Preliminary Results - Part 2

RNS Number : 8670K

Home Retail Group Plc

28 April 2010

 



Consolidated income statement

For the 52 weeks ended 27 February 2010

				52 weeks ended 27 February 2010				52 weeks ended 28 February 2009
					Total		Before exceptional items	Exceptional items	Total
				Notes	£m		£m	£m	£m
Revenue					6,022.7		5,897.4	-	5,897.4
Cost of sales					(4,055.6)		(3,873.8)	-	(3,873.8)
Gross profit					1,967.1		2,023.6	-	2,023.6
Net operating expenses					(1,672.6)		(1,731.6)	(694.0)	(2,425.6)
Operating profit/(loss)					294.5		292.0	(694.0)	(402.0)
- Finance income					46.1		63.7	-	63.7
- Finance expense					(45.6)		(53.5)	-	(53.5)
Net financing income				3	0.5		10.2	-	10.2
Share of post-tax loss of joint ventures and associates					(2.0)		(2.4)	-	(2.4)
Profit/(loss) before tax					293.0		299.8	(694.0)	(394.2)
Taxation					(83.2)		(101.2)	82.3	(18.9)
Profit/(loss) for the year attributable to equity holders of the Company					209.8		198.6	(611.7)	(413.1)
Earnings per share					pence				pence
- Basic				5	24.3				(47.7)
- Diluted				5	24.1				(47.7)
					pence				pence
Proposed final dividend per share					10.0				10.0
Interim dividend per share					4.7				4.7
Proposed total dividend per share					14.7				14.7

Non-GAAP measures	52 weeks ended  27 February 2010				52 weeks ended  28 February 2009
Reconciliation of profit before tax (‘PBT’) to benchmark PBT	Notes	£m			£m
Profit/(loss) before tax		293.0			(394.2)
Adjusted for:
Exceptional items		-			694.0
Demerger incentive schemes		7.7			8.4
Financing fair value remeasurements	3	(2.7)			28.9
Financing impact on retirement benefit obligations	3	0.7			(11.2)
Discount unwind on non-benchmark items	3	6.7			1.8
Onerous lease provision releases		(12.5)			-
Benchmark PBT		292.9			327.7
Benchmark earnings per share		pence			pence
- Basic	5	23.4			25.9
- Diluted	5	23.1			25.6

Consolidated statement of comprehensive income

For the 52 weeks ended 27 February 2010

		52 weeks ended  27 February 2010	52 weeks ended 28 February 2009
		£m	£m
Profit/(loss) for the year attributable to equity holders of the Company		209.8	(413.1)
Other comprehensive income:
Net change in fair value of cash flow hedges
- Foreign currency forward exchange contracts		(26.5)	153.3
Net change in fair value of cash flow hedges transferred to inventory
- Foreign currency forward exchange contracts		43.0	(130.1)
Actuarial gains/(losses) in respect of defined benefit pension schemes		6.6	(135.4)
Fair value movements on available-for-sale financial assets		3.0	(2.3)
Currency translation differences		(3.6)	35.9
Tax (charge)/credit in respect of items taken directly to equity		(5.9)	32.5
Other comprehensive income for the year, net of tax		16.6	(46.1)
Total comprehensive income for the year attributable to equity holders of the Company		226.4	(459.2)

Consolidated balance sheet

At 27 February 2010

		27 February 2010	28 February 2009
	Notes	£m	£m
ASSETS
Non-current assets
Goodwill		1,541.0	1,541.0
Other intangible assets		92.7	103.6
Property, plant and equipment		525.1	559.3
Investment in joint ventures and associates		8.2	8.4
Deferred tax assets		61.6	87.4
Trade and other receivables		4.0	3.4
Other financial assets		13.2	9.2
Total non-current assets		2,245.8	2,312.3
Current assets
Inventories		935.4	930.3
Trade and other receivables		582.1	593.7
Current tax assets		50.5	15.1
Other financial assets		49.5	53.7
Current asset investments		50.0	75.0
Cash and cash equivalents		364.0	209.4
Total current assets		2,031.5	1,877.2
Total assets		4,277.3	4,189.5
LIABILITIES
Non-current liabilities
Trade and other payables		(62.5)	(64.0)
Provisions	6	(198.3)	(198.6)
Deferred tax liabilities		(37.8)	(26.3)
Retirement benefit obligations		(24.9)	(46.4)
Total non-current liabilities		(323.5)	(335.3)
Current liabilities
Trade and other payables		(1,042.4)	(999.2)
Provisions	6	(20.8)	(51.6)
Other financial liabilities		(1.8)	(1.5)
Current tax liabilities		(22.2)	(43.5)
Total current liabilities		(1,087.2)	(1,095.8)
Total liabilities		(1,410.7)	(1,431.1)
Net assets		2,866.6	2,758.4
EQUITY
Share capital		87.7	87.7
Merger reserve		(348.4)	(348.4)
Other reserves		46.6	35.4
Retained earnings		3,080.7	2,983.7
Total equity		2,866.6	2,758.4

