Business review
The business review on the following pages provides information on the corporate objectives of the Group and its businesses, together with a review of our progress during 2006 and an assessment of the key risks and uncertainties that we face.
GUS: corporate objectives
GUS plc is a retail and business services group. Its activities now comprise general merchandise retailing through Argos Retail Group and information and customer relationship management services through Experian.
GUS is committed to creating long-term shareholder value by focusing on businesses with above average growth potential and establishing leadership positions in its chosen markets.
Over the last six years, GUS has established a track record of creating value for shareholders by focusing on growth businesses and investing in their future. Since January 2000, GUS has exited from low growth or low return on assets businesses such as home shopping, property investment and motor vehicle financing. It has also simplified its structure by disposing of Burberry (via placings in 2002 and 2003 and a demerger to GUS shareholders in December 2005) and Lewis in South Africa (via placings in 2004 and 2005).
Over the same period, GUS has invested heavily in Argos Retail Group (ARG) and Experian, both organically and by acquisition. This investment has largely been funded by the proceeds of the disposals noted above. As explained later, we have clear strategies for continued growth at both Argos Retail Group and Experian, supported by investment in operations, infrastructure, complementary acquisitions and good people.
In order to enhance value further, the Board plans to separate GUS into two businesses: Argos Retail Group and Experian. As discussed later, and subject to shareholder approval, this will be achieved by means of a demerger with both businesses becoming independently listed on the London Stock Exchange.
The objective of GUS has been to deliver sustainable returns for all its stakeholders.
Our aim has been to deliver a growth in total shareholder return over the medium term (i.e. over three years) that at least matches the top quartile of comparable listed companies. GUS achieves this through sustainable growth in sales and profit, by investing in projects that give returns in excess of its cost of capital over the medium term. The Board recognises that these objectives can be affected in the short term by external economic, social and political factors. However, it believes that consistent investment in businesses with competitive advantage within growth markets will provide sustainable returns to stakeholders over the longer term.
Our objective has been to grow dividends for shareholders broadly in line with earnings, subject to the investment needs of the business and an acceptable level of dividend cover. At the same time, GUS has maintained an appropriate level of debt funding and serviced this debt properly in the interests of banks and bondholders.
We also aim to act responsibly and ethically towards all of our stakeholders, including our customers, colleagues, suppliers and business partners and the communities around us. Our approach to corporate responsibility is summarised later in the Business Review. We believe that this approach is assisting GUS in achieving its objectives for shareholder return.
