Full Year Results - Part 2

RNS Number : 4268W

Home Retail Group Plc

27 April 2016

 



Consolidated income statement                                                  

For the 52 weeks ended 27 February 2016

		52 weeks ended 27 February 2016				52 weeks ended 28 February 2015
		Before exceptional items	Exceptional items (notes 3 & 4)	After exceptional items		Before exceptional items	Exceptional items (notes 3 & 4)	After exceptional items
	Notes	£m	£m	£m		£m	£m	£m
Continuing operations
Revenue		4,234.7	-	4,234.7		4,231.1	-	4,231.1
Cost of sales		(3,153.9)	-	(3,153.9)		(3,133.2)	-	(3,133.2)
Gross profit		1,080.8	-	1,080.8		1,097.9	-	1,097.9
Net operating expenses		(1,028.6)	(891.5)	(1,920.1)		(981.5)	(29.3)	(1,010.8)
Operating (loss)/profit		52.2	(891.5)	(839.3)		116.4	(29.3)	87.1
- Finance income		1.9	-	1.9		3.4	-	3.4
- Finance expense		(2.9)	-	(2.9)		(2.7)	-	(2.7)
Net financing (expense)/income	5	(1.0)	-	(1.0)		0.7	-	0.7
(Loss)/profit before tax		51.2	(891.5)	(840.3)		117.1	(29.3)	87.8
Taxation		(16.3)	8.0	(8.3)		(28.3)	5.8	(22.5)
(Loss)/profit for the year after tax from continuing operations		34.9	(883.5)	(848.6)		88.8	(23.5)	65.3
Discontinued operations
Profit/(loss) for the year after tax from discontinued operations	3	27.5	13.3	40.8		11.2	(4.9)	6.3
Total (loss)/profit for the year attributable to equity holders of the Company		62.4	(870.2)	(807.8)		100.0	(28.4)	71.6
Earnings per share				pence				pence
Continuing operations:
- Basic	7			(109.4)				8.6
- Diluted	7			(109.4)				8.1
Total Group:
- Basic	7			(104.2)				9.4
- Diluted	7			(104.2)				8.9
Benchmark earnings per share:
- Basic	7			9.3				13.0
- Diluted	7			9.0				12.4
				pence				pence
Proposed final dividend per share	6			-				2.8
Interim dividend per share	6			1.0				1.0
Proposed total dividend per share				1.0				3.8

On 27 February 2016 the Group sold 100% of the Homebase business to Wesfarmers Limited. As a result, Homebase has met the recognition criteria of a discontinued operation under IFRS 5 'Non-current assets held for sale and discontinued operations' and is therefore presented as such throughout this announcement. In order to comply with this presentation, FY15 income statement disclosures have been represented separating continuing and discontinued operations.

Non-GAAP measures			52 weeks ended 27 February 2016		52 weeks ended 28 February 2015
Reconciliation of profit before tax (PBT) to benchmark PBT	Notes		£m		£m
(Loss)/profit before tax from continuing operations			(840.3)		87.8
Adjusted for:
Profit before tax from discontinued operations	3		36.3		6.0
Amortisation of acquisition intangibles			1.8		1.8
Post-employment benefit scheme administration costs			1.9		1.9
Adjustments in respect of store impairment and property provisions			4.7		(0.1)
Exceptional items - continuing operations	4		891.5		29.3
Exceptional items - discontinued operations	3		(13.0)		6.2
Financing fair value remeasurements	5		2.4		1.0
Financing impact on post-employment benefit obligations	5		3.2		3.0
Discount unwind on non-benchmark items	5		6.2		6.7
Balance sheet review			-		(11.5)
Benchmark PBT			94.7		132.1

