Interim Results - 6 Months to 30 September 1999

Great Universal Stores PLC 2 December 1999 INTERIM RESULTS FOR SIX MONTHS ENDED 30 SEPTEMBER 1999 The Great Universal Stores P.L.C. ('GUS') today announces its interim results for the six months ended 30 September 1999. Highlights of the results are as follows:- Operational Highlights ---------------------- Experian: sales and profits advance - particularly strong growth in UK Argos: new initiatives showing early signs of sales and profit improvement Home Shopping: state of apparel market impacting sales and profits in UK Burberry: beginning of an improvement in sales and profits following strategic reshaping Other businesses: broadly in line with expectations Financial Highlights -------------------- Profit before goodwill, exceptionals and taxation: £176.1m (1998: £200.2m) Earnings per share before goodwill amortisation & exceptionals: 13.6p (1998: 15.0p) Interim dividend per share unchanged at 6.2p Lord Wolfson of Sunningdale, Chairman of GUS, commented: 'In common with other clothing retailers, GUS Home Shopping has experienced a significant fall in sales and profits during the first half. This has continued into the second half and a major priority of the Group is to take actions to address the long term trends in the UK agency catalogue business. 'Over the last three years, we have invested in growth areas partly in order to reduce our dependence on agency home shopping. GUS is now very well placed to meet the challenges and opportunities ahead, particularly in e-business.' Enquiries: G.U.S. Lord Wolfson of Sunningdale, Chairman Tel: 020 7495 0070 John Peace, Chief Executive Designate David Tyler, Finance Director Finsbury Rupert Younger Tel: 020 7251 3801 Timothy Grey Announcement also available on GUS website: www.gusplc.co.uk CHAIRMAN'S STATEMENT GROUP RESULTS In the six months to 30 September 1999, Group profit before amortisation of goodwill, exceptional items and taxation amounted to £176.1m compared with £200.2m last year. The Group's effective rate of taxation of 22.8% shows a further improvement on last year's rate of 24.4%. Earnings per share before amortisation of goodwill and exceptionals amounted to 13.6p compared to 15.0p last year. The Board has declared an unchanged interim dividend of 6.2p. In most of the Group's businesses, profits were higher than in the same period last year with significant advances in the underlying profits of Experian (up 15%) and Argos (up 12%). However, this has been a difficult period for the Home Shopping Division in the UK where profits fell mainly because of the serious weakness in the market for clothing. The Group's results also reflect the interest cost of funding the acquisition of Argos for the full six month period for the first time. GROUP DIRECTION While the agency home shopping business in the UK used to be the largest profit contributor in the Group, it has long been operating in a mature market and the UK Home Shopping division in the twelve months to 30 September 1999 accounted for less than 15% of Group profits. GUS' strategy has been to reduce its dependence on agency home shopping and to develop businesses with growth opportunities. The Group's catalogue retailing business has been strengthened by the acquisition of Argos, a value retailer, and considerable investment has been made in Experian, positioning it as a global leader in information services. GUS is now very well placed to take advantage of opportunities in e-business, in both information services and e- tailing. GUS has no current plans to demerge or float Experian. However, the Board regularly examines various options to maximise shareholder value. Given the right circumstances, it is therefore possible that Experian may be demerged or floated when it has developed a suitable track record following the last major acquisition completed in April 1998 EXPERIAN 1999 1998 £m £m Sales 472 434 Trading Profit 95.4 80.8 Margin 20.2% 18.6% Experian, the Group's largest contributor to profits, has continued to make good progress, achieving record results in North America, in the UK and in the rest of the world. Sales grew by 9% to £472.4m and trading profit by 18% to £95.4m. At constant exchange rates, sales growth was 7% and profit growth 15%. The division has continued its strategy of developing products and services that offer complete value-added solutions to