Half-Year Results - Part 2

RNS Number : 3744P

Home Retail Group Plc

24 October 2012

HOME RETAIL GROUP PLC

UNAUDITED CONDENSED HALF-YEARLY FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 1 September 2012

53 weeks to 3.3.12			26 weeks to 1.9.12	26 weeks to 27.8.11
£m		Notes	£m	£m

5,582.8	Revenue	4	2,531.1	2,567.5

(3,794.0)	Cost of sales	5	(1,714.7)	(1,731.4)

1,788.8	Gross profit		816.4	836.1

(1,669.8)	Net operating expenses before exceptional items		(798.5)	(809.6)
(20.3)	Exceptional items	6	35.0	-

98.7	Operating profit		52.9	26.5

53.3	Finance income		24.2	27.3
(48.4)	Finance expense		(23.4)	(24.4)
4.9	Net financing income	7	0.8	2.9

0.5	Share of post-tax (loss)/profit of associates		(2.6)	-

104.1	Profit before tax		51.1	29.4

(31.3)	Taxation	8	(14.6)	(9.0)

72.8	Profit for the period attributable to equity holders of the Company		36.5	20.4

pence	Earnings per share	9	pence	pence
9.1	Basic		4.6	2.6
9.1	Diluted		4.5	2.5

4.7	Dividend per share	10	1.0	4.7

53 weeks to 3.3.12		Non-GAAP measures		26 weeks to 1.9.12	26 weeks to 27.8.11
£m	Reconciliation of profit before tax (PBT) to benchmark PBT		Notes	£m	£m

104.1	Profit before tax			51.1	29.4
	Adjusted for:
20.3	Exceptional items		6	(35.0)	-
(3.3)	Financing fair value remeasurements		7	(1.3)	(2.3)
(4.8)	Financing impact on retirement benefit obligations		7	(1.4)	(2.2)
6.7	Discount unwind on non-benchmark items		7	3.6	3.4
1.2	Amortisation of acquisition intangibles			0.9	-
(8.5)	Onerous lease provision releases			-	-

115.7	Benchmark PBT			17.9	28.3


pence	Benchmark earnings per share		9	pence	pence
10.0	Basic			1.4	2.5
10.0	Diluted			1.4	2.5

HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 1 September 2012

53 weeks to 3.3.12			26 weeks to 1.9.12	26 weeks to 27.8.11
£m		Notes	£m	£m

72.8	Profit for the period attributable to equity holders of the Company		36.5	20.4

	Other comprehensive income:
	Net change in fair value of cash flow hedges
10.8	- Foreign currency forward exchange contracts		(1.0)	(14.0)
	Net change in fair value of cash flow hedges transferred to inventory
9.3	- Foreign currency forward exchange contracts		(5.9)	22.2
(121.2)	Actuarial loss in respect of defined benefit pension schemes	13	(54.6)	(85.4)
0.2	Fair value movements on available-for-sale financial assets		(0.1)	(0.9)
(3.3)	Currency translation differences		(0.9)	(1.4)
24.7	Tax credit in respect of items taken directly to equity		12.3	18.8

(79.5)	Other comprehensive income for the period, net of tax		(50.2)	(60.7)

(6.7)	Total comprehensive income for the period attributable to equity holders of the Company		(13.7)	(40.3)

HOME RETAIL GROUP PLC

CONSOLIDATED BALANCE SHEET

At 1 September 2012

3.3.12			1.9.12	27.8.11
£m		Notes	£m	£m
	ASSETS
	Non-current assets
1,543.9	Goodwill		1,543.9	1,543.9
137.1	Other intangible assets		135.7	135.8
516.3	Property, plant and equipment		474.8	515.2
8.3	Investments in associates		8.4	8.3
50.6	Deferred tax assets		53.8	52.2
3.8	Trade and other receivables		3.8	4.3
17.4	Other financial assets		23.4	15.4

2,277.4	Total non-current assets		2,243.8	2,275.1

	Current assets
933.2	Inventories		1,001.1	1,013.9
594.6	Trade and other receivables		589.0	573.8
0.8	Current tax assets		5.6	24.9
8.3	Other financial assets		2.5	1.2
194.3	Cash and cash equivalents		316.4	200.5

1,731.2	Total current assets		1,914.6	1,814.3

4,008.6	Total assets		4,158.4	4,089.4

	LIABILITIES
	Non-current liabilities
(55.8)	Trade and other payables		(54.3)	(57.1)
(187.5)	Provisions	12	(188.4)	(191.4)
(21.9)	Deferred tax liabilities		(20.1)	(20.7)
(115.3)	Retirement benefit obligations	13	(122.0)	(81.8)

