Warehouse Group has entered into an unconditional contract to sell its Newmarket property in Auckland for $65 million and said the proceeds will be used to reduce debt.
Settlement of the property sale is expected to be completed in July 2017 and the sale proceeds of $65 million will generate a pre-tax gain of approximately $12 million, the Auckland-based company said in a release to the stock exchange. Further details will be provided when it announces its full-year result on Sept. 22.
The site will continue to be leased and operated by Warehouse until it is to be vacated in October 2018.
In March, Warehouse posted a 76 percent drop in first-half profit to $13.6 million after the retailer took an impairment charge against its financial services unit, recognised restructuring costs and earned less from its Red Shed department stores. Net debt stood at $263.3 million, with a gearing ratio of 33.5 percent. Warehouse's interest bill was $8.9 million in the first half.
At the time, it said weak trading had continued into the second half of the year and as a result, full-year adjusted profit was forecast to be $54 million to $58 million, a drop of as much as 15 percent from a year earlier.
The retailer is on a cost-cutting drive, cutting a net 130 jobs at its store support offices in Auckland and some regional centres, in a slimmed business structure to whittle down leadership into its two new arms and move support systems of the existing brands to be group-wide.
The shares last traded at $2.22 and have dropped 22 percent so far this year.
(BusinessDesk)
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7 Comments & Questions
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Maybe use the $65M to upgrade their stores and upskill staff so that they are a good experience - Kmart is leaving them behind and has progressed into the primo bottom end department store.
Unless the Warehouse change their model they will continue to lose market share
Selling the family silver is one of the most unoriginal and frankly laziest way to generate capital, look outside the square Mr Grayston
Lets face it, the days for trading at the bottom and to the low-level earners is over.
The Warehouse is finished as a concept - so, too, is trading to bottom feeders who simply spend on credit.
We are in for a major shake up of all these credit traders, they are little more than finance companies using products to issue loans all on grossly over-valued product which allows them to offer interest free to extend the loans.
Its only a matter of time and there will be a marriage of sorts between Farmers and the Warehouse.Both companies have a common thread in the ownership, and geez imagine the cost savings by only needing one building to house both stores.
Sell and leaseback. Book the capital gains upfront, pay dividends to shareholders but carry the lease rental commitments way into the future.
Anyone else notice that Warehouse profitability has been dropping year after year even as lease commitments kept going up? At last balance date, $811m compared with less than $150m in 2000.
Once upon a time, it would be called a poison pill. Now it is called a merger deterrent!
Another large NZ company is doing the same thing.
The sale and leaseback concept is under stating the debt positions of these companies.
Which large NZ company then?
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