kathmandu annual report 2012 1
contents
Chairman’s Report
Highlights For The Year
Chief Executive’s Report
Board
Management
Directors’ Report
Corporate Governance
Auditor’s Independence Declaration
Financial Statements
Statutory Information
Share Registry
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notice of annual General meetinG
11.00am Friday
16 November 2012
Sofitel Hotel,
61-101 Phillip Street,
Sydney
Australia
2 annual report 2012 kathmandu
chairman’s report
James strong
Chairman
I am pleased to report on another successful year for Kathmandu
Holdings Limited. Kathmandu was unable to match last year’s
record earnings result, but the achievement of both a solid
increase in same store sales and a growth in second half year
profits was a good result for the Company in what are particularly
difficult economic times. A number of important projects were
also delivered that will support future growth.
retail conditions
the retail sector today, particularly in australia, is
re-aligning to an economic environment where consumers
will likely spend less in real terms on discretionary
purchases for several years ahead. this coincides with
the acceleration of multichannel retailing and in particular,
access to international brands via online selling, which
is changing consumer buying patterns quickly and
significantly across most discretionary retail categories.
as a fully vertical brand with total control over how we
distribute our products we are well positioned to benefit
from this situation. It still requires us to grow our market
share and efficiently manage our costs to achieve profit
growth. Kathmandu’s strategy to obtain market share
through increased and sustained investment in its brand,
product and retail channels is unchanged. through this
investment we will maintain our leadership in the outdoor
travel and adventure category, and deliver future profitable
growth for our shareholders.
financial results
the key financial highlights for the year ended
31 July 2012 were:
Growth in sales by 13.4% to $347.1 million
Gross profit margin of 63.2%
Decrease in earnings before interest and tax of 10.9%
from nZ$64 million to nZ$57 million
associated with investment in infrastructure. Store numbers
increased by 13, slightly below our target for the year.
overall eBIt margin reduced from 20.9% to 16.4% of sales.
Growth strateGy
Kathmandu continues to focus on the key growth strategies
outlined at the time of our Ipo in 2009, specifically:
Continue new store rollout in australia and
new Zealand;
Improve existing store network;
enhance product offering;
Grow our Summit Club; and
Develop and grow online and digital
channel capabilities.
Maximising the value of the Kathmandu brand is supported
by all of these strategies, and their successful execution
as the channels to market grow will differentiate us from
the retailers who don’t control their own brand. new store
rollout opportunities, particularly in australia, remain our
most significant and immediate growth opportunity. the
new store rollout programme, the improvement of existing
stores through refurbishment and relocation, and for both
strategies the optimisation of store format and footprint
will underpin our on-going market penetration. Similarly,
most of our future growth in Summit Club will be driven by
membership number increases in australia.
there was satisfactory same store sales growth in both
australia (6.5%) and new Zealand (9.2%). Gross profit
margin was in line with that achieved in FY2010 and the
Company’s long term targets, and whilst operating costs
increased at a higher rate than sales, this was primarily as a
result of non-recurring first half expenditure and expenses
the online channel and the associated development of ever
improving direct to customer communication and marketing
opportunities through electronic and social media will
bring about a fundamental change in retailing and a clear
opportunity for our brand. the introduction of our new
online platform is a significant step in the development of
our capability to sell and service customers globally and
growing our online business in the uK is a first step in
this strategy. We intend to invest further to support the
international growth opportunity for Kathmandu that this,
and other related channels will provide us.
Kathmandu’s product range growth in the past two years
has supported sales growth over that time. Investment
in new and innovative product will always be a focus, but
our strategy in the near term will be to align our ranging
to our store network and the variations that we have in
the regions we sell to and the formats of those stores. at
the same time we expect inventory levels (units and $)
will grow in line with overall sales growth, as compared to
the lift in levels in FY2012 and FY2013 that were primarily
range growth related.
capital inVestment
the uplifted three year capital expenditure programme
that was initiated last year has involved substantial
investment in enlarged and improved distribution facilities,
the establishment of a new office in Melbourne for our
australian domiciled support team, and completion of the
targeted portion of the rollout of the new brand identity
to our stores. the bulk of planned physical infrastructure
investment that is not directly related to our store network
is now complete, but we will be investing greater amounts
in store refurbishments and relocations going forward, as
well as new store rollouts. our investment in improved
information systems continues, with our prime focus now
being on enhancing the customer experience in store and
online and ensuring we have the foundation to be able to
deliver to the global market.
diVidend
the Directors are again recommending a final dividend
of 7 cents per share, with the 3 cents interim dividend
making a total payout for the year of 10 cents per share.
the final dividend will be fully imputed for new Zealand
shareholders, and fully franked for australian shareholders.
kathmandu annual report 2012 3
the 50% to 60% range during the period in which capital
expenditure also runs at a similar ratio.
people
the Board thanks Kathmandu’s Chief executive officer,
peter Halkett and his team for the result achieved by the
Company in a challenging year. It is pleasing to be writing
this report with a positive outlook for our team domiciled in
Christchurch after the challenging last two years, and the
opening of our new Zealand distribution centre in august
was a highlight in the recovery now underway in our home
city. We continue to grow the depth and competency of our
team in all the countries that Kathmandu operates in, and
we welcomed a number of them as shareholders for the
first time this year under our long term incentive plan. our
future growth is being supported by a diverse and talented
team of people.
outlook
the economic prospects both globally and in australasia
have to be viewed with real caution. our approach to
the uK exemplifies the care that your Board is taking in
future expansion, but there is no change to your Board’s
view that the Kathmandu brand has genuine potential to
be a significant global presence in the outdoor travel and
adventure market. We are very clear that in the short term
our key strategy remains to invest to grow the business
and build the Kathmandu brand in the australasian market.
It is essential that we both grow profitably and maintain
our strategic competitive advantage, and we will thus
ensure our investment in growth opportunities continues
to focus primarily on this market where we know we can
deliver further profit growth. We expect this investment,
in conjunction with effective management of operating
expenses, will result in an improved performance next year
and further develop the wider capabilities the Company
requires in order to pursue new growth opportunities
for Kathmandu.
this dividend represents a payout ratio of 57% and the
Board continues to expect the payout ratio will remain in
James strong
Chairman
Victoria street, auckland
newmarket, auckland
4 annual report 2012 kathmandu
highlights for the year
Sales up 13.4%, 7% same store sales increase
Store count increased to 124
New brand identity rolled out
Summit Club membership lifted by over 30%
New online platform launched
kathmandu annual report 2012 5
SALES (NZ$m)
fy2008
fy2009
fy2010
fy2011
fy2012
EBIT (NZ$m)*
fy2008
fy2009
fy2010
fy2011
fy2012
NPAT (NZ$m)*
fy2008
fy2009
fy2010
fy2011
fy2012
* FY2008 - FY2009 as presented in the Prospectus dated 23 October 2009,
and FY2010 excluding the impact of IPO listings costs, and $0.6m of net
exchange losses on foreign currency borrowings.
$245.8$215.6$192.8$25.2$14.9$8.0$48.5$44.1$32.9$306.1$64.0$39.1$347.1$57.0$34.9 6 annual report 2012 kathmandu
chief executive’s report
peter halkett
Managing Director and Chief executive officer
key hiGhliGhts
Sales were up 13.4% to $347.1m.
Same store sales growth of 7% at constant
exchange rates.
New loyalty incentive for Summit Club grew sales
and membership lifted by over 30%.
Net profit after tax was $34.9m; earnings per
share 17.4c.
Total store count increased by 13 to 124.
Over 70% of stores now have new Kathmandu
brand identity.
New distribution centre in New Zealand opened, and
Australian distribution centre has been enlarged.
New ERP and warehouse management systems
operational.
Global online platform live in September 2012.
result oVerView
In the 2012 financial year there was an uplift in the level
of on-going investment made in the business, which will
support future growth for Kathmandu. this has occurred
at a time when the retail environment is, and looks likely
to remain difficult and it reflects our focus on positioning
Kathmandu to grow our market share in the medium and
long-term. although the increase in sales in FY2012 of
$41 million was not matched by an improvement in profit,
this was primarily due to costs associated with the growth
focussed strategic investments that we made. In particular,
we introduced loyalty incentives for Summit Club members
who are regular buyers of Kathmandu product, and this long–
term initiative enhanced sales but reduced our gross margins.
operating expenses, whilst well controlled, were also
impacted by unbudgeted and non-recurring costs
associated with the implementation of new warehouse
management systems and the re-organisation of our
uK business.
In FY2012, we opened a further 10 permanent new stores,
and overall we are trading in 124 locations at 31 July
(including four short term leases), compared to 111 stores
at the same date last year. this growth of 13 additional
stores was short of our annual target of 15 and, as a result,
the new store profit contribution in FY2012 was below both
our expectations and the FY2011 performance.
However, it was much more significant for our future
growth expectations that in this year we successfully:
opened new format flagship stores in Willis Street
(Wellington), newmarket (auckland), Camberwell
(Melbourne) and Chatswood (Sydney); and
finalised new small format layouts for high profile
destinations such as Chapel Street and the rocks,
and a number of future prime mall locations opening in
FY2013 and beyond.
the year-on-year reduction of just over 10% in net profit
after tax was disappointing, but it was pleasing that as
a result of sales performance and tight management of
expenses in the second half of the year, operating costs as
a percentage of sales were down and second half profits
of just under $29m were up on the same period last year.
the overall financial performance, the success of new
Kathmandu stores and the successful implementation
of our new brand identity continue to reinforce that the
Company’s strategies are still appropriate and Kathmandu
is well positioned to deliver profit growth in future years.
Business oVerView
the kathmandu Brand and customer
We believe the strength of our brand is vital to the success
of the business. our popularity and brand recognition
amongst customers is strong in new Zealand and
australia. the effectiveness of our focus on Summit Club
membership growth has been a critical contributing factor
to our continually improving brand positioning. We remain
confident that by 2015, in tandem with our store rollout
programme, we will have one million active Summit Club
members across new Zealand and australia.
the rollout of the new Kathmandu brand identity in stores
and across the full product range has continued throughout
the year. all products that are new to the market now carry
our new brand identity, and we have re-branded over 70%
of the store portfolio. Most of the remaining stores will
be re-branded in tandem with either a lease renewal or
programmed store refurbishment.
all of the initiatives we are undertaking will support our
objective to increase australian brand awareness to the
level achieved in new Zealand, and as a result substantially
improve our market penetration and sales per capita in
kathmandu annual report 2012 7
the country that still provides our most significant growth
the permanent new stores opened during the year were:
opportunity in the short and medium term. We will
continue to grow our customer database and enhance
the relationship we have with those customers. our
customers are a key asset to Kathmandu in the world of
multichannel retailing.
store network
the focus on building our brand positioning and customer
relationships is linked to the requirement for our store
network strategy to adjust to the significant changes that
are occurring in retail property as we decide on our best
options for new and replacement stores. the key drivers
of change are the weaker economic environment and the
accelerated growth in online sales. the choices made
today on store footprint, location and layout have never
been more important.
australia: Warnambool, Chatswood*, tamworth,
Shellharbour, the rocks (Sydney) and Moorabbin DFo
(Melbourne).
new Zealand: Coastlands (Wellington), the palms
(Christchurch), Willis St* (Wellington) and Masterton.
*Both these stores are relocations, and the previous store
has been converted to an outlet site that will likely become
a permanent store.
the relocation of newmarket and Camberwell stores to
new enlarged sites meant the old sites for these stores
are being traded temporarily as outlet stores until lease
expiry in 2013. our other temporary stores are the central
Christchurch store in the post-earthquake re-start retail
precinct and Moonee ponds (Melbourne).
ten permanent new stores were opened in FY2012,
and total store numbers increased by 13 stores year-on-
year. this number was less than we had targeted, but it
reflects our caution on site choices as we assessed the
environment and our options in store formats in a number
of local markets. permanent store numbers totalled 120 as
at 31 July: australia 72, new Zealand 42 and uK 6. Stores
currently open total 124.
as a result of the combination of the timing of our
permanent new store openings in FY2012 and the lesser
number opened (10 versus 14 in FY2011) there was a
reduction in the earnings (at an eBItDa level) from new
stores in FY2012 compared to FY2011.
In FY2013, we have a substantial number of our annual
target of 15 new stores already locked in. ten new store
lease agreements have been negotiated and we expect
8 annual report 2012 kathmandu
camberwell, Victoria
execution of this strategy is directly relevant to the same
store sales growth achieved in FY2011 and FY2012.
total inventories, $73.3m at 31 July 2012 increased by 35%
on the previous year. this increase was in line with our
targets, apart from the impact of opening fewer new stores
than planned. also the adjusted summer season delivery
schedule meant levels of goods in transit increased at 31
July by 88% (c. $6m) on the same time last year. on a per
store basis, there was an 11% increase in inventory after
adjusting for these one-off variations. We anticipate that
in the future, our investment in inventory will generally
increase in line with the rate of increase in sales and store
numbers. our primary focus is now on the management
of our inventory range, investing in highest growth product
groups and range planning to match the variation in our
store formats and geographical locations, particularly
in australia.
uk Business
our uK store portfolio is under review, but we remain
committed to maintaining a small retail network to support
the brand in that market. In FY2012, we closed our uK
regional office and warehouse, and integrated management
of the uK business back into the applicable functional
responsibilities of the australasian based Kathmandu
executive team. Costs associated with this re-organisation
had a one-off impact on earnings of c. $1m. Warehousing
and distribution are now being undertaken by a third party
provider. We envisage future sales growth in the uK will
be derived primarily from the online channel. We intend
to support the brand and our long-term emphasis on web
based selling with retail stores merchandised and fitted
out to best present the new brand identity, and located
primarily in london. Where required we will realign our
retail portfolio accordingly.
infrastructure
We completed several major infrastructure projects during
FY2012. Both the new Zealand and australian distribution
centres have been enlarged and will meet our projected
capacity requirements in the medium term. the new
Zealand distribution centre in Christchurch was a design
build project for Kathmandu, and became operational at the
start of FY2013. the lease of our previous site has been
exited. the Melbourne distribution centre had its floor area
increased by one-third following the end of a sublease
arrangement, and the full site will be re-laid prior to this
year’s Christmas sale. these projects will substantially
enhance distribution efficiency going forward. our
Melbourne support office was relocated at the beginning
of 2012. no other major physical projects relating to our
distribution centres or support offices are envisaged for at
least the next two years.
systems and online
We will continuously invest in improved systems to
support business growth. In august 2011, our upgraded
to have nine of these stores trading before the end of
2012. these will include our flagship site in pitt Street
Mall, Sydney. During that same period, we will also
complete four major store refurbishments or relocations,
including our new flagship site in Hay Street perth. Given
this development programme, we are confident that by
comparison to FY2012, the rollout of the new stores will
contribute incremental earnings in FY2013.
We are committed to continuing re-investment in our
store portfolio, where justified on the basis of both return
on investment and the continuing improvement of our
brand positioning in key markets. In FY2012, we enlarged
our stores in newcastle and Hobart and refurbished our
Victoria Street store in auckland. all of these stores are
in prime Kathmandu markets and locations, and there will
be a number of similar projects undertaken each year,
generally in conjunction with lease renewals. In the first
quarter of FY2013, we refurbished our Highpoint and Knox
City stores in Melbourne, and relocated our nelson store to
larger and more central premises.
Store formats will continue to be evaluated and potentially
modified in response to the wider retail and economic
trends, but also in response to local opportunities. In
particular we are confident from our experience in the past
two years that we have a number of new small format
store opportunities in australia which we will now pursue
within our overall network plan.
product range and inventory
effective and relevant expansion of our product range has
been a core growth strategy since the Company listed
in 2009. During this period, we have increased our total
SKu count by approximately 30%. this range expansion
occurred through expanded product categories with new
styles, additional colours and sizes in existing styles, and
new fabrications or technologies offered. the successful
erp and new warehouse management systems went live.
this change over was not without operational problems,
however these systems are now meeting expected
performance standards and are critical to the efficient
servicing of our ever increasing retail network.
our next major area for systems development is software
for product forecasting and planning, and a point of Sale /
CrM solution with global capability. Vendor selection for
these projects is complete, and we plan to implement new
systems in these areas by the end of FY2013. our spend
on new systems will be elevated for several years as we
continue to build a robust platform capable of supporting
the australasian business, future development of
multichannel retail options locally, and potentially globally.
the primary focus in systems development throughout
the balance of FY2012 has been the new online platform,
which is now live. this platform will underpin our future
strategy to expand online selling into other markets. We
previously maintained three separate sites for each of the
countries we trade in, and had no capability to sell in other
countries. our effectiveness in growing uK sales via the
new site will be our first focus and a good trial market
relative to future expansion options.
market oVerView and emerGinG trends
the general consumer in all our current markets is now,
compared to pre-GFC, a more cautious spender who is
likely to be deleveraging where he or she has a choice
between consciously paying off debt before engaging in
the luxuries of life. our strategy must continue to adapt as
we grow to deal with this new normal and its associated
emerging trends. these trends are most obvious in
the changing face of retail stores and the growth of
multichannel retailing with direct buying from global
online businesses.
the outdoor category remains an attractive sector, both
locally and globally, as evidenced by the continuing growth
of new entrants and new stores selling outdoor and travel
goods. We are careful to manage and develop our business
in a planned manner as we modify our product mix and
range and adjust our store strategies with regard to size,
product offer and location. We believe Kathmandu remains
well placed in this market, and absolute control of our brand
is a fundamental competitive advantage.
financial performance
Group sales $347.1m increased by 13.4% over the previous
year. We consider the increase in same store sales (by
5.7% overall, 7.0% at a constant exchange rate) to be
a good outcome, given market conditions. Country by
country change in same store sales was as follows:
australia 6.5%
new Zealand 9.2%
uK (7.7%)
kathmandu annual report 2012 9
In the three years since Kathmandu Holdings ltd was
listed, we have achieved an overall average per annum
same store sales increase of more than 7% per annum in
both australia and new Zealand.
the increase in total gross profit for FY2012 was $18.9m,
an increase of 9.4% compared to a 29.2% uplift in FY2011.
the sales increase was more than offset by a reduction
in gross margin by 230bps, to 63.2% overall. this is the
same rate of gross margin as we earned in FY2010, and
sits comfortably within our long term target range of 62%
to 64%. Gross margins were down by 300bps in new
Zealand and 190bps in australia. as previously noted, the
key reason for the reduction of gross margins was the
introduction of the new loyalty incentive to enhance the
value of Summit Club membership. We will continue to
reward our best and most loyal customers with this, and
other similar benefits in the future.
the other drivers of change in gross margin over the year
were generally less significant. In particular, improvement
in hedging rates we received on uSD purchasing in FY2012
generally enabled us to manage input cost increases
without lifting retail price points.
expenses, excluding depreciation, amortisation and
financing costs, increased by $23.8m (18.4%). this was an
increase as a percentage of sales from 42.2% to 44.1%.
Most of this increase was in:
property rent, which increased by $7.7m and by 100bps
as a percentage of sales; and
warehousing and distribution costs, which increased
by over $3.3m (excluding rent and rates costs) and by
60bps as a percentage of sales.
the uplift in property rent arose primarily from:
opening new prime flagship sites during the year,
coupled with a cross-over of occupancy costs from
retention of current sites on either a temporary basis or
as a permanent conversion to outlet stores;
warehousing, some of which was temporary in
nature as we dealt with capacity constraints in both
networks; and
new Melbourne head office costs.
In future years, we will continue to see growth in rental
costs primarily related to store rollout. Most incremental
occupancy costs arising from infrastructure improvement
are now in place, apart from the new new Zealand
distribution centre, operational from august 2012. as a
result, from FY2013 and beyond, we expect overhead rent
and rates costs to flatten and then reduce as a percentage
of sales, whilst store rental costs will likely increase slightly
year-on-year as our weighting of stores into the more
expensive australian market continues.
10 annual report 2012 kathmandu
We estimate that up to $2m of the costs of warehousing
our strategy of significant capital investment is expected
and distribution incurred in FY2012 will not be repeated in
to deliver:
FY2013, because these costs were incurred in response to
the difficulties we encountered in the first half of the year
as we introduced new warehouse management systems.
these areas of the business are running reliably and more
efficiently than was the case a year ago.
operating expenses, after adjusting for one-off costs
and asset write-offs, were similar as a percentage of
sales in the second half of FY2012 compared to FY2011.
In this period total expenses (excluding depreciation,
amortisation and financing costs) increased by $7.8m, up
11.1% and overall operating leverage was achieved. the
mix of our operating costs between fixed and variable and
between first and second half periods, in tandem with
our sales being weighted to our second half does impact
on our earnings profile and rate of growth between the
two periods. overall as our earnings are derived primarily
in the second half of each year, the benefits from the
future trend we expect for operating expenses to remain
relatively constant as a percentage of sales will mainly
impact earnings in that second half. this is the scenario we
anticipate in FY2013, when a large number of new stores
are planned for opening in the second quarter of the year.
the rollout of most of the balance of our optimum
store network, particularly in australia within the next
three years;
progress the optimisation of the existing store portfolio;
and
support our growth with adequate and efficient physical
infrastructure and top tier systems.
sustainaBility
In 2011, Kathmandu launched the Sustain the Dream plan
2011-2013. this plan outlines our sustainability objectives,
model and action plan as we seek to integrate sustainability
into the way we conduct our business.