(380.5)	Total non-current liabilities		(384.8)	(351.0)

	Current liabilities
(944.9)	Trade and other payables		(1,103.7)	(1,075.8)
(47.8)	Provisions	12	(43.6)	(18.0)
(5.2)	Other financial liabilities		(9.0)	(15.8)
(4.8)	Current tax liabilities		-	(3.5)

(1,002.7)	Total current liabilities		(1,156.3)	(1,113.1)

(1,383.2)	Total liabilities		(1,541.1)	(1,464.1)

2,625.4	Net assets		2,617.3	2,625.3

	EQUITY
81.3	Share capital		81.3	81.3
6.4	Capital redemption reserve		6.4	6.4
(348.4)	Merger reserve		(348.4)	(348.4)
8.6	Other reserves		3.8	(0.5)
2,877.5	Retained earnings		2,874.2	2,886.5

2,625.4	Total equity		2,617.3	2,625.3

HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 1 September 2012

	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 4 March 2012	81.3	6.4	(348.4)	8.6	2,877.5	2,625.4

Profit for the period	-	-	-	-	36.5	36.5
Other comprehensive income	-	-	-	(6.1)	(44.1)	(50.2)
Total comprehensive income for the period ended 1 September 2012	-	-	-	(6.1)	(7.6)	(13.7)
Transactions with owners:
Movement in share-based compensation reserve	-	-	-	-	5.9	5.9
Net movement in own shares	-	-	-	1.3	(1.3)	-
Equity dividends paid during the period	-	-	-	-	-	-
Other distributions	-	-	-	-	(0.3)	(0.3)
Total transactions with owners	-	-	-	1.3	4.3	5.6
Balance at 1 September 2012	81.3	6.4	(348.4)	3.8	2,874.2	2,617.3


	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 27 February 2011	81.3	6.4	(348.4)	(5.6)	3,007.5	2,741.2

Profit for the period	-	-	-	-	20.4	20.4
Other comprehensive income	-	-	-	4.3	(65.0)	(60.7)
Total comprehensive income for the period ended 27 August 2011	-	-	-	4.3	(44.6)	(40.3)
Transactions with owners:
Movement in share-based compensation reserve	-	-	-	-	4.4	4.4
Net movement in own shares	-	-	-	0.8	(0.8)	-
Equity dividends paid during the period	-	-	-	-	(79.9)	(79.9)
Other distributions	-	-	-	-	(0.1)	(0.1)
Total transactions with owners	-	-	-	0.8	(76.4)	(75.6)
Balance at 27 August 2011	81.3	6.4	(348.4)	(0.5)	2,886.5	2,625.3

HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 1 September 2012

53 weeks to 3.3.12			26 weeks to 1.9.12	26 weeks to 27.8.11
£m		Notes	£m	£m

	Cash flows from operating activities
234.5	Cash generated from operations	14	172.8	143.0
(26.8)	Tax paid		(16.9)	(38.5)

207.7	Net cash inflow from operating activities		155.9	104.5

	Cash flows from investing activities
(24.5)	Acquisition of business		-	(23.6)
(97.1)	Purchase of property, plant and equipment	11	(12.0)	(41.5)
3.9	Proceeds from the disposal of property, plant and equipment	11	1.0	2.7
(37.8)	Purchase of other intangible assets	11	(14.6)	(21.4)
(1.2)	Loans granted to associates	16	(6.8)	(1.2)
(0.9)	Purchase of investments	16	(2.4)	-
100.0	Disposal of investments		-	100.0
2.4	Interest received		0.5	1.3

(55.2)	Net cash flows from investing activities		(34.3)	16.3

	Cash flows from financing activities
0.1	Proceeds from disposal of shares held by Employee Share Trust		-	-
(117.5)	Dividends paid	10	-	(79.9)

(117.4)	Net cash used in financing activities		-	(79.9)

35.1	Net increase in cash and cash equivalents		121.6	40.9

	Movement in cash and cash equivalents
159.3	Cash and cash equivalents at the beginning of the period		194.3	159.3
(0.1)	Effect of foreign exchange rate changes		0.5	0.3
35.1	Net increase in cash and cash equivalents		121.6	40.9

194.3	Cash and cash equivalents at the end of the period		316.4	200.5

HOME RETAIL GROUP PLC

ANALYSIS OF NET CASH/(DEBT)

