Home Retail Group HY 19-10-11 front half FINAL

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Home Retail Group HY 19-10-11 front half FINAL Powered By Docstoc
					                                                                        19 October 2011



                                Home Retail Group plc
                                  Half-Year Results

Home Retail Group, the UK’s leading home and general merchandise retailer, today
announces its results for the 26 weeks to 27 August 2011.

Operating highlights

      Continued leadership in multi-channel retailing, driven by further investment
      initiatives in both businesses and the continued growth of internet penetration
      supported by Check & Reserve
      Investment plans progressing at Argos:
      - Store refurbishment delivering sales uplifts ahead of plan
      - Launch of the Argos TV shopping channel
      - Range extension into children’s books, children’s and adult clothing and gifting
      Homebase gained market share and further developed its home enhancement
      proposition:
      - Expanding exclusive product brand strategy
      - Developing ranges across big ticket categories
      - Award winning installation services with customer recommendation rate in
        excess of 90%
      Acquired the exclusive use of the Habitat brand
      Joint venture to commence multi-channel retail operation in China separately
      announced today

Financial highlights

      Sales down 6% to £2,568m
      Cash gross margin down 7% to £970m
      Operating and distribution costs were broadly flat at £944m, reflecting further cost
      savings offsetting the impact of both underlying cost inflation pressures and the
      investment in new initiatives
      Benchmark operating profit1 down 72% to £27m; Group operating margin of 1.0%
      Benchmark profit before tax2 down 70% to £28m
      Basic benchmark earnings per share3 down 68% to 2.5p
      Reported profit before tax of £29m; reported basic earnings per share of 2.6p
      Closing net cash position of £200m
      Interim dividend maintained at 4.7p

Terry Duddy, Chief Executive of Home Retail Group, commented:

“Homebase delivered another robust performance in its peak trading period. Core
customers at Argos have continued to be under greater pressure and there were ongoing
challenging conditions across several product categories, most notably consumer
electronics.

“As we now enter our busiest trading period market conditions remain both weak and
volatile, and in these early weeks of the second half we have not seen the improvement
in sales that we had anticipated. We are well positioned operationally and we will continue
to shape the future of shopping for our customers, ensuring we bring unrivalled convenience
and value to customers’ every day lives, whether shopping at home or on the move.”


                                          Page 1
1. Benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, store
   impairment and onerous lease charges or releases and exceptional items.

2. Benchmark profit before tax (benchmark PBT) is defined as profit before amortisation of acquisition intangibles,
   store impairment and onerous lease charges or releases, exceptional items, financing fair value remeasurements,
   financing impact on retirement benefit obligations, the discount unwind on non-benchmark items and taxation.

3. Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to
   benchmark PBT, divided by the weighted average number of shares in issue (excluding shares held in Home Retail
   Group’s share trusts net of vested but unexercised share awards).



Enquiries

Analysts and investors (Home Retail Group)
Richard Ashton         Finance Director                                                 01908 600 291
Don Davis              Director of Investor Relations

Media (Finsbury)
Rollo Head                                                                              020 7251 3801

There will be a presentation today at 9.30am to analysts and investors at the UBS
Presentation Suite, 1 Finsbury Avenue, London EC2M 2PA. The presentation can be
viewed live on the Home Retail Group website www.homeretailgroup.com. The
supporting slides and an indexed replay will also be available on the website later in the
day.

An Interim Management Statement, covering the 18 weeks from 28 August 2011 to
31 December 2011, will be announced by Home Retail Group on Thursday
12 January 2012.

Certain statements made in this announcement are forward looking statements. Such statements are based on current
expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ
materially from any expected future events or results referred to in these forward looking statements.




                                                        Page 2
FINANCIAL SUMMARY

26 weeks to                                                                     27 August             28 August
£m                                                                                  2011                  2010
Argos                                                                                1,675.7              1,812.8
Homebase                                                                               839.6                855.3
Financial Services                                                                      52.2                 52.2
Sales                                                                               2,567.5              2,720.3
Cost of goods                                                                     (1,597.2)             (1,680.1)
Gross margin                                                                         970.3               1,040.2
Group gross margin % rate                                                            37.8%                 38.2%
Operating and distribution costs                                                     (943.8)              (947.0)
Argos                                                                                     3.4                   54.4
Homebase                                                                                 29.9                   46.2
Financial Services                                                                        3.0                    2.5
Central Activities                                                                      (9.8)                  (9.9)
Benchmark operating profit                                                              26.5                   93.2
Group operating margin % rate                                                           1.0%                   3.4%
Net interest income (see below)                                                          1.8                    1.5
Share of post-tax results of joint ventures and associates                                 -                      -
Benchmark PBT                                                                           28.3                   94.7

Financing fair value remeasurements                                                       2.3                    9.2
Financing impact on retirement benefit obligations                                        2.2                    2.3
Discount unwind on non-benchmark items                                                  (3.4)                  (3.2)
Profit before tax                                                                       29.4                  103.0
Taxation                                                                               (9.0)                  (28.3)
  of which: taxation attributable to benchmark PBT                                     (8.4)                  (28.9)
  Benchmark effective tax % rate                                                      29.7%                   30.5%

Profit for the period                                                                   20.4                   74.7

Basic benchmark EPS                                                                     2.5p                   7.7p

Basic EPS                                                                               2.6p                   8.8p

Weighted average number of shares for basic EPS                                      799.0m               849.3m

Interim dividend                                                                        4.7p                   4.7p

Closing net cash position                                                             200.5                   326.9


Net interest reconciliation:
Bank deposits and other interest                                                          1.0                    1.3
Financing costs charged to Financial Services                                             1.7                    1.6
Discount unwind on benchmark items                                                      (0.9)                  (1.4)
Net interest income                                                                      1.8                    1.5

Financing fair value remeasurements                                                       2.3                    9.2
Financing impact on retirement benefit balances                                           2.2                    2.3
Discount unwind on non-benchmark items                                                  (3.4)                  (3.2)
Income statement net financing income                                                    2.9                    9.8
The above tables and those throughout this announcement have been prepared in accordance with Note 1 to the
Financial Information on page 23.




                                                     Page 3
CHIEF EXECUTIVE’S STATEMENT

Spending in our markets continues to decline with many consumers facing pressures which
affect the amount of household cash flow they have available for the purchase of
discretionary goods. Argos’ core customer demographic has tended to benefit less from the
current low interest rate environment, which taken together with the fact that they have a
relatively high proportion of their take-home pay consumed by non-discretionary
expenditure, has resulted in them having been more adversely impacted by the prevailing
economic conditions. While we have had success in areas such as homewares and seasonal
products, this has been more than offset by the weakness in other product categories, most
notably consumer electronics which has seen the market decline by about 20% in the period,
the net result of which is a marginal loss of market share in the period. Homebase’s market
share gain reflects a robust performance in a difficult trading environment and while the big
ticket category remains challenging, we have seen good growth in bedroom furniture,
benefiting from the rollout of new fitted ranges into stores together with installation services,
and also a good performance in bathrooms.

The Group’s strong positioning continues to be derived from the following:

   1. Multi-channel expertise and leadership – maintaining a clear market-leading
      position as consumers continue to use the power of the internet and mobile devices
      together with the convenience of immediate product collection via our store networks
   2. Highly competitive customer offering – ensuring the customer continues to
      receive excellent value and choice by maximising the buying scale and sourcing skills
      of the Group
   3. Expansion of product ranges and related services – such as Argos’ ability to
      extend its ranges into new categories like clothing and books as well as growing
      product ranges online. While Homebase extends installation services to enhance its
      big ticket offering and continues its significant range changes in home enhancement
      products
   4. Efficient cost base – where further cost reductions have been achieved to mitigate
      underlying cost inflation and the investment in new initiatives, while maintaining or
      improving operational standards
   5. Financial strength – with a significant cash balance that supports investment in new
      initiatives and a sizeable debt free receivables loan book

Argos and Homebase continue to strengthen their customer propositions with investment in
multi-channel initiatives, expanding choice, developing ranges and services, and improving
product presentation in-store, in catalogues, on TV and online. Argos and Homebase also
continue to help the customer through ongoing ‘WOW’, ‘Value’ and ‘Best Buy’ offers,
supported by a range of in-house provided credit offers.

The Group acquired the exclusive use of the Habitat brand, its brand designs and intellectual
property in the UK and the Republic of Ireland together with the UK website and three of its
London stores for £24.5m.

In a separate announcement today, Home Retail Group has stated that it has agreed to
launch a joint venture company to develop a multi-channel, general merchandise retail
business in China with Haier Group, one of the world’s leading home appliance
manufacturers. The Argos branded joint venture operation will launch in 2012 targeted at
the Shanghai region.




                                             Page 4
BUSINESS REVIEWS

Argos

26 weeks to                                                    27 August          28 August
£m                                                                 2011               2010
Sales                                                             1,675.7            1,812.8
Benchmark operating profit                                             3.4              54.4
Benchmark operating margin                                           0.2%              3.0%

Like-for-like change in sales                                      (9.1%)             (6.5%)
New space contribution to sales change                               1.5%               2.5%
Total sales change                                                 (7.6%)             (4.0%)
Gross margin movement                                        Down c.75bps     Down c.150bps
Benchmark operating profit change                                   (94%)              (32%)
Number of stores at period-end                                         754                749

As the UK’s leading general merchandise retailer, Argos provides a unique offer of choice,
value and convenience.

Operational review

Multi-channel leadership
Multi-channel sales have continued to grow and now represent £770m or 46% of Argos’
total sales. The fastest growing channel continues to be online Check & Reserve, which
grew to represent 22% of all sales. Approximately half of these sales are reserved and
collected from stores the same day, with the remainder collected the following day. The
store network provides the certainty and immediacy of stock availability that customers
require.

