Ann: ADDRESS: KRK: 2016 Annual Meeting of Shareholders - Chairman's Address

• Release Date: 23/02/16 10:12
• Summary: ADDRESS: KRK: 2016 Annual Meeting of Shareholders - Chairman's Address
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					KRK
23/02/2016 10:12
ADDRESS
NOT PRICE SENSITIVE
REL: 1012 HRS Kirkcaldie & Stains Limited

ADDRESS: KRK: 2016 Annual Meeting of Shareholders - Chairman's Address

Chairman's Address to the Annual Meeting of
Kirkcaldie & Stains Limited (the Company)
23 February 2016

Good Morning Ladies and Gentlemen

After almost 153 years of trading, on Saturday 16 January 2016, the 'Grand
Lady of Wellington' closed its doors for the very last time. Everyone can
hold their heads high. We negotiated the exit of a non performing business
and at the same time we looked after our staff who gave back their total
commitment. We also have had wonderful support from our suppliers and
customers which were with us until the very end.

Wellingtonians were saddened to see Kirkcaldie & Stains closing, but at the
same time they were understanding and excited about David Jones opening their
first overseas store in Wellington.
The Board is now focused on the next phase of the wind down, which is to
maximise the residual value in the Company and the distribution of funds to
the Company's shareholders, many of whom have loyally supported Kirkcaldie &
Stains for generations.

The 2015 Financial Year

The 2015 financial year was a year of unprecedented events and, despite the
trading losses, it was a very satisfying year for the Company in that we sold
the Harbour City Centre and approved the sale to David Jones. These two
events resolved the future of the Company.

The Group posted a pre-tax loss of $4,317,000 after recognising a number of
provisions and adjustments as a result of entering into the Sale and Purchase
Agreement with David Jones (the 'Sale'). The Sale meant the Company had to
close its Lambton Quay store and exit its retail operations by end of January
2016.

Shareholders' funds dropped from $30,626,000 at the end of 2014 to
$26,169,000 (or $2.55 per shares) at the end of August 2015. At that time the
Group held cash and cash equivalents of $21,461,000.

Despite the losses, the Group achieved several milestones during the 2015
financial year:
o In October 2014 we settled the sale of the Harbour City Centre which
generated an immediate cash inflow of $17,125,000 with a further $4,750,000
received after balance date on 7 October 2015.
o On 4 June 2015 we entered into the Sale and Purchase Agreement with David
Jones, which shareholders strongly supported and approved at the special
meeting of 31 July 2015.

The announcement of the Sale to David Jones had an immediate positive impact
on Kirkcaldie & Stains' share price which jumped from $1.68 to $2.25
immediately after the announcement, then stabilising to around $2.20 per
share.

Store Closure

As you are aware the Company's retail stock was not included in the Sale to
David Jones and as such we formulated and implemented a plan to progressively
reduce our retail stock with the aim to achieve a nil or close to nil stock
level by the end of January 2016.

We were very successful with this thanks to the ongoing support and
collaboration of our suppliers, concessions and the outstanding performance
of the Kirks' team. The team were set some clear goals: close the 'Grand Old
Lady of Wellington' with the well-deserved dignity and respect and sell as
much stock as possible. The goals have been achieved and, with the exception
of a few lonely items which were donated to Wellington based charitable
organisations, everything else was sold. I have to say that the closing down
results exceeded our initial forecast and this is a testament to the
collaboration and support of all the people involved.

The financial statements for the half year are still being finalised, but
these are expected to be released in early April.

We were conscious of what Kirkcaldie & Stains meant to New Zealand and
Wellington in particular, and as such we wanted to preserve its story for
future generations.  So, we donated our paper archives, photo collections and
items of historical significance to the Wellington Museum, the Alexander
Turnbull Library and Te Papa. We also donated our Charity Bear collection to
the Wellington Children's Hospital, our long standing chosen charity.

The Sale to David Jones settled, as planned, on 1 February 2016: the Lambton
Quay store lease was assigned to David Jones, the Company received the agreed
AUD400,000 for the name 'Kirkcaldie & Stains' and deposited $2 million to its
solicitors' trust account. The $2 million will be held in escrow for one year
in the event of a claim made against Kirkcaldie & Stains for breach of the
agreement with David Jones. However David Jones has agreed, upon completion
of its refurbishment works, to review the escrow arrangements and to consider
releasing all or some of the funds early. It is our expectation that no claim
will be made against the Company for breach of the agreement or its
warranties.

