19 October 2011

Home Retail Group plc Half-Year Results Home Retail Group, the UKs leading home and general merchandise retailer, today announces its results for the 26 weeks to 27 August 2011. Operating highlights Continued leadership in multi-channel retailing, driven by further investment initiatives in both businesses and the continued growth of internet penetration supported by Check & Reserve Investment plans progressing at Argos: - Store refurbishment delivering sales uplifts ahead of plan - Launch of the Argos TV shopping channel - Range extension into childrens books, childrens and adult clothing and gifting Homebase gained market share and further developed its home enhancement proposition: - Expanding exclusive product brand strategy - Developing ranges across big ticket categories - Award winning installation services with customer recommendation rate in excess of 90% Acquired the exclusive use of the Habitat brand Joint venture to commence multi-channel retail operation in China separately announced today Financial highlights Sales down 6% to 2,568m Cash gross margin down 7% to 970m Operating and distribution costs were broadly flat at 944m, reflecting further cost savings offsetting the impact of both underlying cost inflation pressures and the investment in new initiatives Benchmark operating profit1 down 72% to 27m; Group operating margin of 1.0% Benchmark profit before tax2 down 70% to 28m Basic benchmark earnings per share3 down 68% to 2.5p Reported profit before tax of 29m; reported basic earnings per share of 2.6p Closing net cash position of 200m Interim dividend maintained at 4.7p Terry Duddy, Chief Executive of Home Retail Group, commented: Homebase delivered another robust performance in its peak trading period. Core customers at Argos have continued to be under greater pressure and there were ongoing challenging conditions across several product categories, most notably consumer electronics. As we now enter our busiest trading period market conditions remain both weak and volatile, and in these early weeks of the second half we have not seen the improvement in sales that we had anticipated. We are well positioned operationally and we will continue to shape the future of shopping for our customers, ensuring we bring unrivalled convenience and value to customers every day lives, whether shopping at home or on the move.
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1. Benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases and exceptional items. 2. Benchmark profit before tax (benchmark PBT) is defined as profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases, exceptional items, financing fair value remeasurements, financing impact on retirement benefit obligations, the discount unwind on non-benchmark items and taxation. 3. Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to benchmark PBT, divided by the weighted average number of shares in issue (excluding shares held in Home Retail Groups share trusts net of vested but unexercised share awards).

Enquiries Analysts and investors (Home Retail Group) Richard Ashton Finance Director Don Davis Director of Investor Relations Media (Finsbury) Rollo Head

01908 600 291

020 7251 3801

There will be a presentation today at 9.30am to analysts and investors at the UBS Presentation Suite, 1 Finsbury Avenue, London EC2M 2PA. The presentation can be viewed live on the Home Retail Group website www.homeretailgroup.com. The supporting slides and an indexed replay will also be available on the website later in the day. An Interim Management Statement, covering the 18 weeks from 28 August 2011 to 31 December 2011, will be announced by Home Retail Group on Thursday 12 January 2012.
Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements.

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FINANCIAL SUMMARY
26 weeks to m Argos Homebase Financial Services Sales Cost of goods Gross margin Group gross margin % rate Operating and distribution costs Argos Homebase Financial Services Central Activities Benchmark operating profit Group operating margin % rate Net interest income (see below) Share of post-tax results of joint ventures and associates Benchmark PBT Financing fair value remeasurements Financing impact on retirement benefit obligations Discount unwind on non-benchmark items Profit before tax Taxation of which: taxation attributable to benchmark PBT Benchmark effective tax % rate Profit for the period Basic benchmark EPS Basic EPS Weighted average number of shares for basic EPS Interim dividend Closing net cash position Net interest reconciliation: Bank deposits and other interest Financing costs charged to Financial Services Discount unwind on benchmark items Net interest income Financing fair value remeasurements Financing impact on retirement benefit balances Discount unwind on non-benchmark items Income statement net financing income 1.0 1.7 (0.9) 1.8 2.3 2.2 (3.4) 2.9 1.3 1.6 (1.4) 1.5 9.2 2.3 (3.2) 9.8 27 August 2011 1,675.7 839.6 52.2 2,567.5 (1,597.2) 970.3 37.8% (943.8) 3.4 29.9 3.0 (9.8) 26.5 1.0% 1.8 28.3 2.3 2.2 (3.4) 29.4 (9.0) (8.4) 29.7% 20.4 2.5p 2.6p 799.0m 4.7p 200.5 28 August 2010 1,812.8 855.3 52.2 2,720.3 (1,680.1) 1,040.2 38.2% (947.0) 54.4 46.2 2.5 (9.9) 93.2 3.4% 1.5 94.7 9.2 2.3 (3.2) 103.0 (28.3) (28.9) 30.5% 74.7 7.7p 8.8p 849.3m 4.7p 326.9

The above tables and those throughout this announcement have been prepared in accordance with Note 1 to the Financial Information on page 23.

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CHIEF EXECUTIVES STATEMENT

Spending in our markets continues to decline with many consumers facing pressures which affect the amount of household cash flow they have available for the purchase of discretionary goods. Argos core customer demographic has tended to benefit less from the current low interest rate environment, which taken together with the fact that they have a relatively high proportion of their take-home pay consumed by non-discretionary expenditure, has resulted in them having been more adversely impacted by the prevailing economic conditions. While we have had success in areas such as homewares and seasonal products, this has been more than offset by the weakness in other product categories, most notably consumer electronics which has seen the market decline by about 20% in the period, the net result of which is a marginal loss of market share in the period. Homebases market share gain reflects a robust performance in a difficult trading environment and while the big ticket category remains challenging, we have seen good growth in bedroom furniture, benefiting from the rollout of new fitted ranges into stores together with installation services, and also a good performance in bathrooms. The Groups strong positioning continues to be derived from the following: 1. Multi-channel expertise and leadership maintaining a clear market-leading position as consumers continue to use the power of the internet and mobile devices together with the convenience of immediate product collection via our store networks 2. Highly competitive customer offering ensuring the customer continues to receive excellent value and choice by maximising the buying scale and sourcing skills of the Group 3. Expansion of product ranges and related services such as Argos ability to extend its ranges into new categories like clothing and books as well as growing product ranges online. While Homebase extends installation services to enhance its big ticket offering and continues its significant range changes in home enhancement products 4. Efficient cost base where further cost reductions have been achieved to mitigate underlying cost inflation and the investment in new initiatives, while maintaining or improving operational standards 5. Financial strength with a significant cash balance that supports investment in new initiatives and a sizeable debt free receivables loan book Argos and Homebase continue to strengthen their customer propositions with investment in multi-channel initiatives, expanding choice, developing ranges and services, and improving product presentation in-store, in catalogues, on TV and online. Argos and Homebase also continue to help the customer through ongoing WOW, Value and Best Buy offers, supported by a range of in-house provided credit offers. The Group acquired the exclusive use of the Habitat brand, its brand designs and intellectual property in the UK and the Republic of Ireland together with the UK website and three of its London stores for 24.5m. In a separate announcement today, Home Retail Group has stated that it has agreed to launch a joint venture company to develop a multi-channel, general merchandise retail business in China with Haier Group, one of the worlds leading home appliance manufacturers. The Argos branded joint venture operation will launch in 2012 targeted at the Shanghai region.