Total internet orders, including Check & Reserve grew to comprise 33% of Argos’ total sales,
with the remaining 13% of multi-channel sales being products ordered in-store for home
delivery or by telephone. Argos continues to be the second largest internet retailer in the
UK, with over 180 million website visits in the period, an increase of 11% over the same
period last year.

The launch of the web platform for mobile devices and the app for Android phones,
supported by the previously launched Apple iPhone app, is leading to rapid growth of mobile
shopping. At the end of the period the proportion of total sales from mobile shopping was
around 4%.

Argos TV, the home shopping TV trial on the Sky digital television platform, launched on 15
June 2011 since which date it has aired over 600 live shows demonstrating 2,500 products.
There has been a good customer response and the trial will continue over the peak trading
period.

Store network
The programme to refurbish the store network is progressing well. Around 300 stores had
been refurbished by 27 August 2011 and a further 50 stores will be completed in the second
half. Customers’ response to the refurbished stores continues to be very positive and this is
contributing to Argos’ strong brand and store service reputation. The financial performance
of the refurbished stores continues to be encouraging with the average sales uplift being
2.5%, which is ahead of the business case sales uplift requirement of 1%. Refurbishment
costs are averaging approximately £100k per store and therefore the previously announced
£70m cost to complete the programme is on track.

Argos has approximately 150 store lease renewals and 35 store lease break clauses over the
next five years. With this flexibility, Argos will focus on optimising its store network by

                                           Page 5
relocating or closing some older stores and opening some new stores if attractive sites
become available. In the current financial year, it is expected there will be around 15 new
store openings and a similar number of closures.

Improving choice
With around 22,000 lines, the Autumn/Winter 2011 catalogue has increased the choice
compared with last year by around 1,000 lines. This increase has been primarily in the new
children’s clothing category and also in homewares.

Argos has leveraged its market-leading toy and gift licence relationships to extend into
children’s and adult clothing and gifting. Around 500 clothing lines were launched in the
Autumn/Winter 2011 catalogue. In children’s clothing, the range builds on Argos’ existing
strength with major toy licences, such as Disney characters, to provide a wide range of
additional merchandise, such as pyjamas, t-shirts and bedding, brought together in
‘character shops’ within both the catalogue and online. The range also includes adult
clothing, such as London 2012 apparel.

Argos is also trialling a new route to range extension whereby third party products are
embedded within the Argos web shopping experience. This offer allows Argos to sell third
party products on a fully integrated basis through its website and earn a commission on the
sales. The first trial was in the books category with around 5,000 titles being displayed on
the internet. This has now been extended to video game software and technology
accessories.

Own brands continue to offer excellent value and further choice with Chad Valley, Alba,
Bush, Hygena and Schreiber having over 1,500 product lines in the Autumn/Winter 2011
catalogue; and the ‘Colourmatch’ homeware collection, launched in the Spring/Summer
2011 catalogue, has been very successful and has been expanded to over 500 lines.

In technology, Argos increased the in-store display of televisions, cameras and laptops. The
Apple iPad 2 is now also available in 250 stores and via nationwide home delivery.

Improving value
Argos is a leading value retailer and remains highly price competitive, supported by the
Group’s sourcing scale and infrastructure advantages, together with the benefit of Argos’
low-cost operating model. Argos continues to maintain a competitive price position overall
which is measured weekly using internet price comparisons. It maintains a price position
better than the competition on its highest sales volume lines.

Financial review

Sales in the period declined by 7.6% in total. Net new space contributed 1.5% with seven
new stores opened, four closed and a further three being relocated, taking the store
portfolio to 754. Like-for-like sales declined by 9.1%. The consumer electronics market, in
particular televisions and video games systems, has been weak and accounted for the
majority of the reduction in Argos’ sales. Laptops continued to show good growth.

The gross margin rate was down by approximately 75 basis points. Around 100 basis points
was driven by the anticipated net impact of adverse currency and shipping rates together
with around 50 basis points from an increased level of stock clearance activity. This was
partially offset by a benefit from the sales mix.

Total operating and distribution costs were reduced by £9m or 2% with further cost savings
offsetting the impact of both underlying cost inflation pressures and the investment in new
initiatives. Benchmark operating profit was £3.4m, a £51.0m or 94% decline on the
comparable period last year.




                                           Page 6
Homebase

26 weeks to                                                   27 August          28 August
£m                                                                2011               2010
Sales                                                              839.6              855.3
Benchmark operating profit                                          29.9                46.2
Benchmark operating margin                                         3.6%               5.4%

Like-for-like change in sales                                     (0.6%)             (0.8%)
New space contribution to sales change                            (1.2%)             (0.4%)
Total sales change                                                (1.8%)             (1.2%)
Gross margin movement                                      Down c.25bps      Down c.100bps
Benchmark operating profit change                                 (35%)                (6%)
Number of stores at period-end                                       342                 345
Of which contain a mezzanine floor                                   187                 188
Store selling space at period-end (million sq ft)                   15.6                15.8
Of which    - garden centre area                                     3.6                 3.7
            - mezzanine floor area                                   1.8                 1.9

Homebase continues to be well positioned as a leading home enhancement retailer.

Operational review

Extending multi-channel
Internet sales account for 4% of Homebase’s total sales and the value of 'Reserve & Collect'
collections in store increased by 55% against the comparable period last year. Visitor
growth to www.homebase.co.uk remains strong driven by continued improvements to the
customer journey and a refreshed ‘Help & Advice’ section that now includes video content.

The number of online exclusives grew by 1,400 lines to 12,700 lines during the period and a
white label site was launched for made to measure blinds and curtains.

Developing the store portfolio
One store was opened in the period, taking the portfolio to 342. Homebase will continue to
examine the opportunity for new store openings and in addition a small number of closures,
relocations or downsizes will continue to be sought as part of the ongoing management of
the store portfolio.

Homebase successfully delivered its first new home enhancement proposition store. There
is a clear sense of transformation within the decorating categories to deliver Homebase’s
aim of being '1st for decorating' while room-set displays and recipe cards offer ideas and
inspiration to customers. Amongst other developments this new store also benefits from an
improved garden centre layout and a new garden advice centre where colleagues offer
practical ideas and advice including plant finder tools.

The low-cost ‘midi refit’ programme continues successfully to address stores in which a
mezzanine cannot be installed. Three midi refits were completed during the period with a
further seven to be completed in the second half. The refitted Orpington store with an
improved proposition on the mezzanine level for kitchens, bathrooms, bedrooms and
furniture continues to perform strongly.

Developing ranges
Homebase continues to offer differentiated ranges and stylish products to customers with
more ideas and inspiration through a programme of range reviews. During the period
Homebase’s exclusive brand strategy continued with the expansion of the Jamie Oliver and
Qualcast ranges within the seasonal categories. The ‘Home of Style’ brand was successfully
launched as part of the interior range review with over 900 new lines.
                                             Page 7
Homebase has introduced significant range changes in home enhancement, premium paint
brands and bathroom accessories amongst others. It also continues to develop its ranges in
big ticket, with the Odina kitchen trial in seven stores performing ahead of expectations.
The trial will be extended to a further 12 stores in the second half. A big ticket upgrade
programme covering kitchens, bathrooms and fitted bedrooms continues to remove
discontinued display ranges from the showrooms and replace them with more of our best
sellers and to date 96 stores have been completed.

Expanding installation services
Homebase’s installation services support the big ticket offer and provide the customer with a
complete home enhancement solution. Kitchen and bathroom installation is available in all
stores and fitted bedroom installation is offered in 200 stores. Homebase’s market-leading
service enjoys a recommendation rate from customers in excess of 90%.

Value credentials
Homebase has maintained its range of over 500 ‘Value’ lines, offering essential products at
low prices across DIY, decorating and homewares categories. During the period over 500
‘Best Buy’ lines were launched store-wide encompassing 'Best Buy - WOWs', and more
stylised interior products across textiles, lighting and bedding which offer on-trend items at
very competitive prices. Homebase continues to offer competitive pricing on larger
purchase quantities within DIY with around 400 bulk buy deals. The Nectar loyalty card and
a programme of promotional offers continue to provide value for customers.

Financial review

Sales in the period declined by 1.8% in total. Net closed space due to the closures in the
second half of the previous financial year and only one store opening in the first half of the
current financial year reduced sales by 1.2%. Like-for-like sales declined by 0.6%. Big
ticket sales were lower overall reflecting a challenging market, although fitted bedroom
furniture continued to perform well benefiting from the rollout of the installation service and
in-store displays. Bathrooms also performed well. Seasonal sales were in line with last
year, with sales for the remaining categories slightly lower overall.

The gross margin rate was down by approximately 25 basis points driven principally by the
anticipated net impact of adverse currency and shipping rates.

Total operating and distribution costs increased by £6m or 2% driven by the impact of
underlying cost inflation pressures and the investment in new initiatives partially offset by
further cost savings. Benchmark operating profit was £29.9m, a £16.3m or 35% decline on
the comparable period last year.




                                            Page 8
Financial Services

26 weeks to                                                       27 August        28 August
£m                                                                    2011             2010
Sales                                                                   52.2              52.2

Benchmark operating profit before financing costs                         4.7               4.1
Financing costs                                                         (1.7)             (1.6)
Benchmark operating profit                                               3.0               2.5
As at                                           27 August      26 February         28 August
                                                    2011             2011              2010
Store card gross receivables                            501               530              476
Provision                                              (74)              (74)             (69)
Store card net receivables                              427               456              407

Provision % of gross receivables                     14.8%            14.0%             14.6%

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 maximise the total
profit from the transaction for Home Retail Group.

