Australian conglomerate Wesfarmers Ltd (ASX:WES) is to take a big one-off hit related to its high-profile acquisition of UK DIY retailer, Homebase.
Wesfarmers – which bought the struggling DIY chain for £340mln two years ago – said on Monday it is taking a whopping £450mln (A$795mln) pre-tax impairment charge, saying the new purchase has performed “below expectations”.
It is now reviewing its UK operations to see how can improve shareholder returns going forward.
The weak performance is a blow to the Aussie giant’s international expansion strategy, which hinged on the successful roll-out of the Bunnings DIY brand across the UK and Ireland.
“The Homebase acquisition has been below our expectations which is obviously disappointing,” managing director Rob Scott.
Wesfarmers said Bunnings UK & Ireland would report an underlying loss of £97mln (A$165mln) for the first half of its 2018 financial year, which is largely a reflection of the poor showing from Homebase.
On top of that, it is writing down the value of unsuitable stock by £37mln (A$66mln) as well as writing down deferred tax assets to the tune of £53mln (A$92mln).