Warehouse profits down; lifts payout

Profits for The Warehouse were slightly down on last year but shareholders were nevertheless rewarded with a special dividend for the second year running, and the prospect of more to come.

The Warehouse also lifted its dividend payout ratio in its report for the full year to August, from providing 75% of after-tax profits, to 90% - boding well for shareholders in the future.

The Warehouse's revenue was down 2.8% from $1.72 billion to $1.67 billion, and its earnings before interest and tax were up 9% from $116.1 million the previous year to $126.5 million.

The Warehouse had to make a one-off $23 million non-cash adjustment for government tax changes on building depreciation, and without that charge its after-tax profit would have been down 2.4% at $83.2 million compared with $85.2 million the previous year. Subsequently, after-tax profit was down 21.6% from $76.7 million to $60.1 million.

Craigs Investment Partners broker Peter McIntyre said while booking a "flat" year's trading, as largely expected by analysts, The Warehouse dividend delivery reflected the maturity the 28-year-old company had attained in its annual operations.

"While growth prospects are limited, it has a well-known brand and [87] established outlets across the country which do not need much in the way of capital expenditure in the near future. This [dividend] is a boon for investors requiring income, as opposed to [relying] on company growth," Mr McIntyre said.

Forsyth Barr broker Peter Young said The Warehouse's stationery division did better by about $2 million while the Red Sheds were about $2 million short of expectations.

Mr Young said The Warehouse was caught with excess stock due to a warm winter and had to discount it, and was therefore hit on profit margins.

He said The Warehouse guidance on outlook remained "cautious" and the company had reiterated it could be a difficult year ahead.

The Warehouse chairman Keith Smith said as a sign of the board's confidence in the company's ability to continue generating solid operating cash flows, in both the short term and long term, the board had lifted the payout ratio from 75% to 90% of adjusted net profit.

"Lifting the company's payout ratio was a key factor in achieving our stated aim of providing superior returns for shareholders over the long term," he said in a statement.

A final dividend of 8.5c per share was declared yesterday, bringing the total for the year to a fully imputed 24c, up 3c on last year, and also declared a special dividend of 5c, in addition to a special dividend of 1.5c made in March.

The Warehouse group chief executive Ian Morrice said it had been a "very difficult trading environment for retailers with recovery in overall consumption remaining subdued and patchy".

Concerns expressed a year ago about the pace and sustainability of economic recovery "proved well-founded and ... similar concerns remain", and while optimistic about the economy in the medium to long term, preset trading conditions remained "difficult", he said.