Operational review

In-house store card credit sales reduced by 1% to £275m (2010: £278m) and represented
9.4% (2010: 9.1%) of Group retail sales. The proportion of promotional credit sales
continued to represent 76% of all sales placed on the store cards, with the Buy Now Pay
Later product offer remaining a key credit enabler of sales in big ticket categories. In
addition to credit sales placed on the Group’s own store cards, credit offers for purchases at
Homebase, typically greater than £3,000, are provided through product loans from a third
party provider. Including these product loans, total credit sales penetration increased to
10.5% (2010: 10.0%) of Group retail sales.

The stable level of credit sales and increased penetration is a result of additional credit
offers in specific product categories such as furniture and white goods. The number of
applications, the acceptance rate, and therefore the number of new accounts have all
remained broadly flat year-on-year. Customer use of the online account management tools
continues to grow with over 300,000 registered customers.

Financial review

Store card net receivables grew by £20m versus a year ago to £427m, as a result of the mix
towards longer-term credit plans. The Group finances these receivables balances internally
with no third party debt being required. Delinquency rates improved versus the comparable
period last year, resulting in a reduced bad debt charge. Financing costs were broadly flat
versus last year, with this internal recharge being based upon UK base rates with a
corresponding credit being recognised in Group net interest income.

The benchmark operating profit for the period of £3.0m (2010: £2.5m) reflects the financial
return on the revolving (i.e. interest-bearing) element of receivables, as promotional credit
products are recharged to Argos and Homebase at cost. The cost advantage of this internal
arrangement versus a third-party provider is a benefit within both the Argos and Homebase
benchmark operating profits.




                                            Page 9
GROUP FINANCIAL REVIEW

Sales and benchmark operating profit

Group sales were 6% lower at £2,567.5m (2010: £2,720.3m) while Group benchmark
operating profit declined 72% to £26.5m (2010: £93.2m). The drivers of the Argos,
Homebase and Financial Services performance have been analysed as part of the preceding
business reviews.

Central Activities represents the cost of central corporate functions and the investment costs
of new development opportunities. Costs for the period were 1% lower at £9.8m (2010:
£9.9m), with deal-related costs attributable to the Habitat acquisition being offset by the
continued control of central corporate costs.

Net interest income

Net interest income was £1.8m (2010: £1.5m). Within this, third party interest income for
the period reduced to £1.0m (2010: £1.3m) as a consequence of the completion of the
£150m share buy-back programme during the previous financial year which resulted in a
lower average cash balance being held by the Group during the period.

Financing costs charged within Financial Services’ benchmark operating profit saw the
corresponding credit within net interest income increase to £1.7m (2010: £1.6m). This non-
cash internal recharge is based upon UK base rates.

The charge within net interest income in relation to the discount unwind on benchmark
items was £0.9m (2010: £1.4m). This arises from the accounting treatment whereby
provisions for expected future liabilities are required to be discounted back to their current
value. As settlement of the liability moves closer to the present day, additional non-cash
charges to unwind the discount are incurred; this will result in the absolute level of provision
eventually matching the liability in the accounting period that it becomes due.

Benchmark PBT

Benchmark PBT declined 70% to £28.3m (2010: £94.7m) driven by the factors discussed
above.

Financing fair value remeasurements

Certain foreign exchange movements as well as changes in the fair value of certain financial
instruments are recognised in the income statement within net financing income. These
amounted to a net gain of £2.3m (2010: £9.2m), which arises principally as a result of
translation differences on overseas subsidiary cash balances. The reduction in the gain
reflects a lower level of cash balances held overseas and a relative narrowing in the
exchange rate range experienced during the period. Equal and opposite adjustments to
these translation differences are recognised as part of the movements in reserves. As
required by accounting standards, the net nil exchange adjustment is therefore split
between the income statement and the statement of comprehensive income.

Financing impact on retirement benefit obligations

The credit through net financing income in respect of the expected return on retirement
benefit assets net of the interest expense on retirement benefit liabilities was £2.2m (2010:
£2.3m). The current service cost, which the Group considers a fairer reflection of the cost of
providing retirement benefits, is already reflected in benchmark operating profit.




                                            Page 10
Discount unwind on non-benchmark items

An expense of £3.4m (2010: £3.2m) within net financing income relates to the discount
unwind on onerous lease provisions. As these provisions were items previously excluded
from benchmark PBT, the discount unwind has also been excluded from benchmark PBT. As
set out within the net interest income review above, these non-cash charges arise from the
accounting treatment whereby provisions for expected future liabilities are discounted back
to their current value.

Profit before tax

The reported profit before tax for the period was £29.4m (2010: £103.0m).

Taxation

Taxation attributable to benchmark PBT was £8.4m (2010: £28.9m), representing an
estimated effective tax rate for the full financial year of 29.7% (52 weeks to 26 February
2011: 30.5%). The lower effective tax rate reflects two opposing elements: a reduction in
the UK corporation tax rate of 2% to 26% partially offset by the impact of a fixed level of
disallowable expenditure in comparison to a reduced level of profits.

Taxation attributable to non-benchmark items amounted to a debit of £0.6m (2010: credit
of £0.6m). The total tax expense for the period was therefore £9.0m (2010: £28.3m).

Number of shares and earnings per share

The number of shares for the purpose of calculating basic earnings per share (EPS) was
799.0m (2010: 849.3m). The weighted average number of issued ordinary shares reduced
by 46.2m to 813.4m (2010: 859.6m), reflecting the weighted impact of the Group’s share
buy-back programme during the previous financial year. The adjustment for shares held in
Group share trusts net of vested but unexercised share awards was 14.4m (2010: 10.3m).

The calculation of diluted EPS reflects the potential dilutive effect of employee share
incentive schemes. This increases the number of shares for diluted EPS purposes by 3.9m
(2010: 4.5m) to 802.9m (2010: 853.8m).

Basic benchmark EPS is 2.5p (2010: 7.7p), with diluted benchmark EPS of 2.5p
(2010: 7.7p). Reported basic EPS is 2.6p (2010: 8.8p), with reported diluted EPS being
2.5p (2010: 8.7p).

Dividends

An interim dividend of 4.7p is being announced today. This will be paid on 18 January 2012
to shareholders on the register at the close of business on 11 November 2011 (an ex-
dividend date of 9 November 2011).

The final dividend for the financial year ending 3 March 2012 which is payable on 25 July
2012 will be assessed in the light of the full year trading outcome together with the outlook
for the following financial year.




                                           Page 11
Cash flow and closing net cash position

 26 weeks to                                                        27 August         28 August
 £m                                                                     2011              2010

 Benchmark operating profit                                                26.5              93.2

 Depreciation and amortisation                                             60.6               64.6
 Movement in working capital                                               61.8               36.0
 Financing costs charged to Financial Services                              1.7                1.6
 Cash flow impact of FY 09 restructuring charge                           (3.9)              (4.2)
 Other operating items                                                    (3.7)              (7.6)
 Cash flows from operating activities                                    143.0              183.6


 Net capital expenditure                                                 (60.2)             (65.2)
 Acquisition of business                                                 (23.6)                  -
 Taxation                                                                (38.5)              (3.8)
 Net interest                                                                1.3               1.6
 Net movement of term deposits                                            100.0                  -
 Loans granted to joint ventures and associates                            (1.2)             (0.4)
 Cash inflow before financing activities                                 120.8              115.8

 Dividends paid                                                          (79.9)             (85.8)
 Share buy-back programme                                                     -            (109.1)
 Purchase of own shares for Employee Share Trust                              -              (4.5)
 Other financing activities                                                   -                0.2
 Net increase/(decrease) in cash and cash equivalents                     40.9             (83.4)

 Add back: net movement of term deposits                                (100.0)                  -
 Effect of foreign exchange rate changes                                    0.3              (3.7)
 Decrease in financing net cash                                         (58.8)             (87.1)
 Opening financing net cash                                               259.3             414.0
 Closing financing net cash                                              200.5              326.9

Cash flows from operating activities were £143.0m (2010: £183.6m). This £40.6m
reduction was attributable to a reduced level of operating profit partially offset by an
increased working capital inflow.

Net capital expenditure was £60.2m (2010: £65.2m), reflecting ongoing investment across
the Group in the existing store chains and further multi-channel initiatives. The acquisition
of the Habitat brand, including the UK website and three of its London stores, for a total
consideration of £24.5m was made up of a cash payment in the period of £23.6m and
deferred consideration of £0.9m. Tax paid was £38.5m (2010: £3.8m), with the increase
principally being attributable to the non repeat of certain tax benefits received in the
previous financial year in relation to the successful completion of a number of tax efficiency
projects. Dividends paid to shareholders amounted to £79.9m (2010: £85.8m) with the
reduction of £5.9m reflecting the impact of the share buy-back programme which was
completed in the previous financial year.

The Group’s financing net cash position at 27 August 2011 was £200.5m, a decrease of
£58.8m in the period.




                                            Page 12
Balance sheet

As at                                          27 August      26 February       28 August
£m                                                 2011             2011            2010

Goodwill                                            1,543.9         1,541.0        1,541.0
Other intangible assets                               135.8           107.8           92.0
Property, plant and equipment                         515.2           523.4          523.9
Inventories                                         1,013.9         1,016.8        1,013.5
Instalment receivables                                427.0           456.1          407.4
Other assets                                          174.8           181.7          169.1
                                                    3,810.6         3,826.8        3,746.9

Trade and other payables                         (1,132.9)        (1,106.2)      (1,184.2)
Other liabilities                                  (209.4)          (207.8)        (216.3)
                                                 (1,342.3)        (1,314.0)      (1,400.5)

Invested capital                                  2,468.3          2,512.8        2,346.4

Retirement benefit obligations                       (81.8)             (7.5)       (71.4)
Net tax assets                                         52.9               4.6          57.4
Forward foreign exchange contracts                   (14.6)           (28.0)          (3.0)
Financing net cash                                    200.5            259.3         326.9

Net assets                                        2,625.3          2,741.2        2,656.3


Net assets as at 27 August 2011 were £2,625.3m, equivalent to 329p (2010: 325p) per
share excluding shares held in Group share trusts. The reduction in invested capital versus
the 26 February 2011 year-end balance sheet was £44.5m, driven by a reduction in the
Financial Services loan book together with an increase in trade and other payables partly
offset by the increase in other intangible assets attributable to the Habitat acquisition.

