Ann: HALFYR: KRK: Market Announcement - Half Year

• Release Date: 27/04/12 19:02
• Summary: HALFYR: KRK: Market Announcement - Half Year Results
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KRK
27/04/2012 17:02
HALFYR

REL: 1702 HRS Kirkcaldie & Stains Limited

HALFYR: KRK: Market Announcement - Half Year Results

The six-month period ended 29 February 2012 continued to provide difficult
trading conditions, particularly in the retail sector and it was not helped
by the poor summer weather. The property company was again impacted by the
reduction in rental income whilst the earthquake strengthening and
refurbishment work on the Harbour City Centre was undertaken. The result for
the Group showed a pre-tax profit of $9,000 (after tax $11,000) for the
six-month period ended 29 February 2012. This result is below the pre-tax
profit of $561,000 (after tax $380,000) achieved during the same period last
year.
The earthquake strengthening of the main Harbour City Centre ('HCC') building
to 100% of code which started in January 2011 was completed in March 2012 on
budget and on time.
Given the result, the Directors resolved not to pay an interim dividend for
the six-month period ended 29 February 2012. As well as predicting minimum
retail growth for the second half of the financial year, we are expecting
additional non-recurring costs resulting from the implementation of the new
merchandise system and staff reorganisation. Our latest forecast for the full
year to 31 August 2012 shows a pre tax loss for the Group of $0.9 million.
The property company profit before tax for the period was $462,000 which
represents a decrease of $266,000 or 36.5% from the previous period's before
tax profit of $728,000. This was mainly caused by a reduction in rental
income, as previously advised, due to the earthquake strengthening work
carried out on the HCC building. We also fully expensed demolition costs and
our insurance premiums have substantially increased. However the property
company benefited from the reinstatement of rental income from the new
Country Road store which opened in November 2011. All rental income from the
newly redeveloped and earthquake strengthened space leased to Contact Energy
has been reinstated from 1 April 2012.
The retail company reported a loss before tax of $336,000 which represents an
increase of $296,000 from the previous period's loss before tax of $40,000.
This was mainly caused by an increase in depreciation and amortisation
charges linked to our major investment in the integrated POS and merchandise
system and a large increase in insurance premiums. Even with a slight
increase in sales from the previous year, we had a decrease in gross profit
margin of 0.8% due to increased competitive pressures.
Retail trading continued to remain difficult with shoppers extremely cautious
about spending in the current economic environment and many preferring to
retire debt rather than spending disposable income. The Government's focus on
reducing the state sector has impacted on the Wellington community due to its
dependency on the public sector.  Despite the difficult environment,
management is focussed in bringing the retail business back into
profitability in the medium term. The rollout of the integrated POS and
merchandise system has been accelerated and it is to be completed by August
2012.  Kirkcaldie's website is being redesigned and an on-line store is being
built. Actions have been undertaken and savings have been made on back office
expenses. The marketing strategy for our fashion departments has been
reviewed and new brands have been secured. A major revamp has taken place in
ladies fashion, shoes, lingerie and menswear. The new Kiehl's cosmetic brand
will open in May bringing another exclusive to Kirkcaldie's in Wellington.
As always Kirkcaldie & Stains remains focussed on customer service. This
focus culminated in Kirkcaldie & Stains being awarded the title of Department
Store of the Year in the New Zealand 2011 Roy Morgan Research Customer
Satisfaction Awards.
Despite the disappointing retail result and the effect of the property
upgrade, the Group's balance sheet remains robust with shareholders' funds of
$19,753,000 which represents an equity ratio of 42.2%. The most recent
valuation of the HCC building dated 31 August 2011 values the asset at
$46,500,000 (increasing to $48,650,000 upon completion of the current
earthquake strengthening and development project).
Over the past few years the Group has made considerable investments in the
HCC building and in the integrated POS and merchandise system. The Group will
benefit from these investments in future periods by the way of increased
rental income and increased efficiencies in its retail operation.

ENDS

For further information:

Mr Falcon Clouston
Chairman
Kirkcaldie & Stains Limited
PO Box 1494
Wellington 6140
Ph: 04 472 5899
End CA:00222305 For:KRK    Type:HALFYR     Time:2012-04-27 17:02:37