Ann: ADDRESS: KRK: 2014 Annual Meeting - Managing

• Release Date: 20/02/14 10:30
• Summary: ADDRESS: KRK: 2014 Annual Meeting - Managing Director's Address
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					KRK
20/02/2014 08:30
ADDRESS

REL: 0830 HRS Kirkcaldie & Stains Limited

ADDRESS: KRK: 2014 Annual Meeting - Managing Director's Address

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

Good evening Ladies and Gentlemen
Our Annual Report for the financial year ending 31 August 2013 reported an
after-tax profit for the Group of $168,000 compared to an after-tax loss of
$773,000 in the previous year.
The Group's balance sheet remains robust with shareholders' funds of
$37,071,000 which represents an equity ratio of 56.4%.
At year-end the Group held cash and cash equivalents of $2,746,000 which
represents a decrease of $2,381,000 from the prior year.

Retail
The retail operations reported a pre-tax loss of $1,836,000 (including an
impairment charge of $301,000 recognised against a receivable from The
Kirkcaldie & Stains Trustee Company Limited) which compares to a loss of
$1,760,000 in the prior year.  Sales revenue for the year fell from
$34,205,000 to $32,236,000, a decrease of 5.8%. However the gross margin
percentage showed an increase of 1%.
The retail climate in the Wellington region continues to be challenging.
This is supported by Government statistics which show for the year to
September 2013 that the Wellington region, in the categories that 'Kirks'
operates in, dropped by 6.8% on the prior year.  Kirks dropped by 4.8% or
performed 29% better than comparable retailers in the region.  Wellington
faced a number of challenges during the year and a paralysed council, unable
to make decisions or take actions didn't help. We had two earthquakes which
shook consumer confidence about coming into the city and also resulted in two
major multi storey car parking building being permanently closed with no
action and/or no concern from the council (which suits their anti-car agenda
for the city). To cap the year off the council decided not to celebrate
Christmas (retailers most important time of year) with no decorations and no
atmosphere, even though retail businesses pay a significant amount of
business rates. The newly elected council is saying all the right things
about what needs to happen. The council needs to - quote - "think wisely,
plan boldly and act swiftly".
It is not all negative: improvements have been made in the retail business
with an increase in the gross margin, better inventory management and expense
control. Operating expenses (excluding the impairment of the receivable from
the Kirkcaldie & Stains Trustee Company Limited) decreased by $729,000 or
4.4% on the previous year, despite of a number of costs rising.

We also achieved a number of other objectives during the year:
- We refurbished and re-laid Children's world, Men's Shoes, Men's Gifts and
Household Linens.
- We consolidated our Food, Confectionery and Wine offer and our Kitchenware
and Luggage departments into the main store.  To achieve this we moved Cards
& Stationery to the 2nd floor and re-laid the China and Glass area.
- We opened an exclusive young fashion brand from the UK - Miss Selfridge
which will provide access to a number of the other brands owned by the
Arcadia Group.
- We opened the new Wedgewood, Waterford and Royal Doulton concession on the
2nd floor with a new stunning shop-fit.
- We received the Roy Morgan Department Store of the Year Award for 2012 -
winning two years in a row.
- We launched our new online store which to-date has over 10,000 products on
offer and we are adding to it all the time including the Estee Lauder Group
of brands which should be online within the next three months.
- We moved Kirks' administration, price marking and storage facilities out of
the earthquake prone rear site of the HCC to new premises in Petone, Lower
Hutt. The new premises meet earthquake requirements and have allowed us to
significantly upgrade the ambience and environment for our staff as well as
giving us increased storage capacity.

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.
At August 2013 the Harbour City Centre (HCC) was valued $50,000,000 which is
a $3,450,000 increase on the prior year.
We completed the refurbishment of levels 4 and 5.  We created and refurbished
the internal atrium.  Contact Energy refurbished levels 2 and 3 and now
occupies levels 1 to 5.  In addition we upgraded the corridors on level 6,
refurbished the lifts and stairwells, as well as improving the toilets and
the wheel chair access to the building. Finally the roof was resealed.

Retail Business Update for the 2014 Financial Year
We continue to face revenue challenges with the Wellington region still
lagging behind the rest of the country.  In addition online shopping is
growing with sales of $2.7b nationally being recorded for 2013 of which $1b
went to overseas providers.  Online sales both domestically and overseas,
excluding food, now make up nearly 10% of the total retail spend in New
Zealand. Online shopping from overseas providers grew by 15%.  This growth
not only hurts New Zealand based retailers but also denies the collection of
significant tax revenue for the Government.  Ultimately if a solution is not
sought to this growing trend we may have to pay more tax in a different way.
Potentially GST may have to be raised to compensate for the loss of tax
revenue.
We continue to successfully manage our expenses and to-date we have reduced
our expenses by 7% on the prior year.  We are replacing our existing lighting
in the store with energy efficient LED options capable of reducing our energy
consumption from lighting by over 80%. In addition the new LED lights
generate no heat - a real bonus in a non-air conditioned store.
We are rebuilding our women's fashion offer after losing Jane Daniels and
Ashley Fogel closing his business.  For this season we have 25 New Zealand
designed and made in New Zealand brands. We can announce the opening of a
Sportscraft concession in April and are looking at a number of other UK
brands.
We have partnered with other department stores in New Zealand to launch a new
brand - Levene Classic.  Under this brand we will source direct home products
which will give us a much better margin and allow us to make value statements
that will be competitive in the market place.
We have been trailing a rewards offer on 8 cosmetic houses, it is our
intention widen this program to compete in the market place.
Following the consolidation of our retail business in Lambton Quay, we
believe there is an opportunity to open a Kirks furniture store in the city
fringe where the rent is more affordable.  This will also give us more space
in the main store to make the shopping environment more comfortable for our
customers and allow us to drive more sales.
We will continue to add products to our online store with the goal of
tripling the amount of products available for sales by the end of the
financial year.
We still believe that the domestic economy will be challenging.  However with
us looking to grow the top line revenue, continuing to source the right
products and controlling our expenses, we believe the retail business'
performance should improve.
Our focus is still on service, selection, value and style.
2013 was a significant year for Kirks with us celebrating our 150th
anniversary.  A number of activities were held including a black tie dinner
for our suppliers. I am delighted to advise you that we raised $75,000 for
the Wellington Children's Hospital.  We would like to think that this
contribution could go towards building a new Children's Hospital rather than
patching-up the existing one.  This donation is a tribute to our staff, our
suppliers, our service providers and our customers and it shows that we
really care about the community who supports us.
I would like to thank my fellow directors, the Kirks team and our customers
and of course our shareholders for their continued support in challenging
times.

John Milford
Managing Director
End CA:00247230 For:KRK    Type:ADDRESS    Time:2014-02-20 08:30:45