clients. This approach has resulted in a number of significant business wins during the period with clients such as Morgan Stanley Dean Witter, American Express and Egg. Geographical Analysis 1999 1998 Increase Increase £m £m at constant exchange rates Sales: North America 310.3 293.9 +6% +2% United Kingdom 91.4 81.5 +12% +12% Rest of World 70.7 58.8 +20% +23% ------------------------------------ Total 472.4 434.2 +9% +7% ------------------------------------ Profit: North America 66.8 54.2 +23% +19% United Kingdom 21.8 15.1 +44% +44% Rest of World 3.4 2.6 +31% +35% ------------------------------------ Sub total 92.0 71.9 +28% +25% ------------------------------------ Share of FARES profit 3.4 8.9 (62)% (63)% ------------------------------------ Total 95.4 80.8 +18% +15% ------------------------------------ North America In the first half, Experian earned £70.2m trading profit in North America on sales of £310m. Profit margins increased from 18.4% to 21.5%, excluding the share of profits in the FARES real estate information joint venture which was affected by a decline in the mortgage refinancing market. About a quarter of Experian's North American revenues come from the sale of consumer credit information. Despite the continuing downward pressure on prices, revenues from this service increased slightly, unit volumes rose by 10% and profits increased, aided by further reductions in cost levels. At the same time, the company benefited from the continuing development of value- added services around its core credit data. The continuing integration of Metromail with Experian's existing target marketing business provided a number of cost synergies during the period. Around 350 marketing staff were successfully relocated to an enlarged campus in Schaumburg, Illinois. The development of a new data warehouse, called Insource, has created a single source of target marketing data, with information on 98% of US households. This data warehouse will provide a significant competitive advantage for Experian and is key to the company's e- commerce strategy. Revenue growth during the first six months was slowed by the short term impact of these developments, as well as by a slow down in the marketplace during a year when the attention of many clients has been focused on Y2K issues. Looking beyond these issues, it is anticipated that revenue growth will improve significantly. Experian added to its range of web-based products with the launch of Visitor Insight, which utilises the new Insource database and enables clients to increase their understanding of visitors to a website in real time. Using Visitor Insight, clients can tailor the experience and products offered to consumers during their visit and reduce the cost of fraud. United Kingdom In the UK, consumer demand for credit has remained strong, generating demand in every part of Experian's UK business. Sales were 12% ahead of the same period in 1998 at £91.4m despite the fact that some of the services provided by ICD, the business acquired with Metromail, were discontinued. Setting this aside, underlying sales growth was 20%. Strong profit growth was achieved in all areas of Experian's UK operation, with profits rising by 44% to £21.8m. Contributing to this success were new client wins and sales of new products to existing customers. Amongst the product developments was a new account processing system, which supports bank and retail card portfolios as well as loyalty schemes, personal loans and instalment credit. Rest of the world Experian's sales outside North America and the UK grew by 20% to £70.7m. Profit advanced by 31% to £3.4m. The business continues to benefit from the demand amongst leading European and global clients for back-office services. These cover a range of requirements from decision support software through to outsourcing services, such as call centres and document processing. ARGOS 1999 1998 Pro Forma Six months £m £m Sales 806 815 Trading Profit 31.0 27.8 Pro forma trading profit increased by 12% in the first half despite a 3% reduction in like-for-like sales. This profit improvement was the result of better gross margins, aided by improved buying terms resulting from links with GUS Home Shopping, and by tight control of costs. The first phase of substantial changes at Argos has been completed and the initial results are encouraging. * The introduction of the single catalogue