ANNUAL REPORT 2015
KATHMANDU ANNUAL REPORT 2015 01
Contents
02 Chairman’s Report
04 Key Highlights
06 Chief Executives Officer's Report
14 The Board
15 Management Team
16 Directors' Report
26 Corporate Governance
29 Financial Statements
71 Statutory Information
76 Directory
NOTICE OF ANNUAL GENERAL MEETING
11.00am Friday
20 November 2015
George Hotel
50 Park Terrace
Christchurch
New Zealand
02
Chairman’s
Report
Sales
EBIT
EPS
$409.4m
$33.2m 10.1c
Sales growth of 4.2%
Earnings before interest and tax
Earnings per share
I am pleased to present my
second report as Chairman
of Kathmandu.
FINANCIAL RESULTS
The 2015 financial year has been
challenging for Kathmandu and we
have delivered a disappointing result. In
summary, we have seen:
• Begun our investment in new
shareholders reject the offer. The Board
warehouse facilities in Australia;
concluded that the offer did not reflect
• Grown our internet earnings by 28%;
and
• Delivered an encouraging
the underlying value of Kathmandu
and failed to recognise the strength of
Kathmandu’s business and future plans
for growth. Additionally the bid was
performance through the winter sale
highly opportunistic in timing, coming as
period late in the year, recording
it did in a period of what we believe to
1.4% same store sales growth and
be isolated poor trading. The offer was
3.5% point increase in gross margin
heavily weighted in favour of Briscoe
• Sales grow 4.2% to $409.4m;
on the last year.
• Gross margin reduce to 61.5% from
63.1% in FY2014;
The investment in information systems
and warehouse facilities just mentioned
shareholders and did not share enough
of the value of the two companies with
Kathmandu shareholders.
• A decrease in earnings before
interest and tax of 48.4% from
NZ$64.3m to NZ$33.2m; and
coincided in FY2015 with increased
Virtually all Kathmandu shareholders
levels of operating expenditure incurred
rejected the Briscoe Group offer and the
in anticipation of stronger sales
takeover has now lapsed. The Briscoe
performance. This sales growth was not
Group remains the largest shareholder
• A decrease in earnings per share
achieved and Xavier has moved quickly
in Kathmandu and we look forward to
to 10.1 cents per share from 21.0c in
to re-establish a cost base appropriate to
growing the value of their investment in
FY2014.
the company’s sales level.
the company.
On the plus side we have:
• Secured an outstanding new Chief
Executive in Xavier Simonet;
BRISCOE TAKEOVER BID
In order to give shareholders a
clear understanding of the value of
As you will be aware Kathmandu
Kathmandu the Board and management
has been subject to a takeover offer
produced a document setting out the
• Concluded our very important
by the Briscoe Group. After careful
strategies and expected growth in sales
investment in new information
evaluation of the offer and a valuation
and earnings for the company in FY2016.
systems across the company and in
by an independent expert the Board
We are very focused on delivering these
warehouse facilities in New Zealand;
unanimously recommended that
results and believe we will. Doing so will
David Kirk Chairman CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 03
of building brands and developing
successful retail businesses in fashion,
apparel, accessories and related
products in Australia and international
markets. In the short time he has been
with us we have gained a great deal of
confidence in his ability and the positive
impact he will have on the business.
Mark Todd, who has been with the
company for 18 years and who was
acting CEO throughout most of FY2015
recently announced his resignation.
Mark’s financial and retail acumen have
been tremendously valuable to the
company and we wish him well in the
next stage of his career.
Supporting Xavier is an energetic and
committed management team who are
excited by the challenge of delivering an
improved result in FY2016.
result in a significant uplift in the value of
your investment in Kathmandu.
technology systems and infrastructure
will continue to be made.
GROWTH STRATEGIES AND
INVESTMENT
It is useful to set out quickly
Kathmandu’s growth strategies.
These are to:
• Drive same store sales growth,
through investment in the in-store
experience, and focus on enhancing
loyalty and engagement with our
Summit Club members;
• Continue store network expansion
in Australasia;
• Continue to grow our online sales at
over 20% per annum;
Our growth strategies are supported
by our commitment to sustainability,
which is an important part of our
company values. Our new support
office in Christchurch and distribution
centre in Melbourne will both be 5 Star
Green Star rated buildings. We continue
to work with suppliers to monitor the
environmental and social impact of
our products. We focus on sustainable
designs and seek full visibility of the
manufacturing process to ensure our
expectations are met. Kathmandu’s
annual sustainability report details
our progress and plans in this area
in more detail.
• Develop our brand and make sales in
PEOPLE
international markets with a capital-
light business model – meaning
without investing in an extensive
bricks and mortar store network; and
•
Improve our cost efficiency.
Appropriate capital investment in new
store fit-outs, refurbishment of current
stores, and supporting information
It has been a year of change in the
management team.
DIVIDEND
As I mentioned earlier, following an
extensive international search the
Board was delighted to welcome
Xavier Simonet to Kathmandu as Chief
Executive Officer. Xavier started in
July. He brings a proven track record
The Directors have declared a final
dividend of 5 cents per share, which,
with the 3 cents interim dividend, makes
a total payout for the year of 8 cents
per share, a reduction of 4 cents per
share compared with last year. The final
dividend will be fully imputed for New
Zealand shareholders, and fully franked
for Australian shareholders. This dividend
represents a payout ratio of over 78%.
Finally, I would like to thank my
board colleagues for their continuing
commitment to Kathmandu’s success
in what has been a busy and demanding
year.
Thank you for your continued investment
in Kathmandu. We are focused on
delivering an improved result in FY2016
and are confident that we have the team
and strategies in place to do so.
David Kirk
Chairman
04
Key Highlights 2015
$306.1
$347.1
$384.0
$392.9
SALES (NZ$m)
FY2011
FY2012
FY2013
FY2014
FY2015
$64.0
$57.0
$63.4
$64.3
EBIT (NZ$m)
FY2011
FY2012
FY2013
FY2014
FY2015
$39.1
$34.9
$44.2
$42.2
NPAT (NZ$m)
FY2011
FY2012
FY2013
FY2014
FY2015
$409.4
$33.2
$20.4
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 05
NEPAL
EARTHQUAKE
RESPONSE
THROUGH DONATIONS
MADE IN OUR STORES
ACROSS NEW ZEALAND,
AUSTRALIA AND THE
UK, OUR CUSTOMERS
HELPED RAISE
$159,000
06
Chief Executive
Officer's Report
Xavier Simonet
Chief Executive Officer
Online Sales
Summit Club
New Stores
28%
6.2% of Group sales
20%
1.4 million active members
10
Group now has 160 stores
KEY HIGHLIGHTS
• Sales increased by 4.2% to
$409.4m;
• Same store sales declined by
1.9% at constant exchange rates;
• Gross margin reduced by 160bps
across the full year but increased
by 70bps in 2H FY2015;
• Online sales up c.28%; 6.2% of
Group sales;
• Summit Club member numbers
grew c.20%, now more than 1.4
million active members;
• Good UK same store sales
growth, 15.7%, but decision made
to exit the retail store network
in the UK in FY2016 to focus
on online sales channels in that
market;
• New Australian distribution centre
being constructed in Melbourne
for 2H FY2016 opening;
• New purpose built Christchurch
support office to open in the CBD
2H FY2016;
• 10 permanent new stores opened.
Group now has 160 stores; and
• Substantial reduction in earnings
reflected poor trading result and
operating expense increases that
will be addressed in FY2016.
I am immensely excited to
have joined Kathmandu in
July 2015.
Although company results in
FY2015 were disappointing
and did not meet expectations,
Kathmandu has managed over
the last few years to develop
a strong network of profitable
stores and continues to hold
a strong market share in the
outdoor and travel product
categories across Australia and
New Zealand.
RESULT AND FINANCIAL
PERFORMANCE
Earnings, measured at both the EBIT and
NPAT level, declined by c.50% on last
year. The key reasons for this downturn
in profitability were:
• Cost of quitting excess inventory
carried over from FY2014. Clearing
of this stock filled a level of demand
with low margin sales, causing both
significant margin compression
especially in 1H FY2015, and reduced
same store sales overall;
• Poor pricing and promotional
decisions during the first three
quarters of FY2015 which was a
The company has also shown its ability
trading period also compromised
to consistently create and successfully
by the strongly promoted excess
launch innovative products and solutions
inventory clearance events.
in both apparel and equipment. Also,
Advertising in the key Christmas and
it has remained true to its values of
Easter promotions was generally
offering great quality products at
ineffective, and in combination these
accessible price points.
The difficulties the company has
experienced over the last few months
factors led to weaker sales of our
high margin, high volume summer
product groups;
have highlighted the need to review
• Rate of increase in operating costs
its cost structure and deliver cost base
that was excessive given the weaker
efficiencies. Decisive action has been
sales and gross margin results
taken quickly in these areas.
achieved in the summer season.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 07
Whilst the FY2015 result was well below
our expectations, the actions taken to
improve sales and gross margin in the
fourth quarter and the resulting trading
performance in that period provide
confidence that we will return to growing
profitability in FY2016. In particular:
• Our Winter season, the largest in
the year, achieved same store sales
growth at higher gross margins
than the comparable period in
FY2014. Absolute discount levels
were reduced and resulted in an
improvement in gross profit earned
during this period;
• Easter and Winter sale promotions
introduced pricing benefits for
Summit Club members, which
helped to improve start of sale
performance and gross margin
outcomes especially in the Winter
season. It also drove a substantial
uplift in Summit Club membership
and their share of business; and
• Advertising and promotion execution
in the Winter sale was significantly
modified in comparison to previous
campaigns. The focus of this
effective campaign was much
more on new product and product
features along with Summit Club
member benefits.
Overall in FY2015 Kathmandu’s sales
grew 6.3% in Australia and declined
1.3% in New Zealand, and neither result
met expectations. UK sales growth of
17.3% warrants specific comment given
the substantial one-off expenditure
($2.8m) in brand and online advertising in
FY2015. Whilst this growth in sales was
a positive outcome, the level of increase
was not sufficient to justify continuing
with that level of advertising spend going
forward, nor to invest further in our UK
retail store network.
During the year we re-assessed our
long term target gross margins down
by 100 bps to a range of 61% to 63%.
Our FY2015 outcome matched this
expectation, with 2H FY2015 gross
margin increasing on the prior year
to partly offset the weak 1H FY2015
performance.
FINANCIAL PERFORMANCE DETAIL
Group sales of $409.4m increased
by 4.2% overall, but there was a
decrease in same store sales of 1.9%
measured at constant exchange rates.
NEW WINTER
RANGE LAUNCHED
KATHMANDU LAUNCHED ITS NEW
2015 WINTER RANGE IN MAY, A
TIMELY RELEASE THAT COINCIDED
WITH A COLD SNAP IN MANY OF
ITS MAJOR MARKETS
08
"GROUP SALES OF
$409.4M INCREASED
BY 4.2% OVERALL,
BUT THERE WAS A
DECREASE IN SAME
STORE SALES OF
1.9% MEASURED AT
CONSTANT EXCHANGE
RATES."
Glenelg, SA
By country, the change in same store
sales was as follows (53 weeks ending
2 August 2015):
increase is attributable to retail stores
and online operating costs including the
full year impact of 15 stores opened
• Australia -2.7%
• New Zealand -1.1%
• UK +15.7%
Gross profit increased by $3.8m (1.5%),
as gross margin (61.5%) was 160 bps
lower than last year. The impact of the
weak performance in high gross margin
summer product groups in tandem with
the lift in the proportion of sales made
as clearance product was more severe
in Australia than New Zealand. This
also coincided with a period of subdued
consumer confidence in our biggest
market. By country the change in gross
margins were:
• Australia -290 bps
• New Zealand +30 bps
• UK +40 bps
The appreciation of the USD against
the AUD further negatively impacted
Australian gross margins as inventory
is primarily purchased in USD. Our
foreign currency forward hedging
policy continues to be on a rolling
12 month basis.
Operating expenses excluding
depreciation, amortisation and financing
costs increased by $29.8m (17.0%). This
was an increase as a percentage of sales
from 44.5% to 50.0%. Over half of the
during FY2014, and the part year impact
of 10 new stores opened during FY2015.
Other increases in key operating costs
such as advertising, store labour as well
as the uplift in support office headcount
all reflected an anticipated level of sales
growth consistent with prior years,
which did not eventuate. Store rental
costs also rose at a higher rate than
sales through both cost of new store
occupancy and generally fixed rate of
increases to annual lease costs across
the rest of store network. Operating cost
efficiency will be a key area of focus in
FY2016, with our aim to decrease overall
expenses as a percentage of sales.
Capital expenditure reduced by
$4.2m (17%) compared to FY2014.
This is mainly due to the reduction of
investment in information systems in the
third year of realigning all core systems
to be based on the Microsoft Dynamics
AX platform. The investment made
in “bricks and mortar” retail, in both
new stores opened and existing stores
relocated or refurbished, reduced by
$4.6m (31%). This reduction was largely
offset by an initial investment of $4m
in our partly automated warehousing
facility in Melbourne to service our
Australian store network and growing
online business.