The reduction in net assets of £115.9m versus the balance sheet as at 26 February 2011
was driven by the reduction in invested capital discussed above, together with the £74.3m
increase in retirement benefit obligations and the £58.8m reduction in financing net cash,
partially offset by the £48.3m increase in net tax assets and the £13.4m movement in
forward foreign exchange contracts.

Retirement benefit obligations – pensioner buy-in

On 27 May 2011 the Trustees of the Group’s defined benefit pension scheme signed an
agreement with Prudential Retirement Income Limited (PRIL), a subsidiary of Prudential plc,
for a bulk annuity policy covering existing pensioners in payment. The agreement entered
into is generally referred to as a pensioner ‘buy-in’.

Buy-ins of this nature are a common de-risking practice for defined benefit pension
schemes. They eliminate the existing financial risks related to pensioners covered by the
annuity policy, including exposure to investment, inflation and mortality risk. These risks
are replaced with a continuing obligation from the insurer to meet the cash flows associated
with all future payments to pensioners covered by the buy-in agreement.

To assume these risks PRIL has been paid cash and assets equivalent to £278m from the
assets of the pension scheme. This amount was equal to the scheme’s actuarially assessed
value of the pensioner obligations and therefore the buy-in was financially neutral for both
the pension scheme and the Group.




                                          Page 13
Retirement benefit obligations – IAS 19

The Group’s pension arrangements are operated principally through the Home Retail Group
Pension Scheme, a defined benefit scheme, together with the Home Retail Group
Stakeholder Pension Scheme, a defined contribution scheme.

The IAS 19 valuation as at 27 August 2011 for the defined benefit pension schemes was a
net deficit of £81.8m (26 February 2011: £7.5m). Scheme assets decreased to £703.0m
(26 February 2011: £748.8m). The present value of scheme liabilities increased to £784.8m
(26 February 2011: £756.3m), driven principally by a reduction in the assumed discount
rate to 5.5% (26 February 2011: 5.7%).

The IAS 19 asset value has been reduced by approximately £45m as a result of the
pensioner buy-in. This contrasts with the financially neutral impact assessed under the
actuarial method, as described above, because of the different methods of valuing the
annuity contract required by accounting standards. There will be no impact on the Group’s
benchmark profitability or cash flow arising from the pensioner buy-in.

Liquidity and funding

The Group maintains liquidity by arranging funding ahead of requirements and through
access to committed bank facilities. At 27 August 2011, the Group had £700m of undrawn,
committed borrowing facilities, £685m of which does not expire until 2013. These facilities
are in place to enable the Group to finance its working capital requirements and for general
corporate purposes. The Group’s net cash position is however expected to continue to be
sufficient to meet its financing needs for the foreseeable future.

Group financing arrangements

The Group finances its operations through a combination of retained profits, property leases
and borrowing facilities where necessary. The Group’s net cash balances averaged
approximately £300m over the period; the Group did not draw upon its committed
borrowing facilities at any point during the period.

The Group has significant liabilities through its obligations to pay rents under operating
leases; the operating lease charge for the last 12 months amounted to £366.0m (2010:
£376.6m). Based upon an eight times multiple of the operating lease charge the capitalised
value of these liabilities is £2,928m (2010: £3,013m). Alternatively based upon the
discounted cash flows of the expected future operating lease charges the capitalised value of
these liabilities is £2,954m (2010: £3,130m) utilising a discount rate of 2.9% (2010: 3.2%).
In common with credit rating agencies and lenders, the Group treats its lease liabilities as
debt when evaluating financial risk.

Accounting standards and use of non-GAAP measures

The Group has prepared its consolidated financial statements based on International
Financial Reporting Standards for the 26 weeks ended 27 August 2011. The basis of
preparation is outlined in Note 1 to the Financial Information on page 23.

The Group has identified certain measures that it believes provide additional useful
information on the underlying performance of the Group. These measures are applied
consistently but as they are not defined under GAAP they may not be directly comparable
with other companies’ adjusted measures. The non-GAAP measures are outlined in Note 2
to the Financial Information on page 24.

Principal risks and uncertainties

The Group set out in its 2011 Annual Report and Financial Statements the principal risks and
uncertainties which could impact its performance; these remain unchanged since its


                                          Page 14
publication. The Group operates a structured risk management process which identifies and
evaluates risks and uncertainties and reviews mitigation activity.

On a short-term forward-looking basis over the remainder of the financial year, the main
area of potential risk and uncertainty centres on the impact on sales volumes and thereby
profitability in relation to economic conditions and overall consumer demand. Other
potential risks and uncertainties around sales and/or profit growth include the cost of goods
and services to the Group, competitor activity, seasonal weather patterns, failure to execute
the strategy, currency exposures, the regulatory environment, product supply and other
operational processes, infrastructure development, product safety, reliance on key personnel
and business interruption. These risks, together with examples of mitigating activity, are
set out in more detail in the 2011 Annual Report and Financial Statements on pages 32 and
33.




                                          Page 15
   Appendix 1. Trading statement information as reported

                                Financial year 2010/11                                 Financial year 2011/12
                                         Q1                                                 Q1
                                 13 weeks to                                        13 weeks to
                                29 May 2010                                        28 May 2011
Argos
Sales                                  £889m                                              £817m
Like-for-like change in sales          (8.1%)                                             (9.6%)
Net new space contribution               2.9%                                               1.5%
Total sales change                     (5.2%)                                             (8.1%)
Gross margin movement           Down c.150bps                                       Down c.75bps
Homebase
Sales                                  £459m                                              £458m
Like-for-like change in sales          (1.4%)                                               1.6%
Net new space contribution               0.0%                                             (1.7%)
Total sales change                     (1.4%)                                             (0.1%)
Gross margin movement           Down c.150bps                                       Down c.50bps

                                         Q2                H1                               Q2                H1
                                13 weeks to       26 weeks to                      13 weeks to       26 weeks to
                                28 Aug 2010       29 Aug 2009                      27 Aug 2011       27 Aug 2011
Argos
Sales                                  £924m          £1,813m                             £859m          £1,676m
Like-for-like change in sales          (5.0%)           (6.5%)                            (8.6)%           (9.1)%
Net new space contribution               2.2%             2.5%                              1.5%             1.5%
Total sales change                     (2.8%)           (4.0%)                            (7.1)%           (7.6)%
Gross margin movement           Down c.125bps    Down c.150bps                     Down c.100bps     Down c.75bps
Homebase
Sales                                  £396m            £855m                            £382m             £840m
Like-for-like change in sales            0.0%           (0.8%)                           (3.1)%            (0.6)%
Net new space contribution             (1.1%)           (0.4%)                           (0.7)%            (1.2)%
Total sales change                     (1.1%)           (1.2%)                           (3.8)%            (1.8)%
Gross margin movement            Down c.75bps    Down c.100bps                            c.0bps     Down c.25bps

                                          Q3               YTD
                                 18 weeks to       44 weeks to
                                  1 Jan 2011        2 Jan 2010
Argos
Sales                                £1,861m          £3,674m
Like-for-like change in sales          (4.9%)           (5.7%)
Net new space contribution               1.7%             2.1%
Total sales change                     (3.2%)           (3.6%)
Gross margin movement            Down c.25bps     Down c.75bps
Homebase
Sales                                  £487m          £1,342m
Like-for-like change in sales          (1.2%)           (1.0%)
Net new space contribution             (1.6%)           (0.8%)
Total sales change                     (2.8%)           (1.8%)
Gross margin movement              Up c.75bps     Down c.25bps

                                          Q4               H2                FY
                                  8 weeks to      26 weeks to       52 weeks to
                                 26 Feb 2011      26 Feb 2011       26 Feb 2011
Argos
Sales                                  £520m          £2,381m           £4,194m
Like-for-like change in sales          (4.6%)           (4.8%)            (5.6%)
Net new space contribution               1.5%             1.7%              2.1%
Total sales change                     (3.1%)           (3.1%)            (3.5%)
Gross margin movement           Down c.150bps     Down c.50bps     Down c.100bps
Homebase
Sales                                  £208m             £695m          £1,551m
Like-for-like change in sales            3.8%              0.2%          (0.3%)
Net new space contribution             (2.0%)            (1.7%)          (1.1%)
Total sales change                       1.8%            (1.5%)          (1.4%)
Gross margin movement             Up c.300bps       Up c.150bps           c.0bps



                                                         Page 16
HOME RETAIL GROUP PLC

UNAUDITED CONDENSED HALF-YEARLY FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT
For the 26 weeks ended 27 August 2011


 52 weeks to                                                                         26 weeks to   26 weeks to
     26.2.11                                                                             27.8.11       28.8.10
         £m                                                                  Notes           £m            £m

    5,851.9    Revenue                                                        4          2,567.5      2,720.3

   (3,970.7)   Cost of sales                                                  5        (1,731.4)     (1,827.2)

    1,881.2    Gross profit                                                               836.1         893.1

   (1,623.2)   Net operating expenses                                                    (809.6)       (799.9)

