Half Year Results - Part 2

RNS Number : 9259U

Home Retail Group Plc

22 October 2014

 



HOME RETAIL GROUP PLC

UNAUDITED CONDENSED HALF-YEARLY FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 30 August 2014

52 weeks ended 1 March 2014				26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m			Notes	£m	£m
5,663.0		Revenue	4	2,668.6	2,596.2
(3,899.2)		Cost of sales	5	(1,822.7)	(1,765.8)
1,763.8		Gross profit		845.9	830.4
(1,652.4)		Net operating expenses before exceptional items		(816.9)	(800.5)
(41.4)		Exceptional items	6	(11.8)	(12.6)
70.0		Operating profit		17.2	17.3
10.5		Finance income		1.7	2.0
(9.3)		Finance expense		(5.4)	(5.1)
1.2		Net financing (expense)/income	7	(3.7)	(3.1)
71.2		Profit before tax		13.5	14.2
(17.2)		Taxation	8	(4.0)	(1.7)
54.0		Profit for the period attributable to equity holders of the Company		9.5	12.5
pence		Earnings per share	9	pence	pence
6.8		Basic		1.2	1.6
6.6		Diluted		1.2	1.5

52 weeks ended 1 March 2014						26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m			Non-GAAP measures		Notes	£m	£m
			Reconciliation of profit before tax (PBT) to benchmark PBT
71.2			Profit before tax			13.5	14.2
			Adjusted for:
1.8			Amortisation of acquisition intangibles			0.9	0.9
1.9			Post-employment benefit scheme administration costs		14	0.7	1.0
(2.1)			Adjustments in respect of store impairment and property provisions			(0.7)	(5.4)
41.4			Exceptional items		6	11.8	12.6
(9.0)			Financing fair value remeasurements		7	(0.3)	(1.2)
3.3			Financing impact on post-employment benefit obligations		7	1.6	1.8
6.9			Discount unwind on non-benchmark items		7	3.4	3.5
115.4			Benchmark PBT			30.9	27.4
pence			Benchmark earnings per share			pence	pence
10.4			Basic		9	3.0	2.5
10.1			Diluted		9	2.9	2.4

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 30 August 2014

52 weeks ended 1 March 2014						26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m					Notes	£m	£m
54.0			Profit for the period attributable to equity holders of the Company			9.5	12.5
			Items that may be reclassified subsequently to profit or loss:
			Net change in fair value of cash flow hedges
(72.2)			- Foreign currency forward exchange contracts			4.9	(18.9)
			Net change in fair value of cash flow hedges transferred to inventory
13.7			- Foreign currency forward exchange contracts			27.4	(13.8)
1.1			Fair value movements on other financial assets			0.3	0.3
(3.4)			Fair value movements on other financial assets transferred to the income statement			-	-
(3.6)			Currency translation differences			(0.5)	(2.3)
13.1			Tax credit/(charge) in respect of items that will be or have been recycled			(6.2)	8.4
(51.3)						25.9	(26.3)
			Items that will not be reclassified subsequently to profit or loss:
(23.8)			Remeasurement of the net defined benefit liability		14	(37.4)	(8.3)
3.3			Tax credit in respect of items not recycled			7.5	0.4
(20.5)						(29.9)	(7.9)
(71.8)			Other comprehensive income for the period, net of tax			(4.0)	(34.2)
(17.8)			Total comprehensive income for the period attributable to equity holders of the Company			5.5	(21.7)