Depreciation and amortisation expense
increased by $3.7m (36%), as the
substantial amortisation cost arising
from the new systems platform kicked
in. Capital expenditure in FY2016 will
be higher than in FY2015 mainly due to
our continued investment in the new
Melbourne distribution centre.
Finance costs reduced through a
decline in effective interest rates despite
debt levels that were slightly higher
throughout the year to fund both higher
inventory levels and capital projects
spend. The re-negotiation of Group
banking facilities was completed during
FY2015 on improved terms.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 09
WINTER WEBSITE
REFRESH
AS PART OF THE WINTER LAUNCH
KATHMANDU REFRESHED ITS
WEBSITE TO PROVIDE A BETTER
CUSTOMER EXPERIENCE. IT HAD A
MORE CONTEMPORARY LOOK, NEW
PAGE TEMPLATES, RICHER IMAGERY
AND IMPROVED SITE NAVIGATION
10
Inventory levels increased by $9.5m
(9.2%), and by 2.3% on a per store
basis. The timing of new season
deliveries, fewer new stores being
opened than planned, and stock
investment required to support online
growth have contributed to this increase.
The level of reduction in clearance stock
units was a particular focus throughout
the year, and we ended FY2015 with
c.40% less aged stock than last year.
Taxation The effective tax rate rose
from c.29% to c.33%. The trading losses
of the UK business (not tax deductible)
formed a larger portion of the total Group
earnings for the year. The tax expense
arising from Australian intercompany loan
revaluation also contributed to the uplift
in the effective tax rate.
"WE WILL SUPPORT OUR CUSTOMER
ENGAGEMENT AS WELL AS IMPROVE STORE
PROFITABILITY THROUGH GROWING THE
CONTRIBUTION FROM TRAFFIC-DRIVING
PRODUCTS AND MAXIMISING RANGE
PRODUCTIVITY."
Same store sales growth is being
actioned in several key areas. Optimising
our pricing and promotional model for
the future is critical, and this requires us
to provide customers with better quality
and value through a simpler promotions
and pricing architecture, focusing on:
events, both breadth and depth, to
maximise gross profit contribution.
A major enabler to achieving these
outcomes is to capitalise on activation
of Summit Club members. Kathmandu
has over 1.4 million Summit Club
members who represent c. 70% of
Kathmandu’s annual sales, and our
focus is to build enhanced loyalty and
individual engagement with those
members, providing an improved value
proposition through:
• Targeted marketing spend, providing
better, differentiated pricing during
major promotions compared to non-
FUTURE GROWTH PLANS
• Advertising strategy that is lower
Kathmandu will execute a number of
strategies to drive growth in profitability
in FY2016 and beyond. These include:
• driving same store sales growth;
cost overall and makes more
efficient use of the social and digital
media channels;
• Promotion spend that activates an
increase in foot traffic and
• continuing store network expansion
basket size;
in Australasia;
•
realising our full online potential;
• expanding internationally through a
capital-light business model; and
• Refining the promotional calendar to
members; and
increase traffic earlier in seasons,
reducing both ‘sales fatigue and
dependency’ of customers; and
• Personalised communication,
rewards and recognition, facilitated
by Kathmandu’s improved CRM
• becoming more cost efficient.
• Optimising the structure of sales
platform.
Botany, Auckland
Byron Bay, NSW
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 11
In the future, Kathmandu will capitalise
on our CRM platform to provide
information and analytics on the
purchasing behaviour of Summit Club
members. This will drive product
ranging decisions and offers to best
suit the needs of our Summit Club
members. This will be supported further
by improving our in-store experience
through maintaining the highest
standards of customer service and
product knowledge.
We will support our customer
engagement as well as improve store
profitability through growing the
contribution from traffic-driving products
and maximising range productivity. We
will do so by:
• Continuously enhancing each
new-season’s range to resonate
with customer requirements,
strengthening Kathmandu’s image in
‘adventure travel’ and positioning as
an aspirational brand;
•
Improving visual merchandising
and stock presentation in-store to
showcase our expertise in product
for outdoor adventure and travel
activity, supported by comprehensive
customer service;
•
Increasing focus on categories and
products that drive frequency of
visitation; facilitated by our improved
forecasting, planning and real time
performance analysis capability; and
• Optimising space allocation in-store
to those product groups that will
maximise gross profit contribution.
Store network expansion will continue
in Australia and New Zealand, and we
are committed to our long term target
of 180 stores across Australasia. Further
roll-out is based on our established
optimal store sizing in conjunction with
comprehensive assessment of specific
site and catchment characteristics.
Permanent store numbers totalled 160 at
31 July: New Zealand 46, Australia 110
and UK 4. The previously temporary site
in the Christchurch Re-start precinct is
now classified as a permanent store.
Ten new permanent stores opened during
FY2015, and three new stores are already
confirmed in FY2016, with further sites
possible if justified by individual store
ROI criteria. Additionally in FY2016 two
new flagship stores will open in the
Melbourne and Adelaide CBD’s replacing
existing stores in both cities.
Online sales of outdoor apparel in
particular are growing at a much quicker
rate than sales in “bricks and mortar”
retail. This is driven by consumer
preference and favourable category
characteristics. The online sales channel
will be ever more critical for Kathmandu
going forwards. Kathmandu will continue
to invest and improve in its e-commerce
platform and build its online capability by:
• Building a true omni-channel
offering, fully integrating with in-
store sales to provide one range
available to all customers wherever
they shop;
• Continue building a click and collect
offering to expand into key market
places and all sales channels;
• Driving site visitation through
targeted campaigns, partnering and
social media;
• Actively leveraging Summit Club
members to drive online sales; and
• Launching country specific
online stores and participating in
appropriate open marketplace sites.
International expansion remains a
key growth strategy for Kathmandu,
using our brand equity to expand
internationally through a capital-light
model and leveraging its online platform.
In the immediate future this does not
include opening a network of our own
stores in another country, and as already
noted it is our intention to close the UK
retail network during FY2016.
12
SUSTAINABLE
MATERIALS
KATHMANDU IS COMMITTED
TO SUSTAINABILITY IN ITS
RAW MATERIALS AND WE
HAVE THEREFORE COMMITTED
TO COMPLETELY PHASE OUT
CONVENTIONAL COTTON
AND REPLACE IT WITH
SUSTAINABLE COTTON BY 2020
I
m
a
g
e
:
S
u
z
a
n
n
e
L
e
e
f
o
r
F
a
i
r
t
r
a
d
e
I
n
t
e
r
n
a
t
i
o
n
a
l
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION
KATHMANDU ANNUAL REPORT 2015 13
SUSTAINABILITY
I simply want to conclude by saying:
More than a retail business, Kathmandu
is an inspiring brand, with deep roots in
Australia and New Zealand and a strong
heritage. The company plans to leverage
the assets of its brand to make it more
aspirational and to engage with its target
customers, particularly through the
Summit Club loyalty programme.
Strengthening the distinctiveness
of the Kathmandu brand will also
open opportunities to be relevant in
international markets as well as on
social, digital and online channels.
The difficulties the company has
experienced over the last few months
have highlighted the need to review
our cost structure. They have also
emphasised the requirement to optimise
our pricing strategy and promotional
model as well as improve same store
sales growth and profitability in existing
stores. These levers will remain a strong
focus for us in FY2016.
Xavier Simonet
Chief Executive Officer
"OUR ON-GOING
OBJECTIVE IS TO
DELIVER VALUE TO
OUR STAKEHOLDERS
AND TO CONTINUALLY
POSITION KATHMANDU
AS AN INDUSTRY
LEADER."
Kathmandu will tailor its international
expansion strategy to key growth
markets via the most effective channel
for each market – potentially online
only, wholesale distribution, licensed or
franchised retail stores or a combination
of these channels. Flagship stores may
continue to be part of this strategy, in
line with the practice adopted by leading
brands globally.
Cost efficiency is a major area of
opportunity for Kathmandu to improve
its structure and drive operating
margin expansion. Initiatives being
undertaken include:
•
Improved workforce productivity,
with dedicated and skilled team
resources now in place to optimise
and improve store labour scheduling
including management structures;
• Decrease in distribution labour costs
as a percentage of sales, as new
software efficiencies are realised;
• Optimise marketing spend overall,
with clear metrics and ROI, and
focus on more efficient direct
advertising spend, utilising digital
media with greater effect;
• Obtain operating leverage in other
key overhead expenses including
salaries and wages, as we improve
business efficiency and simplify
processes with new systems
platforms.
As a Kathmandu core value,
sustainability is an integral part of
our business strategy. Our on-going
objective is to deliver value to our
stakeholders and to continually position
Kathmandu as an industry leader in
this area.
Full details of our progress can be
found in our 2015 Sustainability Report,
produced in conjunction with our Annual
Report and prepared in accordance with
the Global Reporting Initiative (GRI).
OUR TEAM
Employee numbers as at 31 July
2015 increased from 2,074 last year
to 2,097 this year, with permanent
employees making up c.80% of the
total workforce. Kathmandu’s team have
been particularly resilient in a year of
substantial change. There were a large
number of changes in the makeup of
the Executive and senior management
groups across the business, and the
trading difficulties encountered during
the year required substantially increased
activity in managing and delivering
changes to our promotional campaigns.
The response of our team in these
circumstances was exemplary.
I want to convey particular thanks to
Mark Todd, Finance Director and Chief
Operating Officer, who left the business
at the end of September 2015 after 18
years with the company. I also want to
acknowledge the employees who were
impacted by the restructuring process
and I thank them for their contributions
to the business.
MARKET OVERVIEW AND
FUTURE OUTLOOK
The recent takeover offer from Briscoe
and the associated shareholder, analyst
and media assessment of Kathmandu’s
current market position and future
opportunities has meant our trading
prospects for FY2016 and beyond have
already been unusually well researched
and commented on.
14
The Board
04
06
01
03
05
02
01 DAVID KIRK
CHAIRMAN
03 JOHN HOLLAND
05 SANDRA McPHEE AM
NON-EXECUTIVE DIRECTOR
NON-EXECUTIVE DIRECTOR
Mr Kirk is the Chairman of Trade
Me Group Ltd, the co-founder
and Managing Partner of Bailador
Investment Management, and sits
on the Board of Bailador portfolio
companies. Mr Kirk’s Executive
Management career has seen him
hold Chief Executive Officer roles at
Fairfax Media and PMP Limited and
the Regional President (Australasia) for
Norske Skog.
02 XAVIER SIMONET
MANAGING DIRECTOR AND CHIEF
EXECUTIVE OFFICER
Joined Kathmandu in July 2015 with
over 20 years international experience
in building brands and developing
successful retail businesses in fashion,
apparel, accessories and related
products.
Prior roles include CEO of Radley
(London), VP & GM International of DB
Apparel, 11 years at LVMH (primarily
Asia-Pacific) and International Director
of Seafolly.
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.
Ms McPhee is an experienced executive
and non-executive Director in consumer
facing sectors including aviation, retail,
energy and media. She held a range of
senior international executive roles in
the aviation industry, most recently with
Qantas Airways Limited.
04 JOHN HARVEY
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 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.
06 CHRISTINE CROSS
NON-EXECUTIVE DIRECTOR
Ms Cross has extensive experience in
international retail and consumer goods
including 14 years as a Director on the
operating board of Tesco Plc.
Ms Cross currently runs a retail advisory
consultancy focusing on international
best practice in customer led business
planning and value chain management.
CHAIRMAN’S REPORT | COO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION
KATHMANDU ANNUAL REPORT 2015 15
Management Team
XAVIER SIMONET
MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER
MARK TODD
CHIEF OPERATING OFFICER1
REUBEN CASEY
CHIEF FINANCIAL OFFICER
MICHELLE ADAMS
GENERAL MANAGER, PRODUCT
REBECCA EDWARDS
GENERAL MANAGER,
GROUP HUMAN RESOURCES
ALISON EVANS
GENERAL MANAGER, RETAIL - STORES,
AUSTRALIA AND NEW ZEALAND
CALEB NICOLSON
GENERAL MANAGER, SUPPLY CHAIN
PAUL STERN
GENERAL MANAGER, MARKETING,
INTERNATIONAL AND ONLINE
JOLANN VAN DYK
CHIEF INFORMATION OFFICER
1. Resigned as Chief Operating Officer on 25 September 2015
REVIEW OF OPERATIONS
The profit of the consolidated entity
for the financial year after providing for
income tax amounted to $20,419,000
(2014: $42,152,000).
A detailed review of operations is
provided on pages 2 to 13 of this
annual report.
SIGNIFICANT CHANGES OF AFFAIRS
As announced on 10 August 2015, Chief
Operating Officer Mark Todd tendered
his resignation with effect from 25
September 2015.
No other 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.
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 outdoor,
travel and adventure. It operates
through wholly owned subsidiaries in
New Zealand, Australia and the
United Kingdom.
16
Directors’ Report
Your Directors present their Report and the Financial Statements for the year ended 31 July 2015.
DIRECTORS
The following persons were Directors of
Kathmandu Holdings Limited during the
financial year:
DAVID KIRK
Was re-appointed as a non-Executive
Director, Member of the Audit and
Risk Committee, Member of the
Remuneration and Nomination
Committee on 21 November 2014 and
was appointed Chairman on 5 February
2014, and continues in these offices at
the date of this report.
