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Warehouse almost doubles 1H profit on property sales, dividend beats expectations

Friday 8th March 2013

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Warehouse Group, which this week bought a majority stake in online retailer Torpedo7, almost doubled net profit after selling properties as part of leaseback arrangements, and will pay a bigger interim dividend than analysts were expecting.

Net profit climbed to $106.5 million, or 34.2 cents per share, in the six months ended Jan. 27 from $54.2 million, or 17.4 cents, a year earlier, the Auckland-based retailer said in a statement. That included a $62.4 million gain from the sale and leaseback of its Wiri distribution centre and three stores.

Stripping out that one-time gain, adjusted profit rose 13 percent to $52.9 million, in line with Forsyth Barr analyst Andy Bowley's forecast. Sales rose 18 percent to $1.11 billion.

The country's biggest listed retailer will pay a first-half dividend of 15.5 cents per share, up 2 cents from a year earlier, and ahead of Bowley's expectation of 14 cents. The dividend is payable on March 28 with a record date on March 22.

Warehouse has been reorganising its business after failed ventures in grocery and across the Tasman, this week buying a majority stake in online retailer Torpedo7 for $20 million with a further $13 million in potential earn-outs.

In December, it bought the unprofitable Noel Leeming consumer electronics chain for $65 million, and Warehouse have decided to fold the chain's Bond + Bond brand under the bigger Noel Leeming brand. That merger is expected to be completed by early April.

"It is pleasing to see the group's strategy deliver improved results for shareholders," chairman Graham Evans said in a statement. "Our focus on multichannel and our recently announced agreement to acquire a majority shareholding in Torpedo7 should position us for significant online sales and earnings growth in the medium-term."

The retailer expects adjusted annual profit of between $73 million and $76 million, having previously signalled this year's result would beat last year's $65.2 million.

The headline Red Sheds stores increased sales 3.7 percent to $866.6 million and operating profit rose 5.8 percent to $65.7 million, with a wider operating margin at 7.6 percent.

The Blue Shed stationery stores lifted sales 12 percent to $111.9 million for an 18 percent gain in operating profit to $3.7 million with an improved margin at 3.3 percent.

The Noel Leeming Group contributed sales of $129.3 million for an operating profit of $5.8 million on a margin of 4.5 percent.

Warehouse shares rose 0.9 percent to $3.50 yesterday, and have gained 16 percent this year. The stock is rated an average 'hold' based on six analyst recommendations compiled by Reuters with a median target price of $3.155.

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