14th Mar 2007 07:04
Home Retail Group Plc14 March 2007 14 March 2007 Home Retail Group plc Change of year-end As previously announced, Home Retail Group has changed its year-end from acalendar year ended 31 March to a 52 week year ending on the Saturday closest tothe end of February. This will achieve coterminous year-ends across the Groupand avoid distortion in the financial results relating to the timing of Easter. The Group will this year report on a statutory basis the financial period ended3 March 2007. This will include the results for Homebase from 1 March 2006(approximately 12 months) and the results for the rest of the Group from 1 April2006 (approximately 11 months). As previously announced, based on the actualtrading performance for March 2006, it is estimated that the impact of notreporting the period 4 March 2007 to 31 March 2007 on the results for the yearjust ended will be a reduction of approximately £23m in terms of Group benchmarkoperating profit. To assist with analysis and comparison, pro forma results for the 52 weeks to3 March 2007 will be provided as part of the Preliminary Results to be announcedon 2 May 2007. Attached at Appendix 1, we have set out the basis of preparationfor the pro forma restatements. At Appendix 2 and 3, we have provided restatedresults for the 26 weeks to 2 September 2006 and the 52 weeks to 4 March 2006respectively. A summary of the restated pro forma results is as follows: H1 2006/07 pro forma results 6 months to Pro forma 26 weeks to 30 Sept 2006 restatement 2 Sept 2006£mSales 2,819.9 (163.5) 2,656.4Benchmark operating profit 106.9 (5.2) 101.7Net interest income 5.7 (0.2) 5.5Benchmark PBT 112.6 (5.4) 107.2Basic benchmark EPS 8.7p (0.4p) 8.3p FY 2005/06 pro forma results 12 months to Pro forma 52 weeks to 31 March 2006 restatement 4 March 2006£mSales 5,548.0 (37.7) 5,510.3Benchmark operating profit 337.7 (5.9) 331.8Net interest income n/a 9.5 9.5Benchmark PBT n/a 3.6 337.1Basic benchmark EPS n/a n/a 25.6p The timing of trading statements will also change as a result of the newyear-end. At Appendix 4, we have provided trading statement comparables on thenew basis. Enquiries Analysts and investors (Home Retail Group) Richard Ashton Finance Director 01908 600 291Stuart Ford Head of Investor Relations Certain statements made in this announcement are forward looking statements.Such statements are based on current expectations and are subject to a number ofrisks and uncertainties that could cause actual events or results to differmaterially from any expected future events or results referred to in theseforward looking statements. Appendix 1. Basis of preparation for pro forma restatements Reporting periods Home Retail Group previously reported on a calendar year-end to 31 March, withthe Interim Results reported as the six months to 30 September. Within this, toavoid distortion in the financial results relating to the timing of Easter,Homebase was consolidated on a non-coterminous 12 months to 28 February basis.At the Interim Results, Homebase was therefore consolidated on a seven months to30 September basis, with the second half of its financial year comprising only afive month period. FY 2006/07 As a result of the change in year-end, Home Retail Group will this year reporton a statutory basis the financial period ended 3 March 2007. This will includethe results for Homebase from 1 March 2006 (approximately 12 months) and theresults for the rest of the Group from 1 April 2006 (approximately 11 months). FY 2006/07 on a pro forma basis will be the 52 week period commencing5 March 2006 and ending on 3 March 2007; results on this basis will be reportedas part of the Preliminary Results to be announced on 2 May 2007. Therestatement adjustments on the Group apart from Homebase are illustrated asfollows: Statutory c.11 monthsreporting 1 Apr 2006 toperiod 3 Mar 2007 Earlier days 27 daysto be 5-31 Mar 2006included Pro forma 52 weeksreporting 5 Mar 2006 toperiod 3 Mar 2007 For Homebase, the restatement adjustments for FY 2006/07 are illustrated as follows: Statutory c.12 monthsreporting 1 Mar 2006 toperiod 3 Mar 2007 Earlier days 4 daysto be 1-4 Marexcluded 2006 Pro forma 52 weeksreporting 5 Mar 2006 toperiod 3 Mar 2007 H1 2006/07 For comparative purposes, H1 2006/07 on a pro forma basis will be the 26 weekperiod commencing 5 March 2006 and ending on 2 September 2006; the financialresults adjusted to this basis are shown at Appendix 2. The restatementadjustments on the Group apart from Homebase are illustrated as follows: Statutory 6 monthsreporting 1 Apr 2006 toperiod 30 Sept 2006 Earlier days 27 daysto be 5-31 Mar 2006included Later days 28 daysto be 3-30 Sept 2006excluded Pro forma 26 weeksreporting 5 Mar 2006 toperiod 2 Sept 2006 For Homebase, the restatement adjustments for H1 2006/07 are illustrated asfollows: Statutory 7 monthsreporting 1 Mar 2006 toperiod 30 Sept 2006 Earlier days 4 daysto be 1-4excluded Mar 2006 Later days 28 