XAVIER SIMONET
Was appointed as Managing Director
and Chief Executive Officer on 29 June
2015 and continues in these offices at
the date of this report.
of the Audit and Risk Committee on 20
November 2013, 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 resigned effective 25
November 2014.
MARK TODD
Was re-appointed as an Executive
Director on 21 November 2014 and
appointed as Finance Director, Chief
Financial Officer on 9 October 2009,
and resigned as a Director effective 24
August 2015.
Details of the experience and expertise
of the Directors are outlined on page 14
of this annual report.
JOHN HARVEY
RETIREMENT OF DIRECTORS
Was re-appointed as a non-Executive
Director, Chair of the Audit and
Risk Committee, Member of the
Remuneration and Nomination
Committee on 21 November 2014.
Reappointed as Chair of the Audit and
Risk Committee on 5 February 2014. He
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 Nomination
Committee on 20 November 2013, 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 20
November 2013, and continues in these
offices at the date of this report.
CHRISTINE CROSS
Was re-appointed as a non-Executive
Director, Member of the Remuneration
and Nomination Committee, Member
In accordance with the Company’s
constitution, John Holland and Christine
Cross 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 2015 and the
numbers of meetings attended by each
Director were:
DIRECTOR
MEETINGS
AUDIT AND RISK
COMMITTEE
MEETINGS
REMUNERATION
AND NOMINEE
COMMITTEE
MEETINGS
A
9
1
9
9
9
9
2
8
B
9
1
9
9
9
9
2
9
A
5
XX
5
5
5
5
XX
XX
B
5
XX
5
5
5
5
XX
XX
A
6
XX
6
6
6
6
XX
XX
B
6
XX
6
6
6
6
XX
XX
Director
David Kirk
Xavier Simonet
John Harvey
John Holland
Sandra McPhee
Christine Cross
Peter Halkett
Mark Todd
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
CHAIRMAN’S REPORT | COO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 17
MATTERS SUBSEQUENT TO THE END
OF THE FINANCIAL YEAR
As announced on 10 August 2015, Chief
Operating Officer Mark Todd tendered
his resignation with effect from 25
September 2015.
No other 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 13 of this annual report.
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 5.0
cents per share. Dividends will carry full
New Zealand imputation credits and full
Australian franking credits. The dividend
will be paid on 20 November 2015.
The Company does not currently have a
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 Outcomes from FY2015
• No short term incentives were
earned in FY2015 by any of
Kathmandu’s Executive or senior
management team.
• The Board has carefully considered
the implications and learnings from
the FY2015 result, and as part
of a number of actions taken to
improve profitability and return to
shareholders in the year ahead:
- Most salaried employees will
receive no increase in their
remuneration for FY2016;
- Team structures and employee
numbers amongst our support
offices have been reviewed
and total headcount in those
offices has been reduced by
approximately 10%; and
- Non-Executive Directors fees will
remain unchanged for a second
consecutive year.
These were difficult but necessary
decisions made in order to re-set
our support services to a level
commensurate with our future
growth targets and anticipated
market conditions.
REMUNERATION REPORT
New CEO Remuneration
KEY HIGHLIGHTS
FY2015 was a difficult trading year.
The Group profit result and return to
shareholders was disappointing and
there were a number of changes in our
Executive and senior management team.
After a global search Xavier Simonet
joined Kathmandu as our new Chief
Executive Officer (“CEO”).
• Our focus on the recovery of
Kathmandu’s profitability from
FY2016 onwards is recognised in the
remuneration structure for our new
CEO. More than half (56%) the total
remuneration for Xavier Simonet is
at risk, as detailed below, and this
is higher than the at risk component
(47%) for the previous CEO:
REMUNERATION STRUCTURE – CEO:
CEO
44%
26%
30%
Fixed
STI
LTI
18
Additionally:
• Over 85% of this at risk
remuneration (all except for the
STI KPI’s) is solely dependent
on outcomes of Group financial
performance against short and long
term targets, and
• All long term incentive (70%
of base salary) will be measured on a
single 3 year performance period.
FY2016 Actions
• Executive and senior management
personnel’s short and long term
incentive structures will remain
unchanged in FY2016. Achievement
of earnings (EBITDA) growth targets
will be rewarded with a mix of
cash and equity incentives, with
the latter subject to deferral for a
required period (1 year) of ongoing
employment in the Group;
• During FY2016 the Remuneration
and Nomination Committee of
the Board will be reviewing the
remuneration structure and in
particular the short and long term
incentives to ensure their framework
including performance hurdles
remains appropriately aligned
between shareholder and Executive
interests as the Group’s business
strategies evolve.
The detailed information that follows is
set out in the following sections:
A – PRINCIPLES USED TO DETERMINE
THE NATURE AND AMOUNT OF
REMUNERATION
B – REMUNERATION STRUCTURE
A – PRINCIPLES USED TO DETERMINE
THE NATURE AND AMOUNT OF
REMUNERATION
The Company’s Remuneration and
Nomination Committee of the Board,
currently comprising all independent
non-Executive Directors, determines
the quantum and structure of Directors
and Executive remuneration. The
composition, role and responsibility
of the Committee is outlined in the
Corporate Governance Statement on
page 26 of this annual report. The
Committee adopts a series of principles
in determining remuneration related
decisions. The principles used are:
• Executive remuneration should be
market competitive, and generally
account for market practice including
recognition of level of responsibility
and place of domicile;
• The remuneration structure
should reward those employees
who have the ability to influence
the achievement of the Group’s
strategic objectives and business
plans to enhance shareholder value
for successful Group performance
outcomes and their contribution
to these;
• Executives, whose appointment
and remuneration packages
are considered and approved
individually by the Committee are
personnel who:
-
-
report directly to the CEO;
are designated as an Executive
by the CEO; and
- have responsibility and authority
for management of a significant
profit or cost centre.
C – KEY MANAGEMENT PERSONNEL
AND REMUNERATION DETAILS
• Executives’ remuneration package
should have:
D – SERVICE AGREEMENTS
E – DETAILS OF SHARE-BASED
COMPENSATION
F – ADDITIONAL INFORMATION,
PERFORMANCE RIGHTS VESTING
-
-
a substantial portion of their total
remuneration that is “at risk” and
aligned with reward for creating
shareholder value; and
an appropriate balance between
short and long-term performance
focus and outcomes;
-
a mix of cash and equity based
remuneration.
• The CEO should, relative to other
Executives have
-
-
a greater proportion of total
remuneration (at least 50%) 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 his leadership role
in establishing and delivering
achievement of medium and long
term Group 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
as well as Executives both to align
their reward with the creation of
shareholder value, and to encourage
their ongoing participation in and
retention by the Group;
• 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; and
• The Board uses discretion
when setting remuneration
levels, taking into account the
current market environment and
Group performance.
Remuneration Review 31 July 2015
The Board on the advice of the
Committee has accountability to set all
Executive remuneration. Recognising
the principles above, the current
prevailing market conditions and the
reported performance of the Group, the
Committee determined the following
CHAIRMAN’S REPORT | COO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION
KATHMANDU ANNUAL REPORT 2015 19
in relation to the 31 July 2015 review of
base remuneration:
• Directors, 0% increase (2014: 0%);
• Executive Directors, no increase in
base salary for the CEO who joined
the Group on 29 June 2015; and
• Generally Executives and senior
management personnel received no
increase.
The combination of these comprises the
Executives’ total remuneration. Other
senior management personnel have a
remuneration framework incorporating
components 1. and 2.
1. Base salary and benefits
Executive base salaries are structured
as part of a negotiated total employment
remuneration package comprising a mix
of cash and non-monetary benefits.
Following a review by the Board on the
advice of the Committee, the quantum
and structure of incentive based
earnings available for Executives apart
from the CEO remain unchanged. Their
remuneration structure is outlined below.
Executives are offered a base salary
that comprises the fixed component
of pay and rewards. Base salary for
Executives is reviewed annually to
assess appropriateness to the position
and competitiveness with the market.
B - REMUNERATION STRUCTURE
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 both the
Group and the employee and is based on
reward for their 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.
The Executive remuneration
structure (currently applying to 8
Executives including the CEO) has
three components:
1. Base salary and benefits;
2. Short term incentives determined
on the basis of achievement of
specific targets and outcomes
relating to annual Group financial
performance and individual value
adding performance objectives. The
available incentive reward is split
between cash and equity.
3. Long term incentives via
participation in the Company’s Long
Term Incentive plan.
Executive benefits made available are
superannuation contributions made in
accordance with the legislation specific
to each country in which the employee
is resident, and for some Executives,
leasing and/or reimbursement of
vehicle running costs, and medical
insurance. Key management and
senior management personnel who
relocate their place of working between
countries may be assisted in the cost of
such relocation.
2. Short term incentives
Executives including the CEO are eligible
to participate in an annual short term
incentive which delivers rewards by way
of cash and equity participation, subject
to the achievement of Group financial
performance targets and individual KPI’s.
The CEO’s short term incentive is up
to 60% of base annual salary and other
Executives’ short term incentive is up to
52% of base salary,
Group Earnings before interest, tax,
depreciation and amortisation (EBITDA)
has been determined as the appropriate
financial performance target to trigger
payment of short term incentives. This
criterion excludes depreciation and
amortisation expenses arising from
the substantial capital investment
programme the Group is undertaking
approved and overseen by the Board
with reference to wider medium and
long term growth strategies.
The shareholder approved Long Term
Incentive plan enables the Board to
offer equity incentives as part of both
short and long term remuneration. All
Executives, apart from the CEO,and
all senior management personnel
participate in short term equity
incentives. The CEO’s equity incentives
are all long term.
Executives, except for the CEO, have a
target of at least 45% of the total value
of their annual short term incentive
being equity based, with equity rewards
delivered by way of nil cost performance
rights.
The amount of any short term incentive
paid in a year is dependent upon:
a. the level of performance
achieved against the Group’s
financial performance target
(EBITDA) for the year; and
b. the outcome of individual value
adding performance, measured
by achievement of individual
KPI’s, provided a minimum level
of performance is achieved by
the Group relative to the financial
performance target (EBITDA) for
the year.
An incentive earned by an Executive
under a. is paid as a mix of cash and
equity. An incentive earned under
b. is all paid as cash. The CEO short
term incentive split between a. and
b. is 70% and 30% respectively, all
paid in cash. For other Executives
and senior management personnel,
where Company financial performance
outcomes trigger the employee’s
entitlement to equity rewards as well
as cash, as a condition of the vesting of
the eligible performance rights, the staff
member (whether Executive or senior
management personnel) will generally
be required 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.
For the years ended 31 July 2015 and
31 July 2014 the Group’s financial
20
performance targets were not met and
as a result in both years:
• no annual short term cash incentive
was paid; and
• no short term equity incentives
granted to Executives or senior
management personnel in relation to
these periods vested.
3. Long term incentive plan
Long term incentive plan
Shareholders re-approved the
current long term incentive plan at
the Company’s 2013 Annual General
Meeting based on the granting of nil cost
performance rights. Rights have been
offered each year since the plan was
originally approved in 2010.
The plan 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
Board continues to reassess the plan and
its structure to ensure it will best support
and facilitate the growth in shareholder
value over the long term relative to
current business plans and strategies.
Any grants made to Executive Directors
are subject to shareholder approval.
or relative TSR targets over specified
performance periods of two, three and
four years, with the value of rights to be
allocated between EPS and relative TSR
determined each year. 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 companies.
Performance measurement under
either criterion is at the end of each
applicable performance period with no
ability to re-test. Fifty per cent of the
relevant portion of the award vests for
achievement of targets and a further
fifty per cent vests for the achievement
of aspirational targets. A sliding scale
operates between target and aspirational
performance levels.
The history of grants made to date is
as follows:
2010 - Grants made to all Executives
including Executive Directors. All rights
granted in 2010 have now either vested
or been forfeited.
2011 to 2013 - Grants made only to the
two Executive Directors. After FY2016
testing of rights for vesting or forfeiture,
all remaining grants made in these years
will lapse.
For rights granted in the years up to
and including 2013 vesting of the rights
are dependent upon the Company
achieving Earnings per Share (EPS) and/
In 2014 - A grant made to the single
Executive Director (Mark Todd) only. The
Board resolved to grant for that year only
nil cost performance rights that:
• Were measurable for a single
specified performance period of
three years; and
• Required achievement of only
relative TSR targets over the
specified performance period.
As a result of Mark Todd’s resignation
from the Company, these rights will lapse.
At the end of FY2016, there will be no
grants outstanding under the long term
incentive plan other than those proposed
for the new CEO Xavier Simonet. The
Board intends to grant, subject to
shareholder approval at the 2015 AGM,
nil cost performance rights to the CEO,
Xavier Simonet, equivalent to 70% of his
base salary. The vesting of these rights
will be dependent upon the Company
achieving Earnings per Share (EPS)
and relative TSR targets over a single
specified performance period of three
years, with the value of rights allocated
50:50 between EPS and relative TSR.
For this grant EPS will be measured on
a compound annual growth basis and
TSR will be measured on a relative basis
against a comparator group of ASX listed
companies (other than metal and mining
stocks) ranked 101 to 200 in the S&P/
ASX200 as at date of grant. Performance
measurement under either criterion is
at the end of the 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.
