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Let's Talk Homebase

Damian & Andy

On Wednesday 17th April 2019, Homebase provided the first update on their financial performance since the tumultuous end of their relationship with Wesfarmers and the beginning of the resurgence of the Homebase brand under Hilco ownership.

On the morning of the release, I had the opportunity to discuss the results with Damian McGloughlin (CEO) and Andy Coleman (CFO) and to ask the questions we all want asked and the interview is towards the end of this article. Please note that the highlighted texts are either links through to the original news article on Insight DIY, to images and industry comment on LinkedIn or through to the Homebase website.

It already seems an age ago, but it was only in June last year that Wesfarmers confirmed that the sale of Homebase had gone through earlier than planned and on 1st September 2018 when 95% of creditors voted in favour of the CVA.

Since then we've seen a significant restructuring of their Milton Keynes store support office, resulting in a 38% reduction in headcount, the closure of their Horticultural Buying Office in Swindon, the move from six to four central warehouses, the dumping of the Bunnings brand and the closure of 47 Homebase stores, leaving an estate of 186 branches across the UK and the Republic of Ireland, compared with 298 B&Q and 241 Wickes.

The Bunnings Warehouse store in St.Albans rebadged as Homebase.

Six month results to 30th December 2018

The teams have clearly been working hard as the headline numbers are encouraging. Turnover has reached £498m for the six month period, compared to £516m during the same period the year before, a 3.5% decline, but with the store closures and the subsequent clearance activity, you shouldn't read too much into these. For the boffins amongst us, it's interesting to point out that during the last year of ownership by Home Retail Group, 57% of Homebase turnover was achieved in the six month period between March and August 2015 and 43% between September and February 2016. Although the financial periods have changed, it's fair to assume that the second six months of trading for Homebase, will deliver a higher turnover than the first

The escalating losses under Wesfarmers have finally been stemmed, following the removal of £100m of fixed costs. The comparisons are better, with an EBITDA loss of £33m for the six months, compared to a horrendous £172m loss in the same period a year earlier. They also had an exceptional gain of almost £31m in the period, from the profit on the sale of a freehold store and the write-back of various property related provisions. I think the biggest challenge for the new management team in the first six months was to achieve both financial and operational stability and although clearly still work in progress, this looks on track.

This was helped in November, when the company secured a £95m asset-based lending facility from Wells Fargo to support their working capital. Let's be honest, the company is still trading insolvent and without the lending facility from Wells Fargo, they would have been in trouble. So, the company is by no means out of the woods, but at least they've found a fairly wide path, where that is heading, we’ll probably find out in about 18 month's time.

The rest of the article including the interview has been published here.

22 April 2019

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