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The Warehouse And WestpacTrust To Partner

24 May 2001


The Warehouse Group Limited (“The Warehouse”) and WestpacTrust announced today the formation of a joint venture, called The Warehouse Financial Services Limited, to provide retail financial services through The Warehouse’s nationwide chain of 74 retail stores.

The Warehouse Chief Executive Officer Greg Muir and WestpacTrust Chief Executive Tom Gallagher said the venture combines the expertise and credibility of New Zealand’s largest bank with the distribution success of the country’s largest general retailer in order to meet growing customer demand for retail financial products and services and flexibility in accessing them.

“New Zealand consumers have come to expect greater convenience and wider choice. Our venture with WestpacTrust will combine value-for-money shopping and value-for-money financial products and services under the one roof,” said Mr Muir.

The joint venture also builds on the strong relationship The Warehouse and WestpacTrust have had since 1994. In that time WestpacTrust has operated The Warehouse Card, whose more than 200,000 cardholders are expected to form a strong customer base for the new financial services company.

Mr Gallagher said the venture opens up new markets for both WestpacTrust and The Warehouse. “We look forward to playing a part in providing innovative financial services to even more New Zealanders through the combination of our robust systems, The Warehouse’s extensive and loyal customer base, and the trust New Zealanders have in both businesses.

“WestpacTrust’s selection is an endorsement of our capabilities in delivering financial services and in the investment we have made in these systems,” said Mr Gallagher. “It also reflects our long standing relationship and the strong commitment we both have to New Zealand and the community.”

The Warehouse Financial Services Limited will be responsible for the sales and marketing of financial products and services through The Warehouse. The Warehouse will provide their brand, store locations and marketing channels and services, while WestpacTrust will provide most of the products, product management expertise, the back-end processing systems, infrastructure, and risk/credit management expertise.

With the signing of the joint venture, work will continue on finalising the initial product range, pricing and marketing strategy. The first The Warehouse Financial Services products should be on sale within the next six months. Initially, The Warehouse Financial Services will offer consumer credit and risk related products that will appeal to all New Zealanders, including credit cards and every day, basic cover insurances. Products and services will be sold through The Warehouse stores, by direct mail and over the phone.

Home loans, savings and investment services will not be offered initially but are being evaluated as part of a planned rollout of products and services over the next few years.

“The products and services we offer our customers must have real customer value while being profitable. We plan to extend our range over time, in line with our strategy of offering different types of products across a range of price points,” said Mr Muir.

The new joint venture will have a separate board of directors appointed from The Warehouse and WestpacTrust and will be chaired by WestpacTrust Chief Executive Tom Gallagher. The other directors are Ross Aitken (WestpacTrust General Manager Retail), Girol Karacaoglu (WestpacTrust General Manager Financial and Card Services), Paul Bayliss (WestpacTrust General Manager Strategic Development), and from The Warehouse Greg Muir (Chief Executive Officer), Bruce Gordon (General Manager Non Retail), Brent Waldron (Chief Financial Officer), and David Wilson (General Manager The Warehouse).

“The venture brings together two great New Zealand businesses that share a strong community focus. The Warehouse is New Zealand’s leading value-for-money store and more Kiwis bank with WestpacTrust than any other bank. After intensive planning we are confident we have a proposition that will offer financial products and services at competitive prices while bringing enhanced profitability and return to our shareholders,” said Mr Muir and Mr Gallagher.



Questions and Answers

What range of products will be offered?

The Warehouse Financial Services Limited will provide retail credit and insurance based products and services. Initially this will include credit cards and some everyday insurances. We will look to extend the range of products over time where there is a customer need and where the offers are also viable for the business.

When do you expect to launch products?

The signing of the joint venture creating The Warehouse Financial Services Limited is the first stage in the process of offering financial services. The next stage is finalising the initial product offerings, pricing and marketing strategies. There will be a public launch of the products and services once these details have been worked through. Expect a further announcement within six months. In the meantime the Warehouse Card and associated loyalty programme remain entirely unchanged.

How much money are you putting into this?

The Warehouse Financial Services Limited will be 51% owned by WestpacTrust and 49% owned by The Warehouse Limited. The initial investment is $5 million with further investment planned as business plans are developed and as the business grows.

How much do you expect to make from the joint venture? Each partner will be paid on a profit share basis. Each partner will provide services and support to The Warehouse Financial Services. The business is expected to be earnings positive within three years

Why the 51% / 49% ownership split?

It’s a practical issue to meet a number of business requirements of the shareholders.

Are you going to be a bank?

No. The Warehouse Financial Services will be a strong competitor in the financial services market but it is not setting out to replicate the services of a bank, nor are we targeting any particular sector of society. We looked at offering account based transaction services, but the complexities of offering such services meant that we could not develop a profitable business case at this stage. What we will be doing is offering a range of financial products and services we believe customers want and will be happy to buy in The Warehouse environment.

Will The Warehouse Financial Services offer home loans?

Not initially, but we are considering them and plan to offer them in time.

Who will The Warehouse Financial Services be targeting?

We believe that the services offered will appeal to the wide cross section of New Zealanders shopping at The Warehouse. Our target market is best summed up as all New Zealanders who seek value for money products and services. Our 200,000 customers for The Warehouse Card are a strong initial customer base. We hope to attract them to our new services.

What’s been learnt from overseas experience? Delivering financial services through successful retail chains is well established overseas. The Warehouse Financial Services model differs from overseas launches in that we are purposely not initially offering savings and investment products and home loans until we are confident they can be offered in a way that adds real customer value, while returning a profit.

How will the JV be run? The Warehouse Financial Services will be run as a separate entity with its own management, but it will work closely with both The Warehouse and WestpacTrust. Board members will be drawn from both companies.

What are your roles in the JV? The Warehouse Financial Services Limited will be responsible for marketing the financial services. The Warehouse will provide their brand, store locations and marketing channels and services, while WestpacTrust will provide most of the products, product management expertise, the back-end processing systems, infrastructure, and risk/credit management expertise. In this way we use the strength of each partner to the full.

How will products and services be sold? Products and services will be sold through The Warehouse stores and by phone and/or mail fulfilment.

Why is The Warehouse going into retailing financial products?

The Warehouse customers will be able to review financial service offerings at their leisure in The Warehouse’s extended hours. The Warehouse believes it will be able to bring good value products to its high volume of customers. Research has also shown customers will buy financial products from The Warehouse and the experience with The Warehouse Card has been good with over 200,000 cardholders.

Why was WestpacTrust chosen? The Warehouse needs to deliver a service offering that is both credible and profitable. WestpacTrust’s experience and capabilities in this area were important factors in choosing them. We have a long-standing relationship with The Warehouse Card and WestpacTrust has shown, through its involvement with the Westpac Group, that it has access to global best practice in all parts of the financial services industry.

Why is WestpacTrust getting into a joint venture with a retailer? The Warehouse is New Zealand’s largest general retailer and our best known retail brand. Working with The Warehouse gives WestpacTrust a solid position in the growing non-bank financial services market, with nationwide access to an existing loyal customer base. This will enable WestpacTrust to reach new customers in new ways, which is important in a market that is increasingly competitive.

How will existing Warehouse Cardholders be affected? The existing Warehouse Card customers are very important to us and will continue with the card. It is expected that Warehouse Card cardholders will be offered additional services at our launch. The joint venture company will become the owner of The Warehouse Card. There are over 200,000 cardholders representing an annual spend of over $100 million. Will there be an offering in every store? All stores will have information about The Warehouse Financial Services products.


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