The Warehouse Group Annual Result Announced – $44.5m Profit

The Warehouse Group today announced its audited result for the full year ended 2 August 2020. As announced in the preliminary unaudited release on 8 October, the Group delivered sales of $3.2 billion, up 3.3% on FY19 or 1.5% when adjusting for FY20 being a 53-week year, compared to 52 weeks in FY19.

Group sales in the second half of FY20 were $1.5 billion, up 4.1% on FY19 but flat when adjusting for FY20 being a 53-week year.

The Group full year Reported NPAT was $44.5 million, down 32% on FY19. The Group Reported NPAT includes $67.8 million received in wage subsidies. If Reported NPAT is adjusted to exclude the wage subsidy, the Group would have made a loss of $4.3 million.

The Group Chair Joan Withers said, “The 2020 financial year posed challenges and complexity that we could never have anticipated, pressure testing our strategy and ability to comprehend changes, harness and deploy resources and execute successfully in a dynamic and volatile environment.”

The Group’s Adjusted Net Profit After Tax (NPAT) was $80.7m for the 2020 financial year, up 9.0% on last year, after excluding restructuring costs and other unusual items which totalled $36.3m.

The Warehouse Group CEO Nick Grayston. Photo: supplied

Gross Profit was up 0.6% overall with a second half Gross Profit decline of 5.4% largely offsetting the 6.2% gain in the first half. The lower H2 margin was impacted by COVID-related impacts to product mix, clearance activity and quality of closing inventory and therefore provisioning. Gross margin for the year was 32.6% vs 33.5% last year.

Ms Withers said the year-end results are testament to the underlying strength of our brands and their improved operating performance after several years of transformation initiatives which were designed to see the business address strong competition including the increased impact of overseas online competitors.

Key Points

  • Group sales were $3.2bn, up 3.3% compared to FY19 and up 1.5% on a 52-week basis
  • Reported Net Profit After Tax attributable to shareholders $44.5m, down 32% on last year
  • Reported profit less government wage subsidy showed a $4.3m loss
  • Group online sales up 55.2%
  • For period of lockdown $265m (67%) sales reduction on same time last year
  • Adjusted Net Profit After Tax of $80.7m, up 9.0% on last year
  • No dividend to be paid for FY20

She acknowledged the impacts of COVID-19, with sales reducing by 67% ($265m) on the same period last year for the period between 26 March and 13 May when the country was in alert level 4 and 3. However, by the fourth quarter sales increased by 26% on the same period last year (18% on a 13 week basis) as a result of pent up demand.

“It is heartening that the Group was able to deliver this result during a year in which our stores doors were closed for seven weeks during New Zealand’s initial lockdown in response to COVID-19.”

Group Chief Executive Nick Grayston said “We are very proud of the resilience that our people demonstrated in coping with uncertain and unpredictable circumstances as a result of COVID-19, particularly our fulfilment teams who were dealing with a surge in online demand and new ways of working to take into account distancing and safety needs.

“Online sales grew 55.2% during the year, now representing 11.4% of Group sales. Click & Collect sales increased by 103.2%.

“We have seen customer shopping behaviour change as a result of COVID-19 and we expect some trends, such as increased online shopping, to continue. During the COVID-19 first lockdown, 48% of our customers surveyed said that 2020 was the first time they had shopped online with us,” said Mr Grayston.

Mr Grayston said that the 2020 financial year was always planned to be a time of change for the business, as it adopted a new way of working (Agile) in its head office and updated legacy rosters and The Warehouse store operating model, more accurately to reflect changing customer shopping habits.

“Part of the reason we were able to adapt quickly to meet customer needs was due to the pre-work already in place as part of our move to Agile ways of working involving cross-functional teams which were empowered to make decisions resulting in a faster speed to market, increased customer centricity, higher performance, at the same time making The Warehouse Group a great place to work,” said Mr Grayston.

