Preliminary Results - Part 1

RNS Number : 9002K

Home Retail Group Plc

28 April 2010

 



28 April 2010

Home Retail Group plc

Full-Year Results

Home Retail Group, the UK's leading home and general merchandise retailer, today announces its results for the 52 weeks to 27 February 2010.

Operating highlights

§ Strength of the operating model and excellent cost management have helped to offset challenges due to the market environment

§ Successful Spring 2009 at Homebase, combined with a strong operational performance and tight cost control

§ Continued development and investment in the overall customer offers at Argos and Homebase to meet changing consumer needs

§ Growth in market shares in virtually all of Argos' and Homebase's major product categories including consumer electronics, toys, kitchens and outdoor living

§ Leadership in multi-channel convenience, driven by continuing strong growth in Check & Reserve

§ Focus on absolute cash gross margin to substantially offset the cost of goods pressures while remaining highly price competitive

Financial highlights

§ Sales up 2% to £6,023m; cash gross margin down 3% to £2,276m

§ Operating and distribution costs reduced by £64m or 3% to £1,986m, as increases attributable to volume growth and inflation were more than offset by cost actions

§ Benchmark operating profit¹ down 4% to £290m, with a decline of £37m or 12% at Argos and an increase of £26m or 177% at Homebase

§ Net interest income reduced by £25m to £5m, with an improved net cash position more than offset by lower interest rates

§ Benchmark profit before tax² down 11% to £293m

§ Basic benchmark earnings per share³ down 10% to 23.4p

§ Reported profit before tax of £293m; reported basic earnings per share of 24.3p

§ Cash generation of £130m; closing net cash position of £414m

§ Share buy-back announced; up to £150m to be returned over next 12 months

§ Final dividend of 10.0p recommended; full-year dividend held at 14.7p

Oliver Stocken, Chairman of Home Retail Group, commented:

"The UK home and general merchandise market has experienced reduced levels of customer demand and industry-wide pressures on the cost of goods over the last year.  On all measures, the Group has produced a good result against this backdrop.  Maintaining the dividend, increasing our future investment plans and the announcement of a programme to return capital have all been supported by another year of strong cash generation.  These points also reflect the Board's confidence in the Group's long-term prospects."

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

"The results for both Argos and Homebase exceeded initial expectations as we traded through the year.  We have achieved further market share gains, demonstrated our commitment to remaining highly price competitive and controlled costs extremely tightly to support both operating profit and cash generation.  Our approach over the last year has also prepared us for the year ahead, which is likely to remain difficult for UK retail.  By continuing to invest and constantly develop our multi-channel leadership and differentiated formats, we will retain our competitive advantage and therefore remain well placed for the future."

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

2.  Benchmark profit before tax (benchmark PBT) is defined as profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases, exceptional items, costs related to demerger incentive schemes, financing fair value remeasurements, financing impact on retirement benefit obligations, the discount unwind on non‑benchmark items and taxation.

3.  Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to benchmark PBT, divided by the weighted average number of shares in issue (excluding shares held in Home Retail Group's share trusts net of vested but unexercised options and share awards).

Enquiries

Analysts and investors (Home Retail Group)

Richard Ashton                 Finance Director                                   01908 600 291

Stuart Ford                      Director of Investor Relations

Media (Finsbury)

Rollo Head                                                                                 020 7251 3801

There will be a presentation today at 9.30 am to analysts and investors at the King Edward Hall, Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ.  The presentation can be viewed live on the Home Retail Group website www.homeretailgroup.com.  The supporting slides and an indexed replay will also be available on the website later in the day.

An Interim Management Statement, covering the 13 weeks of 28 February 2010 to 29 May 2010, will be published on 10 June 2010.

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.

FINANCIAL SUMMARY

52 weeks to £m	27 February 2010	28 February 2009
Argos	4,346.8	4,281.9
Homebase	1,571.9	1,513.2
Financial Services	104.0	102.3
Sales	6,022.7	5,897.4
Cost of goods	(3,746.9)	(3,547.4)
Gross margin	2,275.8	2,350.0
Operating and distribution costs	(1,986.1)	(2,049.6)
Argos	266.2	303.6
Homebase	41.2	14.9
Financial Services	5.7	6.1
Central Activities	(23.4)	(24.2)
Benchmark operating profit	289.7	300.4
Net interest income (see below)	5.2	29.7
Share of post-tax results of joint ventures and associates	(2.0)	(2.4)
Benchmark PBT	292.9	327.7
Exceptional items included in operating profit	-	(694.0)
Costs related to demerger incentive schemes	(7.7)	(8.4)
Financing fair value remeasurements	2.7	(28.9)
Financing impact on retirement benefit obligations	(0.7)	11.2
Discount unwind on non-benchmark items	(6.7)	(1.8)
Onerous lease provision releases	12.5	-
Profit/(loss) before tax	293.0	(394.2)
Taxation	(83.2)	(18.9)
of which: taxation attributable to benchmark PBT	(91.4)	(103.5)
Profit/(loss) for the year	209.8	(413.1)
Basic benchmark EPS	23.4p	25.9p
Basic EPS	24.3p	(47.7p)
Number of shares for basic EPS	862.9m	866.6m
Net interest reconciliation:
Third party net interest income	4.4	18.6
Financing costs charged to Financial Services	3.5	13.6
Discount unwind on benchmark items	(2.7)	(2.5)
Net interest income	5.2	29.7
Financing fair value remeasurements	2.7	(28.9)
Financing impact on retirement benefit obligations	(0.7)	11.2
Discount unwind on non-benchmark items	(6.7)	(1.8)
Income statement net financing income	0.5	10.2

The above tables and those throughout this announcement have been prepared in accordance with Note 1 to the Financial Information on page 29.

FINANCIAL SUMMARY (continued)

Sales up £125m or 2% to £6,023m, reflecting growth of 1.5% at Argos and 3.9% at Homebase.  Like-for-like sales were down 2.1% at Argos and up 2.7% at Homebase, while the net new space contribution was 3.6% at Argos and 1.2% at Homebase.

Cash gross margin down £74m or 3% to £2,276m, representing a 200 basis point decline in the Group gross margin rate.  Argos' gross margin rate declined by approximately 175 basis points, driven principally by the net impact of adverse currency movements and the sales mix.  Homebase's gross margin rate declined by approximately 350 basis points, driven principally by the net impact of adverse currency movements and increased promotional and clearance activity.

Operating and distribution costs reduced by £64m or 3% to £1,986m, with costs reduced by £15m at Argos and by £50m at Homebase.  This resulted in exceptionally strong cost productivity of around 5% at Argos and 10% at Homebase.