Consolidated statement of comprehensive income

For the 52 weeks ended 27 February 2016

		52 weeks ended 27 February 2016	52 weeks ended 28 February  2015
		£m	£m
(Loss)/profit for the year attributable to equity holders of the Company		(807.8)	71.6
Items that may be reclassified subsequently to profit or loss:
Net change in fair value of cash flow hedges
- Foreign currency forward exchange contracts		72.0	49.1
Net change in fair value of cash flow hedges transferred to inventory
- Foreign currency forward exchange contracts		(44.4)	(3.3)
Fair value movements on available-for-sale financial assets		(0.3)	0.7
Currency translation differences		2.9	(1.5)
Tax (charge) in respect of items that will be or have been recycled		(5.1)	(9.1)
Items recycled from other reserves		(13.1)	-
		12.0	35.9
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of the net defined benefit liability		(24.7)	(55.6)
Tax credit in respect of items not recycled		3.9	11.1
		(20.8)	(44.5)
Other comprehensive (expense)/income for the year, net of tax		(8.8)	(8.6)
Total comprehensive (expense)/income for the year attributable to equity holders of the Company		(816.6)	63.0

Continuing operations		(849.4)	32.4
Discontinued operations		32.8	30.6
Total comprehensive income for the year attributable to equity holders of the Company		(816.6)	63.0

 

Consolidated balance sheet

At 27 February 2016

		27 February 2016	28 February 2015
	Notes	£m	£m
ASSETS
Non-current assets
Goodwill		300.6	1,543.9
Other intangible assets		228.9	235.5
Property, plant and equipment		259.9	412.9
Deferred tax assets		26.0	44.6
Trade and other receivables		-	1.4
Other financial assets		10.3	10.6
Total non-current assets		825.7	2,248.9
Current assets
Inventories		755.8	963.0
Trade and other receivables		830.3	790.0
Current tax assets		4.9	13.2
Other financial assets		52.1	30.0
Cash and cash equivalents		622.9	309.3
Total current assets		2,266.0	2,105.5
Non-current assets classified as held for sale		-	18.3
Total assets		3,091.7	4,372.7
LIABILITIES
Non-current liabilities
Trade and other payables		(16.8)	(46.4)
Provisions	8	(20.9)	(126.2)
Deferred tax liabilities		(14.0)	(24.3)
Post-employment benefits		(94.5)	(114.4)
Total non-current liabilities		(146.2)	(311.3)
Current liabilities
Trade and other payables		(1,061.7)	(1,283.1)
Provisions	8	(38.1)	(95.7)
Other financial liabilities		(2.6)	(2.9)
Current tax liabilities		(5.5)	(6.8)
Total current liabilities		(1,107.9)	(1,388.5)
Total liabilities		(1,254.1)	(1,699.8)
Net assets		1,837.6	2,672.9
EQUITY
Share capital		81.3	81.3
Capital redemption reserve		6.4	6.4
Merger reserve		(348.4)	(348.4)
Other reserves		10.0	(61.5)
Retained earnings		2,088.3	2,995.1
Total equity		1,837.6	2,672.9

On 27 February 2016 the Group sold 100% of the Homebase business to Wesfarmers Limited. As a result, the FY16 balance sheet does not include Homebase.

 

Consolidated statement of changes in equity

For the 52 weeks ended 27 February 2016

			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 1 March 2015		81.3	6.4	(348.4)	(61.5)	2,995.1	2,672.9
Loss for the year		-	-	-	-	(807.8)	(807.8)
Other comprehensive income/(expense)		-	-	-	12.1	(20.9)	(8.8)
Total comprehensive income/(expense) for the year ended 27 February 2016		-	-	-	12.1	(828.7)	(816.6)
Transactions with owners:
Movement in share-based compensation reserve		-	-	-	-	0.8	0.8
Net movement in own shares		-	-	-	59.4	(46.2)	13.2
Tax debit related to share-based compensation reserve		-	-	-	-	(2.5)	(2.5)
Equity dividends paid during the year		-	-	-	-	(29.0)	(29.0)
Other distributions		-	-	-	-	(1.2)	(1.2)
Total transactions with owners		-	-	-	59.4	(78.1)	(18.7)
Balance at 27 February 2016		81.3	6.4	(348.4)	10.0	2,088.3	1,837.6
			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 2 March 2014		81.3	6.4	(348.4)	(52.3)	2,986.5	2,673.5
Profit for the year		-	-	-	-	71.6	71.6
Other comprehensive income/(expense)		-	-	-	35.6	(44.2)	(8.6)
Total comprehensive income for the year ended 28 February 2015		-	-	-	35.6	27.4	63.0
Transactions with owners:
Movement in share-based compensation reserve		-	-	-	-	8.6	8.6
Net movement in own shares		-	-	-	(44.8)	(3.7)	(48.5)
Tax credit related to share-based compensation reserve		-	-	-	-	1.9	1.9
Equity dividends paid during the year		-	-	-	-	(25.3)	(25.3)
Other distributions		-	-	-	-	(0.3)	(0.3)
Total transactions with owners		-	-	-	(44.8)	(18.8)	(63.6)
Balance at 28 February 2015		81.3	6.4	(348.4)	(61.5)	2,995.1	2,672.9

