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Stock exchange releases

Results for year ended 1 August 2010

The Directors advise that the audited net profit after tax for the 12 months ended 1 August 2010 was $19.581 million (2009: $12.803 million), an increase of 52.9%. The result includes a onetime non cash tax charge of $852,000 resulting from the change to tax for depreciation on buildings. Earnings before tax on normal business activity lifted 59.7% on the previous year to $29.232 million (2009: $18.302). Total Comprehensive Income for the year after fair value adjustments was $22.237 million (2009: $9.748 million). Group sales were $207.139 million (2009: $198.197 million) an increase of 4.5%. Earnings before tax for the second half of the financial year (February to July) lifted 62.5%, driven mainly on gross margin growth. The growth in gross margin can be attributed to three factors: 1. An improved buying regime that has resulted in a diminished need to clear unwanted stock; 2. A better product offering, and; 3. The stronger NZ dollar. Mr Warren Bell, chairman of directors, commented “Whilst the strength on the NZ dollar has undoubtedly been an important factor in achieving improved margin, we cannot overlook the impact of better buying. This is particularly evident in Glassons, where real gains in margin have been achieved as a direct result of delivering to the market a more acceptable product offering. Our stock levels have been particularly well controlled, and in a difficult retail environment our continued ability to closely manage the business has delivered credible results.” All operating segments performed strongly, and Australia has begun to contribute to the group results. Hallensteins: Sales lifted 4.9% (same store sales 3.9%), and profit before tax increased 28% for the year. Newly relocated and refurbished stores in Cuba Street (Wellington) and Palmerston North have experienced positive growth. Glassons New Zealand: Sales lifted 1.7% (same store 2.6%), and profit before tax lifted 52.9% for the year. The prior year sales included low margin sales from clearance outlets that were not repeated this year. Refurbished stores at Riccarton and Palmerston North which launched the new look Glassons brand performed well and the newly relocated flagship store in Newmarket which opened after the end of the financial year has comfortably exceeded budget expectations. Glassons Australia: Total same store sales lifted 5.07% (in Australian dollars). There were no store changes during the period. Profit before tax was $1.530 million compared with a loss in the prior year of -$1.311 million. Strong margin growth was achieved in Australia primarily through presenting the right product offer. The board is encouraged by this result and a store refurbishment program has been planned to consolidate this result and build a credible base for the future. Storm: The Storm chain grew from 4 to 6 stores and continued to make good progress. New stores were opened in Merivale Mall (Christchurch) and Napier. Since balance date a further store has been opened in Willis Street Wellington, taking the total store numbers to 7. Total sales grew 53.7%, and same store sales were +6.7%. Profit before tax lifted to $0.8 million (2009: $0.331 million). Further sites are under active consideration. Dividend The directors have declared a final dividend of 17 cents per share, payable 7th December 2010 with entitlement 30th November 2010. A supplementary dividend of 3.0 cents per share to non resident shareholders will also be paid on that date. The dividend fully reflects board policy to pay dividends commensurate with performance. Future Outlook The retail environment remains challenging, and we do not see any significant improvement in the near term. In Australia the environment is becoming increasingly competitive, with rising interest rates dampening consumer spending. In New Zealand the future outlook is clouded by a GST increase, with an unknown contra effect from decreased personal tax. The momentum achieved over the past year will be extremely difficult to maintain, and the opportunity to further improve sales and margin on the existing business base will be far more challenging. We have made a positive start to the new financial year with group sales for the first 7 weeks 5% ahead of the prior year, but it is far too early in the year to make any prediction of earnings for the first half. The December trading period comprises a significant proportion of the summer season and any projection at this stage would be premature. A further update will be given at the Company’s Annual Meeting in early December 2010. Warren Bell Chairman of Directors 27th September 2010