Annual Financial Report

RNS Number : 2265G

Home Retail Group Plc

04 June 2013

 



Home Retail Group plc

(the "Company")

Annual Report and Financial Statements 2013

Notice of Annual General Meeting 2013

Proxy Form

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

·      Annual Report and Financial Statements 2013

·      Notice of Annual General Meeting 2013

·      Proxy Form

A copy of the above documents has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do  

The Company will hold its 2013 Annual General Meeting at the Jurys Inn Milton Keynes, Midsummer Boulevard, Milton Keynes, MK9 2HP on 3 July 2013 at 11.00 am.

Attached to this announcement is the additional information required under Rule 6.3.5 of the Disclosure and Transparency Rules of the Financial Services Authority, including a description of the principal risk factors for the Company, as set out in the Annual Report and Financial Statements 2013, and a statement of directors' responsibilities.

ADDITIONAL INFORMATION

Principal risks and uncertainties

The principal risks and uncertainties that could impact the Group's performance and our mitigating activities are discussed below.  For further information on how the Group manages risk, see the business review and page 38 of the corporate governance report within the Annual Report and Financial Statements 2013.

AREA OF PRINCIPAL RISK AND UNCERTAINTY	DESCRIPTION AND EXAMPLES OF MITIGATING ACTIVITY
Business strategy Ø  Inappropriate direction Ø  Poor investment decisions Ø  Failure to execute	Last October we announced ambitious and exciting growth plans for both Argos and Homebase. Argos' transformation strategy will see it become a retail digital leader, building on market-leading capabilities in Check & Reserve, internet traffic and mobile expansion. The vision for Homebase enables a strong multi-channel platform alongside store refits which will create a customer-centric home-enhancement offer. To deliver these strategies we will make significant investment in both brands. At every Plc and Operating Board meeting, strategic issues are discussed in addition to the time that is dedicated to strategic reviews at various executive meetings across the Group. Other mitigating activities include: ·          Monthly review of performance against strategic targets ·          Comprehensive strategic debates with the Plc Board and advisers ·          Communication with stakeholders; investors, colleagues, suppliers, government etc.
Trading environment Impact on sales, costs, profit and cash of: Ø  Economic conditions  Ø  Cost of raw material products, services and utilities  Ø  Competitor activity Ø  Seasonality and/or weather  Ø  UK-centric store network  Ø  Appraisal of store network	Our business review clearly demonstrates how macro-economic conditions remain challenging for our customers. We have a broad customer demographic appeal which we plan to build on as mitigation against the risk of a slow recovery of the UK economy. Sales across the Group are assisted by our in-house Financial Services business, making it easier for our customers to buy the products they want. We have robust planning processes; however, unseasonal or extreme weather events have the potential to create significant sales forecast deviations. Other mitigating activities include: ·          Price tracking versus our competition and dynamic pricing to ensure competitiveness is maintained ·          Empowering customer choice by continuing to strengthen range architecture ·          Reflecting needs of customers in financial products ·          Embedded disciplines to maintain strong generation of cash and management of working capital ·          Evaluating store lease renewals (c.345 over next five years) to optimise the Group's store portfolio
Infrastructure development/ projects Delay or failure to manage and implement major business and infrastructure projects effectively	Our strategic agenda requires us to exploit and further enhance our project management capabilities during the year ahead. Our governance frameworks will be instrumental in ensuring successful delivery of all aspects of the change programme. Argos has chosen to partner with Accenture to assist with its transformation programme. Other mitigating activities include: ·          Detailed approval and planning process prior to project commencement ·          Board review of status/progress of major change programmes ·          Management expertise in significant infrastructure/change programmes ·          Post-project implementation reviews
Our colleagues Ø  Reliance on key personnel Ø  Availability of specialist skills Ø  Pension obligations	The Group values its colleagues and their contribution to the success of the organisation. Internal training schemes and the graduate recruitment programme maintain the succession pool and actively encourage promotion from within. Additionally, in order to continue to improve our business, our existing talent base is continually reviewed and strengthened if required. We are committed to open communications with colleagues at all times and monitor employee satisfaction through listening groups and employee forums. Other mitigating activities include: ·          Competitive remuneration packages with oversight by the Remuneration Committee ·          Twice-yearly comprehensive succession planning sessions, up to Operating Board level ·          Strategies for recruitment/development of talent to deliver strategic priorities ·          Suite of development programmes for high-potential colleagues at all levels of the organisation ·          Deployment of pensions auto-enrolment, making saving into a defined contribution scheme accessible to all colleagues ·          Closure of final salary pension scheme to future accrual to support sustainable reduction of fund deficit
Our customers Ø  Failing to meet expectations Ø  Consumer preferences Ø Changing demographics	Our team of customer insight professionals ensures that we listen and respond to our customers to enhance continually the shopping experience. Both businesses continue to expand product choice and services which, combined with improved store and product presentation, will benefit our customers. Mitigating actions include: ·          Extend use of technology platforms and innovations to give customers choice in how they shop with us ·          Understanding customer engagement and building on loyalty to our brands ·          Continuous review of key customer metrics such as mystery shopping and exit interviews ·          Engaging with all customer demographics through social media developments
