Half-Year Results - Part 2

RNS Number : 3928G

Home Retail Group Plc

22 October 2008

 



HOME RETAIL GROUP PLC

UNAUDITED CONDENSED HALF-YEARLY FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 30 August 2008

52 weeks to										26 weeks to		26 weeks to
1.3.08										30.8.08		1.9.07
£m						Notes				£m		£m
5,984.8				Revenue		4				2,736.2		2,736.5
(3,881.0)				Cost of sales						(1,775.7)		(1,770.3)
2,103.8				Gross profit						960.5		966.2
(1,717.5)				Net operating expenses before exceptional items						(860.4)		(836.0)
0.8				Exceptional items		5				(549.9)		20.2
(1,716.7)				Net operating expenses						(1,410.3)		(815.8)
387.1				Operating (loss)/profit		4				(449.8)		150.4
62.3				- Finance income						32.4		30.3
(25.0)				- Finance expense						(18.0)		(11.1)
37.3				Net financing income		6				14.4		19.2
1.6				Share of post-tax results of joint ventures and associates						(1.6)		(0.3)
426.0				(Loss)/profit before tax						(437.0)		169.3
(131.4)				Taxation		7				(9.8)		(54.8)
294.6				(Loss)/profit for the period attributable to equity shareholders						(446.8)		114.5
pence				Earnings per share		8				pence		pence
34.0				- Basic						(51.3)		13.2
33.6				- Diluted						(51.3)		13.1
14.7				Proposed dividend per share		9				4.7		4.7
All activities relate to continuing operations
52 weeks to								26 weeks to				26 weeks to
1.3.08				Non-GAAP measures				30.8.08				1.9.07
£m				Reconciliation of (loss)/profit before tax to benchmark profit before tax ('PBT')				£m				£m
426.0				(Loss)/profit before tax				(437.0)				169.3
(0.8)				Effect of exceptional items		5		549.9				(20.2)
9.0				Effect of financing fair value remeasurements		6		8.3				1.2
(13.0)				Financing impact on retirement benefit balances		6		(5.7)				(6.4)
11.7				Effect of demerger incentive schemes				5.9				5.9
432.9				Benchmark PBT				121.4				149.8
pence				Benchmark earnings per share		8		pence				pence
33.9				- Basic				9.6				11.7
33.6				- Diluted				9.4				11.6

HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the 26 weeks ended 30 August 2008

52 weeks to						26 weeks to		26 weeks to
1.3.08						30.8.08		1.9.07
£m				Notes		£m		£m
				Net income/(expense) recognised directly in equity
				Net change in fair value of cash flow hedges
(17.7)				- Foreign currency forward exchange contracts		36.5		(11.0)
				Net change in fair value of cash flow hedges transferred to inventory
19.8				- Foreign currency forward exchange contracts		(6.2)		9.5
73.9				Actuarial (losses)/gains in respect of defined benefit pension schemes                        12		(99.5)		50.0
0.1				Fair value movements on available-for-sale financial assets		-		0.3
13.5				Currency translation differences		10.1		(1.1)
(22.8)				Tax credit/(charge) in respect of items taken directly to equity		19.4		(14.6)
66.8				Net (expense)/income recognised directly in equity for the period		(39.7)		33.1
294.6				(Loss)/profit for the period attributable to equity shareholders		(446.8)		114.5
361.4				Total recognised (expense)/income for the period attributable to equity shareholders		(486.5)		147.6