Options Plan 2009- now closed and
all options exercised or cancelled
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
and all the options granted vested on
CHAIRMAN’S REPORT | COO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION 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:
Rebecca Edwards
General Manager, Human Resources
Alison Evans
General Manager Retail
- Stores, Australia And New Zealand
KATHMANDU ANNUAL REPORT 2015 21
AUD $
216,000
113,000
NZD $
242,230
125,449
Caleb Nicolson
General Manager, Supply Chain
Paul Stern
General Manager, Marketing,
Online & International
Jolann van Dyk
Chief Information Officer,
from 3 April 2015
Previously Employed:
Tamalin Morton
General Manager, Sales & Marketing
to 12 December 2014
Grant Taylor
Chief Information Officer to
2 April 2015
All of the above Executives were
employed by the Group for the full
years ended 31 July 2015 and 2014,
unless otherwise stated. Throughout
their period of employment, Mark Todd,
Reuben Casey, Michelle Adams, Caleb
Nicolson, Jolann Van Dyk and Rebecca
Edwards were employees of Kathmandu
Limited (New Zealand domiciled) and
Xavier Simonet, Alison Evans, and Paul
Stern, were employees of Kathmandu
Pty Limited (Australian domiciled).
Details of the remuneration of the
Directors and Key Management
Personnel and total remuneration of
other Management Team Members
of the Group, for the current and prior
financial years are set out in section 5.3
of the financial statements.
1 October 2013 for the five Executives
that were still employed as at that date.
BASE FEES
Vesting of the options occurred because
Chairman
the Company achieved a compound
Other non-Executive Directors
annual growth in Total Shareholder Return
(TSR) of 15% over the tested period of
performance measurement that ended
Actual fees paid in year ended 31 July 2015
(converted to reporting currency)
on 1 October 2013. TSR was determined
Chairman
Other non-Executive Directors
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.
The Board has not granted any further
options under this plan. The Board are
of the view that the plan no longer
represents an appropriate on-going
long term incentive structure for the
Company post the IPO.
Non-Executive Directors’ fees
The current aggregate limit for non-
Executive Directors’ fees is $A800,000
per annum. In FY2015 the base fee
payable (including superannuation
if applicable) to the Chairman was
$A206,000 and to a non-Executive
Director $A103,000 per annum.
Additionally $A10,000 per annum is
paid for sub-committee attendances.
No increase has been proposed for the
coming year commencing 1 August 2015.
Executive Directors do not receive
C – KEY MANAGEMENT PERSONNEL
AND REMUNERATION DETAILS
Key Management Personnel:
The following Executives are identified
as key management personnel with
the authority and responsibility, along
with the Directors for planning, directing
and controlling the activities of the
Group, directly or indirectly, during the
financial year:
Currently Employed:
Xavier Simonet
Chief Executive Officer
from 29 June 2015
Reuben Casey
General Manager, Finance
then Chief Financial Officer
from 1 December 2014
Directors’ fees. The amounts approved
Previously Employed:
for Directors’ fees are expressed in
AUD given the specific requirements for
remuneration reporting applying to ASX
listed companies, however all amounts
reported in the tables within this report
are specified in NZD, 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
Directors' fees.
Peter Halkett
Chief Executive Officer to
6 October 2014
Mark Todd
Chief Operating Officer and Finance
Director. Acting CEO 6 October 2014 to
28 June 2015. Resigned as an Executive
Director on 24 August 2015 and as an
Executive on 25 September 2015
Other Management Team
(Executive) members:
Currently Employed:
Michelle Adams
General Manager, Product
22
D - 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 (six months for the CEO). The
agreements provide for three months
base salary inclusive of any applicable
superannuation to be paid in the event of
a redundancy (six months for the CEO).
YEAR ENDED
31 JULY 2010
OPTIONS
GRANT
DATE
OPTIONS
GRANTED
VESTING
DATE
Executive Directors (at time of vesting)
TOTAL FAIR
VALUE OF
OPTIONS
AT GRANT
DATE $
OPTIONS
VESTED
DURING
YEAR ENDED
31 JULY 2014
Peter Halkett
18 Nov 2009
558,655
1 Oct 2013
Mark Todd
18 Nov 2009
160,131
1 Oct 2013
258,678
74,146
558,655
160,131
Other Executives
Michelle Adams
18 Nov 2009
80,266
1 Oct 2013
Tamalin Morton
18 Nov 2009
110,796
1 Oct 2013
37,166
51,304
21,556
80,266
110,796
46,554
E – DETAILS OF SHARE-BASED
Caleb Nicolson
18 Nov 2009
46,554
1 Oct 2013
Total
956,402
442,850
956,402
The fair value of the options granted on
18 November 2009 was $0.46
per option.
There are no grants remaining under this
plan. All vested options were exercised
in the years ended 31 July 2014 and
2015. The aggregate number and total $
cost of exercise in each year was:
OPTIONS
YEAR
EXERCISED EXERCISE $
For rights granted to Executives up
to and including 2013 vesting of the
rights is 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. Rights were offered in 2010 to
all Executives domiciled in Australia
and New Zealand. From 2011 to 2013,
rights were offered to the Executive
Directors only.
2014
2015
270,927
685,475
577,969
1,462,324
The number of rights granted and the
applicable performance period over
Long term incentive plan
The Company Long term incentive plan
entitles the Board to grant performance
rights for no cash consideration, at
intervals determined by the Board.
which EPS and relative TSR is measured
is set out below, along with the fair
value of the rights at the grant date. All
rights granted to Peter Halkett have now
lapsed. All rights granted to Mark Todd
with vesting (expiry) dates in financial
periods after FY2016 will lapse.
COMPENSATION
Options Plan 2009, Final year
of vesting was year ended
31 July 2014
The Company Employee Option plan
entitled the holder to acquire one share
for each option granted by paying
the prescribed exercise price to the
Company once the option had vested
in the holder and the relevant exercise
conditions have been met.
All options granted under this plan as
detailed above vested on 1 October 2013
to the employees still employed with the
Company at that date as the required
performance hurdles were achieved for
all options that had been granted. All of
those options that vested under this plan
were exercised prior to the final exercise
date of 18 November 2014. The total
payable per employee on the exercise of
one or more options was the price per
share in the Company paid for by the
purchasers of shares in the IPO, being
$A1.70 and $NZ2.1333.
The Board do not intend to grant any
further options under this plan.
The number of options previously
granted by the Company that vested
in the year ended 31 July 2014 and was
thus provided as remuneration to
eligible Executives under this plan is
set as follows:
CHAIRMAN’S REPORT | COO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 23
2015
Executive Directors
Mark Todd
Total
2014
Executive Directors
Mark Todd
Mark Todd
Mark Todd
Total
GRANT DATE
RIGHTS GRANTED
DURING THE YEAR
DATE
EXERCISABLE
EXPIRY DATE
TOTAL FAIR VALUE OF
PERFORMANCE RIGHTS
AT GRANT DATE $
12 Dec 2014
110,891
110,891
1 Dec 2017
1 Dec 2017
221,782
221,782
GRANT DATE
RIGHTS GRANTED
DURING THE YEAR
DATE
EXERCISABLE
EXPIRY
DATE
TOTAL FAIR VALUE OF
PERFORMANCE RIGHTS
AT GRANT DATE $
11 Dec 2013
11 Dec 2013
11 Dec 2013
33,051
33,051
33,051
99,153
1 Dec 2015
1 Dec 2015
1 Dec 2016
1 Dec 2016
1 Dec 2017
1 Dec 2017
72,051
72,051
72,051
216,153
Shares issued to Directors and Other Executives on Exercise of Performance Rights:
2015
DATE
GRANTED
DATE
EXERCISED
NUMBER OF
SHARES ISSUED
2014
DATE
GRANTED
DATE
EXERCISED
NUMBER OF
SHARES ISSUED
Executive Directors
Executive Directors
Peter Halkett
29 Nov 2010
17 Dec 2014
Peter Halkett
30 Nov 2011
17 Dec 2014
Peter Halkett
11 Dec 2012
17 Dec 2014
Mark Todd
Mark Todd
Mark Todd
29 Nov 2010
17 Dec 2014
30 Nov 2011
17 Dec 2014
11 Dec 2012
17 Dec 2014
Other Executives
29 Nov 2010
17 Dec 2014
Total
49,488
16,274
27,344
17,460
9,617
16,158
29,298
165,639
Peter Halkett
29 Nov 2010
18 Dec 2013
Peter Halkett
18 Nov 2011
18 Dec 2013
Mark Todd
Mark Todd
29 Nov 2010
18 Dec 2013
18 Nov 2011
18 Dec 2013
Other Executives
29 Nov 2010
18 Dec 2013
Total
59,048
19,994
20,833
11,815
21,250
132,940
24
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.
F – ADDITIONAL INFORMATION, PERFORMANCE RIGHTS VESTING
For each grant of performance rights included in the table below, the percentage of the grant that vested, in the financial period,
and the percentage that was forfeited because the performance criteria were not achieved or the person did not meet the service
criteria is as listed. The performance rights vest over several years provided the vesting conditions are met. No performance rights
will vest if the conditions are not satisfied, hence the minimum value of each performance right yet to vest is $Nil. The maximum
value of performance rights yet to vest has been determined as the total number of performance rights still to vest multiplied by the
fair value of each performance right at grant date.
GRANT
DATE
VESTED
%
FORFEITED
%
FINANCIAL
PERIODS IN WHICH
RIGHTS MAY VEST
MAXIMUM TOTAL
NUMBER OF RIGHTS
YET TO VEST
MAXIMUM TOTAL
VALUE OF GRANTS
YET TO VEST
FY2015
FY2014
FY2014
FY2014
FY2013
FY2013
FY2013
FY2012
FY2012
FY2012
FY2011
FY2011
FY2011
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
50.0%
0.0%
35.0%
43.0%
84.0%
100.0%
43.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
50.0%
0.0%
65.0%
57.0%
16.0%
0.0%
56.5%
FY2019
FY2018
FY2017
FY2016
FY2017
FY2016
FY2015
FY2016
FY2015
FY2014
FY2015
FY2014
FY2013
110,891
33,051
33,051
33,051
32,316
32,315
-
27,476
-
-
-
-
-
336,000
71,776
71,776
71,776
41,203
42,656
-
47,945
-
-
-
-
-
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Mark Todd
Following his resignation, all rights granted to Mark Todd with vesting dates in financial periods after FY2016 will lapse.
Also in FY2015 for three other Executives, of the final one-third of performance rights granted in FY2011, 84% vested and 16%
were forfeited. As at 31 July 2015 there are no remaining grants of nil cost performance rights still to vest other than those granted
to Mark Todd as detailed above.
Company performance
All Executives’ short term incentive is dependent upon the Company’s overall financial performance for each financial year. 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
$9.4m
NA
FY2011
$39.1m
316.0%
FY2012
$34.9m
(10.7%)
FY2013
$44.2m
FY2014
$42.2m
26.6%
(4.5%)
FY2015
$20.4m
(51.7%)
0.3
19.5
17.4
22.1
21.0
10.1
NA
65x
0.9x
1.3x
1.0x
0.5x
$2.13
$2.05
$2.20
$1.59
$2.68
$3.33
$2.05
$2.20
$1.59
$2.68
$3.33
$1.70
(3.8%)
7.3%
(27.7%)
68.6%
24.3%
(48.9%)
$0.07
$0.10
$0.10
$0.12
$0.12
$0.08
CHAIRMAN’S REPORT | COO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 25
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 5.8 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; and
• 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.
This report is made in accordance with a resolution of the Directors.
David Kirk
Chairman
Xavier Simonet
Managing Director and Chief Executive Officer
26
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 (Third Edition),
the New Zealand Stock Exchange Listing
Rules relating to corporate governance,
the NZX Corporate Governance Best
Practice Code, and the Financial Markets
Authority Corporate Governance
Principles and Guidelines (collectively,
the Principles). The Board considers that
the Company’s corporate governance
practices and procedures substantially
reflect the principles. The full content of
the Company’s Corporate governance
policies, practices and procedures can
be found on the Company’s website
(kathmanduholdings.com).
The main policies and practices adopted
by the Company are summarised below.
BOARD OF DIRECTORS CHARTER
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 and monitoring
the progress of major capital
expenditure, capital management
and acquisitions and divestitures;
• approving budgets; and
• approving and monitoring financial
and other reporting.
BOARD COMPOSITION
At present, there are six Directors on the
Board. Five out of the six Directors are
non-Executive Directors. Xavier Simonet
(Managing Director and Chief Executive
Officer,) is the only Executive Director on
the Board. Mark Todd, former Finance
Director, resigned from the Board on 24
August 2015. The Chairman of the Board
is David Kirk. 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 of Directors” section of
this Annual Report.
BOARD PERFORMANCE
The Board Charter provides for an annual
performance evaluation that compares
the performance of the Board with the
requirements of this Charter, reviews the
performance of the Board’s committees
and individual Directors and sets forth
the goals and objectives of the Board
for the upcoming year and effecting
any amendments to this Charter
considered necessary or desirable of
the Board and its Committees. The
Board is currently undertaking a review
of its performance by the anonymous
completion by Directors and Executives
of evaluation questionnaires relating to
Board and committee composition and
performance, and individual interviews
of Directors with the Chairman.