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BUSINESS REVIEWS Argos

26 weeks to m Sales Benchmark operating profit Benchmark operating margin Like-for-like change in sales New space contribution to sales change Total sales change Gross margin movement Benchmark operating profit change Number of stores at period-end 27 August 2011 1,675.7 3.4 0.2% (9.1%) 1.5% (7.6%) Down c.75bps (94%) 754 28 August 2010 1,812.8 54.4 3.0% (6.5%) 2.5% (4.0%) Down c.150bps (32%) 749

As the UKs leading general merchandise retailer, Argos provides a unique offer of choice, value and convenience. Operational review Multi-channel leadership Multi-channel sales have continued to grow and now represent 770m or 46% of Argos total sales. The fastest growing channel continues to be online Check & Reserve, which grew to represent 22% of all sales. Approximately half of these sales are reserved and collected from stores the same day, with the remainder collected the following day. The store network provides the certainty and immediacy of stock availability that customers require. Total internet orders, including Check & Reserve grew to comprise 33% of Argos total sales, with the remaining 13% of multi-channel sales being products ordered in-store for home delivery or by telephone. Argos continues to be the second largest internet retailer in the UK, with over 180 million website visits in the period, an increase of 11% over the same period last year. The launch of the web platform for mobile devices and the app for Android phones, supported by the previously launched Apple iPhone app, is leading to rapid growth of mobile shopping. At the end of the period the proportion of total sales from mobile shopping was around 4%. Argos TV, the home shopping TV trial on the Sky digital television platform, launched on 15 June 2011 since which date it has aired over 600 live shows demonstrating 2,500 products. There has been a good customer response and the trial will continue over the peak trading period. Store network The programme to refurbish the store network is progressing well. Around 300 stores had been refurbished by 27 August 2011 and a further 50 stores will be completed in the second half. Customers response to the refurbished stores continues to be very positive and this is contributing to Argos strong brand and store service reputation. The financial performance of the refurbished stores continues to be encouraging with the average sales uplift being 2.5%, which is ahead of the business case sales uplift requirement of 1%. Refurbishment costs are averaging approximately 100k per store and therefore the previously announced 70m cost to complete the programme is on track. Argos has approximately 150 store lease renewals and 35 store lease break clauses over the next five years. With this flexibility, Argos will focus on optimising its store network by
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relocating or closing some older stores and opening some new stores if attractive sites become available. In the current financial year, it is expected there will be around 15 new store openings and a similar number of closures. Improving choice With around 22,000 lines, the Autumn/Winter 2011 catalogue has increased the choice compared with last year by around 1,000 lines. This increase has been primarily in the new childrens clothing category and also in homewares. Argos has leveraged its market-leading toy and gift licence relationships to extend into childrens and adult clothing and gifting. Around 500 clothing lines were launched in the Autumn/Winter 2011 catalogue. In childrens clothing, the range builds on Argos existing strength with major toy licences, such as Disney characters, to provide a wide range of additional merchandise, such as pyjamas, t-shirts and bedding, brought together in character shops within both the catalogue and online. The range also includes adult clothing, such as London 2012 apparel. Argos is also trialling a new route to range extension whereby third party products are embedded within the Argos web shopping experience. This offer allows Argos to sell third party products on a fully integrated basis through its website and earn a commission on the sales. The first trial was in the books category with around 5,000 titles being displayed on the internet. This has now been extended to video game software and technology accessories. Own brands continue to offer excellent value and further choice with Chad Valley, Alba, Bush, Hygena and Schreiber having over 1,500 product lines in the Autumn/Winter 2011 catalogue; and the Colourmatch homeware collection, launched in the Spring/Summer 2011 catalogue, has been very successful and has been expanded to over 500 lines. In technology, Argos increased the in-store display of televisions, cameras and laptops. The Apple iPad 2 is now also available in 250 stores and via nationwide home delivery. Improving value Argos is a leading value retailer and remains highly price competitive, supported by the Groups sourcing scale and infrastructure advantages, together with the benefit of Argos low-cost operating model. Argos continues to maintain a competitive price position overall which is measured weekly using internet price comparisons. It maintains a price position better than the competition on its highest sales volume lines. Financial review Sales in the period declined by 7.6% in total. Net new space contributed 1.5% with seven new stores opened, four closed and a further three being relocated, taking the store portfolio to 754. Like-for-like sales declined by 9.1%. The consumer electronics market, in particular televisions and video games systems, has been weak and accounted for the majority of the reduction in Argos sales. Laptops continued to show good growth. The gross margin rate was down by approximately 75 basis points. Around 100 basis points was driven by the anticipated net impact of adverse currency and shipping rates together with around 50 basis points from an increased level of stock clearance activity. This was partially offset by a benefit from the sales mix. Total operating and distribution costs were reduced by 9m or 2% with further cost savings offsetting the impact of both underlying cost inflation pressures and the investment in new initiatives. Benchmark operating profit was 3.4m, a 51.0m or 94% decline on the comparable period last year.

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Homebase
26 weeks to m Sales Benchmark operating profit Benchmark operating margin Like-for-like change in sales New space contribution to sales change Total sales change Gross margin movement Benchmark operating profit change Number of stores at period-end Of which contain a mezzanine floor Store selling space at period-end (million sq ft) Of which - garden centre area - mezzanine floor area 27 August 2011 839.6 29.9 3.6% (0.6%) (1.2%) (1.8%) Down c.25bps (35%) 342 187 15.6 3.6 1.8 28 August 2010 855.3 46.2 5.4% (0.8%) (0.4%) (1.2%) Down c.100bps (6%) 345 188 15.8 3.7 1.9

Homebase continues to be well positioned as a leading home enhancement retailer. Operational review Extending multi-channel Internet sales account for 4% of Homebases total sales and the value of 'Reserve & Collect' collections in store increased by 55% against the comparable period last year. Visitor growth to www.homebase.co.uk remains strong driven by continued improvements to the customer journey and a refreshed Help & Advice section that now includes video content. The number of online exclusives grew by 1,400 lines to 12,700 lines during the period and a white label site was launched for made to measure blinds and curtains. Developing the store portfolio One store was opened in the period, taking the portfolio to 342. Homebase will continue to examine the opportunity for new store openings and in addition a small number of closures, relocations or downsizes will continue to be sought as part of the ongoing management of the store portfolio. Homebase successfully delivered its first new home enhancement proposition store. There is a clear sense of transformation within the decorating categories to deliver Homebases aim of being '1st for decorating' while room-set displays and recipe cards offer ideas and inspiration to customers. Amongst other developments this new store also benefits from an improved garden centre layout and a new garden advice centre where colleagues offer practical ideas and advice including plant finder tools. The low-cost midi refit programme continues successfully to address stores in which a mezzanine cannot be installed. Three midi refits were completed during the period with a further seven to be completed in the second half. The refitted Orpington store with an improved proposition on the mezzanine level for kitchens, bathrooms, bedrooms and furniture continues to perform strongly. Developing ranges Homebase continues to offer differentiated ranges and stylish products to customers with more ideas and inspiration through a programme of range reviews. During the period Homebases exclusive brand strategy continued with the expansion of the Jamie Oliver and Qualcast ranges within the seasonal categories. The Home of Style brand was successfully launched as part of the interior range review with over 900 new lines.
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Homebase has introduced significant range changes in home enhancement, premium paint brands and bathroom accessories amongst others. It also continues to develop its ranges in big ticket, with the Odina kitchen trial in seven stores performing ahead of expectations. The trial will be extended to a further 12 stores in the second half. A big ticket upgrade programme covering kitchens, bathrooms and fitted bedrooms continues to remove discontinued display ranges from the showrooms and replace them with more of our best sellers and to date 96 stores have been completed. Expanding installation services Homebases installation services support the big ticket offer and provide the customer with a complete home enhancement solution. Kitchen and bathroom installation is available in all stores and fitted bedroom installation is offered in 200 stores. Homebases market-leading service enjoys a recommendation rate from customers in excess of 90%. Value credentials Homebase has maintained its range of over 500 Value lines, offering essential products at low prices across DIY, decorating and homewares categories. During the period over 500 Best Buy lines were launched store-wide encompassing 'Best Buy - WOWs', and more stylised interior products across textiles, lighting and bedding which offer on-trend items at very competitive prices. Homebase continues to offer competitive pricing on larger purchase quantities within DIY with around 400 bulk buy deals. The Nectar loyalty card and a programme of promotional offers continue to provide value for customers. Financial review Sales in the period declined by 1.8% in total. Net closed space due to the closures in the second half of the previous financial year and only one store opening in the first half of the current financial year reduced sales by 1.2%. Like-for-like sales declined by 0.6%. Big ticket sales were lower overall reflecting a challenging market, although fitted bedroom furniture continued to perform well benefiting from the rollout of the installation service and in-store displays. Bathrooms also performed well. Seasonal sales were in line with last year, with sales for the remaining categories slightly lower overall. The gross margin rate was down by approximately 25 basis points driven principally by the anticipated net impact of adverse currency and shipping rates. Total operating and distribution costs increased by 6m or 2% driven by the impact of underlying cost inflation pressures and the investment in new initiatives partially offset by further cost savings. Benchmark operating profit was 29.9m, a 16.3m or 35% decline on the comparable period last year.