Benchmark operating profit down £11m or 4% to £290m, comprising a £37m or 12% decline at Argos, and a £26m or 177% increase at Homebase.

Benchmark PBT down £35m or 11% to £293m, which includes £25m lower net interest income as further strong cash generation was more than offset by the effective interest rate falling substantially to approximately 1% versus 5% in the prior year.

An effective tax rate of 31.0% based on benchmark PBT, reduced from 31.4% for the previous financial year reflecting a lower proportion of disallowable expenditure.

Basic benchmark EPS down 10% to 23.4p.

Total dividend for the year maintained at 14.7p, with a final dividend of 10.0p recommended by the Board.

Net cash of £414m at 27 February 2010, with the cash generation of £130m in the year benefiting from further good working capital management and a reduced level of capital expenditure.

Share buy-back announced, with up to £150m to be returned over the next 12 months.

CHIEF EXECUTIVE'S STATEMENT

The Group has achieved a good outcome in a challenging year, delivered by our appropriate approach on an operational, financial and strategic basis.  Going forward, we will be increasing our investment in the businesses, and given the Group's strong cash generation, we will also be returning capital to our shareholders by way of a share buy-back programme.  Home Retail Group, as the UK's leading home and general merchandise retailer, will continue to demonstrate clearly its competitive advantage and its strong financial position.

Good outcome in a challenging year

Household spending and consumer confidence have been severely hit.  Hard goods and those products more closely linked to the housing market have suffered the most.  In the year to February 2010, market data indicates that retail sales declined by 3.7% in 'household goods stores' (the ONS measure that estimates retail sales across furniture, homewares, electricals and DIY-related categories).  The aggregate value of the product markets in which the Group operates declined by approximately 3%, to £58bn.  Home Retail Group's total sales increased by £125m or 2.1% over the same period.  Importantly, Argos and Homebase have held or increased market share in virtually all of their individual product markets.

In addition to reduced consumer spending in our product markets, the year also brought significant challenges in terms of product cost pressures driven principally by the weakened value of sterling.  This inflationary pressure has been successfully managed while remaining highly price competitive for our customers.

To further offset these challenges, significant cost actions have been taken across the Group.  Despite cost increases attributable to volume growth and underlying operating cost inflation, our cost base has been reduced by £64m, or 3%.  This is equivalent to cost productivity of approximately £135m or 7% and has been achieved while measures of customer service and operational standards have been maintained or improved.

The net result of consumer spending and product cost pressures, largely offset by the excellent cost management across the Group, was benchmark operating profit down by just £11m, or 4%, to £290m.

Through our continued focus on cash generation, and building upon the successful track record since demerger, a further £130m of net cash was generated during the year.  Working capital continued to be managed tightly, at the same time as we have maintained or improved measures of product availability for customers.  The closing cash position of £414m is also after £87m of net capital expenditure that included continued investment in growth initiatives, and payment of a maintained £126m dividend for our shareholders.

Approach to the last 12 months

Given the challenges and uncertainty at the start of the financial year, cautious planning assumptions were used by the businesses in order to set targets for both stock levels and costs.  This did not constrain the outcome for the year; both Argos and Homebase demonstrated the flexibility of their operating models to fulfil the better than expected demand.  The significant cost actions over the last 12 months to volume-adjust or gain further efficiencies throughout the cost base have also improved the flexibility of our businesses for the future.

The Group has remained absolutely committed to delivering customer value during the consumer slowdown.  All UK retailers in our product markets have been impacted by the weakness of sterling, but the Group targeted a level of customer price inflation that aimed to pass on the impact of cost of goods inflation in absolute terms.  This cash gross margin approach resulted in our businesses remaining highly price competitive, although the gross margin rate reduced as a consequence.

Given customer trends through the downturn, Argos and Homebase have been further adapting the customer offer in terms of product development and range architecture, pricing and promotional activity, and the wider customer service proposition.  For example, we strengthened own brand ranges, added more products to save consumers money on their household bills, and made further improvements to our multi-channel convenience.  Argos and Homebase also continue to benefit from their widespread customer appeal, broad product offerings and relatively high purchase frequency.

Increasing our investment plans

Looking forward, capital expenditure will increase in the next financial year to £125-150m from £87m in the year just ended.  While we will open fewer new stores, we see significant opportunities for further multi-channel, customer offer and format developments; these include expanded online product ranges and new tools and services on the Argos and Homebase websites, as well as the Argos brand refresh and store refurbishment programmes.  These opportunities will ensure our businesses are well invested and positioned to continue leading the way in delivering the most appropriate home and general merchandise shopping experience of the future.

Share buy-back programme

As a separately listed company, Home Retail Group has demonstrated four successive years of strong cash generation and has returned approximately £500m to shareholders by way of dividends over this period.  While the Board intends to maintain a prudent approach to balance sheet management, the strong cash position has created the opportunity to continue investing in value-enhancing growth opportunities while also returning capital to shareholders.  Over the next 12 months up to £150m of shares are expected to be bought back.  The Board will continue to regularly review the Group's capital structure.

Competitive advantage and financial strength

Home Retail Group is the UK's leading home and general merchandise retailer, with clear scale advantage and well invested infrastructure built up over a period of many years.  We continue to expect a return to attractive growth rates in spending in our product markets in due course, driven particularly by the long-term trend of consumers investing in their home environment and from the pace of technology and other product development.  Argos and Homebase are further strengthening their customer propositions ahead of the market recovery, investing in expanding choice, developing ranges and enhancing product presentation in store, in catalogues and online.

Both formats are well positioned and clearly differentiated from other retailers.  Argos will maintain its leadership as a truly multi-channel, value-orientated format across a wide range of product categories, distinct from the more service-orientated models of specialists or the more adjunct offerings of the supermarkets.  Homebase will continue to be differentiated with a more style-led offer across a broader range of home enhancement categories.

The Group's scale supports our price competitiveness relative to most other retailers operating in the same product markets.  The Group's skills and infrastructure, particularly in overseas product sourcing and multi-channel operations, will also leverage financial benefits and synergies which are difficult to replicate given the investment required and period of time over which these competitive advantages have been established.  In particular, our highly developed sourcing operations enable the Group to deal more competitively with cost of goods pressures that all retailers in our product markets experience, as well as support improvements in our range architectures, particularly in the ability to provide great value own brands on a directly sourced basis.

Our businesses continue to adapt well to the consumer environment and are delivering share gains in their markets.  Given our strong financial position, we are investing ahead of the recovery in the wider economy and, more specifically, recovery in consumer demand.  We therefore remain confident in the Group's ability to deliver growth in shareholder value over the long term by maintaining our clear competitive advantage as the UK's leading home and general merchandise retailer.

