Half Year Results - Part 2

RNS Number : 1232B

Home Retail Group Plc

20 October 2009

 



HOME RETAIL GROUP PLC

UNAUDITED CONDENSED HALF-YEARLY FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 29 August 2009

52 weeks to								26 weeks to		26 weeks to
28.2.09								29.8.09		30.8.08
£m						Notes		£m		£m
5,897.4				Revenue		4		2,804.9		2,736.2
(3,873.8)				Cost of sales				(1,856.4)		(1,775.7)
2,023.6				Gross profit				948.5		960.5
(1,731.6)				Net operating expenses before exceptional items				(835.6)		(860.4)
(694.0)				Exceptional items		5		-		(549.9)
(2,425.6)				Net operating expenses				(835.6)		(1,410.3)
(402.0)				Operating profit/(loss)				112.9		(449.8)
63.7				- Finance income				25.2		32.4
(53.5)				- Finance expense				(20.4)		(18.0)
10.2				Net financing income		6		4.8		14.4
(2.4)				Share of post-tax results of joint ventures and associates				(0.9)		(1.6)
(394.2)				Profit/(loss) before tax				116.8		(437.0)
(18.9)				Taxation		7		(39.1)		(9.8)
(413.1)				Profit/(loss) for the period attributable to equity holders of the Company				77.7		(446.8)
pence				Earnings per share		8		pence		pence
(47.7)				- Basic				9.0		(51.3)
(47.7)				- Diluted				8.9		(51.3)
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
28.2.09				Non-GAAP measures				29.8.09		30.8.08
£m				Reconciliation of profit/(loss) before tax to benchmark profit before tax ('PBT')				£m		£m
(394.2)				Profit/(loss) before tax				116.8		(437.0)
694.0				Exceptional items		5		-		549.9
8.4				Demerger incentive schemes				7.7		5.9
28.9				Financing fair value remeasurements		6		(5.0)		8.3
(11.2)				Financing impact on retirement benefit balances		6		(0.1)		(5.7)
1.8				Discount unwind on non-benchmark items				3.3		-
327.7				Benchmark PBT				122.7		121.4
pence				Benchmark earnings per share		8		pence		pence
25.9				- Basic				9.7		9.6
25.6				- Diluted				9.6		9.4

  HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 29 August 2009

52 weeks to						26 weeks to		26 weeks to
28.2.09						29.8.09		30.8.08
£m				Notes		£m		£m
(413.1)				Profit/(loss) for the period attributable to the owners of the Company		77.7		(446.8)
				Other comprehensive income:
				Net change in fair value of cash flow hedges
153.3				- Foreign currency forward exchange contracts		(68.7)		36.5
				Net change in fair value of cash flow hedges transferred to inventory
(130.1)				- Foreign currency forward exchange contracts		28.4		(6.2)
(135.4)				Actuarial losses in respect of defined benefit pension schemes                             12		(51.4)		(99.5)
(2.3)				Fair value movements on available-for-sale financial assets		2.2		-
35.9				Currency translation differences		(5.2)		10.1
32.5				Tax credit in respect of items taken directly to equity		25.7		19.4
(46.1)				Other comprehensive income for the period, net of tax		(69.0)		(39.7)
(459.2)				Total comprehensive income for the period attributable to the owners of the Company		8.7		(486.5)

