21st Nov 2006 07:02
Home Retail Group Plc21 November 2006 21 November 2006 Home Retail Group plc Interim Results Home Retail Group, the UK's leading home and general merchandise retailer, todayannounces its Interim Results for the six months ended 30 September 2006. Theseresults reflect the fact that it was wholly owned by its former parent company,GUS plc, throughout the period under review and continued to be so until thedemerger became effective on 10 October 2006. These results are not thereforerepresentative of the capital structure that Home Retail Group operated underfrom the date the demerger occurred. Certain pro forma information has beenprovided to illustrate the effect of the demerger on Home Retail Group. Group operating highlights * Strong growth in consumer electronics, furniture and kitchens * Capitalising on extensive product portfolio and market leadership; Extension of Argos "Home" catalogue and Homebase "big book of home furnishings" trials * Further supply chain benefits delivered through the leverage of group scale * Increased customer reach with 31 new stores opened across the Group * Multi-channel leadership enhancing growth; Argos Internet orders now representing 15% of its total sales; multi-channel skills being leveraged to support the Homebase proposition Financial highlights * Sales up 8% to £2,820m (2005: £2,618m) * Benchmark operating profit1 up 2% to £106.9m (2005: £105.3m); reported operating profit of £90.5m * Pro forma benchmark profit before tax2 of £112.6m; reported profit before tax of £66.2m * Pro forma basic benchmark earnings per share3 of 8.7p; reported basic earnings per share of 4.8p * Interim dividend of 4.0p per Home Retail Group share Oliver Stocken, Chairman of Home Retail Group, commented: "We are delighted that our successful demerger has created the opportunity forinvestors to invest directly in what we believe is an extremely well-positionedand focused business. In particular, I would like to welcome some 30,000employees as new shareholders in their business." Terry Duddy, Chief Executive Officer of Home Retail Group, commented: "Home Retail Group has delivered a good performance in the first half against abackdrop of challenging conditions in some of our markets. While we remaincautious on the short-term outlook for UK consumer spending, we will continue todrive our businesses forward for long-term growth. We have set out a clearstrategy to achieve this, including leveraging the strength and breadth of ourproduct offering and our unique multi-channel skills." 1. Benchmark operating profit is defined as operating profit beforeamortisation of acquisition intangibles, store impairment charges, exceptionalitems and costs related to demerger incentive schemes. 2. Benchmark profit before tax ("PBT") is defined as profit beforeamortisation of acquisition intangibles, store impairment charges, exceptionalitems, costs related to demerger incentive schemes, financing fair valueremeasurements, financing impact on retirement benefit balances and attributabletaxation. It includes Home Retail Group's share of post-tax results ofassociates. Pro forma benchmark PBT for the six months ended 30 September 2006 is alsopresented to illustrate the impact on the Group's financial performance as ifthe demerger capital structure had existed from 1 April 2006. 3. Basic benchmark earnings per share ("EPS") is defined as Benchmark PBTless taxation attributable to Benchmark PBT, divided by the number of shares inissue at the date of demerger (excluding Home Retail Group shares that will beheld in its Employee Share Ownership Trust ("ESOT")). Pro forma benchmark EPS for the six months ended 30 September 2006 is alsopresented to illustrate the impact on the Group's financial performance as ifthe demerger capital structure had existed from 1 April 2006. Enquiries Analysts and investors (Home Retail Group)Richard Ashton Finance Director 01908 600 291Stuart Ford Head of Investor Relations Press (Finsbury)Rupert Younger 020 7251 3801Rollo Head There will be a presentation today at 8.30am to analysts and investors at KingEdward Hall, Merrill Lynch Financial Centre, 2 King Edward Street, LondonEC1A 1HQ. The presentation can be viewed live on the Home Retail Group websitewww.homeretailgroup.com. The supporting slides and an indexed replay will alsobe available on the website later in the day. Home Retail Group's Third Quarter Trading Update will be on 17 January 2007. 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. Page 2 FINANCIAL SUMMARY Sales (£m) Profit (£m) Six months ended 30 September 2006 2005 2006 2005* Argos 1,794.1 1,608.6 72.4 59.2 Homebase 979.1 966.0 40.8 52.4 Financial Services 46.7 43.6 4.1 3.5 Central Activities - - (10.4) (9.8) Sales and benchmark operating profit 2,819.9 2,618.2 106.9 105.3 Pro forma net interest income# 5.7 n/a Share of post-tax results of associates - - Pro forma benchmark PBT 112.6 n/a Net interest costs attributable to GUS capital structure# (35.7) (18.9) Benchmark PBT 76.9 86.4 Exceptional items (16.4) (11.9) Financing fair value remeasurements (0.9) (3.7) Financing impact on retirement benefit balances 6.6 1.0 Profit before tax 66.2 71.8 Taxation attributable to benchmark PBT (25.9) (30.2) Other taxation 1.0 4.4 Profit for the period 41.3 46.0 Pro forma basic benchmark EPS 8.7p n/a Basic benchmark EPS 5.9p 6.5p Basic EPS 4.8p 5.3p Number of ordinary shares for the purpose of basic EPS 869.0m 869.0m Financial information in the above table and throughout this announcement hasbeen prepared in accordance with the basis of preparation as set out in note 1on page 18. * 2005 benchmark operating profit has been restated to reflect clearer IFRSinterpretation on certain issues and the resegmentation of Central Activities.See Appendix 1 for details. # As part of the demerger, Home Retail Group was allocated pro forma net debt asat 31 March 2006 of £200m. For the six months ended 30 September 2006, pro formanet interest income has therefore been calculated to illustrate the impact onthe Group's financial performance as if this capital structure had existed from1 April 2006. The additional net interest costs attributable to the actual GUScapital structure that was in place for the six months ended 30 September 2006are shown separately. Page 3 FINANCIAL SUMMARY (Continued) Sales up 8% to £2,820m, reflecting growth of 12% at Argos and 1% at Homebase. Benchmark operating profit up 2% to £106.9m, comprising a £13m increase at Argos(a £2m increase adjusting for £11m of one-off costs incurred in the first halflast year), offset by the impact of continued difficult trading conditions atHomebase which saw its benchmark operating profit reduced by £12m. Pro forma benchmark PBT of £112.6m, being benchmark operating profit aftercrediting only the calculated net interest income reflective of being allocatedpro forma net debt as at 31 March 2006 of £200m. Reported profit before tax of£66.2m. An effective tax rate based on pro forma benchmark PBT of 32.5%. This reflectsan estimate of the effective tax rate for the financial year as if the pro formacapital structure