30th Apr 2014 08:54
LONDON (Alliance News) - Home Retail Group PLC Wednesday reported an increase in revenue but a drop in its reported pretax profit for its recent financial year, as it continued to invest in its businesses, especially its plans to transform its Argos retail warehouse stores into a multi-channel retailer.
The home and general merchandise retailer has been pumping money into its Argos business as it plans to reinvent it as a digital retailer and is revamping its home improvement Homebase stores.
The group gave a slightly cautious outlook for the year ahead, citing signs of improving economic conditions in the UK, but said it still expects a subdued consumer environment until the recovery is more broadly based.
Nevertheless, it declared a final dividend of 2.3 pence, raising its full year dividend to 3.3 pence, an increase of 10%, as when stripping out investment costs, profits continued to grow.
For the year ended March 1, the group reported a group "benchmark" pretax profit, which strips out costs such as amortisation of intangibles, store impairment charges and exceptional items of GBP115.4 million, slightly higher than the top end of market expectations, and much higher than the GBP91.1 million it reported the prior year.
The group's reported pretax profit for the year was GBP71.2 million, lower than the GBP120.9 million it recorded a year earlier, as it booked GBP41.4 million in exceptional costs during the period, largely associated with the restructuring of its Argos business, while the year earlier benefited from a gain of GBP31.3 million from the closure of its pension scheme.
Revenues for the year increased 3% to GBP5.66 billion, up 3.5% from GBP5.47 billion the prior year, driven by good performances at both Argos and Homebase, as both businesses delivered positive like-for-like sales growth throughout the year.
The group's gross margin however, continued to be hit by investment, decreasing to 35.9%, from 36.6% the prior year.
"The group expects costs to increase somewhat in future years as it continues to invest in its strategic growth plans. However, the group will continue to seek cost reductions to partially mitigate these increases," Home Retail said in a statement.
Argos, the group's biggest business, increased full-year sales to GBP4.10 billion, up from GBP3.93 billion the prior year, driven by its online business and strong sales of electrical products such as tablets, televisions, white goods and video game systems, which more than offset small declines in furniture, homewares and jewellery.
It said for the full year, online represented 44% of total Argos sales, of which 18% came from mobile commerce sales.
Earlier this year, Home Retail said it was predicting that over half of Argos sales would be made online in the near future, and close to 75% over the next three to five years.
During the year, the group trialled six Argos digital concept stores, where tablet-based browsers replaced in-store catalogues, and focused on fast track product collection and enhanced customer service.
It also continued to expand its product range at Argos with the addition of around 9,000 new lines including extensions of its existing branded product ranges into higher-end models, and the introduction of new brands. Argos now sells around 43,000 lines including about 5,000 exclusively branded lines, it said.
Homebase sales also increased during the year to GBP1.49 billion, up from GBP1.43 billion a year earlier, driven by further growth in big ticket sales and expensive items.
Home Retail continued to progress with its Homebase revamp programme during the year, having completed a further 12 store refits in the period, which it said are delivering sales growth in line with expectations.
"These stores offer more authoritative category merchandising and ranging including several branded concessions, improved kitchen, bathroom and furniture showrooms, a decorating centre and higher levels of customer service," the group said in a statement.
It also said that plans to reduce its Homebase store estate are on track.
During the year, the group launched a next-day delivery proposition at Homebase and said that multi-channel sales grew by 52%.
Home Retail shares were down 0.3% at 205.30 pence Wednesday morning.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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