Full Year Results - Part 2

RNS Number : 6713D

Home Retail Group Plc

01 May 2013

 



Consolidated income statement                                                  

For the 52 weeks ended 2 March 2013

		52 weeks ended 2 March 2013				53 weeks ended 3 March 2012
		Before exceptional items	Exceptional items (note 3)	After exceptional items		Before exceptional items	Exceptional items (note 3)	After exceptional items
	Notes	£m	£m	£m		£m	£m	£m
Revenue		5,475.4	-	5,475.4		5,582.8	-	5,582.8
Cost of sales		(3,743.3)	-	(3,743.3)		(3,794.0)	-	(3,794.0)
Gross profit		1,732.1	-	1,732.1		1,788.8	-	1,788.8
Net operating expenses		(1,626.0)	31.3	(1,594.7)		(1,669.8)	(20.3)	(1,690.1)
Operating profit/(loss)		106.1	31.3	137.4		119.0	(20.3)	98.7
- Finance income		47.2	-	47.2		53.3	-	53.3
- Finance expense		(48.5)	-	(48.5)		(48.4)	-	(48.4)
Net financing (expense)/income	4	(1.3)	-	(1.3)		4.9	-	4.9
Share of post-tax (loss)/profit of associates		(6.0)	-	(6.0)		0.5	-	0.5
Profit/(loss) before tax		98.8	31.3	130.1		124.4	(20.3)	104.1
Taxation		(28.6)	(7.5)	(36.1)		(34.6)	3.3	(31.3)
Profit/(loss) for the year attributable to equity holders of the Company		70.2	23.8	94.0		89.8	(17.0)	72.8
Earnings per share				pence				pence
- Basic	6			11.7				9.1
- Diluted	6			11.6				9.1
				pence				pence
Proposed final dividend per share				2.0				-
Interim dividend per share				1.0				4.7
Proposed total dividend per share				3.0				4.7

Non-GAAP measures			52 weeks ended 2 March 2013		53 weeks ended  3 March 2012
Reconciliation of profit before tax (PBT) to benchmark PBT	Notes		£m		£m
Profit before tax			130.1		104.1
Adjusted for:
Exceptional items	3		(31.3)		20.3
Financing fair value remeasurements	4		1.1		(3.3)
Financing impact on retirement benefit obligations	4		(3.1)		(4.8)
Discount unwind on non-benchmark items	4		7.1		6.7
Amortisation of acquisition intangibles			1.8		1.2
Net onerous lease provision releases	7		(14.6)		(8.5)
Benchmark PBT			91.1		115.7
Benchmark earnings per share			pence		pence
- Basic	6		7.7		10.0
- Diluted	6		7.6		10.0

Consolidated statement of comprehensive income

For the 52 weeks ended 2 March 2013

		52 weeks ended 2 March 2013	53 weeks ended 3 March 2012
		£m	£m
Profit for the year attributable to equity holders of the Company		94.0	72.8
Other comprehensive income:
Net change in fair value of cash flow hedges
- Foreign currency forward exchange contracts		33.4	10.8
Net change in fair value of cash flow hedges transferred to inventory
- Foreign currency forward exchange contracts		(5.3)	9.3
Actuarial loss on defined benefit pension schemes		(17.2)	(121.2)
Fair value movements on available-for-sale financial assets		2.0	0.2
Currency translation differences		0.6	(3.3)
Tax (charge)/credit in respect of items taken directly to equity		(4.0)	24.7
Other comprehensive income for the year, net of tax		9.5	(79.5)
Total comprehensive income for the year attributable to equity holders of the Company		103.5	(6.7)

