Writedowns slash Wesfarmers profits
COLES expects to return to profit growth in coming months but has warned higher levels of competition within Australia’s $100 billion grocery sector are here to stay.
And Rob Scott, the chief executive of parent group Wesfarmers, has indicated he will still look for overseas expansion opportunities despite the poor performance of its Bunnings experiment in Britain and Ireland.
Unveiling Wesfarmers’ first-half results yesterday, Mr Scott conceded the company had made mistakes in those markets.
“Let’s learn from that experience (Bunnings UK and Ireland) but let’s not be gun shy because I think there are a lot of opportunities out there, not only internationally but also domestically,” he said.
Shares in Wesfarmers surged yesterday as a stronger performance from Coles took the sting out of a blowout in losses and deep writedowns at the Bunnings venture in the UK and Ireland.
Net profit at the conglomerate, which also owns Kmart, Target and Officeworks as well as chemicals and mining businesses, plunged to $212 million for the six months to December — down 87 per cent from the same period a year earlier.
It was the lowest first-half profit haul since 2002.
The bottom line was all but wiped out by $1.32 billion in previously flagged writedowns linked to the Bunnings UK and Ireland business.
Losses at the division hit $165 million, up from $48 million in the same period a year earlier. Underlying profit — a measure which excludes oneoff items — fell 2.7 per cent to $1.53 billion while group revenue rose 2.8 per cent to $35.9 billion.
Wesfarmers is reviewing the future of Bunnings in Britain and Ireland and is coming under pressure from some investors to move quickly, cut its losses and exit the markets.
Earnings at Coles fell 14 per cent to $790 million and the Bunnings Australia and New Zealand unit has now overtaken the grocer as the biggest earner at Wesfarmers, generating $864 the half year.
Coles has lost ground in the supermarket wars as Woolworths has invested more than $1 billion in lowering its prices over the past two years.
But Coles chief John Durkan pointed to like-for-like sales growth — a tally that strips out the impact of shops and opening and closing.
It accelerated from 0.3 per cent in the September quarter to 1.3 per cent in the December quarter. Transaction growth also hit its highest level in 18 months. million for