In developing the plan, we incorporated the views of a
range of team members from different functions to ensure
a holistic and integrated approach to sustainability, to align
our approach with our core purpose and values, and to
reflect the importance of this area to our customers and
team members.
the Sustain the Dream plan is divided into five impact areas:
the uplift in our level of capital expenditure in FY2012
minimise our environmental footprint;
resulted in an increase in depreciation and amortisation
expense of $2.1m, 28.4%. We expect a similar rate of
increase will continue for several years ahead, as we plan
to maintain levels of new capital expenditure each year
protect human rights;
add economic value;
strengthen communities; and
at $20m or more in the next two to three years. partly
develop our team.
offsetting this will be reduced costs of financing arising
from the terms negotiated in our new bank facility, which
is in place to the end of 2014. these cost savings were not
In parallel with this year’s annual report, Kathmandu will
release its first public sustainability report that highlights
significant in FY2012. as a result, the rate of reduction in
the progress of the plan. the report was developed in line
both earnings before Interest and tax (down 10.9%) and
with the Global reporting Initiative guidelines to ensure a
net profit after tax (down 10.7%) were similar.
quality and transparent report.
tamworth, new south wales
the palms, christchurch
kathmandu annual report 2012 11
our substantial uplift in product investment over the past
two years as we filled obvious gaps and took up sensible
opportunities for range extension led to an increase in SKu
count of approximately 30% over that period. In the future
we will focus on alignment of our range to our retail stores’
footprint and location. our objective is to increase return
from each SKu in our range through investment in product
growth categories and assortment range planning that will
increase revenue and reduce cost to service ratios.
after we complete re-organising the now enlarged
australian distribution centre later this year we anticipate
a period of reduced capital investment in physical
infrastructure relative to our spend in the past two
years. However this will be offset by our commitment to
continuing investment in our stores, both new and existing,
and our systems - including online. this investment is to
ensure we efficiently support our target australasian store
network, and that in the medium and longer term we have
capability to grow profitable global sales. Specifically, the
launch of our new online platform will support wider sales
activity in new markets, and planned investment to come
in a new poS and CrM platform will also be critical to
wider international expansion.
the medium and long term growth opportunities for
Kathmandu are numerous, but our immediate objective
is to increase earnings in FY2013 above the profit earned
this year despite the continuing uncertainty caused by the
wider economic environment. Given the level of investment
being made in our growth strategies we must be confident
that Kathmandu will deliver improved performance in
FY2013. our team will be working very hard to maximise
the return on the investment being made, not just in the
year ahead, but also in the longer term as we continue to
grow the Kathmandu brand.
Peter Halkett
Managing Director and
Chief executive officer
our team
employee numbers as at 31 July 2012 reduced from
1733 last year to 1722. the reason for this change was
a decrease in causal employees and an increase in full
or part time permanent staff members from 50% to
approximately 62% of the total workforce. our annual
employee engagement survey again delivered pleasing
results for our employees’ support of our brand and their
positive view of Kathmandu as an employer. retention
within our retail management teams remains a specific
objective, and it continues to be challenging, particularly in
the australian market. However, we are making pleasing
progress, and additionally, the depth and competence of
our wider leadership team continues to improve as our
business grows.
We hope that the worst impacts from the Christchurch
earthquakes are behind us. We continue to be very
appreciative of the tremendous on-going support and
commitment from our sales, distribution and office staff
located in our home city.
as a result of the impact of the Christchurch earthquakes,
and in the interest of growing the brand in the australian
market, we have continued to grow our Melbourne based
team, focussing on those areas of the business where
australian domiciled roles will best support our growth in
stores, marketing and direct-to-customer sales activity in
the future.
outlook
In the three years that Kathmandu has been an aSX
and nZX listed company, we have achieved solid same
store sales and profit growth, and continued to roll out
new and profitable stores in australia and new Zealand.
although the economic environment is even more
uncertain today than it was when we listed, we continue
to have confidence that there will be profitable growth for
Kathmandu in both markets in the years ahead. In australia
we have a substantial store rollout programme to complete,
which will underpin achieving market penetration targets
closer to those of new Zealand. our expanded and ever
improving product range and the continuing growth in
Summit Club membership will strengthen our customer
loyalty, and grow sales in both countries.
Investment in the Kathmandu brand and increasing
the scale of our business remains critical to delivering
our objectives. each year we will continue to target
15 new stores. We also plan at least 6 relocations or
refurbishments of existing stores as we enhance our brand
positioning, and take up opportunities to optimise earnings
growth. In the year ahead we will open flagship stores in
central Sydney and perth. locations such as these along
with other flagship stores already opened will help define
and lift our brand profile in the medium term.
12 annual report 2012 kathmandu
board
James stronG
ao CHaIrMan
peter halkett
ManaGInG DIreCtor anD
CHIeF eXeCutIVe oFFICer
mark todd
FInanCe DIreCtor anD
CHIeF FInanCIal oFFICer
Mr Strong is currently Chairman of
Woolworths limited, the australia Council
for the arts and the organising Committee
for the ICC Cricket World Cup 2015. He is a
Director of Qantas airways, and a member
of the australian Grand prix Corporation,
nomura australia advisory Board and
australian Institute of Company Directors.
previous Board roles include Chairman of
Insurance australia Group, rip Curl Group
and Corrs Chambers Westgarth. Mr Strong
was Ceo of australian airlines from 1986-
1989 and Managing Director and Ceo of
Qantas airways from 1993-2001.
Mr Halkett joined Kathmandu in 2006 and
has directed the growth strategy for the
business throughout the period of current
ownership.
Mr todd joined Kathmandu in 1998,
following previous financial management
experience in both the apparel and retail
sectors.
Mr Halkett has had a management career
with extensive retail experience including
Chief executive officer roles in new
Zealand and the united Kingdom. the
companies he has led include two that
were publicly listed, in particular pacific
retail Group.
Mr todd has been Kathmandu’s senior
financial executive throughout his 14
years with the Group, a Director of various
Group companies and manager of the
new Zealand business from 2004-2006.
Mr todd is the Company Secretary.
John harVey
non-eXeCutIVe DIreCtor
John holland
non-eXeCutIVe DIreCtor
sandra mcphee
non-eXeCutIVe DIreCtor
Mr Harvey is a professional Director
with a background in accounting and
professional services, including 23 years
as a partner of pricewaterhouseCoopers
where he also held a number of leadership
and governance roles. Mr Harvey has
extensive experience in financial reporting,
governance, information systems
and processes, business evaluation,
acquisition, merger and takeover reviews.
Mr Harvey is currently a non-executive
Director of apn news & Media, DnZ
property Fund, Heartland Building Society
port otago, new Zealand opera and
Balance agri-nutrients.
Mr Holland is a partner in the national
new Zealand law firm Chapman tripp
and specialises in general corporate and
commercial law. Mr Holland’s securities
law experience includes acting on initial
public offerings, advising on employee
share schemes and in the private
equity area.
Mr Holland is a member of the Financial
Markets authority Capital Markets
Disclosure Consideration panel, having
previously been a member of the
Securities Commission of new Zealand
and is an accredited director of the new
Zealand Institute of Directors.
Ms Mcphee is a professional Director with
an executive career background in sales
and marketing including 10 years with
Qantas airways. Ms Mcphee also served
as Ceo of the ansett/traveland Group.
Ms Mcphee is currently a non-executive
Director of Fairfax Media, aGl energy,
Westfield retail trust and Vice president
of the art Gallery of nSW. She is also
a member of the Jp Morgan advisory
Council, MMC advisory Board and
St Vincents and Mater Health Sydney
Community advisory Council.
kathmandu annual report 2012 13
management
peter halkett
ManaGInG DIreCtor anD
CHIeF eXeCutIVe oFFICer
refer to page 12.
mark todd
FInanCe DIreCtor anD
CHIeF FInanCIal oFFICer
refer to page 12.
Grant taylor
CHIeF InForMatIon oFFICer
michelle adams
GM, proDuCt
Joined Kathmandu in august 2010 with
15 years experience in senior It roles,
including CIo at otago and Southland
District Health Boards and Group It
Manager for pGG Wrightson.
Joined Kathmandu in 2009 following
extensive product and brand management
experience with pacific Brands and
Canterbury.
tamalin morton
GM, MarKetInG
caleB nicolson
GM, SupplY CHaIn
paul stern
GM,BuSIneSS DeVelopMent
& SuStaInaBIlItY
Joined Kathmandu in 2007, with extensive
experience in marketing management
and brand strategy gained through senior
marketing roles with Coles Group and Bass
plc (uK).
Joined Kathmandu in 2007, after eight
years with the Warehouse, where he had
responsibility for delivering change across
the supply chain and the merchandise
function.
Joined Kathmandu in January 2010 with
over 18 years experience in senior retail
and Marketing roles, including at Kmart,
a.S. Watson (Hong Kong), and Cadbury
Schweppes.
matthew watts
GM, retaIl (auStralIa)
Brandon BeVeridGe
GM, retaIl (neW ZealanD &
unIteD KInGDoM)
Joined Kathmandu in 2011, with over 10
years multi site management experience
in zone and national roles with Coles and
Coles express.
Joined Kathmandu in 2007, with an
extensive retail management background
in multi site, proprietorship and national
roles. prior to Kathmandu, he was 15 years
with pacific retail Group.
kathmandu annual report 2012 15
directors’ report
your directors present their report and the financial statements for the year ended 31 July 2012.
directors
the following persons were Directors of Kathmandu
Holdings limited during the financial year.
James strong
Was re-appointed Chairman, non-executive Director,
Member of the audit and risk Committee, Member of the
remuneration and nominee Committee on 24 november
2010 and continues in these offices at the date of this report.
peter halkett
Was appointed as Managing Director and Chief executive
officer on 9 october 2009 and continues in these offices
at the date of this report.
mark todd
Was re-appointed as an executive Director on 18 november
2011 and appointed as Finance Director, Chief Financial
officer and Company Secretary on 9 october 2009 and
continues in these offices at the date of this report.
John harvey
Was appointed as a non-executive Director, Chair of the
audit and risk Committee, Member of the remuneration
and nominee Committee on 16 october 2009 and
continues in these offices at the date of this report.
John holland
Was re-appointed as a non-executive Director, Member of
the audit and risk Committee, Member of the remuneration
and nominee Committee on 24 november 2010 and
continues in these offices at the date of this report.
sandra mcphee
Was re-appointed as a non-executive Director, Member of
the audit and risk Committee, Chair of the remuneration
and nominee Committee on 18 november 2011 and
continues in these offices at the date of this report.
Details of the experience and expertise of the Directors
and the Company Secretary are outlined on page 12 of this
annual report.
retirement of directors
In accordance with the Company’s constitution, James
Strong and John Harvey will retire as Directors at the
annual general meeting and being eligible, offer themselves
for re-election.
meetinG of directors
the number of meetings of the Board of Directors and
Committees held during the year ended 31 July 2012 and
the numbers of meetings attended by each Director were:
Director
Meetings
Audit
and Risk
Committee
Meetings
Remuneration
And Nominee
Committee
Meetings
Director
James Strong
Peter Halkett
Mark Todd
John Harvey
John Holland
Sandra McPhee
A
8
8
8
8
8
8
B
8
8
8
8
8
8
A
8
XX
XX
8
8
8
B
8
XX
XX
8
8
8
A
8
XX
XX
8
8
8
B
8
XX
XX
8
8
8
A – Number of meetings attended
B – Number of meetings held during the time the Director held office during the year
XX - Not a member of relevant Committee
reView of operations
the profit of the consolidated entity for the financial year
after providing for income tax amounted to $34,852,000
(2011: $39,066,000).
a detailed review of operations is provided on pages 2 to
11 of this annual report.
siGnificant chanGes of affairs
there has been no material change in the state of affairs of
the Company or the Group.
principal actiVities
the Group’s principal activity in the course of the financial
year was the design, marketing and retailing of clothing
and equipment for travel and adventure. It operates in new
Zealand, australia and the united Kingdom.
matters suBsequent to the end of the
financial year
no matters or circumstances have arisen since the end
of the financial year which significantly affect or may
significantly affect the operations of the consolidated
entity, the results of those operations, or the state of affairs
of the consolidated entity in future financial years.
likely deVelopments and expected
results of operations
likely developments in the operations of the consolidated
entity and the expected results of those operations in
future financial years are contained on pages 2 to 11 of this
annual report.
16 annual report 2012 kathmandu
enVironmental reGulation
the consolidated entity’s operations are not regulated by
any significant environmental regulation under a law of the
Commonwealth or of a State or territory of australia, or of
new Zealand.
diVidends
Since the end of the financial year the Directors have
declared the payment of a final ordinary dividend of nZ
7.0 cents per share. Dividends will carry full new Zealand
imputation credits and full australian franking credits. the
dividend will be paid on 22 november 2012.
the Company does not currently have an active dividend
re-investment plan.
insurance of officers
the Company has entered into deeds of indemnity,
insurance and access with each Director which confirms
each person’s right of access to certain books and records
of the Company for a period of seven years after the
Director ceases to hold office. this seven year period can
be extended where certain proceedings or investigations
commence before the seven years expires. the deed also
requires the Company to provide an indemnity for liability
incurred as an officer of the Company, to the maximum
extent permitted by law.
Indemnification: pursuant to the Constitution, the Company
is required to indemnify all Directors and employees,
past and present against all liabilities allowed under law.
the Company has entered into an agreement with each
Director to indemnify those parties against all liabilities
to another person that may arise from their position as
Director or other officer of the Company or its controlled
entities to the extent permitted by law. the deed stipulates
that the Company will meet the full amount of any such
liabilities, including reasonable legal costs and expenses.
Insurance: pursuant to the Constitution, the Company may
arrange and maintain Directors’ and officers’ insurance
during each Director’s period of office and for a period
of seven years after a Director ceases to hold office.
this seven year period can be extended where certain
proceedings or investigations commence before the seven
years expires.
remuneration report
the remuneration report is set out in the
following sections:
a – principles used to determine the nature
and amount of remuneration
B – details of remuneration
c – serVice aGreements
d – details of share-Based compensation
e – additional information
the information provided in this remuneration report has
not been audited as Kathmandu Holdings limited is a
foreign company in terms of the Corporations act 2001
(australia). However the report is provided in the same
form as is generally applied by australian companies listed
on the aSX, and the audited remuneration disclosures
contained in note 9 of the financial statements generally
comply with those required under the Corporations act
2001 (australia).
a – principles used to determine the nature
and amount of remuneration
the objective of the Company’s remuneration and
nominee Committee (“the Committee”) is to create
a framework whereby Directors and executives are
remunerated fairly and within generally accepted market
and comparable entity norms, on a basis that appropriately
rewards for the creation of shareholder value. the
composition, role and responsibility of the Committee is
outlined in the Corporate Governance Statement on page
25 of this annual report. the general principles adopted by
the Committee in the setting of remuneration are:
remuneration whether measured at base or total level,
should be market competitive, and generally account for
key relevant internal and external factors such as employee
level of responsibility and place of domicile, Company
commercial circumstances, and market practice;
those employees with the clear ability to influence the
achievement of the Company’s strategic objectives
and business plans (“key management and senior
management personnel”) should be rewarded by
way of performance based rewards structured to
reflect success or otherwise against those objectives
and plans;
the alignment and mix of remuneration should not
be based primarily upon cash incentives earned
from Company short term profit performance. the
remuneration framework recognises the varying
executive roles, remunerates these accordingly and
has an incentive structure that has a reduced and
appropriate proportion of total remuneration that is
cash based;
the opportunity to participate in equity based rewards
should be a component of the reward structure for key
management personnel, both to align their reward with
the creation of shareholder value, and to encourage
their ongoing participation in and retention by
the Company;
Key management personnel who are executives (those
personnel who report directly to the Chief executive
officer and who are not Board members) should have a
substantial portion (as a target no less than one-third) of
their total remuneration aligned with reward for creating
shareholder value. this should generally be achieved
through the application of appropriate and measureable
performance hurdles to be met as criteria for receiving
incentive based remuneration by way of cash or equity;
the executive Directors (Chief executive officer
and Chief Financial officer) should, relative to other
executives have:
• a greater proportion of total remuneration that is
“at risk”, i.e. contingent upon the achievement of
performance hurdles; and
• a greater proportion of “at risk” remuneration
weighted towards equity based rewards rather
than cash, because of their role in establishing and
delivering achievement of medium and long term
Company strategic objectives and business plans,
and increasing shareholder value over that period.
the opportunity to participate in equity based rewards
should be a component of remuneration for all senior
management personnel.
the audited consolidated financial results for the Group
are the basis for measuring achievement against the
financial performance target.
non-executive Directors’ remuneration should enable
the Company to attract and retain high quality Directors
with the relevant experience. In order to maintain
independence and impartiality, non-executive Directors
should not receive performance based remuneration.
remuneration reView 31 July 2012
the Board on the advice of the Committee has discretion
to set all executive remuneration. recognising the
principles outlined above, the current prevailing market
conditions and the reported performance of the Company,
the Committee determined the following in relation to the
31 July 2012 review of remuneration:
no increase in Board Directors fees;
no increase in executive Directors remuneration;
no increase in executive base salaries for FY2013 with
the exception of one executive member (who was
subject to a pre-existing contractual arrangement);
no short term incentives payable for FY2012; and
no change to the structure and levels of available short
term and long term incentives.
executiVe rewards
the executive remuneration framework (currently applying
to 9 executives including the 2 executive Directors) has
four components:
1. Base salary and benefits;
2. short term cash incentives;
3. short term equity incentives with performance
conditions relating to continuing employment with
the company; and
4. long term incentives via participation in the
company’s option and long term incentive plans.
kathmandu annual report 2012 17
the combination of these comprises the executives’ total
remuneration. other senior management personnel have a
remuneration framework incorporating components 1. to 3.
the remuneration framework provides a market
competitive reward for executives that aligns appropriately
with achievement of personal and strategic objectives,
the results delivered, and the creation of value for
shareholders. the framework also creates emphasis on
cross-functional collaboration by requiring the payment of
all short term incentive based rewards to be contingent
firstly upon the achievement of the applicable overall Group
financial performance targets.
Group earnings before Interest, tax, Depreciation and
amortisation (eBItDa) has been determined as the
appropriate financial performance target to trigger payment
of short term cash incentives. the criterion reflects the
substantial capital investment expected to be approved and
overseen by the Board over the medium term. the spend
on this investment programme and the large number of
projects in any year, means substantial variability in the
depreciation and amortisation expense arising year by
year is possible. this may or may not be within executive
control given the nature and mix of the Group’s capital
assets, including information systems infrastructure,
and leases.
the Company’s objective is to provide a remuneration
framework whereby every incentive payment over and
above an executive’s fixed pay, whether in the form of
cash or equity, is appropriate for the results delivered by
the Company and the employee and is based on reward
for performance. the Board, through the Committee
undertakes its governance role in establishing executive
remuneration including, where required, use of external
independent remuneration consultants and/or available
market information, with reference to both total
remuneration and its various components.
1. Base salary and benefits
executive base salaries are structured as part of a total
employment remuneration package which is delivered as
a mix of cash and non-monetary benefits determined by
negotiation with the executive.
executives are offered a competitive base salary that
comprises the fixed component of pay and rewards.
external independent remuneration consultants provide
analysis and advice to assess whether base salary as well
as total remuneration reflects the market positioning for a
comparable role. Base salary for executives is reviewed
annually to provide competitiveness with the market but
there are no guaranteed base salary increases in any
executive’s contracts, except as specifically stated in
this report. an executive’s remuneration is also reviewed
on promotion.
18 annual report 2012 kathmandu
executive benefits include superannuation contributions
made in accordance with the legislation specific to each
country in which the employee is resident, medical
insurance and for some executives leasing and/or
reimbursement of vehicle running costs. Key management
and senior management personnel who relocate their place
of work between countries may be assisted in the cost of
such relocation.
2. short term cash incentives
executives are eligible to participate in an annual short
term cash incentive which delivers rewards by way of cash
bonuses, subject to the achievement of Group financial
performance targets and individual KpI’s.
Senior management personnel also have an annual short
term incentive that is equity based, with rewards delivered
by way of nil cost performance rights. the entitlement
to the short term equity incentive is also subject to the
achievement of Group’s financial performance target for
the year (eBItDa). If the target is achieved, vesting of
the performance rights granted under this incentive will
generally require the staff member to remain employed
by the Group for a period of one year after the end of the
financial year in which Group financial performance that
determines entitlement to the rights is measured.
the value of the annual short term equity incentive for
senior management personnel is generally up to 10%
of base salary.
the amount of any short term cash incentive paid in a year
For the year ended 31 July 2012:
is dependent upon:
the Group’s financial performance targets were not
the level of over performance achieved against the
met, and thus;
Group’s financial performance target (eBItDa) for the
no short term equity incentives granted to executives
year; and
if financial performance targets have been met or
exceeded, the achievement or otherwise of
individual KpI’s.
For the year ended 31 July 2012:
the Group’s financial performance targets were not
met, and thus;
no short term cash incentives were paid.