had existed from 1 April 2006. Effective tax rate based onbenchmark PBT of 33.7%. Reported effective tax rate of 37.6%. Pro forma basic benchmark EPS of 8.7p. Basic benchmark EPS of 5.9p. Basic EPS of4.8p. All basic EPS figures have been calculated using 869.0m shares, being HomeRetail Group's number of shares in issue on demerger (877.4m), less the numberof shares that will be held in Home Retail Group's ESOT (8.4m). Interim dividend of 4.0p per Home Retail Group share announced. Net cash of £34.4m at 30 September 2006. This reflects the seasonality of cashflows from the allocated pro forma net debt as at 31 March 2006 of £200m,together with an improved working capital position. Change of financial year-end from 31 March to end of February. This will alignyear-end reporting dates across the rest of the Group to that of Homebase, whichalready has an end of February year-end to avoid distortions in its financialresults relating to the timing of Easter. Page 4 DIVISIONAL REVIEWS Argos Six months ended 30 September 2006 2005* Sales (£m) 1,794.1 1,608.6 Benchmark operating profit (£m) 72.4 59.2 Benchmark operating margin 4.0% 3.7% Like-for-like change in sales 4.6% (2.7%) New space contribution to sales change 6.9% 6.3% Total sales change 11.5% 3.6% Benchmark operating profit change 22% (38%) Number of stores at period end 673 636 Of which Argos Extra stocked-in 218 167 * 2005 benchmark operating profit has been restated as set out in Appendix 1. As the UK's leading general merchandise retailer, Argos provides a highlysuccessful and unique offer of choice, value and convenience. Argos - operational review Increased choice through Argos Extra continues to benefit sales growth. Argoshas around 17,000 product lines available nationally across all stores andchannels following last year's national roll-out of Argos Extra. The Extraranges contributed approximately 2% to like-for-like growth in the half, asawareness of the wider offering continued to build. 218 stores now stock-in theadditional products, up from 167 last year, with all remaining stores offeringcustomers the option to either order-in for later collection from store or tohave goods delivered direct to home. Extension of the separate "Home" catalogue trial. In response to the encouragingearly performance, Argos has extended its trial to now include approximately 200stores. The second edition has 340 pages and contains over 3,000 products,presenting furniture and home accessories in a more aspirational way. In thelatest Home catalogue, increased emphasis has been given to housewares,including new sections for bathroom and kitchen ranges. Argos continues to lower prices for consumers. An overall price reduction onreincluded lines has continued in the latest edition of the Argos catalogue,despite the impact of increases in certain raw material prices, particularlygold. In addition, Argos also typically lowers around 20% of prices during thelife of a catalogue and communicates this through its "non stop price drop"messaging. The Argos promotional programme includes flyers and brochures beingdistributed typically to around seven million homes a month to communicatecurrent deals and permanent price drops. Argos has added a second national direct importing distribution centre. This700,000 square foot facility opened in June and will build up to full capacityover the next 18 months. Page 5 Store portfolio growth to improve customer reach continues. There were 20 storeopenings and 4 store closures during the half, bringing the total at the end ofthe period to 673 stores. The sales growth contribution from net new stores was7%, of which 2% came from last year's 33 acquired Index stores; the Index storeshave now all been trading for over a year. Of the 20 store openings, one was arelocation, 7 were in new catchments with the remaining 12 being additionalstores in an existing catchment. Argos expects to open a further 10 to 15 storesduring the second half, in line with its ongoing plan to open around 30 stores ayear. Argos' unique fully-integrated multi-channel capability continues to driveconvenience for its customers. Check and Reserve is Argos' fastest growingchannel segment and gives customers the flexibility to reserve products by phoneor the Internet for later collection in store. Check & Reserve grew by over 50%and represented 10% of total sales in the first half. A further 8% of totalsales were ordered over the Internet for delivery to home via Argos Direct,growing by over 40% on the same period last year. Argos Direct represented 25%of total sales, with orders placed in store for later home delivery representingapproximately half of all Argos Direct orders. Argos continues to increase convenience for customers with developments to itsproposition. Average sales participation in stores with kiosks is nowapproximately 12%. With around 250 kiosks being added in readiness for peaktrading, there will be over 1,000 in operation by Christmas. Argos - financial review Sales in the first half of the financial year increased by 11.5% in total. Ofthis, 6.9% came from new space while like-for-like sales increased by 4.6%. Thelike-for-like performance was boosted by very strong growth in the lead up toand during the World Cup, with sales of flat panel TV packages and set top boxesgrowing particularly strongly. Video game systems and bedroom furnitureperformed well throughout the period. In the later months there was also stronggrowth in child safety and other nursery-related lines, while sales of seasonalproducts grew strongly with warmer weather. This overall strong sales performance in the half was, however, substantiallyoffset by a related reduction in gross margin particularly in the earlier monthsof the period. This was driven by the shift in the product mix and by thepopularity of Argos' promotional offers, partially countered by the benefitsobtained from ongoing supply chain initiatives. Benchmark operating profit in the half was £72.4m, a £13.2m growth on theprevious year. However, there were £11m of one-off charges incurred in the firsthalf of last year relating to the transitional costs of the Index acquisitionand restructuring costs associated with changing staffing arrangements in-store.Excluding these, benchmark operating profit grew 3%. Underlying operating costinflation was about 4%, net of cost saving initiatives. A further 7% growth inoperating costs (excluding the £11m of one-off charges) reflects the directcosts of higher sales, new space including the incremental operating costs ofthe acquired Index stores, and additional supply chain infrastructure. Page 6Homebase Seven months ended 30 September 2006 2005* Sales (£m) 979.1 966.0 Benchmark operating profit (£m) 40.8 52.4 Benchmark operating margin 4.2% 5.4% Like-for-like change in sales (2.7%) (3.7%) New space contribution to sales change 4.1% 2.6% Total sales change 1.4% (1.1%) Benchmark operating profit change (22%) (36%) Number of stores at period end 305 293 Of which contain a mezzanine floor 158 134 * 2005 benchmark operating profit has been restated as set out in Appendix 1. Homebase is