slides (PDF 1.5 MB)

Roadshow Presentation
September/October 2006
Home Retail Group’s competitive strengths
`
Market leading position
`
Strong retail brands with large customer bases
`
Choice and value-led product offering
`
Purchasing, sourcing and supply chain scale
`
Integrated multi-channel capability
`
Shared infrastructure and logistics expertise
`
Experienced management team delivering a long-term track record of
growth
1
The leading home and general merchandise retailer
in the UK
Sales (£bn)
c. 10% share of a £55bn+ market
5.5
4.9
4.9
4.2
2.9
2.4
1.9
1.5
1.4
1.4
Halfords
MFI
WH Smith
Kesa
Woolworths
John Lewis
Next
Kingfisher
Boots
DSGi
Home
Retail
0.7
Operating profit before exceptionals
(£m)
426
Product market
Housewares1
Furniture1
Home improvement2
Horticulture, garden
furniture and outdoor
living1
Home
Sold by Sold by
Retail
Argos Homebase position
9
9
#1
9
9
#1
9
9
#2
Small domestic
appliances3
Consumer electronics3
Large domestic
appliances3
Market
size
£8.6bn
£8.2bn
£11.0bn
9
9
#2
£3.2bn
9
9
9
9
#1
#3
£1.3bn
£13.8bn
9
9
#3
£4.0bn
385
338
38
30
19
MFI
60
Woolworths
89
WH Smith
John Lewis
DSGi
Kingfisher
Home
Retail
Boots
Next
111
Kesa
215
Halfords
235
Jewellery4
Toys5
Sports & leisure
equipment6
Source: Last financial year UK sales and profit of continuing retail operations
as per annual report/prelims; MFI includes Howden
Source:
1
Verdict,
2
Verdict/Mintel,
#1 by vol £3.2bn
£1.9bn
#1
9
9
9
3
Verdict/GfK,
#1
4
Mintel/EDR,
5
£1.2bn
Mintel/NPD,
6
Mintel
2
Strong retail brands with large customer bases
Homebase
Argos
`
Leading UK general merchandise
retailer
`
2nd largest home improvement
retailer with strong brand stretch
`
Reputation for choice, value and
convenience
`
Recognised for choice, style and
customer service
`
Unique integrated multi-channel
model
`
Positioned as a leading home
enhancement retailer
`
73% of UK households shopped at
Argos in last 12 months
`
4 million Spend & Save loyalty card
holders
`
Core customer: Hard Working
Families
`
Core customer: ABC1 Home
Enhancers
`
130 million store transactions and
4 million remote orders a year
`
70 million transactions a year
Home Retail Group
`
Each business strong in distinct
consumer segments
`
Purchasing scale
`
Shared infrastructure
`
Outperforming in a tough market
3
Argos highlights
Unique retail store format at the heart
Argos overview
`
Leading general merchandise
retailer in the UK
`
2 in 3 UK households collect an Argos
catalogue from stores every year
`
Publish a twice-yearly 1,700 page
catalogue
`
Customers choose at home
`
Stores act as fast and efficient pick-up
points
`
Two main types of store:
`
Over 650 stores
`
Selling around 17,000 product
lines
`
`
`
`
Longstanding reputation for value
for money
`
Fully integrated multi-channel
model
2nd most popular UK internet retail
site
Five years of sales growth
averaging over 10%
`
–
Fully stocked-in ‘Extra’
–
Smaller store ‘ordered-in’
Technology enables better shopping
experience
–
Kiosks
–
Stock checker
–
Call forward
Cost effective formula in a highly
competitive environment
4
Homebase highlights
Homebase overview
`
Second largest home improvement
retailer in the UK
`
High brand awareness
`
Positioned as a leader across the
wider home enhancement market
`
Successfully outperforming in a tough
market
`
Leveraging product overlap,
infrastructure and expertise of Home
Retail Group
Homebase proposition
Comprehensive
offer
Loyalty
programme
and
promotions
`
Over 30,000 products
`
6 main departments –
DIY, Decorating,
Garden, Homewares,
kitchens/bathrooms,
Furniture
`
4 million Spend & Save
members
`
10% days
`
c. 300 out of town stores
Conveniently
located stores `
High quality
service
Style
Mezzanines supporting
range expansion
`
High levels of in store
service
`
Reliable home delivery
service
`
Known for offering
stylish products
`
Branded and own brand
products
5
Financial Services highlights
Credit penetration
Storecard loan book (gross)
30%
£378m
Revolving
3 mth
BNPL
25%
Credit penetration
£349m
£252m
£155m
£105m
6 mth
BNPL
9 mth
BNPL
20%
15%
10%
5%
0%
<£95
2002
2003
2004
2005
£95 - £195
£195 - £295
Spend
2006
Argos
£295+
Homebase
Growth in moving annual total Argos sales,
grouped into card penetration bands
Number of active customers
>1m
180.0%
>1m
160.0%
140.0%
% Growth since Dec-01
120.0%
458k
100.0%
80.0%
60.0%
40.0%
20.0%
2002
2003
2004
2005
2006
0.0%
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
< 10% Penetration
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
> 10% Penetration
Jul-05
Oct-05
Jan-06
Apr-06
6
Key components of growth strategy
`
Strengthen and grow market leading positions
`
Grow market share in targeted large product markets, capitalising on the
strength and flexibility of Home Retail Group’s businesses
`
–
Consumer electronics
–
Sports and leisure equipment
–
Furniture
–
Large domestic appliances
–
Fitted kitchens and bathrooms
Expand Argos and Homebase store networks to provide enhanced customer
convenience
`
Extend and exploit multi-channel leadership
`
Leverage shared product pool and purchasing scale to deliver excellent value
to customers
7
‘Own the Home’
Small
Consumer
Large Furniture Kitchens Bathrooms
What Jewellery Toys Sports & House DIY /
wares
leisure
garden
domestic
Electronics
domestic
Customers
appliances
appliances
equipment
Want
Different
Ways to
Order
Large range
of products
Stock
Availability
Core:
Strengthen through world class low
cost sourcing capability
Value for
money
Financial
Services
Home
Delivery
Headroom:
Grow through service and
infrastructure investment
Installation
Other
services
8
Expand and develop store networks
`
Argos and Homebase new store openings meet our hurdle rates
`
Plan to open c. 30 Argos stores per year
`
Plan to open c. 15 Homebase stores per year
`
Potential to grow to over 1,200 stores
