Terry Duddy, CEO - welcome Today's agenda Overview Home Retail Group competitive strengths Home Retail Group is a scale operator in the UK retail market Home Retail Group market leadership Strong retail brands with large customer bases Choice and valued product offering Purchasing scale, expertise and infrastructure Home Retail Group has invested to develop leading multi-channel capability Own the Home (1) Own the Home (2) Home Retail Group operates in a 55bn+ market and has only 10% share Key components of growth strategy Strengthen and grow market leading positions Grow share in targeted large markets Expand and develop store networks Extend and exploit multi-channel leadership Home Retail Group businesses leverage shared infrastructure and expertise Commitment to delivering shareholder value Sara Weller, MD Argos Long track record of growth The Argos proposition Argos competitive strengths Unique retail store format at the heart Convenient multi-channel shopping Specialised infrastructure Leading market positions Excellent breadth and depth of choice Range breadth brings greater flexibility Expanded ranges continue to deliver growth Longstanding reputation for value for money Large and loyal customer base Argos is consistently rated highly by customers for choice, value and convenience Argos has significant advantage for convenience, price and range against key competitors Argos is rated more highly than supermarket competitors. Routes to growth Product opportunities in core and growth markets Strengthen and drive leadership in core markets - choice Strengthen leadership in core markets - value and convenience Take share in large, fragmented markets Grow share by improving awareness Grow in fast-growing markets Opportunity for further store growth Two routes for new store growth Example of taking larger share in town through the opening of a 2nd store New stores add to multi-channel offer New trial store: Thurrock -In store technology trial: Malvern Furniture display trial: Watford Leading internet retailer Integrated multi-channel offering Check and reserve is one of the fastest growing services Leverage "Operational Excellence" Leverage Home Retail Group scale and infrastructure Argos summary Paul Loft, MD Homebase The Homebase proposition The changing home enhancement customer and market Competitive strengths Second largest home improvement retailer Large and broad customer base Two key customer groups Loyal customers Strong and differentiated store portfolio Comprehensive offer for the home and garden Positioning Homebase as the leader in the home enhancement market Enhanced shopping experience Enhanced shopping experience - key metrics Improved product offer Improved product offer - sharpened EPPs Improved product offer - range structure Improved product offer - layout and displays Improved product offer - packaging Improved product offer - new products Development of the proposition through mezzanines Leveraging Home Retail Groups scale and expertise What do customers think? Strategy for growth Homebase home enhancement offer Opportunity to roll out and rollback Expand store portfolio Take share in key categories Take share in key categories - kitchens Take share in key categories - bathrooms Take share in key categories - furniture Leverage Home Retail Group capability Homebase summary Maria Thompson, Commercial Director Home Retail Group benefit drivers Sourcing - Home Retail Group buying scale Sourcing - direct importing 2005/6 Strategic sourcing - potential benefits Some examples of strategic sourcing Value chain approach Value chain example - furniture We conduct rigorous evaluation of supply requirements and opportunities driven off the range strategies Value chain activities Leveraging expertise and infrastructure Home Retail Group sourcing Logistics and distribution Services and processes Home Retail Group sourcing, Value Chain, leveraging expertise and infrastructure Eugene Brazil, Customer Services Director - multi-channel infrastructure Multi-channel enabler Scale Home delivery scale and expertise Home Retail Groups two man home delivery network - regional warehouses Superior efficiency Competitive advantage Leveraging home delivery for Homebase Catalogue scale and expertise Speed to market Leveraging catalogue and home delivery for Homebase Conclusion Greg Ball, MD Financial Service Role of Financial Services How we operate Why retail credit is important (1) Why retail credit is important (2) Multi-channel capability Achieving scale Richard Ashton, FD - financial performance Home Retail Group income statement Home Retail Group sales Home Retail Group - cost of sales and gross profit Home Retail Group net operating expenses Home Retail Group operating profit before exceptionals Home Retail Group exceptional items Home Retail Group balance sheet - assets Home Retail Group balance sheet - liabilities Home Retail Group - working capital Home Retail Group summary cash flow Home Retail Group capital expenditure Return on capital employed Pro forma assumptions Pro forma assumptions one-off costs Financial summary Terry Duddy, CEO - summary Home Retail Group summary QUESTIONS AND ANSWERS Q1a Mezzanine uplift at Homebase Q1b Comments on new Group name Q2a Time frame for maturity for new Argos stores Q2b Price cuts over last 4 years Q3a Sales levels in product markets Q3b Average increase in sales from 10& off days Q4 Potential threats and weaknesses Q5a Return on investment from Homebase Q5b Growth from increase in volumes with falling gross margin Q5c Continuation of reporting operating profit for both Argos and Homebase Q6 Gross margin dilution in Argos Q7a Increased levels of cannibalisation Q7b Initiatives for Argos peak trading periods Q7c Stores trials Q8a Number of lines in the Argos catalogue going forward Q8b Financial Services OFT hit Q9 View on capital structure of the business Q10a Potential for future bolt-on acquisitions Q10b Link ups between Argos and Homebase Q10c Competitive pricing