2018 Annual Report Online

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2018 Annual Report Online THE WAREHOUSE GROUP 2018 ANNUAL REPORT TOWARDS INTEGRATED REPORTING OUR GROUP PURPOSE Helping Kiwis live better every day Our shared values 02 Group highlights 03 Chair’s report 04-07 Our Board 08-11 CEO’s report 12-17 Financial highlights 18-19 Our strategy 20-21 Our group profile22-23 Our transformation 24-27 EDLP case study 28-29 Integrated reporting 30-31 Our networks 32-37 Our expertise 38-43 Our people 44-51 Our relationships 52-61 Our environment 62-67 Financial capital 68-71 Financial statements 72-99 Annual 5 year summary 100-101 Governance report 102-116 Contents The Warehouse Group Limited Annual Report 2018 01 About us OurGroup shared Highlights values Group highlights Each of our four retail brands has 12,000 4.7 star employees in New Zealand The Warehouse app rating on iTunes its own unique identity. This year (rating at time of publication) we identified the values that we share and that unify us as a group. Our values light the path to our 50of customers shopped with% two future, guiding our conversations or more Group brands in FY18 275%revenue increase on The Warehouse app and decisions today so we will deliver on our vision and purpose tomorrow. United by these values, Making the desirable 24EV chargers installed at we stand together as one. The Warehouse stores, saving around 7,500kg of CO affordable and the 2 affordable desirable OUR SHARED VALUES Take the lead since 1982 Create the way Be the experience bikes200 serviced each week Here for good at Torpedo7 stores $5.3m $63m 2mpeople visited 251 stores every week raised for communities in FY18 raised in donations for New Zealand since 1982 02 The Warehouse Group Limited Annual Report 2018 03 Chair’s report Joan Withers We’re on plan The Warehouse Group has delivered payments, the adjusted profit result a solid adjusted Net Profit After Tax would have increased 1.6% year on year. ‘While there is still more work to (NPAT) result of $59.0m for FY18, in In FY17 the material one-off impacts be done, I’m heartened by the what has been a significant year of on our profit result were the sale of our change for the business. Financial Services business, restructuring progress that has been made We integrated separate business costs and some property sales. This year units into a more collaborative group, the one-off impacts relate to a write-down this year to ensure the Group is and invested in capabilities and of the goodwill asset in Torpedo7 as the competitive and delivers world-class talent. We fundamentally business takes longer to scale up, and changed our pricing strategy in the restructuring costs associated with our sustainable profitability. core Red Sheds, and embarked on a transformation. two-year transformation programme While there is still more work to be We’re on plan, and I’m to accelerate our strategy of fixing done, I’m heartened by the progress satisfied with our progress the retail fundamentals and investing that has been made this year to ensure in our digital future. the Group is competitive and delivers as we move closer In the context of this change, to sustainable profitability. We're on plan deliver a profit result above guidance to improve EBIT, and I’m satisfied with towards our goal.’ is very pleasing. our progress as we move closer towards our goal. JOAN WITHERS Financial results We have announced a final dividend Chair, The Warehouse Group The Group has reported a net profit of 6.0 cents per share, which totals to an attributable to shareholders for the overall dividend payment of 16.0 cents year of $22.9m, which is an increase per share in FY18. This dividend payout of 12.0% on last year’s result of $20.4m. is above our dividend policy and reflects As the reported profit includes a the Board's confidence of the Group number of one-off items, our normal strategy. We will look to make further practice is to also report an adjusted comments about the dividend policy net profit number which reflects the at the ASM in November 2018. underlying business performance, and this is the number around which we Providing low prices for our provide profit guidance to the market. customers, every day Our adjusted NPAT for FY18 is The Board is pleased with the outcome of $59.0m, which is (13.4%) down on last the completion of the transition to EDLP year’s $68.2m. This result was up on the in The Warehouse. market guidance of $50.0m–$53.0m The Warehouse has made the change that we issued at the half year, due to to Every Day Low Price (EDLP) with a stronger than expected finish to the a 2.5% reduction in sales and a 1.0% financial year. reduction in gross margin. The sales As indicated at the half year, the decline we’re experiencing is in fact Group’s Short Term Incentives (STI) tapering during each quarter of the year, schemes have been triggered in FY18. going from -5.2% in Q1 to -2.6% in Q2 and This represents an increase in cost -1.2% in H2, giving us confidence that year-on-year as the schemes were only margins will continue to improve over the partly triggered in FY17. If we normalise next three years, in line with our plan. the result for the impact of the STI Chair’s report Chair’s The Warehouse Group Limited 04 Annual Report 2018 05 Chair’s report Joan Withers Facing into change It’s clear that we needed to reshape have experienced that challenge, and opportunities, while providing The Warehouse Group for the future. we are excited about the progress we appropriate levels of oversight. The decline of our recent earnings, the are making. complexity of our operations, impending Investing in our digital future local and global competitive threats and Governance In addition to delivering our changing customer expectations have The Warehouse Group's Board is united transformation programme, transitioning necessitated radical change, and we are in its support of the direction we are to EDLP, and realising the benefits of facing into that change head-on. taking. We are acutely aware of our business integration, we are also making We’ve partnered with international role in supporting the transformation progress on our digital future. We ‘We still have a long road experts to work alongside us as we programme and are adjusting our have invested in digital capability and transform our business, not to revisit our governance practices to help the systems this year, and have started to strategy but to improve our ability to business move faster and stay build our omnichannel ecosystem that ahead of us, but our execute change and deliver sustainable focused on our core strategy. will help Kiwis live their lives better. bottom-line results. We are conscious of the need to confidence is strengthening Together, we co-developed the ensure the skillset around the table Continuing our journey framework for our transformation is right for the future direction of the We still have a long road ahead of us, programme. Led by Chief company and we are in the process of but our confidence is strengthening as as we see encouraging Transformation Officer Scott Newton, finalising a director appointment which we see encouraging signs. FY18 has been 200 senior leaders across the business will be both complementary to existing about implementing and accelerating are rolling up their sleeves and skills and experience and strategically our plan, and we’re on plan. signs. FY18 has been delivering rapid initiatives to improve relevant to the evolution As previously mentioned, we have efficiency, reduce complexity and of the business. activated incentive payments. This was about implementing and deliver cost improvement. The Board Sir Stephen Tindall has decided in recognition of the performance this is looking forward to realising the to take a further 12 months leave of year, the management of significant significant benefits of that programme absence from his directorship of The downside risk in the move to EDLP, and accelerating our plan, and over the next 24 months and beyond. Warehouse Group due to his current the change programme being delivered workload which includes the hosting to schedule. Incentives are an important Leading us forward of the 2021 America’s Cup in Auckland, part of attracting and retaining the we’re on plan.’ I’m incredibly energised by the his ongoing work with The Tindall high-level talent required to execute our leadership team that Group CEO Foundation and investment vehicle transformation. Our business operates a Nick Grayston has assembled. They K1W1 and involvement in some of his reward structure that goes much deeper JOAN WITHERS are extremely driven to achieve larger investments including Lanzatech within the organisation than is the case Chair, The Warehouse Group the outcomes we have set, and the and Rocket Lab. Robbie Tindall will in many other companies. commitment and dedication from the continue to act as his alternate on I want to especially thank the entire team is among the best I’ve seen. The Warehouse Group board. employees of The Warehouse Group. In FY18 we welcomed three new We have changed the structure Your contribution in what has been members to the Executive Team and of some of our committees, reviewed a big year of change is very much two members to the wider leadership and clarified some of our policies appreciated. It is your spirit and team.
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