HOME RETAIL GROUP PLC

GROUP BALANCE SHEET

At 30 August 2008

1.3.08								30.8.08		1.9.07
£m						Notes		£m		£m
				ASSETS
				Non-current assets
1,922.7				Goodwill				1,541.0		1,878.9
83.7				Other intangible assets				85.1		76.3
731.8				Property, plant and equipment				618.4		685.1
7.7				Investment in joint ventures and associates				7.6		8.0
46.6				Deferred tax assets				66.1		48.0
4.8				Trade and other receivables				4.6		10.6
83.7				Retirement benefit assets		12		-		59.5
14.2				Available-for-sale financial assets				12.0		14.7
2,895.2				Total non-current assets				2,334.8		2,781.1
				Current assets
1,004.8				Inventories				1,011.0		929.9
597.8				Trade and other receivables				594.8		557.7
16.9				Current tax assets				6.1		3.0
4.3				Derivative financial instruments				38.5		-
-				Current asset investments				75.0		-
174.0				Cash and cash equivalents				199.7		222.9
1,797.8				Total current assets				1,925.1		1,713.5
4,693.0				Total assets				4,259.9		4,494.6
				LIABILITIES
				Non-current liabilities
(41.3)				Trade and other payables				(43.3)		(39.5)
(72.6)				Provisions		11		(143.7)		(63.1)
(67.4)				Deferred tax liabilities				(40.8)		(42.7)
-				Retirement benefit obligations		12		(14.1)		-
(181.3)				Total non-current liabilities				(241.9)		(145.3)
				Current liabilities
(1,089.5)				Trade and other payables				(1,172.8)		(1,139.0)
(26.1)				Provisions		11		(22.3)		(22.9)
(2.8)				Derivative financial instruments				(1.0)		(4.8)
(48.1)				Current tax liabilities				(38.3)		(23.1)
(1,166.5)				Total current liabilities				(1,234.4)		(1,189.8)
(1,347.8)				Total liabilities				(1,476.3)		(1,335.1)
3,345.2				Net assets				2,783.6		3,159.5
				EQUITY
87.7				Share capital				87.7		87.7
(348.4)				Merger reserve				(348.4)		(348.4)
3.9				Other reserves				35.9		(13.9)
3,602.0				Retained earnings				3,008.4		3,434.1
3,345.2				Total equity		13		2,783.6		3,159.5

HOME RETAIL GROUP PLC

CONSOLIDATED CASH FLOW STATEMENT

For the 26 weeks ended 30 August 2008

52 weeks to								26 weeks to		26 weeks to
1.3.08								30.8.08		1.9.07
£m						Notes		£m		£m
				Cash flows from operating activities
564.2				Cash generated from operations		14		269.9		373.3
18.7				Interest received				10.1		8.1
(3.6)				Interest paid				-		(3.6)
(95.1)				Tax paid				(36.7)		(57.2)
484.2				Net cash inflow from operating activities				243.3		320.6
				Cash flows from investing activities
(176.3)				Purchase of property, plant and equipment		10		(44.2)		(57.6)
3.4				Proceeds from the disposal of property, plant and equipment		10		1.6		1.3
(35.0)				Purchase of intangible assets		10		(14.0)		(14.2)
(8.7)				Purchase of investments				(75.0)		(6.8)
(41.4)				Acquisition of businesses				-		-
3.9				Disposal of investment				-		-
(254.1)				Net cash flows used in investing activities				(131.6)		(77.3)
				Cash flows from financing activities
2.3				Proceeds from the sale of own shares				0.1		-
(225.0)				Repayment of loans				-		(225.0)
(0.1)				Repayment of finance leases				-		(0.1)
(118.9)				Dividends paid		9		(86.8)		(78.1)
(341.7)				Net cash flows used in financing activities				(86.7)		(303.2)
(111.6)				Net increase/(decrease) in cash and cash equivalents				25.0		(59.9)
				Movement in cash and cash equivalents
283.8				Cash and cash equivalents at the beginning of the period				174.0		283.8
1.8				Effect of foreign exchange rate changes				0.7		(1.0)
(111.6)				Net increase/(decrease) in cash and cash equivalents				25.0		(59.9)
174.0				Cash and cash equivalents at end of the period				199.7		222.9

ANALYSIS OF NET CASH/(DEBT)

As at 30 August 2008

1.3.08 £m		Non-GAAP measures	30.8.08 £m	1.9.07 £m
		Financing net cash:
174.0		Cash at bank and in hand	199.7	222.9
-		Current asset investments	75.0	-
174.0		Total financing net cash	274.7	222.9
		Operating net (debt):
(3,057.1)		Property leases	(3,049.3)	(2,947.8)
(3,057.1)		Total operating net (debt)	(3,049.3)	(2,947.8)
(2,883.1)		Total net (debt)	(2,774.6)	(2,724.9)
		Deduct:
3,057.1		Operating leases that are off balance sheet	3,049.3	2,947.8
-		Current asset investments	(75.0)	-
174.0		Total net cash reflected in balance sheet	199.7	222.9

The Group uses the term net cash/(debt) which highlights the Group's aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably property leases.  The capitalised value of these property leases is £3,049.3m (1 March 2008: £3,057.1m) based upon discounting the current rentals at the estimated current long-term cost of borrowing of 5.4% (1 March 2008: 5.3%).

