COMPLII FINTECH SOLUTIONS LTD — Annual Report 2003

Oct 14, 2003

Company Announcements Office Australian Stock Exchange Limited Exchange Centre 20 Bridge Street SYDNEY NSW 2000

15 October 2003

Dear Sir

Preliminary Final Report - Period ended 3 August 2003

In accordance with listing rule 4.3A attached is Appendix 4E for release to the market.

Yours faithfully

Laneson

CJ Charleson Company Secretary

For further information concerning this release contact:

Paolo Gnecchi-Ruscone Chief Executive Officer Phone: 02 9287 6394

Chris Charleson Chief Financial Officer Phone: 02 9287 6394

Level 8, 45 Market Street Sydney NSW Australia 2000

Preliminary Final Report of Gowings Retail Limited for the 52 Week Period Ended 3 August 2003

$(ACN 098 238 585)$

This Preliminary Final Report is provided to the Australian Stock Exchange (ASX) under ASX Listing Rule 4.3A.

Current Reporting Period:	52 week period ending 3 August 2003
Previous Corresponding Period:	24 September 2001 (date of incorporation) to 4 August 2002

Results for Announcement to the Market

Revenue and Net Profit/(Loss)

		Percentage Change ℅	Amount \$'000
Revenue from ordinary activities	up	28.3%	to $34,953$
Profit/(loss) from ordinary activities after tax attributable to members	down	252.5%	to $(1,707)$
Net profit/(loss) attributable to members	down	252.5%	to $(1,707)$

Dividends - Ordinary Shares

	Amount per security	Franked amount per security
Final dividend	¢	¢
Interim dividend	¢	¢
Previous corresponding period
interim dividend	¢	¢
Final dividend (paid 7 November 2002) $\overline{\phantom{a}}$	$3.0$ cents	$3.0$ cents
Record date for determining entitlements to the dividend:
final dividend interim dividend	Not applicable
	Not applicable
Net Tangible Asset Backing	2003	2002
Net tangible assets per security	\$0.66	\$0.76

Brief Explanation of Revenue, Net Profit/(Loss) and Dividends (Distributions)

In the 52 week period to 3 August 2003 the consolidated entity total revenue of $$34,953,000$ an increase of \$7,709,000 or 28.3% over the previous corresponding period. However, the previous corresponding trading period was only 39 weeks as it was the initial trading period of the business following listing on the ASX.

Loss after tax for the 52 week period ended 3 August 2003 was \$1,697,000 compared to a profit after tax of $$1,135,000$ for the 39 week period in 2001/02. After a $$10,000$ profit attributable to outside equity interests, a loss of \$1,707,000 is attributable to shareholders. In view of the loss, the directors have not proposed a dividend.

Refer to the attached Review of Operations for details of the trading performance of the Company.

Statement of Financial Performance For the 52 Week Period Ended 3 August 2003

	Note	2003 \$'000	2002 \$'000
Sales revenue (sales of goods)	$\overline{2}$	33,939	26,283
Cost of sales		(20, 024)	(14, 887)
Gross Profit		13,915	11,396
Other revenue from ordinary activities	$\bar{2}$	1,014	961
Selling expenses		(6,985)	(5,033)
Occupancy expenses		(4,277)	(3,023)
Marketing expenses		(1, 546)	(533)
Distribution expenses		(611)	(445)
Administration expenses		(3, 135)	(1, 826)
Borrowing costs		(23)	(30)
Profit/(Loss) From Ordinary Activities Before Income Tax Expense	2	(1,648)	1,467
Income tax expense relating to ordinary activities		(49)	(332)
Net Profit/(Loss)		(1,697)	1,135
Net profit attributable to outside equity interests		(10)	(16)
Net Profit/(Loss) Attributable to Members of the Parent Entity		(1,707)	1,119
Total Changes In Equity Other Than Those Resulting From Transactions With Owners As Owners		(1,707)	1,119
Earnings per share
Basic earnings per share	7	$(8.3)$ cents	5.5 cents
Diluted earnings per share	7	$(8.3)$ cents	5.5 cents

