Warehouse Group, known for its flagship 'red shed' discount department stores, is selling its financial services business to a subsidiary of SBS Bank for $18 million, although most of that will be offset by an impairment.
The sale to SBS's Finance Now is expected to be completed within the next five weeks, Warehouse said, adding that the deal is expected to result in a non-cash impairment of software assets of approximately $16m in its full-year results for 2017. The sale does not include Diners Club New Zealand, and more details will be provided at the time of the settlement of the transaction.
"This transaction will enable the group to focus its capital and people resources on the transformation of its retail business which is our current top priority and will remain so over the next few years," chair Joan Withers said. Warehouse acquired 100 per cent ownership of the financial services business in September 2015 by buying out joint venture partner Westpac Banking Corp for $7.3m, only to face a weaker-than-expected transition and below-target card spending.
In March, the company reported a 76 per cent drop in first-half profit to $13.6m after it took a $22.7m impairment charge against the financial services unit, recognised restructuring costs and earned less from its Red Shed department stores.
Financial services recorded an operating loss of $5.2m in the 26 weeks ended January 29, up from a loss of $2.7m a year earlier. The unit's sales in the first half rose to $10.3m from $8.1m. At the time, the company said the board was reviewing the outlook for the segment "and looking at various alternative strategies to gain the scale necessary for the business to achieve profitability."