Consolidated balance sheet

At 2 March 2013

		2 March 2013	3 March 2012
	Notes	£m	£m
ASSETS
Non-current assets
Goodwill		1,543.9	1,543.9
Other intangible assets		129.2	137.1
Property, plant and equipment		474.9	516.3
Investment in associates		-	8.3
Deferred tax assets		40.7	50.6
Trade and other receivables		2.7	3.8
Other financial assets		24.4	17.4
Total non-current assets		2,215.8	2,277.4
Current assets
Inventories		941.8	933.2
Trade and other receivables		636.8	594.6
Current tax assets		8.3	0.8
Other financial assets		36.9	8.3
Cash and cash equivalents		396.0	194.3
Total current assets		2,019.8	1,731.2
Non-current assets classified as held for sale		9.6	-
Total assets		4,245.2	4,008.6
LIABILITIES
Non-current liabilities
Trade and other payables		(52.6)	(55.8)
Provisions	7	(179.5)	(187.5)
Deferred tax liabilities		(26.6)	(21.9)
Retirement benefit obligations		(85.1)	(115.3)
Total non-current liabilities		(343.8)	(380.5)
Current liabilities
Trade and other payables		(1,116.1)	(944.9)
Provisions	7	(38.3)	(47.8)
Other financial liabilities		(2.8)	(5.2)
Current tax liabilities		(11.7)	(4.8)
Total current liabilities		(1,168.9)	(1,002.7)
Total liabilities		(1,512.7)	(1,383.2)
Net assets		2,732.5	2,625.4
EQUITY
Share capital		81.3	81.3
Capital redemption reserve		6.4	6.4
Merger reserve		(348.4)	(348.4)
Other reserves		31.9	8.6
Retained earnings		2,961.3	2,877.5
Total equity		2,732.5	2,625.4

Consolidated statement of changes in equity

For the 52 weeks ended 2 March 2013

			Attributable to equity holders of the Company
			Capital
		Share	redemption	Merger	Other	Retained
		capital	reserve	reserve	Reserves	earnings	Total
		£m	£m	£m	£m	£m	£m
Balance at 4 March 2012		81.3	6.4	(348.4)	8.6	2,877.5	2,625.4
Profit for the year		-	-	-	-	94.0	94.0
Other comprehensive income		-	-	-	21.9	(12.4)	9.5
Total comprehensive income for the year ended 2 March 2013		-	-	-	21.9	81.6	103.5
Transactions with owners:
Movement in share-based compensation reserve		-	-	-	-	11.9	11.9
Net movement in own shares		-	-	-	1.4	(1.4)	-
Equity dividends paid during the year		-	-	-	-	(8.0)	(8.0)
Other distributions		-	-	-	-	(0.3)	(0.3)
Total transactions with owners		-	-	-	1.4	2.2	3.6
Balance at 2 March 2013		81.3	6.4	(348.4)	31.9	2,961.3	2,732.5
			Attributable to equity holders of the Company
			Capital
		Share	redemption	Merger	Other	Retained
		capital	reserve	reserve	Reserves	earnings	Total
		£m	£m	£m	£m	£m	£m
Balance at 27 February 2011		81.3	6.4	(348.4)	(5.6)	3,007.5	2,741.2
Profit for the year		-	-	-	-	72.8	72.8
Other comprehensive income		-	-	-	11.4	(90.9)	(79.5)
Total comprehensive income for the year ended 3 March 2012		-	-	-	11.4	(18.1)	(6.7)
Transactions with owners:
Movement in share-based compensation reserve		-	-	-	-	8.9	8.9
Net movement in own shares		-	-	-	2.8	(2.7)	0.1
Equity dividends paid during the year		-	-	-	-	(117.5)	(117.5)
Other distributions		-	-	-	-	(0.6)	(0.6)
Total transactions with owners		-	-	-	2.8	(111.9)	(109.1)
Balance at 3 March 2012		81.3	6.4	(348.4)	8.6	2,877.5	2,625.4

Further details on equity movements are shown in note 8.

Consolidated statement of cash flows

For the 52 weeks ended 2 March 2013

		52 weeks ended  2 March 2013	53 weeks ended  3 March 2012
	Notes	£m	£m
Cash flows from operating activities
Cash generated from operations	9	322.1	234.5
Tax paid		(26.1)	(26.8)
Net cash inflow from operating activities		296.0	207.7
Cash flows from investing activities
Acquisition of business		-	(24.5)
Purchase of property, plant and equipment		(55.3)	(97.1)
Proceeds from the disposal of property, plant and equipment		1.9	3.9
Purchase of other intangible assets		(25.3)	(37.8)
Loans granted to associates		(6.8)	(1.2)
Purchase of investments		(4.8)	(0.9)
Disposal of investments		-	100.0
Interest received		1.7	2.4
Net cash used in investing activities		(88.6)	(55.2)
Cash flows from financing activities
Proceeds from disposal of shares held by Employee Share Trust		-	0.1
Dividends paid		(8.0)	(117.5)
Net cash used in financing activities		(8.0)	(117.4)
Net increase in cash and cash equivalents		199.4	35.1
Movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year		194.3	159.3
Effect of foreign exchange rate changes		2.3	(0.1)
Net increase in cash and cash equivalents		199.4	35.1
Cash and cash equivalents at the end of the year		396.0	194.3

Analysis of net cash/(debt)

At 2 March 2013

		2 March  2013	3 March  2012
Non-GAAP measures		£m	£m
Financing net cash:
Cash and cash equivalents		396.0	194.3
Total financing net cash		396.0	194.3
Operating net debt:
Off balance sheet operating leases		(2,361.7)	(2,701.7)
Total operating net debt		(2,361.7)	(2,701.7)
Total net debt		(1,965.7)	(2,507.4)

The Group uses the term 'total net debt' to highlight the Group's aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably operating leases.  The capitalised value of these leases is £2,361.7m (2012: £2,701.7m), based upon discounting the existing lease commitments at the Group's estimated long-term cost of borrowing of 4.2% (2012: 3.4%).