Statement of Financial Position As at 3 August 2003

	Note	2003 \$'000	2002 \$3000
Current Assets
Cash assets		3,341	3,372
Receivables		377	442
Inventories		10,253	11,386
Other		456	435
Total Current Assets		14,427	15,635
Non-Current Assets
Receivables		703	745
Property, plant and equipment		4,132	3,484
Intangibles		4,481	4,727
Deferred tax assets			88
Other		134	87
Total Non-Current Assets		9,450	9,131
Total Assets		23,877	24,766
Current Liabilities
Payables		4,757	3,756
Interest-bearing liabilities		503	53
Current tax liabilities		55	274
Provisions		353	349
Total Current Liabilities		5,668	4,432
Non-Current Liabilities
Interest-bearing liabilities		15	17
Deferred tax liabilities			61
Provisions		117	99
Total Non-Current Liabilities		132	177
Total Liabilities		5,800	4.609
Net Assets		18,077	20,157
Equity
Contributed equity	6	19,210	18,977
Retained profits	3	(1, 194)	1,119
Parent Entity Interest		18,016	20,096
Outside Equity Interest		61	61
Total Equity		18,077	20,157

Statement of Cash Flows For the 52 Week Period Ended 3 August 2003

	Note	2003 \$'000	2002 \$'000
Cash Flows From Operating Activities
Receipts from customers		38,452	29,658
Payments to suppliers and employees		(37, 278)	(31,311)
Interest and bill discounts received		108	152
Interest and other costs of finance paid		(23)	(30)
Income tax paid		(242)
Net cash provided by/(used in) operating activities	4(e)	1,017	(1, 531)
Cash Flows From Investing Activities
Proceeds from repayment οf related party
receivables			6
Payment for property, plant and equipment		(1, 161)	(480)
Net cash provided used in investing activities		(1, 161)	(474)
Cash Flows From Financing Activities
Proceeds from issues of equity securities			7,578
Payment for share issue costs			(1,236)
Proceeds from borrowings		500
Proceeds from repayment of loans		39
Repayment of borrowings		(4)	(1,002)
Dividends paid		(373)	(12)
Net cash provided by financing activities		162	5,328
Net Increase In Cash Held		18	3,323
Cash At The Beginning Of The Period		3,323
Cash At The End Of The Period	4(a)	3,341	3,323

Note	Contents
1.	Basis of Preparation
2.	Profit/(Loss) from Ordinary Activities
3.	Retained Profits
4.	Notes to the Statement of Cash Flows
5.	Details relating to Dividends (Distributions)
6.	Contributed equity
7.	Earnings/(loss) Per Share
8.	Net Tangible Assets per Security
9.	Commitments for expenditure
10.	Segment Information
11.	Information on Audit

1. Basis of Preparation

This preliminary final report has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E.

The accounting policies adopted in the preparation of the preliminary final report are consistent with those adopted and disclosed in the 2002 annual financial report.

		2003 \$'000	2002 \$2000
2.	Profit/(Loss) From Ordinary Activities
	Profit/(loss) from ordinary activities before income tax includes the following items of revenue and expense:
	(a) Revenue
	Revenue from sales of goods	33,939	26,283
	Other revenue from ordinary activities
	- interest income	108	152
	- rental and concession income	607	641
	- other income	299	168
		1,014	961
	Revenue from ordinary activities	34,953	27,244
	(b) Expenses
	Net bad and doubtful debts	88	17
	Loss on disposal of non-current assets	16
	Depreciation of non-current assets	497	248
	Amortisation of non-current assets	246	233
3.	Retained Profits	2003 \$'000	2002 \$'000
	Balance at beginning of period Net profit/(loss)	1,119 (1,697)	1,135
	Net profit attributable to outside equity interests Dividends paid	(10) (606)	(16)
	Balance at end of period	(1, 194)	1,119

4. Notes to the Statement of Cash Flows

	2003	2002
(a) Reconciliation of Cash	\$'000	\$'000
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:
Cash	3,341	3,372
Bank overdraft		(49)
	3,341	3,323

(b) Non-Cash Financing and Investing Activities

The Company issued 387,592 shares under the dividend reinvestment plan for \$233,291.