Cost of Doing Business (CODB) grew at a lesser rate of 0.2% relative to Gross Profit, resulting in Operating Profit growth of 3.9%. CODB includes the government wage subsidy which was applied for on the basis of the Government criteria of a 30% revenue reduction in the month of April.

Mr Grayston said “this covered 55% of the Group’s wage bill during the period, while the remaining portion of salaries and wages were paid by the Group, ensuring that all employees at the time were paid 100% of their normal salary and wages, as opposed to the scheme-required 80%”.

Given the loss prior to adjusting for the wage subsidy, as well as the continued uncertainty around economic activity and trading outlook, Group Directors have decided not to pay a dividend for FY20. Subject to trading over the critical Q2 period and any further alert level restrictions and adverse economic impacts of COVID-19, the Group hopes to return to paying dividends in line with its Dividend Policy for FY21.

The Group ended the 2020 financial year with a net cash position of $168.1 million, as a result of strong working capital management and robust trading conditions following the first seven-week COVID-19 lockdown period. As the Group returns towards a more normal level of working capital, the net cash balance has reduced to approximately $80 million. During the year the Group secured additional banking facilities of $150m, extending the total debt facilities available to $330m. This enabled the Group to repay the maturing $125m fixed rate senior bond.

Source: The Warehouse Group

Covid-19 Impact: Next Six Months Seen As The Real Test For NZ Banks

Profitability of the country’s banks has taken a significant hit from the Covid-19 pandemic but the worst may be yet to come, according to a new report.

Bank profits fell 13 percent to $776.9 million for the three months ended June, compared to the previous quarter, business advisory firm KPMG’s Financial Institutions Performance Survey found.

They fell 20 percent in the first quarter, and are now about half of what they were last year.

KPMG head of banking and finance John Kensington said the banks were in strong financial shape going into the crisis, and have come through the initial impact well, but he thinks the next three to six months will be the real test.

“The second lockdown, there’s been a bounce back, but the indicators are that it isn’t as strong. Some people have taken one body blow and got back from it but if you take a second perhaps you don’t get up off the canvas. I think it’s going to be the next two quarters when you see how things shape up.”

He said with the end of wage subsidies and mortgage deferral schemes the pressure would go on businesses and households, which is when the pressure would also go on the banks.

The amount put aside for bad and doubtful debts has risen by $1.6b in the past six months to $2.5b.

Bank lending was flat, but interest rate margins were markedly lower, income generally steady, and operating expenses lower.

Kensington said the banks had acquitted themselves well in responding to the needs of those affected by the pandemic, but would remain under the spotlight.

“Banks are having to give more consideration to how they identify and manage at-risk individuals at a time of financial hardship for many.”

“The RBNZ continues to make it very clear that it expects the banks to play a major part in how New Zealand deals with the current economic crisis, making sure vulnerable customers are protected.”

Kensington said the Reserve Bank had taken a soft approach regarding banks’ conduct but he expected the scrutiny would now start to increase.

He also expected the RBNZ would take the pandemic as a justification for its controversial moves of 2019 to make banks increase their capital levels, which have been put on hold.

Kensington said the pandemic had accelerated the use of digital platforms for banking and he expected this would continue and see more physical branches closed or put on restricted trading hours.

Source: rnz.co.nz Republished by arrangement.

Fonterra Posts $659m Full Year Profit

Fonterra has posted a profit of $659 million as restructuring, improved sales and margins helped it recover from the previous year’s massive loss.

The profit to the end of July compared with a $605m loss the year before, as the co-operative wrote down the value of assets and took other hits worth $805m.

Excluding the one-off items, Fonterra made a profit of $382m underlying profit. It will pay farmer-suppliers $7.14 per kilo of milk solids, with an added five cents a share dividend.

Fonterra chief executive Miles Hurrell said the result reflected strong milk prices as well as the drastic measures it had been forced to take last year.

“We increased our profit after tax by more than $1 billion, reduced our debt by more than $1 billion and this has put us in a position to start paying dividends again.”