Consolidated statement of cash flows

For the 52 weeks ended 27 February 2016

		52 weeks ended  27 February 2016	52 weeks ended  28 February 2015
	Notes	£m	£m
Cash flows from operating activities
Cash generated from operations	9	134.6	211.8
Tax received/(paid)		13.1	(12.1)
Disposal of leasehold property		(13.2)	(9.0)
Cash flows from operating activities		134.5	190.7
Purchase of property, plant and equipment		(65.5)	(81.2)
Purchase of other intangible assets		(107.3)	(93.3)
Proceeds from the disposal of property, plant and equipment - freehold property		27.7	30.0
Proceeds from the disposal of property, plant and equipment - other		4.3	6.7
Sale of Homebase - discontinued operations	3 (iv)	337.3	-
Interest and other financing fees (paid)/received		(2.3)	0.7
Net cash generated/(used) in investing activities		194.2	(137.1)
Cash flows from financing activities
Purchase of shares for Employee Share Trust		-	(50.0)
Proceeds from disposal of shares held by Employee Share Trust		13.3	1.5
Dividends paid		(29.0)	(25.3)
Net cash used in financing activities		(15.7)	(73.8)
Net increase/(decrease) in cash and cash equivalents		313.0	(20.2)
Movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year		309.3	331.0
Effect of foreign exchange rate changes		0.6	(1.5)
Net increase/(decrease) in cash and cash equivalents		313.0	(20.2)
Cash and cash equivalents at the end of the year		622.9	309.3

 

Analysis of net cash/(debt)

At 27 February 2016

		27 February  2016	28 February  2015
Non-GAAP measures		£m	£m
Financing net cash:
Cash and cash equivalents		622.9	309.3
Total financing net cash		622.9	309.3
Operating net debt:
Off balance sheet operating leases		(676.9)	(1,914.4)
Total operating net debt		(676.9)	(1,914.4)
Total net debt		(54.0)	(1,605.1)

      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 gross lease commitments are £798.9m

      (2015: £2,342.2m), the discounted value of these leases is £676.9m (2015: £1,914.4m) based upon discounting the existing

      lease commitments at the Group's estimated long-term cost of borrowing of 3.6% (2015: 4.1%).

 

Notes

For the 52 weeks ended 27 February 2016

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 27 February 2016 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 2016, 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 2016. The financial year represents the 52 weeks to 27 February 2016 (prior financial year 52 weeks to 28 February 2015).

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 adopted by Home Retail Group are set out in Home Retail Group plc's Annual Report and Financial Statements dated 28 February 2015.  With the exception of those changes in accounting standards which are effective for the first time for the current period, as detailed below, these policies have been consistently applied to all the periods presented. 

On 27 February 2016 the Group sold 100% of the Homebase business to Wesfarmers Limited. As a result, Homebase has met the recognition criteria of a discontinued operation under IFRS 5 'Non-current assets held for sale and discontinued operations' and is therefore presented as such throughout this Announcement. In order to comply with this presentation, FY15 income statement disclosures have been represented separating continuing and discontinued operations.

Changes in accounting standards

There are no new standards, amendments to existing standards or interpretations which are effective for the first time during the year ended 27 February 2016 that have a material impact on the Group. At the balance sheet date there are a number of new standards and amendments to existing standards in issue but not yet effective, including IFRS 15 'Revenue from contracts with customers' and IFRS 9 'Financial Instruments', which are both effective for periods beginning on or after 1 January 2018. IFRS 16 'Leases' was published during the year and will come into effect on periods beginning on or after 1 January 2019. The Group has not early-adopted any of these new standards or amendments to existing standards and the Group will assess their full impact in due course.

