The group, which owns Argos and Homebase, saw sales up 2% to £6,034m. This reflects growth of 1.5% at Argos and 3.9% at Homebase. Like-for-like sales were down 2.1% at Argos and up 2.7% at Homebase. Argos generates over 70% of overall revenue, whereas Homebase generates around 25%.
It reduced costs by 3%, which helped shore up pre-tax profits in line with expectations at £293m. This was 11% below last year’s figures, but Home Retail had previously estimated profits would be £290m. The group will maintain its full year dividend at 11.7p.
The group improved its cash position by £130m over the year and had a closing net cash position of £414m. However, interest income was reduced from £25m to £5m as a result of lower interest rates. The group plans to introduce a £150m share buy-back programme over the next 12 months to return cash to shareholders.
A capital expenditure programme will soak up a further £125m-£150m in the next financial year. The group will open fewer new stores, but will be expanding online product ranges on both the Argos and Homebase websites. It is also ‘refreshing’ the Argos brand and refurbishing a number of stores.
Chief Executive Terry Duddy said that the environment for UK retail was likely to remain difficult in the year ahead. The group has suffered from the reluctance of UK consumers to purchase ‘big ticket’ items during the downturn.
The shares were down 0.25% to 280.3p in early trading, suggesting markets had hoped for better. The shares had a surge in early April on the back of rumours that the group may be a takeover target by Asda. These rumours have, as yet, come to nothing and the shares have slipped back, remaining at a similar level to where they started the year. A price to earnings ratio of 9.45x is not challenging and the group appears to have weathered the downturn relatively skilfully, but further movement in the shares is likely to require some recovery in the underlying markets for the two brands.