The current asset investment comprises a term cash deposit invested for a period of 9 months and due to mature on 15 April 2009. 

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2008

1. Basis of preparation

The unaudited condensed half-yearly financial information comprises the results for the 26 weeks ended 30 August 2008,  the 26 weeks ended 1 September 2007, and the audited consolidated results for the 52 weeks ended 1 March 2008.

The audited consolidated financial information for the 52 weeks to 1 March 2008 has been extracted from Home Retail Group plc's Annual Report and Financial Statements, which was approved by the Board of Directors on 30 April 2008 and delivered to the Registrar of Companies. The report of the Group's auditors, PricewaterhouseCoopers LLP, on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act 1985.

The condensed half-yearly financial information is not audited and does not constitute statutory accounts.  This financial information has been formally reviewed by the Group's auditors, PricewaterhouseCoopers LLP, and their report is set out on page 34.

IFRS and accounting policies

This condensed consolidated half-yearly financial information for the 26 weeks ended 30 August 2008 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The half-yearly condensed consolidated financial report should be read in conjunction with Home Retail Group plc's Annual Report and Financial Statements for the 52 weeks to 1 March 2008, which have been prepared in accordance with International Financial Reporting Standards ('IFRSs') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations as adopted by the European Union.  

The accounting policies adopted by Home Retail Group are set out in Home Retail Group plc's Annual Report and Financial Statements, dated 30 April 2008, which is available on Home Retail Group's website www.homeretailgroup.com. These policies have been consistently applied for all periods presented.

Changes in accounting standards

A number of new standards, amendments and interpretations are effective for the current period, but have had no material impact on the results or financial position of the Group, as disclosed within this report:

• IFRIC 12 - 'Service Concession Arrangements';

• IFRIC 14 - 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'.

At the balance sheet date a number of new standards, amendments and interpretations were in issue but not yet effective:

• IFRS 2 Amendment - 'Share-Based Payment';

• IFRS 3 Amendment - 'Business Combinations';

• IFRS 8 - 'Operating Segments';

• IAS 1 Amendment - 'Presentation of Financial Statements';

• IAS 23 Amendment - 'Borrowing Costs';

• IAS 27 Amendment - 'Consolidated and Separate Financial Statements';

• IAS 39 Amendment - 'Financial Instruments: Recognition and Measurement';

• IFRIC 13 - 'Customer Loyalty Programmes';

• IFRIC 15 - 'Agreements for the Construction of Real Estate';

• IFRIC 16 - 'Hedges of a Net Investment in a Foreign Operation'.

The Group has not early-adopted any of these above new standards, amendments or interpretations. Their impact will be fully considered in due course.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2008

2. Use of non-GAAP measures                                                     

Home Retail Group has identified certain measures that it believes will assist 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 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 the 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 charges, exceptional items, financing fair value remeasurements, financing impact on retirement benefit balances, one-off demerger incentive costs and taxation.

Net debt

The Group uses the term 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 property leases.

3. Foreign currency

		Average						Closing
		26 weeks to		26 weeks to		52 weeks to
		30.8.08		1.9.07		1.3.08		30.8.08		1.9.07		1.3.08
The principal exchange rates used were as follows:
Sterling to US dollar		1.97		1.99		2.00		1.82		2.02		1.99
Sterling to euro		1.27		1.47		1.43		1.24		1.48		1.31

Assets and liabilities of overseas undertakings are translated into sterling at the rates of exchange ruling at the balance sheet date and the income statement is translated into sterling at average rates of exchange.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2008

4. Segmental information 

Home Retail Group's primary reporting format is by business segment. This is in line with the current management structure, which reflects the different risks associated with the different businesses. The Group is organised into three main business segments: Argos, Homebase and Financial Services together with Central Activities. 

26 weeks ended 30 August 2008

								Financial		Central
				Argos		Homebase		Services		Activities		Total
		Notes		£m		£m		£m		£m		£m
Revenue				1,856.4		829.3		50.5		-		2,736.2
Operating profit/(loss)
Operating profit before exceptional items				85.5		29.5		3.1		(18.0)		100.1
Exceptional items		5		-		(549.9)		-		-		(549.9)
Segmental result				85.5		(520.4)		3.1		(18.0)		(449.8)

The results for Financial Services are after deducting funding costs of £8.6m (note 6).