3. short term equity incentives with
performance conditions
the shareholder approved long term incentive plan enables
the Board to offer equity incentives as part of short
and long term remuneration. Both senior management
personnel and executives will participate in short term
equity incentives.
executives excluding the executive Directors have 30%
of the total value of their annual short term incentive
remuneration equity based, with rewards delivered by way
of nil cost performance rights. the entitlement to the short
term equity incentive will be subject to the achievement of
the same Group financial performance and individual KpI’s
as for the short term cash incentive.
executive Directors have 40% of the total value of their
annual short term incentive equity based and measured on
the same basis.
If the Group financial performance targets and individual
KpI’s are achieved, vesting of the performance rights
granted under this incentive will generally require the
executive staff member to remain employed by the Group
for a period of two years after the end of the financial year
in which Group financial performance that determines
entitlement to the rights is measured.
(including the executive Directors) and senior
management personnel in relation to this period
will vest.
For the year ended 31 July 2011 the Group’s financial
performance targets were met and performance rights
granted to senior management personnel for this period
vested on 31 July 2012 for eligible employees. 165,940
rights converted to the same number of ordinary shares on
31 July 2012.
4. long term incentive plans
options plan 2009
the Company implemented the employee option plan on
16 october 2009, and it was developed in the lead in to the
Company’s Ipo in order to provide an incentive scheme for
selected senior employees in conjunction with the public
listing of the Company. an initial grant of options was made
in conjunction with the Ipo to seven executives of the
Company. Vesting of the options is subject to the Company
achieving a compound annual growth in total Shareholder
return (tSr) of 15% for the period applying to each tested
period of performance measurement. tSr was determined
as the criterion for performance measurement based on
research against the market, and advice from external
independent remuneration consultants with reference
to the approach considered appropriate for a Company
undertaking an Ipo of shares.
Subject to achievement of this condition and executives
remaining in employment with the Company at the
vesting date, the options granted to each executive as
detailed below vest progressively in 3 equal tranches on
the test dates of 1 october 2010, 2011 and 2012. If the
tSr performance condition has not been achieved on the
applicable test date there will be re-testing of this condition
on 1 october 2011, 2012 and 2013. all options have an
expiry date five years from their date of grant.
the Board do not intend to grant any further options
under the existing plan. the Board are of the view that
the existing plan no longer represents an appropriate on-
going long term incentive structure for the Company post
the Ipo.
long-term incentive plan november 2010
Shareholders approved a new long term incentive plan at
the Company’s 2010 annual General Meeting based on the
granting of nil cost performance rights. rights have been
offered each year since the plan was approved. Vesting
of the rights are dependent upon the Company achieving
earnings per Share (epS) and /or relative tSr targets over
a 2, 3 and 4 year performance period, with 50% of the
value of rights allocated under each target.
epS is measured on a compound annual growth basis and
tSr is measured on a relative basis against similar sized
australian and new Zealand listed retail organisations.
performance measurement under either criterion is at
the end of each applicable performance period with no
ability to re-test. Fifty percent of the relevant portion of the
award vests for achievement of targets and a further fifty
percent vests for the achievement of aspirational targets.
a sliding scale operates between target and aspirational
performance levels.
this long-term incentive is intended to focus performance
on achievement of key long-term performance metrics. the
selected performance measures provide an appropriate
balance between relative and absolute Company
performance. the Committee considers this plan will best
support and facilitate the growth in shareholder value over
the long term.
rights were offered in 2010 to all executives. From 2011
onwards, the Committee has granted only executive
Directors with nil cost performance rights that will require
achievement of epS and relative tSr targets over the 2, 3
and 4 year periods. these grants are subject to shareholder
approval. other executives and senior management
personnel have been granted nil cost performance rights
under this plan that are measured and will vest under the
short term equity incentive framework.
non-executiVe directors’ fees
the current aggregate limit for non-executive Directors’
fees is $a800,000 per annum with a base fee payable
(including superannuation if applicable) to the Chairman
of $a206,000 and to a non-executive Director currently
of $a103,000 per annum. additionally a$10,000 per
annum is paid for sub-committee attendances. the
Managing Director and Finance Director do not receive
Directors’ fees. the amounts approved for Directors’ fees
are expressed in $a given the specific requirements for
remuneration reporting applying to aSX listed companies,
however all amounts reported in the tables within this
kathmandu annual report 2012 19
report are specified in $nZ, being the reporting currency of
the Company.
It remains the Board’s intention that Directors’ fees will be
reviewed annually, with external independent remuneration
consultants providing advice to ensure fees reflect market
rates. there are no guaranteed annual increases in any
Director’s fees.
non-executive Directors do not participate in the Company
short or long term incentive schemes.
the following fees apply per annum, including sub-
committee attendance fees:
BAse Fees
Chairman
Other non-Executive Directors
Actual fees paid in year ended 31 July 2012
(converted to reporting currency)
Chairman
Other non-Executive Directors
AUD $
216,000
113,000
NZD $
277,534
145,182
B – details of remuneration
the following executives along with the Directors were
the key management personnel with the authority and
responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly, during the
financial year:
peter halkett – Chief executive officer
mark todd – Chief Financial officer
tamalin morton – General Manager, Marketing
michelle adams – General Manager, product
caleb nicolson – General Manager, Supply Chain
paul stern – General Manager, Business Development
and Sustainability
Grant taylor – Chief Information officer
(from 30 august 2010)
matthew watts – General Manager, retail australia
(from 1 March 2012)
Brandon Beveridge – General Manager, retail
new Zealand (from 1 March 2012)
all of the above persons were employed by the Group
and were key management personnel for the entire year
ended 31 July 2012 and the year ended 31 July 2011,
unless otherwise stated. peter Halkett, Mark todd,
Michelle adams, Caleb nicolson, Grant taylor and Brandon
Beveridge are employees of Kathmandu limited (new
Zealand domiciled), and tamalin Morton, paul Stern and
Matthew Watts, are employees of Kathmandu pty limited
(australian domiciled).
20 annual report 2012 kathmandu
Details of the remuneration of the Directors and other
key management personnel of the Group, for the current
and prior financial years are set out in note 9 of the financial
statements.
c - serVice aGreements
all executives are on employment terms consistent with
the remuneration framework outlined in this report. each
of the agreements has an open term, and the period of
notice to be given by the employee is three months. the
agreements provide for three months base salary inclusive
of any applicable superannuation to be paid in the event of
a redundancy.
d – details of share-Based compensation
options plan 2009
the Company employee option plan entitles the holder
to acquire one share for each option granted by paying
the prescribed exercise price to the Company once the
option has vested in the holder and the relevant exercise
conditions have been met.
as noted above, the Board do not intend to grant any
further options under the existing plan. the number of
options previously granted by the Company and thus
provided as remuneration to executive Directors and
other key management personnel under this plan is set
out below.the fair value of the options granted on 18
november 2009 is $0.46 per option.
all options granted under this plan will vest on the exercise
dates above provided the required performance hurdles
are achieved and the employee remains employed with the
Company at the vesting date. In the event an employee
leaves the Company prior to the vesting date the options
will lapse. any options that vest under this plan must
be exercised no later than 18 november 2014. the total
payable per employee on the exercise of one or more
options on a particular day is the price per share in the
Company paid for by the purchasers of shares in the Ipo,
being $a1.70 and $nZ2.1333, regardless of the number
exercised on that day.
Year ended
31 July 2010
Options Grant
Date
Options
Granted During
The Year
First Vesting
Date
Last Vesting
Date
Total Fair Value
Of Options At
Grant Date $
Options Vested
During The
Year
executive Directors
Peter Halkett
Peter Halkett
Peter Halkett
Mark Todd
Mark Todd
Mark Todd
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
Other Key Management Personnel
Michelle Adams
Michelle Adams
Michelle Adams
Tamalin Morton
Tamalin Morton
Tamalin Morton
Caleb Nicolson
Caleb Nicolson
Caleb Nicolson
Total
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
18 Nov 2009
186,218
186,218
186,218
53,377
53,377
53,377
26,755
26,755
26,756
36,932
36,932
36,933
15,518
15,518
15,518
956,402
1 Oct 2010
1 Oct 2013
1 Oct 2011
1 Oct 2013
1 Oct 2012
1 Oct 2013
1 Oct 2010
1 Oct 2013
1 Oct 2011
1 Oct 2013
1 Oct 2012
1 Oct 2013
1 Oct 2010
1 Oct 2013
1 Oct 2011
1 Oct 2013
1 Oct 2012
1 Oct 2013
1 Oct 2010
1 Oct 2013
1 Oct 2011
1 Oct 2013
1 Oct 2012
1 Oct 2013
1 Oct 2010
1 Oct 2013
1 Oct 2011
1 Oct 2013
1 Oct 2012
1 Oct 2013
78,925
88,912
90,841
22,623
25,485
26,038
11,340
12,774
13,052
15,653
17,634
18,017
6,577
7,409
7,570
442,850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.
Bryan Moore was General Manager, Information Services until his resignation on 10 September 2010, consequently 44,949 options granted to him under this plan have lapsed.
2. Matthew Spencer was General Manager, Retail until his resignation on 6 January 2012, consequently 118,624 options granted to him under this plan have now lapsed.
kathmandu annual report 2012 21
no options in the Company were granted or vested in the
previous year. no grants have been made subsequent to
year end.
long term incentive plan november 2010
the Company long term incentive plan entitles the Board
to grant performance rights for no cash consideration, at
intervals determined by the Board. rights were offered in
2010 to all executives and senior management personnel
domiciled in australia and new Zealand.
For executives vesting of the rights will be dependent upon
the Company achieving earnings per Share (epS) and /
or relative tSr targets over a 2, 3 and 4 year performance
period, with 50% of the value of rights allocated under
each target.
For senior management vesting of the rights was
dependent firstly upon achievement of Company epS
targets for FY2011, and given those targets were achieved,
the rights granted vested on 31 July 2012 for personnel
that remained employed by the Company on that date.
For each executive the number of rights granted and the
applicable performance period over which epS and relative
tSr is measured is set out below, along with the fair value
of the rights at the grant date.
2012
Grant Date
Rights
Granted
during the
year
Date
exercisable
expiry Date
Total fair value
of Performance
Rights at Grant
Date $
Performance Rights
granted in prior
periods vested
during the year
executive Directors
Peter Halkett
Peter Halkett
Peter Halkett
Mark Todd
Mark Todd
Mark Todd
30 Nov 2011
30 Nov 2011
30 Nov 2011
30 Nov 2011
30 Nov 2011
30 Nov 2011
Other Key Management Personnel
Michelle Adams
Tamalin Morton
Paul Stern
Caleb Nicolson
Grant Taylor
Matthew Watts
Brandon Beveridge
Total
-
-
-
-
-
-
-
46,498
46,497
46,497
27,476
27,476
27,476
-
-
-
-
-
-
-
1 Dec 2013
1 Dec 2014
1 Dec 2015
1 Dec 2013
1 Dec 2014
1 Dec 2015
1 Dec 2015
1 Dec 2015
1 Dec 2015
1 Dec 2015
1 Dec 2015
1 Dec 2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
86,487
84,160
81,137
51,105
49,732
47,945
-
-
-
-
-
-
-
221,920
400,566
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22 annual report 2012 kathmandu
2011
Grant Date
Rights
Granted
during the
year
Date
exercisable
expiry Date
Total fair value
of Performance
Rights at Grant
Date $
Performance Rights
granted in prior
periods vested
during the year
executive Directors
Peter Halkett
Peter Halkett
Peter Halkett
Mark Todd
Mark Todd
Mark Todd
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
Other Key Management Personnel
Michelle Adams
Michelle Adams
29 Nov 2010
29 Nov 2010
Michelle Adams
29 Nov 2010
Tamalin Morton
Tamalin Morton
Tamalin Morton
Paul Stern
Paul Stern
Paul Stern
Caleb Nicolson
Caleb Nicolson
Caleb Nicolson
Grant Taylor
Grant Taylor
Grant Taylor
Total
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
29 Nov 2010
59,048
59,048
59,048
20,833
20,833
20,833
6,131
6,131
6,131
8,759
8,759
8,759
8,759
8,759
8,759
5,952
5,952
5,952
5,357
5,357
5,357
344,517
1 Dec 2012
1 Dec 2013
1 Dec 2014
1 Dec 2012
1 Dec 2013
1 Dec 2014
1 Dec 2012
1 Dec 2013
1 Dec 2014
1 Dec 2012
1 Dec 2013
1 Dec 2014
1 Dec 2012
1 Dec 2013
1 Dec 2014
1 Dec 2012
1 Dec 2013
1 Dec 2014
1 Dec 2012
1 Dec 2013
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
1 Dec 2014
139,353
132,858
126,363
49,166
46,874
44,583
14,469
13,795
13,120
20,671
19,708
18,744
20,671
19,708
18,744
14,047
13,392
12,737
12,643
12,053
11,464
775,163
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1. Matthew Spencer was General Manager, Retail until his resignation on 6 January 2012, consequently 29,775 rights granted to him under this plan have now lapsed.
performance rights granted to each executive will, subject
to satisfaction of performance conditions, vest on the basis
of one ordinary share for each performance right which
vests, at the end of each performance period.
e – additional information
cash bonuses and performance
as noted above, for the current year no cash bonuses that
were available to be paid to key management personnel
based on achievement of financial performance targets and
individual KpI’s were paid as a result of the Company not
meeting those performance targets.
options and performance
testing for the vesting of options granted under the
Company employee option plan is 1 october in each year
(for one-third of the options granted). From 1 october 2010
onwards in the event that the initial tranche of options do
not vest on initial testing because the tSr performance
target for the tested period has not been met, the options
do not lapse. there is annual retesting against the 15%
compound tSr growth target on 1 october each year
through to 2013 for each tranche.
kathmandu annual report 2012 23
company performance
all key management personnel’s short term cash incentive is dependent upon the Company’s overall financial performance
for each financial year and their long term incentive is dependent upon both earnings per share growth and relative total
shareholder returns over a range of performance periods.
With reference to the measurement of long term incentive performance the table below outlines the Company’s earnings
and share performance since its listing on 13 november 2009:
Year
NPAT
Growth
ePs cents
per share
ePs
Growth
share price
at start of
year
share price
at end of
year
share price
growth
Ordinary
dividends
paid or
declared per
share
FY2010
FY2011
FY2012
$9.4m
NA
$39.1m
316.0%
$34.9m
(10.7%)
0.3
19.5
17.4
NA
65x
0.9x
$2.13
$2.05
$2.20
$2.05
$2.20
$1.59
(3.8%)
7.3%
(27.7%)
$0.07
$0.10
$0.10
Share price quoted is the nZX listing price. the Company is listed on both the aSX and nZX and options will vest on both
exchanges, dependent on where the employee is based.
Historical performance prior to the Company’s listing is not considered meaningful with respect to the Company’s
performance and its impact on shareholder wealth.
shares under options or performance rights
there are no unissued ordinary shares of the Company under any vested options or performance rights at the date of
this report.
remuneration of auditors
Details of remuneration of auditors is set out in note 22 of the Financial Statements.
non-audit services
pricewaterhouseCoopers were appointed auditors of Kathmandu Holdings limited in 2009 and whilst their main role is
to provide audit services to the Company, the Company does employ their specialist advice where appropriate. In each
instance, the Board has considered the nature of the advice sought in the context of the audit relationship and in accordance
with the advice received from the audit and risk Committee, does not consider these services compromised the auditor
independence for the following reasons:
all non-audit services have been reviewed by audit and risk Committee to ensure they do not impact the impartiality
and objectivity of the auditor
none of the services undermined the general principles relating to auditor independence, including not reviewing or
auditing the auditor’s own work, not acting in a management or a decision making capacity for the Company, not acting
as advocate for the Company or not jointly sharing economic risk or rewards.
a copy of the auditor’s independence declaration is contained on page 27 of this annual report.
this report is made in accordance with a resolution of the Directors.
James strong
Chairman
Peter Halkett
Managing Director
24 annual report 2012 kathmandu
BoArd, MANAgEMENT ANd CorPorATE govErNANCE
corporate governance
the Board and management of the Company are
committed to ensuring that the Company adheres to best
practice governance principles and maintains the highest
ethical standards. the Board is responsible for the overall
corporate governance of the Company, including adopting
the appropriate policies and procedures and seeking to
ensure Directors, management and employees fulfil their
functions effectively and responsibly. the Company is listed
on both the new Zealand and australian stock exchanges.
Corporate governance principles and guidelines have been
introduced in both countries. these include the australian
Securities exchange (aSX) Corporate Governance Council
Corporate Governance principles and recommendations,
the new Zealand Stock exchange listing rules relating
to corporate governance, the nZX Corporate Governance
Best practice Code, and the new Zealand Securities
Commission’s Corporate Governance principles and
Guidelines (collectively, the principles). the Board considers
that the Company’s corporate governance practices and
procedures substantially reflect these principles. the full
content of the Company’s Corporate Governance policies,
practices and procedures can be found on the Company’s
website (www.kathmanduholdings.com).
the main policies and practices adopted by the Company
are summarised below.
Board charters of directors and
its committees
the Board has adopted a written charter to provide a
framework for the effective operation of the Board. the
charter addresses the following matters and responsibilities
of the Board:
enhancing Shareholder value;
oversight of the Company, including its control and
accountability systems;
appointing and removing the Managing Director (or
equivalent) and the Chief Financial officer;
ratifying the appointment, and where appropriate, the
removal of the senior executives;
input into and approval of corporate strategy and
performance objectives;
reviewing and ratifying systems of risk management
and internal compliance and control, codes of conduct
and legal compliance;
monitoring senior management’s performance and
implementation strategy, and seeking to ensure
appropriate resources are available;
approving budgets; and
approving and monitoring financial and other reporting.
Board composition
at present, there are six Directors on the Board. Four out
of the six Directors are non-executive Directors. peter
Halkett, (Managing Director and Chief executive officer),
and Mark todd (Finance Director and Chief Financial
officer) are the only executive Directors on the Board. the
Chairman of the Board is James Strong. the biography
of each Board member, including each Director’s skills,
experience, expertise and the term of office held by each
Director at the date of this annual report is set out in the
“Board” section of this annual report.
independence of directors
the factors that the Company will take into account when
assessing the independence of its Directors are set out in
its Charter, a copy of which is available on the Company’s
website (www.kathmanduholdings.com).
the Managing Director (peter Halkett) and Finance
Director (Mark todd) are employed by the Company or
another Group member in an executive capacity and are
not considered to be independent Directors based on the
criteria set out in the Board Charter. all remaining Directors
satisfy the criteria and are considered independent
Directors, namely James Strong, John Harvey, John
Holland and Sandra Mcphee.
Board committees
the Board may from time to time establish appropriate
committees to assist in the discharge of its responsibilities.
the Board has established the audit and risk Committee
and the remuneration and nomination Committee. other
committees may be established by the Board as and when
required. Membership of Board committees will be based
on the needs of the Company, relevant legislative and other
requirements and the skills and experience of individual
Directors.
audit and risk committee
under its charter, this committee must have at least three
members, a majority of whom must be independent
Directors and all of whom must be non-executive
Directors. Currently, all the non-executive Directors are
members of this committee. John Harvey is Chair of the
committee. the primary role of this committee includes:
overseeing the process of financial reporting, internal
approving and monitoring the progress of major capital
expenditure, capital management and acquisitions
and divestitures;
control, continuous disclosure, financial and non-
financial risk management and compliance and
external audit;
monitoring Kathmandu’s compliance with laws and
regulations and Kathmandu’s own codes of conduct
and ethics;
encouraging effective relationships with, and
communication between, the Board, Management and
Kathmandu’s external auditor; and
evaluating the adequacy of processes and controls
established to identify and manage areas of potential
risk and to seek to safeguard the Company’s assets.
under the charter it is the policy of the Company that
its external auditing firm must be independent of the
Company. the committee will review and assess the
independence of the external auditor on an annual basis.
remuneration and
nomination committee
under its charter, this committee must have at least three
members, a majority of whom must be independent
Directors and all of whom must be non-executive
Directors. Currently, all the non-executive Directors are
members of this committee. Sandra Mcphee is Chair of
the committee. the main functions of the committee, are
to assist the Board with a view to establishing a Board of
effective composition, size, expertise and commitment
to adequately discharge its responsibilities and duties,
and assist the Board with a view to discharging its
responsibilities to Shareholders and other stakeholders to
seek to ensure that the Company:
has coherent remuneration policies and practices which
enable the Company to attract and retain executives
and Directors who will create value for Shareholders;
kathmandu annual report 2012 25
policy which establishes procedures which are aimed at
ensuring that Directors and Management are aware of and
fulfil their obligations in relation to the timely disclosure of
material price-sensitive information.
securities tradinG policy
the Company has guidelines for dealing in securities which
are intended to explain the prohibited type of conduct in
relation to dealings in securities under the Corporations
act 2001 (australia) and the Securities Markets act 1988
(nZ) and to establish a best practice procedure in relation
to Directors’, management’s and employees’ dealings
in Shares in the Company. Subject to the overriding
restriction that persons may not deal in Shares while they
are in possession of material price sensitive information,
Directors and management will only be permitted to deal
in Shares during certain ‘window periods’, following the
release of the Company’s full and half year financial results
or the release of a disclosure document offering shares
in the Company. outside of these periods, Directors and
management must receive clearance for any proposed
dealing in Shares.
code of conduct
the Board recognises the need to observe the highest
standards of corporate practice and business conduct.
accordingly, the Board has a formal code of conduct, to be
followed by all employees and officers. the key aspects of
this code are to:
act with honesty, integrity and fairness and in the best
interest of the Company;
act in accordance with all applicable laws, regulations,
fairly and responsibly remunerates Directors and
policies and procedures; and
executives, having regard to the performance of the
Company, the performance of the executives and the
general remuneration environment; and
has effective policies and procedures to attract,
motivate and retain appropriately skilled persons to
meet the Company’s needs.
risk manaGement policy
the identification and proper management of the
Company’s risks are an important priority of the Board. the
Company has a risk management policy appropriate for
its business. this policy highlights the risks relevant to the
Company’s operations, and the Company’s commitment
to designing and implementing systems and methods
appropriate to minimise and control its risk. the audit
and risk Committee is responsible for monitoring risk
management and establishing procedures which seek to
provide assurance that major business risks are identified,
consistently assessed and appropriately addressed.
continuous disclosure policy
the Company is committed to observing its disclosure
obligations under the listing rules. the Company has a
use Company resources and property properly.
diVersity policy
Kathmandu aspires to appoint the best people to do
the best job. In seeking to achieve this objective, the
importance of employee diversity is recognised in our
commitment to recruit, develop and promote employees
on merit, at all levels across the Group, without any form
of discrimination. We respect the unique differences that
employees can bring to Kathmandu such as differences
in age, gender, ethnicity, cultural background, sexual
orientation, religious or political beliefs or activities. the
benefits of diversity will continue to be tested and re-
affirmed with reference to our team composition.
