Explanatory notes to the introduction and financial highlights

1. The change in both the year-end and the Group’s capital structure on demerger resulted in prior year statutory reported results that are non-comparable.

   The statutory reported results for the first half of the current financial year represent the 26 weeks to 1 September 2007. The statutory reported results for the first half of the prior financial year represented the results for Homebase for the seven calendar months of March to September inclusive, and the results for the rest of the Group for the six calendar months of April to September inclusive. The results for the first half of the prior financial year also reflected certain financial impacts that were a result of the fact that Home Retail Group was wholly owned by its former parent company, GUS plc, until the demerger became effective on 10 October 2006. The prior period results are not therefore representative of a financial period length comparable to this year, nor do they reflect the capital structure that Home Retail Group operated under from the date the demerger occurred.




2. Sales

   are calculated on a 26-week basis. This represents the statutory reported 26 weeks to 1 September 2007 and the comparable pro forma 26 weeks to 2 September 2006.
   
   

3. Benchmark operating profit

   is defined as operating profit before amortisation of acquisition intangibles, store impairment charges, exceptional items and costs related to demerger incentive schemes. It is calculated on a pro forma 26-week basis for the comparable period.
   
   

4. Benchmark profit before tax (benchmark PBT)

   is defined as profit before amortisation of acquisition intangibles, store impairment charges, exceptional items, costs related to demerger incentive schemes, financing fair value remeasurements, financing impact on retirement benefit balances and taxation. Net interest income within pro forma benchmark PBT is calculated to illustrate the Group’s financial performance as if the demerger capital structure had existed at 31 March 2006 and had been achieved based on underlying cash flows prior to 31 March 2006. Benchmark PBT also includes Home Retail Group’s share of post-tax results of joint ventures and associates. It is calculated on a pro forma 26 week basis for the comparable period.
   
   

5. 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 from the date of demerger (excluding Home Retail Group shares held in its Employee Share Ownership Trust (ESOT)). It is calculated on a pro forma 26 week basis for the comparable period.

An Interim Management Statement, covering the 18 weeks of 2 September 2007 to 5 January 2008, will be announced by Home Retail Group on 17 January 2008.

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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