Warehouse Group Profit Down After Sale of Finance Business

By Ben Collins Features Dow Jones Newswires

New Zealand retailer The Warehouse Group said Friday that its reported net profit was down sharply after costs related to the sale of its financial services business.

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The company reported an after-tax profit of 20.4 million New Zealand dollars for the year through July, down from NZ$78.3 million for the previous 12 months.

Still, its adjusted net profit of NZ$59.2 million was only down 7.7% on-year on a like-for-like basis, above a guidance range of NZ$54 million to NZ$58 million.

During the fiscal year the company arranged the sale of its financial services business. In a regulatory filing it said it recognized NZ$41.9 million in one-off costs mainly from intangible asset and goodwill impairments linked to the deal, as well as restructuring costs of NZ$12.4 million which were offset by property divestment of NZ$11.5 million.

The company said its group retail sales for the year were up 1.9% at NZ$2.98 billion, and its gross profit was up 1.4% at NZ$971.9 million. Costs increased 2% on-year at NZ$864.1 million.

The Warehouse Group has cut 143 non-store jobs which it says should result in an annual saving of NZ$17 million, mostly through reduced salary payments.

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The company has tried to streamline its operating model and accelerate its digital business.

"It is encouraging that our second half retail performance delivered 13.9% growth in Adjusted Net Profit After Tax despite the internal distractions during this period of transition. The next year will see exciting progress with our digital strategies as we position the business to compete successfully in the rapidly changing retail environment," said chief executive Nick Grayston.

Directors of the company declared a final dividend of 6 New Zealand cents, taking the total payout to 16 New Zealand cents.

The current fiscal year will see one-off costs associated with clearing discontinued product ranges, new store layouts and IT systems and a separate digital business. This comes as Amazon gears up for a launch in Australia, which some analysts have suggested could eat into New Zealand retailers' margins.

The company said its earnings outlook for FY18 would depend on the critical Christmas trading period and will be given at the end of the second quarter.

Write to Ben Collins at ben.collins@wsj.com

(END) Dow Jones Newswires

September 21, 2017 18:22 ET (22:22 GMT)