Kathmandu has established a Diversity policy in accordance
with aSX CGC Corporate Governance principles and
recommendations. a copy of this policy can be obtained from
the Company’s website (www.kathmanduholdings.com).
We consider our current level of employee gender
diversity to be efficacious in meeting our policy objective
of maintaining appropriate female employee ratios across
the Group. We will continue to be vigilant in the review
26 annual report 2012 kathmandu
of measureable diversity objectives in accordance with
recommendation 3.3 of the aSX CGC Corporate Governance
principles and recommendations, and modify or add to
these if required. We will conduct and report a gender audit
annually to measure progress from baseline data and identify
and review any specific areas of gender inequality.
Gender diVersity
In accordance with aSX CGC Corporate Governance
principles and recommendations, recommendation 3.4;
the proportion of females employed by Kathmandu as at 31
July 2012 was as follows:
Board: 17% being 1 female of 6 Directors
executive Management: 22% being 2 females of 9
executives
Senior Management (Wider leadership team):
44% being 18 females of a total of 41 in the Wider
leadership team
total employees new Zealand: 61% being 412 females
of 676 total employees
total employees australia: 51% being 505 females of
989 total employees
total employees united Kingdom: 25% being 14
females of 57 total employees
total Kathmandu Group: 54% being 931 females of
1722 employees
Kathmandu considers our current employee gender
diversity as a strength. We will continue to encourage
gender diversity to support strategies and initiatives that
foster a diverse culture through employee turnover. return
to work and flexible working arrangements which facilitate
gender diversity will be expanded to further encourage
team retention.
a study of employee pay parity was conducted and
audited as part of the Group annual salary review process,
to consider whether any employee gender pay disparity
existed. Based upon the results there is little evidence
of any disparity between male and female employees. a
review of gender pay parity will continue to be an on-going
focus for the Group.
communications with shareholders
the Company is committed to keeping Shareholders
informed of all major developments affecting the
Company’s state of affairs relevant to Shareholders
in accordance with all applicable laws. Information is
communicated to Shareholders through the lodgement
of all relevant financial and other information with aSX
and nZX and publishing information on the Company’s
website (www.kathmanduholdings.com). In particular,
the Company’s website will contain information about the
Company, including media releases, key policies and the
terms of reference of the Company’s Board Committees.
all relevant announcements made to the market and
any other relevant information will be posted on the
Company’s website as soon as they have been released
to the aSX and nZX.
kathmandu annual report 2012 27
Auditor’s Independence Declaration
As lead auditor for the audit of Kathmandu Holdings Limited for the year ended 31 July 2012, I declare
that to the best of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Kathmandu Holdings Limited and the entities it controlled during the
period.
Robert Harris
Partner
PricewaterhouseCoopers
20 September 2012
PricewaterhouseCoopers, 5 Sir Gil Simpson Drive, Burnside, PO Box 13244, Christchurch 8053 New Zealand
T: +64 3 374 3000, F: +64 3 374 3001, www.pwc.com/nz
kAThMANdu annual report 2012 29
financial statements
For the year ended 31 July 2012
Directory
Directors’ Approval of Financial Statements
Statements of Comprehensive Income
Statements of Changes in Equity
Balance Sheets
Statements of Cash Flows
Notes to the Financial Statements
Auditors’ Report
CONTENTS OF NOTES TO FINANCIAL STATEMENTS
1 General information
2
3
4
5
6
7
8
9
Summary of significant accounting policies
Standards, interpretations and amendments to published standards
Income and expenses
Income tax expense
Reconciliaton of net profits after taxation with cash inflow from
operating activities
Cash and cash equivalents
Trade and other receivables
Related party disclosures
10 Derivative financial instruments
11
Inventories
12 Property, plant and equipment
13
Intangible assets
14
Investment in subsidiaries
15 Deferred taxation
16 Trade and other payables
17
Interest bearing liabilities
18 Contributed equity - ordinary shares
19 Employee share based remuneration
20 Reserves and retained earnings
21 Dividends
22 Remuneration of auditors
23 Contingent liabilities
24 Contingent assets
25 Commitments
26 Financial risk management
27 Segmental information
28 Earnings per Share
29 Earthquake disclosures
30 Events occurring after the balance date
29
30
31
32
33
34
35
72
35
35
41
43
44
45
46
46
47
50
50
51
52
53
54
55
56
57
57
61
62
62
62
63
63
64
69
71
71
71
30 annual report 2012 kAThMANdu
directors’ approval of financial
statements
For the year ended 31 July 2012
Authorisation for Issue
the Board of directors authorised the issue of these Financial Statements on 20 September 2012.
Approval by Directors
the directors are pleased to present the Financial Statements of Kathmandu holdings limited for the year ending 31 July 2012 on
pages 31-71.
director
director
date: 20 September 2012
date: 20 September 2012
For and on behalf of the Board of directors
kAThMANdu annual report 2012 31
statements of comprehensive income
For the year ended 31 July 2012
Sales
Cost of sales
Gross profit
Other income
Selling expenses
Administration and general expenses
Finance income
Finance expenses
Finance costs - net
profit before income tax
Income tax (expense)/benefit
profit after income tax
Movement in cash flow hedge reserve
Movement in foreign currency translation reserve
other comprehensive income for the year, net of tax
total comprehensive income for the year attributable to
shareholders
Basic earnings per share
Diluted earnings per share
Weighted average basic ordinary shares outstanding (‘000)
Weighted average diluted ordinary shares outstanding (‘000)
Group
pArent
note
2012
2011
2012
2011
nZ$’000
nZ$’000
nZ$’000
nZ$’000
347,104
306,143
(127,559)
(105,560)
219,545
200,583
-
-
-
-
-
-
48
(113,774)
(48,854)
56,965
144
(5,983)
(5,839)
-
20,013
20,341
(94,812)
(41,751)
64,020
236
(7,039)
(6,803)
-
(1,794)
18,219
-
(92)
(92)
-
(1,868)
18,473
49
-
49
51,126
(16,274)
57,217
(18,151)
18,127
154
18,522
(106)
34,852
39,066
18,281
18,416
5,746
3,739
(5,055)
1,409
9,485
(3,646)
-
-
-
-
-
44,337
35,420
18,281
18,416
17.4cps
17.2cps
200,000
203,121
19.5cps
19.2cps
200,000
203,254
4
4
4
5
20
20
28
28
28
28
32 annual report 2012 kAThMANdu
statements of changes in equity
For the year ended 31 July 2012
Group
Share
Capital
Cash Flow
Hedge
reserve
Foreign
Currency
translation
reserve
Share
Based
payments
reserve
retained
earnings total equity
nZ$’000
nZ$’000
nZ$’000
nZ$’000
nZ$’000
nZ$’000
Balance as at 31 July 2010
Total comprehensive income
Dividends paid
Movement in employee share option reserve
197,049
-
-
-
(4,000)
(5,055)
-
-
2,480
1,409
-
-
Balance as at 31 July 2011
197,049
(9,055)
3,889
Total comprehensive income
Dividends paid
Issue of share capital
Share Options / Performance Rights lapsed
Movement in employee share option reserve
-
-
249
-
-
5,746
3,739
-
-
-
-
-
-
-
-
Balance as at 31 July 2012
197,298
(3,309)
7,628
246
-
-
379
625
-
-
-
-
114
739
43,352
39,066
239,127
35,420
(20,000)
(20,000)
-
379
62,418
254,926
34,852
44,337
(20,000)
(20,000)
-
8
-
249
8
114
77,278
279,634
pArent
Share
Capital
Cash Flow
Hedge
reserve
Foreign
Currency
translation
reserve
Share
Based
payments
reserve
retained
earnings total equity
nZ$’000
nZ$’000
nZ$’000
nZ$’000
nZ$’000
nZ$’000
Balance as at 31 July 2010
Total comprehensive income
Dividends paid
Movement in employee share option reserve
422,137
-
-
-
Balance as at 31 July 2010
422,137
Total comprehensive income
Dividends paid
Issue of share capital
Share Options / Performance Rights lapsed
Movement in employee share option reserve
-
-
249
-
-
Balance as at 31 July 2012
422,386
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
246
(12,359)
410,024
-
-
379
625
-
-
-
-
114
739
18,416
18,416
(20,000)
(20,000)
-
379
(13,943)
408,819
18,281
18,281
(20,000)
(20,000)
-
8
-
249
8
114
(15,654)
407,471
balance sheets
aS at 31 July 2012
ASSetS
Current assets
Cash and cash equivalents
Trade and other receivables
Related party receivable
Derivative financial instruments
Inventories
Current tax assets
Total current assets
non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Deferred tax
Total non-current assets
total assets
LIABILItIeS
Current liabilities
Trade and other payables
Derivative financial instruments
Current tax liabilities
Total current liabilities
non-current liabilities
Derivative financial instruments
Interest bearing liabilities
Total non-current liabilities
total liabilities
net assets
eQuItY
Contributed equity - ordinary shares
Reserves
Retained earnings
total equity
kAThMANdu annual report 2012 33
note
Group
2012
nZ$’000
2011
nZ$’000
pArent
2012
nZ$’000
2011
nZ$’000
7
8
9
10
11
12
13
14
15
16
10
10
17
18
20
20
1,811
3,503
-
-
73,295
-
78,609
41,911
249,092
-
3,218
294,221
372,830
29,304
3,128
6,276
38,708
751
53,737
54,488
93,196
3,574
2,339
-
2
54,001
-
59,916
32,822
243,685
-
3,467
279,974
339,890
21,012
10,505
6,666
38,183
301
46,480
46,781
84,964
26
261
82,885
-
-
3,113
86,285
-
-
321,234
-
321,234
407,519
48
-
-
48
-
-
-
48
5
192
84,216
-
-
3,214
87,627
-
-
321,234
-
321,234
408,861
42
-
-
42
-
-
-
42
279,634
254,926
407,471
408,819
197,298
5,058
77,278
279,634
197,049
(4,541)
62,418
254,926
422,386
739
(15,654)
407,471
422,137
625
(13,943)
408,819
34 annual report 2012 kAThMANdu
statements of cash flows
For the year ended 31 July 2012
Cash flows from operating activities
Cash was provided from:
Receipts from customers
Dividends received
Income tax received
Interest received
Cash was applied to:
Payments to suppliers and employees
Income tax paid
Interest paid
Group
pArent
note
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
345,974
-
-
131
346,105
291,626
16,002
5,949
313,577
306,618
-
-
179
306,797
246,063
14,175
6,785
267,023
-
20,000
257
-
20,257
1,567
-
-
1,567
-
20,000
-
-
20,000
1,477
2,875
-
4,352
net cash inflow from operating activities
6
32,528
39,774
18,690
15,648
Cash flows from investing activities
Cash was provided from:
Proceeds from sale of property, plant and equipment
Cash was applied to:
Purchase of property, plant and equipment
Purchase of intangibles
12
13
32
32
17,868
3,985
21,853
-
-
11,188
676
11,864
net cash (outflow) from investing activities
(21,821)
(11,864)
-
-
-
-
-
-
-
-
-
-
-
-
Cash flows from financing activities
Cash was provided from:
Proceeds of loan advances
Cash was applied to:
Dividends paid
Repayment of loan advances
206,226
206,226
20,000
199,040
219,040
240,223
240,223
20,000
248,177
268,177
1,331
1,331
20,000
-
20,000
4,351
4,351
20,000
-
20,000
net cash inflow / (outflow) from financing activities
(12,814)
(27,954)
(18,669)
(15,649)
net increase / (decrease) in cash held
Opening cash and cash equivalents
Effect of foreign exchange rates
Closing cash
(2,107)
(44)
3,574
344
1,811
4,736
(1,118)
3,574
21
5
-
26
7
(1)
6
-
5
kAThMANdu annual report 2012 35
notes to the financial statements
1 GENERAL INFORMATION
Kathmandu holdings limited (the Company) and its
subsidiaries (together the Group) is a designer, marketer and
retailer of clothing and equipment for travel and adventure. It
operates in new Zealand, australia and the united Kingdom.
the Company is a limited liability company incorporated and
domiciled in new Zealand. the address of its registered office
is 11 Mary Muller drive, heathcote, Christchurch.
these audited consolidated financial statements have
been approved for issue by the Board of directors on
20 September 2012.
2 SuMMARY OF SIGNIFICANT
ACCOuNTING POLICIES
these financial statements have been prepared in accordance
with Generally accepted accounting practice in new Zealand.
they comply with the new Zealand equivalents to International
Financial reporting Standards (nZ IFrS) and other applicable
Financial reporting Standards, as appropriate for profit-
oriented entities. the financial statements also comply with
International Financial reporting Standards (IFrS).
the reporting currency used in the preparation of these
consolidated financial statements is new Zealand dollars,
rounded where necessary to the nearest thousand dollars.
(A) BASIS OF PREPARATION
the principal accounting policies adopted in the preparation
of the financial statements are set out below. these policies
have been consistently applied to all periods presented, unless
otherwise stated.
Entities reporting
the financial statements for the “parent” are for Kathmandu
holdings limited as a separate legal entity.
the consolidated financial statements for the “Group” are for
the economic entity comprising Kathmandu holdings limited
and its subsidiaries. the Group consists of:
kathmandu holdings Limited
parent Company
Milford Group holdings Limited
100% owned by Kathmandu holdings limited
kathmandu Limited
100% owned by Milford Group holdings limited
kathmandu Pty Limited
100% owned by Milford Group holdings limited
kathmandu (u.k.) Limited
100% owned by Milford Group holdings limited
the Company and Group are designated as profit oriented
entities for financial reporting purposes.
Statutory base
Kathmandu holdings limited is a company registered under
the Companies act 1993.
the financial statements have been prepared in accordance
with the requirements of the Financial reporting act 1993 and
the Companies act 1993.
historical cost convention
these financial statements have been prepared under the
historical cost convention, as modified by the revaluation
of certain assets as identified in specific accounting
policies below.
Critical accounting estimates
the Group makes estimates and assumptions concerning the
future. the resulting accounting estimates will, by definition,
seldom equal the related actual results. the estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
(i) Estimated impairment of goodwill and brands
the group tests annually whether goodwill and brands have
suffered any impairment; in accordance with the accounting
policy stated in note 2 (q) (i) & (ii). the recoverable amounts of
cash-generating units have been determined based on the fair
value less cost to sell calculation. these calculations require
the use of estimates (note 13).
(ii) Stock obsolescence
the Group assesses the likely residual value of inventory. a
stock provision is recognised for stock which is selling for
less than cost. any increase in these provisions is taken as a
reduction to inventory on the balance sheet and expensed into
gross profit on the income statement.
(B) PRINCIPLES OF CONSOLIdATION
(i) Subsidiaries
Subsidiaries are all entities (including special purpose entities)
over which the Group has the power to govern the financial
36 annual report 2012 kAThMANdu
and operating policies generally accompanying a shareholding
of more than one half of the voting rights. the existence and
effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group
controls another entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. they are
de-consolidated from the date that control ceases.
the acquisition method of accounting is used to account
for business combinations by the Group. the consideration
transferred for the acquisition of a subsidiary is the fair values
of the assets transferred, the liabilities incurred and the equity
interests issued by the Group. the consideration transferred
includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. acquisition-related
costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. on an acquisition-by-acquisition basis,
the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets.
the excess of the consideration transferred over the amount of
any non-controlling interest in the acquiree and the acquisition
date fair value of any previous equity interest in the acquiree
over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If this is less than
the fair value of the net assets of the subsidiary acquired in
the case of a bargain purchase, the difference is recognised
directly in the income statement.
Inter-company transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
unrealised losses are also eliminated. accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
(ii) Transactions and non-controlling interests
the Group treats transactions with non-controlling interests as
transactions with equity owners of the Group. For purchases
from non-controlling interests, the difference between any
consideration paid and the relevant share acquired of the
carrying value of net assets of the subsidiary is recorded in
equity. Gains or losses on disposals to non-controlling interests
are also recorded in equity.
(C) SEGMENT REPORTING
an operating segment is a component of an entity that
engages in business activities which earns revenue and
incurs expenses and where the chief decision maker reviews
the operating results on a regular basis and makes decisions
on resource allocation. the Group is organised into three
operating segments, depicting the three geographical regions
the Group operates in.
(d) FOREIGN CuRRENCY TRANSLATION
(i) Functional and presentation currency
Items included in the financial statements of each of the
subsidiaries’ operations are measured using the currency
of the primary economic environment in which it operates
(‘functional currency’). the financial statements are presented
in new Zealand dollars, which is the Company’s functional
currency and Group’s presentation currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of
the transaction. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised
in the income statement, except when deferred in equity
as qualifying cash flow hedges. translation differences on
monetary financial assets and liabilities are reported as part of
the fair value gain or loss.
(ii) Group companies
the results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary
economy) that have a functional currency different from the
presentation currency are translated into the presentation
currency as follows:
assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
Income and expenses for each income statement are
translated at average exchange rates (unless this average is
not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income
and expenses are translated at the rate on the dates of the
transactions); and
all resulting exchange differences are recognised as a separate
component of equity.
on consolidation, exchange differences arising from the
translation of the net investment in foreign operations, and
of borrowings and other currency instruments designated
as hedges of such investments, are taken to shareholders’
equity. When a foreign operation is partially disposed of or
sold, exchange differences that were recorded in equity are
recognised in the income statement as part of the gain or
loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
kAThMANdu annual report 2012 37
(E) REVENuE RECOGNITION
revenue comprises the fair value of the consideration received
or receivable for the sale of goods and services, excluding
Goods and Services tax, rebates and discounts and after
eliminating sales within the Group. revenue is recognised as
follows:
(i) Sales of goods
Sales of goods are recognised when a Group entity has
delivered a product to the customer. retail sales are usually
in cash or by credit card. the recorded revenue is the gross
amount of sale (excluding GSt), including credit card fees
payable for the transaction. Such fees are included in
selling expenses.
(ii) Sales of services
Management fees are recognised in the accounting period in
which the services are rendered.
been enacted or substantially enacted by the balance sheet
date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability
is settled.
deferred income tax assets are recognised to the extent that
it is probable that future taxable profit will be available against
which the temporary differences can be utilised. deferred
income tax is provided on temporary differences arising on
investments in subsidiaries and associates, except where the
timing of the reversal of the temporary difference is controlled
by the Group and it is probable that the temporary difference
will not reverse in the foreseeable future.
(G) GOOdS ANd SERVICES TAX (GST)
the income statement and the cash flow statement have
been prepared so that all components are stated exclusive of
GSt. all items in the balance sheet are stated net of GSt,
with the exception of receivables and payables, which include
GSt invoiced.
(iii) Interest income
Interest income is recognised on a time-portion basis using the
effective interest method.
(h) LEASES
The Group is the lessee
(iv) dividend income
dividend income is recognised when the right to receive
payment is established.
(F) CuRRENT ANd dEFERREd INCOME TAX
the tax expense for the year comprises current and deferred
tax. tax is recognised in the income statement, except to the
extent that it relates to items recognised directly in equity. In
this case, the tax is also recognised in equity.
the current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the balance
sheet date in the countries where the Company’s subsidiaries
operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulations is
subject to interpretation and establishes provisions where
appropriate on the basis of amounts expected to be paid to the
tax authorities.
deferred income tax is provided in full, using the liability
method, on temporary differences arising between tax
bases of assets and liabilities and their carrying amounts
in the consolidated financial statements. however, the
deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than
a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. deferred
income tax is determined using tax rates (and laws) that have
leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as
operating leases. payments made under operating leases (net
of any incentives received from the lessor) are charged to the
income statement on a straight-line basis over the period of
the lease.
(I) IMPAIRMENT OF NON-FINANCIAL ASSETS
assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount
may not be recoverable. Intangible assets that have an
indefinite useful life, including goodwill, are not subject
to amortisation and are tested annually for impairment
irrespective of whether any circumstances identifying a
possible impairment have been identified. an impairment loss
is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. the recoverable
amount is the higher of an asset’s fair value less costs to sell
and value in use.