CONSOLIDATED BALANCE SHEET

At 30 August 2014

1 March 2014				30 August 2014	31 August 2013
£m			Notes	£m	£m
		ASSETS
		Non-current assets
1,543.9		Goodwill		1,543.9	1,543.9
193.6		Other intangible assets		210.8	152.3
456.7		Property, plant and equipment		444.3	460.7
41.3		Deferred tax assets		43.5	40.6
1.8		Trade and other receivables		1.8	2.6
9.9		Other financial assets	12	10.2	23.6
2,247.2		Total non-current assets		2,254.5	2,223.7
		Current assets
902.4		Inventories		930.1	965.3
712.1		Trade and other receivables		691.6	640.6
10.4		Current tax assets		4.3	5.3
1.0		Other financial assets	12	5.8	7.9
331.0		Cash and cash equivalents		333.1	412.2
1,956.9		Total current assets		1,964.9	2,031.3
4,204.1		Total assets		4,219.4	4,255.0
		LIABILITIES
		Non-current liabilities
(47.4)		Trade and other payables		(48.1)	(50.8)
(190.0)		Provisions	13	(161.7)	(175.2)
(12.9)		Deferred tax liabilities		(9.4)	(17.0)
(76.6)		Post-employment benefits	14	(104.9)	(84.7)
(326.9)		Total non-current liabilities		(324.1)	(327.7)
		Current liabilities
(1,115.3)		Trade and other payables		(1,204.1)	(1,193.1)
(46.1)		Provisions	13	(65.9)	(38.4)
(36.5)		Other financial liabilities	12	(6.4)	(8.3)
(5.8)		Current tax liabilities		-	-
(1,203.7)		Total current liabilities		(1,276.4)	(1,239.8)
(1,530.6)		Total liabilities		(1,600.5)	(1,567.5)
2,673.5		Net assets		2,618.9	2,687.5
		EQUITY
81.3		Share capital		81.3	81.3
6.4		Capital redemption reserve		6.4	6.4
(348.4)		Merger reserve		(348.4)	(348.4)
(52.3)		Other reserves		(74.0)	(7.9)
2,986.5		Retained earnings		2,953.6	2,956.1
2,673.5		Total equity		2,618.9	2,687.5

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 30 August 2014

	Attributable to equity holders of the Company
		Capital
	Share	redemption	Merger	Other	Retained
	capital	reserve	reserve	reserves	earnings	Total
	£m	£m	£m	£m	£m	£m
Balance at 2 March 2014	81.3	6.4	(348.4)	(52.3)	2,986.5	2,673.5
Profit for the period	-	-	-	-	9.5	9.5
Other comprehensive income	-	-	-	25.6	(29.6)	(4.0)
Total comprehensive income for the period ended 30 August 2014	-	-	-	25.6	(20.1)	5.5
Transactions with owners:
Movement in share-based compensation reserve	-	-	-	-	5.6	5.6
Net movement in own shares	-	-	-	(47.3)	(2.4)	(49.7)
Tax credit related to share-based  compensation reserve	-	-	-	-	2.1	2.1
Equity dividends paid during the period	-	-	-	-	(17.8)	(17.8)
Other distributions	-	-	-	-	(0.3)	(0.3)
Total transactions with owners	-	-	-	(47.3)	(12.8)	(60.1)
Balance at 30 August 2014	81.3	6.4	(348.4)	(74.0)	2,953.6	2,618.9

 

	Attributable to equity holders of the Company
		Capital
	Share	redemption	Merger	Other	Retained
	capital	reserve	reserve	reserves	earnings	Total
	£m	£m	£m	£m	£m	£m
Balance at 3 March 2013	81.3	6.4	(348.4)	31.9	2,961.3	2,732.5
Profit for the period	-	-	-	-	12.5	12.5
Other comprehensive income	-	-	-	(27.1)	(7.1)	(34.2)
Total comprehensive income for the period ended 31 August 2013	-	-	-	(27.1)	5.4	(21.7)
Transactions with owners:
Movement in share-based compensation reserve	-	-	-	-	7.0	7.0
Net movement in own shares	-	-	-	(12.7)	(1.4)	(14.1)
Equity dividends paid during the period	-	-	-	-	(16.0)	(16.0)
Other distributions	-	-	-	-	(0.2)	(0.2)
Total transactions with owners	-	-	-	(12.7)	(10.6)	(23.3)
Balance at 31 August 2013	81.3	6.4	(348.4)	(7.9)	2,956.1	2,687.5