      258.0    Operating profit                                                            26.5          93.2

       57.3    - Finance income                                                            27.3          33.6
      (50.2)   - Finance expense                                                          (24.4)        (23.8)
         7.1   Net financing income                                           6              2.9           9.8

         0.1   Share of post-tax profits of joint ventures and associates                      -             -

      265.2    Profit before tax                                                           29.4         103.0

      (74.3)   Taxation                                                       7            (9.0)        (28.3)

               Profit for the period attributable to equity holders of the
      190.9    Company                                                                     20.4          74.7


      pence    Earnings per share                                             8           pence         pence
       23.1    - Basic                                                                       2.6           8.8
       23.0    - Diluted                                                                     2.5           8.7


       14.7    Dividend per share                                             9              4.7           4.7




 52 weeks to                                                                         26 weeks to   26 weeks to
     26.2.11   Non-GAAP measures                                                         27.8.11       28.8.10
         £m    Reconciliation of profit before tax (PBT) to benchmark PBT    Notes           £m            £m

      265.2    Profit before tax                                                           29.4         103.0
               Adjusted for:
       (5.4)   Financing fair value remeasurements                            6            (2.3)         (9.2)
       (4.6)   Financing impact on retirement benefit obligations             6            (2.2)         (2.3)
        6.1    Discount unwind on non-benchmark items                         6              3.4           3.2
       (7.2)   Onerous lease provision releases                                                -             -

      254.1    Benchmark PBT                                                               28.3          94.7



      pence    Benchmark earnings per share                                   8           pence         pence
       21.3    - Basic                                                                       2.5           7.7
       21.2    - Diluted                                                                     2.5           7.7




                                                            Page 17
HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 26 weeks ended 27 August 2011


 52 weeks to                                                                                    26 weeks to   26 weeks to
     26.2.11                                                                                        27.8.11       28.8.10
         £m                                                                             Notes           £m            £m


               Profit for the period attributable to equity holders of the
      190.9    Company                                                                                20.4          74.7


               Other comprehensive income:
               Net change in fair value of cash flow hedges
      (43.3)   - Foreign currency forward exchange contracts                                         (14.0)        (17.4)
               Net change in fair value of cash flow hedges transferred to inventory
      (15.9)   - Foreign currency forward exchange contracts                                          22.2         (30.2)
        1.9    Actuarial (losses)/gains in respect of defined benefit pension schemes    13          (85.4)        (58.7)
        1.3    Fair value movements on available-for-sale financial assets                            (0.9)         (0.1)
       (6.1)   Currency translation differences                                                       (1.4)        (14.1)
       15.7    Tax credit in respect of items taken directly to equity                                18.8          29.8


      (46.4)   Other comprehensive income for the period, net of tax                                 (60.7)        (90.7)


               Total comprehensive income for the period attributable to equity
      144.5    holders of the Company                                                                (40.3)        (16.0)




                                                              Page 18
HOME RETAIL GROUP PLC

CONSOLIDATED BALANCE SHEET
At 27 August 2011

    26.2.11                                                                      27.8.11     28.8.10
        £m                                                              Notes         £m         £m
               ASSETS
               Non-current assets
    1,541.0    Goodwill                                                          1,543.9     1,541.0
      107.8    Other intangible assets                                             135.8        92.0
      523.4    Property, plant and equipment                                       515.2       523.9
        8.0    Investments in joint ventures and associates                          8.3         7.5
       39.4    Deferred tax assets                                                  52.2        59.1
        4.3    Trade and other receivables                                           4.3         4.0
       15.2    Other financial assets                                               15.4        13.0

    2,239.1    Total non-current assets                                          2,275.1     2,240.5

               Current assets
    1,016.8    Inventories                                                       1,013.9     1,013.5
      610.3    Trade and other receivables                                         573.8       552.0
       10.9    Current tax assets                                                   24.9        34.5
        1.4    Other financial assets                                                1.2        11.6
      100.0    Current asset investments                                                -       50.0
      159.3    Cash and cash equivalents                                           200.5       276.9

    1,898.7    Total current assets                                              1,814.3     1,938.5

    4,137.8    Total assets                                                      4,089.4     4,179.0

               LIABILITIES
               Non-current liabilities
      (58.7)   Trade and other payables                                           (57.1)       (60.5)
    (187.4)    Provisions                                                12      (191.4)     (198.0)
      (24.5)   Deferred tax liabilities                                           (20.7)       (22.0)
       (7.5)   Retirement benefit obligations                            13       (81.8)       (71.4)

    (278.1)    Total non-current liabilities                                     (351.0)     (351.9)

               Current liabilities
   (1,047.5)   Trade and other payables                                         (1,075.8)   (1,123.7)
      (20.4)   Provisions                                                12       (18.0)       (18.3)
      (29.4)   Other financial liabilities                                        (15.8)       (14.6)
      (21.2)   Current tax liabilities                                              (3.5)      (14.2)

   (1,118.5)   Total current liabilities                                        (1,113.1)   (1,170.8)

   (1,396.6)   Total liabilities                                                (1,464.1)   (1,522.7)

    2,741.2    Net assets                                                        2,625.3     2,656.3

               EQUITY
       81.3    Share capital                                                        81.3        83.3
        6.4    Capital redemption reserve                                            6.4         4.4
    (348.4)    Merger reserve                                                    (348.4)     (348.4)
       (5.6)   Other reserves                                                       (0.5)       (4.4)
    3,007.5    Retained earnings                                                 2,886.5     2,921.4

    2,741.2    Total equity                                                      2,625.3     2,656.3




                                                              Page 19
HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 26 weeks ended 27 August 2011
                                                      Attributable to equity holders of the Company
                                                           Capital
                                             Share    redemption        Merger      Other    Retained
                                            capital       reserve      reserve   reserves     earnings         Total
                                               £m               £m          £m           £m           £m         £m

Balance at 27 February 2011                   81.3              6.4     (348.4)        (5.6)      3,007.5    2,741.2

Profit for the period                             -               -           -            -         20.4       20.4
Other comprehensive income                        -               -           -          4.3       (65.0)     (60.7)
Total comprehensive income for the period
ended 27 August 2011                              -               -           -          4.3       (44.6)     (40.3)
Transactions with owners:
 Movement in share-based compensation
 reserve                                          -               -           -            -          4.4        4.4
 Net movement in own shares                       -               -           -          0.8        (0.8)          -
 Equity dividends paid during the period          -               -           -            -       (79.9)     (79.9)
 Other distributions                              -               -           -            -        (0.1)      (0.1)
Total transactions with owners                    -               -           -          0.8       (76.4)     (75.6)
Balance at 27 August 2011                     81.3              6.4    (348.4)         (0.5)     2,886.5     2,625.3



                                                        Attributable to equity holders of the Company
                                                            Capital
                                             Share     redemption         Merger        Other    Retained
                                            capital        reserve       reserve     reserves     earnings     Total
                                               £m              £m            £m            £m          £m       £m

Balance at 28 February 2010                   87.7                -     (348.4)         46.6      3,080.7    2,866.6

Profit for the period                             -               -           -            -         74.7       74.7
Other comprehensive income                        -               -           -       (48.5)       (42.2)     (90.7)
Total comprehensive income for the period
ended 28 August 2010                              -               -           -       (48.5)         32.5     (16.0)
Transactions with owners:
 Movement in share-based compensation
 reserve                                          -               -           -            -          5.9        5.9
 Net movement in own shares                       -               -           -        (2.5)        (1.8)      (4.3)
 Shares purchased for cancellation            (4.4)             4.4           -            -      (109.1)    (109.1)
 Equity dividends paid during the period          -               -           -            -       (85.8)     (85.8)
 Other distributions                              -               -           -            -        (1.0)      (1.0)
Total transactions with owners                (4.4)             4.4           -        (2.5)      (191.8)    (194.3)
Balance at 28 August 2010                      83.3             4.4     (348.4)        (4.4)      2,921.4    2,656.3




                                                      Page 20
HOME RETAIL GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS
For the 26 weeks ended 27 August 2011

 52 weeks to                                                                           26 weeks to   26 weeks to
     26.2.11                                                                               27.8.11       28.8.10
         £m                                                                    Notes           £m            £m


               Cash flows from operating activities
      278.8    Cash generated from operations                                   14          143.0         183.6
      (11.3)   Tax paid                                                                     (38.5)         (3.8)

      267.5    Net cash inflow from operating activities                                    104.5         179.8

               Cash flows from investing activities
           -   Acquisition of business                                          10          (23.6)             -
     (102.2)   Purchase of property, plant and equipment                        11          (41.5)        (52.3)
         3.4   Proceeds from the disposal of property, plant and equipment      11             2.7           1.6
      (43.9)   Purchase of other intangible assets                              11          (21.4)        (14.5)
       (0.4)   Loans granted to joint ventures and associates                   16           (1.2)         (0.4)
     (151.4)   Purchase of investments                                                           -        (50.0)
      100.0    Disposal of investments                                                      100.0          50.0
         2.6   Interest received                                                               1.3           1.6

     (191.9)   Net cash flows from investing activities                                      16.3         (64.0)

               Cash flows from financing activities
     (150.2)   Repurchase of own shares                                                          -       (109.1)
       (6.7)   Purchase of shares for Employee Share Trust                                       -         (4.5)
         0.4   Proceeds from disposal of shares held by Employee Share Trust                     -           0.2
     (123.9)   Dividends paid                                                   9           (79.9)        (85.8)

     (280.4)   Net cash used in financing activities                                        (79.9)       (199.2)

     (204.8)   Net increase/(decrease) in cash and cash equivalents                          40.9         (83.4)

