Annual Financial Report

RNS Number : 6355H

Home Retail Group Plc

01 June 2011

 



Home Retail Group plc

(the "Company")

Annual Report and Financial Statements 2011

Notice of Annual General Meeting 2011

Form of Proxy

The Company has today published the following documents on its website, www.homeretailgroup.com:

·      Annual Report and Financial Statements 2011

·      Notice of Annual General Meeting 2011

·      Form of Proxy

The Company will hold its 2011 Annual General Meeting at the Jurys Inn Milton Keynes, Midsummer Boulevard, Milton Keynes, MK9 2HP on 30 June 2011 at 11.00 am.

In accordance with Listing Rule 9.6.1, the documents listed above have also been submitted to the UK Listing Authority, via the National Storage Mechanism.

Attached to this announcement is the additional information required under Rule 6.3.5 of the Disclosure and Transparency Rules of the Financial Services Authority, including a description of the principal risk factors for the Company, as set out in the Annual Report and Financial Statements 2011, and a responsibility statement.

ADDITIONAL INFORMATION

Principal risks and uncertainties

The principal risks and uncertainties that could impact the Group's performance and our mitigating activities are discussed below.  For further information on how the Group manages risk, see the business review and page 41 of the corporate governance report within the Annual Report and Financial Statements 2011.

AREA OF PRINCIPAL RISK AND UNCERTAINTY	DESCRIPTION AND EXAMPLES OF MITIGATING ACTIVITY
Economic and market risks Impact on sales, margins, costs, profit and cash of: ·      Economic conditions ·      Cost of raw material products, services and utilities ·      Consumer preferences ·      Competitor activity ·      Seasonality and/or weather ·      UK-centric store network ·      Expansion and/or development of store network ·      Changing demographics	As detailed in the chief executive's statement, the volatile economic outlook for 2011 is expected to continue the unpredictable nature of recent years. Within the UK, consumers are adjusting their spending patterns in response to changes in their disposable income. The economic environment, including the response of other retailers to it, widens the possible forecast outcomes of the Group's performance in respect of sales, margins, costs, profit and cash generation. Considerable cost savings have been made in the last two years. Looking ahead we will continue to focus on cost reduction opportunities although material cost savings may be more challenging to achieve, which coupled with the risk of higher cost inflation, may see an increase in costs. Overseas sourcing capabilities continue to be leveraged to support consumers in these challenging economic times, further extending Value ranges in both Argos and Homebase. The Group has responded to changing consumer behaviour with the introduction of Twitter, Facebook and iPhone apps to its multi-channel capabilities. Other mitigating activities include: ·      Empowering customer choice by strengthening range architecture; over 12,000 internet-only product lines have been introduced (see p14 of the business review) ·      Price tracking versus our competition and dynamic pricing to ensure competitiveness is maintained ·      Continuous review of key customer metrics
Strategy ·      Inappropriate direction ·      Poor investment decisions ·      Failure to execute	At every Plc and Operating Board meeting strategic issues are discussed in addition to the time that is dedicated to strategic reviews at various Executive meetings across the Group. The Group has a clear vision to build successful businesses that bring unrivalled convenience and value to customers' everyday lives, whether shopping at home or on the move. Other mitigating activities include: ·      Monthly review of performance against strategic targets ·      Comprehensive strategic debates with non-executive directors and advisers ·      Communication with stakeholders; investors, colleagues, suppliers, government etc.
Currency ·      Purchase of products whose cost base of manufacture is in currencies other than sterling, principally the US dollar ·      Sale of products in currencies other than sterling, principally the euro in the Republic of Ireland	The volatility of the global economy continues to create a risk of exposure to fluctuations in currency rates as over a third of the products ranged by Argos and Homebase are imported, with much sourced from Asia in US dollars. Mitigating actions include: ·      Treasury policies to hedge currencies over appropriate time periods ·      Adjustments to customer pricing to reflect movement in hedged exchange rates ·      Seeking opportunities for further sourcing efficiencies
Regulatory environment ·      Changes in UK and overseas legislation and regulation, eg consumer protection, environmental regulation ·      Changes in UK fiscal and/or employment policy, eg minimum wage	Good governance practices remain important to the Group. In addition to ensuring compliance with existing requirements such as Data Protection, we are active in monitoring potential future developments. We also lobby, often with other retailers, to support and develop the industry and the interests of consumers. Key developments impacting the Group are Payment Card Industry Data Security Standards, the Bribery Act and potential government changes concerning retail credit. Changes and potential changes in accounting regulation, particularly lease accounting, could have a significant impact in future years. Other mitigating activities include: ·      Membership of industry representative groups, including the British Retail Consortium ·      Direct engagement with government and regulators such as Financial Services Authority, UK Department of Business, Innovation and Skills and Trading Standards ·      Dedicated working parties to manage operational change
Operations Failure to ensure appropriate processes are in place to manage the complexity of operations, including sourcing of products and customer service.	Our multi-channel capabilities continue to increase with greater participation of sales purchased online or using Check & Reserve for in-store collection. The anti-fraud controls across the Group are robust with historically low levels of fraud perpetrated, which provides confidence for the development of mobile commerce initiatives. Multi-channel creates a dynamic retail environment that requires the Group to continually evolve its media and promotional strategy. Investment is being made in enhancing the in-store systems that support complex showroom activities for big ticket within Homebase. The sourcing of products from outside the UK introduces complex supply chain risks that the Group seeks to mitigate through robust processes that ensure stock is in the right place at the right time to meet customer needs. Opportunities to leverage distribution capabilities across the Group are regularly reviewed. Other mitigating activities include: ·      Continuously improving the efficiency of catalogue production processes ·      Maintaining and extending the award-winning installation services for kitchens, bathrooms and bedroom furniture ·      Continuation of the Argos store refurbishment programme (see page 14 of the business review) ·      Trialling in-store collection of Argos online exclusive products ·      Specific financial risks are detailed on page 31 of the Group financial review
Infrastructure development and projects Delay or failure to manage and implement major business and infrastructure projects effectively.	The Group is committed to investing for growth, extending multi-channel leadership and maintaining a robust infrastructure. Strategic projects to replace or enhance key systems and infrastructure carry a degree of risk; however, we have dedicated project teams in place with strong governance frameworks to manage them. Projects to enhance systems within our contact centres for home delivery and stores for customer ordering and stock management are being progressed. Other mitigating activities include: ·      Detailed approval and planning process prior to project commencement ·      Board review of status and progress of major change programmes ·      Internal Audit attendance at steering group for key projects ·      Management expertise in significant infrastructure and change programmes ·      Post-project implementation reviews
Product safety Failure to manage supplier relationships and/or ensure appropriate quality checks are in place.	The safety and quality of our products is of paramount importance to the Group. Suppliers are required to sign up to the Group's Supply Chain Principles and to specific policies regarding products and their environmental impact. Argos and Homebase teams aim to work in conjunction with suppliers to ensure improvement opportunities are explored when failings are identified as a result of systematic checks. Demonstrating continuous improvement, our internal alert process for serious product concerns was further enhanced during the year. Other mitigating activities include: ·      Rigorous quality and safety assessment programme for new products ·      Ongoing monitoring of quality and safety for goods on sale ·      Supplier relationship protocols ·      Robust risk-based approach to factory auditing ·      Standardisation of terms and conditions for all suppliers
People ·      Reliance on key personnel ·      Availability of specialist skills ·      Pension obligations	The Group values its colleagues and their contribution to the success of the organisation. Internal training schemes maintain the succession pool and actively encourage promotion from within. Additionally, in order to continue to improve our business and take advantage of opportunities our existing capabilities are continually reviewed and strengthened if needed. We are committed to open communications with colleagues at all times and monitor employee satisfaction through an annual Group-wide staff survey. Other mitigating activities include: ·      Competitive remuneration packages ·      Nomination and Remuneration Committee duties ·      Twice-yearly comprehensive succession planning sessions, up to Operating Board level ·      Strategies for recruitment and development of talent to deliver strategic priorities ·      Regular review of pension trustee activities and plans to mitigate any funding deficit
Business interruption ·      Acts of terrorism ·      Failure or unavailability of operational and/ or IT infrastructure ·      Delay or interruption in service provided by third-party suppliers	A major incident could impact the ability of the Group to continue trading. We manage this risk by maintaining and routinely testing our business continuity plans. The Group remains vigilant to supplier vulnerability and continues to work towards a sustainable outcome for all parties. As the UK prepares to host the Olympic and Paralympic Games in 2012 management effort will be increased as appropriate to address areas of heightened risk. A major infrastructure project to consolidate and relocate our data centre will be completed during 2011, once complete this will further enhance our continuity risk management capabilities. Other mitigating activities include: ·      Business continuity and recovery planning ·      IT recovery plans including website resilience and penetration tests ·      Third-party supplier management