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
(kathmanduholdings.com).
The Managing Director (Xavier Simonet)
is employed by the Company or
another Group member in an Executive
capacity and is not considered to be
an independent Director based on the
criteria set out in the Board Charter.
All remaining Directors satisfy the
criteria and are considered independent
Directors, namely David Kirk, John
Harvey, John Holland, Sandra McPhee
and Christine Cross.
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:
CHAIRMAN’S REPORT | COO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 27
• overseeing the process of financial
•
reporting, internal control, continuous
disclosure, financial and non-financial
risk management and compliance
and external audit;
fairly and responsibly remunerates
Directors and Executives, having
regard to the performance of the
Company, the performance of
the Executives and the general
remuneration environment; and
• monitoring Kathmandu’s compliance
with laws and regulations and
Kathmandu’s own codes of conduct
and ethics;
• encouraging effective relationships
• has effective policies and procedures
to attract, motivate and retain
appropriately skilled persons to meet
the Company’s needs.
with, and communication between,
RISK MANAGEMENT POLICY
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;
The identification and proper
management of the Company’s risk
are an important priority of the Board.
The Company has a Risk Management
Policy (available on the Company’s
website kathmanduholdings.com)
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. A risk
management framework is in place
to identify, oversee, manage and
control risk. A formal review of the risk
framework was undertaken during the
reporting period by the Committee.
CONTINUOUS DISCLOSURE POLICY
The Company is committed to observing
its disclosure obligations under the
Listing Rules. The Company has a policy
that establishes procedures which are
aimed at ensuring that Directors and
Executives 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 Financial Markets Conduct Act
2013 and to establish a best practice
procedure in relation to Directors’,
Executives’ 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, Executives and
key management personnel 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, Executives and key
management personnel must receive
clearance in accordance with the
protocols detailed in the policy 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, policies and
procedures; and
• use Company resources and
property properly.
DIVERSITY POLICY
Kathmandu recognises the value of a
diverse and skilled workforce and is
committed to creating and maintaining
an inclusive and collaborative workplace
culture that will provide sustainability for
our business into the future. Different
perspectives arising from diversity
encourage an innovative, responsive,
productive and competitive business and
• Total Employees United Kingdom:
Total 37 = 25 Male (68%) and 12
Female (32%)
• Total Employees Group: Total 2097
= 884 Male (42%) and 1213
Female (58%)
Kathmandu considers its gender
diversity as a strength and we will
continue to support strategies and
initiatives that address any significant
adverse changes in diversity ratios
through employee turnover. Kathmandu
is also proud of its ethnic diversity which
reflects the diversity of its customers;
business partners and community.
REMUNERATION SYSTEM BASED
ON PERFORMANCE
We are committed to reward our
employees with compensation and
benefit programmes that are based on
performance merit and experience. In
2015 an audit on employee pay parity
was completed. Based upon the results
of this audit, Kathmandu has evidence
that supports pay equality between
gender and other diversity indicators,
with no evidence of pay disparity
between persons holding the same or
similar roles. A review of gender pay
parity will continue to be an on-going
focus for the company.
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 (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 ASX and NZX.
ECONOMIC, ENVIRONMENTAL AND
SOCIAL SUSTAINABILITY
The Company prepares a separate
sustainability report in accordance with
the Global Reporting Initiative (GRI)
G4 reporting framework. It is available
online at kathmanduholdings.com.
28
create value for our customers
and shareholders.
We are committed to leveraging the
diverse backgrounds, experiences
and perspectives of our people to
provide excellent customer service
and innovative products to an equally
diverse community.
Kathmandu’s commitment to
recognising the importance of diversity
extends to all areas of the business
including talent acquisition, learning
and development, succession planning,
internal transfer & promotion, retention
of employees, and company policy
and procedures.
We consider our current level of
employee gender diversity to be
efficacious; however we remain vigilant
in the review of measureable diversity
objectives. 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
Recommendation 1.5, the NZX Listing
rules relating to diversity and the
NZX Diversity Policies and Disclosure
Guidance note. A copy of Kathmandu’s
Diversity Policy can be obtained from the
Company Website.
GENDER DIVERSITY
As at 31 July 2015 the proportion of
females employed by Kathmandu was
as follows:
• Board: 33% being 2 female of 6
Directors
• Executive Management: Total 9 = 6
Males (67%), 3 Females (33%)
• Senior Management (Wider
Leadership Team): Total 60 = 31
Male (52%), 29 Female (48%)
• Total Employees New Zealand: Total
767 = 279 Male (36%) and 488
Female (64%)
• Total Employees Australia: Total
1,293 = 580 Male (45%) and 713
Female (55%)
CHAIRMAN’S REPORT | COO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 29
Financial Statements
FOR THE YEAR ENDED 31 JULY 2015
Introduction and Table of Contents
In this Section
The financial statements have been presented in a style which attempts to make them less complex
and more relevant to shareholders. We have grouped the note disclosures into five sections: ‘Basis of
Preparation’, ‘Results for the Year’, Operating Assets and Liabilities’, ‘Capital Structure and Financing
Costs’ and ‘Other Notes’. Each section sets out the accounting policies applied in producing the
relevant notes. The purpose of this format is to provide readers with a clearer understanding of what
drives financial performance of the Group. The aim of the text boxes is to provide commentary on
each section, or note, in plain English.
Keeping it simple
Notes to the financial statements provide information required by accounting standards or Listing
Rules to explain a particular feature of the financial statements. The notes which follow will also
provide explanations and additional disclosure to assist readers’ understanding and interpretation of
the annual report and the financial statements.
Directors’ Approval of Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Section 1: Basis of Preparation
Section 2: Results for the Year
Section 3: Operating Assets and Liabilities
Section 4: Capital Structure and Financing Costs
Section 5: Other Notes
Auditors' Report
Statutory Information
30
31
32
33
34
36
38
44
51
61
70
71
30
Directors’ Approval of Consolidated
Financial Statements
FOR THE YEAR ENDED 31 JULY 2015
Authorisation for Issue
The Board of Directors authorised the issue of these Consolidated Financial Statements on 29 September 2015.
Approval by Directors
The Directors are pleased to present the Consolidated Financial Statements of Kathmandu Holdings Limited for the year ended
31 July 2015 on pages 31 to 69.
David Kirk
Date: 29 September 2015
Xavier Simonet
Date: 29 September 2015
For and on behalf of the Board of Directors
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION
KATHMANDU ANNUAL REPORT 2015 31
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 JULY 2015
Sales
Cost of sales
Gross profit
Other income
Selling expenses
Administration and general expenses
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation
Earnings before interest and tax
Finance income
Finance expenses
Finance costs - net
Profit before income tax
Income tax expense
Profit after income tax
Other comprehensive income that may be recycled through profit and loss:
Movement in cash flow hedge reserve
Movement in foreign currency translation reserve
Other comprehensive income/(expense) 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)
SECTION
2015
NZ$’000
409,372
(157,482)
251,890
2014
NZ$’000
392,918
(144,777)
248,141
23
1,363
(142,893)
(61,968)
(204,861)
47,052
(13,875)
33,177
1,450
(4,195)
(2,745)
30,432
(10,013)
20,419
12,415
1,034
13,449
33,868
10.1cps
10.1cps
201,343
202,227
(116,174)
(58,876)
(175,050)
74,454
(10,198)
64,256
257
(4,850)
(4,593)
59,663
(17,511)
42,152
(7,122)
(3,794)
(10,916)
31,236
21.0cps
20.8cps
200,422
202,303
3.2/3.3
4.1.1
2.3
4.3.2
4.3.2
2.4
2.4
2.4
2.4
32
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 JULY 2015
CASH
FLOW
HEDGE
RESERVE
NZ $’000
FOREIGN
CURRENCY
TRANSLATION
RESERVE
NZ $’000
SHARE
BASED
PAYMENTS
RESERVE
NZ $’000
RETAINED
EARNINGS
NZ $’000
TOTAL
EQUITY
NZ $’000
Balance as at 31 July 2013
Profit after tax
Other comprehensive income
Dividends paid
Issue of share capital
Share based payment expense
SHARE
CAPITAL
NZ $’000
197,370
-
-
-
858
-
5,067
-
(7,122)
-
-
-
(10,558)
-
(3,794)
-
-
-
Balance as at 31 July 2014
198,228
(2,055)
(14,352)
Profit after tax
Other comprehensive income
Dividends paid
Issue of share capital
Share options / performance rights lapsed
Share based payment expense
Balance as at 31 July 2015
-
-
-
1,963
-
-
-
12,415
-
-
-
-
-
1,034
-
-
-
-
200,191
10,360
(13,318)
823
-
-
-
(301)
211
733
-
-
-
(509)
(209)
9
24
101,487
42,152
-
(24,047)
-
-
294,189
42,152
(10,916)
(24,047)
557
211
119,592
302,146
20,419
-
20,419
13,449
(24,163)
(24,163)
-
209
-
1,454
-
9
116,057
313,314
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION Consolidated Balance Sheet
AS AT 31 JULY 2015
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Derivative financial instruments
Deferred tax
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Derivative financial instruments
Interest bearing liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Derivative financial instruments
Interest bearing liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity - ordinary shares
Reserves
Retained earnings
Total equity
KATHMANDU ANNUAL REPORT 2015 33
SECTION
2015
NZ$’000
2014
NZ$’000
3.1.2
3.1.3
4.2
3.1.1
3.2
3.3
4.2
2.3
3.1.4
4.2
4.1
4.2
4.1
4.3.1
4.3.2
1,700
3,741
13,637
113,270
132,348
54,093
240,033
20
3,957
298,103
430,451
44,048
77
39
1,536
45,700
461
70,976
71,437
117,137
313,314
200,191
(2,934)
116,057
313,314
7,192
3,779
10
103,767
114,748
48,402
238,674
138
6,335
293,549
408,297
37,489
2,999
231
2,739
43,458
209
62,484
62,693
106,151
302,146
198,228
(15,674)
119,592
302,146
34
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 JULY 2015
SECTION
2015
NZ$’000
2014
NZ$’000
Cash flows from operating activities
Cash was provided from:
Receipts from customers
Income tax received
Interest received
Cash was applied to:
Payments to suppliers and employees
Income tax paid
Interest paid
Net cash inflow from operating activities
Cash flows from investing activities
Cash was provided from:
Proceeds from sale of property, plant and equipment
Cash was applied to:
Purchase of property, plant and equipment
Purchase of intangibles
Net cash outflow from investing activities
Cash flows from financing activities
Cash was provided from:
Proceeds of loan advances
Proceeds from share issues
Cash was applied to:
Dividends paid
Repayment of loan advances
Net cash outflow from financing activities
Net increase / (decrease) in cash held
Opening cash and cash equivalents
Effect of foreign exchange rates
Closing cash and cash equivalents
409,506
2,609
56
412,171
363,191
15,147
4,206
382,544
29,627
14
14
16,093
3,901
19,994
(19,980)
101,551
1,454
103,005
24,163
93,740
117,903
(14,898)
(5,251)
7,192
(241)
1,700
394,163
-
50
394,213
338,975
19,555
4,488
363,018
31,195
8
8
15,168
9,047
24,215
(24,207)
53,577
557
54,134
24,047
32,778
56,825
(2,691)
4,297
2,345
550
7,192
3.2
3.3
3.1.2
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 35
RECONCILIATION OF NET PROFIT AFTER TAXATION WITH CASH INFLOW FROM OPERATING ACTIVITIES
Profit after taxation
Movement in working capital:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in inventories
Increase / (decrease) in trade and other payables
Increase / (decrease) in tax liability
Add non cash items:
Depreciation
Amortisation of intangibles
Revaluation of derivative financial instruments
(Increase) / decrease in deferred taxation
Employee share based remuneration
Loss on sale of property, plant and equipment
Cash inflow from operating activities
2015
NZ$’000
2014
NZ$’000
20,419
42,152
111
(8,429)
6,222
(1,205)
(3,301)
10,611
3,264
(4,171)
2,425
9
371
12,509
29,627
(119)
(24,978)
5,176
(2,689)
(22,610)
8,500
1,698
3,079
(2,432)
211
597
11,653
31,195
36
Section 1: Basis of Preparation
In this Section
This section sets out the Group’s accounting policies that relate to the financial statements as a
whole. Where an accounting policy is specific to one note, the policy is described in the note to
which it relates.
1.1 GENERAL INFORMATION
1.2.1 Basis of preparation
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
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.
United Kingdom.
Entities reporting
The Company is a limited liability company incorporated
and domiciled in New Zealand. Kathmandu Holdings
Limited is a company registered under the Companies
Act 1993 and is a FMC reporting entity under Part 7
of the Financial Markets Conduct Act 2013. The address
of its registered office is 11 Mary Muller Drive,
Heathcote, Christchurch.
The Company is listed on the NZX and ASX.