`
Rollout and rollback of proven home enhancement proposition in Homebase
`
Investing in format development
–
Argos – Extra; 'High Tech'; 'Display'
–
Homebase – Mezzanines; Furniture Extra; small store format
9
Extend and exploit multi-channel leadership
`
Product selection options
–
`
`
Catalogue/Specialogue
–
Website
–
In store display
Order channel options
–
Receipt
Channel
On the internet
–
Over the phone
–
In store
Order
Channel
Internet
Pick-up
in Store
Total
2004
2006
2004
Delivered
to Home
2006
2004
2006
6%
12%
2%
6%
4%
6%
Telephone
11%
8%
5%
4%
6%
4%
In-Store
83%
80%
73%
68%
10%
12%
100%
100%
80%
78%
20%
22%
Total
Ways to receive products
–
Pick up in store
` Pre-order facility
–
Home delivery
` All Argos products
` Selected Homebase ranges
10
Purchasing scale and opportunity
Scale and product overlap driving
buying benefits
Strategic sourcing – potential benefits
5-10%
50
Other General
Merchandise
16%
Home
Enhancement
51%
Savings potential %
45
Electricals
33%
Argos and Homebase combined
sales FY05/06
£5.5bn
10-15%
30-50%
eprocurement
40
35
30
5-10%
25
One agent
vs
multiple
20
10-15%
15
10
5
0
Direct
sourcing
Cumulative
potential
Import
vs
domestic
Stage
1
Stage
2
Stage
3
Stage
4
Importing 2005/6
`
Significant move towards importing with
substantial further benefits still achievable
`
Argos >30% of sales directly imported
`
Homebase >20% of sales directly
imported
`
However <50% of import is direct sourced
11
Sales and gross margin record
Homebase
Argos
(£ bn)
2.7
3.0
3.4
+12%
+17%
FY02
LFL
Space
Gross
margin %
+8%
3.9
(£ bn)
1.4
1
1.5
+7%
+5%
1.6
1.6
+6%
(1%)
FY05
FY06
+13%
FY03
FY04
13%
7%
4%
6%
“firm”
3.7
FY05
FY06
5%
3%
(1%)
7%
5%
8%
“firm” “slightly “slightly “in line”
ahead” ahead”
Excludes Argos Additions and Jungle.com
1
FY03
FY04
LFL
n/a
3%
3%
(4%)
Space
n/a
2%
3%
3%
Gross
margin %
n/a
“in line”
“slightly
ahead”
“in line”
Pro forma results – Homebase acquired in December 2002
12
Operating profit before exceptionals record
Homebase
Argos
UK GAAP1
(£ m)
212
241
297
IFRS
326
320
291
UK GAAP1
(£ m)
102
110
114
52
+8%
+10%
+24%
102
IFRS
+1%
(9%)
+14%
+26%
(54%)
FY02 FY03 FY04 FY05
Op. margin 7.8% 8.0% 8.8% 8.9%
1
FY05 FY06
8.8% 7.5%
FY03
Op. margin 7.2%
FY04
FY05
6.9%
7.0%
FY05
7.2%
FY06
3.3%
UK GAAP operating profit is also before goodwill amortisation
Excluding Argos Additions
13
Home Retail Group financial highlights
`
Track record of delivering growth
`
Well invested asset base
`
Financial discipline in investment appraisal
`
Strong cash flow generated from operations
14
Home Retail Group summary
Routes to growth
Competitive strengths
`
Market leading position
`
`
Strong retail brands with large
customer bases
Strengthen and grow market
leading positions
`
`
Choice and value-led product
offering
Grow market share in targeted
large product markets
`
`
Purchasing, sourcing and
supply chain scale
Expand Argos and Homebase
store networks
`
`
Integrated multi-channel
capability
Extend and exploit multichannel leadership
`
`
Shared infrastructure and
logistics expertise
Leverage shared product pool
and purchasing scale to deliver
excellent value to customers
`
Experienced management
team delivering a long-term
track record of growth
15
Supporting data
1. Financials
Home Retail Group Income Statement
£m
FY05
FY06
Sales
5,313
5,548
Cost of sales
(3,493)
(3,687)
Gross profit
1,820
1,861
Net operating expenses
(1,398)
(1,523)
Operating profit before exceptionals
Exceptionals
Operating profit after exceptionals
422
(22)
400
338
(25)
313
16
Home Retail Group sales
£m
FY05
FY06
Variance
Argos
3,652
3,893
+7%
Homebase
1,580
1,562
(1%)
81
93
+15%
5,313
5,548
+4%
Financial services
Total
17
Home Retail Group – cost of sales and gross profit
£m
FY05
FY06
Sales
5,313
5,548
4%
Cost of sales
(3,493)
(3,687)
6%
Gross profit
1,820
1,861
2%
Gross profit - % sales
34.3%
33.5%
Variance
`
Cost of sales comprise both the cost of merchandise and the cost of the
National and the Regional Distribution Centres (“NDC” and “RDC”)
`
Distribution costs amount to approximately 5% of sales
`
Merchandise gross margin in FY06 was “in line” with supply chain benefits
being re-invested in lower prices to customers
`
Distribution costs increased slightly due to a new warehouse opened to
support strategic growth initiatives together with the effect of underlying
cost inflation
18
Home Retail Group – net operating expenses
£m
FY05
FY06
Sales
5,313
5,548
Selling costs
(1,139)
(1,252)
10%
(259)
(271)
5%
(1,398)
(1,523)
9%
21.4%
22.6%
4.9%
4.9%
26.3%
27.5%
Administrative costs
Net operating expenses
Selling costs - % sales
Administrative costs - % sales
Net operating expenses
- % sales
Variance
4%
19
Home Retail Group – operating profit before
exceptionals
£m
FY05
FY06
Argos
320
291
(9%)
Homebase
114
52
(54%)
0
6
434
349
Financial Services
Total reported
Central Costs1
Operating profit before
exceptionals
(12)
422
(11)
338
Variance
n/a
(20%)
8%
(20%)
Sales % ratios
Operating profit before
exceptionals
EBITDA before exceptionals
1
7.9%
6.1%
10.2%
8.5%
The Central Costs are a “carve out” allocation of the GUS plc Central Costs of £22m reported in May
2006. They are NOT intended to be an estimate of the central costs for Home Retail Group plc
20
Home Retail Group – exceptional items
£m
FY05
OFT fine
(16)
Homebase Head Office relocation
Impairment charges
TOTAL
FY06
-
(6)
(12)
-
(13)
(22)
(25)
` GUS plc previously reported Homebase Head Office relocation costs
of £18m in their results for the year ended 31 March 2005
Complies with different presentation required for
Home Retail Group plc
21
Home Retail Group Balance Sheet - assets
£m
FY05
Actual
FY06
Actual
Goodwill
1,834
1,879
1,879
Property, plant, equipment
and intangibles
656
759
759
Inventories
889
881
881
Instalment receivables
427
399
399
Other assets
