Operating highlights
Argos Transformation Plan progress:
- Substantially completed development and testing of new digital propositions - Fast Track Collection and Fast Track Delivery - which launched early in the second half of FY16
- Opened 86 digital concessions, bringing total digital stores to 148
- Internet penetration accounted for 45% of total sales including mobile commerce which grew 13% to represent 25% of total sales
Homebase Productivity Plan progress:
- A further 25 store closures completed
- Infrastructure cost reduction programme accelerated
- 43% digital sales growth to 10% of total sales
Financial highlights
Sales down 2% to £2,629m
Cash gross margin down 1% to £973m
Operating and distribution costs decreased by £10m to £941m, Homebase costs decreased by £26m, Argos costs increased by £14m
Benchmark profit before tax2 increased by £3.2m or 10% to £34.1m, Homebase increased by £6.5m, Argos decreased by £5.6m
Basic benchmark earnings per share3 increased by 13% to 3.4p
Reported profit before tax increased by 73% to £23.4m; reported basic earnings per share of 2.3p
Cash utilisation in the period of £116m with closing net cash of £193m
Interim dividend of 1.0p (H1 FY15: 1.0p)
John Walden, Chief Executive of Home Retail Group, said:
"While Group benchmark profit before tax increased slightly during the first half, performance overall was mixed. Homebase delivered a good first half, with like-for-like sales growth and an improvement in operating profit. It also made good progress with its Productivity Plan and the store closure plan in particular, which helped Homebase to achieve further cost reductions.
"Argos' first half sales and profit were negatively impacted by declines in both electrical and seasonal product categories. Argos continued to make good progress with its Transformation Plan, delivering strongly against its digital store opening programme. Argos also substantially completed the technology and operational steps necessary to launch 'Fast Track' - its new home delivery and store collection propositions. Argos is investing significantly in the launch of Fast Track and although the rate of customer take-up cannot be certain, we are confident that customers will increasingly embrace this market leading service over time.
"We look forward to an improved sales performance for both Argos and the Group in the second half. However, as I have previously stated, trading at Argos during this year's important Christmas season seems less predictable than usual, as both retailers and customers determine whether to repeat last year's unusual Black Friday patterns. The combination of this trading uncertainty, an increased level of investment in the launch of Fast Track and the underlying profit reduction from Argos' challenging first half, mean that at this stage of the financial year we expect the Group's full-year benchmark profit before tax to be slightly below the bottom end of the current range of market expectations of £115m to £140m."