successfully executing its strategy to position itself as the UK'sleading home enhancement retailer despite challenging conditions in its market. Homebase - operational review Homebase continues to differentiate itself further from its competitors with anenhanced and extended home furnishings offer. The 90 page Furniture Extra homedelivery catalogue has over 700 lines and is available in all stores, witharound 190 stores now having an edited product display. A new extended 270 pagecatalogue, the Homebase "big book of home furnishings", features the FurnitureExtra ranges plus a further 180 pages of wider home enhancement productcategories. With the trial now rolled out to 100 stores, the catalogue presentsto customers room settings, design themes and style-led coordination acrossnumerous Homebase product categories. The initiative is also a further exampleof leveraging the existing sourcing and supply chain skills of Home RetailGroup. Trials have begun to roll out the proven home enhancement offering throughoutthe Homebase chain. The development of new product ranges and the expansion ofspace through mezzanines are delivering returns above Home Retail Group'sinvestment hurdle rate. The opportunity remains to provide a comprehensive andcompelling set of merchandise ranges in a consistent manner throughout the storeportfolio. Around one third of the portfolio has received minimal or no storerefurbishment investment for a number of years. Initial trials have thereforerecently begun to review how best to reconfigure space for additional ranges andimprove customer perception in these stores. Homebase continues to add new space to improve customer reach and enhance theproduct offering. Including two store relocations, Homebase opened 11 new storesand closed 3, bringing the total at the end of the period to 305 stores. Themajority of the new stores were of a smaller store format in new catchments.Homebase expects to open approximately 5 stores during the second half, in linewith its ongoing plan to open around 15 stores a year. Page 7 At 30 September, 158 stores had a mezzanine floor, an increase of 14 over theperiod. Four mezzanines were added to existing stores, with the balance comingfrom the new store opening programme. Homebase - financial review Sales in the seven months ended 30 September increased by 1.4% in total, ofwhich 4.1% came from new stores. Like-for-like sales declined by 2.7%. Sales offurniture and kitchens showed strong growth throughout the period, while coreDIY and decorating ranges remained weak. The improvement in sales in the latermonths of the period was largely driven by warmer weather encouraging purchasesof seasonal categories, particularly air conditioning and horticulture. As planned, gross margin was ahead of the previous year due to a reduced levelof promotional activity in the earlier months of the period, together with thebenefits obtained from supply chain initiatives. Benchmark operating profit in the period was £40.8m, an £11.6m decline on theprevious year. Underlying operating cost inflation, net of cost savinginitiatives, was about 4%, with a further 4% of cost growth reflectingadditional investment largely in new space. Page 8 Financial Services Six months ended 30 September 2006 2005 Sales (£m) 46.7 43.6 Benchmark operating profit before financing costs 12.4 12.5 Financing costs (8.3) (9.0) Benchmark operating profit (£m) 4.1 3.5 Store card gross receivables (£m) 394 356 Personal loans gross receivables (£m) 38 78 Financial Services works in conjunction with Argos and Homebase to provide theircustomers with the most appropriate credit offers to drive product sales, whileretaining the maximum possible profit from the transaction within Home RetailGroup. Credit offers are supporting initiatives in the retail businesses such asthe trial of the "Home" catalogue in Argos and growing kitchen sales inHomebase. Store card gross receivables grew by £38m versus 12 months ago (£16m in thehalf), driven by further success of 'buy now pay later' credit offers. The storecards funded approximately 8% of Group retail sales. The continued planned run-off in personal loans saw a £40m reduction in grossreceivables over the last 12 months (£17m in the half). This therefore offsetthe growth in the store card receivables, resulting in the total combinedreceivables being broadly unchanged. Growth in benchmark operating profit before financing costs was held back by anincrease in bad debt provisioning reflecting conditions seen across theindustry. The financing cost charged to Financial Services cost of sales reducedslightly as a result of the total gross receivables being at a lower averagelevel half-on-half. Page 9 Central Activities Six months ended 30 September 2006 2005* Central Activities (£m) (10.4) (9.8) * 2005 Central Activities have been derived as set out in Appendix 1. Central Activities represents the cost of central corporate functions. As partof GUS Group, Home Retail was not historically recharged for these types ofcosts, but for the purposes of preparing this financial information, anapproximation was made of the amount of shared corporate head office costsattributable to Home Retail which have been charged to it by GUS. These costswere affected by the historic arrangements in the GUS Group and are nottherefore representative of the costs going forward. In addition, annual costs of £5m have been transferred from Argos to CentralActivities for the year ended 31 March 2006, of which £2.5m was transferred inthe first half. Pro forma net interest costs Six months ended 30 September 2006 2005 Pro forma net interest expense (2.6) n/a Financing costs charged to Financial Services cost of 8.3 9.0 sales Pro forma net interest income 5.7 n/a Net interest costs of capital structure under GUS (35.7) (18.9) Total net interest expense charged in benchmark PBT (30.0) (18.9) Financing fair value remeasurements (0.9) (3.7) Financing impact on retirement benefit balances 6.6 1.0 Income statement net financing costs (£m) (24.3) (21.6) For the purposes of arriving at benchmark PBT, the financing impact onretirement benefit balances is now excluded. The ongoing accounting charge,which Home Retail Group believes to be a fairer reflection of the cost ofproviding retirement benefits, is already reflected in benchmark operatingprofit. Pro forma net interest income in the six months ended 30 September was £5.7m.This reflects £2.6m of estimated net interest expense on Home Retail Group's netdebt/cash position on the basis of a pro forma allocation of £200m net debt asat 1 April 2006. Against this is the credit of £8.3m reflecting the financingcosts charged within Financial Services' benchmark operating profit. Page 10 OTHER INCOME STATEMENT ITEMS Exceptional items As disclosed in the demerger documentation, demerger-related costs of around£15m are expected to be incurred by Home Retail Group. These include costs inrelation to early vesting of GUS plc share incentive schemes, banking set-upfees and other professional fees. £9.1m of this has been charged in the firsthalf of this year, with the remainder expected