BUSINESS REVIEWS

Argos

52 weeks to £m	27 February 2010	28 February 2009
Sales	4,346.8	4,281.9
Benchmark operating profit	266.2	303.6
Benchmark operating margin	6.1%	7.1%
Like-for-like change in sales	(2.1%)	(4.8%)
New space contribution to sales change	3.6%	3.9%
Total sales change	1.5%	(0.9%)
Gross margin movement	Down c.175bps	Down c.100bps
Benchmark operating profit change	(12%)	(19%)
Number of stores at year-end	745	730
Of which Argos Extra fully stocked-in	339	314

As the UK's leading general merchandise retailer, Argos provides a highly successful and unique offer of choice, value and convenience.

Operational review

Expanding choice

At 19,300 lines, the latest edition of the Argos catalogue has expanded by around 500 lines or 3%.  Most of the increase has been from stocked-in lines, thereby improving the customer choice for immediate availability.

Of the current catalogue's 15,000 lines that are available in stores, 3,700 are 'Extra' products which are fully stocked-in at 339 stores or 45% of the store portfolio, while a further 118 stores carry part of this additional range.  Future systems developments will remove the distinction between 'Core' and 'Extra' ranges, allowing any of the 15,000 products to be stocked-in at any store, based upon demand levels.

The internet is expanding choice beyond the 19,300 lines in the catalogue, with 10,000 further lines currently on trial at www.argos.co.uk.  Major areas of range extension include: technology categories such as video games, office supplies, photography and consumer electronics accessories; white goods; beds; toys and nursery; and sports and leisure equipment.  There has been particular success in white goods, where a further 2,000 lines extend significantly the main Argos catalogue offer.  Additional trials of extended ranges will continue to establish the full opportunity, and will also begin to explore the development of an ordered-in capability for the customer to benefit from the convenience of store-based collection.

Improving ranges

The 'Argos Value' range has been further extended to over 350 products, supporting Argos' strong value credentials.  Following an excellent response, the number of 'WOW' deals has also increased to over 500 and covers a broader range of categories.  Store displays of both 'Argos Value' and 'WOW' products were increased throughout the chain.

The acquisition of the Alba and Bush brands in late 2008 has enabled Argos to successfully reposition its own brand ranges in consumer electronics - particularly TVs - as well as expanding their use into areas such as white goods.  Developing our portfolio of own brands in these areas, together with stronger relationships with third party brands, has helped to significantly improve the range hierarchy.

The Chad Valley toy brand, acquired in early 2009, was applied to around 120 products in its first catalogue for Christmas 2009.  There was a broadly even split between its use on lines previously available at Woolworths, lines previously unbranded at Argos, and lines that were new to the market.  Chad Valley has already become Argos' leading toy brand and in the latest catalogue it has been applied to 200 products and includes extending its use to a broader range of toy categories.

The electricals and toys categories are amongst those where Argos has continued to gain market share, with the repositioning of own brands a key driver of this.  Range hierarchies are being strengthened further across all other categories.  The acquired Hygena and Schreiber brands are now being used on furniture ranges in the latest catalogue.  Argos will continue to develop its other own brands, which include Beanstalk, Challenge, Cookworks and Pro Fitness.  Argos is also expanding its use of licensing, exclusive product lines or celebrity brand endorsements, with examples of these expansion plans including Qualcast, Disney, Regatta, Mamas & Papas and Davina McCall fitness.

Value commitment

Argos has maintained its commitment to being highly price competitive.  During the year, there was retail price inflation in its product markets as a result of product cost pressures driven principally by adverse currency movements.  Argos remains a leading value retailer, supported by the Group's sourcing scale and infrastructure advantages, together with the benefit of Argos' low cost operating model.

An overall competitive position continues to be maintained, measured using weekly internet price comparisons against competitors on approximately 10,000 products.  A price position better than the competition is maintained on the approximate 1,000 lines that drive the greatest sales volumes; these 'key value indicators' (KVIs) include the Argos Value, 'WOW', lowest price point and best selling lines such as popular branded consumer electronics and domestic appliances.  Argos' success at continuing to be advantaged on price versus the market is reflected in further market share growth; this includes significant share gains in product categories that are amongst the most easily price-compared by customers such as televisions, computing and white goods.

Driving further cost efficiencies

At the end of the previous financial year, organisational changes were undertaken to further improve operational efficiency.  The number of head office roles reduced by approximately 10%, and a restructuring of certain levels of store management resulted in a reduction of store-based full time equivalent roles.  Other cost efficiencies have been made across all parts of the business, including bringing 'in-house' the transport of stock from ports, further savings in the catalogue production process and reducing the level of distribution annexation.  Total operating and distribution costs were reduced by around £15m, with cost actions more than offsetting volume-related growth and underlying inflation.

Brand refresh and store refurbishment programme

Since the brand was last updated around 10 years ago, Argos has become the leading integrated multi-channel retailer, expanded through Argos Extra and internet-only ranges, and developed a series of more up-to-date store formats.  A programme to refresh the brand began during the year.  Initial stages have been completed, which has seen the new brand identity applied across the latest catalogue, the website and all other marketing materials.

In the next financial year, approximately 130 stores will be refurbished to reflect the new brand identity as well as the latest shopping process improvements and product displays.  This will include new versions of catalogue browsers, stock checker units, kiosks and call forward technology, as well as updated jewellery displays and other improvements to the customer areas.  Approximately 500 stores, or two-thirds of the store estate, are expected to be refurbished over the next three years.  Refurbishment costs are expected to average approximately £100k per store, with the cost in the first year being approximately £15m and totalling £70m over the complete programme.

Multi-channel leadership

Multi-channel sales grew to £1.9bn or 43% of Argos' sales.  The internet represented 32% of Argos' sales; over two-thirds of this or 22% of Argos' total sales were customers using online Check & Reserve for store collection, with this channel growing by 36% for a second year in a row.  After Amazon, Argos continues to be the largest internet retailer in the UK, with over 300 million website visits driving £1.4bn of sales in the last year.

Around 20% or over £800m of Argos' sales continue to be home delivered, with over 40% of home delivery sales being orders placed by customers while in store.  Of the 10 million products delivered last year, 4 million were larger items delivered via Argos' in-house and market-leading 'two-man' home delivery service.

Argos has continued to develop its multi-channel leadership over the last year and has strong plans in place to continue its position of competitive advantage.

Enhanced tools to assist customer choice

The expansion of online customer ratings and product reviews has been a key development during the year.  There are currently over 500,000 reviews and around 75% of products that carry a customer rating.