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Financial Services
26 weeks to m Sales Benchmark operating profit before financing costs Financing costs Benchmark operating profit As at Store card gross receivables Provision Store card net receivables Provision % of gross receivables 27 August 2011 501 (74) 427 14.8% 27 August 2011 52.2 4.7 (1.7) 3.0 26 February 2011 530 (74) 456 14.0% 28 August 2010 52.2 4.1 (1.6) 2.5 28 August 2010 476 (69) 407 14.6%

Financial Services works in conjunction with Argos and Homebase to provide their customers with the most appropriate credit offers to drive product sales, and to maximise the total profit from the transaction for Home Retail Group. Operational review In-house store card credit sales reduced by 1% to 275m (2010: 278m) and represented 9.4% (2010: 9.1%) of Group retail sales. The proportion of promotional credit sales continued to represent 76% of all sales placed on the store cards, with the Buy Now Pay Later product offer remaining a key credit enabler of sales in big ticket categories. In addition to credit sales placed on the Groups own store cards, credit offers for purchases at Homebase, typically greater than 3,000, are provided through product loans from a third party provider. Including these product loans, total credit sales penetration increased to 10.5% (2010: 10.0%) of Group retail sales. The stable level of credit sales and increased penetration is a result of additional credit offers in specific product categories such as furniture and white goods. The number of applications, the acceptance rate, and therefore the number of new accounts have all remained broadly flat year-on-year. Customer use of the online account management tools continues to grow with over 300,000 registered customers. Financial review Store card net receivables grew by 20m versus a year ago to 427m, as a result of the mix towards longer-term credit plans. The Group finances these receivables balances internally with no third party debt being required. Delinquency rates improved versus the comparable period last year, resulting in a reduced bad debt charge. Financing costs were broadly flat versus last year, with this internal recharge being based upon UK base rates with a corresponding credit being recognised in Group net interest income. The benchmark operating profit for the period of 3.0m (2010: 2.5m) reflects the financial return on the revolving (i.e. interest-bearing) element of receivables, as promotional credit products are recharged to Argos and Homebase at cost. The cost advantage of this internal arrangement versus a third-party provider is a benefit within both the Argos and Homebase benchmark operating profits.

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GROUP FINANCIAL REVIEW

Sales and benchmark operating profit Group sales were 6% lower at 2,567.5m (2010: 2,720.3m) while Group benchmark operating profit declined 72% to 26.5m (2010: 93.2m). The drivers of the Argos, Homebase and Financial Services performance have been analysed as part of the preceding business reviews. Central Activities represents the cost of central corporate functions and the investment costs of new development opportunities. Costs for the period were 1% lower at 9.8m (2010: 9.9m), with deal-related costs attributable to the Habitat acquisition being offset by the continued control of central corporate costs. Net interest income Net interest income was 1.8m (2010: 1.5m). Within this, third party interest income for the period reduced to 1.0m (2010: 1.3m) as a consequence of the completion of the 150m share buy-back programme during the previous financial year which resulted in a lower average cash balance being held by the Group during the period. Financing costs charged within Financial Services benchmark operating profit saw the corresponding credit within net interest income increase to 1.7m (2010: 1.6m). This noncash internal recharge is based upon UK base rates. The charge within net interest income in relation to the discount unwind on benchmark items was 0.9m (2010: 1.4m). This arises from the accounting treatment whereby provisions for expected future liabilities are required to be discounted back to their current value. As settlement of the liability moves closer to the present day, additional non-cash charges to unwind the discount are incurred; this will result in the absolute level of provision eventually matching the liability in the accounting period that it becomes due. Benchmark PBT Benchmark PBT declined 70% to 28.3m (2010: 94.7m) driven by the factors discussed above. Financing fair value remeasurements Certain foreign exchange movements as well as changes in the fair value of certain financial instruments are recognised in the income statement within net financing income. These amounted to a net gain of 2.3m (2010: 9.2m), which arises principally as a result of translation differences on overseas subsidiary cash balances. The reduction in the gain reflects a lower level of cash balances held overseas and a relative narrowing in the exchange rate range experienced during the period. Equal and opposite adjustments to these translation differences are recognised as part of the movements in reserves. As required by accounting standards, the net nil exchange adjustment is therefore split between the income statement and the statement of comprehensive income. Financing impact on retirement benefit obligations The credit through net financing income in respect of the expected return on retirement benefit assets net of the interest expense on retirement benefit liabilities was 2.2m (2010: 2.3m). The current service cost, which the Group considers a fairer reflection of the cost of providing retirement benefits, is already reflected in benchmark operating profit.

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Discount unwind on non-benchmark items An expense of 3.4m (2010: 3.2m) within net financing income relates to the discount unwind on onerous lease provisions. As these provisions were items previously excluded from benchmark PBT, the discount unwind has also been excluded from benchmark PBT. As set out within the net interest income review above, these non-cash charges arise from the accounting treatment whereby provisions for expected future liabilities are discounted back to their current value. Profit before tax The reported profit before tax for the period was 29.4m (2010: 103.0m). Taxation Taxation attributable to benchmark PBT was 8.4m (2010: 28.9m), representing an estimated effective tax rate for the full financial year of 29.7% (52 weeks to 26 February 2011: 30.5%). The lower effective tax rate reflects two opposing elements: a reduction in the UK corporation tax rate of 2% to 26% partially offset by the impact of a fixed level of disallowable expenditure in comparison to a reduced level of profits. Taxation attributable to non-benchmark items amounted to a debit of 0.6m (2010: credit of 0.6m). The total tax expense for the period was therefore 9.0m (2010: 28.3m). Number of shares and earnings per share The number of shares for the purpose of calculating basic earnings per share (EPS) was 799.0m (2010: 849.3m). The weighted average number of issued ordinary shares reduced by 46.2m to 813.4m (2010: 859.6m), reflecting the weighted impact of the Groups share buy-back programme during the previous financial year. The adjustment for shares held in Group share trusts net of vested but unexercised share awards was 14.4m (2010: 10.3m). The calculation of diluted EPS reflects the potential dilutive effect of employee share incentive schemes. This increases the number of shares for diluted EPS purposes by 3.9m (2010: 4.5m) to 802.9m (2010: 853.8m). Basic benchmark EPS is 2.5p (2010: 7.7p), with diluted benchmark EPS of 2.5p (2010: 7.7p). Reported basic EPS is 2.6p (2010: 8.8p), with reported diluted EPS being 2.5p (2010: 8.7p). Dividends An interim dividend of 4.7p is being announced today. This will be paid on 18 January 2012 to shareholders on the register at the close of business on 11 November 2011 (an exdividend date of 9 November 2011). The final dividend for the financial year ending 3 March 2012 which is payable on 25 July 2012 will be assessed in the light of the full year trading outcome together with the outlook for the following financial year.

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Cash flow and closing net cash position 26 weeks to m Benchmark operating profit Depreciation and amortisation Movement in working capital Financing costs charged to Financial Services Cash flow impact of FY 09 restructuring charge Other operating items Cash flows from operating activities 27 August 2011 26.5 60.6 61.8 1.7 (3.9) (3.7) 143.0 28 August 2010 93.2 64.6 36.0 1.6 (4.2) (7.6) 183.6

Net capital expenditure Acquisition of business Taxation Net interest Net movement of term deposits Loans granted to joint ventures and associates Cash inflow before financing activities Dividends paid Share buy-back programme Purchase of own shares for Employee Share Trust Other financing activities Net increase/(decrease) in cash and cash equivalents Add back: net movement of term deposits Effect of foreign exchange rate changes Decrease in financing net cash Opening financing net cash Closing financing net cash

(60.2) (23.6) (38.5) 1.3 100.0 (1.2) 120.8 (79.9) 40.9 (100.0) 0.3 (58.8) 259.3 200.5

(65.2) (3.8) 1.6 (0.4) 115.8 (85.8) (109.1) (4.5) 0.2 (83.4) (3.7) (87.1) 414.0 326.9

Cash flows from operating activities were 143.0m (2010: 183.6m). This 40.6m reduction was attributable to a reduced level of operating profit partially offset by an increased working capital inflow. Net capital expenditure was 60.2m (2010: 65.2m), reflecting ongoing investment across the Group in the existing store chains and further multi-channel initiatives. The acquisition of the Habitat brand, including the UK website and three of its London stores, for a total consideration of 24.5m was made up of a cash payment in the period of 23.6m and deferred consideration of 0.9m. Tax paid was 38.5m (2010: 3.8m), with the increase principally being attributable to the non repeat of certain tax benefits received in the previous financial year in relation to the successful completion of a number of tax efficiency projects. Dividends paid to shareholders amounted to 79.9m (2010: 85.8m) with the reduction of 5.9m reflecting the impact of the share buy-back programme which was completed in the previous financial year. The Groups financing net cash position at 27 August 2011 was 200.5m, a decrease of 58.8m in the period.

