Home Retail's (HOME) half-year revenue rose modestly, helped by better demand in such categories as electricals at Argos and summer-related products as Homebase. Moreover, a transformation scheme - launched last October to "reinvent" the group as a digital retailer - does appear to be delivering a sustained sales turnaround.
Adjust for a raft of exceptionals and operating profit rose 40 per cent year on year to £26.4m. Meanwhile, like-for-like sales at Argos and Homebase rose 2.3 per cent and 5.9 per cent, respectively - not bad given that, until this year, underlying sales had been falling consistently for years. Margins, however, remain under pressure. Argos's gross margin dropped 75 basis points, compared with a 50 basis point slippage a year earlier. Homebase suffered an even chunkier 100 basis point gross margin slide, compared with a 150 basis point improvement in the previous year.
But the transformation scheme is making progress and will, for example, see the launch of a digital Christmas gift catalogue this year and new digital concept stores, featuring tablet catalogues and fast-track collection. Management expects £50m of restructuring costs over three years, with £12.6m having been incurred in the half. Meanwhile, chief executive Terry Duddy announced last month that he will step down in July 2014.
UBS expects adjusted EPS of 8.8p for 2014 (from 7.6p in 2013).
| HOME RETAIL (HOME) | ||||
|---|---|---|---|---|
| ORD PRICE: | 190p | MARKET VALUE: | £1.55bn | |
| TOUCH: | 189-190p | 12-MONTH HIGH: | 195p | LOW: 102p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 330p* | NET CASH: | £412m | |
| Half-year to 31 Aug | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 2.53 | 46.7 | 4.10 | 1.00 |
| 2013 | 2.60 | 14.2 | 1.60 | 1.00 |
| % change | +3 | -70 | -61 | - |
Ex-div: 13 Nov Payment: 22 Jan *Includes intangible assets of £1.7bn, or 209p a share | ||||