255
314
314
Group balances
525
1,064
-
93
131
24
4,679
5,427
4,256
TOTAL LIABILITIES
(2,082)
(2,652)
(1,324)
TOTAL NET ASSETS
2,597
2,775
2,932
Cash and cash equivalents
TOTAL ASSETS
FY06
Pro forma
22
Home Retail Group Balance Sheet - liabilities
FY05
Actual
FY06
Actual
Trade and other payables
(905)
(893)
(891)
Other liabilities
(269)
(209)
(209)
Total trade and other payables
and liabilities
(1,174)
(1,102)
(1,100)
(224)
£m
FY06
Pro forma
Loans and borrowings - external
(298)
(224)
Loans and borrowings - group
(610)
(1,326)
Total loans and borrowings
(908)
(1,550)
(224)
(2,082)
(2,652)
(1,324)
TOTAL LIABILITIES
-
23
Home Retail Group – working capital
£m
FY05
FY06
Variance
Stock
889
881
Debtors
142
164
(22)
Creditors and accruals
(905)
(872)
(33)
Sub-total trade
126
173
(47)
Loan book
427
399
28
TOTAL
553
572
(19)
8
24
Home Retail Group – working capital
£m
FY04
FY05
Stock
706
889
(183)
Debtors
138
142
(4)
(863)
(905)
Sub-total trade
(19)
126
(145)
Loan book
353
427
(74)
TOTAL
334
553
(219)
Creditors and accruals
Variance
42
25
Home Retail Group Summary cash flow
£m
FY05
FY06
Operating profit (before exceptionals)
422
338
Depreciation and amortisation
121
135
EBITDA (before exceptionals)
543
473
Movements in working capital
(219)
(19)
Movement in retirement benefit
(43)
(88)
Other operational cash flows
(40)
(1)
Cash generated from operations1
Percentage of EBITDA
1
Cash generated from operations is before incurring outflows related to
capital expenditure, interest, taxation and dividends
241
44%
365
77%
26
Home Retail Group capital expenditure
£m
New stores
FY05
FY06
62
80
103
81
Distribution and supply chain
50
63
Other
27
31
Total
242
255
Property, plant and equipment
217
232
25
23
242
255
Store enhancement and refurbishment
Intangible assets
Total
27
Home Retail Group store portfolio
Property portfolio predominantly leasehold
796
834
879
287
954
297
Homebase
273
278
Argos
523
556
592
FY03
FY04
FY05
FY06
Argos Extra
‘Stocked In’
-
42
128
191
Homebase
mezzanines
36
67
111
144
657
28
Home Retail Group infrastructure portfolio
22
22
7
6
19
16
Home Delivery
RDC
NDC
Sq feet (millions)
Home Delivery
RDC
NDC
Total
6
4
7
7
8
8
5
6
7
8
FY03
FY04
FY05
FY06
1.7
2.4
1.7
5.8
2.2
2.4
2.4
7.0
3.0
2.7
2.2
7.9
2.8
2.7
2.7
8.2
29
Return on Capital Employed
1
2
3
4
5
£m
FY05
FY06
Total assets1
4,061
4,2063
Total trade and other payables and liabilities2
(1,103)3
(1,100)
Invested capital
2,958
3,106
Capital employed (excludes goodwill)
1,124
1,227
Operating profit before exceptionals4
422
338
Pre-tax ROIC4,5
14.3%
10.9%
Pre-tax ROCE4,5
37.5%
27.5%
Excludes Group loan balances, cash and cash equivalents, and pension asset
Excludes pension liability
31 March 2006 pension asset excluded was £26m
31 March 2005 pension liability excluded was (£71m)
Operating profit for Financial Services includes the interest cost of servicing its loanbook
Calculated on 31 March year end balances
30
Pro forma assumptions
`
It is anticipated that Home Retail Group will be allocated net debt effective at 31 March
2006 of about £200m, in addition to its substantial leasehold obligations
`
Subject to any changes in legislation, it is expected that the effective tax rate based
upon Benchmark PBT for Home Retail Group will be in the low 30%s
`
The dividend policy will be a matter for the Home Retail Group Board to consider
following demerger. However, at this stage, it is anticipated that Home Retail Group
will have a cover of no less than two times
`
The central costs of Home Retail Group plc are expected to be in the range of
£20m–£25m of which approximately £5m are already incurred by, and will be
transferred from, Argos
`
Anticipate underlying cost inflation remains at approximately 4% for FY07
`
Loanbook expected to grow in FY07 with growth in storecard offset partially by
continued, but slowing, personal loans run-off
`
Home Retail Group FS is trading in line with expectations. However, its response to the
recommendations of the recent OFT enquiry in respect of late payment fees is expected
to impact current year reported profit from early in the second half by about £3-4m.
The impact is expected to annualise in the following year
31
Pro forma assumptions – one-off costs
`
Additional costs will be incurred in respect of a number of one-off demerger incentive
schemes:
`
–
Share Grant to approx 50,000 employees
–
Reinvestment scheme for approx 100 senior staff
It is expected that these costs will amount to approximately £45 million spread over a
3 year period commencing at demerger and will be accounted for below
Benchmark PBT
`
Home Retail Group will incur one-off demerger related costs of approximately £15
million. These will be treated as exceptional and charged in the first half of FY07
32
Bank facilities
On demerger Home Retail Group will operate with the following facilities:
`
£225 million existing GUS facility with Citibank repayable in January 2008
`
£700 million multi-currency revolving loan facility with syndicate of banks
–
Term 5 + 1 + 1
–
Two tier structure comprising 10 banks
–
Facility includes a financial covenant of 1.5 times in respect of:
(Benchmark PBT + DA + Rent + Interest) / (Rent + Interest)
33
Financial measures
Data Points (£ millions)
Benchmark PBT
303
Proforma Net Debt
Depreciation & Amortisation
135
Capitalised Leases (@8)
Rent
285
Interest (31 + 15)
200
2,280
46
Performance Metrics
(Benchmark PBT + DA + Rent + Interest) / (Rent + Interest)
= 2.3 times
Adjusted Net Debt / EBITDAR
= 3.2 times
Benchmark PBT is defined as profit before amortisation of acquisition intangibles,
store impairment charges, exceptional items (i.e. gains or losses on disposal,
demerger or closure of businesses and goodwill impairment charges), financing fair
value re-measurements, one-off demerger incentive costs and taxation.
