Most of this is related to "an exceptional goodwill impairment charge" of £852 million relating to a Sainsbury's bid to buy Argos.
A goodwill impairment charge is a means of balancing a company's fair value and carrying value when an intangible asset, such as public perception of a brand, is overestimated.
Even without that charge, annual profits plunged 28% to £94.7 million, while sales were down 1% to £5.6 billion.
Argos like-for-like sales were down 2.6%, though this was offset by a 2.6% net space sales change, meaning total sales change was flat.
However the company made good progress on transitioning to digital stores, with a current total of 177 in the new format - 21% of the Argos store estate.
Despite the profit drop, Home Retail Group Chief Executive John Walden said it had been a "landmark year."
"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."
Walden also noted that Home Retail Group beat its forecast for the year, with a cash balance of £623 million.
Business Insider reported earlier this month that Sainsbury's £1.2 billion bid to takeover Argos was going ahead, and that Home Retail Group shareholders would own 12% of the supermarket giant if the sale goes ahead.
Shares in Home Retail Group dropped 0.53% this morning, landing at £16.96 as of 8:50 AM GMT:
