businesses acquired. 8. Analysis of Group net debt 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m ------------------------------------- -------- -------- -------- Cash and cash equivalents 171 317 259 Current asset investments - 31 31 Other financial assets 31 - - Debt due within one year (312) (284) (35) Finance leases (5) (9) (8) Debt due after more than one year (1,653) (1,313) (1,674) ------------------------------------- -------- -------- -------- Net debt at end of period (1,768) (1,258) (1,427) ------------------------------------- -------- -------- -------- Continuing operations (1,784) (1,289) (1,461) Discontinued operations 16 31 34 ------------------------------------- -------- -------- -------- Net debt at end of period (1,768) (1,258) (1,427) ------------------------------------- -------- -------- -------- Net debt at 30 September 2005 is stated after deducting Â£31m in respect of the fair value of the interest rate swaps related to the Group's borrowings. GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2005 9. Basic and diluted earnings per share The calculation of basic earnings per share for continuing and discontinued operations is based on profit attributable to equity shareholders of the Company divided by the weighted average number of Ordinary shares in issue during the period (excluding own shares held in Treasury and in the ESOP trust). Benchmark earnings per share represents Benchmark PBT (as defined in note 4 above) less attributable taxation (calculated at the Group's effective tax rate), divided by the weighted average number of shares in issue, and is disclosed to indicate the underlying profitability of the Group. The calculation of diluted earnings per share reflects the potential dilutive effect of employee share incentive schemes. Six months to Year to -------------- 30.9.05 30.9.04 31.3.05 Basic earnings per share: pence pence pence ---------------------------------------------- -------- -------- -------- Continuing operations 23.1 24.4 54.2 Discontinued operations 4.9 5.3 5.7 ---------------------------------------------- -------- -------- -------- Continuing and discontinued operations 28.0 29.7 59.9 Effect of exceptional and other adjustment items (note 5) (2.6) (2.1) 0.8 Adjustment between effective and actual rates of taxation 0.1 0.4 0.8 ---------------------------------------------- -------- -------- -------- Benchmark 25.5 28.0 61.5 ---------------------------------------------- -------- -------- -------- Diluted earnings per share: ---------------------------------------------- -------- -------- -------- Continuing operations 22.8 24.1 53.5 Discontinued operations 4.8 5.2 5.6 ---------------------------------------------- -------- -------- -------- Continuing and discontinued operations 27.6 29.3 59.1 ---------------------------------------------- -------- -------- -------- Benchmark 25.1 27.6 60.7 ---------------------------------------------- -------- -------- -------- 30.9.05 30.9.04 31.3.05 Â£m Â£m Â£m ---------------------------------------------- -------- -------- -------- Earnings - continuing operations 228 244 542 Discontinued operations 49 53 57 ---------------------------------------------- -------- -------- -------- Continuing and discontinued operations 277 297 599 Effect of exceptional and other adjustment items (note 5) (26) (21) 8 Adjustment between effective and actual rates of taxation - 4 8 ---------------------------------------------- -------- -------- -------- Benchmark earnings 251 280 615 ---------------------------------------------- -------- -------- -------- 30.9.05 30.9.04 31.3.05 m m m ---------------------------------------------- -------- -------- -------- Weighted average number of Ordinary shares in issue during the period* 986.5 1,001.1 1,000.1 Dilutive effect of share incentive awards 15.1 12.9 12.6 ---------------------------------------------- -------- -------- -------- Dilutive weighted average number of Ordinary shares in issue during the period 1,001.6 1,014.0 1,012.7 ---------------------------------------------- -------- -------- -------- * Excluding own shares held in Treasury and in the ESOP trust 10. Dividend Six months to Year to -------------- 30.9.05 30.9.04 31.3.05 pence pence pence ------------------------------- -------- -------- -------- Interim 9.6 9.0 9.0 Final - - 20.5 ------------------------------- -------- -------- -------- 9.6 9.0 29.5 ------------------------------- -------- -------- -------- The dividends paid in August 2005 and August 2004 were Â£203m (20.5p per share) and Â£191m (19.0p per share) respectively. An interim dividend of 9.6p per new GUS share (2004 9.0p per existing GUS share) has been proposed (but not provided) and will be paid on 3 February 2006 to shareholders on the Register at the close of business on 6 January 2006. The cost of this dividend (2004 Â£90m) will depend on the number of shares in issue on 6 January 2006. If the proposals to effect a demerger of the Group's interest in Burberry and a consolidation of GUS shares are approved by shareholders at the EGM on 12 December 2005, the cost is expected to be approximately Â£83m. Details of the share consolidation will be set out in the demerger circular, which the Group expects to post to shareholders on 19 November. GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2005 11. Transitional adjustment on first time adoption of IAS 39 As permitted by IFRS 1 'First-time Adoption of International Financial Reporting Standards', the Group elected to defer implementation of IAS 39 'Financial Instruments: Recognition and Measurement' until the year