There are no other new standards, amendments to existing standards or interpretations that are not yet effective that would be expected to have a material impact on the Group.

2. NON-GAAP FINANCIAL INFORMATION

Home Retail Group has identified certain measures that it believes will assist the understanding of the performance of the business. The measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but Home Retail Group has included them as it considers them to be important comparables and key measures used within the business for assessing performance.  The following are the key non-GAAP measures identified by Home Retail Group:

Exceptional items

Items which are both non-recurring and material in either size or nature 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 and/or losses on the disposal of businesses.

Benchmark measures

The Group uses the following terms as measures which are not formally recognised under IFRS:

·	Benchmark operating profit is defined as operating profit from all operations (both continuing and discontinued) before amortisation of acquisition intangibles, post-employment benefit scheme administration costs, store impairment and onerous lease charges or releases and costs or income associated with store closures and exceptional items.
·	Benchmark profit before tax (benchmark PBT) is defined as profit from all operations (both continuing and discontinued) before amortisation of acquisition intangibles, post-employment benefit scheme administration costs, store impairment and onerous lease charges or releases and costs or income associated with store closures, exceptional items, financing fair value remeasurements, financing impact on post-employment benefit obligations, the discount unwind on non-benchmark items and taxation.
·	Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to benchmark PBT, divided by the weighted average number of shares in issue (excluding shares held in Home Retail Group's share trusts net of vested but unexercised share awards).

      These measures are considered useful in that they provide 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.

3. DISCONTINUED OPERATIONS

On 27 February 2016 the Group sold 100% of the Homebase business to Wesfarmers Limited. As a result, Homebase has met the recognition criteria of a discontinued operation under IFRS 5 'Non-current assets held for sale and discontinued operations' and is therefore presented as such throughout this Announcement. A summary of the consolidated income statement, exceptional items and the loss on disposal, with respect to discontinued operations are set out below.

(i) Consolidated income statement

Notes 52 weeks ended 27 February 2016 £m 52 weeks ended 28 February 2015 £m Revenue 1,433.1 1,479.3 Cost of sales (801.8) (804.2) Gross profit 631.3 675.1 Net operating expenses (600.8) (654.1) Operating profit before exceptional items 30.5 21.0 Exceptional items 3 (iii) 13.0 (6.2) Operating profit 43.5 14.8 Finance expense (7.2) (8.8) Profit before tax from discontinued operations 36.3 6.0 Taxation 4.5 0.3 Profit after tax from discontinued operations 40.8 6.3               (ii) Benchmark PBT reconciliation 52 weeks ended 27 February 2016 52 weeks ended 28 February 2015 Non-GAAP measures Notes £m £m Reconciliation of PBT to benchmark PBT PBT from discontinued operations 36.3 6.0 Adjusted for: Adjustments in respect of store impairment and property provisions (7.0) (1.2) Exceptional items 3 (iii) (13.0) 6.2 Financing fair value remeasurements 5 0.7 1.3 Discount unwind on non-benchmark items 5 6.2 6.7 Benchmark PBT from discontinued operations 23.2 19.0 Benchmark net financing expense 0.3 0.8 Benchmark operating profit from discontinued operations 23.5 19.8 (iii) Exceptional items 52 weeks ended 27 February 2016 52 weeks ended 28 February 2015 Notes £m £m Loss on disposal 3(iv) (18.5) - Sale related transaction, separation and restructuring costs (7.8) - Gain on sale of freehold property 39.3 - Other restructuring costs - (6.2) Exceptional items in operating profit 13.0 (6.2) Tax on exceptional items in profit before tax 0.3 1.3 Exceptional gain/(loss) after tax for the year 13.3 (4.9) Transaction, separation and restructuring costs of £7.8m relate to the costs incurred as a result of the Homebase sale, and which form part of the previously announced total cost of c.£75m.   The gain on disposal of freehold property represents the gain following the sale of the Group's freehold located in   Battersea, London. The gain represents cash proceeds of £57.7m (2016: £27.7m, 2015: £30.0m) less net book value   and costs of sale of £18.4m. (iv) Loss on disposal 52 weeks ended  27 February 2016 £m 52 weeks ended 28 February 2015 £m FY16 gross cash proceeds  362.1 - Less: Homebase cash (24.8) - FY16 net cash proceeds 337.3 - FY17 gross cash proceeds 2.7 - Total net cash proceeds 340.0 - Net assets disposed of (371.6) - Exchange differences recognised in the income statement on disposal 13.1 - Loss on disposal (18.5) - Exchange differences recognised in the income statement on disposal principally comprises a hedging reserve gain.