               Movement in cash and cash equivalents
      364.0    Cash and cash equivalents at the beginning of the period                     159.3         364.0
         0.1   Effect of foreign exchange rate changes                                         0.3         (3.7)
     (204.8)   Net increase/(decrease) in cash and cash equivalents                          40.9         (83.4)

      159.3    Cash and cash equivalents at the end of the period                           200.5         276.9




                                                             Page 21
HOME RETAIL GROUP PLC

ANALYSIS OF NET CASH/(DEBT)
At 27 August 2011

     26.2.11                                                                                                 27.8.11         28.8.10
          £m      Non-GAAP measures                                                                              £m               £m


                  Financing net cash:
       159.3      Cash and cash equivalents                                                                    200.5           276.9
       100.0      Current asset investments                                                                         -           50.0

       259.3      Total financing net cash                                                                     200.5           326.9



                  Operating net debt:
   (2,874.1)      Off balance sheet operating leases                                                      (2,954.1)        (3,129.6)

   (2,874.1)      Total operating net debt                                                                (2,954.1)        (3,129.6)

   (2,614.8)      Total net debt                                                                          (2,753.6)        (2,802.7)



                  Adjusted for:
     2,874.1      Off balance sheet operating leases                                                         2,954.1         3,129.6
     (100.0)      Current asset investments                                                                         -          (50.0)

       159.3      Total cash and cash equivalents reflected in balance sheet                                   200.5           276.9


The Group uses the term ‘total net debt’ to highlight the Group’s aggregate net indebtedness to banks and other financial institutions
together with debt-like liabilities, notably operating leases. The capitalised value of these leases is £2,954.1m (26 February 2011:
£2,874.1m), based upon discounting the current rentals at the estimated current long-term cost of borrowing of 2.9% (26 February 2011:
4.1%).

Current asset investments in the comparative periods comprised term cash deposits invested for initial terms of between six and nine
months and which matured after the comparative balance sheet dates. There are no such investments at 27 August 2011.




                                                                Page 22
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

1. Basis of preparation

The unaudited condensed half-yearly financial information comprises the results for the 26 weeks ended 27 August 2011, the 26
weeks ended 28 August 2010, and the audited consolidated results for the 52 weeks ended 26 February 2011.

The audited consolidated financial information for the 52 weeks to 26 February 2011 has been extracted from Home Retail Group
plc’s Annual Report and Financial Statements, which was approved by the Board of Directors on 20 April 2011 and delivered to the
Registrar of Companies. The report of the Group’s auditors, PricewaterhouseCoopers LLP, on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The condensed half-yearly financial information is not audited or reviewed and does not constitute statutory financial statements
within the meaning of Section 434 of the Companies Act 2006.

After making enquiries, the directors are satisfied that the Company has sufficient resources to continue in operation for the
foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed half-yearly financial
information.

IFRS and accounting policies

This condensed half-yearly financial information for the 26 weeks ended 27 August 2011 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, ‘Interim Financial Reporting’ as adopted by
the European Union. The condensed half-yearly financial information should be read in conjunction with Home Retail Group plc’s
Annual Report and Financial Statements for the 52 weeks to 26 February 2011, which have been prepared in accordance with
International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC)
interpretations as adopted by the European Union.

The accounting policies adopted by Home Retail Group are set out in Home Retail Group plc’s Annual Report and Financial
Statements, dated 20 April 2011, which is available on Home Retail Group's website www.homeretailgroup.com. With the exception
of those changes in accounting standards which are effective for the first time for the current period, as detailed below, these
policies have been consistently applied for all periods presented.

Changes in accounting standards

A number of new standards, amendments and interpretations are effective for the first time for the current period, but have had no
material impact on the results or financial position of the Group, as disclosed within this report:

    •   Amendment to IAS 24 (revised) – ‘Related Party Disclosures’: relating to disclosure of transactions between government
        related parties and clarification of the definition of related parties;
    •   Amendment to IFRS 1 – ‘First-time Adoption’: relating to exemptions from comparative IFRS 7 disclosures;
    •   Improvements to IFRSs (May 2010);
    •   Amendment to IFRIC 14 – ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
        Interaction’: relating to prepayments of a minimum funding requirement;
    •   IFRIC 19 – ‘Extinguishing Financial Liabilities with Equity Instruments’.

At the balance sheet date a number of new standards and amendments were in issue but not yet effective:

    •   Amendment to IAS 1 – ‘Financial Statement Presentation’: relating to presentation of items in other comprehensive income;
    •   Amendment to IAS 12 – ‘Income Taxes’: relating to deferred tax arising on investment property measured at fair value;
    •   Amendment to IAS 19 (revised) – ‘Employee Benefits’: relating to recognition and measurement of defined benefit pension
        expense and termination benefits and disclosures for all employee benefits;
    •   IAS 27 (revised) – ‘Separate Financial Statements’;
    •   IAS 28 (revised) – ‘Investments in Associates and Joint Ventures’;
    •   Amendments to IFRS 1 – ‘First-time Adoption’: relating to exemptions for severe hyperinflation and removal of fixed dates;
    •   Amendment to IFRS 7 – ‘Financial Instruments: Disclosures’: disclosures relating to transferred financial assets;
    •   IFRS 9 – ‘Financial Instruments’;
    •   IFRS 10 – ‘Consolidated Financial Statements’;
    •   IFRS 11 – ‘Joint Arrangements’;
    •   IFRS 12 – ‘Disclosure of Interests in Other Entities’;
    •   IFRS 13 – ‘Fair Value Measurement’.

The Group has not early-adopted any of these above new standards or amendments. Their impact will be fully considered in due
course.




                                                               Page 23
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

2. Non-GAAP financial information

Home Retail Group has identified certain measures that it believes will assist the understanding of the performance of the business.
The measures are not defined under IFRS and they may not be directly comparable with other companies’ adjusted measures. The
non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but Home Retail
Group has included them as it considers them to be important comparables and key measures used within the business for
assessing performance. The following are the key non-GAAP measures identified by Home Retail Group:


Exceptional items

Items which are both material and non-recurring are presented as exceptional items within their relevant income statement line.
The separate reporting of exceptional items helps provide a better indication of underlying performance of the Group. Examples of
items which may be recorded as exceptional items are impairment charges, restructuring costs and the profits/losses on the
disposal of businesses. There have not, however, been any reported exceptional items in any of the reported periods.

Benchmark operating profit and benchmark profit before tax (benchmark PBT)

The Group uses the terms benchmark operating profit and benchmark PBT as measures which are not formally recognised under
IFRS.
• Benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, store impairment and
   onerous lease charges or releases and exceptional items.
• Benchmark PBT is defined as profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or
   releases, exceptional items, financing fair value remeasurements, financing impact on retirement benefit obligations, the
   discount unwind on non-benchmark items and taxation.
• Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to benchmark PBT,
   divided by the weighted average number of shares in issue (excluding shares held in Home Retail Group’s share trusts net of
   vested but unexercised share awards).
These measures are considered useful in that they provide investors with an alternative means to evaluate the underlying
performance of the Group’s operations.

Total net debt

The Group uses the term total net debt which is considered useful in that it provides the Group’s aggregate net indebtedness to
banks and other financial institutions together with debt-like liabilities, notably operating leases.


3. Foreign currency
                                                               Average                                           Closing
                                             26 weeks to        26 weeks to     52 weeks to
                                                  27.8.11            28.8.10        26.2.11         27.8.11       28.8.10       26.2.11

The principal exchange rates used were
as follows:
Sterling to US dollar                                1.63                1.51          1.55             1.64          1.55         1.61
Sterling to euro                                     1.14                1.17          1.17             1.13          1.22         1.17


Assets and liabilities of overseas undertakings are translated into sterling at the rates of exchange ruling at the balance sheet date
and the income statement is translated into sterling at average rates of exchange.




                                                                 Page 24
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

4. Segmental information

The Board of Directors and Operating Board review the Group’s internal reporting in order to assess performance and allocate
resources. Management has determined the operating segments based on these reports, which reflect the distinct retail brands and
different risks associated with the different businesses. The Group is organised into three main business segments: Argos,
Homebase and Financial Services together with Central Activities.

The Board of Directors and Operating Board assess the performance of the operating segments based on a combination of revenue
and benchmark operating profit. Benchmark operating profit is defined within note 2.



 52 weeks to                                                                                            26 weeks to   26 weeks to
     26.2.11                                                                                                27.8.11       28.8.10
         £m                                                                                                     £m            £m
                 Revenue
    4,194.3      Argos                                                                                      1,675.7      1,812.8
    1,550.7      Homebase                                                                                    839.6         855.3
      106.9      Financial Services                                                                           52.2          52.2
           -     Central Activities                                                                               -             -
    5,851.9      Total segment revenue                                                                      2,567.5      2,720.3


                 Benchmark operating profit/(loss)
      219.0      Argos                                                                                          3.4         54.4
       47.6      Homebase                                                                                     29.9          46.2
         6.0     Financial Services                                                                             3.0           2.5
      (21.8)     Central Activities                                                                           (9.8)         (9.9)


      250.8      Total segment benchmark operating profit                                                     26.5          93.2
         3.2     Benchmark interest                                                                             1.8           1.5
         0.1     Share of post-tax profits of joint ventures and associates                                       -             -


      254.1      Benchmark profit before tax                                                                  28.3          94.7
         5.4     Financing fair value remeasurements                                                            2.3           9.2
         4.6     Financing impact on retirement benefit balances                                                2.2           2.3
       (6.1)     Discount unwind on non-benchmark items                                                       (3.4)         (3.2)
         7.2     Onerous lease provision releases                                                                 -             -


      265.2      Profit before tax                                                                            29.4         103.0
      (74.3)     Taxation                                                                                     (9.0)        (28.3)


      190.9      Profit for the period attributable to equity holders of the Company                          20.4          74.7


The results for Financial Services are after deducting funding costs of £1.7m (2010: £1.6m) (note 6).