Fonterra chief executive Miles Hurrell. Photo: RNZ / Dan Cook

After last year’s result Fonterra moved to sell overseas assets, shut underperforming local plants, cut debt, and reduced its costs.

It adopted a strategy of looking to extract more value from local milk production, and put less emphasis on overseas ventures, including its expansion in China.

Hurrell said Fonterra’s ingredients business, which makes milk powders, had a strong lift in sales, and its China food service business had improved despite disruption and pressures because of Covid-19.

“There continues to be significant uncertainties – including how the global recession and new waves of Covid-19 will impact demand globally, and what will happen to the price relativities between the products that determine our milk price and the rest of our product range.”

It has forecast a payout range of $5.90 to $6.90 a kilo for the current season.

Source: rnz.co.nz, Republished by arrangement

Kiwibank Profit Down $51 Million From Last Year

 

Full year profit for the New Zealand-owned bank Kiwibank has halved year on year, as the bank set aside $51 million for bad and doubtful debts in light of Covid-19.

Profit for the 12 months to June was $57 million, compared with $108m in 2019.

Chief executive Steve Jurkovich said its bottom line was also impacted by the lower interest rate environment, and increased operating costs.

“We continued to increase our investment in good customer outcomes and our transformation to be an even better bank,” he said.

He said this strategy was working, with lending and deposit rates growing faster than the market average.

“Lending growth [was] 9 percent and deposit growth 13 percent in FY20. The market grew at a slower pace of 5 percent and 9 percent respectively.”

The bank had provided support to more than 8,000 personal and business banking customers for loans totalling more than $2.6 billion.

The majority of customers received support through interest-only restructures or repayment deferral arrangements.

The full year result comes off flat first half revenue growth, and reported increased operations and compliance costs.

New Zealand Post owns 53 percent of Kiwibank and its subsidiaries, with the New Zealand Super Fund holding 25 percent and ACC with 22 percent.

Source: rnz.co.nz Republished by arrangement.

Air NZ Resumes Akld Flights From Monday – Masks Mandatory

 

Air New Zealand will resume flying all of its Auckland domestic routes when the region moves to Alert Level 2 on Monday.

The airline has been operating a reduced domestic schedule in and out of Auckland while it has been at Alert Level 3. The majority of the rest of Air New Zealand’s domestic network has remained unchanged but with physical distancing in place.

From Monday it will also be mandatory for customers travelling during Alert Level 2 to wear a face covering while on board. Customers are encouraged to bring their own, or a mask will be provided by the airline prior to boarding.

Air New Zealand Chief Executive Officer Greg Foran says while there will be more flights to and from Auckland, physical distancing will be in place across the airline’s domestic network so there will be fewer seats available for customers.

“Physical distancing means we can only sell just under 50 percent of seats on a turboprop aircraft and just 65 percent on an A320 which also means we won’t be able to offer our lowest lead in fares until physical distancing measures are removed. This has put huge pressure on our business as it means we need to move some of our customers to other flights. We’d like to thank our customers for their patience and understanding while we work through these changes.

“When it comes to face coverings, this has been a requirement for those flying out of Auckland during Alert Level 3 and our customers have been really cooperative to date. We support the government’s move to mandate the wearing of face coverings on public transport at Alert Level 2 from next week.

“All Air New Zealand domestic cabin crew and front of house employees will be wearing masks and gloves, and pilots will wear masks when interacting with customers or moving through airport terminals.”

The airline has extended fare flexibility through until 11:59pm Sunday 6 September. Customers who hold a ticket booked directly with Air New Zealand for a domestic flight up until this date may opt to hold their fare in credit and can do this via the airline’s online booking tool while customers who have booked via a travel agent should speak with their agent to cancel their booking. Customers who no longer plan to travel are asked to do this as soon as possible to help the airline ensure physical distancing is possible and for other customers who need to travel.