26 weeks ended 1 September 2007
								Financial		Central
				Argos		Homebase		Services		Activities		Total
		Notes		£m		£m		£m		£m		£m
Revenue				1,835.3		853.9		47.3		-		2,736.5
Operating profit/(loss)
Operating profit before exceptional items				99.5		47.0		2.7		(19.0)		130.2
Exceptional items		5		-		-		-		20.2		20.2
Segmental result				99.5		47.0		2.7		1.2		150.4

The results for Financial Services are after deducting funding costs of £9.6m (note 6).

52 weeks ended 1 March 2008
								Financial		Central
				Argos		Homebase		Services		Activities		Total
		Notes		£m		£m		£m		£m		£m
Revenue				4,320.9		1,568.5		95.4		-		5,984.8
Operating profit/(loss)
Operating profit before exceptional items				376.2		45.1		5.5		(40.5)		386.3
Exceptional items		5		-		(19.4)		-		20.2		0.8
Segmental result				376.2		25.7		5.5		(20.3)		387.1

The results for Financial Services are after deducting funding costs of £19.6m (note 6).

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2008

5. Exceptional items

52 weeks to			26 weeks to	26 weeks to
1.3.08			30.8.08	1.9.07
£m			£m	£m
-		Goodwill impairment (a)	(381.7)	-
(10.3)		Store impairment charges (b)	(94.5)	-
-		Onerous lease provision (c)	(66.1)	-
(9.1)		Costs relating to the post-acquisition integration of the Focus DIY stores (d)	(7.6)	-
20.2		Accrual release relating to incentive schemes (e)	-	20.2
0.8		Exceptional items in operating (loss)/profit	(549.9)	20.2
(1.0)		Tax on exceptional items in (loss)/profit before tax	28.0	(6.4)
12.6		Exceptional corporation tax credit (f)	-	-
(5.9)		Exceptional deferred tax charge (g)	(2.0)	-
5.7		Exceptional tax (note 7)	26.0	(6.4)
6.5		Exceptional (loss)/profit for the period	(523.9)	13.8

(a) Management has interpreted the recent retail downturn as an external indicator of impairment. As a result, and as required by IAS 34, the assets of the business have been subject to an impairment review.

Goodwill is allocated to cash-generating units at the level of each business segment. The recoverable amount of each of the business segments is determined based on value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding discount rates and growth rates, as well as expected changes to costs and selling prices in the period. Management have estimated the discount rate taking account of the specific risks inherent within the Group's retail businesses. Changes in selling prices and direct costs are based on past experience and expectations of future change in the markets. These calculations use cash flow projections based on financial plans approved by management looking forward up to five years. Cash flows are extrapolated using estimated growth rates beyond the plan period. The key assumptions for the value-in-use calculations, which management believes are appropriate for both retail businesses, are:

• a long-term growth rate of 2.5% has been used to extrapolate cash flows beyond the plan period; and

• a post-tax discount rate of 8.5% has been applied to the cash flow projections which equates to a pre-tax rate of approximately 11.8%.

As a result of the value-in-use calculations an impairment charge of £381.7m has been booked against the carrying value of the Homebase goodwill.

(b) As a result of the impairment review on assets highlighted above, certain assets have been written down to their recoverable amount, being their value-in-use. Value-in-use is calculated by discounting the expected cash flows from the asset at an appropriate discount rate for the risks associated with that asset.  The growth rates and discount rates used are consistent with those used in the goodwill calculations.   For the 26 weeks to 30 August 2008, this resulted in a net impairment charge in respect of the Homebase store portfolio of £94.5m. 

(c)  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. The provision is based on the present value of expected future cash flows, discounted at 5.8%, relating to rents, rates and other property costs to the end of the lease terms net of expected sublet income.  For the 26 weeks to 30 August 2008, this resulted in an onerous lease charge in respect of the Homebase store portfolio of £66.1m.

(d) Represents costs relating to the post-acquisition integration of certain of the Focus DIY stores acquired in the 52-week period ended 1 March 2008.

(e) Represents the release of an accrual in respect of previous GUS-related long-term incentive schemes which were settled in June 2007.