to be incurred in the secondhalf. An additional exceptional cost on demerger of £7.3m in relation to the waiver ofa loan due from Experian has also been taken in the first half of this financialyear. Financing fair value remeasurements Changes in the fair value of certain derivative instruments are recognised inthe income statement within net financing costs. These amounted to charges of£0.9m (2005: £3.7m). Financing impact on retirement benefit balances The credit through net financing costs in respect of the excess of expectedreturn on retirement benefit assets over the interest expense on retirementbenefit liabilities amounted to £6.6m in the period (2005: £1.0m). The increasein the credit is principally as a result of the actuarial valuation of thedefined benefit retirement schemes moving into modest surplus as a result of thespecial contribution of £100m which occurred in March 2006. Taxation The effective tax rate based on pro forma benchmark PBT is 32.5%. This reflectsan estimate of the effective tax rate for the financial year assuming the proforma capital structure of £200m net debt had existed from 1 April 2006.Taxation attributable to pro forma benchmark PBT for the six months ended 30September 2006 is £36.6m. The effective tax rate based on benchmark PBT is 33.7% (2005: 35.0%),representing a tax expense of £25.9m (2005: £30.2m). The reported effective tax rate is 37.6% (2005: 35.9%), representing a total taxexpense of £24.9m (2005: £25.8m). Page 11 NUMBER OF SHARES AND EARNINGS PER SHARE As previously announced, on demerger Home Retail Group was admitted to theOfficial List and to trading on the London Stock Exchange's market for listedsecurities with 877.4m issued ordinary shares. The number of shares for the purpose of calculating earnings per share in bothperiods has been taken as the number of shares in issue at the date of demerger,excluding 8.4m ordinary shares that will be held in Home Retail Group's ESOT. The calculation of diluted EPS reflects the potential dilutive effect ofemployee share incentive schemes in place post demerger. This increases thenumber of shares for diluted EPS purposes by 7.6m. DIVIDENDS As indicated at the time of demerger, a policy whereby the full year dividend isordinarily covered at least twice by basic benchmark EPS has been established bythe Board. For the current financial year, cover will be based on pro formabenchmark EPS. An interim dividend of 4.0p is today being announced and will be paid on 24January 2007 to shareholders on the register at the close of business on 15December 2006. Interim dividend payments are ordinarily expected to be approximately one-thirdof the anticipated full year dividend. However, for the current financial year,the final dividend payment will reflect the change of year end and the fact thatthe Group will report an approximate eleven month period. CASH FLOW AND NET DEBT As part of the demerger, Home Retail Group was allocated pro forma net debt of£200m as at 31 March 2006. Cash flows from operating activities (before incurring outflows related tointerest, tax, investing and financing activities) were £392.1m in the period(2005: £193.7m). Cash generation in the first half is consistent with normalcash flow characteristics of the Group, but in the first half of this year hasadditionally benefited from good management of working capital and thedifference in timing of Easter on the Group's 1 April opening balance sheetpositions. There has also been a lower level of capital expenditure at £90.1m in the period(2005: £144.0m). Movement in net debt was an inflow of £234.4m from the pro forma net debt of£200m as at 31 March 2006. It is expected that an element of this movement willreverse in the second half. Page 12 CHANGE OF YEAR END Homebase currently has a 28 February year-end to avoid distortions in itsfinancial results relating to the timing of Easter. This is non-coterminous withthe 31 March year-end for the rest of the Group. Home Retail is thereforechanging its financial year-end from 31 March to the end of February withimmediate effect to align year-end reporting dates across the Group. Home Retailwill also move to reporting on a 52 week financial year basis ending on theSaturday closest to the end of February. The Group will therefore report the financial period ended 3 March 2007. Thiswill include the results for Homebase from 1 March 2006 (approximately12 months) and the results for the rest of the Group from 1 April 2006(approximately 11 months). Based on Argos' actual trading performance for thefour week period over March 2006, it is estimated that the impact of notreporting the result for the period 4 March 2007 to 31 March 2007 on the resultsfor the current year will be a reduction of £25m in terms of benchmark operatingprofit. In addition, the cost of Central Activities will be approximately £2mlower than on a full year basis. The impact on the rest of the Group will not bematerial. To assist with analysis and comparison, sales and profits for the 52 weeks to3 March 2007 will be provided as part of the Preliminary Results to be announcedon 2 May 2007. In advance of this, as part of the Second Half Trading Update,Home Retail Group will also provide sales and profits for the 52 weeks to 4March 2006 and the 26 weeks to 2 September 2006. Trading Updates are expected to be provided covering the 14 weeks to 6 January2007 on 17 January 2007, and the 22 weeks to 3 March 2007 on 14 March 2007. Page 13 Appendix 1. Restatement of benchmark operating profit for the six months ended30 September 2005 As reported Lease Depreciation Central Restated November 2005 adjustment1 adjustment2 Activities3 £m Argos 57.3 (0.6) - 2.5 59.2Homebase 48.1 - 4.3 - 52.4FS 3.5 - - - 3.5 Sub-total 108.9 (0.6) 4.3 2.5 115.1 Central Activities3:- GUS apportionment (7.3)- Argos transfer (2.5) (9.8) Total 105.3 1 As previously announced at the full year results in May 2006, benchmarkoperating profit was reduced as a result of clearer IFRS interpretationregarding certain elements of lease accounting, namely the treatment ofGuaranteed Rental Uplifts payable on certain leased premises. The full yearadjustment was a charge of £1.2m and the equivalent adjustment required for thefirst six months of last year was a charge of £0.6m. 2 As previously announced at the full year results in May 2006, there was alower depreciation charge in Homebase as a result of clearer IFRS interpretationregarding store impairment on transition to IFRS at 1 April 2004. The equivalentadjustment required for the first seven months of last year was a lowerdepreciation charge of £4.3m. 3 As disclosed in the demerger prospectus in September 2006, an approximationwas made of the amount of GUS shared corporate head office costs attributable toHome Retail Group. For the year ended 31 March 2006, these were £11.2m. For thesix months ended 30 September 2005 they were £7.3m. Additionally, it was disclosed that £5m of annual costs previously incurred byArgos would be transferred to Central Activities. The equivalent adjustmentrequired for the first six months of last year was £2.5m. Page 