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Wesfarmers report huge loss in profits as Homebase failures come to light

Published: 21 February 2018 - Kiran Grewal

Wesfarmers Limited has reported a net profit after tax (NPAT) of $212 million for the half-year ended December 31, 2017. The reported profit includes post-tax significant items of $1,323 million relating to Bunnings United Kingdom and Ireland (BUKI) and Target. Excluding these significant items, NPAT for the half-year decreased 2.7%t to $1,535 million.

Managing director Rob Scott said the continued strong momentum in Bunnings Australia and New Zealand (BANZ), Kmart and Officeworks, in a competitive retail environment, was a highlight for the half. “Strong production volumes and higher coal prices in the Resources business contributed to a significant increase in the Industrials division’s earnings,” Mr Scott said. “Higher earnings across a majority of the Group’s businesses were offset by losses in BUKI and lower Coles earnings following planned investments in price and service.

BUKI reported a loss before interest and tax of £97 million ($165 million) for the half, compared to a loss of £28 million ($48 million) in the prior corresponding period. Revenue for BUKI decreased 15.5% to £517 million (15.7% to $875 million).

“The loss for the half reflected continued trading and execution challenges as a result of the rapid repositioning of Homebase following the acquisition,” Mr Scott said.

“The management team has been strengthened and a review is underway to identify the actions required to improve shareholder returns.”

In addition to BUKI’s reported loss, pre-tax significant items of £531 million ($931 million) were recorded in the half, reflecting the current trading performance of Homebase and a moderated outlook for BUKI.

CEO at shopper marketing agency Savvy, Catherine Shuttleworth, speaks about the Homebase to Bunnings conversion: “The takeover of Homebase by Bunnings seems to be in need of a more customer-focused review. The stores have undergone more of a make under than a make over - with the removal of points of inspiration to a much more masculine and functional offer. Homebase shoppers seem confused and a bit disappointed about what is now in store and sales seem to be reflecting this confusion. No Nectar points is also a disappointment for many shoppers as it was a benefit that Homebase had over other DIY retailers and of course concessions including Laura Ashley and Habitat plus the later added Argos in store shops added a bit more interest and importantly footfall to these stores. Now those “extras” have been removed the new stores feel a bit soulless and the happy and really helpful colleagues in their green dungarees are in shorter supply. Let’s hope that the review of the business will let the Homebase shoppers share their thoughts with the new management.”


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