Announces $1bn write-down.
Wesfarmers managing director, Rob Scott has confirmed a review is underway for Bunnings UK and Ireland (BUKI) to improve shareholder returns with the ‘disappointing’ Homebase acquisition performing below expectations.
Following a review of strategic plans, there will be a number of significant items to be included in the group’s 2018 half year financial results for BUKI.
- Non-cash impairment of 454 million Pounds ($795 million) before tax, with 444 million Pounds ($777 million) to be recorded against goodwill recognised on the acquisition of Homebase and 10 million Pounds ($18 million) against the remaining book value of the Homebase brand name
- Stock write-downs of 37 million Pounds ($66 million), relating to excess, unsuitable and display stock, and store closure provisions of 40 million Pounds ($70 million)
- A write-down of BUKI deferred tax assets of 53 million ($92 million), reflecting a more conservative outlook for the business
“We will take a disciplined approach to further capital deployment in BUKI and provide an update on the outcomes of the business review and our plans for a broader conversion to Bunnings at our Strategy Briefing Day in June,” Scott said.
New BUKI managing director
Wesfarmers concurrently announced that BUKI managing director, Peter J (PJ) Davis will retire from the business after a 25 year career with Bunnings. BUKI will now be led by Damian McGloughin, who will report to Bunnings group managing director, Michael Schneider.
Schneider has more than 30 years of experience in the UK home improvement and DIY market. A number of other senior leadership appointments including David Haydon as COO have been made to strengthen the BUKI team and provide additional local experience and expertise.
Wesfarmers managing director, Rob Scott said, “PJ has been instrumental in driving the growth and success of Bunnings for the past three decades and in the establishment of the Bunnings Warehouse format in Australia in the 1990s.”
$165m loss expected for 1H FY2018
BUKI is expected to report an underlying loss before interest and tax of 97 million Pounds ($165 million) for the first half of the 2018 financial year.
“It is clear that a significant amount of change has been driven through Homebase since the acquisition and the disruption caused by the rapid repositioning of the business has contributed to greater than expected losses across the Homebase network,” Schneider said.
“Sales have been affected as non-core categories and concessions were exited ahead of the implementation of the Bunnings format, and investments in price and new ranges have not offset these lost sales. Trading was particularly weak during the latter part of the first half of the 2018 financial year.
“Our focus is on improving the profitability of Homebase through improved ranging and execution in stores, while continuing to develop plans for a broader conversion to Bunnings.”