The financial statements of the Group have been prepared in
accordance with the requirements of Part 7 of the Financial
Markets Conduct Act 2013 and the NZX Listing Rules. In
accordance with the Financial Markets Conduct Act 2013
because group financial statements are prepared and
presented for Kathmandu Holdings Limited and its subsidiaries,
separate financial statements for Kathmandu Holdings Limited
are no longer required to be prepared and presented.
These audited consolidated financial statements have
been approved for issue by the Board of Directors on
29 September 2015.
1.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in
accordance with Generally Accepted Accounting Practice
The financial statements reported are for the consolidated
“Group” which is the economic entity comprising Kathmandu
Holdings Limited and its subsidiaries.
The Group is designated as a profit-oriented entity for financial
reporting purposes.
Principles of consolidation
Subsidiaries are all entities (including structured entities) over
which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated
from the date that control ceases.
Inter-company transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Unrealised losses are also eliminated. When necessary,
amounts reported by subsidiaries have been adjusted to
conform with the Group’s accounting policies.
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.
in New Zealand. They comply with the New Zealand
Critical accounting estimates
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 financial statements are presented in New Zealand dollars,
which is the Company’s functional currency and Group’s
presentation currency.
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.
Estimates and judgements are continually evaluated and
are based on historical experience as adjusted for current
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 37
market conditions and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
and general expenses and included in a separate line item
‘Depreciation and amortisation’. There is no change in the total
expenses recognised for the 2014 year.
Segment disclosures for the New Zealand segment have been
represented to exclude holding company balances to better
align with how the chief decision maker reviews operating
performance. 'Other' represents holding companies and
consolidation eliminations.
1.2.2 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there
is an intention to settle on a net basis or realise the asset and
settle the liability simultaneously.
Assumptions underlying management’s estimates can be
found in the following notes to the financial statements:
AREA OF ESTIMATION
SECTION
Goodwill – assumptions underlying recoverable value
Fair value of derivatives – assumptions underlying fair value
3.3
4.2
Foreign currency translation
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 statement of comprehensive
income 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 in other
comprehensive income.
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 statement of comprehensive income 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.
Reclassification and disclosures
Expenses within the statement of comprehensive income
have been reclassified from the presentation in the
financial statements for the year ended 31 July 2014. The
reclassification has been made to better represent the nature
of the costs of the business, how key performance indicators
are measured and to allow for improved comparability.
Depreciation and amortisation of $7,019k has been reclassified
from selling expenses and $3,179k from administration
38
Section 2: Results for the Year
In this Section
This section focuses on the results and performance of the Group. On the following pages you will
find disclosures explaining the Group’s results for the year, segmental information, taxation and
earnings per share.
2.1 SEGMENT INFORMATION
An operating segment is a component of an entity that engages in business activities which earns revenue and incurs expenses and
where the chief decision maker reviews the operating results on a regular basis and makes decisions on resource allocation. The
Group is organised into three operating segments, depicting the three geographical regions the Group operates in.
The Group operates in three geographical areas: New Zealand, Australia and the United Kingdom.
31 JULY 2015
Total segment sales
Inter-segment sales
Sales from external customers
EBITDA
Depreciation and software amortisation
Income tax expense
Total segment assets
Total assets includes:
Non-current assets
Additions to non-current assets
Total segment liabilities
31 JULY 2014
Total segment sales
Inter-segment sales
Sales from external customers
Segment EBITDA
Depreciation and software amortisation
Income tax expense
Total segment assets
Total assets includes:
Non-current assets
Additions to non-current assets
Total segment liabilities
AUSTRALIA
NZ$’000
NEW
ZEALAND
NZ$’000
UNITED
KINGDOM
NZ$’000
OTHER
NZ$’000
TOTAL
NZ$’000
266,437
(1,852)
264,585
21,846
7,098
2,840
223,080
142,667
11,883
120,688
140,264
(1,136)
139,128
28,747
6,067
7,583
207,071
27,569
8,084
26,038
5,851
(192)
5,659
(2,078)
707
-
7,464
1,451
27
20,730
-
-
-
(1,463)
3
(410)
(7,164)
126,416
-
(50,319)
412,552
(3,180)
409,372
47,052
13,875
10,013
430,451
298,103
19,994
117,137
AUSTRALIA
NZ$’000
NEW
ZEALAND
NZ$’000
UNITED
KINGDOM
NZ$’000
OTHER
NZ$’000
TOTAL
NZ$’000
248,369
(1,064)
247,305
44,284
6,160
8,926
208,116
138,501
11,252
157,748
142,415
(1,464)
140,951
34,755
3,689
8,981
180,203
26,734
12,008
23,404
4,843
(181)
4,662
(2,904)
341
-
5,175
1,898
947
14,227
-
-
-
(1,681)
8
(396)
14,803
126,416
8
(89,228)
395,627
(2,709)
392,918
74,454
10,198
17,511
408,297
293,549
24,215
106,151
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 39
The number of full-time equivalent employees (excluding short-
term contractors), as at 31 July was:
The New Zealand segment has been represented to exclude
Holding company balances. Other represents holding
companies and consolidation eliminations.
EBITDA represents earnings before income taxes (a non-
GAAP measure), excluding interest income, interest expense,
depreciation and amortisation, as reported in the financial
statements.
Australia
New Zealand
United Kingdom
2015
2014
759
509
27
718
507
29
The Group operates in one industry being outdoor clothing
and equipment.
Revenue is allocated based on the country in which the
customer is located. New Zealand includes head office charges.
The Group has no reliance on any single major customers.
Costs recharged between Group companies are calculated on
an arms-length basis. The default basis of allocation is % of
revenue with other bases being used where appropriate.
Assets / liabilities are allocated based on where the assets /
liabilities are located.
Deferred tax assets have been included within non-current
assets as they form part of the amounts provided to the
Chief Operating Decision Maker (the Executive Management
Team), and the comparative information has been updated to
reflect this.
2.2 PROFIT BEFORE TAX
Accounting policies
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
Sale of goods are recognised at point of sale for retail
customers and when product is dispatched to the customer
for online sales. Retail sales are usually in cash or by credit
card. The recorded revenue is the gross amount of the sale
(excluding GST).
(ii) Interest income
Interest income is recognised on a time-portion basis using the
effective interest method.
Operating expenses
Employee entitlements
2015
NZ$’000
2014
NZ$’000
Wages, salaries and other short term benefits
81,676
71,871
Employee share based remuneration
9
211
(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled within 12
months of the reporting date are recognised in other payables
in respect of employees’ services up to the reporting date and
are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave
are recognised when the leave is taken and measured at the
rates paid or payable. The liability for employee entitlements is
carried at the present value of the estimated future cash flows.
Rental and operating leases
The Group is a Lessee. Leases in which a significant portion of
the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor)
are charged to the statement of comprehensive income on a
straight-line basis over the period of the lease.
2015
NZ$’000
2014
NZ$’000
Rental and operating lease expenses
52,971
44,461
Rent expenses reported in these financial statements relate to
non-cancellable operating leases. The future commitments on
these leases are as follows:
Due within 1 year
Due within 1-2 years
Due within 2-5 years
Due after 5 years
2015
NZ$’000
2014
NZ$’000
52,682
43,402
72,363
26,212
45,220
38,531
62,999
9,157
194,659
155,907
Some of the existing lease agreements have right of renewal
options for varying terms. The Group leases various properties
under non-cancellable lease agreements. These leases are
generally between 1 - 10 years.
40
2.3 TAXATION
Keeping it simple
This section lays out the tax accounting policies, the current and deferred tax charges or credits in
the year (which together make up the total tax charge or credit in the statement of comprehensive
income), a reconciliation of profit before tax to the tax charge and the movements in deferred tax
assets and liabilities.
Deferred income tax assets and liabilities are offset when
there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income
taxes assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle
the balances on a net basis.
Goods and Services Tax (GST)
The statement of comprehensive income and the cash flow
statement have been prepared so that all components are
stated exclusive of GST. All items in the balance sheet are
stated net of GST, with the exception of receivables and
payables, which include GST invoiced.
Taxation – Statement of comprehensive income
The total taxation charge in the income statement is analysed
as follows:
Current income tax charge
Deferred income tax charge / (credit)
Income tax charge reported in
statement of comprehensive income
2015
NZ$’000
2014
NZ$’000
11,356
(1,343)
16,846
665
10,013
17,511
In order to understand how, in the statement of comprehensive
income, a tax charge of $10,013k (2014: $17,511k) arises on profit
before income tax of $30,432k (2014: $59,663k), the taxation
charge that would arise at the standard rate of New Zealand
corporate tax is reconciled to the actual tax charge as follows:
Accounting policies
Current and deferred income tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the statement of comprehensive
income, except to the extent that it relates to items recognised
in other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive income
or directly in equity, respectively.
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 are
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 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.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 41
2015
NZ$’000
30,432
8,521
2014
NZ$’000
59,663
16,706
360
(596)
1,169
-
644
(85)
812
(197)
863
-
(670)
(3)
Profit before income tax
Income tax calculated at 28%
Adjustments to taxation:
Adjustments due to different rate in different jurisdictions
Non-taxable income
Expenses not deductible for tax purposes
Utilisation of tax losses by group companies
Tax expense transferred to foreign currency translation reserve
Adjustments in respect of prior years
Income tax charge reported in statement of comprehensive income
10,013
17,511
Adjustments for prior periods primarily arise where an outcome is obtained on certain tax matters which differs from expectations
held when the related provision was made. Where the outcome is more favourable than the provision made, the difference is
released, lowering the current year tax charge. Where the outcome is less favourable than the provision, an additional charge to the
current year tax will occur.
The tax charge / (credit) relating to components of other comprehensive income is as follows:
Movement in cash flow hedge reserve before tax
Tax impact relating to cash flow hedge reserve
Movement in cash flow hedge reserve after tax
Foreign currency translation reserve before tax
Tax credit / (charge) relating to foreign currency translation reserve
Movement in foreign currency translation reserve after tax
Total other comprehensive income before tax
Total tax credit / (charge) on other comprehensive income
Total other comprehensive income after tax
Current tax
Deferred tax
Total tax credit / (charge) on other comprehensive income
Unrecognised tax losses
2015
NZ$’000
2014
NZ$’000
16,160
(3,745)
12,415
1,654
(620)
1,034
17,814
(4,365)
13,449
(644)
(3,721)
(4,365)
(10,198)
3,076
(7,122)
(4,371)
577
(3,794)
(14,569)
3,653
(10,916)
670
2,983
3,653
The Group has estimated tax losses to carry forward from Kathmandu (U.K.) Limited of £10,399,107 (NZ$21,008,297) (2014:
£9,529,783 (NZ$18,612,857)) which can be carried forward to be offset against future profits generated within the UK.
42
Imputation credits
2015
NZ$’000
2014
NZ$’000
Imputation credits available for use in subsequent reporting periods based on a tax rate of 28%
4,702
6,156
The above amounts represent the balance of the imputation account as at the end of July 2015, 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 in subsequent periods as at 31 July 2015 is A$1,164,293
(2014: A$5,318,617).
Taxation – Balance sheet
The following are the major deferred taxation liabilities and assets recognised by the Group and movements thereon during the
current and prior year:
TAX
DEPRECIATION
NZ$’000
EMPLOYEE
OBLIGATIONS
NZ$’000
FOREIGN
EXCHANGE
NZ$’000
OTHER TIMING
DIFFERENCES
NZ$’000
RESERVES
NZ$’000
TOTAL
NZ$’000
As at 31 July 2013
Recognised in the statement of
comprehensive income
Recognised in other
comprehensive income
As at 31 July 2014
Recognised in the statement of
comprehensive income
Recognised in other
comprehensive income
As at 31 July 2015
212
6
-
218
(43)
-
175
1,122
(36)
-
1,086
78
-
2,617
(1,952)
(104)
561
1,015
7
2,351
1,317
(2,285)
-
11
3,076
791
-
3,679
293
17
4,017
(665)
2,983
6,335
1,343
(3,745)
(3,721)
1,164
1,583
3,989
(2,954)
3,957
Certain deferred taxation assets and liabilities have been offset. The following is the analysis of the deferred taxation balances
(before offset) for financial reporting purposes:
Deferred taxation assets:
- Deferred tax asset to be recovered after more than 12 months
- Deferred tax asset to be recovered within 12 months
Deferred taxation liabilities:
- Deferred tax liability to be recovered after more than 12 months
- Deferred tax liability to be recovered within 12 months
2015
NZ$’000
2014
NZ$’000
2,799
4,232
(1,657)
(1,417)
3,957
2,081
4,661
(383)
(24)
6,335
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 43
The deferred tax balance relates to:
• Property, plant and equipment temporary differences arising on differences in accounting and tax depreciation rates
• Temporary differences on the unrealised gain/loss in hedge reserve
• Realised gain/loss on foreign exchange contracts not yet charged in the statement of comprehensive income
• Unrealised foreign exchange on intercompany loan (Kathmandu Pty Ltd)
Inventory provisioning
•
• Employee benefits accruals
• Temporary differences arising from landlord contributions and rent free periods
• Other temporary differences on miscellaneous items
2.4 EARNINGS PER SHARE
Keeping it simple
Earnings per share (‘EPS’) is the amount of post-tax profit attributable to each share.
