Life Pharmacy Limited – Full Year Announcement

Life Pharmacy Limited – Full Year Announcement

Results for announcement to the market
Reporting Period 12 months to 31 March 2007
Previous Reporting Period 12 months to 31 March 2006

Amount (000s) Percentage change
Revenue from ordinary activities $5,024 -8.5%
Profit/(loss) from ordinary activities after tax attributable to security holders $(6,562) -699%
Net profit/(loss) attributable to security holders $(6,562) -699%

Dividend
No dividend has been declared or is payable.

Annual Meeting
The annual meeting will now be held on Thursday 5 July 2007 (previously 28 June 2007).

Commentary
The net loss of $6,562,000 includes a reduction in the Group’s investment in associates of $6,035,000 following an assessment of the last two years trading and a review of the latest financial forecasts for associate companies.

The net loss before impairment was $527,000 (2006: profit of $1,147,000) and included the expensing of significant investment in:

• the Tony Ferguson Weight Management Program,
• the introduction of the Life Living customer loyalty card,
• the planning and evaluation for in store hearing services,
• establishing the merchandising and category management functions,
• the support given to set up the new pharmacies, and
• consultancy costs incurred in the investigation of potential acquisition and growth opportunities, including the takeover proposal for PBL.

The previous year had included $572,000 gain from the sell down of 51% of the shares in Life Pharmacy Sylvia Park. The sell down of 51% shareholding in Life Pharmacy Albany was planned before year end but did not occur because the franchise and contractual documentation was not in place. It is expected the share sale will take place shortly.

The Group had enjoyed buoyant Christmas trading and a number of the associates were trading strongly. Christchurch stores at Riccarton, The Palms and Northlands continued to perform to expectations. However it has taken longer than expected to build momentum in new and refurbished stores. A significant improvement at the enlarged and refurbished Queensgate store in Lower Hutt had been expected during the year to March 07 but has yet to come to fruition and the new format discount store, SupaChem at Porirua, has taken some time to become established.

At Sylvia Park, in a staged retail centre development without a full customer offer, sales have been disappointing. Since balance date with the recent opening of stage three, there has been a surge of activity, especially on the weekends which is very pleasing.

Overall the aggregate trading result for our stores was therefore disappointing, with a 5% reduction in store EBITDA on the prior period. On a like for like stores basis, aggregate store EBITDA was 3% ahead of the prior period. The directors are seeking a strong improvement in store profits in the current year, on the back of the programs outlined above.

The LPL Board remains committed to growing and investing in the business to achieve scale benefits and as announced on 24 May 2007, a heads of agreement has been signed with Segoura Limited (Segoura). Under the heads of agreement Segoura will subscribe $5,250,000 for a total of 7,000,000 shares in LPL at a price of $0.75 per LPL share. Segoura is backed by Andrew Bagnall and associates.

Under the terms of the heads of agreement LPL has agreed to grant to Segoura an option to subscribe for up to 50.1% of LPL's entire issued share capital for a period of up to two years. The subscription price under the options is $0.75 per share in year one and $0.825 per share in year two.

The agreement is conditional upon (amongst other things) shareholder approval and obtaining the waivers from the Takeovers Code and the NZSX Listing Rules necessary to facilitate the granting of the options.

Ends

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