34
Pension schemes
Defined Benefit
Defined Contribution
` Already operates as a standalone
Home Retail Group scheme
` Approx 10,300 members – closed
to new members
` Members contribute:
− 8% salary for 1/60ths
accrual
− 6% salary for 1/80ths
accrual
` Special contributions of £100m,
£50m and £70m in FY06, FY05
and FY04 respectively
` 31 March 2006 : balance sheet
position
− Assets
605
− Liabilities
(579)
− Surplus
26
` Approx 3,600 members
` 2,000 members in GUS scheme and
1,600 members in Home Retail Group
scheme
` Open to new members
` Members contribute:
− 3% + 3%
− 4% + 4%
− 5% + 5%
35
Supporting data
2. Argos
The Argos proposition
Unique retail store format at the heart
Argos overview
`
Leading general merchandise
retailer in the UK
`
`
Twice yearly 1,700 page catalogue
published
2 in 3 UK households collect an
Argos catalogue from stores every
year
`
Customers choose at home
`
Over 650 stores
`
`
Selling up to 17,000 product lines
Stores act as fast and efficient
pick-up points
`
Longstanding reputation for value
for money
`
Two main types of store:
`
Fully integrated multi-channel
model
`
`
2nd most popular UK internet retail
site
Five years of sales growth
averaging over 10%
`
–
Fully stocked-in ‘Extra’
–
Smaller store ‘ordered-in’
Technology enables better
shopping experience
–
Kiosks
–
Stock checker
–
Call forward
Cost effective formula in a highly competitive environment
36
Leading market positions and growth record
Sales mix1
Market positions *
`
Small Domestic Appliances
#1
`
Consumer Electronics
#3
`
Large Domestic Appliances
#3
`
Housewares
#1
`
Furniture
#1
`
DIY / Garden
#5
`
Jewellery
#1
`
`
Other General
Merchandise
23%
Electrical
45%
Home
Enhancement
32%
Argos sales and total growth2,3
12%
#1
Toys
Sports and leisure equipment
13%
17%
7%
#1
11%
8%
£3.7bn
7%
£3.9bn
£3.4bn
£3.0bn
£2.7bn
£2.3bn
£1.9bn
1999
£2.1bn
2000
2001
2002
2003
2004
2005
2006
Well positioned in large and/or growing markets with scale
* Source: Verdict, Mintel, company data
1 Year ended 31 March 2006
2 Excluding discontinued Additions operations
3 Year to March
37
Argos competitive strengths
`
Convenience: Unique way to shop that integrates stores,
internet and telephone channels
`
Choice: Information-rich catalogue of 17,000 products
with capacity for continued expansion
`
Value: History of reinvesting cost and buying efficiency
in lower prices
`
Proposition attracts large, loyal customer base of ‘hard
working families’
`
`
Supported by extensive infrastructure capabilities
–
Store portfolio
–
Distribution network
–
Home delivery
The Argos values and how we deliver against our vision
38
Convenient multi-channel shopping
Order & Pay
Comprehensive
Product
Range
In-store…
…by telephone…
…or on the internet
Check & Reserve for store
pick-up
Delivery channels
National Coverage
A Unique Model
Search & Select
Pre-pay for home delivery
Our fully integrated multi-channel operation consistently delivers a good customer
experience
39
Excellent breadth and depth of choice
“Breadth of a department store, depth of a
specialist”
`
Around 17,000 lines, including 4,000
delivery only and 3,000 Argos Extra
`
Range from “the ordinary to the
extraordinary” – breadth and depth of
choice
`
Argos Extra range available to all stores
since summer 2005
`
Structured and informative presentation
to make choosing easy
Range breadth brings greater flexibility
`
Breadth of range brings benefits to Argos
as well as to our customers
–
–
Argos catalogue - number of product lines
16,400
9,300
2002
11,600
2003
Argos
17,000
17,500
13,000
13,300
2004
2005
17,200
–
Around 50% of lines are new in each
same season catalogue vs. the previous
one (e.g. Cat 63 to 65)
` Enables product market innovation
(eg Hard Disc recorders, HD ready
TV)
Around 40% range is changed from one
catalogue to the next (e.g. Cat 64 to 65)
` Enables us to maximise seasonal
opportunities (eg jewellery/ toys and
garden furniture/outdoor living)
Enables efficient use of infrastructure
2006
Argos Extra
Breadth of a department store, depth of a specialist
40
Longstanding reputation for value for money
EPP range
'Wow' deals
`
`
Price drops
July sale
Reputation for offering extremely good
value for money
–
Long history of lowering prices on
reincluded lines
–
Supported by buying scale
–
Highly competitive EPP range
–
breakthrough pricing on “Wow” lines
Continued promotions and permanent
price reductions during the life of the
catalogue
–
Non-stop price drop
–
Promos/flyers
`
Lowest prices regardless of purchasing
channel
`
Supported by
–
Low cost store format
–
Single pick distribution capability
(6 RDCs, 4 NDCs)
–
Common infrastructure leverage
Offer greater value for money
41
Large and loyal customer base
`
Very broad overall penetration
–
2.5m customer transactions per week
–
68% of UK households have catalogue
–
73% make at least one purchase a year
–
Typical frequency 6 times per year
`
High levels of customer satisfaction
`
Core customer group of ‘Hard Working
Families’
–
`
Limits on their time and money
Customer growth potential – ‘young
professionals’
–
Time poor, attracted by multi-channel
convenience
`
Nearly 1 million active store card holders
`
c.2.5m e-mail database, grown 160% in past
year
Opportunity to grow beyond our core customer base
42
Routes to growth
1.
Strengthen and drive market leadership in core markets
2.
Continue to take share in large and growing markets
3.
Expand the store network and format development
4.
Extend and exploit integrated multi-channel offering
5.
Leverage scale and infrastructure
43
Strengthen and drive
Long-established leader
Market leader in surprising areas
Take share and grow
Product opportunities in ‘core’ and growth markets
Growth driven by new technology
Opportunities in bigger ticket
fragmented markets
44
Strengthen and drive leadership in core markets
`
`
`
Choice
–
Leading range breadth and depth
–
“Good, Better, Best” architecture
–
Exploit ‘old technology’ as well as new
–
Selection via rigorous ‘Page & Options’ process
"Good” EPP
"Better” own label
"Best” top brands
Value
–
Constant drive to reduce catalogue prices
–
Leverage buying scale and sourcing expertise
–
Rapidly ‘popularise’ to increase affordability
–
Competitive benchmarking at ‘final pricing’ and ongoing
–
Heavyweight promotion plan and ‘non-stop price drop’
Convenience
–
Improving store process
–
Adding speed and convenience through multi-channel
innovations
45
Take share in large, fragmented markets
Grow share by improving awareness
`
Already leading positions, but with
"high headroom" to grow
`
Share
Landline
phones
Higher price points, larger
Toys
products
`
Home delivery and point of sale
Sports
credit are key advantages
Photo
`
Sports equipment
info pages
DIY/
Garden
Pre-pay
mobiles
CE
Furniture
Increasing awareness drive sales,
via catalogues and in-store
SDA
Floorcare/
Microwaves
Office
White
goods
Awareness
Source: Mintel, Verdict, GfK, Argos internal data
`
Investing in product presentation
to reinforce ‘stature’
`
Furniture market offers significant
potential
Garden furniture
‘specialogue’
Grow in fast-growing markets
` Technology driven customer demand
` Accelerate maturity curve
– More space in catalogue
– Enhanced information to make choosing easier
– Leverage supplier relationships e.g. in MP3 to
create affordable own label
