Homebase sale of Battersea freehold

RNS Number : 7846X

Home Retail Group Plc

24 November 2014

 



24 November 2014

Home Retail Group plc

Homebase sale of Battersea freehold and store closures

Sale of Battersea freehold

Home Retail Group announces that Homebase has exchanged contracts for the unconditional sale of its freehold store located in Battersea, London.  The sale, which is expected to complete in 12 months' time, is to a residential property developer and as such, Homebase will vacate the property shortly after the completion date.  The property has been sold for a cash consideration of £57m, of which £30m will be received in the current FY15 financial year, ending 28 February 2015, with the remaining £27m being received on completion in the FY16 financial year, ending 27 February 2016.  The transaction will result in a gain on sale of c.£38m being recorded as an exceptional item in the FY16 financial year. 

Store closures

Home Retail Group also announces that Homebase expects to close c.25 stores in the FY15 financial year.  These closures are not expected to have a material impact on benchmark PBT in either the FY15 or FY16 financial years, partly because they include two profitable stores that Homebase was unable to renew on lease expiry, which are not part of the previously announced store exit programme.  Negotiations in respect of a small number of these store closures are ongoing, however, there is also no material impact expected in the FY15 financial year from a non-benchmark PBT perspective as a result of these closures, with closure costs of approximately £10m being offset by existing property provisions.  The cash outflow in the FY15 financial year as a result of these closures will be approximately £5m, which comprises a cash outflow of approximately £10m in respect of closure costs, partially offset by a cash inflow of approximately £5m in respect of a reduced level of working capital.

In summary, it is estimated that the sale of the Battersea store, together with the c.25 store closures, will have the following impact on the Group's financial results for the FY15 and FY16 financial years:

			FY15		FY16
Assumptions in relation to announced store closures
Store closures			c.25		1
Sales reduction			c.(2%)		c.(3%)
Profit & loss account
Benchmark PBT			c.£0m		c.£0m
Non-benchmark item	- Exceptional item		-		c.£38m
Non-benchmark item	- Closure costs		c.(£10m)		-
Non-benchmark item	- Provisions utilised		c.£10m		-
Total non-benchmark PBT			c.£0m		c.£38m
Cash flow statement
Exceptional item			£30m		£27m
Closure costs			c.(£10m)		-
Working capital			c.£5m		-
Total cash inflow			c.£25m		£27m

Home Retail Group previously announced its intention to close c.25% of Homebase stores, which amounts to c.80 store closures, by the end of its FY18 financial year.  The above c.25 closures represent the start of this process.

Enquiries

Analysts and investors (Home Retail Group)

Richard Ashton                  Finance Director                         01908 600291

Mark Willis                        Director of Investor Relations

Media

Rollo Head                        Finsbury                                     020 7251 3801

Certain statements made 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.

 

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