Warehouse Group has entered into an unconditional contract to sell its Newmarket property in Auckland for $65 million and said the proceeds will be used to reduce debt.
Settlement of the property sale is expected to be completed in July 2017 and the sale proceeds of $65m will generate a pre-tax gain of approximately $12m, the Auckland-based company said in a release to the stock exchange. Further details will be provided when it announces its full-year result on September 22.
The site will continue to be leased and operated by Warehouse until it is to be vacated in October 2018.
In March, Warehouse posted a 76 per cent drop in first-half profit to $13.6m after the retailer took an impairment charge against its financial services unit, recognised restructuring costs and earned less from its Red Shed department stores. Net debt stood at $263.3m, with a gearing ratio of 33.5 per cent. Warehouse's interest bill was $8.9m in the first half.
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At the time, it said weak trading had continued into the second half of the year and as a result, full-year adjusted profit was forecast to be $54m to $58m, a drop of as much as 15 per cent from a year earlier.
The retailer is on a cost-cutting drive, cutting a net 130 jobs at its store support offices in Auckland and some regional centres, in a slimmed business structure to whittle down leadership into its two new arms and move support systems of the existing brands to be group-wide.
The shares last traded at $2.22 and have dropped 22 per cent so far this year.