14 HOME RETAIL GROUP PLC UNAUDITED COMBINED FINANCIAL INFORMATION COMBINED INCOME STATEMENTFor the six months ended 30 September 2006 Year to Six months Six months to to 31.3.06 30.9.06 30.9.05 £m Notes £m £m 5,548.0 Revenue 4 2,819.9 2,618.2(3,686.5) Cost of sales (1,851.2) (1,723.5) 1,861.5 Gross profit 968.7 894.7 (1,523.8) Operating expenses before exceptional items (861.8) (789.4) (24.7) Exceptional items 5 (16.4) (11.9)(1,548.5) Total operating expenses (878.2) (801.3) 313.0 Operating profit 4 90.5 93.4 (31.1) Net financing costs 6 (24.3) (21.6) (4.2) Share of post-tax results of associates - - 277.7 Profit before tax 66.2 71.8 (96.9) Total tax expense 7 (24.9) (25.8) 180.8 Profit for the period attributable to equity 41.3 46.0 shareholders pence Earnings per share 8 pence pence 20.8 - Basic 4.8 5.3 20.6 - Diluted 4.7 5.2 - Proposed dividend per share 9 4.0 - All activities relate to continuing operations Year to Six months Six months to to 31.3.06 Non-GAAP measures 30.9.06 30.9.05 £m Reconciliation of profit before tax to benchmark £m £m profit before tax (PBT) 277.7 Profit before tax 66.2 71.8 24.7 Effect of exceptional items 16.4 11.9 2.4 Effect of financing fair value remeasurements 0.9 3.7 (2.6) Financing impact on retirement benefit balances (6.6) (1.0) 302.2 Benchmark PBT 76.9 86.4 pence Benchmark earnings per share 8 pence pence 22.8 - Basic 5.9 6.5 22.6 - Diluted 5.8 6.4 Page 15 HOME RETAIL GROUP PLC COMBINED BALANCE SHEET At 30 September 2006 31.3.06 30.9.06 30.9.05 £m Notes £m £m ASSETS Non-current assets 1,878.9 Goodwill 1,878.9 1,878.9 61.5 Other intangible assets 83.3 56.3 696.8 Property, plant and equipment 685.9 673.0 0.6 Investment in associates 0.5 5.2 108.8 Deferred tax assets 109.0 110.0 43.1 Trade and other receivables 24.9 78.8 8.4 Other financial assets 13.0 11.5 25.9 Retirement benefit assets 21.9 - 2,824.0 Total non-current assets 2,817.4 2,813.7 Current assets 881.0 Inventories 932.5 901.0 1,581.1 Trade and other receivables 10 508.1 1,082.2 6.7 Current tax assets 7.0 - 1.9 Financial assets - 9.6 130.6 Cash at bank and in hand 264.0 140.0 2,601.3 Total current assets 1,711.6 2,132.8 5,425.3 Total assets 4,529.0 4,946.5 LIABILITIES Non-current liabilities (27.8) Trade and other payables (33.8) (61.6) (221.6) Loans and borrowings (229.2) (224.8) (67.2) Deferred tax liabilities (66.6) (45.8) - Retirement benefit obligations - (86.9) (316.6) Total non-current liabilities (329.6) (419.1) Current liabilities (864.3) Trade and other payables 11 (1,104.4) (970.5)(1,327.3) Loans and borrowings 12 (0.4) (795.2) (89.0) Provisions (92.8) (86.5) - Other financial liabilities (9.3) - (53.4) Current tax liabilities (45.0) (55.8)(2,334.0) Total current liabilities (1,251.9) (1,908.0)(2,650.6) Total liabilities (1,581.5) (2,327.1) 2,774.7 Net assets 2,947.5 2,619.4 EQUITY 2,774.7 GUS investment in Home Retail Group 13 2,947.5 2,619.4 Page 16 HOME RETAIL GROUP PLC COMBINED CASH FLOW STATEMENT For the six months ended 30 September 2006 Year to Six Six months to months to31.3.06 30.9.06 30.9.05 £m Notes £m £m Cash flows from operating activities 364.6 Cash generated from operations 14 392.1 193.7 (51.5) Interest paid on bonds, bank loans and overdrafts (33.4) (18.1) 19.0 Interest received 9.0 5.1 (91.0) Tax paid (31.2) (28.9) 241.1 Net cash inflow from operating activities 336.5 151.8 Cash flows from investing activities(231.3) Purchase of property, plant and equipment (75.1) (136.0) 4.2 Proceeds from the disposal of property, plant and 2.1 2.5 equipment (23.3) Purchase of intangible assets (15.0) (8.0) (5.5) Purchase of investment - - (45.1) Acquisition of businesses - (45.0)(301.0) Net cash flows used in investing activities (88.0) (186.5) Cash flows from financing activities (8.8) Movement in invested capital (56.6) 5.3 - Home Retail Group share of GUS plc final dividend 9 (62.0) - 179.7 New borrowings - 154.3 (1.0) Repayment of finance leases (0.8) (0.8) 169.9 Net cash flows (used in)/generated from financing (119.4) 158.8 activities 110.0 Net increase in cash and cash equivalents 129.1 124.1 Movement in cash and cash equivalents 20.0 Cash and cash equivalents at 1 April 130.0 20.0 - Exchange and other movements 4.9 (4.1) 110.0 Net increase in cash and cash equivalents 129.1 124.1 130.0 Cash and cash equivalents at end of the financial period 264.0 140.0 COMBINED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the six months ended 30 September 2006 Year to Six months to Six months to31.3.06 30.9.06 30.9.05 £m £m £m Net (expense)/income recognised directly in equity 1.1 Fair value (losses)/gains (6.1) 8.9 6.1 Actuarial (losses)/gains in respect of defined (4.5) (6.2) retirement benefit schemes 1.5 Currency translation differences (0.4) (1.7) 2.0 Tax credit/(charge) in respect of items taken directly 3.2 (0.8) to equity 10.7 Net (expense)/income recognised directly in equity (7.8) 0.2 180.8 Profit for the period attributable to shareholders 41.3 46.0 191.5 Total recognised income for the period attributable to 33.5 46.2 shareholders Page 17 HOME RETAIL GROUP PLC NOTES TO THE COMBINED FINANCIAL INFORMATION For the six months ended 30 September 2006 1. Basis of preparation The unaudited interim combined financial information comprises the results forthe six months ended 30 September 2006 and 2005 and the audited combined resultsfor the twelve months ended 31 March 2006. Homebase Limited results are includedfor the seven months to 30 September and for the 12 months to 28 February 2006with adjustments to reflect the balance sheet movements in cash to 31 March2006. This approach has been followed to facilitate comparability of the incomestatement by avoiding the distortions that would arise relating to changes inthe timing of Easter. Home Retail Group has announced their intention to alignyear end across the group to end of February from the current financial year. The combined financial information for the 12 months ended 31 March 2006 hasbeen extracted from the prospectus of Home Retail Group plc, dated 14 September2006. The interim combined financial information is not audited and does notconstitute statutory accounts. These financial statements have been formallyreviewed by the Group's auditors, PricewaterhouseCoopers LLP, and their reportis set out on page 25. Home Retail Group reorganisation Home Retail Group demerged from its parent company, GUS plc, with effect from 10October 2006. Shares in Home Retail Group were admitted to the Official List ofthe Financial Services Authority and to trading on the London Stock Exchange'smarket for listed securities on 11 October 2006. At 30 September 2006, HampdenGroup Limited, an intermediate holding company within the GUS Group, owned allHome Retail Group companies existing at that date. Ownership of Hampden GroupLimited transferred from GUS plc to Home Retail Group plc (formerly known as ARGHoldings (UK) plc) post 30 September 2006 but prior to admission and the demerger will be accounted for using merger accounting principles. This combined financial information presents the financial records of thosebusinesses which were held by Home Retail