Capital Return

At the special meeting on 31 July 2015, shareholders approved the
distribution of the Company's Available Subscribed Capital of approximately
$19.354 million by way of pro-rata share buyback and cancellation offer, or
by way of a Court approved scheme of arrangement.

As communicated to the market, the directors proceeded with the Court
approved scheme of arrangement and on 27 November 2015, the Company filed
applications seeking orders from the High Court to approve a scheme of
arrangement under Part 15 of the Companies Act 1993.

On 9 February 2016 the High Court granted final orders approving the scheme
of arrangement. Pursuant to the scheme, the Company will:
o cancel four (4) in five (5) of its shares; and
o return to shareholders an amount of $2.3602 per share cancelled.

The record date for capital return will be 5.00pm on 25 February 2016 and the
Company will make payment to shareholders on Monday 29 February 2016.

I note that the return of capital will not alter shareholders' proportionate
shareholding, voting and distribution rights. Likewise the return of capital
will not alter shareholders' proportionate entitlement to share in the
residual value in the Company (other than to the extent there may be some
very minor changes to account for rounding).

Residual Value in the Company

Following the distribution of the $19.354 million, there will be a material
amount of shareholder value still left in the Company. Its precise amount
will depend on the following:
o the time taken to procure an assignment on the three remaining leases (262
Thorndon Quay, 19 Regent Street Petone and 26 Brandon Street); and
o whether or not any claim will be made by David Jones against Kirkcaldie &
Stains for breach of the sale and purchase agreement or some other unexpected
matter arises.

The Company is making good progress with the assignment of the Thorndon Quay
and Brandon Street leases. The assignment of the Petone lease has proven more
difficult to achieve given the lease term (still seven years to run) and the
premises' physical configuration (a relatively small warehouse versus large
office space); however we are currently under negotiation with a party
interested in purchasing the property for their own occupation. To get this
deal done so we can surrender the Petone lease we may need to pay some money,
but obviously any payment will be substantially less than the total amount we
would otherwise pay through to the end date of the lease.

The directors are currently assessing whether there is any interest in the
Company as a vehicle for a 'backdoor' listing. If no suitable interested
party is found, the directors will then move towards a solvent liquidation
and de-listing. Any such steps will require shareholder approval and a period
of notice will be given to allow shareholders to investigate their options.

This morning we made a release to NZX providing some guidance to shareholders
on the expected residual value that will be left in the Company after the
capital return in the event that the Board recommends to shareholders that
the Company be put into a formal liquidation process, or another opportunity
arises to realise value for shareholders.

While there are a number of uncertainties, the Board's present assessment is
that once the distribution of $19.354 million has been completed next week,
the Company will have net assets in the range of $6.5 million to $7.5
million.  At this time the Company will have approximately 2,042,830 shares
on issue.

After the distribution of $2.36 per share and cancellation of four out of
every five shares currently on issue, this residual value range is equivalent
to $3.18 to $3.67 per remaining share (or a residual value of $0.63 to $0.73
calculated on the basis of the current 10,250,000 shares on issue).

The Board is optimistic that the final figure will trend towards the higher
end of this range but (as I have just noted) this is principally dependent
on:
o satisfactory resolution of remaining lease issues
o no warranty claim under our agreement with David Jones or any other
unexpected matter arising.

Shareholders and the market will be kept informed as and when these matters
clarify themselves.

Thank you

On behalf of the Board, I would like to say thank you to all Kirks staff for
a very successful closure of an icon. A special thank you must go to the
Management Team which led Kirks and its staff during a very difficult and
testing time. I wish everyone all the best for the future.

I also would like to thank our suppliers, concessions, tenants, advisers and
customers for supporting Kirkcaldie & Stains and its store until the end:
their contribution and on-going efforts had been pivotal to the successful
closure.

And finally I would like to thank you, our shareholders, for your support and
patience over the last few challenging years.

Thank you
Mr Falcon Clouston
Chairman
END
End CA:00278132 For:KRK    Type:ADDRESS    Time:2016-02-23 10:12:47