ref="http://www.cityam.com/company/argos">ARGOS and Homebase owner Home Retail Group yesterday announced plans for a share buyback of up to £150m as new figures showed its annual profit had dropped by 11 per cent.
Underlying profits fell to £292.9m for the year to 27 February – down from £327.7m for the year before – the company said.
Earnings were hit by weak consumer spending and a weaker pound, which raised the cost of imported goods.
Total sales at the group in the year rose by two per cent to £6.023bn, with like-for-like sales – which strip out the impact of store openings – down 2.1 per cent at Argos and up 2.7 per cent at Homebase.
The company’s shares have performed poorly on the STOXX 600 European retail index, fuelling speculation that it could attract a bid from a private equity firm or a supermarket group.
In an attempt to stave off any bid Home Retail said it would return £150m to investors. The firm also said in its full-year results statement that it would step up capital spending to £125m-£150m, up from £87m in the year just ended. The move is aimed at fighting off competition from supermarkets and the internet.
Despite the profit drop, the company said that results for both Argos and Homebase had “exceeded initial expectations”.
The company also said it had made “significant” cost cuts, and had reduced its cost base by £64m.
Home Retail kept its dividend at 14.7p a share.
FAST FACTS | HOME RETAIL GROUP
● Argos was founded in 1973 and Homebase in 1981.
● Homebase is the UK’s second largest homeware retailer with 60m customers every year.
● Last year Home Retail bought Schreiber.