In the next financial year, more product comparison tools with enhanced data and selection criteria will be launched.  Richer content will be available on key ranges including new product image technology, videos and 'How to' guides.  Further improved navigation tools will be launched, and 'Ask & Answer' facilities will be extended.  An Apple iPhone application will be launched soon.

More convenience for store-based collection

During the year, 20 stores were opened and five were closed, increasing the store portfolio to 745.  More products stocked into store for customers' immediate collection have been facilitated by better stocking policies and achieving further benefits from the previously completed systems developments which manage stock ordering and replenishment.

Additional improvements to stockroom processes are being driven through the 'voice put-away' process.  This technology helps to automatically guide stockroom assistants to the correct location, with key benefits being quicker processing and further enhanced stock file accuracy, thereby improving availability and customer satisfaction.  Having been extended to 130 stores during the year, 'voice put-away' will now be rolled-out across the rest of the portfolio over the next two years.

In the next financial year, there will be around 15 to 20 openings, while 5 to 10 older stores are likely to be closed; there will also be a number of stores that are relocated to better sites.  While the availability of suitable new out-of-town property developments is constraining store openings in the short term, Argos' store chain analysis over the long term continues to support further years of growth.

For the rapidly growing number of customers who reserve online for store-based collection, there will be improved stock-finding tools which automatically check more stores and provide alternative channel options and products more effectively.  Improved online and kiosk payment methods are also being developed.

Financial review

Sales in the 52 weeks to 27 February 2010 increased by 1.5% in total; the contribution to sales from net new space was 3.6%, while like-for-like sales declined by 2.1%.  There was further strong growth in televisions and personal computers, offsetting weakness in the video gaming market.  Toy sales grew strongly.  Challenging market conditions continued in home-related areas such as furniture, but the rate of decline moderated over the year.

The gross margin rate was down by approximately 175 basis points.  Around 100 basis points represented the net impact of product cost pressures mainly attributable to adverse currency movements, which were partially offset by supply chain gains, shipping cost savings and a level of customer price inflation.  Around 50 basis points resulted from the sales mix shift towards lower margin consumer electronics categories and away from higher margin home-related areas, although this trend slightly reversed in the final quarter of the year.  The remaining 25 basis points reflected some increased promotional activity over the peak Christmas trading period.

Total operating and distribution costs were reduced by around £15m or 1%.  Total sales increased by 1.5%, equivalent to a potential cost increase of around £20m, and underlying cost inflation was around 2% or £25m.  There was therefore around 5% or £60m of cost productivity as a result of continued excellent cost management.

Benchmark operating profit for the 52 weeks to 27 February 2010 was £266.2m, a £37.4m or 12% decrease on the previous financial year's £303.6m.

Homebase

52 weeks to £m		27 February 2010	28 February 2009
Sales		1,571.9	1,513.2
Benchmark operating profit		41.2	14.9
Benchmark operating margin		2.6%	1.0%
Like-for-like change in sales		2.7%	(10.2%)
New space contribution to sales change		1.2%	6.7%
Total sales change		3.9%	(3.5%)
Gross margin movement		Down c.350bps	Up c.25bps
Benchmark operating profit change		177%	(67%)
Number of stores at year-end		349	345
Of which contain a mezzanine floor		190	188
Store selling space at year-end (million sq ft)		16.1	15.9
Of which	- garden centre area	3.7	3.6
	- mezzanine floor area	1.9	1.9

Homebase continues to be well positioned as a leading home enhancement retailer.

Operational review

Capitalising on a more favourable trading environment

Market conditions during the year were challenging in most areas of home and general merchandise.  However, Homebase has delivered its strongest sales performance for five years, as it capitalised on a more favourable trading environment in some of its product markets, resulting in further market share gains.

In its peak trading period, the Spring 2009 weather conditions were significantly more favourable than the previous year.  This, together with excellent product ranging, maintaining high operational standards and appropriately driving additional demand through promotional and clearance activity, led to a strong performance in seasonal-related categories including horticulture, garden maintenance, and other outdoor living categories such as furniture and barbeques.

Homebase had another year of strong growth in 'big ticket' categories, particularly kitchens.  While the year benefited from the withdrawal of some competitors, Homebase continued to gain from its own initiatives including the previous national rollout of kitchen installations, new product ranges and refreshed store displays.

Range and service development

Homebase continues to develop its point of differentiation as a more style-led offer across home enhancement.  Strong performances in the showroom and homewares areas provide evidence of this successful positioning.  Homebase also continues to protect and develop its core DIY and decorating offer with sales in these areas broadly flat in the year, an improvement on trends in previous years.  This performance has been supported in part by a more competitive pricing position and better customer perception of value.  There have also been improved ranges and product availability to complete key DIY tasks, greater prominence of advertising and promotions for these areas, and a launch of related 'How to' guides.

Homebase is looking to replicate the success of its kitchen installation service.  Bathroom installations, previously trialled in 60 stores, were extended to a further 100 stores in time for the New Year peak trading period, with strong results being achieved to date.  Similarly, the fitted bedroom furniture trial has recently been extended to 100 stores; this product range also now benefits from the addition of the Schreiber brand.

Among a number of initiatives to improve sales and profit densities, new ranges and display techniques for flooring and tiling will be rolled out to around 160 stores.  This expansion typically takes space from underperforming and low density wallpaper ranges.  Trials will also test flooring and tiling installation services.

Improvements to price and value

Homebase has achieved both an improved competitive pricing position and customer perception of value through a number of initiatives.  During the year, there was retail price inflation in Homebase's product markets as a result of product cost pressures driven principally by adverse currency movements.  Homebase, like Argos, targeted a level of customer price inflation that aimed to pass on the impact of cost of goods inflation in absolute terms.

Homebase has specifically matched the market price on over 1,000 'key value indicator' and 'entry price point' lines.  Over 400 'Bulk Buy' deals have also been implemented, with these multi-buy offers often representing market-leading deals.  A new 'Homebase Value' brand of over 300 products has been launched, covering everyday essentials across all categories, with 150 items priced under £5.  Similar to Argos, Homebase also now undertakes frequent automated price comparisons on 6,000 lines against main competitors.  This data is supporting more effective management of everyday competitive pricing.  Stronger promotional campaigns, capitalising on consumer behaviour in the current economic times, have also driven customer satisfaction scores on price and value measures improving by 30%, as well as successfully driving incremental cash profit.

