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UPDATE: Home Retail Starts Homebase Store Closure Programme

Mon, 24th Nov 2014 08:49


LONDON (Alliance News) - Home Retail Group PLC Monday said its Homebase unit has exchanged contracts to sell its freehold store in Battersea, South London, and expects to close about 25 stores in its current financial year, cutting its revenue but boosting profits and cash flow.

The owner of the Homebase DIY chain and the Argos general retailer had said last month it wanted to shrink its Homebase estate by about a quarter by 2018 in an attempt to improve the profitability of the business. That means about 80 stores will be closed in total.

On Monday, it said the sale of the Battersea store and the 25 other store closures it will complete in the current financial year will cut sales by about 2% in the current year and about 3% in its next financial year. It will book GBP10 million of closure costs in the current year, but has already booked this amount as a provision for property, meaning no overall impact on its results. It expects to book an exceptional gain of about GBP38 million - the profit on the Battersea site sale - in the following financial year.

It also expects a GBP30 million boost to its cash flow statement this year and GBP27 million next year, while it will also book a GBP5 million improvement to its working capital this year, and a loss of GBP10 million for the closure costs.

It said it will sell the Battersea site for GBP57 million to a residential property developer, getting GBP30 million in the current financial year that ends on February 28, 2015, and the remaining GBP27 million in the following fiscal year. It will book a gain on the sale of about GBP38 million in fiscal 2016. It expects the deal to complete in about a year.

It said the closure of the other 25 Homebase stores won't have a material impact on its benchmark pretax profit this year or next, partly because they include two profitable stores that Homebase was unable to renew on lease expiry, which are not part of the previously announced store exit programme.

Home Retail shares were down 0.2% at 192.50 pence early Monday.

By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1

Copyright 2014 Alliance News Limited. All Rights Reserved.

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