Notes

For the 52 weeks ended 2 March 2013

1. BASIS OF PREPARATION

The financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated statement of cash flows and related notes, is derived from the full Group consolidated financial statements for the 52 weeks to 2 March 2013 and does not constitute full accounts within the meaning of Section 435 (1) and (2) of the Companies Act 2006.  The Group's Annual Report and Financial Statements 2013, on which the auditors have given an unqualified audit report and which does not contain a statement under Section 498 (2) or (3) of the Companies Act 2006, will be delivered to the Registrar of Companies in due course, and made available to shareholders in June 2013.   The financial year represents the 52 weeks to 2 March 2013 (prior financial year 53 weeks to 3 March 2012).

The Group consolidated financial statements are presented in sterling, rounded to the nearest hundred thousand.  They are prepared on a going concern basis and under the historic cost basis modified for the revaluation of certain financial instruments, share-based payments and post-employment benefits.  The principal accounting policies applied in the preparation of these consolidated financial statements are consistent with those described in the Annual Report and Financial Statements 2012.  These policies have been consistently applied to all the periods presented. 

2. NON-GAAP FINANCIAL INFORMATION

Exceptional items

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

Benchmark profit before tax (benchmark PBT)

The Group uses the term benchmark PBT as a measure which is not formally recognised under IFRS.  Benchmark PBT is defined as profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases, exceptional items, financing fair value remeasurements, financing impact on retirement benefit obligations, the discount unwind on non-benchmark items and taxation.  This measure is considered useful in that it provides investors with an alternative means to evaluate the underlying performance of the Group's operations.

Total net debt

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

Notes

For the 52 weeks ended 2 March 2013

	52 weeks ended  2 March 2013	53 weeks ended  3 March 2012
3. EXCEPTIONAL ITEMS	£m	£m
Net gain on employee benefits	31.3	-
Reorganisation and restructuring charges	-	(20.3)
Exceptional items in operating profit	31.3	(20.3)
Tax on exceptional items in profit before tax	(7.5)	3.3
Exceptional tax	(7.5)	3.3
Exceptional profit/(loss) after tax for the year	23.8	(17.0)
The Home Retail Group defined benefit pension scheme closed to future accrual with effect from 31 January 2013.  This has led to a net gain of £31.3m, which includes a non-cash curtailment gain of £37.4m, offset by costs of £6.1m related to closure of the scheme. Reorganisation and restructuring actions announced during the 53 weeks to 3 March 2012 included the closure of the Group's UK homewares trial format, HomeStore&More, and one of the Group's distribution warehouses.

	52 weeks ended  2 March 2013	53 weeks ended  3 March  2012
4. NET FINANCING (EXPENSE)/INCOME	£m	£m
Finance income:
Bank deposits and other interest	1.9	1.8
Expected return on retirement benefit assets	44.1	48.0
Financing fair value remeasurements - net exchange gains	1.2	3.5
Total finance income	47.2	53.3
Finance expense:
Unwinding of discounts	(8.3)	(8.4)
Financing fair value remeasurements - net exchange losses	(2.3)	(0.2)
Interest expense on retirement benefit liabilities	(41.0)	(43.2)
Total finance expense	(51.6)	(51.8)
Less: finance expense charged to Financial Services cost of sales	3.1	3.4
Total net finance expense	(48.5)	(48.4)
Net financing (expense)/income	(1.3)	4.9

Included within unwinding of discounts is a £7.1m charge (2012: £6.7m) relating to the discount unwind on non-benchmark onerous lease provisions.

