A quick glance at half-year figures from Home Retail Group (HOME) makes a 14 per cent collapse in the share price difficult to understand. But management is asking investors to look at what it calls "benchmark" pre-tax profits, which do not take into account employment benefit scheme costs, impairment and onerous lease charges and costs associated with store closures, among other one-off items.
On that basis, pre-tax profits only grew 10 per cent to £34.1m in the first half, with much of that down to a strong performance from DIY chain Homebase. Profits there grew £6.5m - just enough to offset a £5.6m decline in Argos profits, as demand for electrical and seasonal products fell. Like-for-like sales dipped 3.4 per cent at Argos, but grew 5.6 per cent at Homebase.
Crucially, however, management is warning that it can't rely on the Christmas season (including the increasingly significant Black Friday bonanza) to buck up full-year figures. Instead, they believe the festive period is "less predictable than usual" and that full-year benchmark pre-tax profits will come in "below the bottom end of current range market expectations" - that is, less than £115m.
Prior to these results, Cantor Fitzgerald had expected pre-tax profits of £132m for the current financial year, giving EPS of 13p, bang in line with figures for the year ended 28 February 2015. But downgrades are inevitable.
| HOME RETAIL GROUP (HOME) | ||||
|---|---|---|---|---|
| ORD PRICE: | 130p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 129-130p | 12-MONTH HIGH: | 219p | LOW: 125p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 327p* | NET CASH: | £193m | |
| Half-year 29 Aug | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 2.67 | 13.5 | 1.2 | 1.0 |
| 2015 | 2.63 | 23.4 | 2.3 | 1.0 |
| % change | -2 | +73 | +92 | - |
Ex-div: 12 Nov Payment: 21 Jan *Includes intangible assets of £1.79bn, or 220p a share | ||||