in August provided greater product choice and has resulted in a marked improvement in sales trends since the launch. * All products in the catalogue are now available for home delivery throughout the country by Argos Direct. Home delivered goods now contribute more than 10% of annual sales. * Early results from the trial of Argos Additions, the new clothing and home catalogue, are promising and the trial will be extended to over 50 stores in January in preparation for national distribution in Autumn/Winter 2000. * Service improvements in stores, such as better store layouts, queue management systems and improved EPOS, have enhanced efficiency and made shopping easier for the customer. * Significant improvements have been made to the Argos internet site. It is also now launching an Argos site on Open Digital TV. These changes provide a firm foundation for the future growth of Argos where there are plans for improved offers in e-commerce, in financial services and a wider range of products. These plans are underpinned by the strength of Argos, a trusted, value retailer whose catalogues are in over 60% of UK households. HOME SHOPPING 1999 1998 £m £m UK - Sales 764 817 UK - Trading Profit 14.5 49.0 Europe - Sales 170 172 Europe - Trading Profit 12.3 12.2 The UK Home Shopping Division has been subject to the same trading pressures in the first six months as the UK retail sector in the market for clothing. While home and leisure sales through agency catalogues have been in line with those of last year, demand for apparel has been seriously affected by market conditions and the trend towards price discounting, and apparel sales were down by 12%. As a result, the Division's total sales were 6.5% lower than in the same period last year, which is the main reason for the reduction in trading profits. Profits were also adversely affected by price reductions needed to clear overstocks and by higher than expected distribution costs caused by difficulties in implementing new parcel sorting equipment. Measures are being taken to address the decline in sales and profit, including: * Restructuring the business to reflect changing patterns of demand and the likely margin pressures that will continue going forward. * Rectifying current operational problems in distribution. * Making further cost reductions by co-ordinating key areas of the business with Argos, including home delivery and purchasing. * Enabling Argos Additions to be extended nationally next year, using the Division's merchandise and fulfilment capability. * Enhancing the business' e-commerce offers. * Increasing the pace at which financial services are being introduced to existing customers. This will include expansion of the home and motor insurance operation next year and the trial of a credit card business. Sales in Continental Europe were broadly in line with last year at £170m, with trading profit slightly ahead. The process of integration between Austria and Holland is continuing to go well and a peripheral furniture retailing business in Holland has been sold. FINANCE DIVISION 1999 1998 £m £m Trading Profit (net of funding costs) 15.0 16.0 The profit of the Finance Division, net of funding costs, was £15.0m in the six months, which is a reduction of £1.0m on the same period last year. Profits of General Guarantee Finance, the largest business in the Division, were affected, as others in the industry, by a higher charge for bad debts. Gross margins on new business written have also been under pressure, but GGF has advanced £490m in the first six months of the year, a 20% rise on the comparable period. BURBERRY 1999 1998 £m £m Sales 94 90 Trading Profit 4.2 2.0 Burberry continues to make progress towards repositioning itself as an international luxury brand, improving both its sales and profits. The momentum has been positive in all channels of distribution and forward orders are showing growth. There has been an encouraging response to Burberry's new direction from the fashion and trade press, as well as from our own retail and wholesale customers and licensees. The company is also beginning to benefit from a revival in Asian demand. A new flagship store is to be opened in London's luxury fashion centre on New Bond Street in the Spring of 2000, along with a repositioning and remodelling programme throughout the retail network. SOUTH AFRICAN RETAILING 1999 1998 £m £m Sales 80 68 