At 1 September 2012

3.3.12		1.9.12	27.8.11
£m	Non-GAAP measures	£m	£m

	Financing net cash:
194.3	Cash and cash equivalents	316.4	200.5

194.3	Total financing net cash	316.4	200.5


	Operating net debt:
(2,701.7)	Off balance sheet operating leases	(2,438.1)	(2,954.1)

(2,701.7)	Total operating net debt	(2,438.1)	(2,954.1)

(2,507.4)	Total net debt	(2,121.7)	(2,753.6)


	Adjusted for:
2,701.7	Off balance sheet operating leases	2,438.1	2,954.1

194.3	Total cash and cash equivalents reflected in balance sheet	316.4	200.5

The Group uses the term 'total net debt' to highlight the Group's aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably operating leases. The capitalised value of these leases is £2,438.1m (3 March 2012: £2,701.7m), based upon discounting the current rentals at the estimated current long-term cost of borrowing of 4.4% (3 March 2012: 3.4%).

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 1 September 2012

1. Basis of preparation

The unaudited condensed half-yearly financial information comprises the results for the 26 weeks ended 1 September 2012, the 26 weeks ended 27 August 2011, and the audited consolidated results for the 53 weeks ended 3 March 2012.

The audited consolidated financial information for the 53 weeks ended 3 March 2012 has been extracted from Home Retail Group plc's Annual Report and Financial Statements, which was approved by the Board of Directors on 2 May 2012 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.

After making enquiries, the directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed half-yearly financial information.

IFRS and accounting policies

This condensed half-yearly financial information for the 26 weeks ended 1 September 2012 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 condensed half-yearly financial information should be read in conjunction with Home Retail Group plc's Annual Report and Financial Statements for the 53 weeks ended 3 March 2012, 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 2 May 2012, 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

There are no new standards, amendments to existing standards or interpretations that are effective for the first time for the current period that would be expected to have a material impact on the Group.

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

· Amendment to IAS 19 (revised) - 'Employee Benefits': amendment in June 2011 relating to recognition and

measurement of defined benefit pension expense and termination benefits and disclosures for all employee benefits;

· IFRS 9 - 'Financial Instruments': addresses the classification, measurement and recognition of financial assets and

financial liabilities;

· IFRS 10 - 'Consolidated Financial Statements': identifies the concept of control as the determining factor in whether

an entity should be included within consolidated financial statements;

· IFRS 11 - 'Joint Arrangements': focuses on the rights and obligations of an arrangement rather than its legal form

and classifies joint arrangements as either a joint operation or a joint venture;

· IFRS 12 - 'Disclosure of Interests in Other Entities': includes the disclosure requirements for all forms of interests in

other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet

vehicles; and

· IFRS 13 - 'Fair Value Measurement': provides a precise definition of fair value and a single source of fair value

measurement and disclosure requirements for use across IFRSs.

The Group has not early-adopted any of these new standards or amendments to existing standards. The Group will assess their full impact in due course. There are no other new standards, amendments to existing standards or interpretations that are not yet effective that would be expected to have a material impact on the Group.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 1 September 2012

2. Non-GAAP financial information

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

Exceptional items

Items which are both material and non-recurring are presented as exceptional items within their relevant income statement line. The separate reporting of exceptional items helps provide a better indication of underlying performance of the Group. Examples of items which may be recorded as exceptional items are impairment charges, restructuring costs and the profits/losses on the disposal of businesses.

Benchmark measures

The Group uses the following terms 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 and exceptional items.

· Benchmark profit before tax (benchmark PBT) is defined as profit before amortisation of acquisition intangibles, store

impairment and onerous lease charges or releases, exceptional items, financing fair value remeasurements, financing

impact on retirement benefit obligations, the discount unwind on non-benchmark items and taxation.

· Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to

benchmark PBT, divided by the weighted average number of shares in issue (excluding shares held in Home Retail

Group's share trusts net of vested but unexercised share awards).

These measures are considered useful in that they provide investors with an alternative means to evaluate the underlying performance of the Group's operations.

Total net debt

The Group uses the term 'total net debt' which is considered useful in that it highlights the Group's aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably operating leases.

3. Foreign currency
	Average			Closing
	26 weeks to	26 weeks to	53 weeks to
	1.9.12	27.8.11	3.3.12	1.9.12	27.8.11	3.3.12

The principal exchange rates used were as follows:
Sterling to US dollar	1.58	1.63	1.60	1.59	1.64	1.58
Sterling to euro	1.24	1.14	1.16	1.26	1.13	1.20

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 1 September 2012

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.

