Ann: ADDRESS: KRK: 2014 Annual Meeting - Chairman

• Release Date: 20/02/14 10:30
• Summary: ADDRESS: KRK: 2014 Annual Meeting - Chairman's Address
• Price Sensitive: No
• Download Document  6.61KB

					KRK
20/02/2014 08:30
ADDRESS

REL: 0830 HRS Kirkcaldie & Stains Limited

ADDRESS: KRK: 2014 Annual Meeting - Chairman's Address

Chairman's address to the Annual Meeting of Kirkcaldie & Stains Limited
19 February 2014

Good evening Shareholders
As disclosed in our Annual Report the financial year to the 31st August 2013
was very tough. The year closed with the Group posting a pre-tax loss of
$2.38 million which compares to a pre-tax loss of $1.08 million in the
previous year. The after-tax result for the Group was however a profit of
$168,000 due to the release of $1.9 million in deferred tax liability as a
result of the change in use of the Harbour City Centre (HCC).

Retail
The economic conditions in the Wellington region continued to inhibit
discretionary consumer spending. In addition Internet shopping, facilitated
by the high New Zealand dollar and the current GST legislation, provides
consumers with increasing opportunities to buy international brands online.
The combination of these two factors has had a very significant impact on the
buying behaviour of our customers.
The economic indicators across New Zealand for 2014 look to be improving,
although I will caution that the Wellington region is slow to fire.
I will ask Mr Milford shortly to talk to you more specifically about the
retail operations.

Property
The property operations reported a pre-tax loss of $527,000 compared to a
pre-tax profit of $908,000 in the prior year. The property business was
affected by the refurbishment of levels 4 and 5 of the HCC given that we did
not receive rent for 8 months from these two floors. The cost of demolition
(which we could not capitalise) and repairs and maintenance expenses incurred
in connection with the refurbishment of the common areas of the building had
a significant impact on the annual result. In addition we were affected by
another considerable increase in insurance premiums and costs of $161,000
were incurred for remedial works of a cosmetic nature after the July and
August 2013 earthquakes.
We are pleased to announce that the refurbishment of the HCC has been
completed on time and on budget. Since 1 May 2013 Contact Energy has been
paying full rent on the five floors it occupies.
On the 1st July 2013 the Harbour City Centre ceased to be owner occupied and
became an investment property. All Kirkcaldie and Stains retail operations
were moved back into the main store, and the back office and warehousing
facilities moved to Petone. The HCC is now measured at fair value in our
balance sheet. The value of the HCC at 31 August 2013 was independently
assessed at $50,000,000.  This resulted in our shareholders' funds increasing
by $18 million to $37,071,000. Hence our net asset backing of $3.53 per
share.
Since the completion of the refurbishment of the HCC we have been busy
leasing the space on the ground floor vacated by our retail business, and
refining and reducing our operating costs to maximise the net rental income
for the building. During this time we received a number of enquiries from
parties interested in purchasing the property. As announced on 10 February
2014 the board has made the decision to offer the HCC for sale by
International Tender through Bayleys - Capital Commercial Limited.  The
tender will give prospective purchasers the option of buying both the front
building and the rear development site or either of the two. The timetable is
for the tender process to close on 16th April 2014 and of course any sale
will be conditional on shareholder approval.

The Future
What's from now?  As already stated the board has made the decision to sell
(subject to shareholder approval) the HCC which is owned by Kirkcaldie &
Stains Properties Limited. If this strategy is successful, a portion of the
settlement proceeds will be applied to retire the $23.5 million bank debt,
leaving Kirkcaldie and Stains debt free.
As John will explain the retail business is in for another tough year.
However despite the history of losses I am certain we can improve and refine
our business model to see the retail operations return to profitability in
the medium term. This will, without doubt, involve us making a bigger
investment in our online store and fully utilising all available social media
avenues.
What I am signalling is that before we make any decisions on how and how much
of the surplus generated from the sale of the HCC we distribute to
shareholders, we must first recapitalise the retail company so it can turn a
fair profit in the long run.  The recapitalisation must take into account the
terms and conditions of our long term lease for the store and our ability to
meet the rental payments as they fall due. I am also aware that some
shareholders may not want to take the risk of owning a modern "Omni Retail
Business". This alone may mean we have to consider a restructure of the
shareholding in the retail business.
We intend to spend considerable time over the next few months on addressing
these issues, but nothing will be implemented without shareholder approval
and consultation with our other stakeholders.

Retirement of Phillip Shewell
In late December 2013 the Company announced the wish of Phillip Shewell to
retire as a director of Kirkcaldie & Stains Limited and subsidiaries
effective from our annual meeting today.
Phillip was Kirkcaldie & Stains' Managing Director for over six years until
he resigned in February 2001. Following a recommendation from the board,
Phillip was appointed as a non-executive director in 2002. So in effect
Phillip has served with the Company and subsidiaries for over 20 years.
I would like, on behalf of the board, to thank Phillip for his loyal and
dedicated service to the company and I would also ask all those present
tonight to show their appreciation in the normal way.
Thanks Phillip and we wish you all the best in your retirement.

Election of Directors
This year Kerry Prendergast is up for re-election and the other members of
the board are pleased that she has offered herself for re-election. The board
supports the-re election of Kerry.
As mentioned earlier Mr Christopher Swasbrook has given notification of his
intention not to seek election to the board of Kirkcaldie & Stains Limited at
the 2014 annual meeting.
The retirement of Phillip Shewell leaves a vacancy on the board. The board's
preference is to appoint a director with experience in the retail sector
given the properties are up for sale. The timing of this will be after the
outcome of the tender process.

Management and Staff
I and my fellow directors would like to thank our management and staff for
their hard work and dedication in the past year.

Thank you
Mr Falcon Clouston
Chairman
End CA:00247229 For:KRK    Type:ADDRESS    Time:2014-02-20 08:30:42