` Financial services can add further value
46
Opportunity for further store growth
New stores deliver excellent returns
on investment
`
`
`
`
Potential to increase store network
above 800
Routes for new store growth
`
Estimated 30 store openings per
year
Additional site out of town
–
Complementary to in-town offer
–
Potential to add Extra
–
Typical total average store size
15,000 – 20,000 sq ft with stock
room mezzanine
–
Average OOT store turnover £8m
per annum
Low cost format
–
Space efficient
–
Operating costs
`
Strong returns on capital and
payback
`
Smaller towns
–
Driven by breadth of offer
–
Typical small non-Extra store size
9,000 – 12,000 sq ft
–
Average small non-Extra store
turnover £3m - £4m
Format developments
–
In-store technology
–
Expanded furniture display
47
Example of taking larger share in town through the
opening of a 2nd store
Ipswich
Market Share Jan 2006
Ipswich
Market Share Jan 2005
A14
A14
Market share by area
Nov 2005
Suffolk Retail Park
Carr Street
Over 8%
6.0%-8.0%
4.0%-6.0%
3.0%-4.0%
2.5%-3.0%
Car r Stre e t
2
2.0%-2.5%
1.5%-2.0%
1.0%-1.5%
0.5%-1.0%
under 0.5%
2
single
store
Ipswich (Sales £m)
Ipswich (Sales index)
original
store post
impact
mature
sales at
new store
Total
Argos
6.4
4.5
7.9
12.4
100
70
123
193
48
Extend and exploit integrated multi-channel offering
Channels
` >130m visits last 12 months
Receipt
Channel
Order
Channel
` >£250m Direct sales last year
2004
Internet
` Direct sales up 35% last year
3
tesco.com
130
4
euro.dell.com
121
5
play.com
120
6
next.co.uk
64
7
comet.co.uk
51
8
marksandspencer.com
<50
9
currys.co.uk
<50
Source: Hitwise, July 2005 to June 2006
2004
2006
2%
6%
4%
6%
Telephone
11%
8%
5%
4%
6%
4%
In-Store
83%
80%
73%
68%
10%
12%
100%
100%
80%
78%
20%
22%
<50
550
14%
500
450
12%
400
350
10%
8%
300
250
6%
200
150
100
50
0
4%
2%
% of total company sales
133
Online orders (£m)
Hits (m)
606
argos.co.uk
johnlewis.com
2006
argos.co.uk orders
2
10
2004
12%
Britain's top Internet retailers
Retailer
amazon.co.uk
2006
Delivered
to Home
6%
Total
Rank
1
Pick-up
in Store
Total
0%
2001
2002
2003
2004
2005
2006
Year to March
Direct
Reserved
% Total Company Sales
49
Adding new stores complements the multi-channel
offer
`
Stores and new channels work “in conjunction” not “in competition”
`
Internet feeds store sales
`
–
Check and Reserve sales via the internet up 85% last year
–
68% of stocked in lines ordered on the internet for collection in store
Stores feed home delivery growth
–
`
`
50% of home delivered sales ordered in store last year
Over 3 years, stores have grown both ‘stocked-in’ and ‘home delivered’ sales
–
Average ‘stocked-in’ sales per store up 4%
–
Average ‘home delivered’ sales per store up 24%
Integration of our channels is major competitive advantage
50
Leverage Home Retail Group scale and infrastructure
`
Scale synergies within Home Retail Group
–
Better buying and sourcing
–
Multi-channel infrastructure
–
Financial services
–
Shared operations (Property, ISO)
`
More capability at lower cost
`
“Operational Excellence” programme drives efficiency
`
Better value for customers
51
Argos summary
Routes to growth
Competitive strengths
`
Convenience: Unique way to shop
`
`
Choice: Information-rich catalogue of
17,000 products
Strengthen and drive market leadership
in core markets
`
Value: History of reinvesting cost and
buying efficiency in lower prices
Continue to take share in large and
growing markets
`
Supported by extensive Home Retail
Group infrastructure capabilities
Expand the store network and format
development
`
Proposition attracts large, loyal customer
base of hard working families
Extend and exploit integrated multichannel offering
`
Leverage scale and infrastructure
`
`
`
`
The Argos values and ‘How we deliver’
against our vision
52
Supporting data
3. Homebase
The Homebase proposition
Homebase overview
`
Second largest home improvement
retailer in the UK
`
High brand awareness
`
Positioned as a leader across the
wider home enhancement market
`
Successfully outperforming in a tough
market
`
Leveraging product overlap,
infrastructure and expertise of Home
Retail Group
Homebase proposition
Comprehensive
offer
Loyalty
programme
and
promotions
`
Over 30,000 products
`
6 main departments –
DIY, Decorating,
Garden, Homewares,
kitchens/bathrooms,
Furniture
`
4 million Spend & Save
members
`
10% days
`
c. 300 out of town stores
Conveniently
located stores `
High quality
service
Style
Mezzanines supporting
range expansion
`
High levels of in store
service
`
Reliable home delivery
service
`
Known for offering
stylish products
`
Branded and own brand
products
53
The changing home enhancement customer and
market
`
Historic long-term growth market
`
Current consumer slowdown having a disproportionate effect, primarily driven
by housing market conditions; remain cautious on short-term outlook for DIY
`
`
Traditional DIY sheds will need to adapt
–
Underlying structural shifts in willingness and ability to carry out DIY
–
Consumers still interested in updating and improving their living environment
–
More focus on the products that are stylish and useful within the home
–
More project-related products
–
More products across the broader home enhancement categories
Expect that in the medium term the market will return back to growth rates
that are above the average for the retail sector as a whole
Homebase is well positioned to benefit in the changing market
54
Competitive strengths
`
Scale player: 2nd largest home
improvement retailer
`
Large, loyal customer base
`
Strong and differentiated store portfolio
`
Balanced mix of products: one stop shop
for the home and garden
`
Strongly positioned as a leading home
enhancement retailer
`
Home Retail Group scale and expertise
enhances competitive position
–
Joint purchase scale
–
Operational capability
55
Second largest home improvement retailer
Retailer key data
Year end
Number of
stores
Total
sales
Total sales
growth
LFL
growth
B&Q
Jan 06
322
£3.9bn
-4%
-8%
Homebase
Feb 06
297
£1.6bn
-1%
-4%
Wickes1
Dec 05
176
£0.8bn
-6%
-8%
Focus2
Oct 05
255
£0.7bn
-12%
-9%
03/04
04/05
05/06
Market growth3
+9%
+3%
-6%
Homebase growth
+5%
+6%
-1%
Scale player and outperforming a difficult market
1 Figure calculated as year end December 2005 revenues derived from Note 29 in Travis Perkins PLC annual report 2005, divided by year end October 2004
revenues from Travis Perkins PLC Circular for the acquisition of Wickes as of January 2005. LFL sales for Wickes as disclosed on page 21 of annual report
2005
2 Source: Focus DIY Holdings Limited bondholder document; Numbers include combined Focus companies
3 Source: GfK
56
Large and loyal customer base
` 11 million customers visit Homebase every year
` Over 70 million customer transactions
` Customer base; slightly more upmarket and more likely to be female
Homebase has one of the largest loyalty
programmes in the UK – Spend & Save
Customer base
`
Two key customer groups together represent
70% of the spend in home improvement market
`
Spend & Save loyalty programme drives value
for money and a high degree of loyalty
`
Home and Garden Enhancers: more affluent
families; female bias. 40% of the market
`
4 million active users
`
Account for 42% of sales
DIY Enthusiasts: average income: high
spenders on home improvement. Male bias.