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 30 August 2014

52 weeks ended 1 March 2014				26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m			Notes	£m	£m
		Cash flows from operating activities
161.0		Cash generated from operations	15	146.9	120.9
(17.6)		Tax paid		(6.0)	(11.1)
143.4		Net cash inflow from operating activities		140.9	109.8
		Cash flows from investing activities
(72.5)		Purchase of property, plant and equipment	11	(32.7)	(33.5)
(102.8)		Purchase of other intangible assets	11	(40.1)	(42.3)
2.2		Proceeds from the disposal of property, plant and equipment	11	1.1	1.0
3.5		Loans repaid by associates	17	-	1.2
21.7		Disposal of investments	17	-	9.7
0.6		Interest received		0.3	0.5
(147.3)		Net cash flows from investing activities		(71.4)	(63.4)
		Cash flows from financing activities
(37.4)		Purchase of shares for Employee Share Trust		(50.0)	(14.1)
0.3		Proceeds from disposal of shares held by Employee Share Trust		0.3	-
(23.9)		Dividends paid	10	(17.8)	(16.0)
(61.0)		Net cash used in financing activities		(67.5)	(30.1)
(64.9)		Net increase in cash and cash equivalents		2.0	16.3
		Movement in cash and cash equivalents
396.0		Cash and cash equivalents at the beginning of the period		331.0	396.0
(0.1)		Effect of foreign exchange rate changes		0.1	(0.1)
(64.9)		Net increase/(decrease) in cash and cash equivalents		2.0	16.3
331.0		Cash and cash equivalents at the end of the period		333.1	412.2

ANALYSIS OF NET CASH/(DEBT)

At 30 August 2014

1 March 2014				30 August 2014	31 August 2013
£m		Non-GAAP measures		£m	£m
		Financing net cash:
331.0		Cash and cash equivalents		333.1	412.2
331.0		Total financing net cash		333.1	412.2
		Operating net debt:
(2,046.2)		Off balance sheet operating leases		(1,993.9)	(2,173.1)
(2,046.2)		Total operating net debt		(1,993.9)	(2,173.1)
(1,715.2)		Total net debt		(1,660.8)	(1,760.9)

The Group uses the term 'total net debt' to highlight the Group's aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably operating leases.  The capitalised value of these leases is £1,993.9m (1 March 2014: £2,046.2m), based upon discounting the current rentals at the estimated current long-term cost of borrowing of 4.6% (1 March 2014: 5.0%).

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2014

1. Basis of preparation

The unaudited condensed half-yearly financial information comprises the results for the 26 weeks ended 30 August 2014, the 26 weeks ended 31 August 2013, and the audited consolidated results for the 52 weeks ended 1 March 2014.  The audited consolidated financial information for the 52 weeks ended 1 March 2014 has been extracted from Home Retail Group plc's Annual Report and Financial Statements, which was approved by the Board of Directors on 30 April 2014 and delivered to the Registrar of Companies.  The report of the Group's auditors, PricewaterhouseCoopers LLP, on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.  The condensed half-yearly financial information is not audited or reviewed and does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006.

The directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed half-yearly financial information.

IFRS and accounting policies

This condensed half-yearly financial information for the 26 weeks ended 30 August 2014 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim Financial Reporting' as adopted by the European Union.  The condensed half-yearly financial information should be read in conjunction with Home Retail Group plc's Annual Report and Financial Statements for the 52 weeks ended 1 March 2014, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union.

The accounting policies adopted by Home Retail Group are set out in Home Retail Group plc's Annual Report and Financial Statements, dated 30 April 2014, which is available on Home Retail Group's website www.homeretailgroup.com.  These policies have been consistently applied for all periods presented.

Changes in accounting standards

There are no new standards, amendments to existing standards or interpretations which are effective for the first time during the period ended 30 August 2014 that have a material impact on the Group. At the balance sheet date there are a number of new standards and amendments to existing standards in issue but not yet effective, including IFRS 15 'Revenue from contracts with customers' which is effective for periods beginning on or after 1 January 2017 and IFRS 9 'Financial Instruments', which is effective for periods beginning on or after 1 January 2018. The Group has not early-adopted any of these new standards or amendments to existing standards. The Group will assess their full impact in due course. There are no other new standards, amendments to existing standards or interpretations that are not yet effective that would be expected to have a material impact on the Group.