daysto be 3-30 Sept 2006excluded Pro forma 26 weeksreporting 5 Mar 2006 toperiod 2 Sept 2006 FY 2005/06 For comparative purposes, FY 2005/06 on a pro forma basis will be the 52 weekperiod commencing 6 March 2005 and ending on 4 March 2006; the financial resultsadjusted to this basis are shown at Appendix 3. The restatement adjustments onthe Group apart from Homebase are illustrated as follows: Statutory 12 monthsreporting 1 Apr 2005 toperiod 31 Mar 2006 Earlier days 26 daysto be 6-31 Mar 2005included Later days 27 daysto be 5-31 Mar 2006excluded Pro forma 52 weeksreporting 6 Mar 2005 toperiod 4 Mar 2006 For Homebase, the restatement adjustments for FY 2005/06 are illustrated asfollows: Statutory 12 monthsreporting 1 Mar 2005 toperiod 28 Feb 2006 Earlier days 5 daysto be 1-5excluded Mar 2005 Later days 4 daysto be 1-4 Marincluded 2006 Pro forma 52 weeksreporting 6 Mar 2005 toperiod 4 Mar 2006 Central Activities Central Activities represents the cost of central corporate functions. As partof GUS, Home Retail Group was not recharged for these types of costs, howeverfor the purposes of preparing demerger financial information, an approximationwas made of the amount of GUS corporate head office costs to apportion to HomeRetail Group. These apportioned costs were not representative of either thehistorical costs Home Retail Group would have incurred or the costs it willincur going forward. As part of the pro forma restatements, Home Retail Group has thereforeapproximated the additional costs of central corporate functions it would haveincurred over and above that apportioned to it by GUS. This has been done on thebasis it had operated as a standalone plc through the periods being restated. Capital structure and net interest As part of the demerger, Home Retail Group was allocated pro forma net debt asat 31 March 2006 of £200m. For the purposes of preparing pro forma results, netinterest income has been calculated to illustrate the impact on the Group'sfinancial performance as if this capital structure had existed at 31 March 2006and had been achieved based on the underlying cash flows prior to 31 March 2006.The additional net interest costs attributable to the actual GUS capitalstructure that was in place over the periods are shown separately. Other income statement items Other non-trading income statement items have not been restated as they are notimpacted by the change of year-end. These are principally exceptional items,financing fair value remeasurements and the financing impact on retirementbenefit balances. Appendix 2. Restatement of H1 2006/07 6 months to Pro forma 26 weeks to 30 Sept 2006 restatement 2 Sept 2006 Argos 1,794.1 (40.5) 1,753.6Homebase 979.1 (122.3) 856.8Financial Services 46.7 (0.7) 46.0 ________________________________________Sales 2,819.9 (163.5) 2,656.4 Cost of sales (1,851.2) 94.8 (1,756.4) ________________________________________Gross profit 968.7 (68.7) 900.0 Operating expenses before exceptional items (861.8) 63.5 (798.3) Argos 72.4 (6.0) 66.4Homebase 40.8 1.1 41.9Financial Services 4.1 (0.4) 3.7Central Activities (10.4) 0.1 (10.3) ________________________________________Pro forma benchmark operating profit 106.9 (5.2) 101.7 Pro forma net interest income (note 1) 5.7 (0.2) 5.5Share of post-tax results of - - -associates ________________________________________Pro forma benchmark PBT 112.6 (5.4) 107.2 ==========Net interest costs attributable to GUScapital structure (note 1) (35.7) - (35.7) ________________________________________Benchmark PBT 76.9 (5.4) 71.5 Exceptional items (16.4) - (16.4)Financing fair value remeasurements (0.9) - (0.9)Financing impact on retirement benefit balances 6.6 - 6.6 ________________________________________Profit before tax 66.2 (5.4) 60.8 Taxation (24.9) 1.8 (23.1)of which: taxation attributable topro forma benchmark PBT (36.6) 1.8 (34.8) ________________________________________Profit for the period 41.3 (3.6) 37.7___________________________________________________________________________________Pro forma basic benchmark EPS 8.7p (0.4p) 8.3p Basic benchmark EPS 5.9p (0.4p) 5.5p Basic EPS 4.8p (0.5p) 4.3p Number of ordinary shares for basic EPS 869.0m - 869.0m___________________________________________________________________________________ Note 1: net interest Pro forma net interest expense (2.6) (0.5) (3.1)Financing costs charged to Financial Services 8.3 0.3 8.6 ________________________________________Pro forma net interest income 5.7 (0.2) 5.5 Interest costs attributable to GUS capital structure (35.7) - (35.7) ________________________________________Total net interest expense charged inbenchmark PBT (30.0) (0.2) (30.2) Financing fair value remeasurements (0.9) - (0.9)Financing impact on retirement benefit 6.6 - 6.6balances ________________________________________Income statement net financing costs (24.3) (0.2) (24.5) ________________________________________ Appendix 3. Restatement of FY 2005/06 12 months to