Less than two years after after establishing The Warehouse Group Financial Services, the company has curbed the loss-making business by announcing it will sell to Finance Now, a subsidiary of SBS Bank.
In 2015, The Warehouse Group moved its financial services from a joint-venture arrangement with Westpac into a wholly-owned structure called The Warehouse Group Financial Services. The new entity had three different arms: Warehouse Money; Diners Club New Zealand, which the group acquired in 2014; and Marble Finance, an in-store finance offering operated in partnership with Finance Now.
Although then-CEO Mark Powell described the project as a five-year journey at the time, The Warehouse Group Financial Services has been slow to return a profit. Before its launch, Powell said the new financial services division was expected to lose up to $3 million during FY14-15 as the business base is developed, but in its half-year report for the six months ending January 29, 2017, TWG reported an operating loss of $5.2 million for the Financial Services division. This was an increase from a $2.7 million loss in HY16, prior to launch.
The Warehouse Group announced yesterday it had approved the conditional sale of The Warehouse Group Financial Services for $18 million and expects it to be completed within the next five weeks. The sale, which does not include Diners Club New Zealand, is expected to result in a write-down of around $16 million in the FY17 financial results.
In a statement to the NZX, The Warehouse Group described the sale as expanding an existing positive working relationship between The Warehouse and Finance Now, and enabling The Warehouse to continue to offer branded financial services to its customers, supported by Finance Now.
Joan Withers, chair of The Warehouse says: “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.”