(f) Represents the recognition of a corporation tax credit arising from a reassessment of previous estimates provided for in the Group's tax computations, following the agreement of prior year tax computations.

(g) In the period ended 30 August 2008, the deferred tax charge of £2.0m represents the reversal of a deferred tax asset created on IFRS transition. The full year charge of £5.9m in the 52 weeks ended 1 March 2008 represents an additional deferred tax charge arising from the re-estimation of qualifying assets in respect of accelerated tax depreciation, following the agreement of prior year tax computations. 

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2008

6. Net financing income/(costs)

52 weeks to				26 weeks to	26 weeks to
1.3.08				30.8.08	1.9.07
£m			Note	£m	£m
		Finance income
18.8		Bank deposits and other interest		9.7	8.6
43.5		Expected return on retirement benefit assets		22.7	21.7
62.3		Total finance income		32.4	30.3
		Finance expense
(3.3)		Interest cost of perpetual securities		-	(3.3)
(1.8)		Unwinding of discounts		(1.3)	(0.9)
		Financing fair value remeasurements:
(0.9)		- net losses on financial instruments		-	(0.9)
(8.1)		- net exchange losses		(8.3)	(0.3)
(30.5)		Interest expense on retirement benefit liabilities		(17.0)	(15.3)
(44.6)		Total finance expense		(26.6)	(20.7)
19.6		Less: finance expense charged to Financial Services cost of sales	4	8.6	9.6
(25.0)		Total net finance expense		(18.0)	(11.1)
37.3		Net financing income		14.4	19.2

7. Taxation                                 

52 weeks to			26 weeks to	26 weeks to
1.3.08			30.8.08	1.9.07
£m			£m	£m
(127.5)		UK tax	(8.6)	(53.3)
(3.9)		Overseas tax	(1.2)	(1.5)
(131.4)		Total tax expense	(9.8)	(54.8)

The tax charge for the period of £9.8m (2007: £54.8m) is based on an estimated effective rate of tax of (2.2%) (2007: 32.4%).  This charge is net of a £26.0m credit (2007: £6.4m charge) in respect of exceptional items (note 5).

The effective rate of tax based on benchmark PBT, defined as the total tax expense, adjusted for the tax impact of non-benchmark items, divided by benchmark PBT (excluding joint ventures and associates), is 31.0% (2007: 32.0%).  

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2008

8. Basic and diluted earnings per share ('EPS')

The calculation of basic and diluted EPS is based on the following data:

52 weeks to								26 weeks to		26 weeks to
1.3.08								30.8.08		1.9.07
£m						Note		£m		£m
				Earnings
294.6				(Loss)/profit after tax for the financial period				(446.8)		114.5
(0.8)				Effect of exceptional items		5		549.9		(20.2)
9.0				Effect of financing fair value remeasurements				8.3		1.2
(13.0)				Financing impact on retirement benefit balances				(5.7)		(6.4)
11.7				Demerger incentive schemes				5.9		5.9
(7.1)				Attributable taxation				(28.3)		6.8
294.4				Benchmark profit after tax for the financial period				83.3		101.8
millions				Weighted average number of shares				millions		millions
867.7				Number of ordinary shares for the purpose of basic EPS				871.1		868.2
9.6				Dilutive effect of share incentive awards				10.4		8.7
877.3				Number of ordinary shares for the purpose of diluted EPS				881.5		876.9
pence				EPS				pence		pence
34.0				Basic EPS				(51.3)		13.2
33.6				Diluted EPS (a)				(51.3)		13.1
33.9				Basic benchmark EPS				9.6		11.7
33.6				Diluted benchmark EPS				9.4		11.6

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 period, 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.

(a) In accordance with IAS 33, as the Group made a loss after tax for the 26 weeks ended 30 August 2008, the effect of share incentive awards is anti-dilutive and as such diluted EPS equals basic EPS.

9. Dividend                                                       

An interim dividend of 4.7 pence (2007: 4.7 pence) per Home Retail Group plc ordinary share has been proposed (but not provided) and will be paid on 21 January 2009 to shareholders on the register at the close of business on 14 November 2008. The amount absorbed by this dividend is £40.8m (2007: £40.8m).