Basic EPS is calculated by dividing the profit after tax attributable to equity holders of the Company
of $20,419,451 (2014: 42,151,736) by the weighted average number of ordinary shares in issue
during the year of 201,342,759 (2014: 200,422,443).
Diluted EPS reflects any commitments the Group has to issue shares in the future that would
decrease EPS. In 2015, these are in the form of share options / performance rights. To calculate the
impact it is assumed that all share options are exercised / performance rights taken, and therefore,
adjusting the weighted average number of shares.
Weighted average number of shares in issue
Adjustment for:
- Share options / performance rights
2015
’000
2014
’000
201,343
200,422
884
202,227
1,881
202,303
44
Section 3: Operating Assets and Liabilities
In this Section
This section shows the assets used to generate the Group’s trading performance and the liabilities
incurred as a result. Liabilities relating to the Group’s financing activities are addressed in Section 4.
Deferred tax assets and liabilities are shown in note 2.3.
Keeping it simple
Working capital represents the assets and liabilities the Group generates through its trading activity.
The Group therefore defines working capital as inventory, cash, trade and other receivables and trade
and other payables.
3.1 WORKING CAPITAL
3.1.1 Inventory
Accounting policies
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.
Inventory is considered in transit when the risk and rewards of
ownership have transferred to the Group.
The Group assesses the likely residual value of inventory. A
stock provision is recognised for stock which is expected to sell
for less than cost. Any increase in these provisions is taken as
a reduction to inventory on the balance sheet and expensed to
cost of sales.
Inventory is broken down into trading stock and goods in
transit below:
Trading stock
Goods in transit
2015
NZ$’000
101,198
12,072
113,270
2014
NZ$’000
91,392
12,375
103,767
Inventory has been reviewed for obsolescence and a provision
of $454,413 (2014: $348,189) has been made.
3.1.2 Cash and cash equivalents
Cash on hand
Cash at bank
Short term deposits
2015
NZ$’000
2014
NZ$’000
175
1,508
17
1,700
169
7,009
14
7,192
The carrying amount of the Group's cash and cash equivalents are
denominated in the following currencies:
NZD
AUD
GBP
USD
EUR
520
471
237
470
2
1,700
1,624
5,263
250
52
3
7,192
3.1.3 Trade and other receivables
Accounting policies
Trade receivables are recognised initially at the value of the
invoice sent to the customer and subsequently at the amounts
considered recoverable (amortised cost). The collectability of
trade receivables is reviewed on an on-going basis. Debts,
which are known to be uncollectible, are written off. A provision
for doubtful receivables is established when there is objective
evidence that the Group will not be able to collect all amounts
due according to the original terms of receivables.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 45
3.1.5 Credit risk
Credit risk is the risk of financial loss to the Group if a customer
or counterparty to a financial instrument fails to meet its
contractual obligations. This would arise principally from
the Group’s receivables from customers. The nature of the
customer base is such that there is no individual customer
concentration of credit risk. Other financial instruments which
potentially subject the Group to credit risks principally consist of
bank balances, loans, advances and refund of taxes.
The Group does not carry out credit evaluations for all new
customers requiring credit. Credit is generally only given to
government or local council backed institutions.
Exposure to credit risk
The below balances are recorded at their carrying amount
after any provision for loss on these financial instruments.
The maximum exposure to credit risk at reporting date was
(carrying amount):
Cash and cash equivalents
Trade receivables
Sundry debtors
2015
NZ$’000
2014
NZ$’000
1,700
98
1,039
2,837
7,192
211
1,360
8,763
As at balance date the carrying amount is also considered to
approximate fair value for each of the financial instruments.
There are no past due or impaired balances.
The credit quality of cash and cash equivalents can be assessed
by reference to external credit ratings (if available) or to
historical information about counterparty default rates:
Cash and cash equivalents:
Standard & Poors - AA-
Standard & Poors - BBB+
Total cash and cash equivalents
2015
NZ$’000
2014
NZ$’000
1,494
206
1,700
6,949
243
7,192
Trade receivables
Other assets and prepayments
2015
NZ$’000
2014
NZ$’000
98
3,643
3,741
211
3,568
3,779
The carrying amount of the Group’s trade and other receivables
are denominated in the following currencies:
NZD
AUD
GBP
1,584
1,833
324
3,741
1,075
2,435
269
3,779
3.1.4 Trade and other payables due within one year
Accounting policies
Trade payables are recognised at the value of the invoice
received from a supplier. The carrying value of trade payables is
considered to approximate fair value as amounts are unsecured
and are usually paid by the 30th of the month following
recognition.
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can
be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Trade payables
Employee entitlements
Sundry creditors and accruals
Provisions
2015
NZ$’000
2014
NZ$’000
14,255
7,780
20,600
1,413
44,048
11,868
6,165
19,456
-
37,489
The carrying amount of the Group's trade and other payables are
denominated in the following currencies:
NZD
AUD
GBP
USD
9,490
30,930
1,042
2,586
44,048
9,064
26,067
502
1,856
37,489
Provisions primarily relate to an onerous contract in relation
to the relocation of the Christchurch support office and the
restoration of leased properties for the Christchurch support
office and the Australian distribution centre. These provisions
are expected to be fully utilised within the next 12 months.
46
3.2 PROPERTY, PLANT AND EQUIPMENT
Keeping it simple
The following section shows the physical assets used by the Group to operate the business,
generating revenues and profits. These assets include store and office fit-out, as well as equipment
used in sales and support activities.
Assets are recognised 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.
Accounting policies
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.
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.
Depreciation
Depreciation of property, plant and equipment is calculated using straight line and diminishing value methods 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
Impairment of assets
8 – 50 %
8 – 50 %
10 – 50 %
10 – 60 %
Property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. 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.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 47
Property, plant and equipment can be analysed as follows:
LEASEHOLD
IMPROVEMENT
$’000
OFFICE, PLANT
& EQUIPMENT
$’000
FURNITURE &
FITTINGS
$’000
COMPUTER
EQUIPMENT
$’000
Year ended 31 July 2014
Opening net book value
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book value
As at 31 July 2014
Cost
Accumulated depreciation
Closing net book value
Year ended 31 July 2015
Opening net book value
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book value
As at 31 July 2015
Cost
Accumulated depreciation
Closing net book value
27,379
5,318
(339)
(4,277)
(567)
27,514
49,640
(22,126)
27,514
27,514
10,679
(101)
(5,965)
296
32,423
60,243
(27,820)
32,423
1,922
394
(27)
(446)
(26)
1,817
5,160
(3,343)
1,817
1,817
723
(15)
(464)
4
2,065
5,778
(3,713)
2,065
11,049
8,901
(279)
(2,429)
(261)
16,981
26,802
(9,821)
16,981
16,981
3,905
(74)
(3,281)
102
17,633
30,672
(13,039)
17,633
3,029
555
(131)
(1,348)
(15)
2,090
7,307
(5,217)
2,090
2,090
786
(11)
(901)
8
1,972
8,120
(6,148)
1,972
TOTAL
$’000
43,379
15,168
(776)
(8,500)
(869)
48,402
88,909
(40,507)
48,402
48,402
16,093
(201)
(10,611)
410
54,093
104,813
(50,720)
54,093
Included within property, plant and equipment are assets
currently in progress of $10,441k, this relates to store fit-outs
and work to complete the New Zealand support office and
Australian distribution centre, due for opening March 2016 and
October 2016 respectively.
Sale of property, plant and equipment
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the
statement of comprehensive income.
Depreciation
Leasehold improvements
Office, plant and equipment
Furniture and fittings
Computer equipment
Total depreciation
2015
NZ$’000
2014
NZ$’000
5,965
464
3,281
901
10,611
4,277
446
2,429
1,348
8,500
Depreciation expenditure is excluded from administration and
general expenses in the statement of comprehensive income.
2015
NZ$’000
2014
NZ$’000
371
597
Loss/(gain) on sale of property,
plant and equipment
Capital commitments
Capital commitments contracted for at balance date include
property, plant and equipment of $18,486k (2014: $3,420k).
48
3.3 INTANGIBLE ASSETS
Keeping it simple
The following section shows the non-physical assets used by the Group to operate the business,
generating revenues and profits. These assets include brands, licenses, software development and
goodwill. This section explains the accounting policies applied and the specific judgements and
estimates made by the Directors in arriving at the net book value of these assets.
Accounting policies
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.
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.
Software costs
Software costs have a finite useful life. Software costs are capitalised and written off over the useful economic life.
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.
Software is amortised using straight line and diminishing value methods and rates of 10-67%.
Impairment
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 e.g. cash generating units.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 49
GOODWILL
NZ$’000
BRAND
NZ$’000
SOFTWARE
NZ$’000
TOTAL
NZ$’000
75,406
155,426
-
-
-
-
75,406
76,677
(1,271)
75,406
-
-
-
(3,328)
152,098
152,098
-
152,098
75,406
152,098
-
-
-
-
75,406
76,677
(1,271)
75,406
-
-
-
897
152,995
152,995
-
152,995
4,031
9,047
(155)
(1,698)
(55)
11,170
18,700
(7,530)
11,170
11,170
3,901
(185)
(3,264)
10
11,632
22,467
(10,835)
11,632
234,863
9,047
(155)
(1,698)
(3,383)
238,674
247,475
(8,801)
238,674
238,674
3,901
(185)
(3,264)
907
240,033
252,139
(12,106)
240,033
Intangible assets
Year ended 31 July 2014
Opening net book value
Additions
Disposals
Amortisation
Exchange differences
Closing net book value
As at 31 July 2014
Cost
Accumulated amortisation/impairment
Closing net book value
Year ended 31 July 2015
Opening net book value
Additions
Disposals
Amortisation
Exchange differences
Closing net book value
As at 31 July 2015
Cost
Accumulated amortisation/impairment
Closing net book value
Impairment tests for goodwill and brand
The aggregate carrying amounts of goodwill and brand allocated to each unit are as follows:
New Zealand
Australia
GOODWILL
BRAND
2015
NZ$’000
2014
NZ$’000
2015
NZ$’000
2014
NZ$’000
28,654
46,752
75,406
28,654
46,752
75,406
51,000
101,995
152,995
51,000
101,098
152,098
For the purposes of goodwill and brand impairment testing, the Group operates as two cash generating units, New Zealand and
Australia. The recoverable amount of the cash generating units has been determined based on value in use.
50
The discounted cash flow valuations were calculated using
projected five year future cash flows based on Board approved
business plans. Business plans are modelled assuming like for
like sales growth based on historical performance taking into
account changing market conditions and the continuation of
the store rollout programme. The key assumptions used for the
value in use calculation are as follows:
The expected continued promotion and marketing of the
Kathmandu brand support the assumption that the brand has an
indefinite life.
Amortisation
2015
NZ$’000
2014
NZ$’000
3,264
3,264
1,698
1,698
Terminal growth rate
New Zealand CGU pre-tax discount rate
Australia CGU pre-tax discount rate
2015
2.0%
14.9%
13.5%
2014
2.5%
15.0%
14.0%
Software
Total amortisation
Capital commitments
The calculations confirmed that there was no impairment
of goodwill and brand during the year (2014: 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.
Capital commitments contracted for at balance date include
intangible assets of $1,192k (2014: $1,135k).
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 51
Section 4: Capital Structure and Financing Costs
In this Section
This section outlines how the Group manages its capital structure and related financing costs,
including its balance sheet liquidity and access to capital markets.
Capital structure is how a company finances it’s overall operations and growth by using different
sources of funds. The Directors determine and monitor the appropriate capital structure of
Kathmandu, specifically how much is raised from shareholders (equity) and how much is borrowed
from financial institutions (debt) in order to finance the Group’s activities both now and in the future.
The Directors consider the Group’s capital structure and dividend policy at least twice a year ahead
of announcing results and do so in the context of its ability to continue as a going concern, to
execute strategy and to deliver its business plan.
4.1 INTEREST BEARING LIABILITIES
Accounting policies
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in the statement of comprehensive
income over the period of the borrowings using the effective
interest method.
Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for
at least 12 months after the balance sheet date.
The table below separates borrowings into current and non-
current liabilities:
Current portion
Non-current portion
Total term loans
2015
NZ$’000
2014
NZ$’000
39
70,976
71,015
231
62,484
62,715
On 23 March 2015 the Group entered into a new 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.
The loans are repayable in full on final maturity date of the
facilities being 23 March 2018. Interest is payable based on the
BKBM rate (NZD borrowings), the BBSY rate (AUD borrowings),
or the applicable short term rate for interest periods less than
30 days, plus a margin of up to 1.30%. The bank loans are
secured against the assets of the company and its subsidiaries.
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 six month interim period. The
calculations of these covenants are specified in the bank facility
agreements of 19 December 2011 and have been complied
with at 31 July 2015.
The current interest rates, prior to hedging, on the term loans
ranged between 2.90% - 4.37% (2014: 3.48% - 4.56%).
The Group has entered into a 36 month loan to finance
software licenses. For accounting purposes, an interest rate
has been imputed on the loan. The imputed rate is within
the range shown above for current interest rates on external
borrowings. The loan balance at 31 July 2015 is $39,382 (2014:
$270,750). The loan is not repayable on demand.