HOME RETAIL GROUP PLC

CONSOLIDATED BALANCE SHEET

At 29 August 2009

28.2.09								29.8.09		30.8.08
£m						Notes		£m		£m
				ASSETS
				Non-current assets
1,541.0				Goodwill				1,541.0		1,541.0
103.6				Other intangible assets				99.2		85.1
559.3				Property, plant and equipment				530.4		618.4
8.4				Investment in joint ventures and associates				8.1		7.6
87.4				Deferred tax assets				113.4		66.1
3.4				Trade and other receivables				3.4		4.6
9.2				Other financial assets				11.5		12.0
2,312.3				Total non-current assets				2,307.0		2,334.8
				Current assets
930.3				Inventories				1,047.8		1,011.0
593.7				Trade and other receivables				586.6		594.8
15.1				Current tax assets				2.4		6.1
53.7				Other financial assets				3.2		38.5
75.0				Current asset investments				-		75.0
209.4				Cash and cash equivalents				352.3		199.7
1,877.2				Total current assets				1,992.3		1,925.1
4,189.5				Total assets				4,299.3		4,259.9
				LIABILITIES
				Non-current liabilities
(64.0)				Trade and other payables				(42.0)		(43.3)
(198.6)				Provisions		11		(200.5)		(143.7)
(26.3)				Deferred tax liabilities				(19.3)		(40.8)
(46.4)				Retirement benefit obligations		12		(99.4)		(14.1)
(335.3)				Total non-current liabilities				(361.2)		(241.9)
				Current liabilities
(999.2)				Trade and other payables				(1,139.7)		(1,172.8)
(51.6)				Provisions		11		(41.1)		(22.3)
(1.5)				Other financial liabilities				(40.5)		(1.0)
(43.5)				Current tax liabilities				(24.2)		(38.3)
(1,095.8)				Total current liabilities				(1,245.5)		(1,234.4)
(1,431.1)				Total liabilities				(1,606.7)		(1,476.3)
2,758.4				Net assets				2,692.6		2,783.6
				EQUITY
87.7				Share capital				87.7		87.7
(348.4)				Merger reserve				(348.4)		(348.4)
35.4				Other reserves				1.6		35.9
2,983.7				Retained earnings				2,951.7		3,008.4
2,758.4				Total equity				2,692.6		2,783.6

  HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 29 August 2009

		Attributable to owners of the Company
		Share capital		Merger reserve		Other reserves		Retained earnings		Total
		£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 dividend 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 owners of the Company
		Share capital		Merger reserve		Other reserves		Retained earnings		Total
		£m		£m		£m		£m		£m
Balance at 2 March 2008		87.7		(348.4)		3.9		3,602.0		3,345.2
Loss for the period		-		-		-		(446.8)		(446.8)
Other comprehensive income		-		-		31.8		(71.5)		(39.7)
Total comprehensive income for the period ended 30 August 2008		-		-		31.8		(518.3)		(486.5)
Transactions with owners:
Movement in share-based compensation reserve		-		-		-		11.6		11.6
Net movement in own shares		-		-		0.2		(0.1)		0.1
Equity dividend paid during the period		-		-		-		(86.8)		(86.8)
Total transactions with owners		-		-		0.2		(75.3)		(75.1)
Balance at 30 August 2008		87.7		(348.4)		35.9		3,008.4		2,783.6

		Attributable to owners of the Company
		Share capital		Merger reserve		Other reserves		Retained earnings		Total
		£m		£m		£m		£m		£m
Balance at 2 March 2008		87.7		(348.4)		3.9		3,602.0		3,345.2
Loss for the period		-		-		-		(413.1)		(413.1)
Other comprehensive income		-		-		52.6		(98.7)		(46.1)
Total comprehensive income for the period ended 28 February 2009		-		-		52.6		(511.8)		(459.2)
Transactions with owners:
Movement in share-based compensation reserve		-		-		-		21.3		21.3
Net movement in own shares		-		-		(21.1)		(0.4)		(21.5)
Equity dividend paid during the period		-		-		-		(127.2)		(127.2)
Other distributions		-		-		-		(0.2)		(0.2)
Total transactions with owners		-		-		(21.1)		(106.5)		(127.6)
Balance at 28 February 2009		87.7		(348.4)		35.4		2,983.7		2,758.4

Other distributions represents dividend equivalent amounts paid to participants in the Group's share award schemes on exercise of awards under these schemes.

  HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 29 August 2009

52 weeks to								26 weeks to		26 weeks to
28.2.09								29.8.09		30.8.08
£m						Notes		£m		£m
				Cash flows from operating activities
468.4				Cash generated from operations		13		238.3		269.9
16.6				Interest received				5.6		10.1
(74.7)				Tax paid				(53.0)		(36.7)
410.3				Net cash inflow from operating activities				190.9		243.3
				Cash flows from investing activities
(110.9)				Purchase of property, plant and equipment		10		(24.1)		(44.2)
2.6				Proceeds from the disposal of property, plant and equipment		10		0.6		1.6
(44.7)				Purchase of intangible assets		10		(9.1)		(14.0)
(2.0)				Loan to joint venture				(2.4)		-
(75.2)				Purchase of investments				-		(75.0)
-				Proceeds from disposal of investments				75.0		-
(230.2)				Net cash flows used in investing activities				40.0		(131.6)
				Cash flows from financing activities
(21.6)				Purchase of own shares				(1.7)		-
0.1				Proceeds from the sale of own shares				0.1		0.1
(127.2)				Dividends paid		9		(85.7)		(86.8)
(148.7)				Net cash flows used in financing activities				(87.3)		(86.7)
31.4				Net increase in cash and cash equivalents				143.6		25.0
				Movement in cash and cash equivalents
174.0				Cash and cash equivalents at the beginning of the period				209.4		174.0
4.0				Effect of foreign exchange rate changes				(0.7)		0.7
31.4				Net increase in cash and cash equivalents				143.6		25.0
209.4				Cash and cash equivalents at end of the period				352.3		199.7

ANALYSIS OF NET CASH/(DEBT)

At 29 August 2009

28.2.09 £m		Non-GAAP measures	29.8.09 £m	30.8.08 £m
		Financing net cash:
209.4		Cash and cash equivalents	352.3	199.7
75.0		Current asset investments	-	75.0
284.4		Total financing net cash	352.3	274.7
		Operating net (debt):
(3,304.3)		Property leases	(3,124.4)	(3,049.3)
(3,304.3)		Total operating net (debt)	(3,124.4)	(3,049.3)
(3,019.9)		Total net (debt)	(2,772.1)	(2,774.6)
		Deduct:
3,304.3		Operating leases that are off balance sheet	3,124.4	3,049.3
(75.0)		Current asset investments	-	(75.0)
209.4		Total net cash reflected in balance sheet	352.3	199.7

The Group uses the term total 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 £3,124.4m (28 February 2009: £3,304.3m) based upon discounting the current rentals at the estimated current long-term cost of borrowing of 4.1% (28 February 2009: 4.1%).

The current asset investment comprised a term cash deposit invested for a period of 9 months which matured on 15 April 2009. 

  HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 29 August 2009

1. Basis of preparation

The unaudited condensed half-yearly financial information comprises the results for the 26 weeks ended 29 August 2009, the 26 weeks ended 30 August 2008, and the audited consolidated results for the 52 weeks ended 28 February 2009.

The audited consolidated financial information for the 52 weeks to 28 February 2009 has been extracted from Home Retail Group plc's Annual Report and Financial Statements, which was approved by the Board of Directors on 29 April 2009 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 29 August 2009 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 28 February 2009, 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 29 April 2009, 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 effective for the first time for the current period:

• IFRS 8 'Operating Segments' replaces IAS 14 'Segment Reporting' and requires segmental information reported to be based on that which the Group Board and Operating Board use internally for the purposes of evaluating the performance of the Group's businesses and making decisions about resource allocation between operating segments. The Group adopted IFRS 8 with effect from 1 March 2009. The adoption of IFRS 8 has not resulted in a change to the Group's reportable segments;

• IAS 1 (revised) 'Presentation of Financial Statements' prohibits the presentation of items of income and expense in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from 'owner changes in equity'. Entities can choose whether to present a single performance statement (being a statement of comprehensive income) or two statements (being an income statement and a statement of comprehensive income). The Group has elected to present two statements: an income statement and a statement of comprehensive income. The condensed consolidated half-yearly financial information has been prepared under the revised disclosure requirements.

The vesting conditions and cancellations amendment to IFRS 2 'Share-Based Payment' would normally have been effective for the first time for the current period, however it was early-adopted by the Group during the 52 weeks to 28 February 2009.

Other 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 23 - 'Borrowing Costs';

• Amendments to IAS 32 and IAS 1 - 'Puttable Financial Instruments and Obligations Arising on Liquidation';

• Amendments to IAS 39 and IFRS 7 - 'Reclassification of Financial Instruments';

• Improvements to IFRSs (May 2008);

• 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'.

In addition, the amendment to IFRS 7 'Improving Disclosures about Financial Instruments', the amendments to IFRIC 9 and IAS 39 'Embedded Derivatives' and IFRIC 18 'Transfers of Assets to Customers' are also effective for annual periods beginning on or after 1 March 2009 (or earlier) but have not yet received EU endorsement.

  HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 29 August 2009

1. Basis of preparation (continued)

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

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

• Amendment to IAS 39 - 'Eligible Hedged Items';

• 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'.

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

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 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 profit before amortisation of acquisition intangibles, store impairment and onerous lease charges, 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, exceptional items, costs related to demerger incentive schemes, financing fair value remeasurements, financing impact on retirement benefit balances, 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 property leases.

3. Foreign currency

		Average						Closing
		26 weeks to		26 weeks to		52 weeks to
		29.8.09		30.8.08		29.2.09		29.8.09		30.8.08		29.2.09
The principal exchange rates used were as follows:
Sterling to US dollar		1.56		1.97		1.77		1.63		1.82		1.43
Sterling to euro		1.14		1.27		1.22		1.14		1.24		1.13

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 29 August 2009

4. Segmental information

The Group Board 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 Group Board 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						26 weeks to		26 weeks to
28.2.09						29.8.09		30.8.08
£m						£m		£m
				Revenue
4,281.9				Argos		1,887.8		1,856.4
1,513.2				Homebase		866.0		829.3
102.3				Financial Services		51.1		50.5
-				Central Activities		-		-
5,897.4				Total segment revenue		2,804.9		2,736.2
				Benchmark operating profit/(loss)
303.6				Argos		79.7		85.5
14.9				Homebase		48.9		29.5
6.1				Financial Services		2.5		3.1
(24.2)				Central Activities		(10.5)		(12.1)
300.4				Total segment benchmark operating profit		120.6		106.0
29.7				Benchmark interest		3.0		17.0
(2.4)				Share of post-tax results of joint ventures and associates		(0.9)		(1.6)
327.7				Benchmark profit before tax		122.7		121.4
(694.0)				Exceptional items		-		(549.9)
(8.4)				Demerger incentive schemes		(7.7)		(5.9)
(28.9)				Financing fair value remeasurements		5.0		(8.3)
11.2				Financing impact on retirement benefit balances		0.1		5.7
(1.8)				Discount unwind on non-benchmark items		(3.3)		-
(394.2)				Profit/(loss) before tax		116.8		(437.0)
(18.9)				Taxation		(39.1)		(9.8)
(413.1)				Profit/(loss) for the period attributable to equity holders of the Company		77.7		(446.8)

The results for Financial Services are after deducting funding costs of £1.8m (2008: £8.6m) (note 6).

28.2.09						29.8.09		30.8.08
£m						£m		£m
				Segment assets
2,391.9				Argos		2,460.7		2,462.4
914.7				Homebase		898.7		975.7
455.8				Financial Services		432.0		427.9
40.2				Central Activities		39.8		47.0
3,802.6				Total segment assets		3,831.2		3,913.0
102.5				Tax assets		115.8		72.2
75.0				Current asset investments		-		75.0
209.4				Cash and cash equivalents		352.3		199.7
4,189.5				Total assets per balance sheet		4,299.3		4,259.9

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.

  HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 29 August 2009

5. Exceptional items

52 weeks to						26 weeks to		26 weeks to
28.2.09						29.8.09		30.8.08
£m						£m		£m
(381.7)				Goodwill impairment (a)		-		(381.7)
(152.2)				Store impairment charges (a)		-		(94.5)
(117.3)				Onerous lease provisions (b)		-		(66.1)
(7.6)				Costs relating to the post-acquisition integration of the Focus DIY stores (c)		-		(7.6)
(35.2)				Reorganisation and restructuring charges (d)		-		-
(694.0)				Exceptional items in operating loss		-		(549.9)
58.8				Tax on exceptional items in profit/(loss) before tax		-		28.0
27.4				Exceptional corporation tax credit (e)		-		-
(3.9)				Exceptional deferred tax charge (f)		-		(2.0)
82.3				Exceptional tax (note 7)		-		26.0
(611.7)				Exceptional loss for the period		-		(523.9)

(a)    During the period ended 28 February 2009 management interpreted the economic environment and resulting retail downturn as an external indicator of impairment. As a result, and as required by IAS 36, the assets of the business were subject to an impairment review. This resulted in an impairment charge of £381.7m being booked against the carrying value of the Homebase goodwill and a store impairment charge of £152.2m against the Homebase store portfolio.

    There were no indicators of impairment during the period ended 29 August 2009 and as such no formal impairment review has been performed.

