Responsibilities and governance:
Directors' report
The directors present their report and the audited financial statements for the year ended 31 March 2006.
Principal activities and business review
GUS is a retail and business services group. Its activities comprise general merchandise retailing through Argos Retail Group and information and customer relationship management services through Experian. A review of the results for the year and an indication of future developments appear on pages 4 to 27.
Research and development investment has been a high priority for the Group in driving growth, particularly in relation to product development at Experian as indicated in the Business Review on page 16. Research expenditure totalled £3.3m during the year (2005: £2m) and the amount charged to the Group income statement in the year was £3.3m (2005: £2m).
Profit and dividends
The Group income statement on page 54 shows a profit for the financial year of £595m (2005: £645m). The directors recommend the payment of a final dividend of 21.9p per ordinary share to be paid on 4 August 2006 to shareholders on the register on 7 July 2006. An interim dividend of 9.6p per ordinary share was paid on 3 February 2006 giving a total dividend for the year of 31.5p per new consolidated GUS ordinary share (2005: 29.5p per old GUS ordinary share). In addition, a distribution of the Group’s shares in Burberry by dividend in specie was made to shareholders on 13 December 2005 (see page 69).
Directors
The names and biographical details of the directors are shown on pages 28 and 29. Particulars of directors’ remuneration, service contracts and their interests in the shares of the Company are shown in the Report on directors’ remuneration and related matters on pages 40 to 51. There were no changes in the directors’ interests in shares between the end of the financial year and 24 May 2006 except for the exercise of 4,394 options under the Company’s SAYE share option scheme by each of Sir Victor Blank, Terry Duddy, Oliver Stocken and David Tyler details of which are set out on page 47.
Don Robert and John Coombe joined the Board on 1 April 2005. Lady Patten retired from the Board on 31 January 2006.
The directors retiring by rotation at this year’s Annual General Meeting are Sir Alan Rudge, Oliver Stocken and David Tyler who, each being eligible, offer themselves for re-election.
During the year, the Company maintained liability insurance and third party indemnification provisions for its directors and officers.
Corporate governance
The Company’s statement on corporate governance is set out on pages 32 to 39.
Acquisitions and disposals
On 18 April 2005 the Group announced that Argos had agreed to buy 33 Index stores from Littlewoods Limited and this transaction completed in July 2005. The purchase price was £44m.
On 5 May 2005 the Group announced that Experian had acquired LowerMyBills.com, a leading online generator of mortgage and other loan application leads in the US. The purchase price was $330m, plus a maximum performance related earn-out of $50m over two years.
On 19 May 2005 the Group announced that it had successfully completed the offering of its remaining stake in Lewis Group, realising proceeds of £140m.
On 28 October 2005 the Group announced the disposal of Wehkamp, its home shopping business in the Netherlands. The business was sold for e320m and the sale was completed in January 2006.
On 13 December 2005 the Group successfully demerged its remaining 65% stake in Burberry to GUS shareholders. This was accompanied by a consolidation of GUS shares.
On 14 December 2005 the Group announced Experian had acquired PriceGrabber.com, a leading provider of online comparison shopping services in the US. The purchase price was $485 million.
The cash cost of other acquisitions, all of which were made by Experian, amounted to £359m. These included the acquisition of ClarityBlue, a leading provider in the UK of bespoke marketing database solutions for major companies (at a purchase price of £85m plus a maximum performance related earn-out of up to £15m over three years).
Substantial shareholdings
As at 24 May 2006, the Company had been notified of the following interests in the nominal value of its issued share capital:
| Nominal value of issued share capital £ |
Percentage of nominal value of issued share capital % |
|
| The Goldman Sachs Group Inc. | 9,681,333 | 3.9 |
| Legal & General Investment Management Limited |
9,317,905 | 3.7 |
| Barclays plc | 8,211,655 | 3.3 |
Save for the above, no person has reported any material interest of 3 per cent or more or any non-material interest equal to or more than 10 per cent of the nominal value of the issued share capital of the Company.
Purchase of own shares
At last year’s Annual General Meeting, authority was given for the Company to purchase, in the market, up to 99 million of its own shares, representing approximately 9.9 per cent of its issued Ordinary share capital. At an Extraordinary General Meeting held on 12 December 2005 a new authority was given for the Company to purchase, in the market, up to 85,140,000 of its own shares, representing approximately 9.89 per cent of the Company’s expected issued Ordinary share capital after the share consolidation that accompanied the Burberry demerger.
The authority to make market purchases expires at this year’s Annual General Meeting when shareholders will be asked to give a similar authority. Details are contained in the accompanying circular to shareholders.
The Company did not make any purchases of its own shares during the year under review.
Interests in own shares
Details of the Company’s interests in its own shares are set out in note 30 to the financial statements on page 87.
Donations
The Group’s support for charitable causes is mainly channelled through the work of the GUS Charitable Trust. The Trust’s income from the Company in respect of the year ended 31 March 2006 was £1.1m (2005: £1.4m). In addition to cash contributions, the Group’s employees are encouraged to give their time and skills for the benefit of a variety of charitable causes.
The Group made no political donations and incurred no items of political expenditure.
Employment of disabled persons
Disabled persons, whether registered or not, have equal opportunities when applying for vacancies, with due regard to their aptitudes and abilities. In addition to complying with legislative requirements, procedures ensure that disabled employees are fairly treated and that their training and career development needs are carefully managed. For those employees becoming disabled during the course of their employment, the Group is supportive, whether through retraining or redeployment, so as to provide an opportunity for them to remain with the Group.
Employee involvement
The Group is intent on motivating and keeping staff informed on matters that concern them in the context of their employment and involve them through local consultative procedures. Where there are recognition agreements with trade unions, the consultation process is established through national and local trade union representatives and through joint consultation committees.
Information on matters of concern to employees and about the financial and economic factors affecting the Group’s performance is also disseminated through management channels, conferences, meetings, publications and internet sites.
Schemes offering share options or the acquisition of shares are available for most employees. This encourages their contribution to the Group’s performance.
Creditor payment
For all trade creditors, it is Group policy to:-
- Agree and confirm the terms of payment at
the commencement of business with that supplier;
- Pay in accordance with any contract agreed
with the supplier or as required by law; and
- Review continually the payment procedures and liaise with suppliers as a means of eliminating difficulties and maintaining a good working relationship.
Trade creditors of the Group at 31 March 2006 were 31 days (2005: 30 days) based on the ratio of Group trade creditors at the end of the year to the amounts invoiced during the year by trade creditors. The Company has no trade creditors.
Annual General Meeting
The 88th Annual General Meeting of the Company will be held at the Radisson SAS Portman Hotel, 22 Portman Square, London W1H 7BG at 11.30am on Wednesday, 19 July 2006. The Notice of Meeting is included in a separate circular to shareholders which accompanies this Annual Report. It is also available on the Company’s website: www.gusplc.com.
Auditors
The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution that they be reappointed will be proposed at the Annual General Meeting.
By Order of the Board
Gordon Bentley Secretary 24 May 2006
Registered Office: One Stanhope Gate London W1K 1AF