2. Non-GAAP Financial Information

Home Retail Group has identified certain measures that it believes will assist the understanding of the performance of the business. The measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but Home Retail Group has included them as it considers them to be important comparables and key measures used within the business for assessing performance.  The following are the key non-GAAP measures identified by Home Retail Group:

Exceptional items

Items which are both material and non-recurring are presented as exceptional items within their relevant income statement line.  The separate reporting of exceptional items helps provide a better indication of underlying performance of the Group.  Examples of items which may be recorded as exceptional items are restructuring costs and the profits and/or losses on the disposal of businesses.

Benchmark measures

The Group uses the following terms as measures which are not formally recognised under IFRS:

·      Benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, post-employment benefit scheme administration costs, store impairment and onerous lease charges or releases and costs or income associated with store closures and exceptional items.

·      Benchmark profit before tax (benchmark PBT) is defined as profit before amortisation of acquisition intangibles, post-employment benefit scheme administration costs, store impairment and onerous lease charges or releases and costs or income associated with store closures, exceptional items, financing fair value remeasurements, financing impact on post-employment benefit obligations, the discount unwind on non-benchmark items and taxation. ·      Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to benchmark PBT, divided by the weighted average number of shares in issue (excluding shares held in Home Retail Group's share trust net of vested but unexercised share awards). These measures are considered useful in that they provide investors with an alternative means to evaluate the underlying performance of the Group's operations.

Total net debt The Group uses the term 'total net debt' which is considered useful in that it highlights the Group's aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably operating leases.

3. Foreign currency
The principal exchange rates used were as follows:
	Average				Closing
	26 weeks ended	52 weeks ended	26 weeks ended
	30 August 2014	1 March 2014	31 August 2013		30 August  2014	1 March 2014	31 August  2013
US dollar	1.68	1.58	1.53		1.66	1.67	1.55
Euro	1.23	1.18	1.17		1.26	1.21	1.17

 

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.

4. Segmental information

The Board of Directors and Operating Board review the Group's internal reporting in order to assess performance and allocate resources.  Management has determined the operating segments based on these reports, which reflect the distinct retail brands and different risks associated with the different businesses.  The Group is organised into three main business segments: Argos, Homebase and Financial Services together with Central Activities.  The Board of Directors and Operating Board assess the performance of the operating segments based on a combination of revenue and benchmark operating profit.

52 weeks ended 1 March 2014						26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m						£m	£m
			Revenue
4,051.1			Argos			1,769.1	1,716.8
1,489.2			Homebase			834.5	822.3
122.7			Financial Services			65.0	57.1
5,663.0			Total revenue			2,668.6	2,596.2
			Benchmark operating profit
112.3			Argos			12.0	7.7
18.9			Homebase			27.8	27.2
6.0			Financial Services			3.1	3.1
(24.2)			Central Activities			(13.0)	(11.6)
113.0			Total benchmark operating profit			29.9	26.4
2.4			Benchmark net financing income			1.0	1.0
115.4			Benchmark profit before tax			30.9	27.4
(1.8)			Amortisation of acquisition intangibles			(0.9)	(0.9)
(1.9)			Post-employment benefit scheme administration costs			(0.7)	(1.0)
2.1			Adjustments in respect of store impairment and property provisions			0.7	5.4
(41.4)			Exceptional items			(11.8)	(12.6)
9.0			Financing fair value remeasurements			0.3	1.2
(3.3)			Financing impact on post-employment benefit obligations			(1.6)	(1.8)
(6.9)			Discount unwind on non-benchmark items			(3.4)	(3.5)
71.2			Profit before tax			13.5	14.2
(17.2)			Taxation			(4.0)	(1.7)
54.0			Profit for the period attributable to equity holders of the Company			9.5	12.5

4. Segmental information (continued)

52 weeks ended 1 March 2014						26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m						£m	£m
			Segment assets
2,286.3			Argos			2,310.2	2,320.4
896.6			Homebase			897.7	886.8
563.0			Financial Services			552.5	494.3
75.5			Central Activities			78.1	95.4
3,821.4			Total segment assets			3,838.5	3,796.9
51.7			Tax assets			47.8	45.9
331.0			Cash and cash equivalents			333.1	412.2
4,204.1			Total assets per balance sheet			4,219.4	4,255.0

Segment assets include goodwill and other intangible assets, property, plant and equipment, investments in associates, inventories, trade and other receivables and other financial assets.  Tax assets and cash and cash equivalents are not allocated to segments.

5. Cost of sales
52 weeks ended 1 March 2014					26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m					£m	£m
(3,628.7)		Cost of goods			(1,687.9)	(1,634.1)
(270.5)		Distribution costs			(134.8)	(131.7)
(3,899.2)		Total cost of sales			(1,822.7)	(1,765.8)

6. Exceptional items
52 weeks ended 1 March 2014					26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m					£m	£m
(27.8)		Argos transformation and other restructuring charges			(11.8)	(12.6)
(25.0)		Customer redress - Payment Protection Insurance			-	-
11.4		Warranty Insurance			-	-
(41.4)		Exceptional items in operating profit			(11.8)	(12.6)
9.4		Tax on exceptional items			2.5	2.9
(32.0)		Exceptional loss after tax for the period			(9.3)	(9.7)
Exceptional charges totalling £11.8m (26 weeks ended 31 August 2013: £12.6m) were incurred during the 26 weeks ended 30 August 2014, in respect of the ongoing project to transform Argos into a digital retail leader, combined with a number of other restructuring actions. This includes an amount of £5.1m (2013: £nil) relating to costs associated with the outsourcing of the management of the Group's information systems infrastructure and associated services. Financial Services offers Payment Protection Insurance to its customers. During the 52 weeks ended 1 March 2014, in response to an industry wide review by the Financial Conduct Authority, a full investigation was undertaken with the support of an independent expert, which resulted in a customer redress exercise being carried out. As a result, there was an increase to the existing provision of £25.0m. Until June 2010, Allianz Insurance provided Home Retail Group an underwriting service for warranty products sold in both Argos and Homebase. Allianz Insurance notified Home Retail Group during the 52 weeks ended 1 March 2014 that under a profit share arrangement relating to the run off of these historical policies, the Group was due commission income of £11.4m.

7. Net financing (expense)/income
52 weeks ended 1 March 2014			26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m			£m	£m
		Finance income:
6.8		Financing fair value remeasurements - net exchange gains	1.4	1.9
3.4		Financing fair value remeasurements - other financial assets	-	-
0.3		Other finance income	0.3	0.1
10.5		Total finance income	1.7	2.0
		Finance expense:
(8.1)		Unwinding of discounts	(3.8)	(4.1)
(1.2)		Financing fair value remeasurements - net exchange losses	(1.1)	(0.7)
(3.3)		Net interest expense on post-employment benefit obligations	(1.6)	(1.8)
-		Other finance expense	(0.6)	-
(12.6)		Total finance expense	(7.1)	(6.6)
3.3		Less: finance expense charged to Financial Services cost of sales	1.7	1.5
(9.3)		Total net finance expense	(5.4)	(5.1)
1.2		Net financing (expense)/income	(3.7)	(3.1)

Included within unwinding of discounts is a £3.4m charge (2013: £3.5m) relating to the discount unwind on non-benchmark property provisions.

8. Taxation
52 weeks ended 1 March 2014					26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m					£m	£m
(15.1)		UK tax			(3.6)	(1.1)
(2.1)		Overseas tax			(0.4)	(0.6)
(17.2)		Total tax expense			(4.0)	(1.7)

