Home Retail Group has said that annual profits have dropped 28%, hit by a “disappointing” performance from its Argos chain.

A “goodwill impairment charge” of £852 million also hit the company’s profits, as part of the group’s agreement to sell Argos to Sainsbury’s.

Profits were flat at Argos, although HRG insisted that it was making ‘good progress’. Meanwhile sales at Homebase were down 3%.

John Walden, chief executive of Home Retail Group, commented: "The past year has been a landmark period for the group, during which we have completed the sale of Homebase and recommended to shareholders the offer from J Sainsbury plc for the acquisition of the remaining group, principally Argos. I am pleased that, with its offer for Home Retail Group, Sainsbury's has recognised the good progress we have made in transforming Argos into a digital retail leader.

"During the year we continued to progress the Argos Transformation Plan, including the introduction of Fast Track, which offer market-leading propositions for both same-day home delivery and store collection. We have been encouraged by the customer response to Fast Track with our on-time delivery rates and customer satisfaction having continued to improve to leading levels. Argos also now has a proven digital store model, including small formats and concessions, which require lower capital outlay and provide customers with fast access to an expanded product range regardless of store stock capacity.

"Finally, the group ended the year with a cash balance of £623 million, which is significantly stronger than previously anticipated. With leading digital capabilities, new Fast Track propositions, proven and flexible digital store formats and strong financial resources, we are well positioned for an exciting future."