30% of the market
`
Tiered discounts
`
Encourages repeat visits
`
Targeted marketing to responsive customer
base
`
DIY Enthusiasts
Home and
Garden Enhancers
Homebase aims to be Number 1 for the Home Enhancer and a credible destination
for the DIY enthusiast
Source: Verdict, How Britain shops DIY, 2006
57
Strong and differentiated store portfolio
`
Large out of town superstores with garden display space and parking – 2nd
largest space operator outside of supermarkets
`
`
‘Shop not a shed’
–
Effective use of mezzanines
–
More department store
–
More female friendly
–
Easy to shop, easy to find things
–
Dynamic seasonal areas
Product presentation and service differentiates Homebase from other DIY
shed operators
Strong store portfolio that positions Homebase as a ‘shop not a shed’
58
Balanced mix and strongly positioned
Positioning
Sales mix
Other
5%
Other home
enhancement
32%
`
DIY and
decorating
41%
`
`
`
`
Positioning Homebase as the leader
in the home enhancement market
Enhanced shopping experience
Improving the product offer
Development of the proposition
through mezzanines
Leveraging Home Retail Group’s
scale and expertise
Gardening
and outdoor
living
22%
Year ended 31 March 2006
‘One stop shop’ for home and garden; substantial overlap with Argos product pool
59
Enhanced shopping experience and improved product
offer
Continuous measurement of shopping
experience
Availability
Store service
Staff
engagement
Initially
Now
Aspiration
89%
96%
98%
74%
19%
78%
53%
Continually improving product ranges
`
Over 100 range reviews completed
since acquisition
`
Improved process and
implementation
80%
55%
–
Change sourcing
–
Sharpened EPPs
–
Establish structure of "Good, Better,
Best"
–
Enhanced product display
–
Improve own branding and
packaging
`
New product introduction
`
Jointly undertaken with Argos where
there is overlap
Dramatic improvements in shopping experience and product ranges
Source: Availability - company data on all lines availability; store service - ABA
Mystery Shopper research; staff engagement - company annual staff survey
60
Development of the proposition through mezzanines
`
c.150 mezzanines, or about half the store
portfolio
`
Differentiates the shopping experience –
‘shop not shed’
`
Kitchen and bathroom displays key
mezzanine feature
`
Upgrade of furniture offer
`
Bathroom accessories and lighting
typically moved upstairs
`
More space for core DIY and decorative
products on the ground floor
`
More space for new product ranges
`
Sales uplift >15% in total across the
store; sustained after first year
`
Achieving investment hurdle rate
Mezzanines have been a major enabler to positioning the business successfully
across the wider home enhancement market
61
Leveraging Home Retail Group’s scale and expertise
`
Supplier terms harmonisation
`
Supplier reviews
`
Leverage extensive product portfolio
`
Increased importation of product
`
Catalogue production
`
Home delivery
`
E-commerce
`
Roll-out of financial services operation (store card /
financial products)
`
Transfer of people, cultural approach and best practise
`
Enhance property pipeline
`
Reduced cost of fixtures and fittings
`
Media buying benefits
`
Speed to market with new products and offers
`
Enhanced ability to recruit senior retailers
Leverage on sourcing, expertise, infrastructure, assets and capabilities
62
What do customers think?
Improvement in customer feedback scores
November 2004 v March 2006
up 40%
% improvement in
market research score
up 35%
up 38%
up 33%
up 26%
Prices are
good as
competition
Sell stylish
items
Rarely run out
of stock
Easy to shop
First store I go
to
Improved customer perception across key performance measures is reflective of
why we have gained market share
Source: HPI Research Group; 660 customer telephone interviews carried out each quarter
63
Strategy for growth
1.
Opportunity to roll out proven home enhancement formula
2.
Expand the store portfolio
3.
Take share in key categories
4.
–
Kitchens
–
Bathrooms
–
Furniture
Leverage Home Retail Group purchasing scale, shared product pool and
infrastructure
64
Core DIY
Decorating
Gardening
Kitchens/bathrooms
Furniture
Other new product areas
Development areas
Core areas of strength
Homebase home enhancement offer
65
Opportunity to roll out and rollback
`
Only part way through transformation process of consistent offer across stores
`
Previous product range and mezzanine initiatives support roll out plan
`
Trials to test two investment types later this year
`
If successful, expect to roll out to 30-50 stores a year to bring consistency
across the chain
Stores
% Space
Attributes
Latest format
99
35%
Full Homebase range
Latest fixtures/store environment
Original format
82
33%
Lacks full range
Improved environment
Uninvested
116
32%
Lacks full range
Sub optimal store environment
TOTAL
297
100%
Successful wider home enhancement proposition that we can deliver nationally
66
Expand store portfolio
`
Plan to open around 15 net new
stores per annum
`
Larger locations where currently no
presence
`
Smaller (25,000 ft2) stores in smaller
markets
–
Opens up new locations where
Homebase can profitably trade
`
Identified over 100 new locations
Growth and leverage through additional new stores
67
Take share in key categories
Market size
Homebase
CAGR growth
03/04-05/06
Market leader
(share)
Kitchens
£1.9bn
c.25-35%
c.25% (MFI)
Bathrooms
£1.2bn
c.10-15%
Highly fragmented
(c.75% trade and
specialists)
Furniture
£8.2bn
c.15-25%
<10% (Argos)
Large markets with headroom to grow in each
Source: Verdict; company data
68
Leverage Home Retail Group capability
`
Purchasing scale benefits still to be harvested
`
Argos product pool offers further new product introduction opportunities over
time
`
Multi-channel infrastructure supports key targeted growth areas
`
Catalogue and e-commerce capability increases speed to market and
development
`
–
Larger catalogue in trial in 100 stores
–
Transactional web site driving incremental sales
Financial services offerings enable more customers to buy high ticket items
from Homebase
Continue to leverage scale, infrastructure and expertise of Home Retail Group
69
Homebase summary
Routes to growth
Competitive strengths
`
Scale player: 2nd largest home
improvement retailer
`
Opportunity to roll out proven
home enhancement formula
`
Balanced mix of products: one
stop shop for the home and
garden
`
Expand the store portfolio
`
Take share in key categories
`
Leverage Home Retail Group
purchasing scale, shared
product pool and infrastructure
`
Strongly positioned as a
leading home enhancement
retailer
`
Large, loyal customer base
`
Strong and differentiated store
portfolio
`
Home Retail Group scale and
capability
70
Supporting data
4. Purchasing scale, expertise and infrastructure
Purchasing scale and opportunity
Scale and product overlap driving
buying benefits
Strategic sourcing – potential benefits
5-10%
50