Group plc as at the date of admissionof the shares of Home Retail Group plc to the Official List and to trading onthe London Stock Exchange. The combined financial information has been prepared, using merger accountingprinciples, by combining the individual financial returns of the companies thatcomprise the Hampden Group Limited for the year ended 31 March 2006 and the sixmonths ended 30 September 2006 and 2005. The individual financial returns wereprepared for GUS plc consolidation purposes and have been adjusted for relevantitems previously only recorded at the GUS Group level. Internal transactionswithin Home Retail Group have been eliminated on combination. Home Retail Group did not form a separate legal group at 30 September 2006, 30September 2005 or 31 March 2006 and therefore it is not possible to show sharecapital or an analysis of reserves for Home Retail Group. The net assets of HomeRetail Group are represented by the cumulative investment of GUS in Home RetailGroup (shown as "GUS investment in Home Retail Group"). The following summarises the principles applied in preparing the unauditedinterim combined financial information: - Where a balance is interest bearing and has the characteristics of debt, ithas been presented as debt in the balance sheet, with the interest taken to the income statement. Accordingly, the interest income and expense recorded in thecombined income statement have been affected by the financing arrangementswithin the GUS Group and are not necessarily representative of the interest income and expense that would have been reported had Home Retail Groupbeen independent. They are not necessarily representative of the interest incomeand expense that may arise in the future. - The GUS Group had not historically recharged corporate head office costscomprising administration, management and other services including, but not limited to, management information, accounting and financial reporting, treasury, taxation, cash management, employee benefit administration, investor relations and professional services to its underlying businesses. However for the purposes of the preparation of the combined financial information anapproximation has been made of the amounts of shared corporate head office costsattributable to Home Retail Group. These costs were affected by the arrangementsthat existed in the GUS Group and are not necessarily representative of the costs that may prevail in the future. - The GUS Group has historically operated a central cash account whereby certaincash costs are settled centrally by the GUS Group on behalf of Home Retail Group such as tax. For the purposes of preparation of the combined financialinformation, such centrally settled cash costs have been allocated to HomeRetail Group and reflected in the cash flow statement in line with the reallocation of the related balances to Home Retail Group in the balance sheets and income statement as described above. - Tax charges in this combined financial information have been determined basedon the tax charge recorded by Home Retail Group companies in their local statutory accounts as well as certain adjustments made for GUS Group consolidationpurposes. Page 18 HOME RETAIL GROUP PLC NOTES TO THE COMBINED FINANCIAL INFORMATION For the six months ended 30 September 2006 - All trading balances between Home Retail Group and other GUS Group companies have been presented in either debtors or creditors. - Where a GUS Group balance is unconnected with a trading relationship, is longterm and non-interest bearing it has been reclassified from debtors and creditors and presented as equity within the "GUS investment in Home Retail Group". Accordingly, the GUS investment in Home Retail Group comprises: (a) Long term loans due to and from other GUS Group companies;(b) Assets and liabilities not forming part of Home Retail Group on demerger; and(c) Share capital and reserves of Home Retail Group companies. IFRS This interim combined financial information has been prepared in accordance withInternational Financial Reporting Standards (IFRS) and International FinancialReporting Interpretations Committee ("IFRIC") interpretations as adopted by theEuropean Union and with parts of the Companies Act 1985 applicable to companiesreporting under IFRS and complies with the requirements of the Listing Rulesissued by the Financial Services Authority. This interim combined financialinformation has been prepared under the historical cost convention as modifiedby the revaluation of certain financial instruments. Home Retail Group haschosen not to adopt IAS 34 "Interim Financial Statements" in preparing theinterim combined financial information. Accounting policies The accounting policies adopted by Home Retail Group are set out in theprospectus of Home Retail Group plc dated 14 September 2006, which is available on Home Retail Group's website www.homeretailgroup.com. These policies have been consistently applied for all periods presented. 2. Use of non-GAAP measures Home Retail Group has identified certain measures that it believes will assistunderstanding of the performance of the business. The measures are not definedunder IFRS and they may not be directly comparable with other companies'adjusted measures. The non-GAAP measures are not intended to be a substitutefor, or superior to, any IFRS measures of performance but Home Retail Group hasincluded them as they consider them to be important comparables and key measuresused 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 exceptionalitems within their relevant income statement line. The separate reporting ofexceptional items helps provide a better indication of the underlyingperformance of the combined business. Examples of items which may be recorded asexceptional items are impairment charges, restructuring costs and the profits/losses on the disposal of businesses. Benchmark PBT Home Retail Group uses benchmark PBT as a measure of underlying performance.Benchmark PBT is defined as profit before amortisation of acquisitionintangibles, store impairment charges, exceptional items, costs related todemerger incentive schemes, financing fair value remeasurements and financingimpact on retirement benefit balances. Average Closing Six months Six months Year to to to3. Foreign currency 30.9.06 30.9.05 31.3.06 30.9.06 30.9.05 31.3.06 The principal exchange rates used wereas follows:Sterling to US dollar 1.84 1.82 1.79 1.87 1.76 1.74Sterling to euro 1.45 1.47 1.46 1.47 1.47 1.44 Assets and liabilities of overseas undertakings are translated into sterling atthe rates of exchange ruling at the balance sheet date and the income statementis translated into sterling at average rates of exchange. Page 19 HOME RETAIL GROUP PLC NOTES TO THE COMBINED FINANCIAL INFORMATION For the six months ended 30 September 2006 4. Segmental information Home Retail Group's primary reporting format is by business segment. This is inline with the current management structure, which reflects the different risksassociated with the different businesses. The Group is organised into three mainbusiness segments: Argos, Homebase and Financial Services. Central Activitiesrepresents the cost of central corporate functions. Six months ended 30 September 2006 Financial Central Argos Homebase Services Activities Total Notes £m £m £m £m £m Revenue 1,794.1 979.1 46.7 - 2,819.9 Operating profitOperating profit before exceptional 72.4 40.8 4.1 (10.4) 106.9itemsExceptional items 5 - - - (16.4) (16.4)Segmental result 17 72.4 40.8 4.1 (26.8) 90.5 Six months ended 30 September 2005 Financial Central Argos Homebase Services Activities Total Notes £m £m £m £m £m Revenue 1,608.6 966.0 43.6 - 2,618.2 Operating profitOperating profit before exceptional 59.2 52.4 3.5 (9.8) 105.3itemsExceptional items 5 - (11.9) - - (11.9)Segmental result 17 59.2 40.5 3.5 (9.8) 93.4 The results for Financial Services are after deducting funding costs of £8.3m(2005: £9.0m). The result for Argos has been restated for the six months ended 30 September2005 by reallocating £2.5m of costs to Central Activities. 