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Wesfarmers profit down 86.6% on writedowns

 

Wesfarmers' first-half profit has plummeted 86.6 per cent to $212 million on the back of more than $1.3 billion in impairments against its UK hardware business and Target department stores.

The underperforming Bunnings UK and Ireland chain, which Wesfarmers only acquired in 2016, was responsible for $1.023 billion of the impairments, with Target carrying the remaining $300 million as its comparable sales contracted by another 6.5 per cent.

But net profit dropped 2.7 per cent even when significant items were stripped out, with Coles supermarket earnings before tax falling 14.1 per cent to $790 million following a slowdown in comparable food and liquor sales growth - from 1.3 per cent a year ago to 0.9 per cent.

Wesfarmers attributed the fall in earnings to investments in price and service, and managing director Rob Scott said sales had picked up in the second quarter,

Nonetheless, Wesfarmers maintained its interim dividend at a fully franked $1.03.

Earnings rose 12.2 per cent at Bunnings Australia and NZ, by 9.7 per cent at Officeworks, and by 7.2 per cent at the department store unit underpinned by Kmart.

Mr Scott reiterated that Wesfarmers was reviewing the future of its UK hardware venture, which has had $70 million set aside for store closures, and said shareholders would be updated at June's strategy briefing day.

WESFARMERS H1 WOES

* Net profit down 86.6pct to $212m

* Net profit excluding significant items down 2.7pct to $1.54b

* Revenue up 2.8pct to $35.9b

* Interim dividend flat at $1.03, fully franked