Pro forma 52 weeks to 31 March 2006 restatement 4 March 2006 Argos 3,892.6 (33.8) 3,858.8Homebase 1,561.8 (2.8) 1,559.0Financial Services 93.6 (1.1) 92.5 ________________________________________Sales 5,548.0 (37.7) 5,510.3 Cost of sales (3,686.5) 31.9 (3,654.6) ________________________________________Gross profit 1,861.5 (5.8) 1,855.7 Operating expenses before exceptional items (1,523.8) (0.1) (1,523.9) Argos 296.0 1.0 297.0Homebase 51.8 (0.4) 51.4Financial Services 6.1 - 6.1Central Activities (16.2) (6.5) (22.7) ________________________________________Pro forma benchmark operating profit 337.7 (5.9) 331.8 Pro forma net interest income (note 1) n/a 9.5 9.5Share of post-tax results of associates (4.2) - (4.2) ________________________________________Pro forma benchmark PBT n/a 3.6 337.1 Net interest costs attributable to GUScapital structure (note 1) (31.3) (9.6) (40.9) ________________________________________Benchmark PBT 302.2 (6.0) 296.2 Exceptional items (24.7) - (24.7)Financing fair value remeasurements (2.4) - (2.4)Financing impact on retirement benefit balances 2.6 - 2.6 ________________________________________Profit before tax 277.7 (6.0) 271.7 Taxation (96.9) 2.0 (94.9)of which: taxation attributable to pro forma benchmark PBT n/a n/a (114.5) Profit for the period 180.8 (4.0) 176.8 ________________________________________ ___________________________________________________________________________________Pro forma basic benchmark EPS n/a n/a 25.6p Basic benchmark EPS 22.8p (0.5p) 22.3p Basic EPS 20.8p (0.5p) 20.3p Number of ordinary shares for basic EPS 869.0m - 869.0m___________________________________________________________________________________ Note 1: net interest Pro forma net interest expense n/a (8.3) (8.3)Financing costs charged to Financial Services n/a 17.8 17.8 ________________________________________Pro forma net interest income n/a 9.5 9.5 Interest costs attributable to GUS capital structure (49.2) 8.3 (40.9)Financing costs charged to Financial Services 17.9 (17.9) - ________________________________________Net interest costs attributable to GUScapital structure (31.3) (9.6) (40.9) ________________________________________Total net interest expense charged inbenchmark PBT (31.3) (0.1) (31.4) Financing fair value remeasurements (2.4) - (2.4)Financing impact on retirement benefit balances 2.6 - 2.6 ________________________________________Income statement net financing costs (31.1) (0.1) (31.2) ________________________________________ Appendix 4. Restatement of trading statement comparables Q1 13 weeks to 3 June 2006ArgosSales £855mLike-for-like change in sales 6.1%Net new space contribution to sales change 8.0% _____________Total sales change 14.1% _____________Guidance on gross margin movement Down c.100bps HomebaseSales £441mLike-for-like change in sales (4.7%)Net new space contribution to sales change 3.6% _____________Total sales change (1.1%) _____________Guidance on gross margin movement Up c.200bps Q2 H1 13 weeks to 26 weeks to 2 Sept 2006 2 Sept 2006ArgosSales £899m £1,754mLike-for-like change in sales 4.5% 5.1%Net new space contribution to sales change 6.3% 6.9% _______________ _____________Total sales change 10.8% 12.0% _______________ _____________Guidance on gross margin movement Down c.100bps Down c.100bps HomebaseSales £416m £857mLike-for-like change in sales (1.5%) (3.2%)Net new space contribution to sales change 4.6% 4.1% _______________ _____________Total sales change 3.1% 0.9% _______________ _____________Guidance on gross margin movement Up c.150bps Up c.200bps Q3 YTD 18 weeks to 44 weeks to 6 Jan 2007 6 Jan 2007ArgosSales £1,873m £3,627mLike-for-like change in sales (0.1%) 2.5%Net new space contribution to sales change 4.5% 5.6% _______________ _____________Total sales change 4.4% 8.1% _______________ _____________Guidance on gross margin movement Up c.50bps Down c.25bps HomebaseSales £519m £1,376mLike-for-like change in sales (2.8%) (3.0%)Net new space contribution to sales change 3.0% 3.6% _______________ _____________Total sales change 0.2% 0.6% _______________ _____________Guidance on gross margin movement Up c.350bps Up c.250bps Q4 H2 FY 8 weeks to 26 weeks to 52 weeks to 3 Mar 2007 3 Mar 2007 3 Mar 2007ArgosSales £537m £2,410m £4,164mLike-for-like change in sales 3.0% 0.8% 2.4%Net new space contribution to sales change 3.8% 4.4% 5.5% ____________ ____________ ____________Total sales change 6.8% 5.2% 7.9% ____________ ____________ ____________Guidance on gross margin movement Up c.50bps Up c.50bps c.0 bps HomebaseSales £218m £737m £1,594mLike-for-like change in sales 9.9% 0.6% (1.4%)Net new space contribution to sales change 3.4% 3.1% 3.6% ____________ ____________ ____________Total sales change 13.3% 3.7% 2.2% ____________ ____________ ____________Guidance on gross margin movement Up c.500bps Up c.400bps Up c.300bps This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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