ending 31 March 2006. On adoption of IAS 39, the Group has taken the fair value option in respect of its outstanding eurobonds, euronotes and perpetual securities. Gains or losses on these items resulting from changes in interest rates are taken to income, together with the gains or losses on the associated financial instruments. The effect of adopting IAS 39 on the balance sheet as at 1 April 2005 is as follows: Transition 31.3.05 adjustment 1.4.05 Â£m Â£m Â£m ------------------------------------------------ ------- ------ ----- Current assets Other financial other investments 31 3 34 assets - interest rate swaps - 13 13 currency swaps and forward currency contracts 2 10 12 ------------------------------------------------ ------- ------ ----- 33 26 59 ------------------------------------------------ ------- ------ ----- Current liabilities Trade and other payables (1,597) (3) (1,600) Other financial liabilities - currency swaps and forward currency contracts - (3) (3) ------------------------------------------------ ------- ------ ----- (1,597) (6) (1,603) ------------------------------------------------ ------- ------ ----- Non-current liabilities Loans and borrowings (1,676) (5) (1,681) Deferred tax liabilities (182) (4) (186) ------------------------------------------------ ------- ------ ----- (1,858) (9) (1,867) ------------------------------------------------ ------- ------ ----- Other assets and liabilities 6,806 - 6,806 ------------------------------------------------ ------- ------ ----- Total equity 3,384 11 3,395 ------------------------------------------------ ------- ------ ----- The most significant financial instruments for the Group are its forward sales of foreign currencies to hedge the value of investments in group businesses outside the UK. The treatment of these is effectively the same under IFRS as under UK GAAP, with the fair value being recognised in the balance sheet and mark-to-market re-measurements being taken through the Group statement of recognised income and expense ('SORIE') rather than the Group income statement. Many, but not all, of the Group's other derivatives also qualify for hedge accounting under IFRS. These gains or losses are taken through the SORIE, not the income statement. Some of the Group's derivatives do not qualify for hedge accounting. Gains or losses on these arising from market movements are credited or charged to the income statement. These financing fair value remeasurements are excluded from Benchmark PBT and Benchmark earnings per share. 12. Related parties There were no material transactions with related parties during the period. In the comparative periods, Experian companies made net sales and recharges to associated undertakings of Â£5m in the six months ended 30 September 2004 and Â£10m in the year ended 31 March 2005. There were no other material transactions with related parties in either comparative period. GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2005 13. Summary of the impact of IFRS on the comparative periods Detailed disclosures in respect of the effect of IFRS on the reported position and results for the six months ended 30 September 2004 and year ended 31 March 2005 were issued on 14 June 2005, and are available on the Company website at www.gusplc.com/gus/investors/ifrs. A summary of the impact of IFRS on certain key reported figures is set out below. Since that date, Wehkamp has been reclassified as a discontinued operation (note 6), and the effect of this change on the IFRS financial statements is shown below. Group income statement Reported sales are reduced due to the different presentation required under IFRS in respect of discontinued operations. This restatement is set out in the segmental analysis at note 4 above. IFRS adjustments in respect of other key items within the Group income statement are as follows: Six months ended Year ended 30 September 2004 31 March 2005 ----------------- ----------------- Profit for the Operating Profit before financial Operating Profit before Profit for the profit tax period profit tax financial year Note Â£m Â£m Â£m Â£m Â£m Â£m ------------------ ---- ------ ------- ------- ------- ------- ------- As reported under UK GAAP 292 323 205 680 693 423 IFRS reclassifications: ------- ------- ------- ------- ------- ------- Lewis Group a (25) (46) - (55) (79) - Other discontinued operations a - - - - 27 - Tax expense of associates - - - - (1) - Minority interests b - - 19 - - 49 ------- ------- ------- ------- ------- ------- (25) (46) 19 (55) (53) 49 IFRS remeasurements: ------- ------- ------- ------- ------- ------- Share based payments c (9) (9) (9) (7) (7) (7) Catalogue costs d 8 8 8 (1) (1) (1) Reversal of goodwill amortisation e 99 99 99 207 207 207 Amortisation of acquisition intangibles e - - - (4) (4) (4) Interest earned on pension scheme assets f - 1 1 - 2 2 Deferred tax charges g - - (13) - - (29) Other 1 1 6 3 6 8 ------- ------- ------- ------- ------- ------- 99 100 92 198 203 176 ----------------- ----- ------- ------- ------- ------- ------- ------- As reported under IFRS on 14 June 2005 366 377 316 823 843 648 ----------------- ----- ------- ------- ------- ------- ------- ------- Reclassificati on of Wehkamp (12) (12) - (21) (23) - (note 6) ----------------- ----- ------- ------- ------- ------- ------- ------- As reported under IFRS, as restated 354 365 316 802 820 648 ----------------- ----- ------- ------- ------- ------- ------- ------- 30.9.04 31.3.05 Group balance sheet Note Â£m Â£m ------------------------------------------- ------- ------- -------- Capital employed as reported under UK GAAP 