moving ahead: online music Chaimans address extract:Another...

moving ahead: online music Chaimans address extract:

Another focus was the attention to working capital and debt reduction. Cash flows for the
Group have been good and this has allowed us to continue to reduce debt this year.
Also the strengthening Australian dollar has allowed the Group to cover forward
purchases at relatively attractive levels in recent months.

Each of our Divisions anticipates and has budgeted for improved earnings in 2006
compared to 2005. At this stage the Directors anticipate that budgets will be met
although there has been a noticeable reduction in consumer sentiment and spending in
April and May.

Objectives for 2006
Our objectives for the Group in 2006 are as follows:

1. Continued profitable growth of our Entertainment Division through the focused
acquisition of movie and music titles to add to our well established back
catalogue. Despite heavy discounting in the DVD market we have identified
specific categories such as children titles and music DVD where growth in unit
purchases outweighs unit price declines. We are also reviewing alternative
marketing channels for our products.

2. Adoption by Central Station of an on-line digital download business which allows
this company to achieve earnings growth with no significant increase in working
capital. Central Station also celebrates its 30th birthday in 2006 and compilation
albums marking the occasion have achieved excellent sales.

3. Continued profitable growth of our Giftware Division with a focus on extending
the offering of our successful “Beanie Kid” range as well as rolling out our “Bratz”
hair products range for girls into major retail chains.

4. An overall group focus on lowering the cost of doing business with specific
attention to reducing working capital employed wherever possible.

5. Release of innovative new Housewares products and the relaunch and
repackaging of our successful O’Cedar product range which with other initiatives
will allow this Division to attain a more acceptable return on sales.

6. Reduction of Group overheads so that operating trading gains are held.

7. To increase profits on last years reported results.

On the basis of our unaudited accounts the results for the four months to the end of April
are ahead of the results for the corresponding period last year. Despite the consumer
slowdown noted earlier, the Board anticipates that reported EBIT and pre tax results will
be materially better than last year in the six months to June 30.

We are pleased to report that our Entertainment Division and Central Station in
particular have commenced 2006 at levels of profit well above the corresponding period
in 2005. A feature has been the emergence of on line digital sales as a growing means of
delivering Central Station product to the “Dance music” market.

The Giftware Division is trading at levels corresponding to last year.

The Housewares Division is trading profitably and well ahead of last years loss in the
corresponding period.

HomeLeisure has developed three clearly differentiated consumer trading Divisions. To
some extent each is reliant on consumer buying patterns and confidence as well as the
maintenance of new and attractive products at good trading margins. We believe our
products are and will continue to be attractive to consumers.