Warehouse tackles financial services

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The Warehouse Group’s decision to move into financial services is a response to consumers who want more convenience, says its chief executive, Mark Powell.

Friday, March 7th 2014, 6:00AM 1 Comment

by Susan Edmunds

TW Group announced yesterday that it wants to be a leading New Zealand retail financial services company, offering a premium credit card, instalment products and insurances.

It plans to recruit what it calls leading consumer finance executives to lead and develop the financial services business.

Powell said the acquisition of Noel Leeming and the strategic reshaping of the group had changed its potential scale in financial services.

It will conduct an equity raising of $115m to strengthen its capital base and will acquire the shares of the Diners Club NZ business for $3 million.

During the first half of the 2015 financial year, the group will introduce a range of new products from its own financial services business. The first products will be available by this August.

Powell said it had seen strong demand for finance products for purchases in its stores. It had been offering other companies’ products but had decided it was time to develop its own.

He said it would be important to the group to strike a balance between offering finance to help people purchase items they otherwise would not be able to, and not doing it in such a way that they were enticing people into debt. “There’s demand, definitely.”

He said customers wanted services such as finance deals and insurance to be convenient and good value.

TW Group expects to lose up to $3 million after tax in FY 14 and FY15 as the business base is developed.  But the financial services arm should make a positive contribution by the 2016 year.

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.”

The group is to modify its dividend policy to target a payout of between 75% and 8% adjusted net profit after tax. To provide shareholders with certainty over the 2014 and 2015 years, it is targeting a minimum dividend of 19 cents per share.

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