                                                               Page 25
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

4. Segmental information (continued)



 52 weeks to                                                                                           26 weeks to      26 weeks to
     26.2.11                                                                                               27.8.11          28.8.10
         £m                                                                                                      £m              £m
                   Segment assets
    2,393.0        Argos                                                                                    2,390.1         2,384.4
      891.9        Homebase                                                                                   885.8           883.6
      480.4        Financial Services                                                                         443.6           429.7
       62.9        Central Activities                                                                           92.3            60.8


    3,828.2        Total segment assets                                                                     3,811.8         3,758.5
       50.3        Tax assets                                                                                   77.1            93.6
      100.0        Current asset investments                                                                        -           50.0
      159.3        Cash and cash equivalents                                                                  200.5           276.9


    4,137.8        Total assets per balance sheet                                                           4,089.4         4,179.0


Segment assets include goodwill and other intangible assets, property, plant and equipment, investment in joint ventures and
associates, inventories, trade and other receivables and other financial assets. Tax assets, current asset investments and cash and
cash equivalents are not allocated to segments.


5. Cost of sales

 52 weeks to                                                                                           26 weeks to      26 weeks to
     26.2.11                                                                                               27.8.11          28.8.10
         £m        Cost of sales comprises:                                                                      £m              £m


   (3,674.9)       Cost of goods                                                                          (1,597.2)        (1,680.1)
     (295.8)       Distribution costs                                                                       (134.2)          (147.1)
   (3,970.7)       Total cost of sales                                                                    (1,731.4)        (1,827.2)




                                                               Page 26
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

6. Net financing income/(expense)

52 weeks to                                                                                              26 weeks to      26 weeks to
    26.2.11                                                                                                  27.8.11          28.8.10
         £m                                                                                                        £m                 £m

                  Finance income:

         2.6      Bank deposits and other interest                                                                 1.0                1.3
       46.9       Expected return on retirement benefit assets                                                    23.5            23.1
         7.8      Financing fair value remeasurements - net exchange gains                                         2.8                9.2

       57.3       Total finance income                                                                            27.3            33.6

                  Finance expense:

       (8.7)      Unwinding of discounts (a)                                                                     (4.3)           (4.6)
       (2.4)      Financing fair value remeasurements – net exchange losses                                      (0.5)                  -
     (42.3)       Interest expense on retirement benefit liabilities                                            (21.3)          (20.8)

     (53.4)       Total finance expense                                                                         (26.1)          (25.4)
         3.2      Less: finance expense charged to Financial Services cost of sales                                1.7                1.6

     (50.2)       Total net finance expense                                                                     (24.4)          (23.8)
         7.1      Net financing income                                                                             2.9                9.8


(a) Included within unwinding of discounts is a £3.4m charge (2010: £3.2m) relating to the discount unwind on exceptional
    onerous lease provisions.


7. Taxation

 52 weeks to                                                                                             26 weeks to      26 weeks to
     26.2.11                                                                                                 27.8.11          28.8.10
         £m                                                                                                        £m                 £m


      (70.4)      UK tax                                                                                         (8.4)          (27.3)
       (3.9)      Overseas tax                                                                                   (0.6)           (1.0)
      (74.3)      Total tax expense                                                                              (9.0)          (28.3)


The tax charge for the period of £9.0m (2010: £28.3m) is based on an estimated annual effective rate of tax of 30.6%
(2010: 27.5%). Closing deferred tax has been calculated at the substantively enacted UK corporation tax rate of 25% (2010:
27%). The effect of the reduction in the UK corporation tax rate from 27% to 25% is a deferred tax charge of £1.7m. Of this
charge, £0.6m has been charged to the income statement and £1.1m has been charged directly to the consolidated statement of
comprehensive income.

The proposed reduction in the main rate of UK corporation tax by 1% per year to 23% is expected to be enacted separately each
year. The impact of the future rate reductions on the net deferred tax asset are not material for each future year at the balance
sheet date. The Group will assess the impact of the reduction in the rate in line with its accounting policy in respect of deferred
tax at each balance sheet date.

The estimated annual effective rate of tax based on benchmark PBT, defined as the total tax expense, adjusted for the tax
impact of non-benchmark items, divided by benchmark PBT (excluding joint ventures and associates), is 29.7% (2010: 30.5%).




                                                                 Page 27
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

8. Basic and diluted earnings per share (EPS)


The calculation of basic and diluted EPS is based on the following data:


52 weeks to                                                                                             26 weeks to       26 weeks to
    26.2.11                                                                                                 27.8.11           28.8.10
         £m       Earnings                                                                                        £m                £m


      190.9       Profit after tax for the financial period                                                      20.4              74.7
                  Adjusted for:
       (5.4)      Financing fair value remeasurements                                                           (2.3)             (9.2)
       (4.6)      Financing impact on retirement benefit obligations                                            (2.2)             (2.3)
         6.1      Discount unwind on non-benchmark items                                                          3.4               3.2
       (7.2)      Onerous lease provision releases                                                                   -                 -
         1.8      Attributable taxation charge/(credit)                                                           0.3             (0.6)
       (5.0)      Non-benchmark tax charge/(credit) in respect of prior years                                     0.3                  -


      176.6       Benchmark profit after tax for the financial period                                            19.9              65.8


    millions      Weighted average number of shares                                                          millions         millions


      827.4       Number of ordinary shares for the purpose of basic EPS                                       799.0              849.3
         3.9      Dilutive effect of share incentive awards                                                       3.9               4.5


      831.3       Number of ordinary shares for the purpose of diluted EPS                                     802.9              853.8


      pence       EPS                                                                                          pence              pence


       23.1       Basic EPS                                                                                       2.6               8.8
       23.0       Diluted EPS                                                                                     2.5               8.7


       21.3       Basic benchmark EPS                                                                             2.5               7.7
       21.2       Diluted benchmark EPS                                                                           2.5               7.7

Basic earnings per share is calculated by dividing the profit attributable to the equity holders of the Company by the weighted
average number of ordinary shares in issue during the period, excluding ordinary shares held in Home Retail Group’s share
trusts net of vested but unexercised share awards. Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares.


9. Dividend

An interim dividend of 4.7 pence (2010: 4.7 pence) per Home Retail Group plc ordinary share, amounting to a total interim dividend
of £37.6m (2010: £38.1m), has been announced (but not provided) and will be paid on 18 January 2012 to shareholders on the
register at the close of business on 11 November 2011.

In July 2011, a final dividend of 10.0 pence (2010: 10.0 pence) per Home Retail Group plc ordinary share, amounting to a total final
dividend of £79.9m (2010: £85.8m), was paid to shareholders.




                                                                Page 28
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

10. Business combination

On 24 June 2011, the Group announced it had agreed to purchase the exclusive rights to the Habitat brand, its brand designs and
intellectual property in the UK and the Republic of Ireland, along with the Habitat UK website, three of its London stores and a
share of trading stock, for a total purchase price of £24.5m. The Group considers the acquisition to be a significant addition to the
existing portfolio of own brands and expects to leverage the Group’s multi-channel strength to develop the online proposition.
Goodwill of £2.9m has been recognised on this transaction, which represents the synergies, assembled workforce and future growth
potential of the business acquired.

                                                                                                                         26 weeks to
                                                                                                                             27.8.11
                                                                                                                                   £m
Consideration
Cash                                                                                                                              23.6
Deferred consideration                                                                                                             0.9
Total consideration                                                                                                               24.5


Recognised amounts of identifiable assets acquired and liabilities assumed (at provisional fair values)
Other intangible assets – brands                                                                                                  18.0
Other identifiable net assets                                                                                                      3.6
Total identifiable net assets                                                                                                     21.6
Goodwill                                                                                                                           2.9
                                                                                                                                  24.5


As at 27 August 2011, cash consideration totalling £23.6m has been paid, however £4.2m of this amount is held in escrow, pending
the assignment of the leases of the three acquired London stores to the Group. In the event that it is not possible to assign all three
leases to the Group, some or all of the amount held in escrow will be returned to the Group. The fair value of the acquired assets
and liabilities is provisional pending the assignment of these leases. In addition, an amount of £0.9m is still due to the vendor at 27
August 2011. This relates to amounts withheld in accordance with the agreement, £0.8m of which has been settled since the period
end, with the balance due to be paid during the second half of the year.

The revenue and profit included in the consolidated income statement from the date of acquisition to 27 August 2011 are immaterial
in the context of this financial information, so have not been disclosed.


11. Capital expenditure

In the period, there were additions to property, plant and equipment of £41.5m (2010: £52.3m) and disposals of property, plant
and equipment generated proceeds of £2.7m (2010: £1.6m). In the period, there were additions to intangible assets of £21.4m
(2010: £14.5m). Capital commitments contracted but not provided for by the Group amounted to £11.0m (2010: £10.1m).




                                                                Page 29
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

12. Provisions
                                                      Onerous
                                                       leases          Insurance      Restructuring              Other            Total
                                                            £m                  £m                £m                £m                £m


At 26 February 2011                                     (157.9)              (31.9)             (7.8)            (10.2)         (207.8)
Exchange differences                                       (0.2)                  -                 -                 -           (0.2)
Charged to the income statement                                -              (1.8)                 -             (5.0)           (6.8)
Released to the income statement                               -                  -                 -               0.7               0.7
Acquired through business combination                          -                  -                 -             (0.5)           (0.5)
Utilised during the period                                   1.4                1.0               3.9               3.3               9.6
Discount unwind                                            (4.3)                  -                 -             (0.1)           (4.4)


At 27 August 2011                                      (161.0)               (32.7)            (3.9)            (11.8)         (209.4)



     26.2.11                                                                                                   27.8.11         28.8.10
          £m    Analysed as:                                                                                        £m                £m


      (20.4)    Current                                                                                         (18.0)           (18.3)
     (187.4)    Non-current                                                                                    (191.4)          (198.0)

     (207.8)                                                                                                   (209.4)          (216.3)



The onerous lease provision covers potential liabilities for onerous lease contracts for stores that have either closed, or where
projected future trading income is insufficient to cover the lower of exit cost or value-in-use. Where the value-in-use calculation
is lower, the provision is based on the present value of expected future cash flows relating to rents, rates and other property
costs to the end of the lease terms net of expected trading or sublet income.