(b)    The exceptional onerous lease provisions cover potential liabilities for onerous lease contracts for stores that have either closed, or where projected future trading income is insufficient to cover the lower of exit cost or value-in-use. Where the value-in-use calculation is lower, the provisions are based on the present value of expected future cash flows, discounted at a pre-tax rate of 5.8%, relating to rents, rates and other property costs to the end of the lease terms net of expected sublet income. For the 52 weeks to 28 February 2009, this resulted in an exceptional onerous lease charge in respect of the Homebase store portfolio of £117.3m.

(c)    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.

(d)    Represents costs relating to the reorganisation and restructuring programme during the 52 weeks to 28 February 2009. Actions taken 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.

(e)    Represents the recognition of a corporation tax credit arising from the revision and agreement of prior year tax computations and the completion of a periodic review of the tax risks associated with the Group's overseas trading operations.

(f)    The deferred tax charge represents the reversal of a deferred tax asset created on IFRS transition.  

  HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 29 August 2009

6. Net financing income/(expense)

52 weeks to								26 weeks to		26 weeks to
28.2.09								29.8.09		30.8.08
£m						Note		£m		£m
				Finance income
18.6				Bank deposits and other interest				2.5		9.7
45.1				Expected return on retirement benefit assets				17.7		22.7
-				Financing fair value remeasurements - net exchange gains				5.0		-
63.7				Total finance income				25.2		32.4
				Finance expense
(4.3)				Unwinding of discounts				(4.6)		(1.3)
(28.9)				Financing fair value remeasurements - net exchange losses				-		(8.3)
(33.9)				Interest expense on retirement benefit liabilities				(17.6)		(17.0)
(67.1)				Total finance expense				(22.2)		(26.6)
13.6				Less: finance expense charged to Financial Services cost of sales		4		1.8		8.6
(53.5)				Total net finance expense				(20.4)		(18.0)
10.2				Net financing income				4.8		14.4

7. Taxation

52 weeks to			26 weeks to	26 weeks to
28.2.09			29.8.09	30.8.08
£m			£m	£m
(15.8)		UK tax	(37.8)	(8.6)
(3.1)		Overseas tax	(1.3)	(1.2)
(18.9)		Total tax expense	(39.1)	(9.8)

The tax charge for the period of £39.1m (2008: £9.8m) is based on an estimated annual effective rate of tax of 33.5% (2008: (2.2%)). The charge for the 26 weeks to 30 August 2008 is net of a £26.0m credit 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 32.0% (2008: 31.0%).

  HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 29 August 2009

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
28.2.09				29.8.09	30.8.08
£m			Note	£m	£m
		Earnings
(413.1)		Profit/(loss) after tax for the financial period		77.7	(446.8)
694.0		Exceptional items	5	-	549.9
8.4		Demerger incentive schemes		7.7	5.9
28.9		Financing fair value remeasurements		(5.0)	8.3
(11.2)		Financing impact on retirement benefit balances		(0.1)	(5.7)
1.8		Discount unwind on non-benchmark items		3.3	-
(84.6)		Attributable taxation		(0.4)	(28.3)
224.2		Benchmark profit after tax for the financial period		83.2	83.3
millions		Weighted average number of shares		millions	millions
866.6		Number of ordinary shares for the purpose of basic EPS		860.9	871.1
10.4		Dilutive effect of share incentive awards		10.2	10.4
877.0		Number of ordinary shares for the purpose of diluted EPS		871.1	881.5
pence		EPS		pence	pence
(47.7)		Basic EPS		9.0	(51.3)
(47.7)		Diluted EPS (a)		8.9	(51.3)
25.9		Basic benchmark EPS		9.7	9.6
25.6		Diluted benchmark EPS		9.6	9.4

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, where the Group has made a loss after tax, 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 (2008: 4.7 pence) per Home Retail Group plc ordinary share, amounting to a total interim dividend of £40.5m (2008: £40.4m), has been proposed (but not provided) and will be paid on 20 January 2010 to shareholders on the register at the close of business on 13 November 2009. 

In July 2009, a final dividend of 10.0 pence (2008: 10.0 pence) per Home Retail Group plc ordinary share, amounting to a total final dividend of £85.7m (2008: £86.8m), was paid to shareholders. 