Consolidated statement of changes in equity

For the 52 weeks ended 27 February 2010

			Attributable to equity holders of the Company
			Share	Merger	Other	Retained
			capital	reserve	reserves	earnings	Total
			£m	£m	£m	£m	£m
At 1 March 2009			87.7	(348.4)	35.4	2,983.7	2,758.4
Profit for the year			-	-	-	209.8	209.8
Other comprehensive income			-	-	8.3	8.3	16.6
Total comprehensive income for the year ended 27 February 2010			-	-	8.3	218.1	226.4
Transactions with owners:
Movement in share-based compensation reserve			-	-	-	20.4	20.4
Net movement in own shares			-	-	2.9	(12.0)	(9.1)
Equity dividends paid during the year			-	-	-	(126.3)	(126.3)
Other distributions			-	-	-	(3.2)	(3.2)
Total transactions with owners			-	-	2.9	(121.1)	(118.2)
Balance at 27 February 2010			87.7	(348.4)	46.6	3,080.7	2,866.6
			Attributable to equity holders of the Company
			Share	Merger	Other	Retained
			capital	reserve	reserves	earnings	Total
			£m	£m	£m	£m	£m
At 2 March 2008			87.7	(348.4)	3.9	3,602.0	3,345.2
Loss for the year			-	-	-	(413.1)	(413.1)
Other comprehensive income			-	-	52.6	(98.7)	(46.1)
Total comprehensive income for the year ended 28 February 2009			-	-	52.6	(511.8)	(459.2)
Transactions with owners:
Movement in share-based compensation reserve			-	-	-	21.3	21.3
Net movement in own shares			-	-	(21.1)	(0.4)	(21.5)
Equity dividends paid during the year			-	-	-	(127.2)	(127.2)
Other distributions			-	-	-	(0.2)	(0.2)
Total transactions with owners			-	-	(21.1)	(106.5)	(127.6)
Balance at 28 February 2009			87.7	(348.4)	35.4	2,983.7	2,758.4

Consolidated statement of cash flows

For the 52 weeks ended 27 February 2010

		52 weeks ended  27 February 2010	52 weeks ended  28 February 2009
	Notes	£m	£m
Cash flows from operating activities
Cash generated from operations	8	461.0	468.4
Tax paid		(107.3)	(74.7)
Net cash inflow from operating activities		353.7	393.7
Cash flows from investing activities
Purchase of property, plant and equipment		(73.7)	(110.9)
Proceeds from the disposal of property, plant and equipment		1.9	2.6
Purchase of intangible assets		(17.5)	(44.7)
Loan to joint venture		(5.1)	(2.0)
Purchase of investments		(51.6)	(75.2)
Disposal of investment		75.0	-
Interest received		7.2	16.6
Net cash used in investing activities		(63.8)	(213.6)
Cash flows from financing activities
Purchase of shares for Employee Share Trust		(9.4)	(21.6)
Proceeds from sale of own shares		0.3	0.1
Dividends paid		(126.3)	(127.2)
Net cash used in financing activities		(135.4)	(148.7)
Net increase in cash and cash equivalents		154.5	31.4
Movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year		209.4	174.0
Effect of foreign exchange rate changes		0.1	4.0
Net increase in cash and cash equivalents		154.5	31.4
Cash and cash equivalents at the end of the year		364.0	209.4

Analysis of net cash/(debt)

At 27 February 2010

		27 February 2010	28 February 2009
Non-GAAP measures		£m	£m
Financing net cash:
Cash and cash equivalents		364.0	209.4
Current asset investments		50.0	75.0
Total financing net cash		414.0	284.4
Operating net debt:
Off balance sheet operating leases		(3,148.1)	(3,304.3)
Total operating net debt		(3,148.1)	(3,304.3)
Total net debt		(2,734.1)	(3,019.9)
Adjusted for:
Off balance sheet operating leases		3,148.1	3,304.3
Current asset investments		(50.0)	(75.0)
Total cash and cash equivalents reflected in balance sheet		364.0	209.4

The Group uses the term total net debt which highlights 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 £3,148.1m (2009: £3,304.3m), based upon discounting the current rentals at the estimated current long-term cost of borrowing of 4.1% (2009: 4.1%).