4. EXCEPTIONAL ITEMS FROM CONTINUING OPERATIONS	52 weeks ended 27 February 2016	52 weeks ended 28 February 2015
	£m	£m
Argos goodwill impairment	(851.7)	-
Habitat goodwill and brand intangible impairment	(12.5)	-
Argos transformation charges	(10.3)	(12.2)
Financial Services customer redress	(17.0)	(4.1)
Other restructuring charges	-	(13.0)
Exceptional items in operating (loss)/profit	(891.5)	(29.3)
Tax on exceptional items in profit before tax	8.0	5.8
Exceptional loss after tax for the year	(883.5)	(23.5)
The carrying amount of Argos goodwill has been reviewed in light of the recommended offer received from J Sainsbury plc on 1 April 2016 for the purchase of Home Retail Group plc. An impairment charge of £851.7m has been recognised to write the carrying value of goodwill down to its recoverable amount. This charge has been calculated to align Group net assets, adjusted for certain items, to the offer value. A charge of £12.5m has been incurred in relation to the impairment of the Habitat brand intangibles and goodwill which occurs directly as a result of the sale of Homebase and subsequent closure of Habitat concessions in Homebase over approximately the next 6 months. Exceptional restructuring charges totalling £10.3m (FY15: £12.2m) were incurred during the 52 weeks ended 27 February 2016. These charges were incurred in Argos in respect of the ongoing project to transform Argos into a digital retail leader. A total charge of £41.5m has been recognised across the three-year period versus the original estimate of c.£50m which was announced at the start of the Transformation Plan in October 2012. The Financial Services customer redress charges principally relate to customer redress in respect of Payment Protection Insurance which was historically provided by Financial Services. This includes a charge relating to a potential exposure resulting from the Supreme Court ruling on Plevin vs Paragon in November 2014 and the subsequent FCA consultation paper issued in November 2015. Exceptional items from discontinued operations were covered in note 3(iii).

5. NET FINANCING INCOME/(EXPENSE)

	52 weeks ended 27 February 2016				52 weeks ended 28 February 2015
		Continuing operations £m	Discontinued operations £m	Total £m				Continuing operations £m	Discontinued operations £m		Total £m
Finance income:
Bank deposits		1.9	-	1.9				0.7	-		0.7
Financing fair value remeasurements - net  exchange gains		-	-	-				2.7	-		2.7
Total finance income		1.9	-	1.9			3.4			-		3.4
Finance expense:
Unwinding of discounts		-	(6.5)	(6.5)			-			(7.5)		(7.5)
Financing fair value remeasurements - net exchange losses		(1.7)	(0.7)	(2.4)			(2.4)			(1.3)		(3.7)
Net finance expense on post-employment benefit obligations		(3.2)	-	(3.2)			(3.0)			-		(3.0)
Other finance expense		(2.1)	-	(2.1)			(1.2)			-		(1.2)
Total finance expense		(7.0)	(7.2)	(14.2)			(6.6)			(8.8)		(15.4)
Less: finance expense charged to Financial Services cost of sales		4.1	-	4.1			3.9			-		3.9
Total net finance expense		(2.9)	(7.2)	(10.1)			(2.7)			(8.8)		(11.5)
Net financing (expense)/income		(1.0)	(7.2)	(8.2)			0.7			(8.8)		(8.1)

Included within unwinding of discounts is a £6.2m charge (2015: £6.7m) relating to the non-benchmark discount unwind on property provisions.

