End of Year Trading Statement

RNS Number : 7286O

Home Retail Group Plc

12 March 2009

 



12 March 2009

Home Retail Group plc

End of Year Trading Statement

Home Retail Group, the UK's leading home and general merchandise retailer, today announces details of the final eight-week trading period for the financial year ended 28 February 2009.

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

'Group benchmark profit before tax for the year just ended will meet current market expectations, and our net cash position has increased by approximately £100m over the year.  Whilst Argos had a better than expected sales performance in the latest period, the environment for the new financial year will be extremely challenging. We are responding with the necessary trading and cost actions, and believe the Group will maintain its strong relative position and competitive advantage.'

		Latest period (8 weeks to  28 February)		H2 (26 weeks to  28 February)	Full year (52 weeks to  28 February)
Argos
Sales		£575m		£2,425m	£4,282m
Like-for-like change in sales		(1.6%)		(6.2%)	(4.8%)
Net new space contribution		3.2%		3.8%	3.9%
Total sales change		1.6%		(2.4%)	(0.9%)
Gross margin movement		Down c.125bps		Down c.125bps	Down c.100bps
Homebase
Sales		£205m		£684m	£1,513m
Like-for-like change in sales		(10.2%)		(10.2%)	(10.2%)
Net new space contribution		4.7%		5.9%	6.7%
Total sales change		(5.5%)		(4.3%)	(3.5%)
Gross margin movement		Down c.175bps		Down c.100bps	Up c.25bps

Argos

Total sales at Argos grew by 1.6% to £575m in the eight weeks to 28 February 2009. Net new space contributed 3.2%; there were five openings and three relocations during the period, with the portfolio increasing by a net 23 over the full year to reach 730 stores.

Like-for-like sales declined by 1.6% in the period.  There was further strong progress in consumer electronics driven by flat screen TVs, video gaming and the new PC ranges.  There was also good growth in the more traditional toy areas. The weakest areas continued to reflect the challenging market conditions in furniture and homewares.  Online Check & Reserve orders for immediate store collection saw another period of growth of over 30%.

The approximate 125 basis point gross margin decline reflected the product mix, including a strong January sale and post-Christmas clearance activity. There were also product cost pressures, particularly as a result of adverse currency movements.  Argos is committed to remaining highly price competitive, and continues to constantly monitor and adjust prices over the life of the catalogue.

Homebase

Total sales at Homebase declined by 5.5% to £205m in the eight weeks to 28 February 2009. Net new space contributed 4.7%; there was one closure during the period, although the portfolio increased by a net 14 over the full year to reach 345 stores.

Like-for-like sales declined by 10.2% in the period.  There was continued strong growth in kitchens.  Garden maintenance and horticulture areas saw particularly difficult trading conditions.  Most other product categories reflected the challenging market environment already experienced for a number of quarters.

The approximate 175 basis point gross margin decline reflected another period of strong promotional and clearance activity, a product mix impact in what is a short trading period, and product cost pressures.

Other

A number of organisational changes are being undertaken to improve the operational efficiency of the Group and drive further cost productivity. Actions taken include a streamlining of head office functions across all parts of the Group, restructuring of store-based staff to better match demand levels and trading patterns, and a consolidation of home delivery warehouses. An exceptional charge of approximately £35m will be taken in the financial year just ended in relation to these organisational changes. The cash costs relating to this charge will be approximately £5m in the year just ended with the balance expected to be incurred in the new financial year.  The annualised cost saving from these actions is approximately £50m. Around £35m of this is expected to be achieved within the new financial year, helping to partially offset the impact of the challenging environment.

At the half-year, in relation to Homebase, the Group incurred a £382m goodwill write down, a £95m impairment charge to the carrying value of store-related assets and a £66m onerous lease provision. Based on the latest market outlook, it is expected that an additional exceptional charge of approximately £100m will be taken in the financial year just ended in relation to further impairments of store-related assets and provisions for onerous leases.  There is no additional write down in respect of goodwill.  These accounting charges taken at the half-year and full-year do not change the cash flows of the Group.  The impact of impairing store-related assets will result in a reduced depreciation cost within Homebase benchmark operating profit.

The Group maintains a strong financing position, with net cash at 28 February 2009 estimated to be approximately £100m higher than last year's £174m. The Group's net cash position is expected to continue to be sufficient to meet its needs in the foreseeable future. In addition, the Group has £700m of un-drawn committed borrowing facilities available, £685m of which does not expire until 2013.

Enquiries

Analysts and investors (Home Retail Group)
Richard Ashton	Finance Director	01908 600 291
Stuart Ford	Head of Investor Relations

Media (Finsbury)
Rollo Head		020 7251 3801

There will be a conference call for analysts and investors to discuss this statement at 8.30am this morning. The call can be listened to live on the Home Retail Group website www.homeretailgroup.com. An indexed replay will also be available on the website later in the day.

Home Retail Group will announce its full-year results on Wednesday 29 April 2009.

Information in this announcement is based upon unaudited management accounts.  In addition, certain statements made 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.

 

END

 

 

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