(c) Financing Facilities	2003 \$'000	2002 \$2000
Secured bank overdraft facility, reviewed annually and payable at call:
Amount used	500
Amount unused	500
	1,000
Unsecured bank overdraft facility, reviewed annually: Amount used		49
Amount unused		51
		100

(d) Cash Balances Not Available for Use

Rent guarantee	ີ້

1. Notes to the Statement of Cash Flows (Continued)

(e) Reconciliation of Profit From Ordinary
Activities After Related Income Tax to
Flows Net Cash From Operating	2003	2002
Activities	\$'000	\$'000
Profit from ordinary activities after related
income tax	(1,697)	1,135
(Profit)/loss on sale of non-current assets	17
Depreciation and amortisation of non-
current assets	743	481
Increase/(decrease) in current tax liability	(220)	275
Increase/(decrease) in deferred tax
balances	27	60
Changes in net assets and liabilities, net of
effects from acquisition and disposal of
businesses:
(Increase)/decrease in assets:
Receivables	10	(10)
Current inventories	1,133	(535)
Other current assets	(21)	(107)
Increase/(decrease) in liabilities:
Current trade payables	1,003	(2,915)
Provisions	22	85
Net cash from operating activities	1,017	(1, 531)

5. Details Relating to Dividends (Distributions)

		Date dividend payable	Amount per security
Final dividend	2003	N/A
	2002	7 November 2002	3.0 cents
Interim dividend	2003	N/A
	2002	N/A
Total	2003
	2002		3.0 cents

Total dividend (distribution) per security (interim plus final) 2003 2002 ¢ ¢ Ordinary securities

3.0

Dividend Reinvestment Plan

The Company has a dividend reinvestment plan under which the holders of ordinary shares may elect to have all or part of their dividend satisfied by the issue of new ordinary shares rather than by being paid in cash.

6. Contributed Equity

	2003 \$'000	2002 \$'000
Balance at beginning of period	18,977
Issue of shares	233	20.213
Less cost of capital raising	$\overline{\phantom{0}}$	(1,236)
Balance at end of period	19,210	18,977

The number of fully paid shares on issue at 3 August 2003 was 20,600,093 (2002: 20,212,501). On 7 November 2002, 387,592 shares were issued under the Company's dividend reinvestment plan.

There are 468,000 (2002:714,000) options over unissued shares at 3 August 2003. 79,500 options expired in the period due to employees resigning and 166,500 expired through the Company not meeting set performance targets. Subsequent to the year end a further 50,000 options expired. The remaining options are exercisable at \$1.00 and expire on 31 November 2006 or earlier should the employee no longer be employed by the Company.

7. Earnings/(loss) Per Share

	2003 $\epsilon$ per share	2002 $\epsilon$ per share
Basic EPS	(8.3)	5.5
Diluted EPS	(8.3)	5.5

Basic Earnings/loss per Share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

	2003 \$'000	2002 \$'000
Earnings/(loss)	(1,706)	1,119
	2003 Number	2002 Number
Weighted average number of ordinary shares	20,496,027	20,212,501

Diluted Earnings per Share

Options over ordinary shares of the Company have not been taken into account in calculating diluted earnings per share as their exercise price (\$1.00) is significantly in excess of the current trading price of the shares.

8. Net Tangible Assets Per Security

	2003	2002
Net tangible assets per security	\$0.66	\$0.76

9. Commitments for expenditure

	2003 \$'000	2002 \$'000
Commitments in relation to operating leases contracted for at the reporting date but not recognized as liabilities, payable:
Within one year	4.946	3,985
Later than one year but not later than 5 years	20,849	17,591
Later than 5 years	21,063	18,712
	46,858	40,288

10. Segment Information

The consolidated entity operates in one business, namely the general retailing of menswear and men's products, and in one geographical market. Australia.

