Retailer the Warehouse Group has announced plans to move into the financial services business, which involves initially a $3 million purchase of the Diners Club business in this country and a $115 million capital raising.
The company, which now styles itself TW Group, said the strategic ambition was to "be a leading NZ retail financial services company".
TW Group, said that through its retail brands, it currently offers a range of financial services products via a joint venture and various third party arrangements. The previous acquisition of the Noel Leeming business and the "strategic reshaping of the group" had 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," the company said.
It is buying the Diners Club business in New Zealand from current owners Diners Club Singapore for $3 million, plus assumption of the responsibility for funding of NZ Diners.
TWG said the acquisition would "provide a team of over 50 experienced people, core infrastructure, a premium card product, an existing customer base and receivables portfolio".
Post the acquisition, TW Group plans:
- 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 $3 million 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 company said.
Chief executive Mark Powell said that following 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 company's today launching a $115 million capital raising "to strengthen The Warehouse Group’s capital base".
This consists of a $115M capital raising underwritten by Deutsche Craigs Ltd, comprising:
- A $100M institutional placement at $3.23 per share. The placement will be conducted on 6th March with settlement on 13th March. Placements shares will be issued ex Dividend;
- 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 company also today announced an adjusted net profit after tax of $46.2 million in line with recent guidance and down 12.5% compared with $52.8 million last year. Reported net profit after tax for the period was $58.7 million compared with $106.3 million last year when significant one-off gains were made on the disposal of properties.