$67.8 mln wage subsidy windfall saves The Warehouse from a loss

Business

Retail chain The Warehouse won't be paying a dividend this year and says it faces continued uncertainty around its trading outlook

8th Oct 20, 2:54pm by David Hargreaves

Major retail chain The Warehouse Group won't be paying a dividend this year and says it's only made a profit thanks to receiving $67.8 million worth of wage subsidies.

The company, scheduled to release its audited results for the year to August 2, 2020 on October 15, opted to release brief unaudited details of its results a week early on Thursday (8th).

In the statement issued to NZX, The Warehouse said its net profit after tax (NPAT) for the financial year was $44.5 million, down 32% on the result from a year ago.

"The group reported NPAT includes $67.8 million received in wage subsidies. If reported NPAT is adjusted to exclude the wage subsidy, the group would have a made a loss of $4.3 million."

The company has been involved in large scale layoffs and restructuring this year.

It said sales were $3.2 billion, up 3.3% on last year or 1.5% when adjusting for the latest financial year having been a 53 week year, compared to 52 weeks in FY19. Group sales in the second half of FY20 were $1.5 billion, up 4.1% on FY19 but flat when adjusting for FY20 being a 53 week year.

"Given the loss prior to the wage subsidy, as well as the continued uncertainty around economic activity and trading outlook, the group directors have decided not to pay a dividend for FY20," the company said.

"Subject to trading over the critical Q2 [second quarter] period and any further alert level restrictions and adverse economic impacts of Covid-19, the group hopes to return to paying dividends in line with its Dividend Policy for FY21."

The company said it ended the 2020 financial year with a net cash position of $168.1 million, as a result of strong working capital management and robust trading conditions following the first seven week Covid-19 lock-down period.

"As the Group returns towards a more normal level of working capital, the net cash balance has reduced to approximately $80 million."

The "adjusted" net profit figure was $80.7 million, including adjustments for unusual items of $36.3 million (after tax), up 9.0% on last year.

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21 Comments

by ShoreThing | 8th Oct 20, 3:08pm 1602122913

Thanks taxpayers, very kind of you to lend such generous support so the Tindalls could continue to make huge profits - even in the midst of a pandemic!

by J.C. | 8th Oct 20, 3:15pm 1602123314

Right. They could front at least half their net profit for salaries and wages. The Tindalls and the shareholders won't be taking home anything though.

by ShoreThing | 8th Oct 20, 3:18pm 1602123513

Not immediately, but the profit will go into retained earnings and eventually distributed back to the shareholders so it's really a timing issue rather than them actually losing anything. I note WHS didn't go for a capital raising, so shareholders are just being handed tens of millions of taxpayer dollars for absolutely zero risk.

by J.C. | 8th Oct 20, 4:04pm 1602126259

Not immediately, but the profit will go into retained earnings and eventually distributed back to the shareholders so it's really a timing issue rather than them actually losing anything

Don't be so sure about that. We're only just starting. Their margins will likely be squeezed going forward. And The Warehouse is not 'cheap' compared to retail overseas.

by Hook | 8th Oct 20, 6:25pm 1602134723

Actually you should thank Cindy for wasting your money via a ridiculously "easy to comply with" lolly scramble. There should never have been any Wage subsidy. Another vote buying initiative that seems to have worked perfectly for Labour. "Fees free, Kiwibuild, reduction in child poverty, reducing homelessness" all a blatant empty promise to a woefully naive and gullible electorate.. but hey... if it works to keep you in a job .. why bother with annoying things like actual achievement??

by frazz | 9th Oct 20, 6:50am 1602179436

There there Dear, vote JC...open the borders and more cheesecake Hook?

by nigelh | 9th Oct 20, 8:51am 1602186695

Agree. There should never have been a wage subsidy. Let business layoff as they see fit and those laid off fast tracked onto benefits without a stand down period.

by DaveB1978 | 14th Oct 20, 9:30am 1602621012

I’m not anti the wage subsidy but the devil is in the details as usual. I don’t think they should have got $67 million. Maybe smaller businesses would have folded if it hadn’t been for the subsidy. That would have resulted in more unemployment and a longer recovery as having the confidence to start a new business is a higher bar than being able to grow an existing one.

by DaveB1978 | 14th Oct 20, 9:38am 1602621500

by Andrewj | 8th Oct 20, 3:09pm 1602122958

Heaven forbid that a private company ever made a loss. Headline should be- Taxpayer bails out wealthy businessmen, rest of you can get lost.

by J.C. | 8th Oct 20, 3:17pm 1602123436

It's a bigger than that. The Warehouse is the NZ equivalent of EDLP (even though it's more expensive) retail seen elsewhere in the world going through in the age of deflation. Where would the 'poor people' shop if there were no Warehouse?

by bw | 8th Oct 20, 3:21pm 1602123705

K Mart? Setting up a student in a flat, you don't go to The Warehouse any more...it's too expensive!

by stuart786786 | 8th Oct 20, 3:09pm 1602122971

After Harvey Norman fiasco have been carefull and may be finacial adjusted accordingly.

by RCD | 8th Oct 20, 3:11pm 1602123109

I am very glad to have donated $44.5 Million to the coffers of the Warehouse shareholders to save them from penury.
No doubt they will enjoy an extra fine bottle of wine with their dinner at some point next year when my gift is carried forward to bolster next years dividend payout.
The more honest approach in this circumstance would have been to refund to the Government the profit held over.

by rastus1 | 8th Oct 20, 4:44pm 1602128663

..subsidizing a company to import c**p that is in a landfill within a few months. This is the sort of business we don't want.

The banks and political clowns need to let creative destruction commence. But they are trying as hard as they can to keep the unstainable business monsters blundering along.

by Hook | 8th Oct 20, 7:03pm 1602136988

The Warehouse may import cheap cr@p but it's the consumers of NZ that buy it. Easy to dump on providers of cheap imports but what about consumers who are constantly supporting the "buy now throw away tomorrow " model? Where is their responsibility? Before the advent of Warehouse, Bunnings, Mitre 10 Mega there were many small family owned outlets..all gone now. Don't blame the supplier - blame the buyer!

by Davo3636 | 9th Oct 20, 5:05pm 1602216314

I think given how low wages are, people have no choice.

by Pusheen | 8th Oct 20, 11:07pm 1602151636

C'mon now, we started to see what being kind really means here in NZ.

by Uh Oh | 9th Oct 20, 9:00am 1602187236

Too Big to Bail....??

by President of P… | 9th Oct 20, 1:36pm 1602203770

I though for a moment the picture said "The Wellfare Group"

by Gingernut | 12th Oct 20, 10:02am 1602450123

They received $68m in wage subsidies without which they would have made a loss of $4m on sales of $3.2b.
Even allowing for the unexplained $36m of 'unusual items' this does not make sense
What am I missing here?