For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash flows (cash generating units).
(J) CASh ANd CASh EQuIVALENTS
Cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or
38 annual report 2012 kAThMANdu
less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in
value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
(k) TRAdE RECEIVABLES
trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision for
doubtful debts.
the collectability of trade receivables is reviewed on an
on-going basis. debts, which are known to be uncollectible,
are written off. a provision for doubtful receivables is
established when there is objective evidence that the
Group will not be able to collect all amounts due according
to the original terms of receivables. Significant financial
difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or
delinquency in payments are considered indicators that the
trade receivable is impaired. the amount of the provision is
the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted
at the effective interest rate. the amount of the provision is
recognised in the income statement.
(L) INVENTORIES
Inventories are stated at the lower of cost and net realisable
value. Cost is determined on a weighted average cost method
and includes expenditure incurred in acquiring the inventories
and bringing them to their existing location and condition. net
realisable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses.
(M) INVESTMENTS ANd
OThER FINANCIAL ASSETS
the Group classifies its investments in the following
categories: loans and receivables, and financial assets at
fair value through profit or loss. the classification depends
on the purpose for which the investments were acquired.
Management determines the classification of its investments
at the initial recognition and re-evaluates this designation at
every reporting date.
(ii) Financial assets at fair value through
profit or loss
Financial assets at fair value through profit or loss are financial
assets held for trading. a financial asset is classified in this
category if acquired principally for the purpose of selling in the
short-term. derivatives are also categorised as held for trading
unless they are designated as hedges. assets in this category
are classified as current assets.
Financial assets carried at fair value through profit or loss
are initially recognised at fair value, and transaction costs
are expensed in the income statement. Financial assets are
derecognised when the rights to receive cash flows from the
investments have expired or have been transferred and the
Group has transferred substantially all risks and rewards of
ownership. loans and receivables are carried at amortised
cost using the effective interest method.
Gains or losses arising from changes in the fair value of
‘financial assets at fair value through profit or loss’ are
presented in the income statement, except for foreign
exchange movements on monetary assets, which are
recognised in the income statement within ‘finance costs
– net’. dividend income from financial assets at fair value
through profit or loss is recognised in the income statement
as part of other income when the Group’s right to receive
payments is established.
the Group assesses at each balance sheet date whether
there is objective evidence that a financial asset or a group of
financial assets is impaired.
(N) dERIVATIVES
derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently re-
measured to their fair value. the method of recognising the
resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the
item being hedged. the Group designates certain derivatives
as either; (1) hedges of the fair value of recognised assets or
liabilities or a firm commitment (fair value hedge); or (2) hedges
of highly probable forecast transactions (cash flow hedges).
(i) Loans and receivables
loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. they arise when the Group provides money, goods
or services directly to a debtor with no intention of selling the
receivable. they are included in current assets, except for those
with maturities greater than 12 months after the balance sheet
date which are classified as non-current assets.
the Group documents at the inception of the transaction
the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy
for undertaking various hedge transactions. the Group also
documents its assessment, both at hedge inception and on
an on-going basis, of whether the derivatives that are used in
hedging transactions have been and will continue to be highly
effective in offsetting changes in fair values or cash flows of
hedged items.
kAThMANdu annual report 2012 39
(i) Fair value hedge
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recorded in the income
statement, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting,
the adjustment to the carrying amount of a hedged item for
which the effective interest method is used is amortised to
profit and loss over the period of maturity.
Quoted market prices or dealer quotes for similar instruments
are used for long-term debt. other techniques, such as
estimated discounted cash flows, are used to determine fair
value for the remaining financial instruments. the fair value of
interest rate swaps is calculated as the present value of the
estimated future cash flows. the fair value of forward foreign
exchange contracts is determined using quoted forward
exchange rates at the balance sheet date.
the carrying value less impairment provision of trade
receivables and payables are assumed to approximate their
(ii) Cash flow hedge
fair values.
the effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. the gain or loss
relating to the ineffective portion is recognised immediately
in the income statement. amounts accumulated in equity are
recycled in the income statement in the periods when the
hedged item will affect profit or loss (for instance when the
forecast sale that is hedged takes place). however, when the
forecast transaction that is hedged results in the recognition of
a non-financial asset (for example, inventory) or a non-financial
liability, the gains and losses previously deferred in equity are
transferred from equity and included in the measurement of
the initial cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated,
or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity
at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in the income
statement. When a forecast transaction is no longer expected
to occur, the cumulative gain or loss that was reported in
equity is immediately transferred to the income statement.
the only financial instruments held by the Group that are
measured at fair value are over the counter derivatives. these
derivatives have all been determined to be within level 2 (for
the purposes of nZ IFrS 7) of the fair value hierarchy as all
significant inputs required to ascertain the fair value of these
derivatives are observable.
(P) PROPERTY, PLANT ANd EQuIPMENT
all property, plant and equipment are stated at historical cost
less depreciation and impairment. historical cost includes
expenditure that is directly attributable to the acquisition of
the items. Cost may also include transfers from equity of
any gains/losses on qualifying cash flow hedges of foreign
currency purchases of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can
be measured reliably. all other repairs and maintenance are
charged to the income statement during the financial period in
(iii) derivatives that do not qualify for
which they are incurred.
hedge accounting
Certain derivative instruments do not qualify for hedge
accounting or hedge accounting has not been adopted.
Changes in the fair value of these derivative instruments
are recognised immediately in the income statement within
‘finance costs – net’.
(O) FAIR VALuE ESTIMATION
the fair value of financial assets and financial liabilities
must be estimated for recognition and measurement or for
disclosure purposes.
the fair value of financial instruments that are not traded in
an active market (for example, over-the-counter derivatives)
is determined using valuation techniques. the fair value of
forward exchange contracts is determined using forward
exchange market rates at the balance sheet date.
depreciation of property, plant and equipment is calculated
using diminishing value method so as to expense the cost of
the assets over their useful lives. the rates are as follows:
Leasehold Improvements
Office, Plant and Equipment
Furniture and Fittings
Computer Equipment
Motor Vehicles
10 – 50 %
10 – 48 %
10 – 48 %
20 – 60%
15 – 30%
the assets’ residual value and useful lives are reviewed and
adjusted if appropriate at each balance sheet date.
Capital work in progress is not depreciated until available for use.
an asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
40 annual report 2012 kAThMANdu
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. these are included in the
income statement.
(Q) INTANGIBLE ASSETS
(i) Goodwill
Goodwill arises on the acquisition of subsidiaries. Goodwill
represents the excess of the cost of the acquisition over
the Group’s interest in the net fair value of the assets and
liabilities of the acquiree. Separately recognised goodwill
is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on
goodwill are not reversed.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. the allocation is made to those cash-
generating units or groups of cash-generating units that are
expected to benefit from the business combination in which
the goodwill arose.
(ii) Brand
acquired brands are carried at original cost based on
independent valuation obtained at the date of acquisition.
the brand represents the price paid to acquire the rights
to use the Kathmandu brand. the brand is not amortised.
Instead the brand is tested for impairment annually or more
frequently if events or changes in circumstances indicate that
it might be impaired, and is carried at cost less accumulated
impairment losses.
(iii) Software costs
Software costs have a finite useful life. Software costs are
capitalised and written off over the useful economic life using
diminishing value method and rates of 10-60%.
Costs associated with developing or maintaining computer
software programs are recognised as an expense as incurred.
Costs that are directly associated with the production of
identifiable and unique software products controlled by the
Group, and that will probably generate economic benefits
exceeding costs beyond one year, are recognised as
intangible assets. direct costs include the costs of software
development employees.
(R) TRAdE ANd OThER PAYABLES
these amounts represent liabilities for goods and services
provided to the Group prior to the end of financial year which
are unpaid. the amounts are unsecured and are usually paid
by the 30th of the month following recognition. trade payables
are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method.
(S) PROVISIONS
a provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can
be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific
to the liability. the Group has no provisions at year end.
(T) BORROWINGS
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in the income statement over the period
of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for
at least 12 months after the balance sheet date.
(u) ShARE CAPITAL
ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from
the proceeds.
Where any Group company purchases the Company’s
equity share capital (treasury shares), the consideration paid,
including any directly attributable incremental costs (net of
income taxes) is deducted from equity attributable to the
Company’s equity holders until the shares are cancelled or
reissued. Where such shares are subsequently reissued,
any consideration received net of any directly attributable
incremental transaction costs and the related income tax
effects, is included in equity attributable to the Company’s
equity holders.
(V) EMPLOYEE BENEFITS
(i) Wages and salaries, annual leave and sick leave
liabilities for wages and salaries, including non-monetary
benefits, annual leave, and accumulating sick leave expected
to be settled within 12 months of the reporting date are
recognised in other payables in respect of employees’ services
up to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled. liabilities
for non-accumulating sick leave are recognised when the leave
is taken and measured at the rates paid or payable. the liability
for employee entitlements is carried at the present value of the
estimated future cash flows.
(ii) Long service leave
the liability for long service leave is recognised in the
provision for employee benefits and measured as the present
value of expected future payments to be made in respect
of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is given
to expected future wage and salary levels, experience of
employee departures and periods of service. expected future
payments are discounted using market yields at the reporting
date on national government bonds with terms to maturity
and currency that match, as closely as possible, the estimated
future cash flows.
(iii) Equity settled share option plan
the employee Share option plan allows Group employees
to acquire shares of the Company. the fair value of options
granted is recognised as an employee expense in the
Income Statement with a corresponding increase in the
employee share based payments reserve. the fair value is
measured at grant date and spread over the vesting periods.
the fair value of the options granted is measured using the
Monte Carlo simulation approach, taking into account the
terms and conditions upon which the options are granted.
When options are exercised the amount in the share option
reserve relating to those options, together with the exercise
price paid by the employee, is transferred to share capital.
When any vested options lapse, upon employee termination
or unexercised options reaching maturity, the amount in the
share based payments reserve relating to those options is
transferred to retained earnings.
(iv) Equity settled long term incentive plan
the executive and Senior Management long term
Incentive plan grants Group employees performance rights
subject to performance hurdles being met. the fair value
of rights granted is recognised as an employee expense in
the Income Statement with a corresponding increase in the
employee share based payments reserve. the fair value
is measured at grant date and amortised over the vesting
periods. the fair value of the rights granted is measured
using the Kathmandu holdings limited share price as
at the grant date less the present value of the dividends
forecast to be paid prior to the each vesting date. When
performance rights vest, the amount in the share based
payments reserve relating to those rights are transferred to
share capital. When any vested performance rights lapse
upon employee termination, the amount in the share based
payments reserve relating to those rights is transferred to
retained earnings.
(W) dIVIdENdS
kAThMANdu annual report 2012 41
statements in the period in which the dividends are approved
by the Company’s shareholders.
(X) CASh FLOW STATEMENT
the following are definitions of the terms used in the Cash
Flow Statement:
Cash comprises: cash at bank, cash on hand and
overdraft balances;
Investing activities are those activities relating to the
acquisition, holding and disposal of property, plant and
equipment and of investments. Investments can include
securities not falling within the definition of cash;
Financing activities are those activities which result
in changes in the size and composition of the capital
structure of the Company;
operating activities include all transactions and other
events that are not investing or financing activities.
(Y) ChANGES IN ACCOuNTING POLICIES
there were no changes in the accounting policies during
the period.
3 STANdARdS, INTERPRETATIONS ANd
AMENdMENTS TO PuBLIShEd STANdARdS
the following new standards and amendments to standards
were applied during the period;
NZ IAS 24: Related Parties disclosures (effective
for annual reporting periods beginning on or after
1 January 2011):
the amendment simplifies and clarifies the definition of a
related party.
FRS 44: New Zealand Additional disclosures and
harmonisation Amendments (effective 1 July
2011):
FrS 44 sets out new Zealand specific disclosures for
entities that apply nZ IFrSs. these disclosures have
been relocated from nZ IFrSs to clarify that these
disclosures are additional to those required by IFrSs.
the harmonisation amendments amends various nZ
IFrSs for the purpose of harmonising with the source
IFrSs and australian accounting Standards. the significant
amendments include:
deletion of the requirement for an independent valuer
to conduct the valuation of investment property and
property, plant and equipment;
inclusion of the option to account for investment property
using either cost or fair value model;
introduction of the option to use the indirect method of
reporting cash flows that is not currently in nZ IaS 7.
dividend distribution to the Company shareholders is
recognised as a liability in the Company’s and Group’s financial
In addition, various disclosure requirements have
been deleted.
nZ IaS 27 is renamed Separate Financial Statements
and is now a standard dealing solely with separate
financial statements. application of this standard by
the group and parent entity will not affect any of the
amounts recognised in the financial statements, but may
impact the type of information disclosed in relation to
the parent’s investments in the separate parent entity
financial statements.
NZ IFRS 13 Fair Value Measurement (effective 1
January 2013):
nZ IFrS 13 explains how to measure fair value and
aims to enhance fair value disclosures. the Group
has yet to determine which, if any, of its current
measurement techniques will have to change as a
result of the new guidance. It is therefore not possible
to state the impact, if any, of the new rules on any of
the amounts recognised in the financial statements.
however, application of the new standard will impact
the type of information disclosed in the notes to the
financial statements. the Group does not intend to
adopt the new standard before its operative date,
which means that it would be first applied in the annual
reporting period ending 31 July 2014.
42 annual report 2012 kAThMANdu
adoption of the new rules has not affected any of the amounts
recognised in the financial statements, but has simplified
some of the Group’s current disclosures.
Standards, interpretations and amendments to published
standards that are not yet effective
NZ IFRS 9: Financial Instruments (effective for
annual reporting periods beginning on or after 1
January 2015):
this standard replaces the parts of nZ IaS 39 Financial
Instruments: recognition and Measurement that relates
to the classification and measurement of financial
instruments.
all financial assets are required to be classified into
two measurement categories: at fair value and at
amortised cost.
the determination is based on the entity’s business model
for managing the financial assets and the contractual cash
flow characteristics of the financial asset.
For financial liabilities, the standard retains most of the
nZ IaS 39 requirements. an additional presentational
requirement has been added for liabilities designated
at fair value through profit and loss. Where the fair
value option is taken, the part of a fair value change
due to an entity’s own credit risk is recorded in other
comprehensive income.
NZ IFRS 10 Consolidated Financial Statements
(effective 1 January 2013), revised NZ IAS 27
Separate Financial Statements:
nZ IFrS 10 replaces all of the guidance on control and
consolidation in nZ IaS 27 Consolidated and Separate
Financial Statements, and nZ IFrIC 12 Consolidation
– Special purpose entities. the core principle that a
consolidated entity presents a parent and its subsidiaries
as if they are a single economic entity remains
unchanged, as do the mechanics of consolidation.
however, the standard introduces a single definition of
control that applies to all entities. It focuses on the need
to have both power and rights or exposure to variable
returns before control is present. power is the current
ability to direct the activities that significantly influence
returns. returns must vary and can be positive, negative
or both. there is also new guidance on participating and
protective rights and on agent/principal relationships.
While the Group does not expect the new standard to
have a significant impact on its composition, it has yet to
perform a detailed analysis of the new guidance in the
context of its various investees that may or may not be
controlled under the new rules.
4
INCOME ANd EXPENSES
profit / (loss) before income tax includes the following
specific (income) and expenses:
Income
Dividends received
Management fees
expenses
Depreciation
- Leasehold improvements
- Office, plant and equipment
- Furniture and fittings
- Computer equipment
- Motor vehicles
Total depreciation
Amortisation
- Software
Total amortisation
(Gain) / Loss on sale of property, plant and equipment
Rental and operating lease expenses
Directors’ fees
Employee entitlements:
- Wages, salaries and other short term benefits
- Employee share based remuneration
Finance costs
Interest income
Interest expense
Other finance costs
Net exchange (gain) / loss on foreign currency borrowings
Remuneration of auditors is detailed in note 22.
Amortisation expenditure is included in administration expenses in the income statement.
kAThMANdu annual report 2012 43
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
-
-
-
-
4,986
485
2,020
421
20
7,932
1,599
1,599
891
39,595
714
61,795
371
(131)
4,274
1,587
109
5,839
3,902
484
1,555
584
28
6,553
862
862
527
31,918
728
52,286
379
(179)
4,443
2,256
283
6,803
(20,000)
(20,000)
-
-
-
-
-
-
-
-
-
-
-
714
-
371
-
-
-
(92)
(92)
(341)
-
-
-
-
-
-
-
-
-
-
728
-
379
-
-
-
(49)
(49)
44 annual report 2012 kAThMANdu
5
INCOME TAX EXPENSE
Income statement
Current income tax charge
Deferred income tax charge (refer note 15)
Income tax charge / (credit) reported in income statement
reconciliation of effective tax charge
Profit before income tax
Income tax calculated at 28% (2011: 30%)
Adjustments to taxation:
Adjustments due to different rate in different jurisdictions
Non-taxable income
Expenses not deductible for tax purposes
Effect of change in corporate tax rate
Utilisation of tax losses by group companies
Tax expense transferred to foreign currency translation reserve
Adjustments in respect of prior years
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
17,053
17,237
(779)
914
16,274
18,151
(154)
-
(154)
(339)
445
106
51,126
14,315
57,217
17,165
18,127
5,075
18,522
5,557
654
-
946
-
-
464
(105)
51
-
967
13
-
202
(247)
-
-
(5,600)
(6,000)
31
-
-
-
340
(154)
189
(5)
365
-
-
106
Income tax charge / (credit) reported in income statement
16,274
18,151
unrecognised tax losses
the group has estimated tax losses to carry forward from Kathmandu (u.K.) limited of £7,290,184 (nZ$14,350,756) (2011:
£5,743,723 (nZ$12,016,157)) which can be carried forward to be offset against future profits generated within the uK.
ImputAtIon CreDItS
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
Imputation credits available for use in subsequent reporting periods
3,554
4,479
(1)
-
the above amounts represent the balance of the imputation account as at the end of July 2012, adjusted for:
Imputation credits that will arise from the payment of the amount of the provision for income tax;
Imputation debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
the balance of australian franking credits able to be used by the Group as at 31 July 2012 is a$3,369,445 (2011: a$836,783).
kAThMANdu annual report 2012 45
6 RECONCILIATION OF NET PROFIT AFTER TAXATION WITh CASh INFLOW FROM OPERATING ACTIVITIES
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
Profit after taxation
34,852
39,066
18,281
18,416
Movement in working capital:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in inventories
Increase / (decrease) in trade and other payables
Increase / (decrease) in tax liability
Add non cash items:
Depreciation
Amortisation of intangibles
Revaluation of derivative financial instruments
(Increase) / decrease in deferred taxation
Employee share based remuneration
Loss on sale of property, plant and equipment
Items classified as financing activities:
Intercompany financing
(1,130)
1,564
(18,473)
(16,585)
7,887
(558)
4,121
2,369
(12,274)
(8,531)
7,932
1,599
(1,131)
288
371
891
6,553
862
913
5
379
527
9,950
9,239
(69)
-
6
101
38
-
-
-
-
371
-
371
(11)
-
(26)
(3,213)
(3,250)
-
-
-
445
379
-
824
-
-
-
(342)
Cash inflow from operating activities
32,528
39,774
18,690
15,648
46 annual report 2012 kAThMANdu
7 CASh ANd CASh EQuIVALENTS
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
Cash on hand
Cash at bank
Short term deposits
167
1,455
189
1,811
The carrying amount of the Group’s cash and cash equivalents are denominated in the following currencies:
NZD
AUD
GBP
USD
EUR
487
211
927
177
9
155
3,419
-
3,574
389
2,499
550
135
1
8 TRAdE ANd OThER RECEIVABLES
1,811
3,574
-
26
-
26
26
-
-
-
-
26
-
5
-
5
5
-
-
-
-
5
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
Trade receivables
Sundry debtors and prepayments
206
3,297
3,503
92
2,247
2,339
Bad and doubtful trade receivables
The Group has recognised a loss of $0 (2011: $0) in respect of bad and doubtful trade receivables during the year ended 31 July 2012.
The carrying amount of the Group’s trade and other receivables are denominated in the following currencies:
NZD
AUD
GBP
1,565
1,241
697
3,503
1,129
683
527
2,339
-
261
261
261
-
-
261
-
192
192
192
-
-
192
kAThMANdu annual report 2012 47
9 RELATEd PARTY dISCLOSuRES
Parent and ultimate Controlling Party
Kathmandu holdings limited is the immediate parent, ultimate
parent and controlling party.
during the year, legal fees of $163,683 (2011: $75,730)
were paid to Chapman tripp for services provided (primarily
related to property leases). John holland is both a director
of Kathmandu holdings limited and a partner of Chapman
tripp. as at 31 July 2012, there were outstanding legal fees of
$20,149 (2011: $0).
during the year, operating lease costs of $223,054 (2011:
$199,000) were paid to Chalmers properties limited, a
subsidiary of port otago limited. John harvey is a director of
both of these companies.
during the year the Company advanced and repaid loans
to its subsidiaries by way of an internal current account. In
presenting the financial statements of the Group, the effect
of transactions and balances between fellow subsidiaries and
those with the parent have been eliminated. all transactions
with related parties were in the normal course of business and
provided on commercial terms.
