Half Year Results - Part 2

RNS Number : 6609U

Home Retail Group Plc

20 October 2010

 



HOME RETAIL GROUP PLC                                                                                                   

UNAUDITED CONDENSED HALF-YEARLY FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 28 August 2010

52 weeks to 27.2.10				26 weeks to 28.8.10	26 weeks to 29.8.09
£m			Notes	£m	£m
6,022.7		Revenue	4	2,720.3	2,804.9
(4,055.6)		Cost of sales		(1,827.2)	(1,856.4)
1,967.1		Gross profit		893.1	948.5
(1,672.6)		Net operating expenses		(799.9)	(835.6)
294.5		Operating profit		93.2	112.9
46.1		- Finance income		33.6	25.2
(45.6)		- Finance expense		(23.8)	(20.4)
0.5		Net financing income	5	9.8	4.8
(2.0)		Share of post-tax results of joint ventures and associates		-	(0.9)
293.0		Profit before tax		103.0	116.8
(83.2)		Taxation	6	(28.3)	(39.1)
209.8		Profit for the period attributable to equity holders of the Company		74.7	77.7
pence		Earnings per share	7	pence	pence
24.3		- Basic		8.8	9.0
24.1		- Diluted		8.7	8.9
14.7		Dividend per share	8	4.7	4.7

52 weeks to 27.2.10				Non-GAAP measures		26 weeks to 28.8.10	26 weeks to 29.8.09
£m			Reconciliation of profit before tax (PBT) to benchmark PBT		Notes	£m	£m
293.0			Profit before tax			103.0	116.8
			Adjusted for:
7.7			Demerger incentive schemes			-	7.7
(2.7)			Financing fair value remeasurements		5	(9.2)	(5.0)
0.7			Financing impact on retirement benefit obligations		5	(2.3)	(0.1)
6.7			Discount unwind on non-benchmark items		5	3.2	3.3
(12.5)			Onerous lease provision releases			-	-
292.9			Benchmark PBT			94.7	122.7
pence			Benchmark earnings per share		7	pence	pence
23.4			- Basic			7.7	9.7
23.1			- Diluted			7.7	9.6

HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 28 August 2010

52 weeks to 27.2.10						26 weeks to 28.8.10	26 weeks to 29.8.09
£m					Notes	£m	£m
209.8			Profit for the period attributable to equity holders of the Company			74.7	77.7
			Other comprehensive income:
			Net change in fair value of cash flow hedges
(26.5)			- Foreign currency forward exchange contracts			(17.4)	(68.7)
			Net change in fair value of cash flow hedges transferred to inventory
43.0			- Foreign currency forward exchange contracts			(30.2)	28.4
6.6			Actuarial (losses)/gains in respect of defined benefit pension schemes		11	(58.7)	(51.4)
3.0			Fair value movements on available-for-sale financial assets			(0.1)	2.2
(3.6)			Currency translation differences			(14.1)	(5.2)
(5.9)			Tax credit/(charge) in respect of items taken directly to equity			29.8	25.7
16.6			Other comprehensive income for the period, net of tax			(90.7)	(69.0)
226.4			Total comprehensive income for the period attributable to equity holders of the Company			(16.0)	8.7

