Warehouse agrees to sell financial services unit to SBS for $18m

Warehouse chairwoman Joan Withers says the retail business is its top priority (photo: Jerry Yelich-O'Connor)
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Warehouse Group, known for its flagship 'red shed' discount department stores, is selling its financial services business to a subsidiary of SBS Bank for $18 million, although most of that will be offset by an impairment.

The sale to SBS's Finance Now is expected to be completed within the next five weeks, Warehouse said, adding that the deal is expected to result in a non-cash impairment of software assets of approximately $16 million in its full-year results for 2017. The sale does not include Diners Club New Zealand, and more details will be provided at the time of the settlement of the transaction.

"This transaction will enable the group to focus its capital and people resources on the transformation of its retail business which is our current top priority and will remain so over the next few years," chair Joan Withers said. Warehouse acquired 100 percent ownership of the financial services business in September 2015 by buying out joint venture partner Westpac Banking Corp for $7.3 million, only to face a weaker-than-expected transition and below-target card spending.

In March, the company reported a 76 percent drop in first-half profit to $13.6 million after it took a $22.7 million impairment charge against the financial services unit, recognised restructuring costs and earned less from its Red Shed department stores.

Financial services recorded an operating loss of $5.2 million in the 26 weeks ended Jan. 29, up from a loss of $2.7 million a year earlier. The unit's sales in the first half rose to $10.3 million from $8.1 million. At the time, the company said the board was reviewing the outlook for the segment "and looking at various alternative strategies to gain the scale necessary for the business to achieve profitability."

Warehouse shares were placed in a trading halt this morning ahead of this announcement. They rose 1 cents to $2.24 when the trading halt was lifted and have shed 15 percent over the past year.

(BusinessDesk)


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Wow, this is an about face. From diversification of revenue streams to a stronger focus on core business. This was doomed from the get-go and now they only have Diners Club to write off. What a mess...

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Pretty pleased Heartland were not the buyers.

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What an absolute disaster of an investment! Where is the directors' apology?

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Maybe start by getting rid of the chairwoman - she has been attached to some disasters already

Time for Sir Stephen to sell out to the Normans before it fails and let them via Pascoes take the Warehouse back to some stability and growth. The past few years has seen a series of foreign CEO's with a range of views and strategies - all of which have failed. The Normans could delist it and run the company properly

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I find your comment about Joan Withers interesting to say the least.
The Warehouse acquired 100 percent ownership of the financial services business in September 2015, yet Joan Withers only became Chairwoman of The Warehouse in September 2016 (and had not been involved as a Director of the Warehouse since June 2005). Anyone who had undertaken any independent research on this issue (perhaps a simple search through the Companies Office) would struggle to come to your conclusion of Joan Withers having some responsibility for an issue that was obviously well in motion prior to her joining The Warehouse Board 9-months ago.

And no, I don’t know Joan Withers.

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We're used to the continual negativity from Scribe; - anti bank, anti-big 4, you name it ...

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Diners Club?

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