Air New Zealand already has a number of safety measures in place to keep customers and staff safe which will continue in Alert Level 2. These include:

Customers are encouraged to check in for their flight via the Air New Zealand app, and allow extra time to process through check-in and security
For those checking in at larger airports, every second self-service kiosk will be operating to support physical distancing. There will also be floor markers for queuing at check-in counters, service desks, bag drops and departure gates, and fewer customers will be boarded and disembarked at a time
Inflight, seating will be allocated to allow an empty seat between customers travelling alone. The airline will aim to keep families and some travelling companions together, so there may be some people sitting together with no additional space between them
Food and beverage services on all domestic flights will not be available to minimise contact between customers and cabin crew. Customers should let cabin crew know if they would like a cup of water
Jet aircraft cabins have hospital operating theatre-grade HEPA filters installed, which filter out viruses.

Air New Zealand’s Auckland lounges and valet parking will reopen from Monday 31 August. Masks will be available for customers at all lounges. Due to capacity restrictions under Alert Level 2 the maximum number of people able to access any of the airline’s lounges is capped at 100.

For the latest information, customers can check the Air New Zealand COVID-19 Hub and travel alerts page.

Air New Zealand will continue to review its domestic network going forward based on demand and physical distancing requirements.

Air NZ Posts An After Tax Loss of $454 Million

Air New Zealand has posted one of the biggest corporate losses in recent memory as Covid-19 has all but grounded the airline in recent months.

 

The carrier reported an after-tax loss of $454 million for the year ended June compared with the previous year’s $276m profit.

Much of the loss was because of write downs in the value of planes, and restructuring costs as it cut costs and sacked about 4,000 staff, which altogether totalled $541m.

Stripping out one-off costs its underlying loss was $87m against $387m profit, as revenue fell 16 percent to $4.84 billion. The airline has received more than $100m in wage subsidies.

Chief executive Greg Foran said the pandemic had shown the airline’s core strength as it moved quickly to readjust through reduced services, control of costs, and laying up much of international fleet.

But he said the airline would struggle for the foreseeable future.

“However, we have to bear in mind that with almost 70 percent of our revenue derived from international flying, while border restrictions remain in place our business will continue to be significantly impacted.”

The airline has stopped virtually all international flights and has only managed to get to around 70 percent of domestic services before the recent resurgence of the virus.

“The recent resurgence of community transmission in New Zealand in August, has also reminded us that we cannot afford to be complacent,” Foran said.

Unlike most of its operations, Air New Zealand’s cargo business had solid growth in revenue as it increased flights for essential goods.

The carrier said it was burning cash at the rate of $65m to $85m a month, but as of this week it had $1.1 billion in cash reserves, which included the government backed loan of $900m, which it said it expected to start drawing on soon.

In March, Air New Zealand was given a $900m loan facility from the Crown, which it is able to call on if its cash reserves fall below an undisclosed level over the next two years. The government – which already owns 52 percent of the company – would have the ability to turn the loan into shares in the airline.

The loan, in two instalments, has interest rates of up to 9 percent, and there has been speculation Air New Zealand would look at an issue of shares as a cheaper option.

It said that it was looking at all options about the airline’s longer term capital structure. It also shied away from giving any detailed forecast for the coming year because of uncertainty surrounding travel restrictions and the level of demand.

“However, each of the scenarios we are currently modelling suggest we will make a loss in 2021.”

Foran said earlier this week physical distancing requirements meant Air NZ could sell less than half the available seats on turboprops and two thirds of the seats on jets. He said the airline could operate safely without distancing if crews wore PPE and passengers wore masks.

Gyles BeckfordBusiness Editor

Source: rnz.co.nz Republished by arrangement.

Alliance Group Loyalty Payments – Much Needed Cash For Rural Economy

Loyal shareholders in Alliance Group, New Zealand‘s only 100 per cent farmer-owned major red meat co-operative, have been rewarded with a $5 million distribution.

The quarterly payments have been made to Alliance’s Platinum and Gold shareholders who supply 100 per cent of their livestock to the company.