HOME RETAIL GROUP PLC

CONSOLIDATED BALANCE SHEET

At 28 August 2010

27.2.10				28.8.10	29.8.09
£m			Notes	£m	£m
		ASSETS
		Non-current assets
1,541.0		Goodwill		1,541.0	1,541.0
92.7		Other intangible assets		92.0	99.2
525.1		Property, plant and equipment		523.9	530.4
8.2		Investment in joint ventures and associates		7.5	8.1
61.6		Deferred tax assets		59.1	113.4
4.0		Trade and other receivables		4.0	3.4
13.2		Other financial assets		13.0	11.5
2,245.8		Total non-current assets		2,240.5	2,307.0
		Current assets
935.4		Inventories		1,013.5	1,047.8
582.1		Trade and other receivables		552.0	586.6
50.5		Current tax assets		34.5	2.4
49.5		Other financial assets		11.6	3.2
50.0		Current asset investments		50.0	-
364.0		Cash and cash equivalents		276.9	352.3
2,031.5		Total current assets		1,938.5	1,992.3
4,277.3		Total assets		4,179.0	4,299.3
		LIABILITIES
		Non-current liabilities
(62.5)		Trade and other payables		(60.5)	(42.0)
(198.3)		Provisions	10	(198.0)	(200.5)
(37.8)		Deferred tax liabilities		(22.0)	(19.3)
(24.9)		Retirement benefit obligations	11	(71.4)	(99.4)
(323.5)		Total non-current liabilities		(351.9)	(361.2)
		Current liabilities
(1,042.4)		Trade and other payables		(1,123.7)	(1,139.7)
(20.8)		Provisions	10	(18.3)	(41.1)
(1.8)		Other financial liabilities		(14.6)	(40.5)
(22.2)		Current tax liabilities		(14.2)	(24.2)
(1,087.2)		Total current liabilities		(1,170.8)	(1,245.5)
(1,410.7)		Total liabilities		(1,522.7)	(1,606.7)
2,866.6		Net assets		2,656.3	2,692.6
		EQUITY
87.7		Share capital		83.3	87.7
-		Capital redemption reserve		4.4	-
(348.4)		Merger reserve		(348.4)	(348.4)
46.6		Other reserves		(4.4)	1.6
3,080.7		Retained earnings		2,921.4	2,951.7
2,866.6		Total equity		2,656.3	2,692.6

HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 28 August 2010

			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 28 February 2010			87.7	-	(348.4)	46.6	3,080.7	2,866.6
Profit for the period			-	-	-	-	74.7	74.7
Other comprehensive income			-	-	-	(48.5)	(42.2)	(90.7)
Total comprehensive income for the period ended 28 August 2010			-	-	-	(48.5)	32.5	(16.0)
Transactions with owners:
Movement in share-based   compensation reserve			-	-	-	-	5.9	5.9
Net movement in own shares			-	-	-	(2.5)	(1.8)	(4.3)
Shares purchased for cancellation			(4.4)	4.4	-	-	(109.1)	(109.1)
Equity dividends paid   during the period			-	-	-	-	(85.8)	(85.8)
Other distributions			-	-	-	-	(1.0)	(1.0)
Total transactions with owners			(4.4)	4.4	-	(2.5)	(191.8)	(194.3)
Balance at 28 August 2010			83.3	4.4	(348.4)	(4.4)	2,921.4	2,656.3
			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 2009			87.7	-	(348.4)	35.4	2,983.7	2,758.4
Profit for the period			-	-	-	-	77.7	77.7
Other comprehensive income			-	-	-	(34.2)	(34.8)	(69.0)
Total comprehensive income for the period ended 29 August 2009			-	-	-	(34.2)	42.9	8.7
Transactions with owners:
Movement in share-based    compensation reserve			-	-	-	-	13.5	13.5
Net movement in own shares			-	-	-	0.4	(2.0)	(1.6)
Equity dividends paid   during the period			-	-	-	-	(85.7)	(85.7)
Other distributions			-	-	-	-	(0.7)	(0.7)
Total transactions with owners			-	-	-	0.4	(74.9)	(74.5)
Balance at 29 August 2009			87.7	-	(348.4)	1.6	2,951.7	2,692.6
			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 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

HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 28 August 2010

52 weeks to 27.2.10				26 weeks to 28.8.10	26 weeks to 29.8.09
£m			Notes	£m	£m
		Cash flows from operating activities
461.0		Cash generated from operations	13	183.6	238.3
(107.3)		Tax paid		(3.8)	(53.0)
353.7		Net cash inflow from operating activities		179.8	185.3
		Cash flows from investing activities
(73.7)		Purchase of property, plant and equipment	9	(52.3)	(24.1)
1.9		Proceeds from the disposal of property, plant and equipment	9	1.6	0.6
(17.5)		Purchase of intangible assets	9	(14.5)	(9.1)
(5.1)		Loan to joint venture		(0.4)	(2.4)
(51.6)		Purchase of investments		(50.0)	-
75.0		Disposal of investments		50.0	75.0
7.2		Interest received		1.6	5.6
(63.8)		Net cash flows from investing activities		(64.0)	45.6
		Cash flows from financing activities
-		Repurchase of own shares		(109.1)	-
(9.4)		Purchase of shares for Employee Share Trust		(4.5)	(1.7)
0.3		Proceeds from disposal of shares by Employee Share Trust		0.2	0.1
(126.3)		Dividends paid	8	(85.8)	(85.7)
(135.4)		Net cash used in financing activities		(199.2)	(87.3)
154.5		Net (decrease)/increase in cash and cash equivalents		(83.4)	143.6
		Movement in cash and cash equivalents
209.4		Cash and cash equivalents at the beginning of the period		364.0	209.4
0.1		Effect of foreign exchange rate changes		(3.7)	(0.7)
154.5		Net (decrease)/increase in cash and cash equivalents		(83.4)	143.6
364.0		Cash and cash equivalents at the end of the period		276.9	352.3