Multi-channel development

During the year, Homebase achieved its target of over 30,000 product lines being browseable via www.homebase.co.uk.  Some 10,000 of these are transactional, double the level a year earlier.  The 'Stock Check' service was rolled out to all UK stores early in 2009 and customer use has been growing strongly.  Towards the end of the year, the Stock Check & Reserve service was rolled out to all stores.  Customer response to these developments and other improvements in web content has resulted in significant increases in website customer satisfaction ratings.

Homebase has been developing its email and web-based promotions to drive further traffic and sales through its website.  The email marketing database has been extended from 0.5 million relevant customers to over 7 million by leveraging the combination of Homebase, Argos and Nectar information.  These developments have boosted online traffic and helped drive strong growth in transactional sales during the period.

In the next financial year, the number of transactional Homebase products will continue to be increased, as will the use of Argos and internet-only products.  Improved search criteria and enhanced store location choices for reserved goods will be introduced.  A new 'Get into Gardening' customer community site has been launched, offering advice and tips through videos, forums and blogs.

New loyalty scheme

Homebase has successfully transferred its in-house Spend & Save loyalty card programme over to the Nectar scheme.  Customer feedback indicated that Nectar was simpler to understand and benefited from use across multiple retailers and service providers, while the scheme was also superior in customer reach with around 17 million card holders making it the biggest loyalty card programme in Britain.  The Nectar scheme also provides an enhanced level of customer insight.

Since launch, measures of card usage and related spend have all exceeded expectations.  Six million of the Nectar card holders have already shopped at Homebase.  In the next financial year, there will be more Nectar-specific promotional events, and increased use of Nectar to drive category or specific product promotions.  Longer term, further use will be made of the Nectar capabilities to develop customer segmentation and more targeted marketing programmes.

Store portfolio development

A net four stores were opened during the year; there were six openings and two closures, taking the portfolio to 349 stores.  No openings are planned in the next financial year.  In the approximate 20% of the portfolio that has seen little or no investment for many years, the low cost refit trial was implemented in a further 10 stores during the year.  Sales uplifts across these refits have been achieving the targeted 15% level, and a further 10 stores are expected to be refitted in the next financial year.  Small numbers of store closures, relocations or downsizes will continue as part of our ongoing management of the portfolio.

Cost base management

Significant cost actions were taken at Homebase in the second half of the previous financial year.  Despite better than expected demand in the year just ended, distribution and operating costs were held at the budgeted levels in absolute terms, without detrimental impact on customer service or operational standards.  As a result, total operating and distribution costs were reduced by around £50m or 6% in the period, with cost actions more than offsetting volume-related growth and underlying inflation.

Store payroll costs had been reduced from the second half of the previous financial year through the realignment of shift patterns and task allocations.  At the end of that year, further organisational changes were undertaken to improve operational efficiency and cost productivity.  These included head office function roles being reduced by approximately 15% and a restructuring of store supervisory positions which reduced store-based full time equivalent roles by approximately 5%.  In addition to lowering costs, these actions have given the business a more efficient and effective structure, while protecting customer service, availability and essential processes.  Homebase's already strong colleague engagement scores improved slightly during the year.

Financial review

Sales in the 52 weeks to 27 February 2010 increased by 3.9% in total; the contribution to sales from net new space was 1.2%, while like-for-like sales increased by 2.7%.  There was strong growth in seasonally-related categories during Homebase's peak trading period, given Spring 2009 benefited from better year-on-year weather conditions.  The year saw further good growth in big ticket categories, particularly kitchens.  Sales for the remaining categories overall were marginally up.

The gross margin rate was down by approximately 350 basis points.  Around 175 basis points represented the net impact of product cost pressures mainly attributable to adverse currency movements, which were partially offset by supply chain gains, shipping cost savings and a level of customer price inflation.  Around 150 basis points resulted from increased promotional activity and clearance of previously over-wintered seasonal stocks, which drove successfully both sales and cash gross margin, but which reduced the gross margin rate.  The remaining 25 basis point reduction reflected the sales mix impact given the strong sales of seasonally-related categories as well as big ticket products.

Total operating and distribution costs were reduced by around £50m or 6%.  Total sales increased by 3.9%, equivalent to a potential cost increase of around £30m, and underlying cost inflation was around 1% or £10m.  Depreciation was around £10m lower as a result of the impairment of store-related assets in the previous financial year.  There was therefore around 10% or £80m of underlying cost productivity as a result of successful cost reduction and containment initiatives.

Benchmark operating profit for the 52 weeks to 27 February 2010 was £41.2m, a £26.3m or 177% increase on the previous financial year's £14.9m.

Financial Services

52 weeks to £m		27 February 2010	28 February 2009
Sales		104.0	102.3
Benchmark operating profit before financing costs		9.2	19.7
Financing costs		(3.5)	(13.6)
Benchmark operating profit		5.7	6.1
Store card gross receivables		497	488
Personal loan gross receivables		-	3
Total gross receivables		497	491
Provision		(68)	(67)
Net receivables at year-end		429	424
Provision % of gross receivables		13.6%	13.6%
Store card total credit sales		579	573

Financial Services works in conjunction with Argos and Homebase to provide their customers with the most appropriate credit offers to drive product sales, and to maximise the total profit from the transaction for Home Retail Group.

Operational review

The in-house store card operations drove £579m of Group retail sales, up 1% on the previous year.  The proportion of promotional credit sales continued to represent 77% of all sales placed on the store cards; the offer of 'buy now, pay later' products remains a key enabler of sales in 'big ticket' categories.  In addition to credit sales placed on the Group's own store cards, credit offers for purchases at Homebase of typically over £3,000 are provided through product loans from Barclays Partner Finance.  Including these product loans, total sales penetration was 9.6%.

At the start of the year being reported the account management system was migrated to a new platform.  This has helped to lower processing costs, while further initiatives to lower costs and improve customer convenience included increased contact centre automation and a trial for automated applications in store facilitated through the previously rolled-out new Argos till systems.  A new online account management tool for customers has also recently been launched.

Financial review

Total gross receivables grew by £6m year-on-year, with a £9m increase in the store card and a £3m reduction from the final run-off of the personal loan receivables.

Delinquency rates continued to rise in line with our expectations.  However, the year-on-year increase peaked around the half-year, with the differential subsequently easing.  As a result, the bad debt charge increased by £9m in the first half and by £13m for the full year.  Financing costs reduced by £10m in the period reflecting a substantially lower funding cost rate being applied, since this non-cash internal recharge is based upon UK base rates.  A corresponding impact is recognised in Group net interest income.  All other costs were tightly controlled and were marginally down year-on-year.