12 months ended 31 March 2006 Financial Central Argos Homebase Services Activities Total Notes £m £m £m £m £m Revenue 3,892.6 1,561.8 93.6 - 5,548.0 Operating profitOperating profit before exceptional 296.0 51.8 6.1 (16.2) 337.7itemsExceptional items 5 - (24.7) - - (24.7)Segmental result 17 296.0 27.1 6.1 (16.2) 313.0 The results for Financial Services are after deducting funding costs of £15.8m. The result for Argos has been restated for the 12 months ended 31 March 2006 byreallocating £5.0m of costs to Central Activities. Page 20 HOME RETAIL GROUP PLC NOTES TO THE COMBINED FINANCIAL INFORMATION For the six months ended 30 September 2006 5. Exceptional items Year to Six months to Six months to 31.3.06 30.9.06 30.9.05 £m £m £m - Costs relating to the demerger of Home Retail Group and 9.1 - Experian(a) - Waiver of loan from Experian(b) 7.3 - 11.9 Re-organisation costs(c) - 11.9 12.8 Store impairment charges - - 24.7 Total exceptional items 16.4 11.9 (a) Demerger-related expenditure including costs in relation to early vesting ofshare incentive schemes, banking set up fees and other professional fees. (b) Represents a loan due from Experian which has been waived as part of thedemerger process. (c) In 2005, Home Retail Group (then ARG), undertook a reorganisation wherebyapproximately 500 Homebase roles, including the merchandising and buying functions previously based in Wallington, Surrey, relocated to the Group's headoffice in Milton Keynes. The costs of the move have totalled £11.9m in 2006. 6. Net financing costs Year to Six months to Six months to 31.3.06 30.9.06 30.9.05 £m £m £m Finance income 10.3 Interest receivable from GUS Group companies 4.0 5.3 8.7 Bank deposits 4.8 - 27.5 Expected return on retirement benefit assets 20.7 14.0 46.5 Total finance income 29.5 19.3 Finance expense (9.2) Perpetual securities interest (4.6) (4.7) (2.4) Financing fair value remeasurements (0.9) (3.7) (0.8) Bank loans and overdrafts 0.8 1.0 (55.6) Interest payable to GUS Group companies (40.7) (29.1) (0.5) Discount unwind on provisions (1.4) (0.4) (24.9) Interest expense on retirement benefit liabilities (14.1) (13.0) - Interest expense on OFT fine (1.2) - (93.4) Total finance expense (62.1) (49.9) 15.8 Less: finance expense charged to Financial Services 8.3 9.0 cost of sales (77.6) Total net finance expense (53.8) (40.9) (31.1) Net financing costs (24.3) (21.6) 7. Taxation Year to Six months Six months to to 31.3.06 30.9.06 30.9.05 £m £m £m Tax expense (95.3) - UK (23.9) (25.8) (1.6) - Overseas (1.0) - (96.9) (24.9) (25.8) The tax charge for the period of £24.9m (2005: £25.8m) is based on an estimatedeffective rate of tax of 37.6% (2005: 35.9%). The effective rate of tax based on benchmark PBT, defined as the total taxexpense, adjusted for the tax impact of non-bench mark items, divided bybenchmark PBT of £76.9m (2005: £86.4m), is 33.7% (2005: 35.0%). Page 21 HOME RETAIL GROUP PLC NOTES TO THE COMBINED FINANCIAL INFORMATION For the six months ended 30 September 2006 8. Basic and diluted earnings per share ("EPS") Basic and diluted EPS for all reported periods have been completed on the basisof the number of Home Retail Group plc ordinary shares in issue at the date ofdemerger, excluding ordinary shares that will be held in Home Retail Group'sEmployee Share Option Trust ("ESOT"). The calculation of basic and diluted EPSis based on the following data: Year to Six months Six months to to 31.3.06 30.9.06 30.9.05 £m Note £m £m Earnings 180.8 Profit after tax for the financial period 41.3 46.0 24.7 Effect of exceptional items 5 16.4 11.9 2.4 Effect of financing fair value remeasurements 0.9 3.7 (2.6) Financing impact on pension balances (6.6) (1.0) (7.3) Attributable taxation (1.0) (4.4) 198.0 Benchmark profit after tax for the financial 51.0 56.2 period m Number of shares m m 870.5 Number of ordinary shares for the purpose of 870.5 870.5 basic EPS 7.6 Dilutive effect of shares incentive awards 7.6 7.6 878.1 Number of ordinary shares for the purpose of 878.1 878.1 diluted EPS pence EPS pence pence 20.8 Basic EPS 4.8 5.3 22.8 Basic benchmark EPS 5.9 6.5 20.6 Diluted EPS 4.7 5.2 22.6 Diluted benchmark EPS 5.8 6.4 9. Dividend An interim dividend of 4.0 pence per Home Retail Group plc ordinary share hasbeen proposed (but not provided) and will be paid on 24 January 2007 toshareholders on the register at the close of business on 15 December 2006. Theamount absorbed by this first dividend of Home Retail Group plc is £35m. In August 2006, £62m was paid to GUS plc as Home Retail Group's share of the GUSplc final dividend in respect of the year ended March 06. 10. Trade and other receivables - current 31.3.06 30.9.06 30.9.05 £m £m £m 516.8 Trade and other receivables - external 508.1 481.1 1,064.3 Trade and other receivables - GUS Group companies - 601.1 1,581.1 Total trade and other receivables 508.1 1,082.2 11. Trade and other payables - current 31.3.06 30.9.06 30.9.05 £m £m £m 863.1 Trade and other payables - external 1,089.9 970.5 1.2 Trade and other payables - GUS Group companies 14.5 - 864.3 Total trade and other payables 1,104.4 970.5 Page 22 HOME RETAIL GROUP PLC NOTES TO THE COMBINED FINANCIAL INFORMATION For the six months ended 30 September 2006 12. Loans and borrowings - current 31.3.06 30.9.06 30.9.05 £m £m £m 1.8 Loans and borrowings - external 0.4 1.4 1,325.5 Loans and borrowings - GUS Group companies - 793.8 1,327.3 Total loans and borrowings 0.4 795.2 13. Reconciliation of movement in invested capital 31.3.06 30.9.06 30.9.05 £m £m £m 180.8 Profit for the period attributable to shareholders 41.3 46.0 (12.0) Dividends paid and proposed to other GUS Group companies (7.1) (5.9) (6.3) Other movements 0.4 (17.0) 10.7 Movements in Statement of Recognised Income and Expense (7.8) 0.2 - Capitalisation of loans and other GUS Group balances 200.0 - - Home Retail Group share of GUS plc final dividend (62.0) - 9.6 Share Scheme 8.0 4.2 182.8 Net change in investment in Home Retail Group 172.8 27.52,591.9 Opening investment in Home Retail Group 2,774.7 2,591.92,774.7 Closing investment in Home Retail Group 2,947.5 2,619.4 14. Cash generated from operations Year to Six months to Six months