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Balance sheet As at m Goodwill Other intangible assets Property, plant and equipment Inventories Instalment receivables Other assets 27 August 2011 1,543.9 135.8 515.2 1,013.9 427.0 174.8 3,810.6 (1,132.9) (209.4) (1,342.3) 2,468.3 (81.8) 52.9 (14.6) 200.5 2,625.3 26 February 2011 1,541.0 107.8 523.4 1,016.8 456.1 181.7 3,826.8 (1,106.2) (207.8) (1,314.0) 2,512.8 (7.5) 4.6 (28.0) 259.3 2,741.2 28 August 2010 1,541.0 92.0 523.9 1,013.5 407.4 169.1 3,746.9 (1,184.2) (216.3) (1,400.5) 2,346.4 (71.4) 57.4 (3.0) 326.9 2,656.3

Trade and other payables Other liabilities Invested capital Retirement benefit obligations Net tax assets Forward foreign exchange contracts Financing net cash Net assets

Net assets as at 27 August 2011 were 2,625.3m, equivalent to 329p (2010: 325p) per share excluding shares held in Group share trusts. The reduction in invested capital versus the 26 February 2011 year-end balance sheet was 44.5m, driven by a reduction in the Financial Services loan book together with an increase in trade and other payables partly offset by the increase in other intangible assets attributable to the Habitat acquisition. The reduction in net assets of 115.9m versus the balance sheet as at 26 February 2011 was driven by the reduction in invested capital discussed above, together with the 74.3m increase in retirement benefit obligations and the 58.8m reduction in financing net cash, partially offset by the 48.3m increase in net tax assets and the 13.4m movement in forward foreign exchange contracts. Retirement benefit obligations pensioner buy-in On 27 May 2011 the Trustees of the Groups defined benefit pension scheme signed an agreement with Prudential Retirement Income Limited (PRIL), a subsidiary of Prudential plc, for a bulk annuity policy covering existing pensioners in payment. The agreement entered into is generally referred to as a pensioner buy-in. Buy-ins of this nature are a common de-risking practice for defined benefit pension schemes. They eliminate the existing financial risks related to pensioners covered by the annuity policy, including exposure to investment, inflation and mortality risk. These risks are replaced with a continuing obligation from the insurer to meet the cash flows associated with all future payments to pensioners covered by the buy-in agreement. To assume these risks PRIL has been paid cash and assets equivalent to 278m from the assets of the pension scheme. This amount was equal to the schemes actuarially assessed value of the pensioner obligations and therefore the buy-in was financially neutral for both the pension scheme and the Group.

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Retirement benefit obligations IAS 19 The Groups pension arrangements are operated principally through the Home Retail Group Pension Scheme, a defined benefit scheme, together with the Home Retail Group Stakeholder Pension Scheme, a defined contribution scheme. The IAS 19 valuation as at 27 August 2011 for the defined benefit pension schemes was a net deficit of 81.8m (26 February 2011: 7.5m). Scheme assets decreased to 703.0m (26 February 2011: 748.8m). The present value of scheme liabilities increased to 784.8m (26 February 2011: 756.3m), driven principally by a reduction in the assumed discount rate to 5.5% (26 February 2011: 5.7%). The IAS 19 asset value has been reduced by approximately 45m as a result of the pensioner buy-in. This contrasts with the financially neutral impact assessed under the actuarial method, as described above, because of the different methods of valuing the annuity contract required by accounting standards. There will be no impact on the Groups benchmark profitability or cash flow arising from the pensioner buy-in. Liquidity and funding The Group maintains liquidity by arranging funding ahead of requirements and through access to committed bank facilities. At 27 August 2011, the Group had 700m of undrawn, committed borrowing facilities, 685m of which does not expire until 2013. These facilities are in place to enable the Group to finance its working capital requirements and for general corporate purposes. The Groups net cash position is however expected to continue to be sufficient to meet its financing needs for the foreseeable future. Group financing arrangements The Group finances its operations through a combination of retained profits, property leases and borrowing facilities where necessary. The Groups net cash balances averaged approximately 300m over the period; the Group did not draw upon its committed borrowing facilities at any point during the period. The Group has significant liabilities through its obligations to pay rents under operating leases; the operating lease charge for the last 12 months amounted to 366.0m (2010: 376.6m). Based upon an eight times multiple of the operating lease charge the capitalised value of these liabilities is 2,928m (2010: 3,013m). Alternatively based upon the discounted cash flows of the expected future operating lease charges the capitalised value of these liabilities is 2,954m (2010: 3,130m) utilising a discount rate of 2.9% (2010: 3.2%). In common with credit rating agencies and lenders, the Group treats its lease liabilities as debt when evaluating financial risk. Accounting standards and use of non-GAAP measures The Group has prepared its consolidated financial statements based on International Financial Reporting Standards for the 26 weeks ended 27 August 2011. The basis of preparation is outlined in Note 1 to the Financial Information on page 23. The Group has identified certain measures that it believes provide additional useful information on the underlying performance of the Group. These measures are applied consistently but as they are not defined under GAAP they may not be directly comparable with other companies adjusted measures. The non-GAAP measures are outlined in Note 2 to the Financial Information on page 24. Principal risks and uncertainties The Group set out in its 2011 Annual Report and Financial Statements the principal risks and uncertainties which could impact its performance; these remain unchanged since its
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publication. The Group operates a structured risk management process which identifies and evaluates risks and uncertainties and reviews mitigation activity. On a short-term forward-looking basis over the remainder of the financial year, the main area of potential risk and uncertainty centres on the impact on sales volumes and thereby profitability in relation to economic conditions and overall consumer demand. Other potential risks and uncertainties around sales and/or profit growth include the cost of goods and services to the Group, competitor activity, seasonal weather patterns, failure to execute the strategy, currency exposures, the regulatory environment, product supply and other operational processes, infrastructure development, product safety, reliance on key personnel and business interruption. These risks, together with examples of mitigating activity, are set out in more detail in the 2011 Annual Report and Financial Statements on pages 32 and 33.

Page 15

Appendix 1. Trading statement information as reported

Financial year 2010/11 Q1 13 weeks to 29 May 2010 Argos Sales Like-for-like change in sales Net new space contribution Total sales change Gross margin movement Homebase Sales Like-for-like change in sales Net new space contribution Total sales change Gross margin movement 889m (8.1%) 2.9% (5.2%) Down c.150bps 459m (1.4%) 0.0% (1.4%) Down c.150bps Q2 13 weeks to 28 Aug 2010 Argos Sales Like-for-like change in sales Net new space contribution Total sales change Gross margin movement Homebase Sales Like-for-like change in sales Net new space contribution Total sales change Gross margin movement 924m (5.0%) 2.2% (2.8%) Down c.125bps 396m 0.0% (1.1%) (1.1%) Down c.75bps Q3 18 weeks to 1 Jan 2011 Argos Sales Like-for-like change in sales Net new space contribution Total sales change Gross margin movement Homebase Sales Like-for-like change in sales Net new space contribution Total sales change Gross margin movement 1,861m (4.9%) 1.7% (3.2%) Down c.25bps 487m (1.2%) (1.6%) (2.8%) Up c.75bps Q4 8 weeks to 26 Feb 2011 Argos Sales Like-for-like change in sales Net new space contribution Total sales change Gross margin movement Homebase Sales Like-for-like change in sales Net new space contribution Total sales change Gross margin movement 520m (4.6%) 1.5% (3.1%) Down c.150bps 208m 3.8% (2.0%) 1.8% Up c.300bps H1 26 weeks to 29 Aug 2009 1,813m (6.5%) 2.5% (4.0%) Down c.150bps 855m (0.8%) (0.4%) (1.2%) Down c.100bps YTD 44 weeks to 2 Jan 2010 3,674m (5.7%) 2.1% (3.6%) Down c.75bps 1,342m (1.0%) (0.8%) (1.8%) Down c.25bps H2 26 weeks to 26 Feb 2011 2,381m (4.8%) 1.7% (3.1%) Down c.50bps 695m 0.2% (1.7%) (1.5%) Up c.150bps FY 52 weeks to 26 Feb 2011 4,194m (5.6%) 2.1% (3.5%) Down c.100bps 1,551m (0.3%) (1.1%) (1.4%) c.0bps Financial year 2011/12 Q1 13 weeks to 28 May 2011 817m (9.6%) 1.5% (8.1%) Down c.75bps 458m 1.6% (1.7%) (0.1%) Down c.50bps Q2 13 weeks to 27 Aug 2011 859m (8.6)% 1.5% (7.1)% Down c.100bps 382m (3.1)% (0.7)% (3.8)% c.0bps H1 26 weeks to 27 Aug 2011 1,676m (9.1)% 1.5% (7.6)% Down c.75bps 840m (0.6)% (1.2)% (1.8)% Down c.25bps