The benchmark operating result of £5.7m for the year reflects the financial return on the revolving (i.e. interest-bearing) element of receivables, as promotional credit products are recharged to Argos and Homebase at cost.  The cost advantage of this internal arrangement versus third-party promotional credit provision is therefore a benefit within the Argos and Homebase benchmark operating profits.

GROUP FINANCIAL REVIEW

Sales and benchmark operating profit

Group sales were 2% higher at £6,022.7m (2009: £5,897.4m) while Group benchmark operating profit declined 4% to £289.7m (2009: £300.4m).  Within this, the drivers of the Argos, Homebase and Financial Services performance are analysed as part of the preceding business reviews.

Central Activities represents the cost of central corporate functions and the investment costs of new development opportunities.  Costs for the year were 3% lower at £23.4m (2009: £24.2m), which included savings from organisational changes made at the end of the previous financial year to streamline head office functions.  The HomeStore&More trial expanded with a fourth store and the testing of an adjacent bedroom furniture format at one of the earlier stores.  The trial stores will continue to assess the potential opportunity for this new format development.

Net interest income

Net interest income was £5.2m (2009: £29.7m).  Within this, third party interest income for the period reduced to £4.4m (2009: £18.6m).  While the Group's net cash position increased, the effective interest rate earned reduced to approximately 1% from 5%.

Financing costs charged within Financial Services' benchmark operating profit saw the corresponding credit within net interest income reduce to £3.5m (2009: £13.6m).  This non-cash internal recharge is based upon UK base rates, and therefore reduced substantially.

The charge within net interest income in relation to the discount unwind on benchmark items was £2.7m (2009: £2.5m).  This arises from the accounting treatment whereby provisions for expected future liabilities are required to be discounted back to current value.  As settlement of the liability moves closer to the present day, additional non-cash charges to unwind the discount are incurred; this will result in the absolute level of provision eventually matching the liability in the accounting period that it becomes due.

Share of post-tax results of joint ventures and associates

These amounted to a loss of £2.0m (2009: £2.4m).  The loss is due principally to costs incurred by the joint venture with Barclays Bank PLC in regard to the Argos credit card.

Benchmark profit before tax

Benchmark profit before tax for the year declined 11% to £292.9m (2009: £327.7m).

Costs related to demerger incentive schemes

These amounted to £7.7m (2009: £8.4m), with the final charge being unchanged from that reported in the first half of the year.  It was originally announced that these costs could amount to a maximum of £45m, to be charged to the income statement over the three-year period from the October 2006 demerger, and are excluded from benchmark profit before tax.  The actual cumulative cost has totalled £34m.

Financing fair value remeasurements

Certain foreign exchange movements as well as changes in the fair value of certain financial instruments are recognised in the income statement within net financing income.  These amounted to a net gain of £2.7m (2009: loss of £28.9m), which arises principally as a result of translation differences on subsidiary cash balances.  The gain reflects the strengthening of sterling against other currencies during the year.  Equal and opposite adjustments to these translation differences are recognised as part of the movements in reserves.  As required by accounting standards, the net nil exchange adjustment is therefore split between the income statement and the statement of comprehensive income.

Financing impact on retirement benefit obligations

The charge through net financing income in respect of the expected return on retirement benefit assets net of the interest expense on retirement benefit liabilities was £0.7m (2009: credit £11.2m).  The current service cost, which the Group considers a fairer reflection of the cost of providing retirement benefits, is already reflected in benchmark operating profit.

Discount unwind on non‑benchmark items

An expense of £6.7m (2009: £1.8m) within net financing income relates to the discount unwind on onerous lease provisions.  As these provisions were items previously excluded from benchmark profit before tax, the discount unwind has also been excluded from benchmark profit before tax.  As set out within the net interest income review above, these non-cash charges arise from the accounting treatment whereby provisions for expected future liabilities are discounted back to current value.

Onerous lease provision releases

A credit of £12.5m (2009: nil) was recorded in the year, relating to onerous lease provisions no longer required.  As the provision charges were items previously excluded from benchmark profit before tax, the provision releases will also be excluded from benchmark profit before tax.

Profit before tax

The reported profit before tax for the year was £293.0m (2009: loss of £394.2m).

Taxation

Taxation attributable to benchmark profit before tax was £91.4m (2009: £103.5m), representing an effective tax rate (excluding joint ventures and associates) of 31.0% (2009: 31.4%).  The reduction in the effective rate largely reflects a lower amount of disallowable expenditure.

Taxation attributable to non-benchmark items amounted to a credit of £8.2m (2009: £84.6m).  This includes a credit of £7.6m (2009: £23.5m) being prior year non-benchmark items.  The total tax expense for the year was therefore £83.2m (2009: £18.9m).

Number of shares and earnings per share

The number of shares for the purpose of calculating basic earnings per share (EPS) is 862.9m (2009: 866.6m), representing the weighted average number of issued ordinary shares of 877.4m, less an adjustment of 14.5m (2009: 10.8m) representing shares held in Group share trusts net of vested but unexercised options and share awards.

The calculation of diluted EPS reflects the potential dilutive effect of employee share incentive schemes.  This increases the number of shares for diluted EPS purposes by 9.3m (2009: 10.4m) to 872.2m (2009: 877.0m).

Basic benchmark EPS is 23.4p (2009: 25.9p), with diluted benchmark EPS of 23.1p (2009: 25.6p).  Reported basic EPS is 24.3p (2009: loss of 47.7p), with reported diluted EPS being 24.1p (2009: loss of 47.7p).

Dividends

Home Retail Group's dividend policy remains to target dividend cover over the medium term of around two times, based on full-year basic benchmark EPS.

While earnings have reduced by 10%, the Group's cash generation has continued to be strong.  A final dividend maintained at 10.0p is therefore being recommended by the Board, holding the dividend for the year at 14.7p.  Based on basic benchmark EPS of 23.4p (2009: 25.9p), dividend cover is 1.59 times (2009: 1.76 times).  The final dividend, subject to approval by shareholders at the AGM, will be paid on 21 July 2010 to shareholders on the register at the close of business on 21 May 2010.

