WHS
06/03/2014 09:04
GENERAL
REL: 0904 HRS The Warehouse Group Limited
GENERAL: WHS: TW Group Strategic Move Into Financial Services
THE WAREHOUSE GROUP ANNOUNCES A STRATEGIC MOVE INTO FINANCIAL SERVICES
The Board of The Warehouse Group (TW Group) today announced a strategic move
into financial services as part of the ongoing reshaping of the business over
the last two years. The strategic ambition is to 'be a leading NZ retail
Financial Services Company'.
Financial Services
Currently TW Group, through its retail brands, offers a range of financial
services products via a Joint Venture and various Third Party arrangements.
The acquisition of Noel Leeming and the strategic 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 business.
In order to maximise the Financial Services opportunity there are a number of
key strategic steps being undertaken:
- An equity raising of $115M to strengthen the Groups capital base
- The acquisition of the shares of the Diners Club New Zealand (DCNZ)
business for $3M (and the assumption of the responsibility for funding) which
will provide a team of over 50 experienced people, core infrastructure, a
premium card product, an existing customer base and receivables portfolio
- The development of a range of products including a scheme card, a premium
credit card, instalment products and insurances
- The recruitment of leading consumer finance executives to lead and develop
the Financial Services business
During the first half of FY15 TW Group will roll out a range of new products
from its own Financial Services business. It is expected that Financial
Services will lose up to $3M after tax in FY14 and FY15 as the business base
is developed. However, the growth of the product range and receivables
portfolio should result in a positive contribution from Financial Services by
FY16.
The Warehouse Group CEO Mark Powell said "with the acquisition of Noel
Leeming, it became clear that we had the scale across the Group to have a
significant Financial Services business. Over the past year we have reviewed
a number of options and believe starting our own 'captive' Financial Services
business to be the best way of realising the potential value for our
Shareholders. This is a five year journey, but we are excited by the
opportunity it presents"
Capital Raise
In support of the Financial Services Strategy an equity raising is being
undertaken to strengthen The Warehouse Group's capital base. This consists
of a $115M capital raising underwritten by Deutsche Craigs Ltd, comprising:
o A $100M institutional placement at $3.23 per share, a 5% discount to the ex
dividend 5 day VWAP. The placement will be conducted on 6th March with
settlement on 13th March. Placements shares will be issued ex Dividend
o A $15M Share Purchase Plan, available to eligible NZ resident Shareholders
on the register at the record date of 18th March. Each eligible shareholder
can apply for up to $15,000 new shares, with further details to be announced
in due course
The Warehouse Group Founder Sir Stephen Tindall said "I am fully supportive
of The Warehouse Group strategy and am excited by the potential of Financial
Services. Both I and the Tindall Foundation have committed to participate in
the equity raising to maintain our existing levels of ownership in The
Warehouse Group"
Capital Management Changes
In addition to the equity raising we are intending to make two changes in our
approach to capital management to provide us with greater flexibility moving
forward
o The Warehouse Group is investigating the implementation of a Dividend
Reinvestment Plan (DRP). Assuming that the Board of The Warehouse Group
approves a DRP during FY14, we anticipate that the earliest a DRP would be in
place is for the FY15 Interim Dividend.
o In light of the Group's Financial Services strategy, the 'ahead of the
curve' investments in our multichannel businesses, the capital investment
requirements across a larger group, investments in our Financial Services
strategy, and the additional growth opportunities that exist, we believe it
is prudent to modify our dividend policy. Our new policy will target a
payout of between 75% - 85% of adjusted NPAT. FY14 & FY15 are likely to be
transitional years in terms of a % payout and to provide shareholders
certainty around the level of dividend over this period we are targeting a
minimum dividend of 19 cents per share per annum in FY14 & FY15. This
minimum payout is subject to no significant change in trading, ensuring we
are meeting our obligations under our Bank & Bond covenants and are able to
provide appropriate levels of funding for strategic initiatives. FY14's
dividend is comprised of a 13 cent per share interim dividend and a targeted
6 cent final dividend.
TW Group
The Warehouse Group Chairman Ted van Arkel said "The Warehouse Group is very
different than it was two years ago and is in an ongoing process of being
reshaped. We are pleased with the progress that has been made. A 'captive'
Financial Services business is a logical next step for us, given the scale
and importance of Financial Services to all parts of the Group. It has the
potential to contribute significant earnings for the TW Group in the medium
term.
ENDS
Background: The Warehouse Group Limited
The Warehouse Group Limited comprises 92 Warehouse stores, 76 Noel Leeming
stores and 63 Warehouse Stationery stores in New Zealand and several online
businesses. The company had turnover of $2.2 billion in FY13 and employs
over 10,000 people.
Contact details regarding this announcement:
Investors and Analysts
Stephen Small
Chief Financial Officer
Cellphone: +6421 714159
Media
Mark Powell, Group CEO, to be contacted via Gayle Theuniissen
on +649 489 8900 X96333 or +6421 742784
Attachments
1. Media Release
2. NZX Appendix 7 Share Purchase Plan
End CA:00247870 For:WHS Type:GENERAL Time:2014-03-06 09:04:17