The current asset investment comprises a term cash deposit invested for a period of six months (2009: nine months) which matures after the balance sheet date on 10 May 2010 (2009: 15 April 2009).

Notes

For the 52 weeks ended 27 February 2010

1. BASIS OF PREPARATION

The Group consolidated financial statements are presented in sterling, rounded to the nearest hundred thousand.  They are prepared under the historic cost basis modified for the revaluation of certain financial instruments.  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 2009.  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 impairment charges, restructuring costs and the profits/losses on the disposal of businesses.

Benchmark profit before tax ('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, 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.  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 provides 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 27 February 2010

	52 weeks ended  27 February 2010	52 weeks ended  28 February 2009
3. NET FINANCING INCOME/(EXPENSE)	£m	£m
Finance income:
Bank deposits and other interest	4.4	18.6
Expected return on retirement benefit assets	34.6	45.1
Financing fair value remeasurements - net exchange gains	7.1	-
Total finance income	46.1	63.7
Finance expense:
Unwinding of discounts (a)	(9.4)	(4.3)
Financing fair value remeasurements - net exchange losses	(4.4)	(28.9)
Interest expense on retirement benefit liabilities	(35.3)	(33.9)
Total finance expense	(49.1)	(67.1)
Less: finance expense charged to Financial Services cost of sales	3.5	13.6
Total net finance expense	(45.6)	(53.5)
Net financing income	0.5	10.2

(a)  Included within unwinding of discounts is a £6.7m charge (2009: £1.8m) relating to the discount unwind on exceptional onerous lease provisions.

			52 weeks ended  27 February 2010	52 weeks ended  28 February 2009
4. DIVIDENDS			£m	£m
Amounts recognised as distributions to equity holders
Final dividend of 10.0p per share (2009: 10.0p) for the prior year			(85.7)	(86.8)
Interim dividend of 4.7p per share (2009: 4.7p) for the current year			(40.6)	(40.4)
Ordinary dividends on equity shares			(126.3)	(127.2)
A final dividend in respect of the year ended 27 February 2010 of 10.0p per share, amounting to a total final dividend of £86.6m, 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 14.7p per share, amounting to £127.2m.  The proposed dividend has not been included as a liability at 27 February 2010 in accordance with IAS 10 'Events after the Balance Sheet Date'. It will be paid on 21 July 2010 to shareholders who are on the register of members at close of business on 21 May 2010. The Home Retail Group Employee Share Trust ('EST') has waived its entitlement to dividends in the amount of £2.7m (2009: £1.8m).

Notes

For the 52 weeks ended 27 February 2010

5. 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 options and 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  27 February 2010		52 weeks ended  28 February 2009
Earnings		£m		£m
Profit/(loss) after tax for the financial year		209.8		(413.1)
Adjusted for:
Exceptional items		-		694.0
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)		-
Attributable taxation		(0.6)		(61.1)
Non-benchmark tax credit in respect of prior years		(7.6)		(23.5)
Benchmark profit after tax for the financial year		201.5		224.2
Weighted average number of shares		millions		millions
Number of ordinary shares for the purpose of basic EPS		862.9		866.6
Dilutive effect of share incentive awards		9.3		10.4
Number of ordinary shares for the purpose of diluted EPS		872.2		877.0
EPS		pence		pence
Basic EPS		24.3		(47.7)
Diluted EPS (a)		24.1		(47.7)
Basic benchmark EPS		23.4		25.9
Diluted benchmark EPS		23.1		25.6

(a)  In accordance with IAS 33, as the Group made a loss after tax for the 52 weeks ended 28 February 2009, the effect of share incentive awards is anti-dilutive and as such diluted EPS equals basic EPS.