to 31.3.06 30.9.06 30.9.05 £m £m £m 313.0 Operating profit 90.5 93.4 1.0 Loss on sale of property, plant and equipment - - 134.9 Depreciation and amortisation 77.0 69.1 7.6 (Increase)/decrease in stocks (51.5) (12.5) 5.8 (Increase)/decrease in debtors 22.3 (2.3) (33.1) Increase/(decrease) in creditors 235.7 25.8 13.8 Increase/(decrease) in provisions for liabilities and 3.9 (0.6) charges (88.0) Movement in retirement benefits 6.2 10.7 9.6 Movements in share reserve 8.0 10.1 364.6 Cash generated from operations 392.1 193.7 15. Post balance sheet events (a) Group reorganisation Home Retail Group was demerged from GUS plc with effect from 10 October 2006whereupon Home Retail Group plc became the ultimate parent company of HomeRetail Group companies. Shares in Home Retail Group plc were admitted to listingon the London Stock Exchange on 11 October 2006. (b) OFT fine On 19 October 2006, the Court of Appeal dismissed Argos' appeal against thepenalty imposed on Argos by the Office of Fair Trading. Argos is seeking leaveto appeal to the House of Lords. A provision of £16.2m in relation to the fineand associated interest costs was charged in the year ended 31 March 2005 andthis was increased by a further £1.2m for associated interest costs in the sixmonths ended 30 September 2006. Page 23 HOME RETAIL GROUP PLC NOTES TO THE COMBINED FINANCIAL INFORMATION For the six months ended 30 September 2006 16. Home Retail Group website The maintenance and integrity of the Home Retail Group website,www.homeretailgroup.com, is the responsibility of the Company's directors. Thework carried out by the auditors does not involve consideration of these mattersand, accordingly, the auditors accept no responsibility for any changes that mayhave occurred to the Combined Financial Information since it was initiallypresented on the website. Legislation in the United Kingdom governing thepreparation and dissemination of financial information may differ fromlegislation in other jurisdictions. 17. Reconciliation of segmental result A reconciliation between the segmental result of Home Retail Group presented inthe financial statements of GUS plc and the segmental result shown in note 5above is set out below: Year to Six months Six months to to31.3.06 30.9.06 30.9.05 £m Notes £m £m 336.1 Home Retail Group segment - as previously reported 108.9 by GUS plc 5.0 Costs allocated to Central Activities((a)) 2.5 Further IFRS adjustments for: - lease accounting (0.6) - depreciation relating to store impairment charges 4.3 341.1 Home Retail Group segment - as reported on 21 117.3 115.1 November 2006 (16.2) Costs allocated to Central Activities((a)) (10.4) (9.8) (11.9) Exceptional item relating to reorganisation costs 5 - (11.9) - Exceptional items relating to the demerger 5 (16.4) - 313.0 Segmental result 4 90.5 93.4 (a) For the purposes of preparation of the Combined Financial Information anallocation has been made in respect of shared corporate head office costs between GUS plc, Experian and Home Retail Group, based on estimated usage of services; together with a re-allocation of central costs from Argos to Central Activities. Page 24 HOME RETAIL GROUP PLC INDEPENDENT REVIEW REPORT TO HOME RETAIL GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 September 2006 which comprises the combined interimbalance sheet as at 30 September 2006 and the related combined interimstatements of income, cash flows and recognised income and expense for the sixmonths then ended and related notes. This financial information has beenprepared on the basis set out in note 1 to the financial information. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the disclosed accounting policies have been applied.A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly we do notexpress an audit opinion on the financial information. This report, includingthe conclusion, has been prepared for and only for the Company for the purposeof the Listing Rules of the Financial Services Authority and for no otherpurpose. We do not, in producing this report, accept or assume responsibilityfor any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expressly agreed by our prior consent inwriting. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. PricewaterhouseCoopers LLP Chartered Accountants London 21 November 2006 Notes: (a) The maintenance and integrity of the Home Retail Group plc website is theresponsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in other jurisdictions. Page 25 HOME RETAIL GROUP PLC SHAREHOLDER INFORMATION Registrar Enquiries concerning holdings of the Company's shares and notification of theholder's change of address should be referred to Lloyds TSB Registrars, theCauseway, Worthing, West Sussex, BN99 6DA (telephone: 0845 603 9903). Electronic communications Shareholders can arrange to receive future Home Retail Group plc annual andinterim reports electronically and to submit voting instructions on line atshareholder meetings by registering at www.shareview.co.uk. The service isprovided by Lloyds TSB Registrars and gives access to a comprehensive range ofshareholder information, including dividend payment details. Home Retail Group plc website A full range of investor information on Home Retail Group is available atwww.homeretailgroup.com. This includes webcasts of results presentations givento analysts and fund managers together with the slides accompanying thosepresentations. Dividend Reinvestment Plan The Home Retail Group Dividend Reinvestment Plan ("DRIP") enables shareholdersto use their cash dividends to purchase Home Retail Group shares. Shareholderswho wish to participate in the DRIP for the first time, in respect of theinterim dividend to be paid on 24 January 2007, should return a completed andsigned DRIP mandate form to be received by the Registrar, by no later than 3January 2007. For further details, please contact Lloyds TSB Registrars, TheCauseway, Worthing, West Sussex, BN99 6DA (telephone: 0870 241 3018). Share price information The latest Home Retail Group share price is available on the Home Retail Groupwebsite, as well as through other information services such as Ceefax, Teletextand also on the Financial Times Cityline Service telephone 0906 843 2740 (callscharged at 60p per minute). Share dealing facility Existing or potential investors can buy or sell Home Retail Group ordinaryshares using an Internet or telephone share dealing service provided by LloydsTSB Registrars by logging onto www.shareview.co.uk or by calling 0870 850 0852between 8.30am and 4.30pm weekdays. Financial calendar Interim ex-dividend date 13 December 2006Third quarter trading update 17 January 2007Interim dividend to be paid 24 January 2007Second half trading update 14 March 2007Preliminary results for the period to 3 March 2007 2 May 2007Final ex-dividend date 23 May 2007First quarter trading update 13 June 2007Final dividend to be paid 25 July 2007 Registered office Home Retail Group plc, Avebury, 489 - 499 Avebury Boulevard, Milton Keynes MK92NW Page 26 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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