Business Review >
Financial Services
Financial Services - operational review
Financial Services works in conjunction with Argos and Homebase
to provide their customers with the most appropriate credit offers
to drive product sales, and to ensure the maximum possible profit
from the transaction for Home Retail Group.
Credit offers support initiatives in the retail businesses.
For example, the trial of the ‘Home’ catalogue in Argos
and growing kitchen sales in Homebase benefit from in-house financial
services. While approximately 50% of existing gross receivable balances
as at 3 March 2007 are promotional credit offer-based, approximately
70% of credit sales have been driven by promotional credit offers
during the year. Financial Services’ financial objective is
to achieve a return on the revolving (i.e. non-promotional) element
of receivables in line with financial services industry norms and
to recover costs on the provision of promotional credit products
to Argos and Homebase customers. The retail businesses are therefore
receiving a competitive advantage in the form of the provision of
promotional credit products at cost.
The Financial Services offering is fully multi-channel.
Customers can apply for credit and use the account during the same
online visit. The Internet is the fastest growing channel for card
applications and £1 of every £6 spent on the Argos website
is spent using the Argos store card.
Development of the Financial Services product portfolio continues.
An Argos credit card was launched in May 2007 as part of the joint
venture arrangement with Barclays Bank PLC. This will offer a unique
three-month interest-free credit period on all purchases and access
to a new exclusive loyalty scheme.
Financial Services - financial review
Store card gross receivables grew by £70m versus the previous
balance sheet date, driven by the continued success of the range
of promotional credit products offered. The store cards funded 8%
of Group retail sales. The continued planned run-off in personal
loans saw a £31m reduction in gross receivables over the period.
Growth in benchmark operating profit before financing costs was
held back by reduced income of about £2m relating to the lowering
of customer late payment fees from December 2006. A further impact
from late payment fees of around £5m is expected in the current
year.
| Financial Services |
|
|
| Pro forma 52 weeks to |
3 March
2007 |
4 March
2006 |
| |
|
|
| Sales (£m) |
93.2 |
92.5 |
| |
|
|
| Benchmark operating profit before financing
costs |
22.8 |
23.9 |
| Financing costs |
(17.8) |
(17.8) |
| Benchmark operating profit (£m) |
5.0 |
6.1 |
| |
3 March
2007 |
31
March 2006 |
| Store card gross receivables |
448 |
378 |
| |
|
|
| Personal loans gross receivables |
24 |
55 |
Top of page
|