Sourcing Ø  Strength of supplier relationships Ø  Purchase of products whose cost base of manufacture is in currencies other than sterling, principally the US dollar	Overseas sourcing capabilities continue to be leveraged to benefit customers in these difficult economic times. With over a third of products imported, the volatility of the global economy exposes the Group to both currency fluctuations, particularly the US dollar, and changes in freight costs. Mitigating actions include: ·          Strong supplier associations bringing innovation to everyday living ·          Seeking opportunities for further sourcing efficiencies ·          Treasury policies to hedge currencies over appropriate time periods ·          Forward buying of freight commitments ·          Adjustments to customer pricing to reflect movement in hedged currency rates and freight costs
Operations Failure to ensure appropriate processes are in place to manage the complexity of operations, including multi-channel and customer service	Within Argos, projects are progressing to redesign ways of working for a 'digital-led' future as business processes are currently dominated by our successful catalogue heritage. De-risking this significant change programme requires a blend of experienced colleagues and externally-sourced talent to ensure we retain our efficient supply chain capabilities. A programme of store refits will continue Homebase's evolution as a customer-centric home enhancement retailer. This will provide a compelling backdrop to showcase the exclusive brands that offer differentiation from others in the marketplace. Product availability remains a key priority as the Group mitigates complex supply chain risks through robust processes and new initiatives to enable immediacy on a wide range of products. Other mitigating activities include: ·          Exploiting existing infrastructure to develop market-leading fulfilment options ·          Actively testing alternatives to the traditional Argos catalogue format ·          Maintaining and extending Homebase's award-winning installation services for kitchens, bathrooms and bedroom furniture ·          Targeted investment in customer service
Product safety Failure to manage supplier relationships and/or ensure appropriate quality checks are in place	The safety and quality of our products is of paramount importance to the Group. Suppliers are required to sign-up to the Group's supply chain principles and to specific policies regarding products and their environmental impact. Argos and Homebase teams aim to work in conjunction with suppliers to ensure improvement opportunities are explored when failings are identified as a result of systematic checks. Other mitigating activities include: ·          Ongoing monitoring of quality/safety for goods on sale ·          Rigorous quality and safety assessment programme for new products ·          Pre-shipment inspection of imports by a third party and our own quality teams in the Far East ·          Robust risk-based approach to factory auditing ·          Standard terms and conditions for all suppliers to meet required performance standards
Regulatory environment Ø  Changes in UK and overseas legislation and regulation, eg consumer protection, environmental regulation Ø  Changes in UK fiscal/employment policy, eg minimum wage	Good governance practices are important to the Group. In addition to ensuring compliance with existing requirements such as data protection, we are active in monitoring potential future developments. We also lobby, often with other retailers, to support and develop the industry and the interests of consumers. Home Retail is committed to high standards and is proud to have formed partnerships with regulatory bodies such as Trading Standards, Fire and Rescue services and Environmental Health. In 2012, Argos was the first UK retailer to promote free online safety software to customers ahead of the Government's proposed legislation to ensure protection for children from adult content on the internet. Other mitigating activities include: ·          Membership of industry representative groups, including the British Retail Consortium ·          Pro-active engagement with government and regulators such as Financial Conduct Authority, UK Department of Business, Innovation and Skills (BIS) and Trading Standards ·          Dedicated working parties to manage operational change
Business interruption Ø  Acts of terrorism Ø  Failure or unavailability of operational and/or IT infrastructure Ø Delay or interruption in service provided by third-party suppliers	A major incident could impact the ability of the Group to continue trading. We manage this risk by maintaining and routinely testing our business continuity plans. The Group remains vigilant to supplier vulnerability and continues to work towards a sustainable outcome for all parties. Other mitigating activities include: ·          Business continuity and recovery planning ·          IT recovery plans including website resilience and penetration tests ·          Third-party supplier management

Statement of directors' responsibilities

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

report and the financial statements in accordance with applicable law and regulations.

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

Under that law the directors have prepared the Group and Parent Company financial

statements in accordance with International Financial Reporting Standards (IFRSs) as adopted

by the European Union. Under company law the directors must not approve the financial

statements unless they are satisfied that they give a true and fair view of the state of affairs

of the Group and the Company and of the profit or loss of the Group for that

period.

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

•           select suitable accounting policies and then apply them consistently;

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

•           state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

•           prepare the Group financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to

show and explain the Company's transactions and disclose with reasonable accuracy, at any

time, the financial position of the Company and the Group and enable them to ensure that the

financial statements and the directors' remuneration report comply with the Companies Act

2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They

are also responsible for safeguarding the assets of the Company and the Group and hence for

taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

Legislation in the United Kingdom governing the preparation and dissemination of financial

statements may differ from legislation in other jurisdictions. 

Each of the directors, whose names and functions are listed on page 33 confirm that, to the

best of their knowledge:

•           the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

•           the directors' report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

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

www.homeretailgroup.com.

Gordon Bentley

Secretary

4 June 2013

 

END

 

 

ACSNKQDNOBKKBAK