Material amounts outstanding between the parent and
subsidiaries at year end were:
loans from the parent to subsidiaries (Kathmandu
limited) $82,884,844 (2011: $84,215,544).
loans to the parent from subsidiaries $0 (2011: $0).
Material transactions between the parent and its
subsidiaries were:
all subsidiaries within the Group (note 14) are related parties.
no amounts owed to related parties have been written off or
forgiven during the year.
Management fees charged to subsidiaries $0
(2011: $341,000).
(a) key Management Personnel
Salaries
Other short-term employee benefits
Employee performance rights
Employee share option plans
(b) Non-Executive directors
Total directors fees
directors fees for the parent company were paid to the following:
James Strong
Sandra Mcphee
John harvey
John holland
Group
pArent
2012
nZ$’000
3,193
81
204
67
3,545
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
2,515
1,355
246
177
4,293
-
-
204
67
271
-
-
246
177
423
Group
pArent
2012
nZ$’000
713
2011
nZ$’000
728
2012
nZ$’000
713
2011
nZ$’000
728
48 annual report 2012 kAThMANdu
(c) Remuneration detail (as referred to in the Remuneration Report)
2012
SHort-term BeneFItS
poSt-empLoY-
ment BeneFItS
SHAre BASeD pAYmentS
name
Cash Salary
and fees
Cash bonus
non-
monetary
benefits
Super-
annuation
retirement
Benefits
Share
options
proportion of
remuneration
as equity
related
performance
rights
$
$
$
$
$
$
$
%
non-executive Directors
James Strong
John Harvey
John Holland
Sandra McPhee
277,534
145,182
145,182
145,182
total non-executive Directors
executive Directors
Peter Halkett
Mark Todd
713,080
850,981
499,753
total executive Directors
1,350,734
other Key management personnel
Michelle Adams
Tamalin Morton
Paul Stern
Caleb Nicolson
Grant Taylor
Matthew Watts
Brandon Beveridge
260,778
330,283
330,283
242,025
212,392
213,001
164,162
total other Key management personnel
total
1,752,924
3,816,738
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
59,483
-
-
-
-
-
-
3,374
13,465
62,857
13,465
1,346
7,313
-
-
3,374
3,374
19,651
19,651
6,897
-
9,791
22,201
696
-
18,581
75,713
81,438
89,178
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
proportion of
remuneration
as performance
related
%
0.0%
0.0%
0.0%
0.0%
total
$
277,534
145,182
145,182
145,182
0.0%
0.0%
0.0%
0.0%
0.0%
713,080
0.0%
-
-
-
-
-
-
-
-
-
-
38,877
11,144
110,363
48,929
14.1% 1,059,704
10.4%
576,665
0.0%
0.0%
50,021
159,292
12.8% 1,636,369
0.0%
5,586
7,710
-
3,240
-
-
-
7,102
10,146
10,146
6,895
6,205
-
4,127
4.5%
4.9%
2.8%
3.9%
2.8%
0.0%
2.4%
282,125
367,790
360,080
262,431
221,971
244,993
168,985
16,536
66,557
44,621
203,913
3.2%
6.4%
1,908,375
4,257,824
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2011
SHort-term BeneFItS
poSt-empLoY-
ment BeneFItS
SHAre BASeD pAYmentS
name
Cash Salary
and fees
Cash bonus
non-
monetary
benefits
Super-
annuation
retirement
Benefits
Share
options
performance
rights
proportion of
remuneration
as equity
related
$
$
$
$
$
$
$
%
kAThMANdu annual report 2012 49
total
$
283,235
148,174
148,174
148,174
0.0%
0.0%
0.0%
0.0%
0.0%
727,757
proportion of
remuneration
as performance
related
%
0.0%
0.0%
0.0%
0.0%
0.0%
32.4%
28.0%
-
-
-
-
-
-
-
-
-
-
91,884
26,337
48,815
62,499
12.3% 1,146,417
14.2%
623,948
118,221
111,314
13.0% 1,770,365
30.9%
19,511
13,202
18,223
-
7,657
-
29,775
18,393
26,277
26,277
17,856
16,071
8.2%
9.1%
9.0%
5.2%
7.6%
5.7%
600,518
347,897
496,760
505,371
335,842
281,286
58,593
134,649
7.5% 2,567,674
176,814
245,963
8.3% 5,065,796
29.2%
30.2%
31.2%
30.7%
30.4%
32.7%
30.6%
26.3%
non-executive Directors
James Strong
John Harvey
John Holland
Sandra McPhee
283,235
148,174
148,174
148,174
total non-executive Directors
727,757
executive Directors
-
-
-
-
-
-
-
-
-
-
Peter Halkett
Mark Todd
627,627
350,149
372,000
175,000
6,091
2,963
total executive Directors
-
-
-
-
-
-
7,000
977,776
547,000
9,054
7,000
other Key management personnel
Matt Spencer
Michelle Adams
Tamalin Morton
Paul Stern
Caleb Nicolson
Grant Taylor
346,083
206,000
277,995
304,150
201,339
173,077
175,393
10,590
19,166
105,000
1,182
4,120
155,105
155,105
-
-
19,160
19,839
102,000
2,963
4,027
92,000
-
138
total other Key management personnel
1,508,644
784,603
14,735
66,450
total
3,214,177
1,331,603
23,789
73,450
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50 annual report 2012 kAThMANdu
10 dERIVATIVE FINANCIAL INSTRuMENTS
Asset
Interest rate swaps - cash flow hedge
Less non-current portion:
Current portion
Liabilities
Interest rate swaps - cash flow hedge
Foreign exchange contracts - cash flow hedge
Less non-current portion:
Interest rate swaps - cash flow hedge
Current portion
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
-
-
-
-
990
2,889
3,879
751
3,128
2
2
-
2
340
10,466
10,806
301
10,505
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The above table shows the Group’s financial derivative holdings at year end. Refer to note 2(o) for information on the calculation of fair values.
(a) Interest rate swaps - cash flow hedge
Interest rate swaps are to exchange a floating rate of interest
for a fixed rate of interest. the objective of the transaction is
to hedge the core borrowings of the business to minimise the
impact of interest rate volatility within acceptable levels of risk
thereby limiting the volatility on the Group’s financial results.
the total amount of interest rate swaps at balance date was
$45,940,337 (2011: $40,284,450). the fixed interest rates
range between 3.99% and 5.71% (2011: 4.73% and 5.25%).
the effectiveness of the contracts is measured by comparing
the changes in the present value of the cash flow arising
from the hedged forecast interest rate at fixed rate, with the
changes in fair value of the forward contract.
(b) Foreign exchange contracts - cash flow hedge
the objective of these contracts is to hedge highly probable
anticipated foreign currency purchases against currency
fluctuations. these contracts are timed to mature when
import purchases are scheduled for payment. the total of
foreign exchange contracts amount to uS$76,750,000,
nZ$99,138,128 (2011: uS$63,050,000, nZ$84,184,649).
the effectiveness of the contracts is measured by comparing
the changes in the present value of the cash flow arising from
the hedged forecast purchase at the forward rate, with the
changes in fair value of the forward contract.
11
INVENTORIES
Trading stock
Goods in transit
Group
pArent
2012
nZ$’000
60,391
12,904
73,295
2011
nZ$’000
47,146
6,855
54,001
2012
nZ$’000
2011
nZ$’000
-
-
-
-
-
-
Inventory has been reviewed for stock selling below cost and no provision (2011: $0) has been made.
kAThMANdu annual report 2012 51
12 PROPERTY, PLANT ANd EQuIPMENT
Group
As at 31 July 2010
Cost or valuation
Accumulated depreciation
Closing net book value
Year ended 31 July 2011
Opening net book value
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book value
As at 31 July 2011
Cost or valuation
Accumulated depreciation
Closing net book value
Year ended 31 July 2012
Opening net book value
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book value
As at 31 July 2012
Cost or valuation
Accumulated depreciation
Closing net book value
Leasehold
improvement
$’000
office, plant
& equipment
$’000
Furniture &
fittings
$’000
Computer
equipment
$’000
motor
vehicles
$’000
28,373
(10,607)
17,766
17,766
9,134
(137)
(3,902)
205
23,066
37,178
(14,112)
23,066
23,066
12,407
(535)
(4,986)
394
30,346
49,362
(19,016)
30,346
3,565
(2,007)
1,558
1,558
304
-
(484)
27
1,405
3,907
(2,502)
1,405
1,405
517
(7)
(485)
19
1,449
4,441
(2,992)
1,449
10,301
(3,877)
6,424
6,424
1,025
(28)
(1,555)
96
5,962
11,379
(5,417)
5,962
5,962
4,077
(779)
(2,020)
85
7,325
14,070
(6,745)
7,325
6,990
(4,837)
2,153
2,153
725
(7)
(584)
12
2,299
7,621
(5,322)
2,299
2,299
859
(19)
(421)
14
2,732
8,379
(5,647)
2,732
314
(197)
117
117
-
-
(28)
1
90
317
(227)
90
90
8
(20)
(20)
1
59
252
(193)
59
total
$’000
49,543
(21,525)
28,018
28,018
11,188
(172)
(6,553)
341
32,822
60,402
(27,580)
32,822
32,822
17,868
(1,360)
(7,932)
513
41,911
76,504
(34,593)
41,911
52 annual report 2012 kAThMANdu
13
INTANGIBLE ASSETS
Group
As at 31 July 2010
Cost or valuation
Accumulated amortisation
Closing net book value
Year ended 31 July 2011
Opening net book value
Additions
Amortisation
Exchange differences
Closing net book value
As at 31 July 2011
Cost or valuation
Accumulated amortisation
Closing net book value
Year ended 31 July 2012
Opening net book value
Additions
Disposals
Amortisation
Exchange differences
Closing net book value
As at 31 July 2012
Cost or valuation
Accumulated amortisation
Closing net book value
Goodwill
nZ$’000
Brand
nZ$’000
Software
nZ$’000
total
nZ$’000
76,677
(1,271)
75,406
165,285
-
165,285
3,065
(1,931)
1,134
245,027
(3,202)
241,825
75,406
165,285
1,134
241,825
-
-
-
75,406
76,677
(1,271)
75,406
-
-
2,023
167,308
167,308
-
167,308
75,406
167,308
-
-
-
-
75,406
76,677
(1,271)
75,406
-
-
-
3,018
170,326
170,326
-
170,326
676
(862)
23
971
676
(862)
2,046
243,685
3,764
(2,793)
247,749
(4,064)
971
243,685
971
3,985
(9)
(1,599)
12
3,360
7,801
(4,441)
3,360
243,685
3,985
(9)
(1,599)
3,030
249,092
254,804
(5,712)
249,092
Impairment tests for goodwill and brand
the aggregate carrying amounts of goodwill and brand allocated to each unit are as follows:
Group
GooDWILL
BrAnD
New Zealand
Australia
2012
nZ$’000
28,654
46,752
75,406
2011
nZ$’000
28,654
46,752
75,406
2012
nZ$’000
51,000
119,326
170,326
2011
nZ$’000
51,000
116,308
167,308
kAThMANdu annual report 2012 53
For the purposes of goodwill and brand impairment testing, the Group operates as two cash generating units, new Zealand and
australia. the recoverable amount of the cash generating units has been determined based on the fair value less cost to sell.
the discounted cash flow valuations were calculated using projected five year future cash flows, based on Board approved
business plans. Growth is expected to continue as the store rollout programme (approximately fifteen stores per year) continues
and like for like sales increase. Cash flows beyond five years have been extrapolated using the following key assumptions:
the calculations confirmed that there was no impairment
of goodwill and brand during the year (2011: nil). the Board
believes that any reasonably possible change in the key
assumptions used in the calculations would not cause the
carrying amount to exceed its recoverable amount.
the expected continued promotion and marketing of the
Kathmandu brand support the assumption that the brand has
an indefinite life.
2012
2011
Terminal growth rate
2.5%
2.5%
New Zealand CGU pre-tax discount rate
Australia CGU pre-tax discount rate
15.2%
14.9%
15.7%
15.4%
Consolidated pre-tax discount rate
15.1%
15.6%
INVESTMENT IN SuBSIdIARIES
14
the consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in note 2:
name of entity
Milford Group Holdings Limited
Kathmandu Limited
Kathmandu Pty Limited
Kathmandu (U.K.) Limited
equity holding
2012
100%
100%
100%
100%
2011
100%
100%
100%
100%
all subsidiary entities have a balance date of 31 July. Kathmandu pty limited and Kathmandu (u.K.) limited are incorporated in
australia and united Kingdom, respectively. all other subsidiary entities are incorporated in new Zealand.
the principal activities of the subsidiaries are:
Milford Group Holdings Limited
Kathmandu Limited
Kathmandu Pty Limited
Kathmandu (U.K.) Limited
Investment in subsidiaries
Milford Group Holdings Limited
Kathmandu Limited
Kathmandu Pty Limited
Kathmandu (U.K.) Limited
Country of registration
principal Activity
New Zealand
New Zealand
Australia
United Kingdom
2012
nZ$
Holding company
Outdoor retailer
Outdoor retailer
Outdoor retailer
2011
nZ$
321,233,808
321,233,808
-
-
-
-
-
-
321,233,808
321,233,808
54 annual report 2012 kAThMANdu
15 dEFERREd TAXATION
the following are the major deferred taxation liabilities and assets recognised by the Group and movements thereon during the
current and prior year.
tax
depreciation
nZ$’000
employee
obligations
nZ$’000
9
59
-
68
19
-
87
695
235
1
931
(94)
-
837
Group
Losses
nZ$’000
366
(365)
-
1
-
-
1
other timing
differences
nZ$’000
reserves
total
nZ$’000
nZ$’000
1,657
(843)
39
853
854
44
1,751
745
-
869
1,614
-
(1,072)
542
3,472
(914)
909
3,467
779
(1,028)
3,218
As at 31 July 2010
Charge to the income statement
Charge to other comprehensive income
As at 31 July 2011
Charge to the income statement
Charge to other comprehensive income
As at 31 July 2012
pArent
tax
depreciation
nZ$’000
employee
obligations
nZ$’000
-
-
-
-
-
69
(69)
-
-
-
Losses
nZ$’000
365
(365)
-
-
-
other timing
differences
nZ$’000
reserves
total
nZ$’000
nZ$’000
11
(11)
-
-
-
-
-
-
-
-
445
(445)
-
-
-
As at 31 July 2010
Charge to the income statement
As at 31 July 2011
Charge to the income statement
As at 31 July 2012
Certain deferred taxation assets and liabilities have been offset. the following is the analysis of the deferred taxation balances
(after offset) for financial reporting purposes:
Deferred taxation assets:
- Deferred tax asset to be recovered after more than 12 months
- Deferred tax asset to be recovered within 12 months
Deferred taxation liabilities:
- Deferred tax liability to be recovered after more than 12 months
- Deferred tax liability to be recovered within 12 months
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
1,461
1,779
(1)
(21)
3,218
1,445
3,057
-
(1,035)
3,467
-
-
-
-
-
-
-
-
-
-
Movements
the gross movement on the deferred income tax account is as follows:
Opening balance
Income statement charge
Tax charged directly to equity
Closing balance
Effective tax rate reconciliation:
Re-measurement of deferred tax - company tax rate change from 30% to 28%
16 TRAdE ANd OThER PAYABLES
kAThMANdu annual report 2012 55
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
3,467
779
(1,028)
3,218
3,472
(914)
909
3,467
-
-
-
-
445
(445)
-
-
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
-
-
(13)
(13)
-
-
5
5
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
Trade payables
Employee entitlements
Sundry creditors and accruals
10,084
3,868
15,352
29,304
6,685
4,979
9,348
21,012
the carrying amount of the Group’s trade and other payables are denominated in the following currencies:
NZD
AUD
GBP
USD
5,943
20,064
1,768
1,529
29,304
5,624
8,722
810
5,856
21,012
10
-
38
48
53
(5)
-
-
48
-
-
42
42
24
18
-
-
42
56 annual report 2012 kAThMANdu
17
INTEREST BEARING LIABILITIES
Non-current portion
Total term loans
the bank loan is part of a multi option facility agreement with
Commonwealth Bank of australia and aSB Bank limited and
a facility agreement with Bank of new Zealand and national
Bank of australia, both dated 19 december 2011. the loans
are repayable in full on final maturity date of the facilities being
21 december 2014. Interest is payable based on the BKBM
rate ($nZ borrowings), the BBSy rate ($a borrowings), or the
applicable short term rate for interest periods less than 30
days, plus a margin of up to 1.15%. the bank loans are secured
against the assets of the company and its subsidiaries.
The maturity analysis of interest bearing liabilities is:
Payable within 1 year
Payable 1 to 2 years
Payable 2 to 3 years
Payable 3 to 4 years
Group
pArent
2012
nZ$’000
53,737
53,737
2011
nZ$’000
46,480
46,480
2012
nZ$’000
2011
nZ$’000
-
-
-
-
the covenants entered into by the Group require specified
calculations of Group earnings before interest, tax, depreciation
and amortisation (eBItda) plus lease rental costs to exceed
total fixed charges (net interest expense and lease rental
costs) at the end of each half during the financial year. Similarly
eBItda must be no less than a specified proportion of total
net debt at the end of each half. the calculations of these
covenants are specified in the bank facility agreements of 19
december 2011 and have been complied with at 31 July 2012.
the current interest rates, prior to hedging, on the term loans
ranged between 3.59% - 4.47% (2011: 3.65% - 5.99%).
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
-
-
53,737
-
-
46,480
-
-
53,737
46,480
-
-
-
-
-
-
-
-
-
-
18 CONTRIBuTEd EQuITY - ORdINARY ShARES
Ordinary shares fully paid ($)
Balance at beginning of year
Issue of shares under Executive and Senior Management Long Term
Incentive Plan
kAThMANdu annual report 2012 57
Group
pArent
2012
nZ$’000
197,298
2011
nZ$’000
197,049
2012
nZ$’000
422,386
2011
nZ$’000
422,137
197,049
197,049
422,137
422,137
249
-
249
-
Balance at end of year
197,298
197,049
422,386
422,137
numBer oF AutHorISeD SHAreS
Group
2012
’000
2011
’000
pArent
2012
’000
2011
’000
Ordinary shares on hand at beginning of the year
200,000
200,000
200,000
200,000
Shares issued under Executive and Senior Management Long Term
Incentive Plan
166
-
166
-
Ordinary shares on hand at end of the year
200,166
200,000
200,166
200,000
Ordinary shares
as at 31 July 2012 there were 200,165,940 ordinary issued shares in Kathmandu holdings limited and these are classified as
equity. 165,940 shares were issued under the “executive and Senior Management long term Incentive plan 24 november
2010” during the year ending 31 July 2012 (2011: nil).
all ordinary shares carry equal rights in respect of voting and the receipt of dividends. ordinary shares do not have a
par value.
19 EMPLOYEE ShARE BASEd REMuNERATION
Executive Share Option Plan 16 October 2009:
on 16 october 2009 the Board approved an executive Share
option plan to issue options to selected senior executives and
to executive directors. options will vest annually in part or in
full with the holder, in three tranches commencing 1 october
2010. all options not vested expire on 1 october 2013, and
all options vested must be exercised within five years from
date of grant. entitlement to exercise is conditional on the
Company achieving in relation to each tranche a compound
total shareholder return of 15% per annum over the period of
trading that is measured in relation to that tranche. each option
entitles the holder to one ordinary share in the capital of the
Company. the exercise price is determined by the Board but
is generally $2.1333 for new Zealand based employees and
a$1.70 for australian based employees.
during the financial year the Company issued nil options (2011:
nil) to executive directors and senior executives. the fair value
of options issued during the financial year is $0 (2011: $0). the
options issued during 2010 were valued under a Monte Carlo
simulation approach factoring in the total shareholder return
condition using the following assumptions:
Current price at issue date
Risk free interest rate
Expected life (years)
Expected share volatility
$2.14
5.40%
5
30%
a 50% net profit after tax dividend payout ratio was factored
into the valuation of the options based on management
budgets. the expected volatility was estimated based on the
historical volatility of comparable listed retail businesses.
the estimated fair value for each tranche of options issued
is amortised over the vesting period from the grant date.
the Company has recognised a compensatory expense in
the income statement of $21,911 (2011: $168,587) which
represents this amortisation.
58 annual report 2012 kAThMANdu
Movements in the number of share options outstanding and their related weighted average exercise price are as follows:
Balance at beginning of year
Issued
Forfeited
Balance at end of year
2012
2011
Average
exercise price
$ per share
2.1333
-
2.1333
2.1333
options
‘000
1,074
-
(118)
956
Average
exercise price
$ per share
2.1333
-
2.1333
2.1333
Share options outstanding at the end of the year have the following expiry date, exercise dates and exercise prices.
First Vesting month
October 2010
October 2011
October 2012
Last Vesting
month
October 2013
October 2013
October 2013
exercise
price
$2.1333
$2.1333
$2.1333
2012
‘000
319
319
318
956
options
‘000
1,120
-
(46)
1,074
2011
‘000
358
358
358
1,074
Executive and Senior Management Long Term Incentive Plan 24 November 2010
on 24 november 2010, shareholders approved at the annual General Meeting the establishment of an employee long
term Incentive plan (ltI) to grant performance rights to executive directors, Key Management personnel and other Senior
Management. performance rights will vest subject to the satisfaction of performance conditions which will be different for
executive directors as compared with the Key Management personnel and Senior Management.