53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m		£m	£m
	Revenue
3,935.3	Argos	1,686.4	1,675.7
1,536.4	Homebase	787.3	839.6
111.1	Financial Services	57.4	52.2
-	Central Activities	-	-
5,582.8	Total segment revenue	2,531.1	2,567.5

	Benchmark operating profit/(loss)
106.9	Argos	3.3	3.4
23.8	Homebase	24.5	29.9
6.1	Financial Services	2.9	3.0
(25.1)	Central Activities	(11.9)	(9.8)

111.7	Total segment benchmark operating profit	18.8	26.5
3.5	Benchmark interest	1.7	1.8
0.5	Share of post-tax (loss)/profit of associates	(2.6)	-

115.7	Benchmark profit before tax	17.9	28.3
(20.3)	Exceptional items	35.0	-
3.3	Financing fair value remeasurements	1.3	2.3
4.8	Financing impact on retirement benefit obligations	1.4	2.2
(6.7)	Discount unwind on non-benchmark items	(3.6)	(3.4)
(1.2)	Amortisation of acquisition intangibles	(0.9)	-
8.5	Onerous lease provision releases	-	-

104.1	Profit before tax	51.1	29.4
(31.3)	Taxation	(14.6)	(9.0)

72.8	Profit for the period attributable to equity holders of the Company	36.5	20.4

The results for Financial Services are after deducting funding costs of £1.6m (2011: £1.7m) (note 7).

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 1 September 2012

4. Segmental information (continued)

53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m		£m	£m
	Segment assets
2,299.0	Argos	2,331.9	2,390.1
883.8	Homebase	886.2	885.8
479.3	Financial Services	461.7	443.6
100.8	Central Activities	102.8	92.3

3,762.9	Total segment assets	3,782.6	3,811.8
51.4	Tax assets	59.4	77.1
194.3	Cash and cash equivalents	316.4	200.5

4,008.6	Total assets per balance sheet	4,158.4	4,089.4

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

5. Cost of sales

53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m	Cost of sales comprises:	£m	£m

(3,521.1)	Cost of goods	(1,579.5)	(1,597.2)
(272.9)	Distribution costs	(135.2)	(134.2)
(3,794.0)	Total cost of sales	(1,714.7)	(1,731.4)

6. Exceptional items

53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m		£m	£m

-	Net gain on employee benefits	35.0	-
(20.3)	Reorganisation and restructuring charges	-	-
(20.3)	Exceptional items in operating profit	35.0	-
3.3	Tax on exceptional items	(8.5)	-
(17.0)	Exceptional profit/(loss) after tax for the period	26.5	-

The Home Retail Group defined benefit pension scheme will close to future accrual with effect from 31 January 2013. This has led to a net gain of £35.0m, which includes a non-cash curtailment gain of £39.3m, offset by a charge of £4.3m principally for transitional payments to active members of the scheme. Further details are included in note 13. Reorganisation and restructuring actions announced during the 53 weeks to 3 March 2012 included the closures of the Group's UK homewares trial format, HomeStore&More, and one of the Group's distribution warehouses.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 1 September 2012

7. Net financing income

53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m		£m	£m
	Finance income:

1.8	Bank deposits and other interest	0.7	1.0
48.0	Expected return on retirement benefit assets	21.7	23.5
3.5	Financing fair value remeasurements - net exchange gains	1.8	2.8

53.3	Total finance income	24.2	27.3

	Finance expense:

(8.4)	Unwinding of discounts	(4.2)	(4.3)
(0.2)	Financing fair value remeasurements - net exchange losses	(0.5)	(0.5)
(43.2)	Interest expense on retirement benefit liabilities	(20.3)	(21.3)

(51.8)	Total finance expense	(25.0)	(26.1)
3.4	Less: finance expense charged to Financial Services cost of sales	1.6	1.7

(48.4)	Total net finance expense	(23.4)	(24.4)
4.9	Net financing income	0.8	2.9

Included within unwinding of discounts is a £3.6m charge (2011: £3.4m) relating to the discount unwind on exceptional onerous lease provisions.

8. Taxation

53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m		£m	£m

(28.9)	UK tax	(14.2)	(8.4)
(2.4)	Overseas tax	(0.4)	(0.6)
(31.3)	Total tax expense	(14.6)	(9.0)

The tax charge for the period of £14.6m (2011: £9.0m) is based on an estimated annual effective rate of tax of 28.6% (2011: 30.6%). Closing deferred tax has been calculated at the substantively enacted UK corporation tax rate of 23% (2011: 25%). The effect of the reduction in the UK corporation tax rate from 25% to 23% is a deferred tax charge of £2.7m. Of this charge, £0.1m has been charged to the income statement and £2.6m has been charged directly to the consolidated statement of comprehensive income.