The statutory tax charge for the period of £4.0m (2013: £1.7m) is based on an estimated annual benchmark effective rate of tax of 25.5% (2013: 28.5%), which is adjusted for the tax impact of non-benchmark items arising during the half year, to derive the effective tax rate for the half year of 29.6% (2013: 12.0%).  The benchmark effective rate of tax is defined as the tax on benchmark PBT divided by benchmark PBT.  The current year benchmark effective rate of tax includes the favourable impact of a 2% reduction to the UK corporation tax rate from 23% to 21%. Closing deferred tax has been calculated at the substantively enacted UK corporation tax rate of 20% effective from 1 April 2015 (2013: 21%), this is the rate at which those balances are expected to reverse.
9. Basic and diluted earnings per share (EPS) Basic EPS is calculated by dividing the profit attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares held in the Home Retail Group share trust net of vested but unexercised share awards. Diluted EPS is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares.
52 weeks ended 1 March 2014					26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m		Earnings			£m	£m
54.0		Profit after tax for the financial period			9.5	12.5
		Adjusted for:
1.8		Amortisation of acquisition intangibles			0.9	0.9
1.9		Post-employment benefit scheme administration costs			0.7	1.0
(2.1)		Adjustments in respect of store impairment and property provisions			(0.7)	(5.4)
41.4		Exceptional items			11.8	12.6
(9.0)		Financing fair value remeasurements			(0.3)	(1.2)
3.3		Financing impact on post-employment benefit obligations			1.6	1.8
6.9		Discount unwind on non-benchmark items			3.4	3.5
(6.9)		Attributable taxation credit			(3.9)	(4.3)
(8.2)		Non-benchmark tax credit in respect of prior years			-	(2.2)
(0.2)		Tax rate change			-	0.4
82.9		Benchmark profit after tax for the financial period			23.0	19.6
millions		Weighted average number of shares			millions	millions
795.0		Number of ordinary shares for the purpose of basic EPS			773.1	800.0
26.4		Dilutive effect of share incentive awards			28.3	23.6
821.4		Number of ordinary shares for the purpose of diluted EPS			801.4	823.6
pence		EPS			pence	pence
6.8		Basic EPS			1.2	1.6
6.6		Diluted EPS			1.2	1.5
10.4		Basic benchmark EPS			3.0	2.5
10.1		Diluted benchmark EPS			2.9	2.4
10. Dividend
An interim dividend of 1.0 pence (2013: 1.0 pence) per Home Retail Group plc ordinary share, amounting to a total interim dividend of £7.5m (2013: £7.9m), has been announced (but not provided) and will be paid on 22 January 2015 to shareholders on the register at the close of business on 13 November 2014. In July 2014, a final dividend of 2.3 pence (2013: 2.0 pence) per Home Retail Group plc ordinary share, amounting to a total final dividend of £17.8m (2013: £16.0m), was paid to shareholders.

11. Capital expenditure

In the period, there were additions to property, plant and equipment of £32.7m (2013: £33.5m) and disposals of property, plant and equipment generated proceeds of £1.1m (2013: £1.0m).  In the period, there were additions to intangible assets of £40.1m (2013: £42.3m).  Capital commitments contracted but not provided for by the Group amounted to £20.3m (2013: £20.1m).

12. Other financial assets and liabilities
IFRS 13 requires disclosure of fair value measurements by level of the following measurement hierarchy: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
30 August 2014		Level 1	Level 2	Level 3	Total
		£m	£m	£m	£m
Assets
Other financial assets		10.1	-	0.1	10.2
Other financial assets - forward foreign exchange contracts		-	5.8	-	5.8
Total assets		10.1	5.8	0.1	16.0
Liabilities
Other financial liabilities - forward foreign exchange contracts		-	(6.4)	-	(6.4)
Total liabilities		-	(6.4)	-	(6.4)
31 August 2013		Level 1	Level 2	Level 3	Total
		£m	£m	£m	£m
Assets
Other financial assets		21.1	-	2.5	23.6
Other financial assets - forward foreign exchange contracts		-	7.9	-	7.9
Total assets		21.1	7.9	2.5	31.5
Liabilities
Other financial liabilities - forward foreign exchange contracts		-	(8.3)	-	(8.3)
Total liabilities		-	(8.3)	-	(8.3)

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques.  The valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates.  If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. The fair value of the level 2 forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.  The financial asset within the level 3 hierarchy is measured at cost less impairment.  The impairment has been calculated to write down the asset to its recoverable value based on the actual financial position of the Group's associate.  The fair value measurement is hence not sensitive to changes in inputs. There have been no movements in level 3 financial assets or transfers of assets or liabilities between levels of the fair value hierarchy during the period.

The fair value of trade and other receivables, cash and cash equivalents and trade and other payables approximate their carrying amounts.