Other General
Merchandise
16%
Home
Enhancement
51%
Savings potential %
45
Electricals
33%
Argos and Homebase combined
sales FY05/06
£5.5bn
10-15%
30-50%
eprocurement
40
35
30
5-10%
25
One agent
vs
multiple
20
10-15%
15
10
5
0
Direct
sourcing
Cumulative
potential
Import
vs
domestic
Stage
1
Stage
2
Stage
3
Stage
4
Importing 2005/6
`
Significant move towards importing with
substantial further benefits still achievable
`
Argos >30% of sales directly imported
`
Homebase >20% of sales directly
imported
`
However <50% of import is direct sourced
71
Expertise
Activities, services and processes
`
Value Chain – analysis and review
`
Continuous improvement
`
–
Supply base review
–
Supplier management
Product standardisation
–
Source of supply
–
Technical specification
`
Product specifications
`
Quality control
`
Packaging
`
–
Cube optimisation
–
Cost savings
–
Improved customer presentation
Milestones
2001 Group Asia office opens in HK
2002 Homebase joins Group
2004 Group Asia office opens in
Shanghai
Group office in Shenzen
Offshore warehousing and
consolidation
2006 Eastern Europe sourcing team
established
More off shore warehousing and
consolidation
Ethical sourcing
72
Infrastructure
Indexed growth in imported and
directly sourced purchases
`
Freight forwarding
`
Off-shore warehousing and
consolidation
`
Off-dock storage
`
Import warehouses
`
–
600,0002 ft main Argos unit
–
New warehouse 2007
–
Outsourced warehousing and break
bulk
Expertise leverage across Home
Retail Group
Indexed on 2001 directly sourced
purchases
Logistics and distribution
2600
2100
1600
1100
600
100
2001
2002
2003
2004
2005
Directly sourced purchases US $m indexed
Total imports (FOB) US $m indexed
73
Supporting data
5. Multi-channel infrastructure
Home Retail Group’s multi-channel infrastructure and scale
underpins profitability and competitive advantage
E-commerce
`
Scale and expertise from long-established, award winning, innovative and market
leading internet operations
Customer service
`
Shared customer service operation for product orders, delivery enquiries and credit
services online and over the phone
`
Around 2,000 employees handling over 18 million enquiries a year
Home delivery
`
Large scale national home delivery operation, 7 million deliveries to customers each
year
`
Deliver to 1 in 7 UK homes
`
Bigger than Next, JLP, M&S, DSGi, Comet
`
Significant investment in home delivery infrastructure over the last four years
`
Argos Direct unit sales grew by 58% in three years
Catalogue production
`
Largest print run in the UK; 20 million catalogues – twice a year
74
Home delivery scale and expertise
`
Fundamentals to low costs
1.
2.
3.
4.
Stem distance
–
Limit the distance between warehouse and customer
–
Three major regional distribution centres
Vehicle Fill
–
Maximise the number of items you get on a vehicle
–
On average 30 customer orders per box
Drop density
–
Shorten the journey between each customer delivery
–
Less than five miles on average
Achieve delivery success
–
Three delivery slots, telephone ahead
–
>97% successful deliveries each day
–
Leveraging home delivery for Homebase, e.g. garden furniture; over
40% cost saving versus third party carrier
The scale of operations translates into low costs, a flexible infrastructure and a
competitive advantage that is difficult to replicate
75
Catalogue scale and expertise
`
33 years of catalogue production expertise
`
40 million catalogues produced each year
`
Drives significant scale benefits
`
–
Image creation
–
Paper purchase
–
Print buying
Provides speed to market
–
Argos ‘Home’ catalogue 2 million copies in
100 stores
–
Concept to market in four months
The scale of operations reinforces competitive advantage through expertise, cost
advantage and speed to market
76
Leveraging catalogue and home delivery for
Homebase
`
`
Furniture Extra trial (July 2004)
–
12 stores, 3,000 sq ft displays
–
Supported by a collection from the Argos furniture
range
–
Leveraging Home Delivery network, contact
centres and catalogue products
National rollout (completed December 2005)
–
135 furniture display stores, remainder catalogue
only stores
–
5 million 80 page catalogues
–
Over 700 products
`
Positive consumer response; positive sales
growth
`
New 200 page extended home furnishings
catalogue now being trialled in 100 stores
The benefits of full multi-channel operations have been leveraged for Homebase
77
Supporting data
6. Financial Services
Financial Services operating model
In House
Commission /
Profit Share
Partnerships
Retail Credit
& Warranties
Direct
Insurances
Consumer
Lending
NEW
` Argos Storecard
` Motor & Home
` Homebase
Storecard
` (Lloyds TSB)
` Creditor
Insurance
` Warranty
Insurance
` Travel & Pet
` (Specialist
providers)
` Future development of
consumer lending
propositions
` Joint venture with
Barclaycard for new Argos
credit card and
Argos/Homebase personal
loan products
The business operates distinct models to suit the underlying products on offer
78
Financial Services’ scale and ability to support and
grow retail sales
Credit penetration
Storecard loan book (gross)
£349m
£378m
30%
Revolving
3 mth
BNPL
Credit penetration
25%
£252m
£155m
£105m
6 mth
BNPL
9 mth
BNPL
20%
15%
10%
5%
0%
<£95
£95 - £195
£195 - £295
£295+
Spend
2002
2003
2004
2005
2006
Number of active customers
>1m
Argos
Homebase
Growth in moving annual total Argos sales,
grouped into card penetration bands
180.0%
>1m
160.0%
140.0%
% Growth since Dec-01
120.0%
458k
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
2002
2003
2004
2005
2006
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
< 10% Penetration
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
> 10% Penetration
Growing loan book and customer base
79
Multi-channel capability
In Store & Kiosk
Telephone
E-Commerce
Credit sales
£387m
£15m
£38m
Penetration
6.8%
7.7%
12.5%
Applications
592k
140k
140k
Ability to apply and use storecards across all channels
80
Disclaimer
This presentation has been prepared and issued by Home Retail Group plc (the “Company”) solely for your information and for use at the presentation to institutional investors in connection with the proposed admission of the Company’s ordinary shares to the Official
List of the Financial Services Authority and to trading on the London Stock Exchange plc's market for listed securities (together, the “Admission”). By attending the meeting where this presentation is made and/or by accepting this document, you agree to be bound
by the following limitations.
This presentation is an advertisement and not a prospectus and potential investors should not subscribe for or purchase any shares referred to in this presentation except on the basis of information in the prospectus to be published by the
Company in due course in connection with the Admission. Copies of the prospectus will, following publication, be available from the Company’s registered office.