6. DIVIDENDS			52 weeks ended 27 February 2016	52 weeks ended 28 February 2015
			£m	£m
Amounts recognised as distributions to equity holders
Final dividend of 2.8p per share (2015: 2.3p) for the prior year			(21.2)	(17.8)
Interim dividend of 1.0p per share (2015: 1.0p) for the current year			(7.8)	(7.5)
Ordinary dividends on equity shares			(29.0)	(25.3)
On 1 April 2016, the Board recommended an offer from J Sainsbury plc for the purchase of Home Retail Group plc, the details of which are set out in note 11. As a result of the 2.8p element of the proposed capital return component of the offer, which reflects a payment in lieu of the FY16 final dividend, no final dividend is proposed for FY16.

7. BASIC AND DILUTED EARNINGS PER SHARE (EPS)
Basic EPS 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 EPS is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares.
Earnings Notes 52 weeks ended 27 February 2016 £m 52 weeks ended 28 February 2015 £m (Loss)/profit after tax for continuing operations (848.6) 65.3 Profit after tax for discontinued operations 40.8 6.3 Total (loss)/profit after tax for the financial year (807.8) 71.6 Adjusted for: Amortisation of acquisition intangibles 1.8 1.8 Post-employment benefit scheme administration costs 1.9 1.9 Adjustments in respect of store impairment and property provisions 4.7 (0.1) Exceptional items - continuing operations 4 891.5 29.3 Exceptional items - discontinued operations 3(iii) (13.0) 6.2 Financing fair value remeasurements 2.4 1.0 Financing impact on post-employment benefit obligations 5 3.2 3.0 Discount unwind on non-benchmark items  5 6.2 6.7 Balance sheet review 5 - (11.5) Attributable taxation credit (11.4) (7.8) Non-benchmark tax credit in respect of prior years (6.9) (3.0) Tax rate change (0.2) - Benchmark profit after tax for the financial year 72.4 99.1 Continuing operations 50.0 85.1 Discontinued operations 22.4 14.0

Weighted average number of shares	millions	millions
Number of ordinary shares for the purpose of basic EPS	775.5	764.3
Dilutive effect of share incentive awards	25.0	36.0
Number of ordinary shares for the purpose of diluted EPS	800.5	800.3

	52 weeks ended 27 February 2016 pence	52 weeks ended 28 February 2015 pence
EPS from continuing operations:
- Basic	(109.4)	8.6
- Diluted	(109.4)	8.1
EPS from discontinued operations:
- Basic	5.3	0.8
- Diluted	5.1	0.8
EPS for total Group:
- Basic	(104.2)	9.4
- Diluted	(104.2)	8.9

EPS from continuing operations and EPS for total Group are losses per share for FY16. As such, in line with the requirements of IAS 33 'earnings per share', these diluted EPS calculations are based on the basic number of shares.

			52 weeks ended 27 February 2016	52 weeks ended 28 February 2015
EPS			pence	pence
Total basic benchmark EPS			9.3	13.0
- Continuing operations			6.4	11.2
- Discontinued operations			2.9	1.8
Diluted benchmark EPS			9.0	12.4
- Continuing operations			6.2	10.6
- Discontinued operations			2.8	1.8

8. PROVISIONS

	Property	Insurance	Restructuring	FS customer redress	Other	Total
	£m	£m	£m	£m	£m	£m
At 1 March 2015	(130.7)	(35.5)	(20.8)	(29.0)	(5.9)	(221.9)
Charged to the income statement	(8.0)	(4.3)	(19.0)	(17.0)	(5.7)	(54.0)
Released to the income statement	14.6	3.2	-	-	-	17.8
Utilised during the year - cash	18.3	4.9	25.8	34.5	5.8	89.3
Utilised during the year - non cash	0.7	-	1.2	-	-	1.9
Transfer from accruals	(1.3)	-	(0.2)	-	-	(1.5)
Exchange differences	(1.6)	-	-	-	-	(1.6)
Discount unwind	(6.7)	-	-	-	-	(6.7)
Impact of business disposal	112.9	2.3	0.2	-	2.3	117.7
At 27 February 2016	(1.8)	(29.4)	(12.8)	(11.5)	(3.5)	(59.0)
					2016	2015
Analysed as:					£m	£m
Current					(38.1)	(95.7)
Non-current					(20.9)	(126.2)
					(59.0)	(221.9)