HOME RETAIL GROUP PLC

ANALYSIS OF NET CASH/(DEBT)

At 28 August 2010

27.2.10				28.8.10	29.8.09
£m		Non-GAAP measures		£m	£m
		Financing net cash:
364.0		Cash and cash equivalents		276.9	352.3
50.0		Current asset investments		50.0	-
414.0		Total financing net cash		326.9	352.3
		Operating net debt:
(3,148.1)		Off balance sheet operating leases		(3,129.6)	(3,124.4)
(3,148.1)		Total operating net debt		(3,129.6)	(3,124.4)
(2,734.1)		Total net debt		(2,802.7)	(2,772.1)
		Adjusted for:
3,148.1		Off balance sheet operating leases		3,129.6	3,124.4
(50.0)		Current asset investments		(50.0)	-
364.0		Total cash and cash equivalents reflected in balance sheet		276.9	352.3

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 £3,129.6m (27 February 2010: £3,148.1m), based upon discounting the current rentals at the estimated current long-term cost of borrowing of 3.2% (27 February 2010: 4.1%).

The current asset investment comprises a term cash deposit invested for a period of six months (27 February 2010: six months) which matures after the balance sheet date on 20 September 2010 (27 February 2010: 10 May 2010).

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 28 August 2010

1. Basis of preparation

The unaudited condensed half-yearly financial information comprises the results for the 26 weeks ended 28 August 2010, the 26 weeks ended 29 August 2009, and the audited consolidated results for the 52 weeks ended 27 February 2010.

The audited consolidated financial information for the 52 weeks to 27 February 2010 has been extracted from Home Retail Group plc's Annual Report and Financial Statements, which was approved by the Board of Directors on 28 April 2010 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 498 of the Companies Act 2006.

The condensed half-yearly financial information is not audited or reviewed and does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006.

IFRS and accounting policies

This condensed consolidated half-yearly financial information for the 26 weeks ended 28 August 2010 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 27 February 2010, 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 28 April 2010, which is available on Home Retail Group's website www.homeretailgroup.com.  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 for all periods presented.

Changes in accounting standards

A number of new standards, amendments and interpretations are also effective for the first time for the current period, but have had no material impact on the results or financial position of the Group, as disclosed within this report: ·         Amendment to IAS 27 - 'Consolidated and Separate Financial Statements'; ·         Amendment to IAS 32 - 'Financial Instruments: Presentation - Disclosure provisions superseded by IFRS 7 effective 2007'; ·         Amendment to IAS 39 - 'Eligible Hedged Items'; ·         Amendment to IFRS 1 - 'First-time Adoption of International Financial Reporting Standards'; ·         Amendment to IFRS 2 - 'Group Cash-settled Share-Based Payment'; ·         Amendment to IFRS 3 - 'Business Combinations'; ·         Improvements to IFRSs (April 2009); ·         IFRIC 17 - 'Distributions of Non-cash Assets to Owners'.

At the balance sheet date a number of new standards, amendments and interpretations were in issue but not yet effective: ·         Amendment to IAS 24 - 'Related Party Disclosures'; ·         IFRS 9 - 'Financial Instruments'; ·         Improvements to IFRSs (May 2010); ·         Amendment to IFRIC 14 - 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'; ·         IFRIC 19 - 'Extinguishing Financial Liabilities with Equity Instruments'. 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 28 August 2010

2. Non-GAAP financial information

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 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.  There have not however been any reported exceptional items in any of the reported periods.

Benchmark operating profit and benchmark profit before tax (benchmark PBT)

The Group uses the terms benchmark operating profit and benchmark PBT as measures which are not formally recognised under IFRS.   Benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases, exceptional items and costs related to demerger incentive schemes. 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.

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.