Statement of directors' responsibilities

The following statement, which should be read in conjunction with the reports of the auditors set out on pages 53 and 98 of the Annual Report and Financial Statements 2011, is made with a view to distinguishing for shareholders the respective responsibilities of the directors and of the auditors in relation to the annual report and financial statements.

The directors are responsible for preparing the annual report, the directors' remuneration report and

the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that

law the directors have prepared the Group and Parent Company financial statements in accordance

with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The

Group financial statements are required by law to give a true and fair view of the state of affairs and of

the profit and loss of the Group for that year.

The preliminary results for the 52 weeks ended 26 February 2011 have been extracted from the

annual report and the Group financial statements.

In preparing the Group financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state that the Group financial statements comply with IFRSs as adopted by the European Union,

subject to any material departures disclosed and explained in the financial statements; and

• prepare the Group financial statements on the going concern basis unless it is inappropriate to

presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that disclose with reasonable

accuracy, at any time, the financial position of the Group and enable them to ensure that the financial

statements and the directors' remuneration report comply with the Companies Act 2006 and, as

regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for

safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the

prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the Company's website. Legislation

in the United Kingdom governing the preparation and dissemination of financial statements may differ

from legislation in other jurisdictions.

A list of current directors of Home Retail Group plc is maintained on the Home Retail Group website,

www.homeretailgroup.com.

Gordon Bentley

Secretary

1 June 2011

 

END

 

 

ACSDKDDQOBKKBAK