11. Information on Audit

This preliminary final report is based on accounts to which one of the following applies.

	The accounts have been audited.	The accounts have been subject to review.
X	The accounts are in the process of $\Box$ being audited.	The accounts have not yet been audited or reviewed.

Description of likely dispute or qualification if the accounts have not yet been audited or subject to review or are in the process of being audited or subjected to review.

None

For immediate release

14 October 2003

Dear Shareholder

Gowings has gone through a very difficult year. Unfortunately whatever effort or actions we might take in the future we are not be able to change the past 12 months. We have therefore decided to learn from the past, take incisive actions to change the direction of the business and invest all of our energy in our future and on the opportunities we have in front of us.

The issues that have had a major impact on the performance of the Company in the last year were:

• 1. Stores performance. Whilst the city based stores performed creditably the performance of our two airport stores. Hornsby and Parramatta was, at best, poor. This has placed an undue strain on the whole organization. Retail in men's apparel in general has been extremely tough and it is not necessarily going to get any easier in the near future.
• 1. Decline in tourism and falling CBD employment . In the city the tourist market is a significant part of our business, especially with respect to our "Heritage" brand business (Bonds, RM Williams, Drizabone, Akubra etc.) The whole SARS episode had a strong negative impact on that business and held the CBD stores, in particular Wynyard, to a lower sales performance.

The constant fall in employment numbers in the CBD business district caused by the downsizing of many financial institutions has generated a tangible reduction in the numbers of shoppers throughout the city stores.

1. Pricing promotions and sales activities. Price matching the intense competition amongst the major city retailers has impacted immensely on our gross margin as has extending our yearly warehouse sale to all stores. This extension was however essential for us in order to turn excess stock in to cash.

1. Product ranging and inventory. The product offering, although impressive, has grown to be too broad, extremely difficult to manage properly and has not always reflected our customer's needs. This has lead to the company being over ranged and overstocked in some departments.

Whilst a tight control of cost was maintained in some areas, events have proven that bigger picture issues dominated the year and sufficient action was not taken to deal with the challenges posed by them.

The retail landscape is constantly changing and will continue to do so. Our success is going to revolve around us refocusing our business and increasing our relevance. However, our success will be more dictated by us understanding that we need to run our business in a smarter and more efficient way. We have recently conducted a series of audits on all sectors of our business and have identified a number of areas where there is a definite opportunity for improvements to be made.

Our initial areas of action are:

• 1. We have appointed Ken Terry as a non-excutive director and deputy chairman. Ken has considerable experience of retailing businesses and is currently President of Sheridan International. I welcome his appointment and look forward to sharing his immense knowledge of business generally and retailing specifically.
• 1. We have changed our management structure and methodology to reflect a more entrepreneurial approach. We have done this by empowering our store managers, allocating them more responsibility and establishing clear KPI's. This will enable them to exercise a proactive approach to the day to day running of their business.
• 1. We have implemented a cost review strategy whereby we will eliminate all non-essential costs. In particular, we have reviewed our marketing expenses and reallocated some of them to more sales and services related activities.
• 1. We have reviewed, and considerably reduced, our product assortment and mix to better reflect our customers purchasing needs and desires. This will allow us to further reduce our inventory levels and improve stock turns.
• 1. We have redesigned the layouts of each one of our stores to improve our customer's ease of shopping and to clearly reflect our product offering.

These new layouts have been engineered to take into account and maximize the opportunities for third party concessions in our business.