10. Capital expenditure

In the period, there were additions to property, plant and equipment of £24.1m (2008: £44.2m) and disposals of property, plant and equipment generated proceeds of £0.6m (2008: £1.6m).

In the period, there were additions to intangible assets of £9.1m (2008: £14.0m).

Capital commitments contracted but not provided for by the Group amounted to £14.7m (2008: £30.3m).

  HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 29 August 2009

11. Provisions

						Onerous		Insurance		Restructuring
						leases		provisions		provisions		Other		Total
						£m		£m		£m		£m		£m
At 28 February 2009						(173.4)		(33.1)		(33.6)		(10.1)		(250.2)
Charged to the income statement						(1.0)		(3.6)		-		-		(4.6)
Utilised during the period						2.6		2.2		12.1		1.0		17.9
Discount unwind						(4.6)		-		-		(0.1)		(4.7)
At 29 August 2009						(176.4)		(34.5)		(21.5)		(9.2)		(241.6)
28.2.09												29.8.09		30.8.08
£m												£m		£m
(51.6)				Current								(41.1)		(22.3)
(198.6)				Non-current								(200.5)		(143.7)
(250.2)												(241.6)		(166.0)

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. 

A number of organisational changes were undertaken to improve the operational efficiency of the Group and drive further cost productivity.  Actions taken included streamlining of head office functions across all parts of the Group, restructuring of store-based staff to better match demand levels and trading patterns, and a consolidation of home delivery warehouses.

Other provisions include legal claims and other sundry provisions. 

12. Post employment benefits

As at the balance sheet date, the obligation in respect of the Home Retail Group defined benefit pension plans was £699.3m (28 February 2009: £550.8m) and the market value of the plan assets was £599.9m (28 February 2009: £504.4m), resulting in a net deficit on the plans of £99.4m (28 February 2009: £46.4m).

The increase in the defined benefit obligation arises due to a £148.5m increase to scheme liabilities, resulting from changes in the underlying actuarial assumptions, net of a £95.5m increase to scheme assets, mainly from experience gains. The increase in scheme liabilities arises substantially due to a reduction in the assumed discount rate to 5.7% (28 February 2009: 6.5%). As a result a net £51.4m actuarial loss (28 February 2009: £135.4m) 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 £6.5m (2008: £7.0m) to the Home Retail Group defined benefit pension plans.

  HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 29 August 2009

13. Notes to the consolidated statement of cash flows

52 weeks to			26 weeks to	26 weeks to
28.2.09			29.8.09	30.8.08
£m			£m	£m
Cash generated from operations:
(402.0)		Operating profit/(loss)	112.9	(449.8)
(0.2)		Loss/(profit) on sale of property, plant and equipment	1.7	(0.5)
159.4		Depreciation and amortisation	64.0	76.5
533.9		Impairment losses	-	476.2
13.6		Finance expense charged to Financial Services cost of sales	1.8	8.6
74.5		(Increase)/decrease in inventories	(117.5)	(6.2)
12.6		Decrease in receivables	6.3	8.9
(97.3)		Increase/(decrease) in payables	168.0	74.7
(10.2)		Movement in working capital	56.8	77.4
146.9		(Decrease)/increase in provisions	(13.3)	65.9
5.9		Movement in retirement benefits	1.6	4.0
21.1		Share-based payment expense (net of dividend equivalent payments)	12.8	11.6
468.4		Cash generated from operations	238.3	269.9

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 12.

  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 2009. With the exception of Andy Hornby, who resigned on 1 July 2009, 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

Chief Executive

21 October 2009

Richard Ashton

Finance Director

21 October 2009

  HOME RETAIL GROUP PLC

SHAREHOLDER INFORMATION

Registrar

For all enquiries and shareholder administration (other than for ADRs), 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 20 January 2010, should return a completed and signed DRIP mandate form to be received by the Registrar, by no later than 26 December 2009. 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		11 November 2009
Interim Management Statement		14 January 2010
Interim dividend to be paid		20 January 2010
Full-year trading statement		11 March 2010
Full-year results for the 52 weeks to 27 February 2010		28 April 2010
Final ex-dividend date		19 May 2010
Interim Management Statement		10 June 2010
Final dividend to be paid		21 July 2010

Registered office

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

 

END

 

 

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