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Home Retail Group - Final, final Results

Steve Clayton | 27 April 2016 | A A A
Home Retail Group - Final, final Results

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Home Retail Group has released what are likely to be its last financial results as a listed company, following the recommended offer for the group from Sainsbury's, announced earlier this year, the terms of which can be found below. The shares were largely unchanged after the results were published.

Sales were flat at Homebase, since sold to Wesfarmers, a major Australian retailer, whilst Argos sales dropped 3%. The roll-out of Argos Digital stores and concessions continued apace, with digital outlets now 21% of the Argos estate. Internet transactions were almost half of sales and mobile commerce reached 28% of total sales. The national roll-out of the Fast Track same-day delivery and collection service was completed.

Argos costs rose by £22m and benchmark profit fell 28% to £95m, with a similar decrease in benchmark earnings per share to 9.3p. Year-end cash balances were £623m, rather more than expected, whilst reported profits were distorted by a huge goodwill write-down, related to the offer by Sainsbury, of £852m leading to total losses after tax for the Group of £808m.

1 April 2016: The Boards of Sainsbury and Home Retail Group have now announced the terms of a final offer, by Sainsbury, for Home Retail Group, the Directors of which are unanimously recommending. The terms are essentially unchanged from those first proposed and at the closing price of 276.3p per Sainsbury share, prior to the announcement, represent a total equivalent value per Home Retail Group of 171.5p.

The terms are:

For each Home Retail Group share, Offer Consideration of:
0.321 new Sainsbury shares and 55 pence in cash
In addition Home Retail Group shareholders will also be entitled to receive the following payments as a Proposed Capital Return:
25 pence per Home Retail Group share in respect of the Homebase sale and;
2.8p per Home Retail Group share in lieu of a final dividend for the financial year ended 27 Feb 2016

The Offer Consideration and Proposed Capital Return together represent a premium of approximately 74% to the 98.7p level that Home Retail Group shares closed at on 4 Jan 2016, prior to the offer period commencing.

The deal is being effected by means of a Scheme of Arrangement and there will be a mix and match facility, by which shareholders can elect to receive more of the consideration in either cash, or equity, subject only to other shareholders making equal and opposite elections.

The acquisition is expected to complete during the third quarter of 2016.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.