Ann: ADDRESS: KRK: Special Meeting - Chairman's address

• Release Date: 31/07/15 11:15
• Summary: ADDRESS: KRK: Special Meeting - Chairman's address
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					KRK
31/07/2015 11:15
ADDRESS
NOT PRICE SENSITIVE
REL: 1115 HRS Kirkcaldie & Stains Limited

ADDRESS: KRK: Special Meeting - Chairman's address

Chairman's Address to the Special Meeting of Shareholders
of Kirkcaldie & Stains Limited ('the Company')
31 July 2015

Good Morning Ladies and Gentlemen

Thank you very much for your attendance today for this historic meeting in
the life of Kirkcaldie and Stains.

You will have all received the Notice of Meeting that included the rationale
and the resolutions that the Directors are asking you to approve today. My
comments at this point will therefore be quite brief.

In September last year, the Company's shareholders were asked to approve the
sale of the Harbour City Centre building.  As a result of the successful sale
of the building, at the Annual Meeting the Directors then laid out three
strategic options for the future of the company.  These options were
identified by an independent review of our retail operations.

The three options were:
o Focus on a retail turnaround strategy with a 3-5 year horizon and an
investment of $8-10 million.
o Downsize the retail offer and align with an external provider to develop an
on-line direct channel
o Sell or divest the business and the building lease

Today's voting is to give effect to the outcome of those deliberations which
is to divest the business and the building lease by approving the assignment
of the lease of the Lambton Quay store and the sale of certain Company's
assets to David Jones.

During the review process, the Board formed a view about the current and
emerging retail environment.  This environment has changed radically over the
past decade.

The Board's view of the competitive landscape is that a single large format
store such as Kirkcaldie & Stains lacks the buying power and scale to compete
with the new multi store regional and global operators. These operators have
the ability to create their own brands, extract competitive pricing from
suppliers, and establish platforms for on-line offerings, which a single
store such as Kirkcaldie & Stains has not been able to cost effectively do.

It is important to note that in this emerging environment, our retail
operations have sustained trading losses for each of the past seven years.
Within our resources, we have tried to develop an online direct channel to
compete.  But our efforts have not succeeded.

We were successful with the sale of the Harbour City Centre and we have
received substantial funds.  However the Board's view is that it could not
justify investing a large portion of these proceeds in the retail business
when we are faced with these greater competitive pressures from multi-store
operators. Our view is that any such investment would place too great a
strain on the Company's reserves and would provide no guarantee of an
acceptable return to shareholders.

The second option was to narrow our retail offering.  Again, in this new
retail environment of multi store operators with strong on-line direct
channels and the ability to amortise costs across multiple sites, we again
concluded that success would not be assured.

The Board therefore believes and recommends to shareholders that the best
option available to preserve value for shareholders is to divest the retail
business and return funds to shareholders.

In approaching the option of divestment of the Company's retail business and
maximising funds to return to shareholders, we had a number of priorities.
Any proposal for you needed to involve a suitable third party which could:
o Take an assignment of the Lambton Quay store lease
o Continue to serve our loyal customers
o Be willing and able to offer on-going employment to as many as possible of
our loyal and excellent staff
o Be a fitting successor to the role that Kirkcaldie and Stains has played in
the life of Wellington and indeed, in New Zealand.

In David Jones we believe we have found an excellent counterparty for
consideration by shareholders.

In summary the proposed transaction with David Jones:
o Provides a concrete proposal arising from the strategic options previously
outlined
o Provides the opportunity for a number of the Company's employees to receive
offers of employment in a leading department store, which will ensure a
brighter future for them
o Provides Kirks' customers and Wellington with an outstanding destination
retail environment
o Provides the Company with the opportunity to distribute to shareholders
some of the cash resources built up from the sale of the Harbour City Centre
o Provides the Company with the opportunity, following any such distribution,
to investigate the best means of realising the residual value of the Company

If the resolutions put to the shareholders today are approved, the Company
will continue to trade from its existing locations until late January 2016
with the main objective of realising its retail stock in an efficient and
value enhancing manner.  At the same time the Company will commence the
process to distribute to shareholders an amount of cash equivalent to its
Available Subscribed Capital of $19.354 million.

While no final decision can be made until we know the outcome of today's
meeting, the Board's current view (as well as that of the Company's legal
advisers) is that the best method of distributing funds to shareholders is by
way of a court approved scheme of arrangement. Distributing funds in this way
would avoid any Takeovers Code implications or implications arising under
Listing Rule 7.5. If both resolutions are approved today, the Company is
likely to prepare the necessary court documents with a view to obtaining
final court orders once David Jones has consent from the Overseas Investment
Office to proceed with the transaction. Court approval would be subject to
the transaction settling, with funds then being able to be distributed
shortly after settlement.

If today's resolutions are passed we will actively develop these plans and
will keep the market informed.

If the transaction with David Jones is not approved today, it will be
cancelled and the Board will need to reconsider its position. In absence of
any change in circumstances, the Board is likely to continue to hold the view
that a sale of the Company's retail business is the preferred course of
action and as such it would continue to explore similar options for a sale.

In conclusion, while it will be sad to close the doors at Kirkcaldie & Stains
after 152 years, the transaction with David Jones is in the best interests of
the Company's shareholders, staff, customers, Wellington and indeed New
Zealand. For these reasons the directors of Kirkcaldie & Stains unanimously
recommend shareholders to approve the resolutions.

On behalf of the Company, I would like to thank Kirks staff for their
unconditional support and continuous commitment to customer service despite
the uncertainty of the last few months. I wish everyone all the best for the
future.
Please vote in favour of the resolutions.  Thank you.

Falcon Clouston, Chairman

ENDS
End CA:00267767 For:KRK    Type:ADDRESS    Time:2015-07-31 11:15:05