3. Foreign currency
	Average				Closing
	26 weeks to	26 weeks to	52 weeks to
	28.8.10	29.8.09	27.2.10		28.8.10	29.8.09	27.2.10
The principal exchange rates used were as follows:
Sterling to US dollar	1.51	1.56	1.59		1.55	1.63	1.52
Sterling to euro	1.17	1.14	1.13		1.22	1.14	1.12

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 28 August 2010

4. Segmental information

The Board of Directors and Operating Board review the Group's internal reporting in order to assess performance and allocate resources.  Management has determined the operating segments based on these reports, which reflect the distinct retail brands and 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. The Board of Directors and Operating Board assess the performance of the operating segments based on a combination of revenue and benchmark operating profit.  Benchmark operating profit is defined within note 2.

52 weeks to 27.2.10						26 weeks to 28.8.10	26 weeks to 29.8.09
£m						£m	£m
			Revenue
4,346.8			Argos			1,812.8	1,887.8
1,571.9			Homebase			855.3	866.0
104.0			Financial Services			52.2	51.1
-			Central Activities			-	-
6,022.7			Total segment revenue			2,720.3	2,804.9
			Benchmark operating profit/(loss)
266.2			Argos			54.4	79.7
41.2			Homebase			46.2	48.9
5.7			Financial Services			2.5	2.5
(23.4)			Central Activities			(9.9)	(10.5)
289.7			Total segment benchmark operating profit			93.2	120.6
5.2			Benchmark interest			1.5	3.0
(2.0)			Share of post-tax results of joint ventures and associates			-	(0.9)
292.9			Benchmark profit before tax			94.7	122.7
(7.7)			Demerger incentive schemes			-	(7.7)
2.7			Financing fair value remeasurements			9.2	5.0
(0.7)			Financing impact on retirement benefit balances			2.3	0.1
(6.7)			Discount unwind on non-benchmark items			(3.2)	(3.3)
12.5			Onerous lease provision releases			-	-
293.0			Profit before tax			103.0	116.8
(83.2)			Taxation			(28.3)	(39.1)
209.8			Profit for the period attributable to equity holders of the Company			74.7	77.7

The results for Financial Services are after deducting funding costs of £1.6m (2009: £1.8m) (note 5).

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 28 August 2010

4. Segmental information (continued)

52 weeks to 27.2.10						26 weeks to 28.8.10	26 weeks to 29.8.09
£m						£m	£m
			Segment assets
2,364.1			Argos			2,384.4	2,460.7
896.4			Homebase			883.6	898.7
453.6			Financial Services			429.7	432.0
37.1			Central Activities			60.8	39.8
3,751.2			Total segment assets			3,758.5	3,831.2
112.1			Tax assets			93.6	115.8
50.0			Current asset investments			50.0	-
364.0			Cash and cash equivalents			276.9	352.3
4,277.3			Total assets per balance sheet			4,179.0	4,299.3

Segment assets include goodwill and other intangible assets, property, plant and equipment, investment in joint ventures and associates, inventories, trade and other receivables and other financial assets.  Tax assets, current asset investments and cash and cash equivalents are not allocated to segments.

5. Net financing income/(expense)
52 weeks to 27.2.10			26 weeks to 28.8.10	26 weeks to 29.8.09
£m			£m	£m
		Finance income:
4.4		Bank deposits and other interest	1.3	2.5
34.6		Expected return on retirement benefit assets	23.1	17.7
7.1		Financing fair value remeasurements - net exchange gains	9.2	5.0
46.1		Total finance income	33.6	25.2
		Finance expense:
(9.4)		Unwinding of discounts (a)	(4.6)	(4.6)
(4.4)		Financing fair value remeasurements - net exchange losses	-	-
(35.3)		Interest expense on retirement benefit liabilities	(20.8)	(17.6)
(49.1)		Total finance expense	(25.4)	(22.2)
3.5		Less: finance expense charged to Financial Services cost of sales	1.6	1.8
(45.6)		Total net finance expense	(23.8)	(20.4)
0.5		Net financing income	9.8	4.8

(a)  Included within unwinding of discounts is a £3.2m charge (2009: £3.3m) relating to the discount unwind on exceptional onerous lease provisions.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 28 August 2010