In July 2008, a final dividend of 10.0 pence (2007: 9.0 pence) per Home Retail Group plc ordinary share was paid to shareholders. The amount absorbed by this dividend was £86.8m (2007: £78.1m).                                                      

10. Capital expenditure

In the period, there were additions to property, plant and equipment of £44.2m (2007: £57.6m) and disposals of property, plant and equipment generated proceeds of £1.6m (2007: £1.3m).

In the period, there were additions to intangible assets of £14.0m (2007: £14.2m).

Capital commitments contracted but not provided for by the Group amounted to £30.3m (2007: £41.1m).

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2008

11. Provisions

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. 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. 

Provision is made at the period end for the estimated costs of claims incurred by Home Retail 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 Home Retail Group. The estimated cost of claims includes expenses to be incurred in settling claims. 

Other provisions include legal claims and other sundry provisions. 

12. Post employment benefits

						Onerous		Insurance
						leases		provisions		Other		Total
						£m		£m		£m		£m
				At 1 March 2008		(51.4)		(31.4)		(15.9)		(98.7)
				Charged to the income statement		(67.4)		(7.9)		(0.2)		(75.5)
				Utilised during the period		1.8		3.1		4.7		9.6
				Discount unwind		(1.4)		-		-		(1.4)
				At 30 August 2008		(118.4)		(36.2)		(11.4)		(166.0)
1.3.08										30.8.08		1.9.07
£m										£m		£m
(26.1)				Current						(22.3)		(22.9)
(72.6)				Non-current						(143.7)		(63.1)
(98.7)										(166.0)		(86.0)

As at the balance sheet date, the obligation in respect of the Home Retail Group defined benefit pension plans was £657.1m (1 March 2008: £562.8m) and the market value of the plan assets was £643.0m (1 March 2008: £646.5m), resulting in a net deficit on the plans of £14.1m (1 March 2008: £83.7m surplus).

The decrease in the value of the plans arises mainly due to changes in the underlying actuarial assumptions. This reduction is largely as a result of the impact of increases in the assumptions for the rate of inflation to 4.0% (1 March 2008: 3.5%) and for the rate of increases for salaries to 5.3% (1 March 2008: 4.8%), as well as a decrease to the assumed discount rate to 6.0% (1 March 2008: 6.1%), giving rise to an increase to the defined benefit obligation, which results in a net £99.5m actuarial loss (1 March 2008: £73.9m gain) reported in the Statement of Recognised Income and Expense.  There has been no change in the mortality assumptions used.

During the period, the Group has paid contributions totalling £7.0m (2007: £7.0m) to the Home Retail Group defined benefit pension plans.

13. Reconciliation of movements in equity

1.3.08						30.8.08		1.9.07
£m						£m		£m
294.6				(Loss)/profit for the period attributable to shareholders		(446.8)		114.5
66.8				Movements in Statement of Recognised Income and Expense		(39.7)		33.1
21.6				Movement in share-based compensation reserve		11.6		11.3
2.4				Net movement in own shares		0.1		-
(118.9)				Equity dividends paid during the period		(86.8)		(78.1)
266.5				(Decrease)/increase in net equity		(561.6)		80.8
3,078.7				Opening net equity		3,345.2		3,078.7
3,345.2				Closing net equity		2,783.6		3,159.5

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 30 August 2008

14. Notes to the consolidated cash flow statement

52 weeks to						26 weeks to		26 weeks to
1.3.08						30.8.08		1.9.07
£m						£m		£m
Cash generated from operations:
387.1				Operating (loss)/profit		(449.8)		150.4
0.4				(Profit)/loss on sale of property, plant and equipment		(0.5)		0.1
151.6				Depreciation and amortisation		76.5		73.9
10.3				Impairment losses		476.2		-
19.6				Finance expense charged to Financial Services cost of sales		8.6		9.6
(98.4)				(Increase) in inventories		(6.2)		(23.5)
(21.2)				Decrease/(increase) in receivables		8.9		24.7
71.5				Increase in payables		74.7		113.4
(48.1)				Movement in working capital		77.4		114.6
9.2				Increase in provisions for liabilities and charges		65.9		7.2
12.5				Movement in retirement benefits		4.0		6.2
21.6				Share-based payment expense		11.6		11.3
564.2				Cash generated from operations		269.9		373.3
Reconciliation of net increase in cash and cash equivalents to movement in net debt:
60.2				Net cash at the beginning of the period		174.0		60.2
1.8				Effect of foreign exchange rate changes		0.7		(1.0)
(111.6)				Net increase/(decrease) in cash and cash equivalents		25.0		(59.9)
223.6				Decrease in debt		-		223.6
174.0				Net cash at the end of the period		199.7		222.9

15. Seasonality                                                       

The retail sales for Argos and Homebase are subject to seasonal fluctuations. Demand for Argos products is highest during the months of November and December, whilst demand for Homebase products is highest through the spring, at Easter and during the summer months and, for big ticket items, during the January sales.  