Notes

For the 52 weeks ended 27 February 2010

			Onerous leases	Insurance provisions	Restructuring provisions	Other	Total
6. PROVISIONS			£m	£m	£m	£m	£m
At 1 March 2009			(173.4)	(33.1)	(33.6)	(10.1)	(250.2)
Charged to the income statement			-	(2.8)	-	-	(2.8)
Released to the income statement			12.5	-	0.8	0.6	13.9
Transfer			(2.3)	-	(0.8)	1.1	(2.0)
Utilised during the year			8.6	3.2	19.0	0.9	31.7
Discount unwind			(9.3)	-	(0.2)	(0.2)	(9.7)
At 27 February 2010			(163.9)	(32.7)	(14.8)	(7.7)	(219.1)
						2010	2009
Analysed as:						£m	£m
Current						(20.8)	(51.6)
Non-current						(198.3)	(198.6)
						(219.1)	(250.2)

The onerous lease provision covers potential liabilities for onerous lease contracts for stores that have either closed, or where projected future trading revenue 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 sublet income. The majority of this provision is expected to be utilised over the period to 2017.

Provision is made at the year-end for the estimated costs of claims incurred by the Group's captive insurance company 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 2014.

A number of organisational changes were undertaken to improve the operational efficiency of the Group and drive further cost productivity.  Actions taken included a streamlining of head office functions across all parts of the Group, restructuring of store-based staff and a consolidation of home delivery warehouses.  The majority of this remaining provision is expected to be utilised within one year.

Other provisions include legal claims and other sundry provisions. The majority of this provision is expected to be utilised within one year.

Notes

For the 52 weeks ended 27 February 2010

7. NOTES TO THE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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.
Net movement in own shares of £2.9m (2009: (£21.1m)) represents the purchase, and subsequent utilisation or sale, of shares for the purpose of satisfying obligations arising from Home Retail Group plc share-based compensation schemes.  Shares in Home Retail Group plc are held in the following trusts which have been established since demerger: 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 27 February 2010, the EST held 13,899,537 shares with a market value of £35.4m.  The shares in the EST are held within equity of the Group at a cost of £20.0m.  During the year 3,112,268 shares were acquired for a cost of £9.4m. Dividends on these shares 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 27 February 2010, the Trust held 1,007,291 shares with a market value of £2.6m.  These shares are held within equity of the Group at a cost of £4.2m. No additional shares were purchased during the year.

8. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
	52 weeks ended  27 February 2010		52 weeks ended  28 February 2009
Cash generated from operations	£m		£m
Profit/(loss) before tax	293.0		(394.2)
Adjustments for:
Share of post-tax losses of joint ventures and associates	2.0		2.4
Net financing income	(0.5)		(10.2)
Operating profit/(loss)	294.5		(402.0)
Loss/(profit) on sale of property, plant and equipment	2.5		(0.2)
Depreciation and amortisation	130.1		159.4
Impairment losses	-		533.9
Finance expense charged to Financial Services cost of sales	3.5		13.6
(Increase)/decrease in inventories	(5.1)		74.5
Decrease in receivables	11.5		12.6
Increase/(decrease) in payables	63.2		(97.3)
Movement in working capital	69.6		(10.2)
(Decrease)/increase in provisions	(40.8)		146.9
Movement in retirement benefits	(15.6)		5.9
Share-based payment expense (net of dividend equivalent payments)	17.2		21.1
Cash generated from operations	461.0		468.4

Notes

For the 52 weeks ended 27 February 2010

9. RELATED PARTIES

The Group's related parties are its joint ventures and associates, key management personnel and the Home Retail Group defined benefit pension plans.

The Group lent £5.1m (2009: £2.0m) to and invested £0.5m (2009: £nil) in a joint venture, Home Retail Group Personal Finance Limited. The total loan of £15.2m (2009: £10.1m) was outstanding as at 27 February 2010.

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

During the year, the Group has paid contributions totalling £31.3m (2009: £13.9m) to the Home Retail Group defined benefit pension plans including £17.3m as part of the deficit recovery plan and increased employer contribution rate agreed with the scheme trustees following the completion of the 31 March 2009 actuarial valuation.

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 27 February 2010 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, in which case there should be supporting assumptions or qualifications as necessary. 

The directors are responsible for keeping proper 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.

By order of the Board

Terry Duddy                                                         Richard Ashton

Chief Executive                                                     Finance Director

28 April 2010                                                        28 April 2010

 

END

 

 

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