Operating highlights
Good first half, with both businesses delivering a positive like-for-like sales performance
Argos Transformation plan progress:
- Internet penetration increased to 43% of Argos' total sales, with mobile commerce growing 124% to account for 16% of total sales
- Launched both new and improved smartphone and tablet apps
- Reached eight million customer registrations
- Expanded 'hub & spoke' trial to around 50 stores
Homebase Renewal plan progress:
- Completed a further five store refits
- Launched a next or named day delivery proposition
- Grew multi-channel sales by 28%
- Achieved further market share gains
Financial highlights
Sales up 3% to £2,596m; like-for-like sales up 2.3% at Argos, and up 5.9% at Homebase
Cash gross margin up 1% to £962m
Operating and distribution costs held broadly flat at £936m
Benchmark operating profit up 40% to £26.4m
Benchmark profit before tax up 53% to £27.4m
Basic benchmark earnings per share up 79% to 2.5p
Reported profit before tax of £14.2m; reported basic earnings per share of 1.6p
Cash generation in the period of £16m with closing net cash of £412m
Interim dividend of 1.0p (2012: 1.0p)
Terry Duddy, Chief Executive of Home Retail Group, said:
"The Group has had a good first half with both businesses delivering successive quarters of positive sales performance and market share gains. Argos performed well and recorded its fifth consecutive quarter of like-for-like sales growth. It has continued to grow its internet sales, powered by the growth in mobile commerce which now accounts for 16% of Argos' total sales. Homebase traded strongly through its peak trading period, recording its best half of like-for-like sales performance since acquisition in 2002, and has now achieved 18 consecutive quarters of market share growth in the shed sector.
We continued to manage costs well, taking action to mitigate cost growth from sales related increases, underlying cost inflation and investment in strategic initiatives. As a result, we were able to hold costs broadly flat year on year. Cash performance was also good with the Group generating £16m of cash in the period to close the half with net cash of £412m, which supports the Group's ability to fund the investment plans in both businesses.
Both Argos and Homebase are making good progress with their investment plans, and remain on track to deliver their long term strategic objectives. The Argos transformation is well underway, including the introduction of new smartphone and tablet apps, the extension of the 'hub & spoke' trial, the launch of a digital Christmas gift guide and the development of digital concept stores. Homebase has completed five store refits, and plans to complete around 10 further refits in the current financial year. These refitted stores are performing in line with our expectations. In addition, the introduction of improved delivery options has supported multi-channel sales participation, which grew by 28%.
As we look ahead to the second half of the year, we expect consumer spending will remain subdued, and whilst some macroeconomic indicators are improving, these have not yet led to an increase in household disposable income. Overall we are making good progress and are in excellent operational shape as we approach the key Christmas trading period."