Trading Profit 17.2 15.9 In difficult economic conditions, where sales in the retail furniture market have showed a decline, the South African business delivered a good performance. Sales increased by 19% in Rands (like-for-like 16%), benefiting from an extension of its furniture ranges and from effective marketing. Operating profit rose by 10% in Rands despite the effect of a weak employment market on bad debts. During the six month period, 16 new outlets were opened, including ten electrical stores under the 'Best Electric' fascia. The opportunities for the profitable expansion of the Best Electric concept are encouraging. PROPERTY 1999 1998 £m £m Trading Profit 16.0 15.5 The profit from the Group's 50% interest in BL Universal was in line with expectations. The company, managed by The British Land Company PLC, has continued its policy of selling properties with low growth potential and investing the proceeds in acquiring freehold properties, mainly large retail parks, where growth in capital and rental income is available. Proceeds from sales in the first half amounted to £31m and acquisitions totalling £23m were made. BALANCE SHEET During the last six months, the Group has completed its plans for the re- financing of its balance sheet. It now has over £800m of non-recourse borrowings, securitised on General Guarantee's loan book. It has raised £670m from two eurobond issues and it has syndicated bank facilities amounting to £1.05bn. This range of financing sources provides the Group with a sound longer-term footing for its needs. BOARD CHANGES As I reached the age of sixty-four in November, the Board has been addressing the issue of succession planning. We have decided to create a new position, that of Group Chief Executive, and John Peace has been appointed to this role. John is the Chief Executive of Experian and has worked for GUS since 1970. He has been a major contributor to the successful development of our information services business and the appointment reflects his considerable managerial talents. We also welcome Michael de Kare-Silver who joined the GUS Board in October to take responsibility for the Group's e-commerce strategy. GUS is well placed to take advantage of the considerable growth potential in e-commerce and Michael brings skills to the business which will help us develop these activities. CURRENT TRADING Experian's trading performance so far in the second half has met expectations. Argos has had a good October and November achieving growth in its like-for- like sales. The trading pattern of the Group's other divisions in October and November remained much in line with the trends established in the first half. The UK Home Shopping business continues to be adversely influenced by difficult conditions in the retail market for clothing and its sales in total show a similar downward trend to that in the first six months. As a consequence of this, the Group's profit for the year is now likely to be below current market expectations. GUS will issue its regular Christmas trading update on the UK catalogue retailing businesses on 13 January 2000. This report will be sent to shareholders and will be made available to members of the public at the Registered Office of the Company, Universal House, Devonshire Street, Manchester, M60 1XA. CONSOLIDATED PROFIT AND LOSS ACCOUNT SIX MONTHS ENDED 30 SEPTEMBER 1999 Six months to Year to 30.9.99 30.9.98 31.3.99 (Reviewed) (Restated & (Audited) Reviewed) £m £m £m TURNOVER 2,495.6 2,405.1 5,466.6 Cost of sales (1,489.0) (1,428.5) (3,260.3) ---------------------------------------- Gross profit 1,006.6 976.6 2,206.3 Net operating expenses (including (842.4) (780.1) (1,668.3) amortisation of goodwill) ---------------------------------------- Operating profit 164.2 196.5 538.0 Share of operating profit of BL 16.0 15.5 31.9 Universal PLC Share of operating profit of associated undertakings 6.4 8.8 22.1 ---------------------------------------- TRADING PROFIT 186.6 220.8 592.0 Loss on termination of business - (14.2) (14.3) PROFIT ON ORDINARY ACTIVITIES BEFORE 186.6 206.6 577.7 INTEREST Net interest expense (50.0) (53.9) (127.3) ---------------------------------------- PROFIT BEFORE TAXATION 136.6 152.7 450.4 Tax on profit on ordinary activities - UK (26.2) (31.3) (88.2) - Overseas (13.9) (14.0) (39.2) ---------------------------------------- (40.1) (45.3) (127.4) ---------------------------------------- PROFIT