Troubled department store, Kirkcaldie & Stains, has posted seen a significant drop in pre-tax profit for the six month period ended February 28 2015.
During the period, the retail operations reported a pre-tax profit of $145,000 against a pre-tax profit of $231,000 during the same period last year. The after-tax loss was $404,000 (last year: $193,000 profit), again largely because of the write down of the tax asset.
After a good start to the year, February retail revenues disappointed and sales revenue ended 0.5 per cent behind last year.
Cosmetics, which saw the addition of Jo Malone, continues to perform above last year and expectations. A new concession selling Georg Jensen Living and Alessi products opened on the second floor in November 2014. Both have been well received by customers and the group’s online presence continues to grow.
The strategic review of retail operations likewise continues and it will remain the board’s main focus over the coming months.
The board has decided that while it is considering the options for the business, it should not make a permanent CEO appointment to replace John Milford but instead announce the return of Philip Shewell as acting chief executive and the appointment of Michael (Mike) Curtis as a director.
Pre-tax rofits came in at $57,000, compared $791,000 during the same period last year, reflecting rental revenues and expenses of the Harbour City Centre (subsequently sold) for the full period.
The group’s after tax loss for the six month period ended February 28 2015 was $501,000. This compares to the $563,000 after tax profit during the same period last year.
The primary contributor to the difference in group performance arises from the directors’ decision to write down a previously recognised deferred tax asset of $531,000.
This tax asset had arisen principally from the future tax depreciation benefit from the retail store fit out and stock obsolescence provision. With the current level of profits being achieved by the retail operations, the directors no longer had confidence in the certainty of that asset being fully realised within the foreseeable future.
The now discontinued property operations reported a pre-tax loss of $5000, which compared to a pre-tax profit of $650,000 during the same period last year (which included the rental revenues and expenses for the full period from the Harbour City Centre).
The after tax loss was $14,000 (last year: $460,000 profit). A significant contributor to this after tax loss was a fair value adjustment of $266,000 required in respect of the outstanding receivable from the sale of the Harbour City Centre to take account of the time value of money, but this will fully reverse on receipt of the outstanding amount.
The sale of the Harbour City Centre building settled on October 7 2014 when the first payment of $41,100,000 was received. Net proceeds of that payment, after repaying the bank loan, were $16,981,000. The proceeds have been placed on term deposit with three registered banks. Reception of the final installment of $4,750,000 is expected from the purchaser of the HCC on October 7 2015.