The proposed reduction in the main rate of UK corporation tax by 1% to 22% is expected to be enacted in 2013. The impact of future rate reductions on the net deferred tax asset is not material for each future year at the balance sheet date. The Group will assess the impact of the reduction in the rate in line with its accounting policy in respect of deferred tax at each balance sheet date.

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 associates), is 31.7% (2011: 29.7%).

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 1 September 2012

9. Basic and diluted earnings per share (EPS)

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

53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m	Earnings	£m	£m

72.8	Profit after tax for the financial period	36.5	20.4
	Adjusted for:
20.3	Exceptional items	(35.0)	-
(3.3)	Financing fair value remeasurements	(1.3)	(2.3)
(4.8)	Financing impact on retirement benefit obligations	(1.4)	(2.2)
6.7	Discount unwind on non-benchmark items	3.6	3.4
1.2	Amortisation of acquisition intangibles	0.9	-
(8.5)	Onerous lease provision releases	-	-
0.5	Attributable taxation charge	8.0	0.3
(4.8)	Non-benchmark tax charge/(credit) in respect of prior years	-	0.3
0.1	Tax rate change	0.1	-

80.2	Benchmark profit after tax for the financial period	11.4	19.9

millions	Weighted average number of shares	millions	millions

799.4	Number of ordinary shares for the purpose of basic EPS	800.4	799.0
3.9	Dilutive effect of share incentive awards	4.0	3.9

803.3	Number of ordinary shares for the purpose of diluted EPS	804.4	802.9

pence	EPS	pence	pence

9.1	Basic EPS	4.6	2.6
9.1	Diluted EPS	4.5	2.5

10.0	Basic benchmark EPS	1.4	2.5
10.0	Diluted benchmark EPS	1.4	2.5

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 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.

10. Dividend

An interim dividend of 1.0 pence (2011: 4.7 pence) per Home Retail Group plc ordinary share, amounting to a total interim dividend of £8.0m (2011: £37.6m), has been announced (but not provided) and will be paid on 23 January 2013 to shareholders on the register at the close of business on 16 November 2012.

No final dividend was paid in respect of the 53 weeks ended 3 March 2012.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 1 September 2012

11. Capital expenditure

In the period, there were additions to property, plant and equipment of £12.0m (2011: £41.5m) and disposals of property, plant and equipment generated proceeds of £1.0m (2011: £2.7m). In the period, there were additions to intangible assets of £14.6m (2011: £21.4m). Capital commitments contracted but not provided for by the Group amounted to £10.4m (2011: £11.0m).

12. Provisions
		Onerous leases	Insurance	Restructuring	Other	Total
		£m	£m	£m	£m	£m

At 4 March 2012		(153.5)	(46.7)	(24.3)	(10.8)	(235.3)
Exchange differences		0.8	-	-	-	0.8
Charged to the income statement		-	(4.8)	-	(0.3)	(5.1)
Utilised during the period		1.1	2.9	6.9	1.0	11.9
Discount unwind		(4.2)	-	-	(0.1)	(4.3)

At 1 September 2012		(155.8)	(48.6)	(17.4)	(10.2)	(232.0)


3.3.12					1.9.12	27.8.11
£m	Analysed as:				£m	£m

(47.8)	Current				(43.6)	(18.0)
(187.5)	Non-current				(188.4)	(191.4)

(235.3)					(232.0)	(209.4)

The onerous lease provision covers 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 provision is based on the present value of expected future cash flows relating to rents, rates and other property costs to the end of the lease terms net of expected trading or sublet income.

