Warehouse Group predicts big profit rise

The Warehouse Group is forecasting a 15- 21% lift in first-half net profit for the country's largest multi-channel retailer, following strong Christmas trading and improved management of seasonal stock.

Adjusted net profit after tax for the six months ending January 31 is expected to range between $43 million and $45 million, the board says.

Strong first-half sales and profit performance have been recorded across all the group's retail brands with the on-going execution of the group's strategy resulting in both sales and margin growth.

The retail profit has been "somewhat tempered" at a group level by the anticipated start-up losses in the new financial services business, which are expected to continue for at least two years while it builds scale.

Outgoing chief executive Mark Powell, who is about to hand the reins over to Nick Grayston, says the strong performance continues the positive momentum developed in the second half of last year, with the group's initiatives starting to yield the required profit growth following four years of investment catch-up.

Chairman Ted van Arkel says full year profit guidance will be given at the release of the half-year results on March 11 but it’s now expected to be up on last year, although not at the same level of the first-half increase given the foreign exchange movement risk and losses from the financial services arm. Historically, the group makes most of its profit in the second quarter.

At the annual meeting late last year, Mr van Arkel said the board expected full year net profit to be broadly in line with the $57.1 million achieved in 2015, which was slightly down on the $60.7 million posted in 2014.

The board has changed its dividend policy to allow any profits from its new financial services group to be ploughed back into building up its lending book.

The dividend policy has been to pay out between 75-85% of adjusted net profit after tax and that's now been modified to apply only to the retail group.

Shareholders were paid a 16c per share dividend for 2015, which equates to 93.7% of adjusted net profit after tax. That was higher than normal because the company had promised shareholders when it raised $115 million for the financial services business in March 2014 that it would pay a 19c per share dividend for the next two years.

The board revised that back to 16c after a profit downgrade early last year and will now pay out of the modified policy range this financial year.

Warehouse Group shares are trading up 1c at $2.74.

(BusinessDesk)