Chairman's Statement
 “These
results represent a strong start to Home Retail Group’s new life
as an independent company. They are particularly pleasing in a year
during which we achieved the successful demerger from GUS plc and
were faced with some difficult conditions in our markets.”
In presenting Home Retail Group’s first annual report
to shareholders, I am delighted to report a successful trading performance
over the past year.
I am pleased to highlight that we have achieved a 10% share of
the £58 billion home and general merchandise market, extending
our leading position. This has been delivered through the successful
combination and leverage of Argos and Homebase, two distinctive,
complementary retail brands that are household names in the UK.We
have also successfully demerged from GUS plc to become a standalone
FTSE 100 company.
Financial performance
The results you will see in this report cover periods both before
and after the demerger. They include certain financial impacts of
GUS’ ownership of our business up to the point of demerger.
The most recent reported statutory results also cover a shorter
period than a full year, due to a change in our year-end. We have
therefore included pro forma measures to provide greater comparability.
On a pro forma basis, sales grew by 6% to £5,851m, benchmark
operating profit by 8% to £359.4m, pre-tax profit by 12% to
£376.7m and earnings per share by 14% to 29.3p. The improvement
in year-end net cash to £60m, against a pro forma net debt
of £200m at 31 March 2006, includes the effect of strong working
capital management and improved profit performance, together with
an approximate £100m benefit as a result of the change in
year-end. Your Board is recommending a final dividend of 9.0p per
Home Retail Group share, making 13.0p for the year.
This trading performance represents a strong start to Home Retail
Group’s life as an independent company and is, I believe,
particularly commendable for having been achieved in the face of
difficult market conditions.
Strategy for growth
As presented at the time of demerger, we have a very clear strategy
for driving the growth of our business.
We believe our extensive product portfolio, market leadership
and purchasing scale provide us with opportunities to develop our
product range and offering in core areas. This also allows us to
ensure the most efficient and cost-effective sourcing of products
and services.
We intend to use the strength of the Argos and Homebase brands,
the flexibility of their formats and the advantage of their shared
infrastructure to increase our market share in targeted large product
markets.
We are also planning to broaden our customer reach through the
opening of around 30 new Argos stores and 15 new Homebase stores
a year. The combined Argos and Homebase portfolios are already approaching
1,000 stores.
Finally, we will extend and exploit our leadership in the ‘multi-channel’
service pioneered so successfully by Argos - combining stores, Internet
and telephone ordering and home delivery, to provide the highest
level of convenience. Over one-third of all Argos sales are now
ordered and delivered across more than one channel, and we are also
using our skill and scale to support Homebase’s ‘multi-channel’
development.
Underpinning all of this is a strong commitment to customers which
is an important driver of financial performance in the retail sector.
Through Argos and Homebase, Home Retail Group works hard to provide
the highest quality of service.
Strengthening the team
At the time of the demerger we were fortunate to have John Coombe
and Andy Hornby join the Board of Home Retail Group. I am also delighted
to welcome Penny Hughes as a further non-executive director. Penny,
who joined in December 2006, has a wealth of experience in retail
and consumer marketing and is already proving a strong addition
to the Board.
One of the strengths of Home Retail Group is the experience of
its management team, without which the transition period to a public
company would undoubtedly have been more difficult.We are therefore
particularly grateful to our group human resources director, Mike
Sibbald, who, after providing the Group with 11 years of commitment,
expertise and guidance, supported the business through the demerger
prior to his retirement in April 2007. I am very pleased to welcome
David Guise as his successor, who joins us from Diageo.
Corporate responsibility
We continue to make good progress in the management of the complex
environmental, ethical and social issues that affect our business.
For example, we are moving forward in delivering against stretching
recycling targets across the business and in reducing energy consumption.
You will find more information about our approach to corporate responsibility
later in this report.
Home Retail Group plays an active role in community activities,
supporting charities and working directly with local and national
projects. Taking part in these activities is popular with our colleagues,
who feel that they are contributing to their communities and that
the Group is supporting them in doing so.
Looking forward
These strong results, delivered in a challenging market and while
going through a successful demerger process, are further testament
to our colleagues’ dedication led by chief executive, Terry
Duddy. I would therefore like to thank Terry and the team for their
hard work throughout the year.
Home Retail Group currently employs some 53,000 people across the
business. The performance of our business rests upon the passion
and commitment of all our colleagues. I am therefore extremely pleased
that over 30,000 employees are now shareholders in Home Retail Group
and are able to share in the Group’s long term success.
Home Retail Group is approaching the new financial year from a
position of operational strength. This, together with our strategy
for growth, means that we are well placed to make further progress
in what we expect to be another challenging year.
Oliver Stocken
Chairman
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