Provision is made for the estimated costs of insurance claims incurred by the Group 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 number of organisational changes have been undertaken in prior years to improve the operational efficiency of the Group and drive further cost productivity. Actions announced during the 53 weeks to 3 March 2012 included the closures of the Group's UK homewares trial format, HomeStore&More, and one of the Group's distribution 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 1 September 2012

13. Post-employment benefits

As at the balance sheet date, the obligation in respect of the Home Retail Group defined benefit pension scheme (the scheme) was £903.4m (3 March 2012: £879.7m) and the market value of the scheme assets was £781.4m (3 March 2012: £764.4m), resulting in a net deficit on the scheme of £122.0m (3 March 2012: £115.3m).
53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m		£m	£m

(7.5)	Opening net deficit on the scheme	(115.3)	(7.5)
(17.2)	Current service cost	(8.2)	(9.0)
-	Curtailment gain	39.3	-
4.8	Financing impact on retirement benefit obligations	1.4	2.2
(121.2)	Actuarial loss	(54.6)	(85.4)
25.8	Contributions paid by the Group	15.4	17.9

(115.3)	Closing net deficit on the scheme	(122.0)	(81.8)
The material assumptions used to assess the liabilities of the scheme have been updated by independent qualified actuaries as at the period end. The most significant of these are the discount rate and the rate of inflation which are 4.4% (3 March 2012: 4.8%) and 2.9% (3 March 2012: 3.1%) respectively. On 14 June 2012, following a period of consultation, the Group announced the closure of the scheme to future accrual with effect from 31 January 2013, which has resulted in a curtailment gain of £39.3m being recognised in the income statement for the period. As a result of the closure, all active members of the scheme will become treated as if they were deferred members. The effect of the closure will be that these members will no longer be entitled to pension benefits linked to future salary increases. This amounts to a change in benefits accruing to these members and results in a one-off reduction in the ultimate liabilities in respect of these individuals. Contributions paid by the Group total £15.4m (2011: £17.9m), including £8.0m (2011: £10.0m) as part of the deficit recovery plan agreed with the scheme trustees following the completion of the 31 March 2009 actuarial valuation.

HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION

For the 26 weeks ended 1 September 2012

14. Notes to the consolidated statement of cash flows

53 weeks to 3.3.12		26 weeks to 1.9.12	26 weeks to 27.8.11
£m		£m	£m
	Cash generated from operations:
104.1	Profit before tax	51.1	29.4
	Adjustments for:
(0.5)	Share of post-tax loss/(profit) of associates	2.6	-
(4.9)	Net financing income	(0.8)	(2.9)
98.7	Operating profit	52.9	26.5

1.8	Loss on sale of property, plant and equipment	0.2	0.5
126.5	Depreciation and amortisation	64.0	60.6
3.4	Finance expense charged to Financial Services cost of sales	1.6	1.7

85.8	(Increase)/decrease in inventories	(67.9)	5.1
16.1	Decrease in receivables	6.0	36.3
(102.5)	Increase/(decrease) in payables	160.2	20.4
(0.6)	Movement in working capital	98.3	61.8

5.0	(Decrease)/increase in provisions	(3.3)	(3.5)
(8.6)	Movement in retirement benefit obligations	(46.5)	(8.9)
8.3	Share-based payment expense (net of dividend equivalent payments)	5.6	4.3
234.5	Cash generated from operations	172.8	143.0

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 associates, key management personnel and the Home Retail Group Pension Scheme.

During the period, the Group granted loans totalling £6.8m (2011: £1.2m) to its associates and invested £2.4m (2011: £nil) in the share capital of its associates. At 1 September 2012, the amounts owed by its associates to the Group totalled £7.2m (2011: £1.2m).

The only other material transactions between the Group and any of these parties were in relation to the Home Retail Group Pension Scheme, and are set out in note 13.

17. Post balance sheet events

On 24 October 2012, the Group announced its transformation plan for Argos following a comprehensive review of Argos' business. The plan will transform the company from a catalogue-led business to a digitally-led business, and is expected to result in c.£50m of exceptional costs over the three financial years ending 27 February 2016.

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 2012. With the exception of Oliver Stocken, who resigned as a director with effect from 4 July 2012, there have been no changes of director 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

24 October 2012 24 October 2012

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, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.

email: homeretailgroup@capitaregistrars.com

Telephone: 0871 664 0437* (from abroad +44 20 8639 3377).

Text phone: 0871 664 0532* (from abroad +44 20 8639 2062).

Fax number: 0871 664 0438 (from abroad +44 1484 600 914).

*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: Citibank@shareholders-online.com

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 23 January 2013, should return a completed and signed DRIP mandate form to be received by the Registrar, by no later than 29 December 2012. 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, at www.homeretailgroup.com.

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	14 November 2012
Interim Management Statement	17 January 2013
Interim dividend to be paid	23 January 2013
Full-year trading statement	14 March 2013
Full-year results for the 52 weeks to 2 March 2013	1 May 2013
Final ex-dividend date	22 May 2013
Interim Management Statement	13 June 2013
Final dividend to be paid	24 July 2013