13. Provisions
			Property	Insurance	Restructuring	Customer redress	Other	Total
			£m	£m	£m	£m	£m	£m
At 2 March 2014			(151.8)	(38.1)	(9.5)	(33.7)	(3.0)	(236.1)
Exchange differences			1.3	-	-	-	-	1.3
Charged to the income statement			(2.1)	(3.5)	-	-	-	(5.6)
Released to the income statement			2.8	-	-	-	-	2.8
Utilised during the period			3.8	2.4	2.7	2.7	2.3	13.9
Discount unwind			(3.9)	-	-	-	-	(3.9)
At 30 August 2014			(149.9)	(39.2)	(6.8)	(31.0)	(0.7)	(227.6)
1 March 2014							30 August 2014	31 August 2013
£m	Analysed as:						£m	£m
(46.1)	Current						(65.9)	(38.4)
(190.0)	Non-current						(161.7)	(175.2)
(236.1)							(227.6)	(213.6)

Property provisions principally comprise obligations on onerous leases together with other costs or income associated with store closures. In respect of onerous leases, provision is made for onerous lease contracts on stores that have either closed, or where projected future trading income is insufficient to cover the lower of exit cost or value-in-use. Where the value-in-use calculation is lower, the provision is based on the present value of expected future cash flows relating to rents, rates and other property costs to the end of the lease terms net of expected trading or sublet income. The majority of this provision is expected to be utilised over the period to 2020. Provision is made for the estimated costs of insurance claims incurred by the Group but not settled at the balance sheet date, including the costs of claims that have arisen but have not yet been reported to the Group. The estimated cost of claims includes expenses to be incurred in settling claims. The majority of this provision is expected to be utilised over the period to 2018. The restructuring provision relates to a number of actions undertaken by the Group during the current and prior years.  Actions currently being undertaken by the Group include the ongoing project to transform Argos into a digital retail leader.  The majority of this provision is expected to be utilised within one year. Financial Services offers Payment Protection Insurance (PPI) to its customers. The customer redress provision comprises the estimated cost of making redress payments to customers in respect of past sales of PPI policies, including the related administrative expenses. The eventual cost is dependent upon response rates, uphold rates, redress costs, claim handling costs and those costs associated with claims that are subsequently referred to the Financial Ombudsman Service. The provision represents management's best estimate of future costs and will remain under review. This provision is expected to be utilised within three years.

14. Post-employment benefits
As at the balance sheet date, the Group's defined benefit pension scheme obligations were £1,044.1m (1 March 2014: £968.4m) and the market value of the scheme assets was £939.2m (1 March 2014: £891.8m), resulting in a net deficit of £104.9m (1 March 2014: £76.6m).
52 weeks ended 1 March 2014			26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m			£m	£m
(85.1)		Opening net deficit	(76.6)	(85.1)
-		Current service cost	-	(0.2)
(1.9)		Post-employment benefit scheme administration costs	(0.7)	(1.0)
(3.3)		Net finance expense on post-employment benefit obligations	(1.6)	(1.8)
(23.8)		Remeasurement of the net defined benefit liability	(37.4)	(8.3)
22.0		Contributions paid by the Group - deficit recovery	11.0	11.0
15.5		- other	0.4	0.7
(76.6)		Closing net deficit	(104.9)	(84.7)
The material assumptions used to assess the Group's defined benefit pension scheme obligations have been updated by independent qualified actuaries as at the period end.  The most significant of these are the discount rate and the rate of inflation which are 3.9% (1 March 2014: 4.4%) and 3.1% (1 March 2014: 3.3%) respectively. Contributions paid by the Group total £11.4m (2013: £11.7m), including £11.0m (2013: £11.0m) as part of the deficit recovery plan agreed with the scheme trustees following the completion of the 31 March 2012 actuarial valuation.

15. Notes to the consolidated statement of cash flows
52 weeks ended 1 March 2014				26 weeks ended 30 August 2014	26 weeks ended 31 August 2013
£m		Cash generated from operations		£m	£m
71.2		Profit before tax		13.5	14.2
		Adjustments for:
(1.2)		Net financing expense/(income)		3.7	3.1
70.0		Operating profit		17.2	17.3
(0.2)		Profit on sale of property, plant and equipment and other intangible assets		(0.1)	(0.1)
129.5		Depreciation and amortisation		66.8	65.7
(3.0)		Reversal of impairment losses		-	-
3.3		Finance expense charged to Financial Services cost of sales		1.7	1.5
39.4		(Increase)/decrease in inventories		(27.7)	(23.5)
(74.6)		Decrease/(Increase) in receivables		20.1	(2.2)
5.5		Increase in payables		86.8	73.5
(29.7)		Movement in working capital		79.2	47.8
12.4		(Decrease)/increase in provisions		(12.5)	(7.6)
(35.6)		Movement in post-employment benefit obligations		(10.7)	(10.5)
14.3		Share-based payment expense (net of dividend equivalent payments)		5.3	6.8
161.0		Cash generated from operations		146.9	120.9

