HRG announces half year results

Home Retail Group, the UK’s leading home and general merchandise retailer, today announces its results for the 26 weeks to 27 August 2011.

As anticipated, HRG’s pre-tax profit has declined by 70% to £28.3 million, with total sales down by 6% to £2.6 billion.

Argos reported a 94% drop in operating profit for the 26 week period to 27th August 2011, while sister company Homebase saw operating profit decline by 35% to £29.9 million.

Argos reported sales of £1.7 billion – down 7.6% – with like-for-like sales dropping by 9.1%, attributed to a decline in sales of consumer electronics. Homebase’s total sales were down by 1.8% to £80 million, with flat like-for-like sales.

The financial release coincides with the revelation that HRG is entering the Chinese market in partnership with Haier Group – a home appliance manufacturing company. The joint venture will involve a ‘multi-channel, general merchandise retail business’, according to an HRG statement.

OPERATING HIGHLIGHTS:

1) Continued leadership in multi-channel retailing, driven by further investment initiatives in both businesses and the continued growth of internet penetration supported by Check & Reserve.

2) Investment plans progressing at Argos:
- Store refurbishment delivering sales uplifts ahead of plan
- Launch of the Argos TV shopping channel
- Range extension into children’s books, children’s and adult clothing and gifting

3) Homebase gained market share and further developed its home enhancement proposition:
- Expanding exclusive product brand strategy
- Developing ranges across big ticket categories
- Award winning installation services with customer recommendation rate in excess of 90%

4) Acquired the exclusive use of the Habitat brand.

5) Joint venture to commence multi-channel retail operation in China separately announced today.

FINANCIAL HIGHLIGHTS:

- Sales down 6% to £2,568m
- Cash gross margin down 7% to £970m
- Benchmark operating profit down 72% to £27m; Group operating margin of 1.0%
- Benchmark profit before tax down 70% to £28m
- Basic benchmark earnings per share down 68% to 2.5p
- Reported profit before tax of £29m; reported basic earnings per share of 2.6p
- Closing net cash position of £200m
- Interim dividend maintained at 4.7p
- Operating and distribution costs were broadly flat at £944m, reflecting further cost savings offsetting the impact of both underlying cost inflation pressures and the investment in new initiatives

Terry Duddy, Chief Executive of Home Retail Group, commented:

“Homebase delivered another robust performance in its peak trading period. Core customers at Argos have continued to be under greater pressure and there were ongoing challenging conditions across several product categories, most notably consumer electronics.

“As we now enter our busiest trading period market conditions remain both weak and volatile, and in these early weeks of the second half we have not seen the improvement in sales that we had anticipated. We are well positioned operationally and we will continue to shape the future of shopping for our customers, ensuring we bring unrivalled convenience and value to customers’ every day lives, whether shopping at home or on the move.”

Source: HRG Press Release
www.homeretailgroup.com/home/media/hrg/news/2011/2011-10-19