An insurance provision is made at the period-end for the estimated costs of claims incurred by the Group’s captive insurance
company but not settled at the balance sheet date, including the costs of claims that have arisen but have not yet been reported
to the Group. The estimated cost of claims includes expenses to be incurred in settling claims.

A number of organisational changes have been undertaken in prior years to improve the operational efficiency of the Group and
drive further cost productivity. Actions taken included the streamlining of head office functions across all parts of the Group,
restructuring of store-based staff and a consolidation of home delivery warehouses.

Other provisions include legal claims and other sundry provisions.


13. Post-employment benefits

As at the balance sheet date, the obligation in respect of the Home Retail Group defined benefit pension scheme was £784.8m
(26 February 2011: £756.3m) and the market value of the scheme assets was £703.0m (26 February 2011: £748.8m), resulting in
a net deficit on the scheme of £81.8m (26 February 2011: £7.5m).

The increase in the defined benefit obligation arises due to a £28.5m increase to scheme liabilities and a decrease of £45.8m to
scheme assets. The decrease in scheme assets primarily results from the buy-in arrangement described below. As a result, a net
£85.4m actuarial loss (26 February 2011: £1.9m net gain) has been taken to equity and is reported in the consolidated statement of
comprehensive income.

As part of the Group’s risk management strategy for liabilities arising under the scheme, certain pensioner liabilities were subject to
a buy-in arrangement on 27 May 2011. Under the terms of this arrangement, the scheme paid £278m to an insurance company and
will in return receive annuity payments equal to the monthly pensions then in payment. This eliminates the scheme’s exposure to
the investment, inflation and mortality risks associated with these pensioner members.

The buy-in had no impact on the reported profits of the Group for the half year to 27 August 2011, or the liabilities of the scheme as
calculated in accordance with IAS 19. The income stream receivable under the insurance contract is an asset of the scheme with a
value equal to the related liabilities as measured in accordance with IAS 19. As this asset was less than the cash cost of the buy-in,
the transaction reduced the reported assets of the scheme by approximately £45m.

During the period, the Group has paid contributions totalling £17.9m (2010: £19.8m) to the Home Retail Group defined benefit
pension scheme, including £10m (2010: £12m) as part of the deficit recovery plan agreed with the scheme trustees following the
completion of the 31 March 2009 actuarial valuation.

                                                                   Page 30
HOME RETAIL GROUP PLC

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011

14. Notes to the consolidated statement of cash flows

52 weeks to                                                                                                  26 weeks     26 weeks to
    26.2.11                                                                                                 to 27.8.11        28.8.10
         £m                                                                                                         £m             £m
                  Cash generated from operations:
      265.2       Profit before tax                                                                               29.4           103.0
                  Adjustments for:
       (0.1)      Share of post-tax profits of joint ventures and associates                                          -               -
       (7.1)      Net financing income                                                                            (2.9)           (9.8)
      258.0       Operating profit                                                                                26.5            93.2


         0.7      Loss on sale of property, plant and equipment                                                     0.5            0.5
      127.5       Depreciation and amortisation                                                                   60.6            64.6
         3.2      Finance expense charged to Financial Services cost of sales                                       1.7            1.6


     (81.4)       Decrease/(increase) in inventories                                                                5.1         (78.1)
     (27.5)       Decrease/(increase) in receivables                                                              36.3            30.4
       19.0       Increase in payables                                                                            20.4            83.7
     (89.9)       Movement in working capital                                                                     61.8            36.0


     (20.3)       Decrease in provisions                                                                          (3.5)           (7.4)
     (10.9)       Movement in retirement benefit obligations                                                      (8.9)           (9.8)
       10.5       Share-based payment expense (net of dividend equivalent payments)                                 4.3            4.9
      278.8       Cash generated from operations                                                                 143.0           183.6


15. Seasonality

The retail sales for Argos and Homebase are subject to seasonal fluctuations. Demand for Argos products is highest during the
months of November and December, whilst demand for Homebase products is highest through the spring, at Easter and during the
summer months and, for big ticket items, during the January sales.


16. Related parties

The Group’s related parties are its associate, key management personnel and the Home Retail Group Pension Scheme. On 16 May
2011, the Group provided an amount of £1.2m by way of loan to its associate, Ogalas Limited, under the terms of a facility
agreement dated 20 May 2010. At 27 August 2011, the amount owed by Ogalas Limited to the Group was £1.2m. The only other
material transactions between the Group and any of these parties were in relation to the Home Retail Group Pension Scheme, and
are set out in note 13.


17. Post balance sheet events

On 19 October 2011, the Group announced that it had agreed to launch a joint venture company to develop a multi-channel, general
merchandise retail business in China with Haier Group, one of the world’s leading home appliance manufacturers.

The Group will have a 49% holding in the joint venture company and the remaining 51% will be held by Haier Electronics Group Co.,
Ltd. It is anticipated that the joint venture will require a total investment of £45m, of which the Group will provide £22m, payable in
three tranches over a two-year period, subject to the satisfaction of agreed performance conditions. The first tranche, payable by
the Group in 2012, will amount to £10m.




                                                                Page 31
HOME RETAIL GROUP PLC

STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors confirm that this condensed half-yearly financial information has been prepared in accordance with IAS 34 as adopted
by the European Union, and that the interim management report herein includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:

    •   an indication of important events that have occurred during the first six months and their impact on the condensed half-
        yearly financial information, and a description of the principal risks and uncertainties for the remaining six months of the
        financial year; and
    •   material related party transactions in the first six months and any material changes in the related party transactions
        described in the last annual report.

The directors of Home Retail Group plc are listed in the Home Retail Group plc Annual Report and Financial Statements 2011.
During the period since the Annual Report, the following director changes have occurred: Penny Hughes resigned as non-executive
director on 30 June 2011; Ian Durant was appointed as non-executive director on 6 July 2011; Cath Keers was appointed as non-
executive director on 1 September 2011. A list of current directors is maintained on the Home Retail Group website,
www.homeretailgroup.com.

By order of the Board



Terry Duddy                        Richard Ashton
Chief Executive                    Finance Director
19 October 2011                    19 October 2011




                                                                Page 32
HOME RETAIL GROUP PLC

SHAREHOLDER INFORMATION

Registrar

For all enquiries and shareholder administration (other than for American Depositary Receipts), please contact Capita Registrars:
Postal address: Capita Registrars, Northern House, Woodsome Park, Huddersfield HD8 0GA.
email: homeretailgroup@capitaregistrars.com
Telephone: 0871 664 0437* (from abroad +44 20 8639 3377).
Text phone: 0871 664 0532* (from abroad +44 20 8639 2062).
Fax number: 0871 664 0438 (from abroad +44 1484 600 914).
*Calls cost 10p per minute plus network extras


American Depositary Receipt (ADR)

Home Retail Group's ADR programme is administered by Citibank and ADR enquiries may be directed to:
Postal address: Citibank Shareholder Services, P.O. Box 43077, Providence, Rhode Island 02940-3077, USA.
email: Citibank@shareholders-online.com
Telephone (toll free): 1-877-Citi-ADR (248-4237)
Telephone (international): 1-781-575-4555
Website: www.citi.com/dr


Electronic communications

Shareholders can register to receive reports and notifications by email, browse shareholder information and submit voting
instructions at www.homeretailgroup-shares.com. This service is provided by Capita Registrars.


Home Retail Group plc website

Investor relations information, such as webcasts of results presentations to analysts and investors and accompanying slides, is
available at www.homeretailgroup.com.


Dividend reinvestment plan

The Home Retail Group Dividend Reinvestment Plan (DRIP) enables shareholders to use their cash dividends to purchase Home
Retail Group shares. Shareholders who wish to participate in the DRIP for the first time, in respect of the interim dividend to be paid
on 18 January 2012, should return a completed and signed DRIP mandate form to be received by the Registrar, by no later than
24 December 2011. For further details, please contact Capita Registrars.


Share price information

The latest Home Retail Group share price is available on the Home Retail Group website, as well as through other information
services such as Ceefax, Teletext and also on the Financial Times Cityline Service telephone 0906 843 2740 (calls charged at 60p
per minute).


Share dealing facility

Investors can buy or sell Group shares through Capita Share Dealing Services. Go to www.capitadeal.com or call 0871 664 0454
(calls cost 10p per minute plus network extras) between 8.30 am and 4.30 pm weekdays.


Financial calendar

Interim ex-dividend date                                                                    9 November     2011
Interim Management Statement                                                                 12 January    2012
Interim dividend to be paid                                                                  18 January    2012
Full-year trading statement                                                                    15 March    2012
Full-year results for the 53 weeks to 3 March 2012                                                2 May    2012
Final ex-dividend date                                                                           23 May    2012
Interim Management Statement                                                                    19 June    2012
Final dividend to be paid                                                                        25 July   2012


Registered office

Home Retail Group plc, Avebury, 489 - 499 Avebury Boulevard, Milton Keynes MK9 2NW




                                                                Page 33

				
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