16. Seasonality

The retail sales for Argos and Homebase are subject to seasonal fluctuations.  Demand for Argos products is highest during the months of November and December, whilst demand for Homebase products is highest through the spring, at Easter and during the summer months and, for big ticket items, during the January sales.

17. Related parties

The Group's related parties are its associates and key management personnel. The Group received £nil (2013: £9.7m) for its shareholding and £nil (2013: £1.2m) as loan repayment on the sale of its associate Ogalas Limited.    At 30 August 2014, the amounts owed by its associates to the Group totalled £0.1m (2013: £2.5m). During the period, there were no material transactions or balances between the Group and its key management personnel or members of their close families.

Statement of directors' responsibilities

The directors confirm that this condensed half-yearly financial information has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely: ·      an indication of important events that have occurred during the first six months and their impact on the condensed half-yearly financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and ·      material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report. The directors of Home Retail Group plc are listed in the Home Retail Group plc Annual Report and Financial Statements 2014.  There have been no changes of director since the Annual Report.  A list of current directors is maintained on the Home Retail Group website, www.homeretailgroup.com. By order of the Board John Walden                              Richard Ashton Chief Executive                          Finance Director 22 October 2014                        22 October 2014

SHAREHOLDER INFORMATION

Registrar For all enquiries and shareholder administration (other than for American Depositary Receipts), please contact Capita Asset Services: Postal address: Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. email: [e-mail] Telephone: [phone]* (from abroad [phone]). Text phone: [phone]* (from abroad [phone]). Fax number: 0871 664 0438 (from abroad [phone]). *Calls cost 10p per minute plus network extras

American Depositary Receipt (ADR) Home Retail Group's ADR programme is administered by Citibank and ADR enquiries may be directed to: Postal address: Citibank Shareholder Services, P.O. Box 43077, Providence, Rhode Island 02940-3077, USA. email: [e-mail] Telephone (toll free): 1-877-Citi-ADR (248-4237) Telephone (international): 1-781-575-4555 Website: www.citi.com/dr

Electronic communications Shareholders can register to receive reports and notifications by email, browse shareholder information and submit voting instructions at www.homeretailgroup-shares.com. This service is provided by Capita Asset Services.

Home Retail Group plc website Investor relations information, such as webcasts of results presentations to analysts and investors and accompanying slides, is available at www.homeretailgroup.com.

Dividend reinvestment plan The Home Retail Group Dividend Reinvestment Plan (DRIP) enables shareholders to use their cash dividends to purchase Home Retail Group shares.  Shareholders who wish to participate in the DRIP for the first time, in respect of the interim dividend to be paid on 22 January 2015, should return a completed and signed DRIP mandate form to be received by the Registrar, by no later than 28 December 2014.  For further details, please contact Capita Asset Services.

Share price information The latest Home Retail Group share price is available on the Home Retail Group website, at www.homeretailgroup.com.

Share dealing facility Investors can buy or sell Group shares through Capita Share Dealing Services. Go to www.capitadeal.com or call 0871 664 0454 (calls cost 10p per minute plus network extras) between 8.30 am and 4.30 pm weekdays.

Financial calendar Interim ex-dividend date 12 November 2014 Interim dividend record date 13 November 2014 Interim Management Statement 15 January 2015 Interim dividend paid 22 January 2015 Full-year trading statement 12 March 2015 Full-year results for the 52 weeks to 28 February 2015 29 April 2015 Final ex-dividend date 20 May 2015 Final dividend record date 21 May 2015 Interim Management Statement 11 June 2015 Final dividend paid 23 July 2015

Registered office Home Retail Group plc, Avebury, 489 - 499 Avebury Boulevard, Milton Keynes MK9 2NW.

 

END

 

 

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