6. Taxation
52 weeks to 27.2.10					26 weeks to 28.8.10	26 weeks to 29.8.09
£m					£m	£m
(80.4)		UK tax			(27.3)	(37.8)
(2.8)		Overseas tax			(1.0)	(1.3)
(83.2)		Total tax expense			(28.3)	(39.1)

The tax charge for the period of £28.3m (2009: £39.1m) is based on an estimated annual effective rate of tax of 27.5% (2009: 33.5%).  Following the 2010 Emergency Budget the main rate of UK corporation tax has been reduced from 28% to 27% from 1 April 2011. The UK deferred tax balances have been calculated in accordance with this rate change and the impact on the tax charge for the period is not material.  Further reductions to the main rate are proposed; these are not enacted and, therefore, have not been reflected in the tax charge.

The estimated annual 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 30.5% (2009: 32.0%).

7. Basic and diluted earnings per share (EPS)
The calculation of basic and diluted EPS is based on the following data:
52 weeks to 27.2.10					26 weeks to 28.8.10	26 weeks to 29.8.09
£m		Earnings			£m	£m
209.8		Profit after tax for the financial period			74.7	77.7
		Adjusted for:
7.7		Demerger incentive schemes			-	7.7
(2.7)		Financing fair value remeasurements			(9.2)	(5.0)
0.7		Financing impact on retirement benefit obligations			(2.3)	(0.1)
6.7		Discount unwind on non-benchmark items			3.2	3.3
(12.5)		Onerous lease provision releases			-	-
(0.6)		Attributable taxation			(0.6)	(0.4)
(7.6)		Non-benchmark tax credit in respect of prior years			-	-
201.5		Benchmark profit after tax for the financial period			65.8	83.2
millions		Weighted average number of shares			millions	millions
862.9		Number of ordinary shares for the purpose of basic EPS			849.3	860.9
9.3		Dilutive effect of share incentive awards			4.5	10.2
872.2		Number of ordinary shares for the purpose of diluted EPS			853.8	871.1
pence		EPS			pence	pence
24.3		Basic EPS			8.8	9.0
24.1		Diluted EPS			8.7	8.9
23.4		Basic benchmark EPS			7.7	9.7
23.1		Diluted benchmark EPS			7.7	9.6

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.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 28 August 2010

8. Dividend

An interim dividend of 4.7 pence (2009: 4.7 pence) per Home Retail Group plc ordinary share, amounting to a total interim dividend of £38.2m (2009: £40.6m), has been announced (but not provided) and will be paid on 19 January 2011 to shareholders on the register at the close of business on 12 November 2010. In July 2010, a final dividend of 10.0 pence (2009: 10.0 pence) per Home Retail Group plc ordinary share, amounting to a total final dividend of £85.8m (2009: £85.7m), was paid to shareholders.

9. Capital expenditure

In the period, there were additions to property, plant and equipment of £52.3m (2009: £24.1m) and disposals of property, plant and equipment generated proceeds of £1.6m (2009: £0.6m). In the period, there were additions to intangible assets of £14.5m (2009: £9.1m). Capital commitments contracted but not provided for by the Group amounted to £10.1m (2009: £14.7m).

10. Provisions
			Onerous leases	Insurance	Restructuring	Other	Total
			£m	£m	£m	£m	£m
At 28 February 2010			(163.9)	(32.7)	(14.8)	(7.7)	(219.1)
Charged to the income statement			-	(5.0)	-	-	(5.0)
Transfer			(0.2)	-	0.2	-	-
Utilised during the period			4.2	3.2	4.1	0.9	12.4
Discount unwind			(4.5)	-	-	(0.1)	(4.6)
At 28 August 2010			(164.4)	(34.5)	(10.5)	(6.9)	(216.3)
27.2.10						28.8.10	28.8.09
£m	Analysed as:					£m	£m
(20.8)	Current					(18.3)	(41.1)
(198.3)	Non-current					(198.0)	(200.5)
(219.1)						(216.3)	(241.6)

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.

An insurance provision is made at the period-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.

A restructuring provision was made in 2008/09 to cover a number of organisational changes which were to be undertaken to improve the operational efficiency of the Group and drive further cost productivity.  The actions included the streamlining of head office functions across all parts of the Group, restructuring of store-based staff and a consolidation of home delivery warehouses. 

