Operating revenue was $34,917m, up 4.2%. Bunnings UKI had a "modest" loss because of restructuring before interest and tax of £28 million ($48 million) and revenue of £612 million ($1,038 million).
Managing director Richard Goyder said: "In the United Kingdom and Ireland, Bunnings (BUKI) has moved at pace, making solid progress on phase one of its transformation plan. Earnings for BUKI were affected by necessary restructuring, including clearance of deleted lines and high levels of price deflation associated with the move to ‘Always Low Prices’.
"Strict disciplines were also maintained in respect of capital expenditure, which contributed to a $566 million increase in free cash flows to $2,231 million.
"This resulted in a strengthening of the Group’s balance sheet, with net financial debt at 31 December 2016 largely in line with the prior corresponding period, despite the debt-funded acquisition of Homebase in February 2016."
Wesfarmers bought Homebase in January 2016 for £340m and is spending £500m on transformations, with the first revamped store opening this month at St Albans.
Bunnings United Kingdom and Ireland (BUKI) loss was inclusive of £13 million ($21 million) of restructuring and one-off repositioning costs.
During the half, the BUKI team focused on full separation of the business from its former owner (HRG), the reset of Homebase and establishing the Bunnings Warehouse pilot stores.
Trading across the July to December 2016 period (being months five to ten post-acquisition) was steady, "despite significant disruption resulting from the extraction of Homebase from HRG and significant work to start repositioning the business".
Trading volumes were in line with the prior year, after adjusting for the store closures instigated by the previous owner and the exi t of the Habitat and Argos ranges and other non-core home improvement categories.
The company said:
"It was pleasing to record higher customer participation, with transactions increasing (on a like-for-like basis) by 9.1%. The Homebase business has been repositioned to ‘Always Low Prices’, resulting, as anticipated, in material price deflation. Higher stock weights have supported wider assortments, with new ranges and key supply agreements secured to deliver a core home improvement and garden offer.
"Clearance activity for deleted lines is largely complete. Merchandising and operational changes in the Homebase business are well advanced, with kitchen, bathroom and flooring ranges to finalise in the second half of the financial year.
"A significant amount of work was undertaken in the first half of the financial year in advance of the opening of the first Bunnings Warehouse store earlier this month. The selected site at St Albans in Hertfordshire ceased trading as a Homebase store in late November 2016, with construction works completed before the end of December 2016, followed by fit-out merchandising and operational plans to create the first Bunnings Warehouse. The new store successfully commenced trading on Thursday 2 February 2017. Merchandise and racking is in place to open other pilot stores in line with previously announced plans.
"All of the Homebase work, as well as the program for the pilot Bunnings Warehouse stores, has been timed with a view to having the overall business as well-positioned as possible for the important 2017 spring/summer trading period.
"Good progress has been made with transition, separation and integration activity. Significant work is underway to transform systems and the supply chain, and the Store Support Centre was relocated in December 2016. Reducing the high cost base and exiting trailing acquisition agreement support costs are a priority for the second half and beyond. The first half result includes £13 million ($21 million) in one-off charges for transition work, concession exits and intangible write-offs, as well as costs associated with the establishment of the first Bunnings Warehouse stores."
"Work continues in line with the first phase of the previously announced acquisition plans. All work is prioritised around building strong business foundations, including driving a better operating performance from the repositioned Homebase business and restructuring of the underlying business to provide low-cost, high-capability operations. There will continue to be a strong focus on the implementation of plans for the establishment of four pilot Bunnings Warehouse stores in the 2017 financial year."