Notes

For the 52 weeks ended 2 March 2013

			52 weeks ended  2 March   2013	53 weeks ended  3 March   2012
5. DIVIDENDS			£m	£m
Amounts recognised as distributions to equity holders
Final dividend of nil per share (2012: 10.0p) for the prior year			-	(79.9)
Interim dividend of 1.0p per share (2012: 4.7p) for the current year			(8.0)	(37.6)
Ordinary dividends on equity shares			(8.0)	(117.5)
A final dividend in respect of the year ended 2 March 2013 of 2.0p per share, amounting to a total final dividend of £16.0m, has been proposed by the Board of Directors, and is subject to approval by the shareholders at the Annual General Meeting.  This would make a total dividend for the year of 3.0p per share, amounting to £24.0m.  The proposed dividend has not been included as a liability at 2 March 2013 in accordance with IAS 10 'Events after the Balance Sheet Date'.  It will be paid on 24 July 2013 to shareholders who are on the register of members at close of business on 24 May 2013. The Home Retail Group Employee Share Trust (EST) has waived its entitlement to dividends in the amount of £0.1m (2012: £2.1m).

6. BASIC AND DILUTED EARNINGS PER SHARE (EPS)
Basic earnings per share is calculated by dividing the profit attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares held in Home Retail Group's share trusts, net of vested but unexercised share awards.  Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares.

			52 weeks ended  2 March  2013	53 weeks ended  3 March  2012
Earnings			£m	£m
Profit after tax for the financial year			94.0	72.8
Adjusted for:
Exceptional items			(31.3)	20.3
Financing fair value remeasurements			1.1	(3.3)
Financing impact on retirement benefit obligations			(3.1)	(4.8)
Discount unwind on non-benchmark items			7.1	6.7
Amortisation of acquisition intangibles			1.8	1.2
Net onerous lease provision releases			(14.6)	(8.5)
Attributable taxation			9.2	0.5
Non-benchmark tax credit in respect of prior years			(2.7)	(4.8)
Tax rate change			(0.1)	0.1
Benchmark profit after tax for the financial year			61.4	80.2
Weighted average number of shares			millions	millions
Number of ordinary shares for the purpose of basic EPS			800.6	799.4
Dilutive effect of share incentive awards			12.4	3.9
Number of ordinary shares for the purpose of diluted EPS			813.0	803.3
EPS			pence	pence
Basic EPS			11.7	9.1
Diluted EPS			11.6	9.1
Basic benchmark EPS			7.7	10.0
Diluted benchmark EPS			7.6	10.0

Notes

For the 52 weeks ended 2 March 2013

			Onerous leases	Insurance	Restructuring	Other	Total
7. PROVISIONS			£m	£m	£m	£m	£m
At 4 March 2012			(153.5)	(46.7)	(24.3)	(10.8)	(235.3)
Exchange differences			(1.9)	-	-	-	(1.9)
Charged to the income statement			(21.0)	(5.5)	-	(11.8)	(38.3)
Released to the income statement			35.6	2.0	-	0.4	38.0
Utilised during the year			4.4	8.7	12.5	2.7	28.3
Discount unwind			(8.3)	-	-	(0.3)	(8.6)
At 2 March 2013			(144.7)	(41.5)	(11.8)	(19.8)	(217.8)
						2013	2012
Analysed as:						£m	£m
Current						(38.3)	(47.8)
Non-current						(179.5)	(187.5)
						(217.8)	(235.3)

The onerous lease provision covers potential liabilities for onerous lease contracts for stores that have either closed, or where projected future trading income is insufficient to cover the lower of exit cost or value-in-use. Where the value-in-use calculation is lower, the provision is based on the present value of expected future cash flows relating to rents, rates and other property costs to the end of the lease terms net of expected trading or sublet income. The majority of this provision is expected to be utilised over the period to 2020.

Provision is made for the estimated costs of insurance claims incurred by the Group but not settled at the balance sheet date, including the costs of claims that have arisen but have not yet been reported to the Group. The estimated cost of claims includes expenses to be incurred in settling claims. The majority of this provision is expected to be utilised over the period to 2018.

A number of organisational changes were announced during the 53 weeks to 3 March 2012 to improve the operational efficiency of the Group and drive further cost productivity. These actions included the closure of the Group's UK homewares trial format, HomeStore&More, and one of the Group's distribution warehouses.  The majority of this provision is expected to be utilised within one year.

Other provisions include legal claims, potential customer redress in respect of financial services products and other sundry provisions. The majority of these provisions are expected to be utilised over the period to 2016.

Notes

For the 52 weeks ended 2 March 2013

8. NOTES TO THE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Capital redemption reserve
The capital redemption reserve arose as a result of the share buy-back programme that was undertaken during the year ended 26 February 2011.

Merger reserve
The merger reserve arose on the demerger of the Group from GUS plc during 2006.