AFTER TAXATION 96.5 107.4 323.0 Dividends on ordinary shares (62.4) (62.4) (207.2) ---------------------------------------- RETAINED PROFIT 34.1 45.0 115.8 PROFIT BEFORE AMORTISATION OF GOODWILL, EXCEPTIONAL ITEMS AND 176.1 200.2 513.6 TAXATION (Note 1) ---------------------------------------- BASIC AND DILUTED EARNINGS PER SHARE 9.6p 10.7p 32.1p BASIC AND DILUTED EARNINGS PER SHARE BEFORE EXCEPTIONAL ITEMS AND AMORTISATION OF GOODWILL 13.6p 15.0p 38.8p DIVIDEND PER SHARE 6.2p 6.2p 20.6p CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 1999 30.9.99 30.9.98 31.3.99 (Reviewed) (Restated & (Audited) Reviewed) £m £m £m FIXED ASSETS Goodwill 1,465.5 1,527.5 1,503.5 Other intangible assets 126.2 111.2 123.4 Tangible assets 818.7 767.0 799.0 Investment in BL Universal PLC 237.5 296.7 249.0 (joint venture) Fixed asset investments - associated undertakings 44.7 35.3 44.7 - other 9.0 2.9 8.4 --------------------------------------- 2,701.6 2,740.6 2,728.0 --------------------------------------- CURRENT ASSETS Stocks 585.9 668.2 501.7 Debtors - due within one year 1,551.4 1,760.9 1,714.3 - due in more than one year 336.9 739.8 537.5 --------------------------------------- Securitised receivables 861.6 - 413.9 Less: non-recourse borrowings (830.0) - (400.0) --------------------------------------- 31.6 - 13.9 Investments at cost 35.7 27.6 32.7 Bank balances and cash 264.8 371.3 253.6 --------------------------------------- 2,806.3 3,567.8 3,053.7 Creditors - amounts falling due (1,989.6) (3,241.5) (2,654.9) within one year --------------------------------------- NET CURRENT ASSETS 816.7 326.3 398.8 --------------------------------------- TOTAL ASSETS LESS CURRENT 3,518.3 3,066.9 3,126.8 LIABILITIES Creditors - amounts falling due after more than one year (921.7) (568.0) (594.0) Provisions for deferred and other liabilities and charges (126.4) (116.8) (123.7) --------------------------------------- NET ASSETS 2,470.2 2,382.1 2,409.1 --------------------------------------- CAPITAL AND RESERVES Called up share capital 251.5 251.4 251.4 Revaluation and other reserves 307.3 382.1 308.2 Profit and loss account 1,911.4 1,748.6 1,849.5 --------------------------------------- EQUITY SHAREHOLDERS' FUNDS 2,470.2 2,382.1 2,409.1 --------------------------------------- CONSOLIDATED CASH FLOW STATEMENT SIX MONTHS ENDED 30 SEPTEMBER 1999 Six months to Year to 30.9.99 30.9.98 31.3.99 (Reviewed) (Restated & (Audited) Reviewed) £m £m £m Cash flow from operating activities Operating profit 164.2 196.5 538.0 Exceptional items - - (23.7) --------------------------------------- 164.2 196.5 514.3 Depreciation and amortisation charges 151.1 126.7 270.0 Change in working capital - proceeds of securitisation 430.0 - 400.0 - other (74.0) 15.9 (143.9) --------------------------------------- 671.3 339.1 1,040.4 Dividends received from associated undertakings 4.4 6.8 10.0 Returns on investments and servicing of finance (36.8) (62.0) (109.0) Taxation (41.9) (60.9) (203.8) Capital expenditure (138.5) (129.0) (272.0) Financial investment 11.7 (2.9) 58.3 Acquisitions and disposals (0.8) (2,231.9) (2,230.8) Equity dividends paid (144.8) - (203.3) --------------------------------------- Cash inflow/outflow before use of liquid resources and financing 324.6 (2,140.8) (1,910.2) Management of liquid resources 21.0 572.3 652.3 Financing (378.6) 1,594.3 1,246.0 --------------------------------------- (DECREASE)/INCREASE IN CASH IN THE PERIOD (33.0) 25.8 (11.9) --------------------------------------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/CASH (Decrease)/increase in cash in the period (33.0) 25.8 (11.9) Cash outflow/(inflow) from change in debt and lease financing 379.0 (1,594.3) (1,246.0) Cash inflow from decrease in liquid resources (21.0) (572.3) (652.3) --------------------------------------- Change in net cash resulting from cash flows 325.0 (2,140.8) (1,910.2) Loans and finance leases acquired with subsidiaries (0.2) - - New finance leases (2.6) (8.0) (10.4) Translation difference 32.8 12.7 (34.1) --------------------------------------- Movement in net (debt)/cash in the period 355.0 (2,136.1) (1,954.7) Net (debt)/cash at beginning of the period (1,669.8) 284.9 284.9 --------------------------------------- NET (DEBT) AT END OF THE PERIOD (1,314.8) (1,851.2) (1,669.8) DIVISIONAL ANALYSIS SIX MONTHS ENDED 30 SEPTEMBER 1999 Turnover Trading