Home Retail pulls final dividend

While management points to the tough economic outlook as a key cause of Home Retail's woes, investors remained concerned that online competition is the real enemy. Home Retail has been putting effort into moving into this area itself, but the majority of Argos's declining sales that are classified as 'multi-channel' (48 per cent of the total) still involve customers visiting stores to pick up or order goods. Argos's sales fell 7.7 per cent, which led to operating profits crashing 57 per cent to £94m. The picture was hardly prettier at DIY chain Homebase, where sales fell 2.6 per cent and profits more than halved to £23m.

A key attraction for investors is the strength of the group's balance sheet. As well as a net cash position, customers owe £461m on store cards after accounting for £79m of bad-debt provisions. But there are two big questions facing investors eying this booty: what can be done to reverse the trading decline and how much will it cost? Analysts believe a major restructuring is required, which will come at great expense. There are also property-lease obligations of £2.7bn to take account of.

Broker Panmure Gordon expect current year adjusted EPS to fall to 6p (8.4p in 2012).