Cash flow and net cash position

52 weeks to £m	27 February 2010	28 February 2009
Benchmark operating profit	289.7	300.4
Exceptional items within operating profit	-	(694.0)
Onerous lease provision releases	12.5	-
Costs related to demerger incentive schemes	(7.7)	(8.4)
Statutory operating profit after exceptional items	294.5	(402.0)
Depreciation and amortisation	130.1	159.4
Movement in working capital	69.6	(10.2)
Financing costs charged to Financial Services	3.5	13.6
Non-cash Homebase exceptional charges	-	651.2
Cash flow impact of prior year restructuring charge	(17.4)	(3.1)
Other operating items	(19.3)	59.5
Cash flows from operating activities	461.0	468.4
Net interest	7.2	16.6
Taxation	(107.3)	(74.7)
Net capital expenditure	(87.4)	(132.4)
Brand acquisitions	(1.9)	(20.6)
Purchase of term deposit	(50.0)	(75.0)
Sale of term deposit	75.0	-
Other investments	(6.7)	(2.2)
Cash inflow before financing activities	289.9	180.1
Dividends paid	(126.3)	(127.2)
Purchase of shares for Employee Share Trust	(9.4)	(21.6)
Other financing activities	0.3	0.1
Net increase in cash and cash equivalents	154.5	31.4
Opening cash and cash equivalents	209.4	174.0
Net cash inflow	154.5	31.4
Effect of foreign exchange rate changes	0.1	4.0
Closing cash and cash equivalents	364.0	209.4
Term deposit	50.0	75.0
Closing financing net cash	414.0	284.4

Cash flows from operating activities were £461.0m (2009: £468.4m).  Strong working capital management resulted in an inflow of £69.6m (2009: outflow of £10.2m); this inflow included the benefit of some timing differences which are expected to unwind in the new financial year.  The working capital inflow more than offset the lower benchmark operating result.

Net capital expenditure was £87.4m (2009: £132.4m), reflecting the lower number of stores opened year-on-year.  Tax paid was £107.3m (2009: £74.7m), with the prior year benefiting from a tax authorities repayment in respect of the settlement of historic tax issues.  Dividends paid to shareholders amounted to £126.3m (2009: £127.2m), and £9.4m (2009: £21.6m) was used to purchase shares for the Home Retail Employee Share Trust.

The Group's financing net cash position at 27 February 2010 was £414.0m, an increase of £129.6m over the year.  The financing net cash position included a £50.0m term deposit which was purchased in November 2009 and matures in May 2010.

Balance sheet

As at £m	27 February 2010	28 February 2009
Goodwill	1,541.0	1,541.0
Other intangible assets	92.7	103.6
Property, plant and equipment	525.1	559.3
Inventories	935.4	930.3
Instalment receivables	429.4	424.5
Other assets	178.1	190.2
	3,701.7	3,748.9
Trade and other payables	(1,104.9)	(1,063.2)
Other liabilities	(219.1)	(250.2)
	(1,324.0)	(1,313.4)
Invested capital	2,377.7	2,435.5
Retirement benefit obligations	(24.9)	(46.4)
Net tax assets	52.1	32.7
Derivative financial instruments	47.7	52.2
Financing net cash	414.0	284.4
Reported net assets	2,866.6	2,758.4
Pre-tax return on invested capital	12.1%	12.2%

Reported net assets as at 27 February 2010 were £2,866.6m, equivalent to 332p per share excluding shares held in the Employee Share Trust.  The year-on-year increase in net assets was £108.2m.  Within this, invested capital reduced by £57.8m, driven by the working capital reduction and lower capital expenditure.  These movements also contributed to the £129.6m increase in financing net cash.

Benchmark pre-tax return on invested capital (ROIC) is a key performance measure for the Group.  Benchmark operating profit plus share of post-tax results of joint ventures and associates was £287.7m, down £10.3m or 3%, while year-end invested capital reduced by 2%.  This resulted in a pre-tax ROIC of 12.1% (2009: 12.2%).

Liquidity and funding

The Group maintains liquidity by arranging funding ahead of requirements and through access to committed facilities.  At 27 February 2010, the Group had £700m of undrawn committed borrowing facilities, £685m of which does not expire until 2013.  These facilities are in place to enable the Group to finance its working capital requirements and for general corporate purposes.  The Group's net cash position is however expected to continue to be sufficient to meet its financing needs in the foreseeable future.

Group financing arrangements

The Group finances its operations through a combination of retained profits, property leases and borrowing facilities where necessary.  The Group's net cash balances averaged approximately £500m over the year; the Group did not draw upon its committed borrowing facilities at any point during the year.

The Group has significant liabilities through its obligations to pay rents under operating leases; the operating lease rental expense for the year amounted to £379.1m.  The capitalised value of these liabilities is £3,033m based upon an eight times multiple of the year's operating lease charge, or £3,148m based upon discounted cash flows of the expected future operating lease charges.  In common with credit rating agencies and lenders, the Group treats its lease liabilities as debt when evaluating financial risk.

Capital structure management and share buy-back programme

Financial year £m	05/06	06/07	07/08	08/09	09/10
Benchmark PBT	337.1	376.7	432.9	327.7	292.9
Add: depreciation and amortisation	134.9	147.5	151.6	159.4	130.1
Add: lease rental expense	299.2	328.2	344.8	372.8	379.1
Deduct: interest income	(9.5)	(16.6)	(33.3)	(29.7)	(5.2)
EBITDAR	761.7	835.8	896.0	830.2	796.9
Financing net (debt)/cash	(200)	60	174	284	414
Capitalised lease rental expense	(2,394)	(2,626)	(2,758)	(2,982)	(3,033)
Adjusted net debt	(2,594)	(2,566)	(2,584)	(2,698)	(2,619)
Adjusted net debt/EBITDAR ratio	3.4x	3.1x	2.9x	3.2x	3.3x

The Group has continued its strong track record of cash generation.  In the four years since demerger, over £600m of net cash has been generated.  This cumulative net cash generation has been after approximately £500m of dividends to shareholders and approximately £700m of capital expenditure and other investments that have continued to position the businesses strongly for growth.  The Group's adjusted net debt/EBITDAR ratio, which capitalises the lease rental expense on an eight times multiple, was 3.4x at demerger, strengthened to 2.9x after two years, and moved back to 3.3x for the financial year just ended.

The Board has conducted its regular review of the Group's capital structure as part of the year-end process.  In doing so it has taken account of the Group's current cash position, its significant lease obligations, maintaining a capital structure equivalent to a potential investment grade rating, continuing to invest appropriately in the business and maintaining flexibility to enable the Group to withstand unforeseen fluctuations in the trading environment.

As a result of the review, it is anticipated that over the next 12 months up to £150m of capital will be returned to shareholders through a share buy-back programme.  The programme will be funded out of the Group's existing cash resources.  At a share price of 300p, it would represent approximately 6% of the Company's 877.4m issued ordinary shares.  The Company currently has authority to purchase up to 10% of its issued ordinary shares, and renewal of this authority will be sought at the Company's AGM on 30 June 2010.

Retirement benefit obligations

Pension arrangements are operated principally through the Home Retail Group Pension Scheme, a defined benefit scheme, together with the Home Retail Group Stakeholder Pension Scheme, a defined contribution scheme.