Page 16

HOME RETAIL GROUP PLC UNAUDITED CONDENSED HALF-YEARLY FINANCIAL INFORMATION CONSOLIDATED INCOME STATEMENT
For the 26 weeks ended 27 August 2011
52 weeks to 26.2.11 m 5,851.9 (3,970.7) 1,881.2 (1,623.2) 258.0 57.3 (50.2) 7.1 0.1 265.2 (74.3) Revenue Cost of sales Gross profit Net operating expenses Operating profit - Finance income - Finance expense Net financing income Share of post-tax profits of joint ventures and associates Profit before tax Taxation Profit for the period attributable to equity holders of the Company Earnings per share - Basic - Diluted Dividend per share 9 8 7 6 Notes 4 5 26 weeks to 27.8.11 m 2,567.5 (1,731.4) 836.1 (809.6) 26.5 27.3 (24.4) 2.9 29.4 (9.0) 26 weeks to 28.8.10 m 2,720.3 (1,827.2) 893.1 (799.9) 93.2 33.6 (23.8) 9.8 103.0 (28.3)

190.9 pence 23.1 23.0 14.7

20.4 pence 2.6 2.5 4.7

74.7 pence 8.8 8.7 4.7

52 weeks to 26.2.11 m 265.2

Non-GAAP measures Reconciliation of profit before tax (PBT) to benchmark PBT Profit before tax Adjusted for: Notes

26 weeks to 27.8.11 m 29.4

26 weeks to 28.8.10 m 103.0

(5.4) (4.6) 6.1 (7.2) 254.1

Financing fair value remeasurements Financing impact on retirement benefit obligations Discount unwind on non-benchmark items Onerous lease provision releases Benchmark PBT

6 6 6

(2.3) (2.2) 3.4 28.3

(9.2) (2.3) 3.2 94.7

pence 21.3 21.2

Benchmark earnings per share - Basic - Diluted

pence 2.5 2.5

pence 7.7 7.7

Page 17

HOME RETAIL GROUP PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 27 August 2011
52 weeks to 26.2.11 m Profit for the period attributable to equity holders of the Company Notes 26 weeks to 27.8.11 m 26 weeks to 28.8.10 m

190.9

20.4

74.7

Other comprehensive income: Net change in fair value of cash flow hedges (43.3) - Foreign currency forward exchange contracts Net change in fair value of cash flow hedges transferred to inventory (15.9) 1.9 1.3 (6.1) 15.7 (46.4) - Foreign currency forward exchange contracts Actuarial (losses)/gains in respect of defined benefit pension schemes Fair value movements on available-for-sale financial assets Currency translation differences Tax credit in respect of items taken directly to equity Other comprehensive income for the period, net of tax Total comprehensive income for the period attributable to equity holders of the Company 13 22.2 (85.4) (0.9) (1.4) 18.8 (60.7) (30.2) (58.7) (0.1) (14.1) 29.8 (90.7) (14.0) (17.4)

144.5

(40.3)

(16.0)

Page 18

HOME RETAIL GROUP PLC CONSOLIDATED BALANCE SHEET

At 27 August 2011
26.2.11 m ASSETS Non-current assets 1,541.0 107.8 523.4 8.0 39.4 4.3 15.2 2,239.1 Goodwill Other intangible assets Property, plant and equipment Investments in joint ventures and associates Deferred tax assets Trade and other receivables Other financial assets Total non-current assets Current assets 1,016.8 610.3 10.9 1.4 100.0 159.3 1,898.7 4,137.8 Inventories Trade and other receivables Current tax assets Other financial assets Current asset investments Cash and cash equivalents Total current assets Total assets LIABILITIES Non-current liabilities (58.7) (187.4) (24.5) (7.5) (278.1) Trade and other payables Provisions Deferred tax liabilities Retirement benefit obligations Total non-current liabilities Current liabilities (1,047.5) (20.4) (29.4) (21.2) (1,118.5) (1,396.6) 2,741.2 Trade and other payables Provisions Other financial liabilities Current tax liabilities Total current liabilities Total liabilities Net assets EQUITY 81.3 6.4 (348.4) (5.6) 3,007.5 2,741.2 Share capital Capital redemption reserve Merger reserve Other reserves Retained earnings Total equity 81.3 6.4 (348.4) (0.5) 2,886.5 2,625.3 83.3 4.4 (348.4) (4.4) 2,921.4 2,656.3 12 (1,075.8) (18.0) (15.8) (3.5) (1,113.1) (1,464.1) 2,625.3 (1,123.7) (18.3) (14.6) (14.2) (1,170.8) (1,522.7) 2,656.3 13 12 (57.1) (191.4) (20.7) (81.8) (351.0) (60.5) (198.0) (22.0) (71.4) (351.9) 1,013.9 573.8 24.9 1.2 200.5 1,814.3 4,089.4 1,013.5 552.0 34.5 11.6 50.0 276.9 1,938.5 4,179.0 1,543.9 135.8 515.2 8.3 52.2 4.3 15.4 2,275.1 1,541.0 92.0 523.9 7.5 59.1 4.0 13.0 2,240.5 Notes 27.8.11 m 28.8.10 m

Page 19

HOME RETAIL GROUP PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 27 August 2011
Attributable to equity holders of the Company Capital redemption Merger Other Retained reserve reserve reserves earnings m 6.4 m (348.4) m (5.6) 4.3 4.3 m 3,007.5 20.4 (65.0) (44.6)

Share capital m Balance at 27 February 2011 Profit for the period Other comprehensive income Total comprehensive income for the period ended 27 August 2011 Transactions with owners: Movement in share-based compensation reserve Net movement in own shares Equity dividends paid during the period Other distributions Total transactions with owners Balance at 27 August 2011 81.3 -

Total m 2,741.2 20.4 (60.7) (40.3)

81.3

6.4

(348.4)

0.8 0.8 (0.5)

4.4 (0.8) (79.9) (0.1) (76.4) 2,886.5

4.4 (79.9) (0.1) (75.6) 2,625.3

Share capital m Balance at 28 February 2010 Profit for the period Other comprehensive income Total comprehensive income for the period ended 28 August 2010 Transactions with owners: Movement in share-based compensation reserve Net movement in own shares Shares purchased for cancellation Equity dividends paid during the period Other distributions Total transactions with owners Balance at 28 August 2010 87.7 -

Attributable to equity holders of the Company Capital redemption Merger Other Retained reserve reserve reserves earnings m m m m (348.4) 46.6 (48.5) (48.5) 3,080.7 74.7 (42.2) 32.5

Total m 2,866.6 74.7 (90.7) (16.0)

(4.4) (4.4) 83.3

4.4 4.4 4.4

(348.4)

(2.5) (2.5) (4.4)

5.9 (1.8) (109.1) (85.8) (1.0) (191.8) 2,921.4

5.9 (4.3) (109.1) (85.8) (1.0) (194.3) 2,656.3

Page 20

HOME RETAIL GROUP PLC CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 27 August 2011
52 weeks to 26.2.11 m Cash flows from operating activities 278.8 (11.3) 267.5 Cash generated from operations Tax paid Net cash inflow from operating activities Cash flows from investing activities (102.2) 3.4 (43.9) (0.4) (151.4) 100.0 2.6 (191.9) Acquisition of business Purchase of property, plant and equipment Proceeds from the disposal of property, plant and equipment Purchase of other intangible assets Loans granted to joint ventures and associates Purchase of investments Disposal of investments Interest received Net cash flows from investing activities Cash flows from financing activities (150.2) (6.7) 0.4 (123.9) (280.4) (204.8) Repurchase of own shares Purchase of shares for Employee Share Trust Proceeds from disposal of shares held by Employee Share Trust Dividends paid Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Movement in cash and cash equivalents 364.0 0.1 (204.8) 159.3 Cash and cash equivalents at the beginning of the period Effect of foreign exchange rate changes Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the end of the period 159.3 0.3 40.9 200.5 364.0 (3.7) (83.4) 276.9 9 (79.9) (79.9) 40.9 (109.1) (4.5) 0.2 (85.8) (199.2) (83.4) 10 11 11 11 16 (23.6) (41.5) 2.7 (21.4) (1.2) 100.0 1.3 16.3 (52.3) 1.6 (14.5) (0.4) (50.0) 50.0 1.6 (64.0) 14 143.0 (38.5) 104.5 183.6 (3.8) 179.8 Notes 26 weeks to 27.8.11 m 26 weeks to 28.8.10 m