• 1. We have started a customer service and sales staff training program to increase our sales conversion rates.
• 1. We are in the process of implementing a new loss prevention program to combat shrinkage caused by shoplifting and bring it to acceptable levels.
• 1. We have started the process of implementing an upgraded computer assisted reordering system which will improve the supply of our best selling products, improve sales and also help to reduce our out of stocks.
• 1. We have conducted a series of in depth market research studies to review our current market positioning and ensure we have the necessary information and ability to put a comprehensive strategic plan in place. This is essential so that we can fully exploit all of our potential and all opportunities we have to expand our customer base and the Gowings brand awareness.
• 1. We are also evaluating further opportunities available to us to exploit our Web site and our extensive Gowings Club database.
• 1. We are in the process of expanding our third party concession program to increase the presence of concessions in all stores.

At present our main focus and priority is to ensure that we place ourselves in the best position possible to have a strong and profitable trading result over the key Christmas period.

I am confident that by implementing and relentlessly carrying through these steps will allow us to save on unnecessary expenses, increase traffic, increase sales, improve our gross margin and reduce working capital, with the ultimate aim of delivering a satisfactory return on the investment made by our shareholders. I look forward to reporting in the future on the changes now underway.

Yours sincerely

P Gnecchi-Ruscone Chief Executive Officer

2002/03 Review of Operations

Overview

In the 52 week period to 3 August 2003, the consolidated entity recorded total revenue of \$34,953,000 an increase of \$7,709,000 or 28.3% over the previous corresponding period. However, the previous corresponding trading period was only 39 weeks as it was the initial trading period of the business following listing on the ASX.

Loss after tax for the 52 week period ended 3 August 2003 was \$1,697,000 compared to a profit after tax of \$1,135,000 for the 39 week period in 2001/02. After a \$10,000 profit attributable to outside equity interests, a loss of \$1,707,000 is attributable to shareholders. In view of the loss, the directors have not proposed a dividend.

Revenue

The consolidated entity's revenue from the sale of goods increased over the period by 29.1% to \$33,939,000. Other revenue increased by 5.5% to \$1,014,000.

An analysis of revenue is set out below:

Total revenue	34,953	27,244
Revenue from the sale of goods Other revenue	33,939 1.014	26,283 961
	2003 52 weeks \$'000	2002 39 weeks \$'000

Retail sales

On a like for like basis, excluding sales from stores opened or closed in the period, retail sales have fallen by 3%. This is attributed to a number of factors as outlined in the CEO's report.

The retail marketplace remains dominated by a small number of dominant retailers. In 2002/03 competition has been intense, with sale periods being brought forward thereby significantly reducing the period when merchandise is on sale at a non-discounted price. Reluctantly we have been drawn into the pricing wars, as to not do so would see our sales erode even further.

It is possible to be almost blasé about the significant events that have rocked the world in the last 18 months, starting with the September 11 terrorist attacks in the US, followed by the Bali bombing in 2002, the SARS crisis early in 2003 and most recently the second Gulf War. All these events have had an adverse impact on tourism and in particular on the number of tourists from overseas. Gowings is somewhat dependent on tourist shoppers especially at our Sydney CBD stores in Market Street and at Wynyard. Here we estimate that tourists can account for 10-20% of total sales.

2002/03 Review of Operations

Our Hornsby store recorded sales up by 16% in 2002/03 compared to the previous period. By comparing like for like trading periods (the Hornsby store opened in October 2001) the increase reduces to 6%, which is still a credible result considering the Hornsby area was ravaged by bushfires over the key trading period of Christmas 2002. Christmas sales at the Hornsby store were down 14% on the previous period.

2003 saw the opening of our new store in the Westfield shopping centre in Parramatta. The 2002/03 results include 8 months of trading from the store and despite the absence of a base to measure the performance against, the trading is below our expectations and there are a number of actions that need to be undertaken at this store.

As flagged in last year's annual report, we did not exercise our 3 year lease options over the Sydney Airport leases and we stopped trading at these locations at the end of October 2002. Much of the fixturing was incorporated in the fit-out of the Parramatta store and the remaining stock was also transferred to Parramatta.

Other revenue

Other revenue principally comprises interest income and rental income from in store concessions.