Executive directors and key Management Personnel
performance rights granted to executive directors and six Key Management personnel are summarised below:
Grant Date
30 Nov 2011*
29 Nov 2010
Balance at
start of year
number
Granted during
the year
number
Vested during
the year
number
Lapsed during
the year
number
Balance at the
end of year
number
-
221,920
374,292
374,292
-
221,920
-
-
-
-
(29,775)
(29,775)
221,920
344,517
566,437
* Performance Rights in 2011 only granted to Executive Directors.
the performance rights will vest in three equal tranches. In each tranche 50% of the rights are subject to a relative total
Shareholder return (tSr) hurdle and the remaining 50% are subject to an epS growth hurdle.
the proportion of rights subject to the relative tSr hurdle is dependent on Kathmandu holdings limited’s tSr performance
relative to a defined comparable group of companies in new Zealand and australia listed on either the aSX or nZX, and with
market capitalisation indicatively in a range between 300% and 45% of Kathmandu holdings limited market capitalisation. the
percentage of tSr related rights vest according to the following performance criteria:
Kathmandu Holdings Limited relative tSr ranking
Below the 50th percentile
50th percentile
51st – 74th percentile
75th percentile or above
% Vesting
0%
50%
50% + 2% for each percentile above the 50th
100%
kAThMANdu annual report 2012 59
the tSr performance is calculated for the following performance periods:
tranche
Tranche 1
Tranche 2
Tranche 3
2012
24 months to 1 December 2013
24 months to 1 December 2014
24 months to 1 December 2015
2011
24 months to 1 December 2012
24 months to 1 December 2013
24 months to 1 December 2014
the fair value of the tSr rights have been valued under a Monte Carlo simulation approach predicting Kathmandu holdings
limited’s tSr relative to the comparable group of companies at the respective vesting dates for each tranche. the fair value of
tSr rights, along with the assumptions used to simulate the future share prices using a random-walk process are shown below:
2012
2011
Fair value of TSR rights
$165,331
$173,422
Current price at issue date
Risk free interest rate
Expected life (years)
Expected share volatility
$2.48
3.54%
2-4
36%
$1.62
4.79%
2-4
38%
the estimated fair value for each tranche of options issued is amortised over the vesting period from the grant date. the Company
has recognised a compensatory expense in the income statement of $54,101 (2011: $41,948) which represents this amortisation.
the proportion of rights subject to the epS growth hurdle is dependent on the compound average annual growth in Kathmandu
holdings limited’s epS relative to the year ending 31 July 2010. the applicable performance periods are:
tranche
Tranche 1
Tranche 2
Tranche 3
2012 performance period
FY13 EPS relative to FY11 EPS
FY14 EPS relative to FY11 EPS
FY15 EPS relative to FY11 EPS
2011 performance period
FY12 EPS relative to FY10 EPS
FY13 EPS relative to FY10 EPS
FY14 EPS relative to FY10 EPS
the percentage of the epS growth related rights scales according to the compound average annual epS growth achieved as
follows:
epS Growth
< 10%
>=10%, < 11%
>=11%, < 12%
>=12%, < 13%
>=13%, < 14%
>=14%, < 15%
>=15%
% Vesting
0%
50%
60%
70%
80%
90%
100%
the fair value of the rights have been assessed as the Kathmandu holdings limited share price as at the grant date less the
present value of the dividends forecast to be paid prior to each vesting date. the estimated fair value for each tranche of options
issued is amortised over the vesting period from the grant date. the Company has recognised a compensatory expense in the
income statement of $78,923 (2011: $61,194) which represents this amortisation.
60 annual report 2012 kAThMANdu
key Management Personnel
performance rights granted to Key Management personnel under the shareholder approved employee long term Incentive plan
are summarised below:
Grant Date
30 Nov 2011
29 Nov 2010
Balance at start
of year
number
Granted during
the year
number
Vested during
the year
number
Lapsed during
the year
number
Balance at the
end of year
number
-
-
-
291,918
-
291,918
-
-
-
(291,918)
-
(291,918)
-
-
-
performance rights granted to each employee vest upon the Company achieving performance hurdles and the employee
remaining in employment with the Company until the vesting date. the performance period and vesting dates are
summarised below:
Grant Date
Performance period (year ending)
Vesting Date
2012
30 Nov 2011
31 Jul 2012
31 Jul 2014
2011
N/A
31 Jul 2011
N/A
the fair value of the rights have been assessed as the Kathmandu holdings limited share price as at the grant date less the
present value of the dividends forecast to be paid prior to the vesting date. the fair value of each right has been calculated to be
nZ$2.23 per right (2011: n/a).
the performance hurdles set for the year ending 31 July 2012 were not met and accordingly no expense has been recorded in the
income statement.
Senior Management
performance rights granted to Key Management personnel under the shareholder approved employee long term Incentive plan
are summarised below:
Grant Date
30 Nov 2011
29 Nov 2010
Balance at start
of year
number
Granted during
the year
number
Vested during
the year
number
Lapsed during
the year
number
Balance at the
end of year
number
-
192,670
177,977
177,977
-
192,670
-
(165,940)
(165,940)
(192,670)
(12,037)
(204,707)
-
-
-
performance rights granted to each employee vest upon the Company achieving specified performance hurdles and the employee
remaining in employment with the Company until the vesting date. the performance hurdles and vesting dates are summarised
below:
Grant Date
Performance period (year ending)
Vesting Date
2012
2011
30 Nov 2011
29 Nov 2010
31 Jul 2012
31 Jul 2013
31 Jul 2011
31 Jul 2012
the fair value of the rights have been assessed as the Kathmandu holdings limited share price as at the grant date less the
present value of the dividends forecast to be paid prior to the vesting date. the fair value of each right has been calculated to be
nZ$2.35 per right (2011: $1.50).
the performance hurdles set for rights issued during 2011 were not met for the year ending 31 July 2012 and accordingly no
expense has been recorded in the income statement.
Expenses arising from share based payments:
Share Option Plan 2009
Executive Directors and Key Management Personnel
Senior Management
20 RESERVES ANd RETAINEd EARNINGS
(A) reSerVeS
(i) Cash flow hedging reserve
Opening balance
Revaluation - gross
Deferred tax
Transfer to net profit - gross
Closing balance
(ii) Foreign currency translation reserve
Opening balance
Currency translation differences
Closing balance
(iii) Share based payments reserve
Opening balance
Current year amortisation
Transfer to Share Capital on vesting of shares to Employees
Share Options / Performance Rights lapsed
Closing balance
Total Reserves
Nature and purpose of reserves
(i) Cash flow hedging reserve
the hedging reserve is used to record gains or losses on a
hedging instrument in a cash flow hedge that are recognised
directly in equity, as described in policy 2 (n) (ii). the amounts
are recognised in profit and loss when the associated hedged
transaction affects profit and loss.
(ii) Foreign currency translation reserve
the foreign currency translation reserve is used to record gains
or losses on investments in foreign operations. the amounts
kAThMANdu annual report 2012 61
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
22
200
149
371
169
103
107
379
22
200
149
371
169
103
107
379
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
(9,055)
6,967
(1,072)
(149)
(3,309)
3,889
3,739
7,628
625
371
(249)
(8)
739
(4,000)
(6,161)
869
237
(9,055)
2,480
1,409
3,889
246
379
-
-
625
-
-
-
-
-
-
-
-
625
371
(249)
(8)
739
5,058
(4,541)
739
-
-
-
-
-
-
-
-
246
379
-
-
625
625
are accumulated in equity and recognised in profit and loss
when the foreign operation is partially disposed of or sold.
(iii) Share based payments reserved
the share based payments reserve is used to recognise the
fair value of share options and performance rights granted
but not exercised or lapsed. amounts are transferred to share
capital when vested options are exercised by the employee or
performance rights are granted.
62 annual report 2012 kAThMANdu
(B) retAIneD eArnInGS
Group
pArent
Opening retained earnings
Profit for the year
Share Options/Performance Rights lapsed
Less dividends paid
Balance at 31 July
21 dIVIdENdS
Prior year final dividend paid
Current year interim dividend paid
Dividends paid ($0.10 per share (2011; $0.10))
2012
nZ$’000
62,418
34,852
8
(20,000)
77,278
2011
nZ$’000
43,352
39,066
-
(20,000)
62,418
2012
nZ$’000
(13,943)
18,281
8
(20,000)
(15,654)
Group
pArent
2012
nZ$’000
14,000
6,000
20,000
2011
nZ$’000
14,000
6,000
20,000
2012
nZ$’000
14,000
6,000
20,000
2011
nZ$’000
(12,359)
18,416
-
(20,000)
(13,943)
2011
nZ$’000
14,000
6,000
20,000
22 REMuNERATION OF AudITORS
during the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and other network audit firms:
Audit services - pricewaterhouseCoopers
Statutory audit
Half year review
Other assurance services
Total remuneration for audit services
23 CONTINGENT LIABILITIES
Liabilities outstanding under letters of credit
Rent guarantees
Financial guarantees
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
122
28
5
155
106
25
7
138
59
28
-
87
57
25
-
82
Group
pArent
2012
nZ$’000
1,542
2011
nZ$’000
2,497
9,848
1,713
8,530
1,188
2012
nZ$’000
2011
nZ$’000
-
-
-
-
-
-
Financial guarantees cover internal overdrafts and credit card limits between banks across the Group.
24 CONTINGENT ASSETS
there are no contingent assets in 2012 (2011: nil).
25 COMMITMENTS
(a) Capital commitments
Capital commitments contracted for at balance date are:
Property, plant and equipment
Intangible assets
kAThMANdu annual report 2012 63
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
1,680
1,183
2,863
131
159
290
-
-
-
-
-
-
(b) Operating lease commitments
Group company as lessee:
rent expenses reported in these financial statements relate to non-cancellable operating leases. the future commitments on
these leases are as follows:
Due within 1 year
Due within 1-2 years
Due within 2-5 years
Due after 5 years
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
39,193
34,446
73,580
20,048
31,708
28,885
62,889
23,785
167,267
147,267
-
-
-
-
-
-
-
-
-
-
Some of the existing lease agreements have right of renewal options for varying terms.
the Group leases various properties under non-cancellable lease agreements. these leases are generally between 1 - 10 years.
64 annual report 2012 kAThMANdu
26 FINANCIAL RISk MANAGEMENT
the Group’s activities expose it to a variety of financial risks,
market risk (including currency risk and interest rate risk), credit
risk and liquidity risk. the Group’s overall risk management
programme focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the
financial performance of the Group. the Group uses derivative
financial instruments such as foreign exchange contracts
and interest rate swaps to manage certain risk exposures.
derivatives are exclusively used for economic hedging
purposes, i.e. not as trading or other speculative instruments,
however not all derivative financial instruments qualify for
hedge accounting.
risk management is carried out based on policies approved
by the Board of directors. the Group treasury policy provides
written principles for overall risk management, as well as
policies covering specific areas, such as foreign exchange risk.
the parent is not directly exposed to any significant financial
risk.
(a) Market risk
Foreign exchange risk
the Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures,
primarily with respect to the aud, uSd and the GBp. the
Group is exposed to currency risk on conversion of the trading
results from its subsidiaries operating in australia and the
united Kingdom, and any cash remitted between australia
and the united Kingdom and new Zealand. the Group does
not hedge for such remittances. the Group is exposed to
purchases that are denominated in a currency other than
the functional currency of Group entities, and over 90% of
purchases are denominated in united States dollars. hedging
of this exposure is detailed in note 10. Interest on borrowings
is denominated in either new Zealand dollars or australian
dollars, and is paid for out of surplus operating cashflows
generated in new Zealand or australia.
refer to note 10 which shows the forward foreign exchange
contracts held by the Group as derivative financial instruments
at balance date. a sensitivity analysis of foreign exchange rate
risk on the Group’s financial assets and liabilities is provided in
the table below.
Cash flow and fair value interest rate risk
the Group’s main interest rate risk arises from floating rate
borrowings drawn down under bank debt facilities. the Group
uses interest rate swaps to hedge floating rate borrowings in
accordance with the Group treasury policy. Interest rate swaps
have the economic effect of converting borrowings from
floating to fixed rates.
refer to note 10 for notional principal amounts and valuations
of interest rate swaps outstanding at balance date. a
sensitivity analysis of interest rate risk on the Group’s financial
assets and liabilities is provided in the table below. refer to
note 17 for further details of the Group’s borrowings.
at the reporting date the interest rate profile of the Group’s banking facilities was:
CArrYInG Amount
Total secured loans
less principal covered by interest rate swaps
Principal on floating interest
Group
pArent
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
53,737
(45,940)
7,797
46,480
(40,284)
6,196
-
-
-
-
-
-
Interest rates on loans currently range from 3.59% – 4.47% (2011: 3.65% – 5.99%). the Group has entered into interest rate
swap agreements to reduce the impact of changes in interest rates on its long-term debt. the cashflow hedge (gain)/loss on
interest rate swaps at balance date was $986,157 (2011: $338,244).
kAThMANdu annual report 2012 65
Summarised sensitivity analysis
the following table summarises the sensitivity of the Group’s
financial assets and financial liabilities to interest rate risk and
foreign exchange risk.
a sensitivity of -10% / +10% (2011: -15% / +5%) for foreign
exchange risk has been selected. While it is unlikely that
an equal movement of the new Zealand dollar would be
observed against all currencies an overall sensitivity of -10% /
+10% (2011: -15% / +5%) is reasonable given the exchange
rate volatility observed on an historic basis for the preceding
five year period and market expectation for potential future
movements.
a sensitivity of 1% (2011: 1%) has been selected for interest
rate risk. the 1% is based on reasonably possible changes
over a financial year, using the observed range of historical
data for the preceding five year period.
amounts are shown net of income tax. all variables other than
applicable interest rates and exchange rates are held constant.
Group
IntereSt rAte rISK
ForeIGn exCHAnGe rISK
31 July 2012
Derivative financial instruments
(asset) / liability
Financial assets
Cash
Trade receivables and sundry debtors
Financial liabilities
Trade payables
Borrowings
Carrying
amount
$’000
-1%
+1%
-10%
+10%
profit
equity
profit
equity
profit
equity
profit
equity
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
3,879
(459)
209
459
(216)
-
(9,246)
-
7,565
1,811
1,422
29,304
53,737
(13)
-
(13)
-
537
537
-
-
-
-
-
-
13
-
13
-
(537)
(537)
-
-
-
-
-
-
106
(79)
27
(1,869)
-
(1,869)
-
-
-
-
(2,179)
(2,179)
(87)
65
(22)
1,529
-
1,529
-
-
-
-
1,783
1,783
total increase / (decrease)
65
209
(65)
(216)
(1,842)
(11,425)
1,507
9,348
Group
IntereSt rAte rISK
ForeIGn exCHAnGe rISK
31 July 2011
Derivative financial instruments
(asset) / liability
Financial assets
Cash
Financial liabilities
Trade payables
Borrowings
Carrying
amount
$’000
-1%
+1%
-15%
+5%
profit
equity
profit
equity
profit
equity
profit
equity
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
10,804
(403)
323
403
(331)
-
(12,930)
-
3,489
3,574
(26)
21,012
46,480
-
465
465
-
-
-
-
26
-
(465)
(465)
-
-
-
-
405
(1,955)
-
(1,955)
-
-
(2,539)
(2,539)
(109)
528
-
528
-
-
685
685
total increase / (decrease)
36
323
(36)
(331)
(1,550)
(15,469)
419
4,174
the parent is not sensitive to either interest rate or foreign exchange risk.
66 annual report 2012 kAThMANdu
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer
or counterparty to a financial instrument fails to meet its
contractual obligations. this would arise principally from
the Group’s receivables from customers. the nature of the
customer base is such that there is no individual customer
concentration of credit risk. other financial instruments which
potentially subject the Group to credit risks principally consist of
bank balances, loans, advances and refund of taxes.
Trade and other receivables
the nature of the customer base is such that there is no
individual customer concentration of credit risk.
the Group does not carry out credit evaluations for all new
customers requiring credit. Credit is generally only given to
government or local council backed institutions.
Exposure to credit risk
the below balances are recorded at their carrying amount
after any provision for loss on these financial instruments. the
maximum exposure to credit risk at reporting date was:
CArrYInG Amount
Group
pArent
Cash and cash equivalents
Trade receivables
Sundry debtors
2012
nZ$’000
2011
nZ$’000
2012
nZ$’000
2011
nZ$’000
1,811
206
1,216
3,233
3,574
92
407
4,073
26
-
-
26
5
-
-
5
As at balance date the carrying amount is also considered the fair value for each of the financial instruments.
(c) Liquidity risk
liquidity risk is the risk that an unforeseen event or
miscalculation in the required liquidity level will result in the
Group foregoing investment opportunities or not being able to
meet its obligations in a timely manner, and therefore gives rise
to lower investment income or to higher borrowing costs than
normal. prudent liquidity risk management includes maintaining
sufficient cash, and ensuring the availability of funding from
adequate amounts of credit facilities.
the Group’s liquidity exposure is managed by ensuring
sufficient levels of liquid assets and committed facilities
are maintained based on regular monitoring of cash flow
forecasts. the Group has lending facilities of $142,671,855
(2011: $126,311,631) and operates well within this facility.
this includes short term bank overdraft requirements, and at
balance date no bank accounts were in overdraft.
the table below analyses the Group’s financial liabilities and
net-settled derivative financial liabilities into relevant maturity
groupings based on the remaining period at the balance date
to the contractual maturity date. the amounts disclosed in the
table are the contractual undiscounted cash flows.
Group 2012
Trade and other payables
Guarantees
Borrowings
Group 2011
Trade and other payables
Guarantees
Borrowings
Less than
1 year
nZ$’000
Between
1 and 2 years
nZ$’000
Between
2 and 5 years
nZ$’000
over
5 years
nZ$’000
29,304
13,103
3,128
45,535
21,012
12,215
2,163
35,390
-
-
3,128
3,128
-
-
47,274
47,274
-
-
54,932
54,932
-
-
-
-
-
-
-
-
-
-
-
-
the Group enters into forward exchange contracts to manage
the risks associated with the purchase of foreign currency
denominated products.
the table below analyses the Group’s derivative financial
instruments that will be settled on a gross basis into relevant
At 31 July 2012
Forward foreign exchange contracts
-
-
Inflow
Outflow
Net Inflow / (Outflow)
Net settled derivatives – interest rate swaps
Net Inflow / (Outflow)
At 31 July 2011
Forward foreign exchange contracts
-
-
Inflow
Outflow
Net Inflow / (Outflow)
Net settled derivatives – interest rate swaps
Net Inflow / (Outflow)
kAThMANdu annual report 2012 67
maturity groupings based on the remaining period at the
balance date to the contractual maturity date. the amounts
disclosed in the table are the contractual undiscounted
cash flows. they are expected to occur and affect the profit
or loss at various dates between balance date and the
following five years.
Less than
1 year
nZ$’000
Between
1 and 2 years
nZ$’000
Between
2 and 5 years
nZ$’000
96,243
(99,138)
(2,895)
-
-
-
-
-
-
(606)
(300)
(83)
73,719
(84,185)
(10,466)
-
-
-
(254)
(84)
-
-
-
-
Fair values
the following methods and assumptions were used to
estimate the fair values for each class of financial instrument.
Foreign exchange contracts and interest rate swaps
the fair value of these instruments is estimated based on the
quoted market price of these instruments.
Trade debtors, trade creditors and bank balances
the carrying value of these items is equivalent to their
fair value.
Term liabilities
the fair value of the Group’s term liabilities is estimated based
on current market rates available to the Group for debt of
similar maturity.
Guarantees and overdraft facilities
the fair value of these instruments is estimated on the basis
that management do not expect settlement at face value to
arise. the carrying value and fair value of these instruments is
nil. details of guarantees are included in note 23. all guarantees
are repayable on demand.
68 annual report 2012 kAThMANdu
Financial instruments by category
Loans and
receivables
nZ$’000
Derivatives used
for hedging
nZ$’000
measured at
amortised cost
nZ$’000
total
nZ$’000
Group
At 31 July 2012
Cash and cash equivalents
Trade and other receivables
Total financial assets
Trade and other payables
Interest bearing liabilities
Derivative financial instrument liabilities
Total financial liabilities
At 31 July 2011
Cash and cash equivalents
Trade and other receivables
Derivative financial instrument assets
Total financial assets
Trade and other payables
Interest bearing liabilities
Derivative financial instrument liabilities
Total financial liabilities
parent
At 31 July 2012
Cash and cash equivalents
Related party receivable
Total financial assets
Trade and other payables
Total financial liabilities
At 31 July 2011
Cash and cash equivalents
Related party receivable
Total financial assets
Trade and other payables
Total financial liabilities
1,811
1,422
3,233
-
-
-
-
3,574
499
-
4,073
-
-
-
-
26
82,885
82,911
-
-
5
84,216
84,221
-
-
-
-
-
-
-
3,879
3,879
-
-
2
2
-
-
10,806
10,806
-
-
-
-
-
-
-
-
-
-
-
-
-
26,521
53,737
-
80,258
-
-
-
-
18,342
46,480
-
64,822
-
-
-
48
48
-
-
-
42
42
1,811
1,422
3,233
26,521
53,737
3,879
84,137
3,574
499
2
4,075
18,342
46,480
10,806
75,628
26
82,885
82,911
48
48
5
84,216
84,221
42
42
kAThMANdu annual report 2012 69
Capital risk management
the Group’s capital includes contributed equity, reserves and
retained earnings.
the Group’s objectives when managing capital are to
safeguard the Group’s ability to continue as a going concern in
order to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets
to reduce debt or draw down more debt.