Page 21

HOME RETAIL GROUP PLC ANALYSIS OF NET CASH/(DEBT)

At 27 August 2011
26.2.11 m Non-GAAP measures Financing net cash: 159.3 100.0 259.3 Cash and cash equivalents Current asset investments Total financing net cash 200.5 200.5 276.9 50.0 326.9 27.8.11 m 28.8.10 m

Operating net debt: (2,874.1) (2,874.1) (2,614.8) Off balance sheet operating leases Total operating net debt Total net debt (2,954.1) (2,954.1) (2,753.6) (3,129.6) (3,129.6) (2,802.7)

Adjusted for: 2,874.1 (100.0) 159.3 Off balance sheet operating leases Current asset investments Total cash and cash equivalents reflected in balance sheet 2,954.1 200.5 3,129.6 (50.0) 276.9

The Group uses the term total net debt to highlight the Groups aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably operating leases. The capitalised value of these leases is 2,954.1m (26 February 2011: 2,874.1m), based upon discounting the current rentals at the estimated current long-term cost of borrowing of 2.9% (26 February 2011: 4.1%). Current asset investments in the comparative periods comprised term cash deposits invested for initial terms of between six and nine months and which matured after the comparative balance sheet dates. There are no such investments at 27 August 2011.

Page 22

HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
1. Basis of preparation The unaudited condensed half-yearly financial information comprises the results for the 26 weeks ended 27 August 2011, the 26 weeks ended 28 August 2010, and the audited consolidated results for the 52 weeks ended 26 February 2011. The audited consolidated financial information for the 52 weeks to 26 February 2011 has been extracted from Home Retail Group plcs Annual Report and Financial Statements, which was approved by the Board of Directors on 20 April 2011 and delivered to the Registrar of Companies. The report of the Groups auditors, PricewaterhouseCoopers LLP, on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006. The condensed half-yearly financial information is not audited or reviewed and does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006. After making enquiries, the directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed half-yearly financial information. IFRS and accounting policies This condensed half-yearly financial information for the 26 weeks ended 27 August 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting as adopted by the European Union. The condensed half-yearly financial information should be read in conjunction with Home Retail Group plcs Annual Report and Financial Statements for the 52 weeks to 26 February 2011, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union. The accounting policies adopted by Home Retail Group are set out in Home Retail Group plcs Annual Report and Financial Statements, dated 20 April 2011, which is available on Home Retail Group's website www.homeretailgroup.com. With the exception of those changes in accounting standards which are effective for the first time for the current period, as detailed below, these policies have been consistently applied for all periods presented. Changes in accounting standards A number of new standards, amendments and interpretations are effective for the first time for the current period, but have had no material impact on the results or financial position of the Group, as disclosed within this report: Amendment to IAS 24 (revised) Related Party Disclosures: relating to disclosure of transactions between government related parties and clarification of the definition of related parties; Amendment to IFRS 1 First-time Adoption: relating to exemptions from comparative IFRS 7 disclosures; Improvements to IFRSs (May 2010); Amendment to IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction: relating to prepayments of a minimum funding requirement; IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.

At the balance sheet date a number of new standards and amendments were in issue but not yet effective: Amendment to IAS 1 Financial Statement Presentation: relating to presentation of items in other comprehensive income; Amendment to IAS 12 Income Taxes: relating to deferred tax arising on investment property measured at fair value; Amendment to IAS 19 (revised) Employee Benefits: relating to recognition and measurement of defined benefit pension expense and termination benefits and disclosures for all employee benefits; IAS 27 (revised) Separate Financial Statements; IAS 28 (revised) Investments in Associates and Joint Ventures; Amendments to IFRS 1 First-time Adoption: relating to exemptions for severe hyperinflation and removal of fixed dates; Amendment to IFRS 7 Financial Instruments: Disclosures: disclosures relating to transferred financial assets; IFRS 9 Financial Instruments; IFRS 10 Consolidated Financial Statements; IFRS 11 Joint Arrangements; IFRS 12 Disclosure of Interests in Other Entities; IFRS 13 Fair Value Measurement.

The Group has not early-adopted any of these above new standards or amendments. Their impact will be fully considered in due course.

Page 23

HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
2. Non-GAAP financial information Home Retail Group has identified certain measures that it believes will assist the understanding of the performance of the business. The measures are not defined under IFRS and they may not be directly comparable with other companies adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but Home Retail Group has included them as it considers them to be important comparables and key measures used within the business for assessing performance. The following are the key non-GAAP measures identified by Home Retail Group: Exceptional items Items which are both material and non-recurring are presented as exceptional items within their relevant income statement line. The separate reporting of exceptional items helps provide a better indication of underlying performance of the Group. Examples of items which may be recorded as exceptional items are impairment charges, restructuring costs and the profits/losses on the disposal of businesses. There have not, however, been any reported exceptional items in any of the reported periods. Benchmark operating profit and benchmark profit before tax (benchmark PBT) The Group uses the terms benchmark operating profit and benchmark PBT as measures which are not formally recognised under IFRS. Benchmark operating profit is defined as operating profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases and exceptional items. Benchmark PBT is defined as profit before amortisation of acquisition intangibles, store impairment and onerous lease charges or releases, exceptional items, financing fair value remeasurements, financing impact on retirement benefit obligations, the discount unwind on non-benchmark items and taxation. Basic benchmark earnings per share (benchmark EPS) is defined as benchmark PBT less taxation attributable to benchmark PBT, divided by the weighted average number of shares in issue (excluding shares held in Home Retail Groups share trusts net of vested but unexercised share awards). These measures are considered useful in that they provide investors with an alternative means to evaluate the underlying performance of the Groups operations. Total net debt The Group uses the term total net debt which is considered useful in that it provides the Groups aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably operating leases. 3. Foreign currency Average 26 weeks to 27.8.11 The principal exchange rates used were as follows: Sterling to US dollar Sterling to euro 1.63 1.14 1.51 1.17 1.55 1.17 1.64 1.13 1.55 1.22 1.61 1.17 26 weeks to 28.8.10 52 weeks to 26.2.11 27.8.11 28.8.10 26.2.11 Closing

Assets and liabilities of overseas undertakings are translated into sterling at the rates of exchange ruling at the balance sheet date and the income statement is translated into sterling at average rates of exchange.

Page 24

HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
4. Segmental information The Board of Directors and Operating Board review the Groups internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports, which reflect the distinct retail brands and different risks associated with the different businesses. The Group is organised into three main business segments: Argos, Homebase and Financial Services together with Central Activities. The Board of Directors and Operating Board assess the performance of the operating segments based on a combination of revenue and benchmark operating profit. Benchmark operating profit is defined within note 2.

52 weeks to 26.2.11 m Revenue 4,194.3 1,550.7 106.9 5,851.9 Argos Homebase Financial Services Central Activities Total segment revenue

26 weeks to 27.8.11 m

26 weeks to 28.8.10 m

1,675.7 839.6 52.2 2,567.5

1,812.8 855.3 52.2 2,720.3

Benchmark operating profit/(loss) 219.0 47.6 6.0 (21.8) Argos Homebase Financial Services Central Activities 3.4 29.9 3.0 (9.8) 54.4 46.2 2.5 (9.9)

250.8 3.2 0.1

Total segment benchmark operating profit Benchmark interest Share of post-tax profits of joint ventures and associates

26.5 1.8 -

93.2 1.5 -

254.1 5.4 4.6 (6.1) 7.2

Benchmark profit before tax Financing fair value remeasurements Financing impact on retirement benefit balances Discount unwind on non-benchmark items Onerous lease provision releases

28.3 2.3 2.2 (3.4) -

94.7 9.2 2.3 (3.2) -

265.2 (74.3)

Profit before tax Taxation

29.4 (9.0)

103.0 (28.3)

190.9

Profit for the period attributable to equity holders of the Company

20.4

74.7

The results for Financial Services are after deducting funding costs of 1.7m (2010: 1.6m) (note 6).