Property provisions comprise obligations in respect of onerous leases together with other costs or income associated with store closures. In respect of onerous leases, provision is made for onerous lease contracts on stores that have either closed, or where projected future trading income is insufficient to cover the lower of exit cost or cost of continuing to trade the store. Where the cost of continuing to trade the store 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.

Provision is made for the estimated costs of insurance claims incurred by the Group which have not been 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 operational costs to be incurred in administering future claims.

The restructuring provision principally relates to the restructuring charges incurred following the sale of Homebase.

The Financial Services customer redress provision principally relates to customer redress in respect of Payment Protection

Insurance (PPI) and includes a charge relating to a potential exposure resulting from the Supreme Court ruling on Plevin vs Paragon in November 2014 and the subsequent FCA consultation paper issued in November 2015. The customer redress provision comprises the estimated cost of making redress payments to customers in respect of past sales of PPI policies, including the related operational costs of administering these claims. The eventual cost is dependent upon response rates, uphold rates, redress costs, claim handling costs and costs associated with claims that are subsequently referred to the Financial Ombudsman Service. The provision represents management's best estimate of future costs and will remain under review.

9. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
		52 weeks ended 27 February 2016	52 weeks ended 28 February 2015
Cash generated from operations	Notes	£m	£m
(Loss)/profit before tax from continuing operations		(840.3)	87.8
Net financing expense/(income)		1.0	(0.7)
Operating (loss)/profit from continuing operations		(839.3)	87.1
Operating profit from discontinued operations	3 (i)	43.5	14.8
Total operating (loss)/profit		(795.8)	101.9
Adjusted for loss on disposal within exceptional items	3(iii)	18.5	-
Adjusted for profit on disposal of freehold property		(39.3)	-
Profit on sale of property, plant and equipment and other intangible assets		(0.7)	(1.5)
Depreciation and amortisation		140.6	136.0
Impairment charge		875.5	15.8
Finance expense charged to Financial Services cost of sales		4.1	3.9
Increase in inventories		(27.7)	(60.6)
Increase in trade and other receivables		(13.5)	(23.0)
Increase in payables		94.1	120.2
Movement in trade working capital		52.9	36.6
Increase in Financial Services loan book		(34.6)	(55.4)
Movement in total working capital		18.3	(18.8)
Decrease in provisions		(39.5)	(13.0)
Movement in post-employment benefit obligations - annual deficit recovery payment		(22.0)	(22.0)
Movement in post-employment benefit obligations - Homebase disposal related payment		(26.0)	-
Movement in post-employment benefit obligations - other		1.2	1.2
Share-based payment expense (net of dividend equivalent payments)		(0.3)	8.3
Cash generated from operations		134.6	211.8

10. RELATED PARTIES

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

At 27 February 2016, the amounts owed by its associates to the Group totalled £0.1m (2015: £0.1m), net of accumulated impairment losses totalling £3.9m (2015: £3.9m) 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 1 April 2016, the Board recommended an offer from J Sainsbury plc for the purchase of Home Retail Group plc. Under the terms of the offer, Home Retail Group shareholders will be entitled to receive the following for each Home Retail Group share;

·      0.321 new Sainsbury's shares; and

·      55.0 pence in cash

In addition, Home Retail Group shareholders will also be entitled to the following payments, which together form the proposed capital return;

·      25.0 pence per share, reflecting the £200m return to shareholders in respect of the Homebase sale; and

·      2.8 pence per share in lieu of a final dividend in respect of the financial year ended 27 February 2016.  As a result, a final dividend will not be paid.

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 2016 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

John Walden                                                   Richard Ashton

Chief Executive                                               Finance Director

27 April 2016                                                  27 April 2016

 

END

 

 

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