Reported net after profit tax for The Warehouse Group over the full year was $20.4 million, compared to $78.3 million in 2016. Grayston acknowledges the sale of its financial arm as to why the bottom line fell $57.9 million.
“What I would say is that the main drivers are the cost of the restructuring, which we signaled when we announced it, and it was certainly in the range that we forecasted, but that in itself will enable us to take out the cost. The second part of it is about making the business set for the future – so we’re happy to have done that.
“As you think about it, the financial services and the subsequent disposal has been all about taking out complexity so we can really focus on our retail turn-around.”
Group retail sales were up only 0.3 percent, which has been linked to the cost of the internal restructure and the sale of the financial arm. TWG said one of its key achievements for 2017 was “restructuring and simplification of the group’s operating model.”
The restructure saw a total net reduction of 143 jobs, while the process itself revolved disestablishing around 500 people. Grayston says the redeployment for the restructure was part of the whole part to turn the business around.
“There is really two main parts of the strategy. The first is, fix the retail fundamentals, and the second is, invest in our digital future. So, this falls into the first category predominantly, and we have consolidated the management of the retail businesses and extracted central shared services model to create a new service of excellence.”
Although the total restructuring costs amounted to $12 million, 55 percent of which was redundancy costs, the annualised savings are expected to total $17 million. Seventy percent of that relates to saved salary costs.
This focus on restructuring and business simplification was also expressed in TWG’s sale of its financial services arm in July. According to Grayston, the sale of Warehouse Money allowed “us to take it off our own balance sheets and reduce the management time taken up in terms of doing that.”
“Candidly, we are very pleased with the way in which we are able to manage that business. We partner with Finance Now which is part of SBS Bank who are an existing partner. And rather than closing that business, we have sold it to them. So, they are able to continue to provide those values to our customers.”
“The other thing about the result - what we’re really pleased about – is, as you look at taking out and stripping back those one-off costs, it’s all about fixing the business,” says Grayston. “In the second half, having had a tough Christmas period in the red business, we saw a significant turnaround. So, we are already seeing the results of those strategic changes that we’ve made, as we execute things like retail simplification and the everyday low price.”