Page 25

HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
4. Segmental information (continued)

52 weeks to 26.2.11 m Segment assets 2,393.0 891.9 480.4 62.9 Argos Homebase Financial Services Central Activities

26 weeks to 27.8.11 m

26 weeks to 28.8.10 m

2,390.1 885.8 443.6 92.3

2,384.4 883.6 429.7 60.8

3,828.2 50.3 100.0 159.3

Total segment assets Tax assets Current asset investments Cash and cash equivalents

3,811.8 77.1 200.5

3,758.5 93.6 50.0 276.9

4,137.8

Total assets per balance sheet

4,089.4

4,179.0

Segment assets include goodwill and other intangible assets, property, plant and equipment, investment in joint ventures and associates, inventories, trade and other receivables and other financial assets. Tax assets, current asset investments and cash and cash equivalents are not allocated to segments. 5. Cost of sales 52 weeks to 26.2.11 m (3,674.9) (295.8) (3,970.7) Cost of sales comprises: Cost of goods Distribution costs Total cost of sales 26 weeks to 27.8.11 m (1,597.2) (134.2) (1,731.4) 26 weeks to 28.8.10 m (1,680.1) (147.1) (1,827.2)

Page 26

HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
6. Net financing income/(expense) 52 weeks to 26.2.11 m Finance income: 2.6 46.9 7.8 57.3 Bank deposits and other interest Expected return on retirement benefit assets Financing fair value remeasurements - net exchange gains Total finance income Finance expense: (8.7) (2.4) (42.3) (53.4) 3.2 (50.2) 7.1 Unwinding of discounts (a) Financing fair value remeasurements net exchange losses Interest expense on retirement benefit liabilities Total finance expense Less: finance expense charged to Financial Services cost of sales Total net finance expense Net financing income (4.3) (0.5) (21.3) (26.1) 1.7 (24.4) 2.9 (4.6) (20.8) (25.4) 1.6 (23.8) 9.8 1.0 23.5 2.8 27.3 1.3 23.1 9.2 33.6 26 weeks to 27.8.11 m 26 weeks to 28.8.10 m

(a) Included within unwinding of discounts is a 3.4m charge (2010: 3.2m) relating to the discount unwind on exceptional onerous lease provisions. 7. Taxation 52 weeks to 26.2.11 m (70.4) (3.9) (74.3) UK tax Overseas tax Total tax expense 26 weeks to 27.8.11 m (8.4) (0.6) (9.0) 26 weeks to 28.8.10 m (27.3) (1.0) (28.3)

The tax charge for the period of 9.0m (2010: 28.3m) is based on an estimated annual effective rate of tax of 30.6% (2010: 27.5%). Closing deferred tax has been calculated at the substantively enacted UK corporation tax rate of 25% (2010: 27%). The effect of the reduction in the UK corporation tax rate from 27% to 25% is a deferred tax charge of 1.7m. Of this charge, 0.6m has been charged to the income statement and 1.1m has been charged directly to the consolidated statement of comprehensive income. The proposed reduction in the main rate of UK corporation tax by 1% per year to 23% is expected to be enacted separately each year. The impact of the future rate reductions on the net deferred tax asset are not material for each future year at the balance sheet date. The Group will assess the impact of the reduction in the rate in line with its accounting policy in respect of deferred tax at each balance sheet date. The estimated annual effective rate of tax based on benchmark PBT, defined as the total tax expense, adjusted for the tax impact of non-benchmark items, divided by benchmark PBT (excluding joint ventures and associates), is 29.7% (2010: 30.5%).

Page 27

HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
8. Basic and diluted earnings per share (EPS) The calculation of basic and diluted EPS is based on the following data: 52 weeks to 26.2.11 m 190.9 (5.4) (4.6) 6.1 (7.2) 1.8 (5.0) 176.6 millions 827.4 3.9 831.3 pence 23.1 23.0 21.3 21.2 Earnings Profit after tax for the financial period Adjusted for: Financing fair value remeasurements Financing impact on retirement benefit obligations Discount unwind on non-benchmark items Onerous lease provision releases Attributable taxation charge/(credit) Non-benchmark tax charge/(credit) in respect of prior years Benchmark profit after tax for the financial period Weighted average number of shares Number of ordinary shares for the purpose of basic EPS Dilutive effect of share incentive awards Number of ordinary shares for the purpose of diluted EPS EPS Basic EPS Diluted EPS Basic benchmark EPS Diluted benchmark EPS (2.3) (2.2) 3.4 0.3 0.3 19.9 millions 799.0 3.9 802.9 pence 2.6 2.5 2.5 2.5 (9.2) (2.3) 3.2 (0.6) 65.8 millions 849.3 4.5 853.8 pence 8.8 8.7 7.7 7.7 26 weeks to 27.8.11 m 20.4 26 weeks to 28.8.10 m 74.7

Basic earnings per share is calculated by dividing the profit attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares held in Home Retail Groups share trusts net of vested but unexercised share awards. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. 9. Dividend An interim dividend of 4.7 pence (2010: 4.7 pence) per Home Retail Group plc ordinary share, amounting to a total interim dividend of 37.6m (2010: 38.1m), has been announced (but not provided) and will be paid on 18 January 2012 to shareholders on the register at the close of business on 11 November 2011. In July 2011, a final dividend of 10.0 pence (2010: 10.0 pence) per Home Retail Group plc ordinary share, amounting to a total final dividend of 79.9m (2010: 85.8m), was paid to shareholders.

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HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
10. Business combination On 24 June 2011, the Group announced it had agreed to purchase the exclusive rights to the Habitat brand, its brand designs and intellectual property in the UK and the Republic of Ireland, along with the Habitat UK website, three of its London stores and a share of trading stock, for a total purchase price of 24.5m. The Group considers the acquisition to be a significant addition to the existing portfolio of own brands and expects to leverage the Groups multi-channel strength to develop the online proposition. Goodwill of 2.9m has been recognised on this transaction, which represents the synergies, assembled workforce and future growth potential of the business acquired. 26 weeks to 27.8.11 m Consideration Cash Deferred consideration Total consideration Recognised amounts of identifiable assets acquired and liabilities assumed (at provisional fair values) Other intangible assets brands Other identifiable net assets Total identifiable net assets Goodwill 18.0 3.6 21.6 2.9 24.5 As at 27 August 2011, cash consideration totalling 23.6m has been paid, however 4.2m of this amount is held in escrow, pending the assignment of the leases of the three acquired London stores to the Group. In the event that it is not possible to assign all three leases to the Group, some or all of the amount held in escrow will be returned to the Group. The fair value of the acquired assets and liabilities is provisional pending the assignment of these leases. In addition, an amount of 0.9m is still due to the vendor at 27 August 2011. This relates to amounts withheld in accordance with the agreement, 0.8m of which has been settled since the period end, with the balance due to be paid during the second half of the year. The revenue and profit included in the consolidated income statement from the date of acquisition to 27 August 2011 are immaterial in the context of this financial information, so have not been disclosed. 11. Capital expenditure In the period, there were additions to property, plant and equipment of 41.5m (2010: 52.3m) and disposals of property, plant and equipment generated proceeds of 2.7m (2010: 1.6m). In the period, there were additions to intangible assets of 21.4m (2010: 14.5m). Capital commitments contracted but not provided for by the Group amounted to 11.0m (2010: 10.1m). 23.6 0.9 24.5

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HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
12. Provisions Onerous leases m At 26 February 2011 Exchange differences Charged to the income statement Released to the income statement Acquired through business combination Utilised during the period Discount unwind At 27 August 2011 (157.9) (0.2) 1.4 (4.3) (161.0) Insurance m (31.9) (1.8) 1.0 (32.7) Restructuring m (7.8) 3.9 (3.9) Other m (10.2) (5.0) 0.7 (0.5) 3.3 (0.1) (11.8) Total m (207.8) (0.2) (6.8) 0.7 (0.5) 9.6 (4.4) (209.4)

26.2.11 m (20.4) (187.4) (207.8) Analysed as: Current Non-current

27.8.11 m (18.0) (191.4) (209.4)

28.8.10 m (18.3) (198.0) (216.3)

