ADDRESS: KRK: Managing Director's speech to the Annual General Meeting

16 Feb 2010 5:30 pm

KRK 16/02/2010 ADDRESS

REL: 1730 HRS Kirkcaldie & Stains Limited

ADDRESS: KRK: Managing Director's speech to the Annual General Meeting

Good evening Ladies and Gentlemen,

Our annual report for the financial year ending the 31st August 2009 reported a satisfactory profit for the company of $1,024 million which is an increase of 31.6% in consolidated tax paid profit over the previous year. This profit is largely as a result of the performance of the property company rather than the retail company.

The retail environment for the whole year was difficult, with the first half being worse than the second. We finished the year with a 5% decrease in sales compared to the previous year. The management team focused on the things that we could influence within the business. The profit margin was maintained at 42%, the same as the previous year, our inventory levels have been reduced by 18% and we have ensured that our inventory is clean. We have reduced our discretionary expenses by 5.4%. A 21 year lease renewal on the AMP owned main store building has been negotiated, bringing together two leases into one. In addition, we have secured two further rights of renewal of 21 years each.

We have continued to secure new merchandise brands such as the first Mimco fashion accessory concession in New Zealand, a designer watch and sunglass concept with brands such as Fossil, Burberry, Emporio Armani, DKNY, Tom Ford, Gucci and Adidas. In addition we have expanded the number of concessions within the store. The point of sale project started its staged rollout in November 2009 with the installation of the tills in the store. The project will now focus on the retail management system and customer relationship management project and it is envisaged that this next phase of the project will take twelve months to be substantially implemented.

We foresee a subdued trading year for the retail company ahead. Retail sales from September 2009 to January 2010 (after adjusting for a one off clearance sale that was held in the same period last year) are 2.3% below last year. We are forecasting a half year pre tax result close to $1 million which will be an improvement on the prior year half year result of $731,000. We expect the full year result to be close to that achieved in the prior year which was a profit of $1,530,000.

We will continue to focus on inventory control and maintaining our margins. Discretionary expenditure will be closely monitored whilst we look to reduce fixed overheads as contracts are renegotiated. The opportunity for further expense savings has been reduced so we will now focus on growing top line sales. A more aggressive yearly promotional plan has been formulated which will see us increase market share. We are also consolidating our retail presence in the Harbour City Centre in preparation for other retail tenants taking extra space.

The point of sale rollout and our focus on sales has led us to redefine the operations of the business and create dedicated teams in three key areas: sales, buying and administration. We believe that this will enhance our sales, improve our margins and make our administration more efficient.

The focus for the property company for the coming year will be to formulate a strategy for the tenant mix in the front building, finalise plans for the retail utilisation on the ground floor and ensure a low vacancy rate amongst our 100 plus tenants.

I would like to take this opportunity to thank you our shareholders and our customers for your support, I would also like to thank the great team that we have at Kirkcaldie & Stains for their past and future efforts.

ENDS

For further information please contact:

Mr John Milford Managing Director Email: John.milford@kirkcaldies.co.nz Phone : (04) 494 7260 End CA:00191250 For:KRK Type:ADDRESS Time:2010-02-16:17:30:06

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