Friday 16 November 2018

Homebase jobs are at risk if chain sold

Photo: PA
Photo: PA
John Mulligan

John Mulligan

Hundreds of jobs at Homebase stores in Ireland are at risk after its Australian owner, Wesfarmers, said its disastrous decision to buy the chain two years ago could see it ditch the business completely.

The chain has 11 outlets here, employing more than 380 full-time and part-time staff. After emerging from examinership in 2013, the Homebase business here is now profitable, posting a €12.5m pre-tax profit in the year to the end of February 2017.

Wesfarmers has slashed A$1bn (€638.5m) from the value of the Homebase chain, which it acquired from Argos owner Home Retail Group in 2016 for A$705m.

Wesfarmers had hoped to emulate the success of its Australian hardware chain, Bunnings.

However, its calamitous foray outside its home market is now likely to see it retreat to its antipodean safe haven.

"A lot of the underlying causes of the losses we've reported today have been through our doing," said Wesfarmers managing director Rob Scott. Wesfarmers' shares tumbled 4.5pc in Sydney.

The march to Europe came just months before the UK voted to leave the European Union. Retail sales generally in the UK have been hit as inflation creeps higher, pay remains static, and continuing uncertainty about the economy once divorce from the trading bloc is completed.

Homebase was making a profit when it was acquired by Wesfarmers, but isn't now.

The Australian group said that Homebase is expected to have made an underlying loss of £97m (€109.5m) in the first half of the company's financial year, which ended in December. That reflects the "poor trading performance", according to Wesfarmers.

"The Homebase acquisition has been below our expectations, which is obviously disappointing," said Mr Scott. "In light of this, a review of BUKI [Bunnings UK and Ireland] has commenced to identify the actions required to improve shareholder returns."

It already plans to close up to 39 of its 234 stores in Britain.

Mr Scott said an exit from the business would be considered, but that for now it "wouldn't be the preferred option".

Home Retail Group put its Irish Homebase division into examinership in 2013 during the downturn. Two Homebase outlets in Ireland at the time closed, leaving it with 13. It now has 11.

Accounts for the business here show that revenue grew 13pc on a life-for-like basis to €48.6m in the 12 months to the end of February 2017, having closed a store in the previous financial year.

Its profits soared the latest financial year as it benefited from the release from a €15.4m onerous lease provision.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business