The Warehouse Group chief executive Mark Powell announced
the establishment of a finance services division yesterday.
Photo by NZ Herald.
The move by The Warehouse Group to become a leading
retail finance company made more sense than some of its
previous strategic decisions, Forsyth Barr broker Suzanne
Kinnaird said yesterday.
The group announced yesterday it had added a ''strategic
priority'' of becoming a leading finance service company
within five years, including the acquisition of 100% of
Diners Club New Zealand for about $3 million.
Ms Kinnaird said the acquisition of Diners Club brought
additional expertise and supporting infrastructure.
''This makes more sense to us than previous strategic
decisions such as moving into Australia. If The Warehouse can
execute, we expect it to add value.''
The group's current finance book - operated by third parties
and joint ventures - was about $400 million and The Warehouse
was aiming to grow that to $600 million in five years, she
The shares were in a trading halt while an equity raising of
$115 million, made up of $100 million placement, at $3.23 a
share, and $15 million shareholders purchase plan, was
The Warehouse founder, Sir Stephen Tindall, indicated he and
his foundation would take up 50% of the placement.
Brokers expected there to be a ''solid uptake'' of the
The announcement also signalled a name change, with group
executives now referring to The Warehouse Group as TW Group.
Group managing director Mark Powell said the group, through
its retail brands, offered a range of financial services
products through a joint venture and various third party
The acquisition of Noel Leeming and the reshaping of the
group changed its potential scale in financial services.
''With the current volume of receivables generated and the
opportunity for further growth, it is now the right time for
TW Group to pursue its own `captive' financial services
The Diners Club purchase would provide a team of more than 50
experienced people, core infrastructure, a premium card
product, an existing customer base and a receivables
There would be a development of a range of products including
a scheme card, a premium credit card, instalment products and
Also, there would be recruitment of leading consumer finance
executives to lead and develop the financial services
During the first half of 2015, the group would roll out a
range of new products. It was expected the financial services
division would lose up to $3 million after tax in 2014 and
2015 as the business base developed.
Mr Powell said the group had reviewed several options and
believed starting its own captive business was the best way
of realising the potential value for shareholders.
''This is a five-year journey but we are excited by the
opportunity it presents.''
Other changes being considered including the implementation
of a dividend reinvestment plan that could be in place for
the 2015 interim dividend.
The group would also modify its dividend policy and target a
payout of between 75% to 85% of adjusted reported profit.
The next two financial years were likely to be transitional
in terms of a percentage payout and to provide shareholders
with certainty, TW was targeting a minimum dividend of 19c
per share a year for both of those financial years.
Mr Powell said the minimum payout was subject to no
significant changes in trading, ensuring it was meeting its
obligations under the bank and bond covenants and being able
to provide ''appropriate levels'' of funding for strategic
At a glance
- Establishment of a finance services division with the
purchase of Diners Club NZ for $3 million.$100 million
capital raising at $3.23 a share.$15 million shareholders
- Sir Stephen Tindall takes up about half of the offer.
- Premium credit card, scheme card, instalment products and
insurance to be offered.