16. 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 only material transactions between the Group and any of these parties were in relation to the Home Retail Group defined benefit pension plans, and are set out in note 12.

17. Home Retail Group website                                                                                                    

The maintenance and integrity of the Home Retail Group website, www.homeretailgroup.com, is the responsibility of the Company's directors. The work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the condensed half-yearly financial information since it was initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

HOME RETAIL GROUP PLC

Statement of directors' responsibilities

The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

The directors of Home Retail Group plc are listed in the Home Retail Group plc Annual Report and Financial Statements 2008. There have been no changes of directors since the Annual Report. A list of current directors is maintained on the Home Retail Group website, details of which are set out in note 17.

By order of the Board

Terry Duddy

Chief Executive

22 October 2008

Richard Ashton

Finance Director

22 October 2008

HOME RETAIL GROUP PLC                

INDEPENDENT REVIEW REPORT TO HOME RETAIL GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the 26 weeks ended 30 August 2008, which comprises the consolidated income statement, consolidated statement of recognised income and expense, group balance sheet, consolidated cash flow statement and associated notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Review conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 26 weeks ended 30 August 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

London

22 October 2008

Notes:

a.   The maintenance and integrity of the Home Retail Group plc website is the responsibility of the directors; the work carried out by 

      the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any  

      changes that may have occurred to the financial statements since they were initially presented on the website.

b.  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation

     in other jurisdictions.

HOME RETAIL GROUP PLC

SHAREHOLDER INFORMATION

Registrar

For all enquiries and shareholder administration, please contact Capita Registrars:
Postal address: Capita Registrars, Northern House, Woodsome Park, Huddersfield HD8 0GA.
email: [e-mail]
Telephone: [phone]* (from abroad [phone]).
Text phone: [phone]* (from abroad [phone]).
Fax number: 0871 664 0438 (from abroad [phone]).
*Calls cost 10p per minute plus network extras

Electronic communications  

Shareholders can register to receive reports and notifications by email, browse shareholder information and submit voting instructions at www.homeretailgroup-shares.com. This service is provided by Capita Registrars.

Home Retail Group plc website

Investor relations information, such as webcasts of results presentations to analysts and investors and accompanying slides, is available at www.homeretailgroup.com.

Dividend reinvestment plan

The Home Retail Group Dividend Reinvestment Plan ('DRIP') enables shareholders to use their cash dividends to purchase Home Retail Group shares. Shareholders who wish to participate in the DRIP for the first time, in respect of the interim dividend to be paid on 21 January 2009, should return a completed and signed DRIP mandate form to be received by the Registrar, by no later than 26 December 2008. For further details, please contact Capita Registrars.

Share price information

The latest Home Retail Group share price is available on the Home Retail Group website, as well as through other information services such as Ceefax, Teletext and also on the Financial Times Cityline Service telephone [phone] (calls charged at 60p per minute).

Share dealing facility

Investors can buy or sell Group shares through Capita Share Dealing Services. Go to www.capitadeal.com or call 0871 664 0454 (calls cost 10p per minute plus network extras) between 8.30 am and 4.30 pm weekdays.

Financial calendar

Interim ex-dividend date	12 November 2008
Interim Management Statement	15 January 2009
Interim dividend to be paid	21 January 2009
Full-year trading statement	12 March 2009
Full-year results for the 52 weeks to 28 February 2009	29 April 2009
Final ex-dividend date	20 May 2009
Interim Management Statement	11 June 2009
Final dividend to be paid	22 July 2009

Registered office

Home Retail Group plc, Avebury, 489 - 499 Avebury Boulevard, Milton Keynes MK9 2NW

 

END

 

 

IR BFLLLVBBEFBV