3,149 3,070 ------- ------- Pension liabilities f (224) (226) Catalogue costs d (8) (15) Lease incentives h (34) (34) Amortisation of acquisition intangibles e - (4) Reversal of UK GAAP goodwill amortisation charge after transition e 98 207 Goodwill impairment on transition e (3) (3) Deferred taxation g 202 186 Dividends i 91 202 Other (2) 1 ------- ------- 120 314 -------------------------------------------- ------ ------- -------- As reported under IFRS 3,269 3,384 -------------------------------------------- ------ ------- -------- GUS plc UNAUDITED NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2005 13. Summary of the impact of IFRS on the comparative periods (continued) Notes a. Under IFRS, the Group income statement down to profit after tax excludes the results of discontinued operations. b. The concept of a group differs under IFRS and minority interests are regarded as equity holders of the Group. Thus rather than deducting a minority interest in arriving at profit for the financial period, the profit for the period is instead attributed to the different types of equity holders. c. IFRS requires that the fair value of all share-based payments is charged to the income statement over the vesting period. Depending on the type of scheme concerned, the recognition, or timing, or both, of the charges to profit may differ compared with UK GAAP. d. Under UK GAAP, catalogue costs were expensed over the period in which the catalogues generated revenue. These costs are expensed as incurred under IFRS. e. Goodwill amortisation charged under UK GAAP after the transition date, 1 April 2004, is reversed in the IFRS financial statements. Goodwill will be subject to an annual impairment review. IFRS also requires that, on acquisition, specific intangible assets are identified and then amortised over their useful economic lives. These include items such as brand names and customer lists, to which value is first attributed at the time of acquisition. f. Under IFRS, the pension charge principally comprises a current service cost, charged to operating profit, and a financing item reported within net interest. Under IAS 19, the Group has adopted the option that requires the full actuarial value of the surplus or deficit of pension schemes and other post-retirement benefits to be shown on the balance sheet. Any movements in the pension assets and liabilities arising from actuarial gains and losses are recognised immediately in full through the SORIE. g. Under UK GAAP, tax relief on goodwill written off to reserves in respect of pre-1998 US acquisitions was credited each year against the tax charge in the income statement. Under IFRS, a deferred tax asset is set up for this future relief at the time of the acquisition; as the tax relief is received, it is credited against this deferred tax asset. h. Under UK GAAP, property lease incentives were recognised over the period to the first rent review. Under IFRS, these are recognised over the full term of the lease. i. Under IFRS, a dividend that is proposed but not yet authorised is not accrued in the financial statements. 14. Post balance sheet event On 28 October 2005, the Group announced an agreement to sell Wehkamp, its last remaining home shopping business. Under the terms of this agreement, Wehkamp will be sold for approximately â‚¬390m (Â£265m) to Industri Kapital, a private equity firm. Completion is expected in December, subject to European Union regulatory approval. The cash proceeds on completion will be used to pay down debt. 15. GUS plc website The maintenance and integrity of the GUS plc website, www.gusplc.com, is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. GUS plc INDEPENDENT REVIEW REPORT TO GUS PLC Introduction We have been instructed by the Company to review the financial information for the six months ended 30 September 2005, which comprises the Unaudited Group Income Statement for the six months ended 30 September 2005, the Unaudited Group Balance Sheet as at 30 September 2005, the Unaudited Group Cash Flow Statement for the six months ended 30 September 2005, the Unaudited Group Statement of Recognised Income and Expense for the six months ended 30 September 2005, the Unaudited Group Reconciliation of Movements in Equity for the six months ended 30 September 2005 and the related unaudited notes for the six months ended 30 September 2005. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. As disclosed in note 1, the next annual financial statements of the Group will be prepared in accordance with IFRS as adopted for use in the European Union. This interim report has been prepared in accordance with the basis of preparation set out in note 1. The accounting policies are consistent with those that the directors intend to use in the next annual financial statements. As explained in the 'Basis of preparation' note 1, there is however, a possibility that the directors may determine that some changes are necessary when preparing the full annual financial statements for the first time in accordance with accounting standards adopted for use in the European Union. The IFRS standards and IFRIC interpretations that will be applicable and adopted for use in the European Union at 31 March 2006 are not known with certainty at the time of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or in whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2005. PricewaterhouseCoopers LLP Chartered Accountants Manchester 16 November 2005 This information is provided by RNS The company news service from the London Stock Exchange

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