Profit Six months to Year to Six months to Year to 30.9.99 30.9.98 31.3.99 30.9.99 30.9.98 31.3.99 £m £m £m £m £m £m Experian 472.4 434.2 898.5 95.4 80.8 192.2 Argos (see note below) 806.0 708.7 1,812.1 31.0 22.6 116.0 Home Shopping - United Kingdom & other 763.7 817.0 1,787.5 14.5 49.0 105.5 - Continental Europe 170.1 171.7 373.7 12.3 12.2 29.3 Finance Division (Note 2) 109.1 115.0 235.8 35.5 56.1 112.6 Burberry 94.1 90.3 206.9 4.2 2.0 10.7 South African Retailing 80.2 68.2 152.1 17.2 15.9 42.7 Property - - - 16.0 15.5 31.9 ----------------------------------------------------- 2,495.6 2,405.1 5,466.6 226.1 254.1 640.9 -------------------------- Net interest expense (Note 2) (50.0) (53.9) (127.3) ------------------------- Profit before amortisation of goodwill, exceptional items and taxation 176.1 200.2 513.6 Amortisation of goodwill (principally Argos) (39.5) (33.3) (72.6) Exceptional items (Note 1) - (14.2) 9.4 ------------------------- Profit before taxation 136.6 152.7 450.4 ------------------------- Turnover and profit before taxation are derived from continuing operations. In respect of Argos, the comparative figures cover the post acquisition period from 27 April 1998. GEOGRAPHICAL ANALYSIS SIX MONTHS ENDED 30 SEPTEMBER 1999 Turnover Trading Profit Six months to Year to Six months to Year to 30.9.99 30.9.98 31.3.99 30.9.99 30.9.98 31.3.99 £m £m £m £m £m £m United Kingdom 1,828.3 1,778.0 4,119.1 118.9 157.6 403.6 Western Europe 247.2 239.8 534.1 16.2 15.3 39.1 North America 335.2 316.2 653.6 70.2 62.8 148.6 Rest of World 84.9 71.1 159.8 20.8 18.4 49.6 ----------------------------------------------------- 2,495.6 2,405.1 5,466.6 226.1 254.1 640.9 ----------------------------------------------------- MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS SIX MONTHS ENDED 30 SEPTEMBER 1999 Six months to Year to 30.9.99 30.9.98 31.3.99 £m £m £m Profit after taxation 96.5 107.4 323.0 Dividends - Interim (62.4) (62.4) (62.4) - Final - - (144.8) ------------------------------------- 34.1 45.0 115.8 Goodwill credited/(charged) to reserves 8.1 8.7 (2.5) Proceeds of issue of ordinary share capital 0.4 - - Other recognised gains and losses relating to the period (net) 18.5 17.9 (14.7) ------------------------------------- 61.1 71.6 98.6 Opening equity shareholders' funds 2,409.1 2,310.5 2,310.5 ------------------------------------- Closing equity shareholders' funds 2,470.2 2,382.1 2,409.1 ------------------------------------- The goodwill items are in respect of transactions by Experian prior to the adoption of FRS 10. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES SIX MONTHS ENDED 30 SEPTEMBER 1999 Six months to Year to 30.9.99 30.9.98 31.3.99 £m £m £m Profit after taxation 96.5 107.4 323.0 Revaluation of properties - - 11.8 Currency translation differences in terms of Sterling 18.5 17.9 (26.5) ------------------------------------- Total gains and losses recognised in the period 115.0 125.3 308.3 ------------------------------------- ANALYSIS OF NET BORROWINGS AT 30 SEPTEMBER 1999 30.9.99 30.9.98 31.3.99 £m £m £m Cash and other liquid resources 154.6 325.4 208.4 Debt due within one year (605.2) (1,587.9) (1,339.2) Finance leases (29.2) (58.9) (42.2) Debt due after more than one year (835.0) (529.8) (496.8) ------------------------------------- Net debt at end of the period (1,314.8) (1,851.2) (1,669.8) Non-recourse borrowings (830.0) - (400.0) ------------------------------------- Net borrowings at end of the period (2,144.8) (1,851.2) (2,069.8) ------------------------------------- NOTES 1. Group results for the period: Six months to Year to 30.9.99 30.9.98 31.3.99 £m £m £m Profit before amortisation of goodwill, exceptional items and taxation 176.1 200.2 513.6 Amortisation of goodwill (principally Argos) (39.5) (33.3) (72.6) Loss on termination of business - (14.2) (14.3) VAT refunds - - 23.7 ------------------------------------- Profit before taxation 136.6 152.7 450.4 ------------------------------------- In the year to 31 March 1999, an exceptional credit within cost of sales of £23.7m relating to the refund of previously overpaid VAT in the UK Home Shopping division was recognised along with an exceptional charge of £14.3m in respect of the closure of Argos Holland. The VAT refund was recognised in the second half of that year whilst the closure costs of Argos Holland arose primarily in the first half of the year. 2. Securitised receivables - Finance Division The Group balance sheet at 31 March 1999 disclosed securitised receivables and the related non-recourse borrowings using a linked presentation. As a consequence of the adoption of the linked presentation, divisional sales and trading profit for the six months to 30 September 1999 are stated after charging financing costs of £17.8m. The initial securitisation programme was only completed on 25 March 1999, and there was no equivalent adjustment in the financial statements for the year to 31 March 1999 as the amount involved was not material. 