Other provisions include legal claims and other sundry provisions.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 28 August 2010

11. Post-employment benefits

As at the balance sheet date, the obligation in respect of the Home Retail Group defined benefit pension plans was £772.2m (27 February 2010: £692.6m) and the market value of the plan assets was £700.8m (27 February 2010: £667.7m), resulting in a net deficit on the plans of £71.4m (27 February 2010: £24.9m). The increase in the defined benefit obligation arises due to a £79.6m increase to scheme liabilities, resulting from changes in the underlying actuarial assumptions, net of a £33.1m increase to scheme assets.  The increase in scheme liabilities arises substantially due to a reduction in the assumed discount rate to 5.2% (27 February 2010: 6.0%).  As a result a net £58.7m actuarial loss (27 February 2010: £6.6m net gain) has been taken to equity and is reported in the consolidated statement of comprehensive income.  There have been no material changes to any other assumptions used. During the period, the Group has paid contributions totalling £19.8m (2009: £6.5m) to the Home Retail Group defined benefit pension plans.

12. Share capital

On 28 April 2010, it was announced that the Group anticipated over the following 12 months to return to shareholders up to £150m of capital through a share buy-back programme.  To date, 44,910,000 shares have been purchased at an average price of 241p and a net cash cost of £109.1m.  The purchased shares, with a nominal value of £4.4m, have been cancelled.  An amount equivalent to the nominal value of the cancelled shares has been transferred to a capital redemption reserve.

13. Notes to the consolidated statement of cash flows
52 weeks to 27.2.10				26 weeks to 28.8.10	26 weeks to 29.8.09
£m				£m	£m
		Cash generated from operations:
293.0		Profit before tax		103.0	116.8
		Adjustments for:
2.0		Share of post-tax results of joint ventures and associates		-	0.9
(0.5)		Net financing income		(9.8)	(4.8)
294.5		Operating profit		93.2	112.9
2.5		Loss on sale of property, plant and equipment		0.5	1.7
130.1		Depreciation and amortisation		64.6	64.0
3.5		Finance expense charged to Financial Services cost of sales		1.6	1.8
(5.1)		Increase in inventories		(78.1)	(117.5)
11.5		Decrease in receivables		30.4	6.3
63.2		Increase in payables		83.7	168.0
69.6		Movement in working capital		36.0	56.8
(40.8)		Decrease in provisions		(7.4)	(13.3)
(15.6)		Movement in retirement benefits		(9.8)	1.6
17.2		Share-based payment expense (net of dividend equivalent payments)		4.9	12.8
461.0		Cash generated from operations		183.6	238.3

14. 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.

15. 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 11.

HOME RETAIL GROUP PLC

Statement of directors' responsibilities

The directors confirm that this condensed half-yearly financial information 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, namely:

·         an indication of important events that have occurred during the first six months and their impact on the condensed half-yearly financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·          material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The directors of Home Retail Group plc are listed in the Home Retail Group plc Annual Report and Financial Statements 2010.  With the exception of Mike Darcey, who was appointed to the Board on 20 April 2010, there have been no changes of directors since the Annual Report.  A list of current directors is maintained on the Home Retail Group website, www.homeretailgroup.com.

By order of the Board

Terry Duddy                           Richard Ashton

Chief Executive                       Finance Director

20 October 2010                     20 October 2010

HOME RETAIL GROUP PLC

SHAREHOLDER INFORMATION

Registrar For all enquiries and shareholder administration (other than for American Depositary Receipts), 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

American Depositary Receipt (ADR) Home Retail Group's ADR programme is administered by Citibank and ADR enquiries may be directed to: Postal address: Citibank Shareholder Services, P.O. Box 43077, Providence, Rhode Island 02940-3077, USA. email: [e-mail] Telephone (toll free): 1-877-Citi-ADR (248-4237) Telephone (international): 1-781-575-4555 Website: www.citi.com/dr

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 19 January 2011, should return a completed and signed DRIP mandate form to be received by the Registrar, by no later than 25 December 2010.  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 10 November 2010 Interim Management Statement 13 January 2011 Interim dividend to be paid 19 January 2011 Full-year trading statement 10 March 2011 Full-year results for the 52 weeks to 26 February 2011 20 April 2011 Final ex-dividend date 18 May 2011 Interim Management Statement 9 June 2011 Final dividend to be paid 20 July 2011

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

 

END

 

 

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