This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any ordinary shares in the Company or any other securities, nor shall it or any part of it
nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto. Any offer, invitation or solicitation shall be made solely by means of the prospectus and recipients of this
presentation who are considering a purchase of shares in the Company following distribution of the prospectus in connection therewith are reminded that any such purchase should be made solely on the basis of the information contained
in such prospectus and any supplementary prospectus(es). This presentation does not constitute a recommendation regarding the securities of the Company.
This document and its contents are confidential and may not be further copied, distributed or passed on, directly or indirectly, to any other person or published or reproduced directly or indirectly, in whole or in part, by any medium or in any form for any purpose.
The information contained in this document is being provided to you solely for the purpose of the preparation and publication of a research report in relation to the Company and may not be used for any other purpose. If such research is not published or Admission
does not proceed, the information in this presentation and any draft research based upon such information must be kept confidential and not used for any other purpose.
Neither this document nor any part or copy of it may be taken or transmitted into or distributed in or into, directly or indirectly, the United States, its territories or possessions, Australia, Canada or Japan. Any failure to comply with these restrictions may constitute a
violation of US, Australian, Canadian or Japanese securities laws, respectively. The distribution of this document in other jurisdictions may also be restricted by law, and persons into whose possession this document comes should inform themselves about, and
observe, any such restrictions.
This document is not an offer of securities for sale in the United States or elsewhere. The Company's ordinary shares have not been and will not be registered under the United States Securities Act of 1933 (the “Securities Act”) and may not be offered or sold in the
United States unless they are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. No public offer of the securities referred to herein is being made in the United
States.
The Company's ordinary shares have not been and will be not registered under the applicable laws of any state or jurisdiction of Australia, Canada or Japan and, subject to certain exceptions, may not be offered or sold within Australia, Canada or Japan or to or for
the benefit of any national, resident or citizen of Australia, Canada or Japan.
This document is intended for distribution in member states of the European Economic Area to persons who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (“Qualified Investors”). This document must
not be acted or relied upon in any member state of the European Economic Area by persons who are not Qualified Investors. Any investment or investment activity to which this communication relates is available in any member state of the European Economic Area
only to, and will be engaged in only with, Qualified Investors.
This document is intended for distribution in the United Kingdom only to: (i) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
"Order"); or (ii) persons falling within Article 49(2)(a) to (d) of the Order or to those persons to whom it can otherwise lawfully be distributed (all such persons together being referred to as "relevant persons"). This document must not be acted upon by persons who
are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons.
The information in this presentation is given in confidence and the recipients of this presentation should not base any behaviour, in relation to qualifying investments or relevant products (as defined in the Financial Services and Markets Act 2000 (“FSMA”)) and the
Code of Market Conduct (made pursuant to FSMA), which would amount to either market abuse for the purposes of FSMA, or insider dealing for the purposes of the Criminal Justice Act 1993 on the information in this presentation until after the information has been
made generally available. Nor should the recipient use the information in this presentation in any way which would constitute “market abuse” or “insider dealing”.
UBS Limited and Merrill Lynch International (together the “Joint Sponsors”) and their respective affiliates are each acting exclusively for the Company and GUS plc (“GUS”) and for no one else in connection with Admission and will not be responsible to any other
person for providing the protections afforded to their respective clients, or for providing advice in relation to Admission or any other transaction or arrangement referred to in this presentation.
This presentation has been prepared by, and is the sole responsibility of, the Company. Some of the information in this presentation is still in draft form and has not been legally verified by the Company, GUS, their advisers, the Joint Sponsors or any other person
and may be subject to updating, completion, revision and amendment and such information may change materially. It will only be finalised at the time of Admission. This presentation speaks at the date hereof. No representation or warranty, express or implied, is or
will be made by or on behalf of the Company, GUS, their advisers, the Joint Sponsors or any of their respective directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this
presentation and any reliance you place on them will be at your sole risk. In particular the market data has been obtained by the Company and GUS from third party sources. Neither the Company nor GUS has independently verified such data and whilst the
Company and GUS have compiled and extracted the market data, they can provide no assurances of the accuracy and completeness of such information and take no responsibility for such data. Neither the Company nor GUS is under any obligation to update or keep
current the information contained in this presentation or to correct any inaccuracies which may become apparent, and any opinions expressed in it are subject to change without notice. None of the Company, GUS, their advisers, the Joint Sponsors or any of their
respective members, directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith.
Statements, beliefs and opinions contained in this presentation, including those related to Admission, particularly those regarding the possible or assumed future or other performance of the Company or the Group, industry growth or other trend projections, are or
may be forward looking statements, beliefs or opinions and reflect the Company’s or, as appropriate, the Company’s directors’ current expectations and projections about future events and are subject to risks and uncertainties that may cause actual results to differ
materially. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements, beliefs, or opinions.
These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. These risks and uncertainties include, among other factors, changing business or other market conditions and the prospects
for growth anticipated by the management of the Company. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. As a result, there can be no assurance that projected results or developments will
be attained and you are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will
continue in the future. The Company, its advisers, the Joint Sponsors and each of their respective directors, officers and employees disclaim any obligation to update the Company's view of such risks and uncertainties or to publicly announce the result of any revision
to the forward-looking statements made herein, except where it would be required to do so under applicable law.
By attending the presentation to which this document relates and/or by accepting this document you will be taken to have represented, warranted and undertaken that: (i) you have read and agree to comply with the contents of this notice, including, without
limitation, the obligation to keep this presentation and its contents confidential, and (ii) you will not at any time have any discussion, correspondence or contact concerning the information in this presentation or Admission with any of the directors or employees of the
Company or GUS or their respective subsidiaries nor with any of their suppliers, customers, sub-contractors or any governmental or regulatory body without the prior written consent of the Company.
Disclaimer
`
The information, and any opinion contained in this document does not constitute a public offer under
any applicable legislation or an offer to sell or a solicitation or an offer to buy any securities or financial
instruments or any advice or recommendation with respect to such securities or other financial
instruments.
The information contained in this document is subject to, and must be read in conjunction with, all
other publicly available information, including, where relevant, any fuller disclosure document published
by Home Retail Group plc. Any person at any time acquiring the securities must do so only on the basis
of such person's own judgement as to the merits of the suitability of the securities for its purposes and
only on such information as is contained in public information having taken all such professional or
other advice as it considers necessary or appropriate in the circumstances and not in reliance on the
information contained herein. The information contained in this document is not tailored for any
particular investor and does not constitute individual investment advice.
`
Any information in this document of the price at which investments have been bought or sold in the
past or the yield on investments cannot be relied upon as a guide to future performance.
`
This document is being distributed by Home Retail Group plc only to, and is directed only at (a) persons
who have professional experience in matters relating to investments who fall within Article 19(1) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and (b) persons to whom it
may otherwise lawfully be communicated (together "relevant persons"). Any investment or investment
activity to which this document relates is available only to and will be engaged in only with, relevant
persons. Any person who is not a relevant person should not act or rely on this document or any of its
contents.