3. Comparative figures for the six months to 30 September 1998 have been restated as follows:- (a) adoption of new accounting policies and disclosures, previously reflected in the Group's financial statements for the year to 31 March 1999. * goodwill capitalised as a fixed asset is amortised through the profit and loss account on a straight line basis over its useful economic life. * the Group's share of the operating profits of its associated undertakings is now separately reported on the face of the profit and loss account. * accruals and collection costs are now included within creditors due within one year and creditors due after more than one year as appropriate. * cash flows relating to interest are separately identified in the consolidated cash flow statement. (b) the basis on which income is recognised during the financial year in the Group's UK Home Shopping division has been amended to provide a more accurate phasing of profitability between the two half years with no impact on the results for the full year. The effect of this change on the results for the six months to 30 September 1999 is to increase reported turnover and profit before tax by £51.0m and £9.7m respectively. Comparative figures have been restated and the effect is to increase turnover and reported profit before tax for the six months to 30 September 1998 by £51.8m and £9.9m respectively. (c) the tax charge for the six months to 30 September 1998 has been restated to reflect the Group's effective rate of taxation for the year to 31 March 1999. The tax charge for the six months to 30 September 1999 is in turn based on the estimated effective rate of tax for the Group for the year to 31 March 2000. 4. Year 2000 In the 1999 Annual Report it was noted that the Group was well advanced in its plans for Year 2000 compliance and that it was the directors' intention that the necessary programme of work be completed in advance of the critical dates. The programme of work has now been substantially completed but it has to be recognised that, given the complexity of the problem, it is not possible for any organisation to be certain that no Year 2000 problems will occur even if its own systems are Year 2000 compliant. It is estimated that expenditure in respect of the Year 2000 issue, including staff and other internal costs, will amount to approximately £54m, of which approximately £46m had been incurred by 30 September 1999. 5. The financial information for the year to 31 March 1999 has been extracted from the Group's statutory financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and include the auditors' report which was unqualified. The interim financial statements, which comply with the accounting policies set out in the 1999 Annual Report, are not audited and do not constitute statutory accounts. These financial statements have been formally reviewed by the Group's auditors, PricewaterhouseCoopers, and the full text of their report is included within this announcement. 6. The interim dividend will be paid on 1 February 2000 to shareholders on the register at the close of business on 10 January 2000. Independent review report to The Great Universal Stores PLC INTRODUCTION We have been instructed by the Company to review the financial information set out on pages 9 to 16 and we have read the other information contained in the interim report for any apparent misstatements or material inconsistencies with the financial information. DIRECTORS' RESPONSIBILITIES The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. REVIEW WORK PERFORMED We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. REVIEW CONCLUSION On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 1999. PricewaterhouseCoopers Chartered Accountants Manchester

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