The IAS 19 valuation as at 27 February 2010 for the defined benefit pension plans was a net deficit of £24.9m (28 February 2009: £46.4m).  Plan assets increased to £667.7m (28 February 2009: £504.4m), driven principally by higher market values.  The present value of plan liabilities increased to £692.6m (28 February 2009: £550.8m), driven principally by a reduction in the assumed discount rate to 6.0% (28 February 2009: 6.5%).

A full actuarial valuation of the defined benefit scheme is carried out every three years by independent, qualified actuaries.  The latest full review, as at 31 March 2009, resulted in a deficit of £102m.  Increases to funding have been agreed with the pension trustee.  The cash flow impact of the additional payments are £17m in the year to 27 February 2010 (with the Group's net cash position at 27 February 2010 of £414m being after this payment), reducing to £16m and £14m in the two subsequent financial years.

Counterparty credit risk management

The Group's exposure to credit risk with regard to treasury transactions is managed by dealing only with major banks and financial institutions with appropriate credit ratings and within limits set for each organisation.  Dealing activity is closely controlled and counterparty positions are monitored on a regular basis.

Interest rate risk management

The Group's principal objective is to manage the trade-off between the effective rate of interest and the credit risk associated with the counterparty bank or financial institution.

The annual effective rate of interest earned on the Group's net cash balances reduced substantially in the financial year being reported.  This reflects a period when UK base rates have been at their lowest.

Currency risk management

The Group's key objective is to minimise the effect of exchange rate volatility.  Transactional currency exposures that could significantly impact the income statement are hedged using forward purchase contracts.

Approximately 30% of the Group's product costs are paid for directly in US dollars.  Sterling weakened substantially against the US dollar between August 2008 and April 2009.  This had a significant impact on the Group's hedged rates, and therefore the cost of goods sold.

US dollar hedged rates	08/09	09/10	change
First half	2.00	1.75	(0.25)
Second half	2.00	1.50	(0.50)
Full year	2.00	1.60	(0.40)

Share price and total shareholder return

The Group's share price ranged from a low of 189.0p to a high of 329.7p during the financial year.  On 26 February 2010, the closing mid market price was 255.0p, giving a market capitalisation of £2.2 billion at the year-end.

Total shareholder return (the change in the value of a share including reinvested dividends) has been an increase of 26.9% over the year.  This compares to an increase of 47.8% for the FTSE 350 General Retail sector and an increase of 45.5% for the wider FTSE 100.

Accounting standards and use of non-GAAP measures

The Group has prepared its consolidated financial statements under International Financial Reporting Standards for the 52 weeks ended 27 February 2010.  The basis of preparation is outlined in Note 1 to the Financial Information on page 29.

The Group has identified certain measures that it believes provide additional useful information on the underlying performance of the Group.  These measures are applied consistently but as they are not defined under GAAP they may not be directly comparable with other companies' adjusted measures.  The non-GAAP measures are outlined in Note 2 to the Financial Information on page 29.

Principal risks and uncertainties

The Group will set out the principal risks and uncertainties which could impact its performance, together with examples of mitigating activity, in its 2010 Annual Report and Financial Statements; an unedited full text excerpt will also be included in the Regulatory Information Service announcement accompanying the publication of the full report.

The Group operates a structured risk management process which identifies and evaluates risks and uncertainties and reviews mitigating activity.  As previously disclosed, the main area of potential risk and uncertainty centres on the impact on sales volumes and thereby profitability in relation to economic conditions and overall consumer demand.  Other potential risks and uncertainties around sales and/or profit growth include the cost of goods and services to the Group, competitor activity, seasonal weather patterns, currency exposures, the regulatory environment, product supply and other operational processes, infrastructure development, product safety, reliance on key personnel and business interruption.

Annual report and annual general meeting

The 2010 Annual Report and Financial Statements is expected to be available at www.homeretailgroup.com and posted to shareholders on or around 28 May 2010.  The Annual General Meeting will be held from 11.00 am on Wednesday 30 June 2010 at the Jurys Inn Milton Keynes, Midsummer Boulevard, Milton Keynes MK9 2HP.

Appendix 1.  Trading statement comparables

	Q1 13 weeks to 30 May 2009
Argos
Sales	£937m
Like-for-like change in sales	(2.8%)
Net new space contribution to sales change	3.7%
Total sales change	0.9%
Gross margin movement	Down c.75bps
Homebase
Sales	£465m
Like-for-like change in sales	3.8%
Net new space contribution	2.0%
Total sales change	5.8%
Gross margin movement	Down c.250bps
	Q2 13 weeks to 29 Aug 2009		H1 26 weeks to 29 Aug 2009
Argos
Sales	£951m		£1,888m
Like-for-like change in sales	(1.4%)		(2.1%)
Net new space contribution to sales change	3.9%		3.8%
Total sales change	2.5%		1.7%
Gross margin movement	Down c.125bps		Down c.100bps
Homebase
Sales	£401m		£866m
Like-for-like change in sales	1.6%		2.8%
Net new space contribution to sales change	1.3%		1.6%
Total sales change	2.9%		4.4%
Gross margin movement	Down c.400bps		Down c.325bps
	Q3 18 weeks to 2 Jan 2010		YTD 44 weeks to 2 Jan 2010
Argos
Sales	£1,922m		£3,810m
Like-for-like change in sales	0.1%		(1.0%)
Net new space contribution to sales change	3.8%		3.8%
Total sales change	3.9%		2.8%
Gross margin movement	Down c.250bps		Down c.175bps
Homebase
Sales	£501m		£1,367m
Like-for-like change in sales	4.0%		3.2%
Net new space contribution	0.6%		1.3%
Total sales change	4.6%		4.5%
Gross margin movement	Down c.375bps		Down c.350bps
	Q4 8 weeks to 27 Feb 2010		H2 26 weeks to 27 Feb 2010		FY 52 weeks to 27 Feb 2010
Argos
Sales	£537m		£2,459m		£4,347m
Like-for-like change in sales	(9.4%)		(2.2%)		(2.1%)
Net new space contribution to sales change	2.8%		3.6%		3.6%
Total sales change	(6.6%)		1.4%		1.5%
Gross margin movement	Down c.100bps		Down .225bps		Down .175bps
Homebase
Sales	£205m		£706m		£1,572m
Like-for-like change in sales	(0.6%)		2.6%		2.7%
Net new space contribution to sales change	0.6%		0.6%		1.2%
Total sales change	0.0%		3.2%		3.9%
Gross margin movement	Down c.425bps		Down c.400bps		Down .350bps

 

END

 

 

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