The onerous lease provision covers potential liabilities for onerous lease contracts for stores that have either closed, or where projected future trading income is insufficient to cover the lower of exit cost or value-in-use. Where the value-in-use calculation is lower, the provision is based on the present value of expected future cash flows relating to rents, rates and other property costs to the end of the lease terms net of expected trading or sublet income. An insurance provision is made at the period-end for the estimated costs of claims incurred by the Groups captive insurance company but not settled at the balance sheet date, including the costs of claims that have arisen but have not yet been reported to the Group. The estimated cost of claims includes expenses to be incurred in settling claims. A number of organisational changes have been undertaken in prior years to improve the operational efficiency of the Group and drive further cost productivity. Actions taken included the streamlining of head office functions across all parts of the Group, restructuring of store-based staff and a consolidation of home delivery warehouses. Other provisions include legal claims and other sundry provisions. 13. Post-employment benefits As at the balance sheet date, the obligation in respect of the Home Retail Group defined benefit pension scheme was 784.8m (26 February 2011: 756.3m) and the market value of the scheme assets was 703.0m (26 February 2011: 748.8m), resulting in a net deficit on the scheme of 81.8m (26 February 2011: 7.5m). The increase in the defined benefit obligation arises due to a 28.5m increase to scheme liabilities and a decrease of 45.8m to scheme assets. The decrease in scheme assets primarily results from the buy-in arrangement described below. As a result, a net 85.4m actuarial loss (26 February 2011: 1.9m net gain) has been taken to equity and is reported in the consolidated statement of comprehensive income. As part of the Groups risk management strategy for liabilities arising under the scheme, certain pensioner liabilities were subject to a buy-in arrangement on 27 May 2011. Under the terms of this arrangement, the scheme paid 278m to an insurance company and will in return receive annuity payments equal to the monthly pensions then in payment. This eliminates the schemes exposure to the investment, inflation and mortality risks associated with these pensioner members. The buy-in had no impact on the reported profits of the Group for the half year to 27 August 2011, or the liabilities of the scheme as calculated in accordance with IAS 19. The income stream receivable under the insurance contract is an asset of the scheme with a value equal to the related liabilities as measured in accordance with IAS 19. As this asset was less than the cash cost of the buy-in, the transaction reduced the reported assets of the scheme by approximately 45m. During the period, the Group has paid contributions totalling 17.9m (2010: 19.8m) to the Home Retail Group defined benefit pension scheme, including 10m (2010: 12m) as part of the deficit recovery plan agreed with the scheme trustees following the completion of the 31 March 2009 actuarial valuation.

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HOME RETAIL GROUP PLC NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL INFORMATION
For the 26 weeks ended 27 August 2011
14. Notes to the consolidated statement of cash flows 52 weeks to 26.2.11 m Cash generated from operations: 265.2 (0.1) (7.1) 258.0 0.7 127.5 3.2 (81.4) (27.5) 19.0 (89.9) (20.3) (10.9) 10.5 278.8 15. Seasonality The retail sales for Argos and Homebase are subject to seasonal fluctuations. Demand for Argos products is highest during the months of November and December, whilst demand for Homebase products is highest through the spring, at Easter and during the summer months and, for big ticket items, during the January sales. 16. Related parties The Groups related parties are its associate, key management personnel and the Home Retail Group Pension Scheme. On 16 May 2011, the Group provided an amount of 1.2m by way of loan to its associate, Ogalas Limited, under the terms of a facility agreement dated 20 May 2010. At 27 August 2011, the amount owed by Ogalas Limited to the Group was 1.2m. The only other material transactions between the Group and any of these parties were in relation to the Home Retail Group Pension Scheme, and are set out in note 13. 17. Post balance sheet events On 19 October 2011, the Group announced that it had agreed to launch a joint venture company to develop a multi-channel, general merchandise retail business in China with Haier Group, one of the worlds leading home appliance manufacturers. The Group will have a 49% holding in the joint venture company and the remaining 51% will be held by Haier Electronics Group Co., Ltd. It is anticipated that the joint venture will require a total investment of 45m, of which the Group will provide 22m, payable in three tranches over a two-year period, subject to the satisfaction of agreed performance conditions. The first tranche, payable by the Group in 2012, will amount to 10m. Profit before tax Adjustments for: Share of post-tax profits of joint ventures and associates Net financing income Operating profit Loss on sale of property, plant and equipment Depreciation and amortisation Finance expense charged to Financial Services cost of sales Decrease/(increase) in inventories Decrease/(increase) in receivables Increase in payables Movement in working capital Decrease in provisions Movement in retirement benefit obligations Share-based payment expense (net of dividend equivalent payments) Cash generated from operations (2.9) 26.5 0.5 60.6 1.7 5.1 36.3 20.4 61.8 (3.5) (8.9) 4.3 143.0 (9.8) 93.2 0.5 64.6 1.6 (78.1) 30.4 83.7 36.0 (7.4) (9.8) 4.9 183.6 29.4 103.0 26 weeks to 27.8.11 m 26 weeks to 28.8.10 m

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HOME RETAIL GROUP PLC STATEMENT OF DIRECTORS RESPONSIBILITIES

The directors confirm that this condensed half-yearly financial information has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely: an indication of important events that have occurred during the first six months and their impact on the condensed halfyearly financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The directors of Home Retail Group plc are listed in the Home Retail Group plc Annual Report and Financial Statements 2011. During the period since the Annual Report, the following director changes have occurred: Penny Hughes resigned as non-executive director on 30 June 2011; Ian Durant was appointed as non-executive director on 6 July 2011; Cath Keers was appointed as nonexecutive director on 1 September 2011. A list of current directors is maintained on the Home Retail Group website, www.homeretailgroup.com. By order of the Board

Terry Duddy Chief Executive 19 October 2011

Richard Ashton Finance Director 19 October 2011

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HOME RETAIL GROUP PLC SHAREHOLDER INFORMATION

Registrar For all enquiries and shareholder administration (other than for American Depositary Receipts), please contact Capita Registrars: Postal address: Capita Registrars, Northern House, Woodsome Park, Huddersfield HD8 0GA. email: homeretailgroup@capitaregistrars.com Telephone: 0871 664 0437* (from abroad +44 20 8639 3377). Text phone: 0871 664 0532* (from abroad +44 20 8639 2062). Fax number: 0871 664 0438 (from abroad +44 1484 600 914). *Calls cost 10p per minute plus network extras

American Depositary Receipt (ADR) Home Retail Group's ADR programme is administered by Citibank and ADR enquiries may be directed to: Postal address: Citibank Shareholder Services, P.O. Box 43077, Providence, Rhode Island 02940-3077, USA. email: Citibank@shareholders-online.com Telephone (toll free): 1-877-Citi-ADR (248-4237) Telephone (international): 1-781-575-4555 Website: www.citi.com/dr

Electronic communications Shareholders can register to receive reports and notifications by email, browse shareholder information and submit voting instructions at www.homeretailgroup-shares.com. This service is provided by Capita Registrars.

Home Retail Group plc website Investor relations information, such as webcasts of results presentations to analysts and investors and accompanying slides, is available at www.homeretailgroup.com.

Dividend reinvestment plan The Home Retail Group Dividend Reinvestment Plan (DRIP) enables shareholders to use their cash dividends to purchase Home Retail Group shares. Shareholders who wish to participate in the DRIP for the first time, in respect of the interim dividend to be paid on 18 January 2012, should return a completed and signed DRIP mandate form to be received by the Registrar, by no later than 24 December 2011. For further details, please contact Capita Registrars.

Share price information The latest Home Retail Group share price is available on the Home Retail Group website, as well as through other information services such as Ceefax, Teletext and also on the Financial Times Cityline Service telephone 0906 843 2740 (calls charged at 60p per minute).

Share dealing facility Investors can buy or sell Group shares through Capita Share Dealing Services. Go to www.capitadeal.com or call 0871 664 0454 (calls cost 10p per minute plus network extras) between 8.30 am and 4.30 pm weekdays.

Financial calendar Interim ex-dividend date Interim Management Statement Interim dividend to be paid Full-year trading statement Full-year results for the 53 weeks to 3 March 2012 Final ex-dividend date Interim Management Statement Final dividend to be paid 9 November 12 January 18 January 15 March 2 May 23 May 19 June 25 July 2011 2012 2012 2012 2012 2012 2012 2012

Registered office Home Retail Group plc, Avebury, 489 - 499 Avebury Boulevard, Milton Keynes MK9 2NW

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