John Walden, the new chief executive of Home Retail Group (HOME), has unveiled plans to reinvigorate a "financially challenged" Homebase, including shrinking the store estate by a quarter over the next four years. The announcement has put the kibosh on rumours of a possible spin-off of the DIY chain. Instead, the group will pursue a three-year project to improve productivity, with a big focus on customer service and higher, more uniform operating standards. The goal is a "smaller but stronger" business.
The Argos transformation plan will also remain a strategic priority, as it offers "the greatest potential source of shareholder value", said Mr Walden. A tie-up with eBay last year is to be rolled out to 700 Argos shops, servicing 65,000 eBay merchants. Mr Walden hinted that other retailers might benefit from a similar deal. Argos is also working to broaden its customer base by introducing more aspirational brands.
With like-for-like sales up 2.9 per cent, the group's adjusted half-year pre-tax profit grew 13 per cent to £30.9m - towards the lower end of expectations. The profit weakness was down to cost front-loading at Argos, which makes 90 per cent of its operating profit in the more festive second half. Full-year guidance remains unchanged, but as ever is predicated on a good Christmas.
Investec expects pre-tax profit of £131m for the full year, giving EPS of 12p, up from £115m and 10p last year.
HOME RETAIL GROUP (HOME) | ||||
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ORD PRICE: | 174p | MARKET VALUE: | £1.4bn | |
TOUCH: | 174.2-174.4p | 12-MONTH HIGH: | 225p | LOW: 157p |
DIVIDEND YIELD: | 1.9% | PE RATIO: | 27 | |
NET ASSET VALUE: | 322p* | NET CASH: | £333m |
Half-year to 31 Aug | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2013 | 2.6 | 14.2 | 1.6 | 1 |
2014 | 2.7 | 13.5 | 1.2 | 1 |
% change | +3 | -5 | -25 | - |
Ex-div: 12 Nov Payment: 22 Jan *Includes intangible assets of £1.75bn, or 216p a share |