Farmers are paid an additional 10 cents per kilogram for each lamb, six cents/kg for a sheep, 8.5 cents/kg for cattle and 10 cents/kg for deer. The payments cover the period April-June 2020.

“Our loyalty programme is an important part of our strategy to recognise and reward our loyal shareholders for their consistent and committed supply,” says David Surveyor, Alliance Group chief executive.

“Platinum and Gold shareholders receive a host of other benefits including priority processing, which is particularly important during challenging times such as droughts, and prioritised access to minimum price contracts. They can also take advantage of our free store stock facilitation service.

“Our co-operative status is a great strength. Farmers are at the heart of every decision we make. Every cent we make is either paid back to farmers or re-invested back into the business for important projects such as our $4 million beef processing facility at Lorneville near Invercargill.

“Success for Alliance is processing our farmers’ livestock, keeping our people safe, preserving jobs and income, supporting our local communities and maximising prices in global markets.”

The latest distribution brings the total amount distributed to loyal shareholders for the 2019-20 season to $13 million.

Meanwhile, farmers are being encouraged to register to attend Alliance Group’s 2020 Annual Roadshows over September and October. Twenty-three meetings will be held across the country, starting out in Omihi on 22 September and finishing in Cromwell on 20 October. For more details and to register, please visit: www.allianceroadshows.co.nz.

Covid-19 – Countdown Supermarkets Product Limits and Revised Trading Hours

Countdown has temporarily changed its opening hours nationwide and introduced limits on products that are in high demand, to help ease pressure on its store teams as the country responds to changes in COVID-19 Alert Levels. The company’s Priority Assistance online shopping service for vulnerable customers has also been reinstated today.

Countdown’s General Manager Corporate Affairs, Safety and Sustainability, Kiri Hannifin, says Countdown is in a very good position to navigate the alert level changes and customers should feel safe in its stores.

“Our previous lockdown experience has stood us in good stead. We know that our processes are robust, our supply chain is strong, we can keep Kiwis safe, and we have plenty of food for everyone. We hope this provides Kiwis with reassurance that together, we can deal with different lockdown scenarios again.

“We’d urge customers to consider others when they are shopping in our stores. Whether that’s physically distancing themselves from other shoppers, making sure they’re only buying what they need, and of course being kind to our team and fellow customers,” says Kiri Hannifin.

Today Countdown has introduced the following:

Store hours:

All Countdown stores throughout New Zealand will close at 9pm tonight and re-open at 8am tomorrow, with these new hours (8am – 9pm) in place until further notice.

Product limits:

Limits are in place for a number of products that were particularly impacted when the country went into lockdown in March. From today there is a limit of three on the following categories:

Flour

Rice

Dry Pasta

Canned Baked Beans and Spaghetti

UHT Milk

Frozen Vegetables

Toilet Paper

Paper Towel

Personal Wash

Hand Sanitiser

Paracetamol

Household Cleaner

Period Products

Baby Formula

A limit of six has been put on wine and beer and a limit of one pack per customer has been put on all mask products.

Priority Assistance online shopping service –

As with March and April, Countdown has seen significant volume to its online shopping sites over the last day. To help make sure we can get groceries to those New Zealanders who are unable visit their local store and considered at risk from COVID-19, we have re-started our Priority Assistance service.

Customers who were previously approved for this service will already automatically have access to priority online delivery slots. New customers may be able to apply for Priority Assistance from tomorrow. (Thurs)

Kiri Hannifin, says the news about four COVID cases in Auckland is obviously concerning for all of us as Kiwis, but we are well practiced in what needs to be done in our stores to keep our team and our customers safe.

She says “We echo the Prime Minister’s comments that there is no need at all for anyone to stock up – we have plenty of food and supplies for everyone and we want everyone to shop as they usually would and consider others.”

Ms Hannifin says “We have done this before and we can do it again – look out for each other, be kind and stay safe.”