Externally imposed capital requirements
the Group is subject to various covenants with its banking
syndicate in relation to the ratios of earnings to total debt and
interest on that debt, which were complied with during and at
the end of the year.
27 SEGMENTAL INFORMATION
the Group operates in three geographical areas: new Zealand, australia and the united Kingdom.
31 July 2012
Australia
nZ$’000
new
Zealand
nZ$’000
united
Kingdom
nZ$’000
elimination
total
nZ$’000
nZ$’000
Segment profit / (loss) before income tax
29,240
26,977
(3,435)
(1,656)
51,126
Income tax expense
Profit / (loss) after tax
(8,746)
(7,528)
-
-
(16,274)
34,852
Segment profit / (loss) before income tax includes the following
specific income and (expenses):
Sales to external customers
Sales to Group entities
Cost of sales
Interest income
Interest expense
Other finance costs
Intercompany net finance income/(expense)
Intercompany recharges income/(expense)
Depreciation and software amortisation
Exchange gain/(loss) on foreign currency borrowing
213,974
896
(70,839)
48
(2,420)
(882)
(3,867)
(8,135)
(5,882)
1,583
126,127
1,357
(53,489)
83
(1,850)
(705)
3,867
8,135
(3,321)
(123)
7,003
297
(3,231)
-
(4)
-
-
-
(328)
87
-
347,104
(2,550)
-
-
-
-
-
-
-
-
(1,656)
(127,559)
131
(4,274)
(1,587)
-
-
(9,531)
(109)
Additions of non-current assets
13,817
7,831
205
-
21,853
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
42,676
150,085
192,761
(97,826)
(27,739)
(125,565)
407,330
338,718
746,048
(9,928)
(26,749)
(36,677)
3,954
246
4,200
(375,351)
(194,828)
(570,179)
(7,510)
76,556
-
-
(7,510)
76,556
78,609
294,221
372,830
(38,708)
(54,488)
(93,196)
70 annual report 2012 kAThMANdu
31 July 2011
Australia
$’000
new
Zealand
$’000
united
Kingdom
$’000
elimination
total
$’000
$’000
Segment profit / (loss) before income tax
33,149
27,311
(2,568)
(675)
57,217
(9,723)
(8,428)
-
-
(18,151)
Income tax expense
Profit / (loss) after tax
Segment profit / (loss) before income tax includes the following
specific income and (expenses):
Sales to external customers
Sales to Group entities
Cost of sales
Interest income
Interest expense
Other finance costs
Intercompany net finance income/(expense)
Intercompany recharges income/(expense)
Exchange gain/(loss) on foreign currency borrowing
Depreciation and software amortisation
187,565
216
(58,578)
141
(2,530)
(1,158)
(3,556)
(6,872)
741
(4,628)
110,335
1,082
(43,469)
38
(1,913)
(1,098)
3,556
6,872
56
(2,371)
8,243
62
(3,513)
-
-
-
-
-
(340)
(416)
Additions of non-current assets
7,551
4,244
69
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
32,381
138,507
170,888
(88,755)
(20,057)
(108,812)
388,794
335,600
724,394
(11,270)
(26,724)
(37,994)
3,103
695
3,798
(364,362)
(194,828)
(559,190)
(3,721)
65,563
-
-
(3,721)
65,563
revenue is allocated based on the country in which the customer is located. new Zealand includes holding company costs and
head office charges.
assets / liabilities are allocated based on where the assets / liabilities are located.
the Group operates in one industry being outdoor clothing and equipment.
deferred tax assets have been included within non-current assets as they form part of the amounts provided to the Chief
operating decision Maker, and the comparative information has been updated to reflect this.
39,066
-
306,143
(1,360)
-
-
-
-
-
-
-
(740)
-
-
(105,560)
179
(4,443)
(2,256)
-
-
(283)
(7,415)
11,864
59,916
279,974
339,890
(38,183)
(46,781)
(84,964)
kAThMANdu annual report 2012 71
28 EARNINGS PER ShARE
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average
number of ordinary shares in issue during the year.
diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume
conversion of all dilutive potential ordinary shares. the Group’s dilutive potential ordinary shares are in the form of share
options / performance rights.
2012
’000
2011
’000
Weighted average number of shares in issue
200,000
200,000
Adjustment for:
-
Share options / performance rights
Total potential diluted ordinary shares
3,121
203,121
3,254
203,254
29 EARThQuAkE dISCLOSuRES
the Christchurch earthquake that occurred on 22 February 2011 has not had a significant impact on trading. Kathmandu has
business interruption insurance that provides cover for this event.
as at the date of this report one store (Cashel Street) remains closed and will be for the foreseeable future. a business interruption
claim following the 22 February 2011 event has been lodged and remains in process. a further material damage claim has been
lodged to cover any loss of inventory and damage to fixtures and fittings in our Cashel Street store. no expected insurance
proceeds from these claims have been recognised in the financial statements.
30 EVENTS OCCuRRING AFTER ThE BALANCE dATE
there are no events occurring after balance date that materially affect the information within the financial statements.
72 annual report 2012 kAThMANdu
Independent Auditors’ Report
to the shareholders of Kathmandu Holdings Limited
Report on the Financial Statements
We have audited the financial statements of Kathmandu Holdings Limited on pages 31 to 71,
which comprise the balance sheets as at 31 July 2012, the statements of comprehensive income,
statements of changes in equity and statements of cash flows for the year then ended, and the
notes to the financial statements that include a summary of significant accounting policies and
other explanatory information for both the Company and the Group. The Group comprises the
Company and the entities it controlled at 31 July 2012 or from time to time during the financial
year.
Directors’ Responsibility for the Financial Statements
The Directors are responsible for the preparation of these financial statements in accordance
with generally accepted accounting practice in New Zealand and that give a true and fair view of
the matters to which they relate and for such internal controls as the Directors determine are
necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing (New Zealand) and
International Standards on Auditing. These standards require that we comply with relevant
ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors’
judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditors
consider the internal controls relevant to the Company and the Group’s preparation of financial
statements that give a true and fair view of the matters to which they relate, in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company and the Group’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
We have no relationship with, or interests in, Kathmandu Holdings Limited or any of its
subsidiaries other than in our capacities as auditors and providing other assurance services.
These services have not impaired our independence as auditors of the Company and the Group.
kAThMANdu annual report 2012 73
Independent Auditors’ Report
Kathmandu Holdings Limited
Opinion
In our opinion, the financial statements on pages 31 to 71:
(i)
(ii)
(iii)
comply with generally accepted accounting practice in New Zealand; and
comply with International Financial Reporting Standards; and
give a true and fair view of the financial position of the Company and the Group as
at 31 July 2012, and their financial performance and cash flows for the year then
ended.
Report on Other Legal and Regulatory Requirements
We also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act
1993. In relation to our audit of the financial statements for the year ended 31 July 2012:
(i)
(ii)
we have obtained all the information and explanations that we have required; and
in our opinion, proper accounting records have been kept by the Company as far as
appears from an examination of those records.
Restriction on Distribution or Use
This report is made solely to the Company’s shareholders, as a body, in accordance with Section
205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state
to the Company’s shareholders those matters which we are required to state to them in an
auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s
shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
Chartered Accountants
20 September 2012
Christchurch
74 annual report 2012 kAThMANdu
statutory information
EMPLOYEE REMuNERATION
the Group operates in new Zealand, australia and the uK where remuneration market levels differ. the offshore remuneration
amounts are converted into new Zealand dollars. of the employees noted in the table below, 50% are employed by the Group
outside new Zealand. during the year a number of employees or former employees, not being non-executive directors of the
Group, received remuneration and other benefits that exceeded nZ$100,000 in value as follows:
remunerAtIon
numBer oF empLoYeeS
$
100,000
110,001
120,001
130,001
140,001
150,001
160,001
170,001
180,001
200,001
220,001
240,001
250,001
260,001
280,001
360,001
570,001
1,050,001
$
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
210,000
230,000
250,000
260,000
270,000
290,000
370,000
580,000
1,060,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5
6
5
3
3
2
1
2
2
2
1
1
1
1
1
2
1
1
dISTRIBuTION OF ShAREhOLdERS ANd hOLdINGS
1 to 999
1,000 to 4,999
5,000 to 9,999
10,000 to 99,999
100,000 and over
Total
%
number of
Holders
413
1,007
460
430
50
18%
43%
19%
18%
2%
2,360
100%
number of
ordinary Shares
244,310
2,599,489
3,324,653
10,296,080
183,701,408
200,165,940
%
0%
1%
2%
5%
92%
100%
the details set out above were as at 7 September 2012.
the Company has only one class of shares on issue, ordinary shares, and these shares are listed on the nZX and aSX. there are
no other classes or equity security currently on issue. the Company’s ordinary shares each carry a right to vote on any resolution
on a poll at a meeting of shareholders. holders of ordinary shares may vote at a meeting in person, or by proxy, representative or
attorney. Voting may be conducted by voice, by show of hands, or poll. there are no voting rights attached to options.
there were 84 shareholders holding less than a marketable parcel, as defined by aSX listing rules, of the Company’s ordinary
shares, based on the market price as at 7 September 2012.
there are no restricted securities or securities subject to voluntary escrow on issue.
kAThMANdu annual report 2012 75
LIMITATIONS ON ThE ACQuISITION
OF SECuRITIES
the Company is not subject to Chapters 6, 6a, 6B and 6C of the Corporations act 2001 (australia) dealing with the acquisition of
shares (i.e. substantial holdings and takeovers).
limitations on the acquisition of the securities imposed by the jurisdiction in which the Company is incorporated (new Zealand)
are:
a.
In general, securities in the Company are freely transferable and the only significant restrictions or limitations in relation
to the acquisition of securities are those imposed by new Zealand laws relating to takeovers, overseas investment and
competition.
b. the new Zealand takeovers Code creates a general rule under which the acquisition of 20% or more of the voting
rights in the Company or the increase of an existing holding of 20% or more of the voting rights of the Company can
only occur in certain permitted ways. these include a full takeover offer in accordance with the takeovers Code, a
partial takeover offer in accordance with the takeovers Code, an acquisition approved by an ordinary resolution, an
allotment approved by an ordinary resolution, a creeping acquisition (in certain circumstances) or compulsory acquisition
of a shareholder holds 90% or more of the shares of the Company.
the new Zealand overseas Investment act 2005 and overseas Investment regulations 2005 (new Zealand) regulate
certain investments in new Zealand by overseas persons. In general terms, the consent of the new Zealand overseas
Investment office is likely to be required where an “overseas person” acquires shares in the Company that amount
to 25% or more of the shares issued by the Company, or if the overseas person already holds 25% or more, the
acquisition increases that holding.
c.
d. the new Zealand Commerce act 1986 is likely to prevent a person from acquiring shares in the Company if the
acquisition would have, or would be likely to have, the effect of substantially lessening competition in the market.
SuBSTANTIAL SECuRITY hOLdERS
according to notices given under the Securities Markets act 1988 (new Zealand), the substantial security holders in ordinary
shares (being the only class of listed voting securities) of the Company and their relevant interests according to the substantial
security holder file as at 7 September 2012, were as follows:
Commonwealth Bank of Australia (7 September 2012)
Accident Compensation Corporation (7 September 2012)
AMP (2 April 2012)
Eley Griffiths (05 September 2012)
AusBil Dexia (25 November 2009)
ordinary shares
20,980,315
18,387,591
14,872,888
12,066,312
10,512,000
%
10.5%
9.2%
7.4%
6.0%
5.3%
as at 7 September 2012, the Company had 200,165,940 ordinary shares on issue.
76 annual report 2012 kAThMANdu
PRINCIPAL ShAREhOLdERS
the names and holdings of the twenty largest shareholders as at 7 September 2012 were:
name
ordinary Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
NEW ZEALAND CENTRAL SECURITIES DEPOSITORY LIMITED
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS (NZ) LTD
PETER HALKETT
J P MORGAN NOMINEES AUSTRALIA LIMITED
AMP LIFE LIMITED
NEW ZEALAND DEPOSITORY NOMINEE LIMITED
RBC INVESTOR SERVICES – AUSTRALIA NOMINEES PTY LIMITED
RBC INVESTOR SERVICES – AUSTRALIA NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
FRANED PTY LIMITED
TUATARA TOURS NZ LIMITED
QUADRANT PRIVATE EQUITY MANAGEMENT PTY LIMITED
QUADRANT PRIVATE EQUITY SERVICES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
dIRECTORS’ ShAREhOLdINGS
directors held interests in the following shares of the Company at 31 July 2012:
James Strong
Peter Halkett
Mark Todd
Mark Todd
John Harvey
John Holland
Sandra McPhee
beneficially owned
beneficially owned
beneficially owned
not beneficially owned
beneficially owned
beneficially owned
beneficially owned
47,050,170
41,180,964
36,436,374
20,725,399
10,354,057
4,914,441
4,176,140
3,503,279
1,459,832
1,365,743
1,235,310
1,108,977
950,936
773,977
719,211
717,600
502,432
441,176
441,176
392,966
336,898
1,429,832
361,418
43,437
51,563
82,033
58,823
%
23.51%
20.57%
18.20%
10.35%
5.17%
2.46%
2.09%
1.75%
0.73%
0.68%
0.62%
0.55%
0.48%
0.39%
0.36%
0.36%
0.25%
0.22%
0.22%
0.20%
kAThMANdu annual report 2012 77
ShARE dEALINGS BY dIRECTORS
In accordance with Section 148(2) of the Companies act 1993, the Board has received disclosures from the directors named
below of acquisitions or disposals of relevant interests in the Company between 1 august 2011 and 31 July 2012, the details of
those dealings were entered in the Company’s interests register. the particulars of such disclosures are:
Director
Peter Halkett
James Strong
nature of Interest
Beneficial
Beneficial
Shares Acquired
30,000
160,428
Consideration
NZD 1.64
AUD 1.70
Date
22/12/2011
23/11/2011
SuBSIdIARY COMPANY dIRECTORS
Section 211(2) of the Companies act 1993 requires the Company to disclose, in relation to its subsidiaries, the total remuneration
and value of other benefits received by directors and former directors, and particulars of entries in the interests registers made
during the year ended 31 July 2012.
no subsidiary has directors who are not full-time employees of the Group.
the remuneration and other benefits of such employees (received as employees) totalling $100,000 or more during the
year ended 31 July 2012, are included in the relevant bandings for remuneration disclosed at the beginning of the “Statutory
Information” section of this annual report.
no employee of the Group appointed as a director of Kathmandu holdings limited or its subsidiaries receives or retains any
remuneration or other benefits in their capacity as a director.
the persons who held office as directors of subsidiary companies at 31 July 2012, and those who ceased to hold office during the
year ended 31 July 2011, are as follows:
Milford Group holdings Limited
peter halkett, Mark todd
kathmandu Limited
peter halkett, Mark todd
kathmandu Pty Limited
peter halkett, Mark todd, paul Stern (Matthew Spencer ceased to hold office in the year ending 31 July 2012)
kathmandu (u.k.) Limited
peter halkett, Mark todd
78 annual report 2012 kAThMANdu
dISCLOSuRE OF INTERESTS BY dIRECTORS
In accordance with Section 140(2) of the Companies act 1993, the directors named below have made a general disclosure of
interest, by a general notice disclosed to the Board and entered in the Company’s interests register. General notices given by
directors which remain current as at 31 July 2012 are as follows:
John harvey
A director of:
dnZ property Fund limited
port otago limited
new Zealand opera limited
heartland Building Society limited
apn news & Media limited
Balance agri-nutrients limited (appointed 1 Jan 2011)
An advisor to the board of:
resource Coordination partnership limited
John holland
A partner of:
Chapman tripp
A member of:
Financial Markets authority Capital Markets disclosure
Consideration panel (appointed 1 Feb 2012)
James Strong
Chairman of:
Woolworths limited
australian Council for the arts
local organising Committee for the ICC Cricket World
Cup 2015
A director of:
Qantas airways limited
A member of:
nomura australia limited advisory Board
australian Institute of Company directors
australian Grand prix Corporation
Sandra Mcphee
A director of:
aGl energy limited
tourism australia
Fairfax Media limited
Westfield retail trust
A vice president of:
the art Gallery of nSW trust
A member of:
Jp Morgan advisory Council
advisory Board of MMC
St Vincents and Mater health Sydney Community
advisory Council
kAThMANdu annual report 2012 79
dIRECTORS’ ANd OFFICERS’ INSuRANCE ANd INdEMNITY
the Group has arranged, as provided for under the Company’s Constitution, policies of directors’ and officers’ liability Insurance
which, with a deed of Indemnity entered into with all directors, ensures that generally directors will incur no monetary loss as a
result of actions undertaken by them as directors. Certain actions are specifically excluded, for example, the incurring of penalties
and fines which may be imposed in respect of breaches of the law.
uSE OF COMPANY INFORMATION
there were no notices from directors of the Company requesting to use Company information received in their capacity as
directors which would not otherwise have been available to them.
GROuP STRuCTuRE
Kathmandu holdings limited owns 100% of the following companies:
Milford Group holdings limited
Kathmandu limited
Kathmandu pty limited
Kathmandu (uK) limited
dIRECTORS’ dETAILS
James Strong
peter halkett
Mark todd
John harvey
John holland
Sandra Mcphee
Chairman, non-executive
Managing director and Chief executive officer
Finance director and Chief Financial officer and Company Secretary
non-executive director
non-executive director
non-executive director
EXECuTIVES’ dETAILS
peter halkett
Mark todd
Chief executive officer
Chief Financial officer
dIRECTORY
the details of the Company’s principal administrative and registered office in new Zealand is:
11 Mary Muller drive
heathcote
po Box 1234
Christchurch 8140
80 annual report 2012 kAThMANdu
ShARE REGISTRY
In new Zealand:
physical address:
link Market Services (lInK)
level 16, Brookfields house,
19 Victoria Street West,
auckland 1010
new Zealand
postal address:
po Box 91976,
auckland, 1142
new Zealand
telephone:
Investor enquiries:
+64 9 375 5999
+64 9 375 5998
Facsimile:
Internet address:
+64 9 375 5990
www.linkmarketservices.com
In australia:
link Market Services (lInK)
physical address:
postal address:
level 1, 333 Collins Street
Melbourne, VIC 3000
australia
locked Bag a14
Sydney, South nSW 1235
australia
telephone:
Investor enquiries:
Facsimile:
Internet address:
+61 2 8280 7111
+61 2 8280 7111
+61 2 9287 0303
www.linkmarketservices.com.au
STOCk EXChANGES
the Company’s shares are listed on the nZX and the aSX.
INCORPORATION
the Company is incorporated in new Zealand.
store locations
AUSTRALIA
VIC
Ballarat
Bendigo
Blackburn
Melbourne (Bourke St)
Camberwell
Camberwell Outlet Store
Chadstone
Chapel St
Doncaster
Fitzroy
Frankston
Geelong
Hampton East
Highpoint
Knox
Moonee Ponds
Moorabbin
Richmond
Smith Street Outlet Store
South Wharf DFO Outlet Store
Southland
Spencer Street Fashion Station
Warrnambool
NSW
Albury
Birkenhead Point Outlet Store
Bondi Junction
Castle Towers
NEW ZEALAND
NORTH ISLAND
Albany
Botany
Broadway
Coastlands
Gisborne
Hamilton
Hastings
Lyall Bay
Manukau
Masterton
Napier
New Plymouth
Newmarket Outlet
Onehunga Outlet
Otaki
Palmerston North
Petone
Queen Street (Auckland)
Rotorua
Sylvia Park
Takapuna
Taupo
Tauranga
Chatswood Outlet Store
Chatswood Westfield
Cronulla
Erina Fair
Hornsby
Macarthur
Macquarie
Newcastle
Orange
Parramatta
Redyard (Auburn)
Rouse Hill
Shellharbour
Kent Street
Tamworth
The Rocks
Wagga Wagga
Warringah
Wollongong
SA
Adelaide Harbour Town Outlet Store
Marion Shopping Centre
Tea Tree
Adelaide (Rundle Street)
ACT
Belconnen
Canberra Centre
Canberra Outlet Store
Woden
QLD
Brisbane City
Cairns
Carindale
Chermside
Fortitude Valley
Kawana
Logan
Pacific Fair (Broadbeach)
Southport
Toowoomba
Townsville
TAS
Devonport
Hobart
Launceston
WA
Cottesloe
Carousel (Cannington)
Fremantle
Innaloo
Perth Harbourtown Outlet Store
Whitford
UNITED KINGDOM
Tauranga CBD
Te Rapa
Victoria Street (Auckland)
Waitakere
Wanganui
Wellington
Whakatane
Whangarei
Willis St Outlet
SOUTH ISLAND
Ashburton
Blenheim
Cashel St (Christchurch)
Dunedin
Invercargill
Nelson
Papanui
Queenstown
Riccarton
The Palms
Timaru
Tower Junction (Christchurch)
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KATHMANDU HOLDINGS LIMITED
ANNUAL REPORT 2012