Profit hit for Bunnings

Wesfarmers looks at closing UK venture

EXPECTATIONS are growing that Wesfarmers’ new chief Rob Scott will pull the plug on the group’s Bunnings business in the UK and Ireland within the year, analysts say.

Speculation over the future of Bunnings UK and Ireland comes as the division’s losses blow out and Wesfarmers prepared to hand down its slimmest first-half profit haul in more than a decade

The Perth-based retail and industrial conglomerate will book a $1 billion impairment against the value of Bunnings UK and Ireland at its upcoming half-year results.

Wesfarmers will also absorb a fresh $306 million impairment against Target’s value.

The chain has delivered more than $1.5 billion in impairments in 18 months.

Wesfarmers yesterday said it had launched a review of Bunnings UK and Ireland, which is set to lose $165 million (£97 million) for the first-half of the 2018 financial year.

The loss is far greater than analysts had been expecting and more than triple the $48 million (£28 million) plunge into the red posted for the same period a year earlier.

Peter Davis, a 25-year Bunnings veteran, has stood down as head of the UK and Ireland business.

Damian McGloughlin, poached from UK hardware giant B&Q in the middle of last year, will take over as the division’s managing director.

Wesfarmers shelled out $705 million for the ailing UK hardware chain Homebase at Managing director Jason Beddow of listed investment company Argo the start of 2016, gaining a network of 265 stores.

It has converted 19 Homebase stores to the Bunnings model so far and closed about 10 outlets.

Mr Scott said while the review would look at the option of selling Bunnings UK and Ireland, it was not the preferred outcome.

He said the group had lost Homebase customers by exiting product lines too rapidly as the business was converted to a Bunnings model.

It had also lost too much local management talent, he said.

The combined impairments will take a massive cut out of the $1.6 billion first-half profit analysts had expected Wesfarmers to deliver.

The group is now tracking to post its lowest first-half profit since 2005.

The cash flow of the mining companies is pretty good and they are at a point in the cycle where they are generating a lot of cash and not spending a lot of money on capital ...