Business Confidence Falls, as Post-Lockdown Rebound Fades

The post-lockdown rebound in economic activity appears to have run its course as businesses begin to feel the burn of a closed border.

ANZ’s latest monthly preliminary survey of business confidence shows headline confidence in the first week of August had fallen to a net negative 42.4 percent, down from 32 percent a month earlier.

Businesses’ view of their own future also dropped, by 8 points, with a net 17 percent expecting business to worsen in the year ahead.

ANZ chief economist Sharon Zollner said it looked like the rebound had done its dash.

“We saw a hint of that in the data last month, where we saw the second half of July was weaker then the first half. So, in that regard it was perhaps not much of a surprise to see things slip a little bit.’

Zollner said there was three prongs to the economic crisis brought on by the pandemic, and the country was now at the end of the beginning.

“We’ve got the closed border and the impact on tourism and the foreign education sector and then there’s the impact of slower global growth on our goods exports and both of those things are just getting started.

“When you think about the dynamics of the year ahead you will have a pretty volatile picture.”

Many of the other forward looking indicators in the survey deteriorated over the first week of August, including investment, export and employment intentions.

However, it was not all one-way traffic.

Capacity utilisation lifted over the first week of the month to a net negative 2.8 percent from 7.8 in July.

Zollner said it was an old-fashioned concept that measured how hard a firm was running their machines or whether the number of shifts its staff were working had picked up.

“I really wouldn’t make too much of a fact that it ticked up when everything else has gone down because I think it’s really outnumbered.”

Source: rnz.co.nz Republished by arrangement.

Merchant Fees to Drop – Businesses Hopeful Costs Will be Passed on

Small businesses are cautiously optimistic a drop in charges for accepting credit card and contactless payments will help with cashflow woes.

Visa and Mastercard have both agreed to reduce the interchange fees they charge banks whenever a customer pays using one of their issued cards.

The fees, along with bank fees and charges such as eftpos terminal hire are passed to the business owner.

These fees bundled together – known as merchant service fees – have long been a pain point for businesses. The costs for accepting credit card and contactless payments can be prohibitive.

Advocacy group Small Business Voice chief executive Max Whitehead said it was great news.

“Small businesses rely heavily on their customers to pay by credit card… most people today don’t deal in cash – the credit card is critical.”

However, he was concerned about how the savings would trickle down.

“The concern I have is will the banks pass it on? They have enormous control.

“I would be extremely disappointed and I think the public would be too if this wasn’t passed down through small businesses through to the consumer.”

Retail NZ chief executive Greg Harford said Mastercard’s change would come into effect today, and Visa’s on 15 August.

“This should be reducing overall rates on most credit and debit transactions by somewhere between 10 and 20 basis points so we’d expect merchant fees themselves coming down by at least that much.”

“Merchants who are on an interchange plus arrangement with their bank will see immediate reductions in their bill in August and those reductions will get bigger in September once Visa’s reductions come into full effect.

Merchants on a bundled rate should make sure they were getting the benefits of lower interchange fees.

He said merchants should not be paying more than 0.6 percent per debit card (contactless) transaction and 1.4 percent for credit card transactions.

“I was talking to a merchant this morning who was quoted 4.75 percent which is well above the odds and certainly not what they should be paying.”

The percentage charged per transaction does depend on a businesses turnover through the till and the type of card being used to pay.

Westpac bank has already come out saying it would roll out a new pricing structure, which would charge merchants 0.6 percent per contactless transaction, and credit card transactions would be less.

General manager Karen Silk said the changes would result in substantial savings, particularly for small businesses where transaction volumes were typically lower and as a result costs have been higher.

“For example, a cafe owner with relatively low volumes of transactions may have paid 10 to 15 cents in fees when processing a debit contactless payment for a $5 coffee. Now, they will only pay 3 cents,” Silk said.

Demand for contactless payments had also increased since the Covid-19 pandemic and banks waived fees for contactless payments for a time, however they have now resumed.

Source: rnz.co.nz Republished by arrangement