Other reserves

Other reserves principally consist of shares held in trust, the hedging reserve and the translation reserve.

The movement in own shares of £1.4m (2012: £2.8m) represents the utilisation or sale of shares held for the purpose of satisfying obligations arising from the Group's share-based compensation schemes. Shares in Home Retail Group plc are held in the following trusts:

Home Retail Group Employee Share Trust (EST)
The EST provides for the issue of shares to Group employees under share option and share grant schemes (with the exception of the Share Incentive Plan). At 2 March 2013, the EST held 12,762,196 (2012: 13,525,067) shares with a market value of £16.1m (2012: £14.1m). The shares in the EST are held within equity of the Group at a cost of £20.4m (2012: £21.6m). No additional shares were purchased during the year (2012: nil). Dividends on shares held by the EST are waived.

Home Retail Group Share Incentive Scheme Trust
The Home Retail Group Share Incentive Scheme Trust provides for the issue of shares to Group employees under the Share Incentive Plan.  At 2 March 2013, the Trust held 651,283 (2012: 698,305) shares with a market value of £0.8m (2012: £0.7m). These shares are held within equity of the Group at a cost of £2.7m (2012: £2.9m). No additional shares were purchased during the year (2012: nil).

9. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
		52 weeks ended 2 March 2013	53 weeks ended 3 March  2012
Cash generated from operations		£m	£m
Profit before tax		130.1	104.1
Adjustments for:
Share of post-tax loss/(profit) of associates		6.0	(0.5)
Net financing expense/(income)		1.3	(4.9)
Operating profit		137.4	98.7
Loss on sale of property, plant and equipment		0.2	1.8
Depreciation and amortisation		124.7	126.5
Finance expense charged to Financial Services cost of sales		3.1	3.4
(Increase)/decrease in inventories		(8.6)	85.8
(Increase)/decrease in receivables		(40.9)	16.1
Increase/(decrease) in payables		163.4	(102.5)
Movement in working capital		113.9	(0.6)
(Decrease)/increase in provisions		(24.5)	5.0
Movement in retirement benefit obligations		(44.3)	(8.6)
Share-based payment expense (net of dividend equivalent payments)		11.6	8.3
Cash generated from operations		322.1	234.5

Notes

For the 52 weeks ended 2 March 2013

10. RELATED PARTIES

The Group's related parties are its associates and key management personnel.

During the year, the Group granted loans totalling £6.8m (2012: £1.2m) to its associates and invested £2.4m (2012: £nil) in the share capital of its associates.  At 2 March 2013, the amounts owed by its associates to the Group totalled £3.7m (2012: £1.1m), after taking account of impairment losses totalling £3.9m (2012: £nil) following the decision to close HH Retail Limited, the Group's associate in China.

During the year, there were no material transactions or balances between the Group and its key management personnel or members of their close families.

11. POST BALANCE SHEET EVENTS

On 8 March 2013, the Group completed the sale of its 33% stake in Ogalas Limited, an Irish company trading as 'home store + more' in the Republic of Ireland.  The Group received £9.7m for its shareholding and a loan repayment of £1.2m.  After taking account of transaction costs, the proceeds approximate to the carrying value of the Group's investment in Ogalas Limited so no material profit or loss is expected on the sale, prior to the recycling of approximately £1m of exchange gains from the Group's translation reserve.  As a result, the Group's interest in Ogalas Limited, reported as an associate, has been reclassified to non-current assets held for sale in the Group's balance sheet as at 2 March 2013.

On 27 March 2013, the Group entered into a new unsecured three-year multi-currency revolving credit facility of £165m with a syndicate of banks.  On the same day, the Group cancelled its existing £685m facility.

Statement of directors' responsibilities

The directors are responsible for preparing the annual report and the Group 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 financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.  The Group financial statements are required by law to give a true and fair view of the state of affairs and of the profit or loss of the Group for that year.

The preliminary results for the 52 weeks ended 2 March 2013 have been extracted from the annual report and the Group financial statements.

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

·  select suitable accounting policies and then apply them consistently;

·  make judgements and estimates that are reasonable and prudent;

·  state that the Group financial statements comply with IFRSs as adopted by the European Union, 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 Group will continue in business. 

The directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation.  They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

A list of current directors of Home Retail Group plc is maintained on the Home Retail Group website, www.homeretailgroup.com.

By order of the Board

Terry Duddy                                                   Richard Ashton

Chief Executive                                               Finance Director

1 May 2013                                                     1 May 2013

 

END

 

 

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