Gross Profit

Gross profit for 2002/03 increased by \$2,519,000 or 22.1% over the corresponding period to \$13,915,000. The gross profit percentage reduced from 43.4% to 41.0%. This in part reflects the intense retail competition and the absence of higher margin sales to tourists referred to above. However, it additionally reflects the results of a detailed review of our product assortment that was undertaken in the final quarter of the year. As part of this review our core range was refined and narrowed. As a result a number of lines, and in some cases whole ranges, were identified as being non-core and have been discontinued. The discontinued lines were substantially cleared as part of the July 2003 Warehouse Sale, which was run, for the first time, in all stores. This resulted in the clearance of in excess of \$1 million of stock, but the margin achieved on these sales was substantially below that which we would normally expect.

As a result of this review we commence 2003/04 with a much cleaner stock profile and clearly identified range plans.

Operating expenses

Operating expenses comprise selling expenses, occupancy expenses, marketing expenses, distribution expenses and administration expenses. For 2002/03 operating expenses totaled \$16,554,000 and amounted to 48.8% of retail sales. This represents an increase of 52% over 2001/2 which was only a 39 week period. 2001/02 operating expenses amounted to 41.3% of sales. 2002/03 operating expenses include the costs of running the Hornsby store for the full year along with the costs of the new Parramatta store from December 2002. In addition, the costs of exiting the airport sites, which amounted to approximately \$200,000, are included in operating expenses.

2002/03 Review of Operations

Income tax

In view of the loss before taxation, no provision for income taxation has been made. In addition, existing deferred tax assets and liabilities have been written off.

Cash flow

The cash flow statement for the consolidated entity can be summarised as follows:

	2002/03 \$'000	2001/02 \$'000
Cash inflow/(outflow) from operations	1.017	(1,531)
Cash outflow from investing activities	(1, 161)	(474)
Cash inflow from financing	162	5,328
Net increase in cash held	18	3,323
Cash at the beginning of the period	3,323
Cash at the end of the period	3.341	3.323

Cash from operations amounted to \$1,017,000 despite the consolidated entity making a loss after tax of \$1,697,000. This was mainly due to better working capital management achieved through a reduction of in inventories of over \$1.1 million, despite the addition of the new Parramatta store, and an increase in current payables of just over \$1 million. In the previous period an operating cash outflow of \$1,531,000 was recorded.

Cash flow from investing activities amounted to \$1,161,000. The majority of this was in relation to the fit-out of the Parramatta store.

Cash flows from financing activities reflect the cash component of the 2001/02 dividend (\$373,000) offset by \$500,000 bank finance raised. In 2001/02 a net \$6.3 million was raised from the issue of equity, from which \$1 million was used to repay borrowings.

The consolidated entity ends the year with \$3.3 million in cash and a moderate level of gearing of \$0.5 million. The consolidated entity's gearing ratio is approximately 3%.

2002/03 Review of Operations

Net assets

Net assets at 3 August 2003 are \$18.1 million, compared to \$20.2 million at 4 August 2002. The reduction is attributable to the loss attributable to shareholders of \$1.7 million and the dividend paid during the year of \$0.6 million offset by the increase in equity for the shareholders who participated in the DRP (\$0.2 million).

Inventories amounted to \$10.3 million in 2003 compared to \$11.4 million in 2002. The reduction is mainly attributable to the range review that was undertaken during the final quarter of the year.

Tangible fixed assets have increased by a net \$0.6 million, reflecting additions of \$1.1 million (mainly for the fit-out of the Parramatta store) less depreciation of \$0.5 million.

Intangible assets amounted to \$4.5 million and related to goodwill on the acquisition of the retail business from Gowing Brothers Limited in 2001. The balance has reduced by \$0.25 million over 2002 reflecting the amortisation of the balance.

Borrowings at 3 August 2003 amounted to \$0.5 million, an increase of \$0.4 million over 2002. We have a bill acceptance facility of \$1.0 million, which is drawn down to \$0.5 million. The consolidated entity is conservatively geared at approximately 3% of net assets.

Net tangible assets per security at 3 August 2003 amounted to \$0.66 (2002: \$0.76).