Warehouse to offload financial services sector

People who buy insurance from The Warehouse or have a Visa card issued by company shouldn’t see any immediate changes from it offloading its financial services business, the company says.

The Warehouse has agreed to sell its financial services business – branded Warehouse Money – to Invercargillbased SBS Bank for $18 million but will continue to sell its products under its own brand in its stores.

The retailer warned the deal was likely to result in a $16m write-down when it posts its annual result on September 22.

Subject to the finalisation of documentation during the next five weeks, The Warehouse’s financial services business will become part of SBS Bank subsidiary Finance Now.

The Warehouse launched Warehouse Money in 2015 after spending $7.3m buying Westpac out of a joint venture that had offered credit cards. It now also offers car, house, travel and health insurance.

Chief executive Nick Grayson said The Warehouse had been pleased with the data the business had provided but the sale was designed to take risk off its balance sheet.

‘‘Offering credit is something that requires fairly deep pockets.’’

The disposal would let The Warehouse focus on more urgent things, such as ‘‘fixing our retail fundamentals and investing in our digital future’’, he said. ‘‘We are pleased to have been able to do this by working with some existing partners who know our business.’’

The Warehouse said in a statement to the NZX that the sale would extend ’’an existing positive working relationship between The Warehouse and Finance Now’’.

Grayson said The Warehouse would continue to sell the services it currently provided under the Warehouse Money brand and he was not aware of any planned changes at this point.

‘‘Final details are yet to be confirmed, however, the purchase price of $18m, subject to asset-based adjustments, is expected to result in a non-cash impairment of software assets of approximately $16m in the 2017 financial results,’’ it said.

More details would be provided when the deal was finalised, it said.

SBS chairman John Ward said it looked forward to continuing its ‘‘longstanding and well-established relationship’’ with The Warehouse.

The Warehouse has lifted a trading halt on its shares, which it had requested yesterday before the announcement.

Grayson said it was fulfilling its disclosure requirements to the market by outlining the transaction to the NZX after both boards had approved it in principle and before it was fully completed.

Shares in the company subsequently rose 4 cents to $2.27 in afternoon trading.