52
The principal of interest bearing liabilities is:
Payable within 1 year
Payable 1 to 2 years
Payable 2 to 3 years
Payable 3 to 4 years
4.1.1 Finance costs
Interest income
Interest expense
Other finance costs
Net exchange loss/(gain) on foreign currency borrowings
2015
NZ$’000
2014
NZ$’000
39
-
70,976
-
71,015
231
62,484
-
-
62,715
2015
NZ$’000
2014
NZ$’000
(56)
3,645
594
(1,438)
2,745
(50)
3,904
570
169
4,593
Other finance costs relates to facility fees on banking arrangements.
4.1.2 Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from floating rate borrowings drawn down under bank debt facilities. The Group uses
interest rate swaps to hedge floating rate borrowings in accordance with the Group treasury policy. Interest rate swaps have the
economic effect of converting borrowings from floating to fixed rates.
Refer to section 4.2 for notional principal amounts and valuations of interest rate swaps outstanding at balance date. A sensitivity
analysis of interest rate risk on the Group’s financial assets and liabilities is provided in the table below. At the reporting date the
interest rate profile of the Group's banking facilities was (carrying amount):
Total secured loans
less Principal covered by interest rate swaps
Net Principal subject to floating interest rates*1
1 Debt levels fluctuate throughout the year and as at 31 July, are typically at a cyclical low.
2015
NZ$’000
70,976
(50,694)
20,282
2014
NZ$’000
62,444
(48,374)
14,070
The Group has entered into interest rate swap agreements to reduce the impact of changes in interest rates on its long-term debt.
The cash flow hedge (gain)/loss on interest rate swaps at balance date was $517,348 (2014: $150,844).
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 53
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
A sensitivity of 1% (2014: 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 are held constant. The impact on equity is
presented exclusive of the impact on retained earnings.
31 JULY 2015
CARRYING AMOUNT
$’000
PROFIT
$’000
EQUITY
$’000
PROFIT
$’000
EQUITY
$’000
-1%
+1%
Derivative financial instruments (asset) / liability
(13,119)
(507)
876
Financial assets
Cash
Financial liabilities
Borrowings
Total increase / (decrease)
1,700
70,976
(12)
(12)
710
710
191
-
-
-
-
876
507
12
12
(710)
(710)
(191)
(908)
-
-
-
-
(908)
CARRYING AMOUNT
$’000
PROFIT
$’000
EQUITY
$’000
PROFIT
$’000
EQUITY
$’000
-1%
+1%
3,060
7,192
62,444
(572)
852
(52)
(52)
624
624
-
-
-
-
-
852
572
52
52
(624)
(624)
-
(885)
-
-
-
-
(885)
31 JULY 2014
Derivative financial instruments (asset) / liability
Financial assets
Cash
Financial liabilities
Borrowings
Total increase / (decrease)
4.1.3 Liquidity Risk
Liquidity risk is the risk that an unforeseen event or miscalculation in the required liquidity level will result in the Group 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 $138,580,931/ $125,000,000 AUD (2014:
$126,373,626 / $115,000,000 AUD) and operates well within this facility. This includes short term bank overdraft requirements, and
at balance date no bank accounts were in overdraft.
54
Keeping it simple
The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities
into relevant maturity groupings based on the remaining period at the balance date to the contractual
maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, so
will not always reconcile with the amounts disclosed on the balance sheet.
Group 2015
Trade and other payables
Borrowings
Group 2014
Trade and other payables
Borrowings
LESS THAN
1 YEAR
NZ$’000
BETWEEN
1 AND 2 YEARS
NZ$’000
BETWEEN
2 AND 5 YEARS
NZ$’000
OVER
5 YEARS
NZ$’000
44,048
2,184
46,232
37,489
2,295
39,784
-
2,178
2,178
-
63,344
63,344
-
72,976
72,976
-
-
-
-
-
-
-
-
-
The Group enters into forward exchange contracts to manage the risks associated with the purchase of foreign currency
denominated products.
The table below analyses the Group’s derivative financial instruments that will be settled on a gross basis into relevant maturity
groupings based on the remaining period at the balance date to the contractual maturity date. The amounts disclosed in the table
are the contractual undiscounted cash flows. They are expected to occur and affect the profit or loss at various dates between
balance date and the following five years.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 55
LESS THAN 1 YEAR
NZ$’000
BETWEEN 1 AND 2 YEARS
NZ$’000
BETWEEN 2 AND 5 YEARS
NZ$’000
146,814
(133,177)
13,637
-
-
-
(263)
(143)
119,979
(122,889)
(2,910)
(181)
-
-
-
(73)
-
-
-
(77)
-
-
-
(46)
At 31 July 2015
Forward foreign exchange contracts
- Inflow
- Outflow
Net Inflow / (Outflow)
Net settled derivatives – interest rate swaps
Net Inflow / (Outflow)
At 31 July 2014
Forward foreign exchange contracts
- Inflow
- Outflow
Net Inflow / (Outflow)
Net settled derivatives – interest rate swaps
Net Inflow / (Outflow)
4.2 DERIVATIVE FINANCIAL INSTRUMENTS
Keeping it simple
A derivative is a type of financial instrument typically used to manage risk. A derivative’s value
changes over time in response to underlying variables such as exchange rates or interest rates
and is entered into for a fixed period. A hedge is where a derivative is used to manage an
underlying exposure.
The Group is exposed to changes in interest rates on its borrowings and to changes in foreign
exchange rates on its foreign currency (largely USD) purchases. The Group uses derivatives to hedge
these underlying exposures.
Derivative financial instruments are initially included in the balance sheet at their fair value, either
as assets or liabilities, and are subsequently re-measured at fair value at each reporting date. An
interest rate swap is an instrument to exchange a fixed rate of interest for a floating rate, or vice
versa, or one type of floating rate for another.
Accounting policies
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 hedges of highly probable
forecast transactions (cash flow hedges).
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.
56
Cash flow hedge
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 statement of
comprehensive income. Amounts accumulated in equity are recycled in the statement of comprehensive income in the periods
when the hedged item will affect profit or loss. 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 statement of comprehensive income. 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 statement of comprehensive income.
Foreign currency translation
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 statement of
comprehensive income, except when deferred in other comprehensive income. Translation differences on monetary financial assets
and liabilities are reported as part of the fair value gain or loss.
Derivative financial instruments
Foreign exchange contracts
Current asset
Current liability
Non-current liability
Net foreign change contracts – cash flow hedge (asset / (liability))
Interest rate swaps
Current asset
Non-current asset
Current liability
Non-current liability
Net interest rate swaps – cash flow hedge (asset / (liability))
Total derivative financial instruments
2015
NZ$’000
2014
NZ$’000
13,637
-
-
13,637
-
20
(77)
(461)
(518)
13,119
-
(2,701)
(209)
(2,910)
10
138
(298)
-
(150)
(3,060)
The above table shows the Group’s financial derivative holdings at year end.
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 floating rate 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 notional amount of interest rate swaps at balance date
was $50,694,013 (2014: $48,373,626). The fixed interest rates range between 3.05% and 4.13% (2014: 3.05% and 5.71%). Refer
section 4.1.3 for timing of expected cash flows relating to interest rate swaps.
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 notional amount of foreign exchange
contracts amount to US$95,450,000, NZ$133,176,765 (2014: US$100,250,000, NZ$122,888,501).
No material hedge ineffectiveness for interest rate swaps or foreign exchange contracts exists as at balance date (2014: nil).
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 57
4.2.1 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 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. 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.
A sensitivity analysis of foreign exchange rate risk on the Group’s financial assets and liabilities is provided in the table below.
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to foreign exchange risk.
A sensitivity of -10% / +10% (2014: -10% / +10%) 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% (2014: -10% /
+10%) 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.
Amounts are shown net of income tax. All variables other than applicable exchange rates are held constant. The impact on equity is
presented exclusive of the impact on retained earnings.
CARRYING AMOUNT
$’000
PROFIT
$’000
EQUITY
$’000
PROFIT
$’000
EQUITY
$’000
-10%
+10%
31 July 2015
Derivative financial instruments (asset) / liability
(13,119)
-
(16,312)
-
13,365
Financial assets
Cash
Trade receivables and sundry debtors
Financial liabilities
Trade payables
Borrowings
Total increase / (decrease)
1,700
1,137
44,048
70,976
131
(173)
(42)
(2,765)
-
(2,765)
(2,807)
-
-
-
-
(4,878)
(4,878)
(21,190)
(107)
141
34
2,262
-
2,262
2,296
-
-
-
-
3,991
3,991
17,356
58
CARRYING AMOUNT
$’000
PROFIT
$’000
EQUITY
$’000
PROFIT
$’000
EQUITY
$’000
-10%
+10%
3,060
7,192
1,572
37,489
62,444
-
(12,588)
-
10,299
445
(112)
333
(2,274)
-
(2,274)
(1,941)
-
-
-
-
(4,396)
(4,396)
(16,984)
(364)
91
(273)
1,861
-
1,861
1,588
-
-
-
-
3,596
3,596
13,895
Derivative financial instruments (asset) / liability
Financial assets
Cash
Trade receivables and sundry debtors
Financial liabilities
Trade payables
Borrowings
Total increase / (decrease)
4.3 EQUITY
Keeping it simple
This section explains material movements recorded in shareholders’ equity that are not explained
elsewhere in the financial statements. The movements in equity and the balance at 31 July 2015 are
presented in the statement of changes in equity.
Accounting policies
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
Dividends
Dividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their payment.
4.3.1 Contributed equity - ordinary shares
Ordinary shares fully paid ($)
Balance at beginning of year
Issue of shares under Executive and Senior Management Long Term Incentive Plan
Balance at end of year
Number of issued shares
Ordinary shares issued at beginning of the year
Shares issued under Executive and Senior Management Long Term Incentive Plan
Ordinary shares issued at end of the year
2015
NZ$’000
2014
NZ$’000
200,191
198,228
1,963
200,191
2015
’000
200,633
851
201,484
198,228
197,370
858
198,228
2014
’000
200,216
417
200,633
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 59
As at 31 July 2015 there were 201,484,583 ordinary issued shares in Kathmandu Holdings Limited and these are classified as
equity. 165,639 shares (2014: 146,648) were issued under the “Executive and Senior Management Long Term Incentive Plan 24
November 2010” and 685,475 shares (2014: 270,927) were issued under the “Executive Share Option Plan 16 October 2009”
during the year ending 31 July 2015.
All ordinary shares carry equal rights in respect of voting and the receipt of dividends. Ordinary shares do not have a par value.
Refer to section 5.4 for Employee share based remuneration plans.
4.3.2 Reserves and retained earnings
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
other comprehensive income, as described in the accounting policy in section 4.2. The amounts are recognised in profit and loss
when the associated hedged transaction affects profit and loss.
Foreign currency translation reserve
The FCTR is used to record foreign currency translation differences arising on the translation of the Group entities results and
financial position. The amounts are accumulated in other comprehensive income and recognised in profit and loss when the foreign
operation is partially disposed of or sold.
Share based payments reserve
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.
Reserves
(i) Cash flow hedging reserve
Opening balance
Revaluation - gross
Deferred taxation on revaluation
Transferred to hedged asset
Transfer to net profit - gross
Closing balance
(ii) Foreign currency translation reserve
Opening balance
Currency translation differences – Gross
Currency translation differences – Taxation
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
2.3
2.3
2015
NZ$’000
2014
NZ$’000
(2,055)
29,281
(3,745)
(12,857)
(264)
10,360
(14,352)
1,654
(620)
(13,318)
733
9
(509)
(209)
24
5,067
(7,541)
3,076
(2,690)
33
(2,055)
(10,558)
(4,371)
577
(14,352)
823
211
(301)
-
733
(2,934)
(15,674)
60
4.3.3 Dividends
Prior year final dividend paid
Current year interim dividend paid
Dividends paid ($0.12 per share (2014: $0.12))
2015
NZ$’000
2014
NZ$’000
18,119
6,044
24,163
18,028
6,019
24,047
4.3.4 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.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION Section 5: Other Notes
5.1 RELATED PARTIES
Subsidiaries
Milford Group Holdings Limited
Kathmandu Limited
Kathmandu Pty Limited
Kathmandu (U.K.) Limited
KATHMANDU ANNUAL REPORT 2015 61
EQUITY HOLDING
2015
2014
100%
100%
100%
100%
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 the United Kingdom, respectively. All other subsidiary entities are incorporated in New Zealand.
The principal activities of the subsidiaries are:
COUNTRY OF REGISTRATION
PRINCIPAL ACTIVITY
New Zealand
New Zealand
Australia
United Kingdom
Holding company
Outdoor retailer
Outdoor retailer
Outdoor retailer
Material amounts outstanding between the parent and
subsidiaries at year end were:
• Loans from the parent to subsidiaries (Kathmandu Limited
and Milford Group Holdings Limited) $108,437,709 (2014:
$84,274,467).
• Loans to the parent from subsidiaries $27,655,127 (2014:
$3,004,251).
Key Management Personnel
Salaries
Other short-term employee benefits
Employee performance rights
2015
NZ$’000
2014
NZ$’000
2,844
166
9
3,019
3,450
350
211
4,011
Milford Group Holdings Limited
Kathmandu Limited
Kathmandu Pty Limited
Kathmandu (U.K.) Limited
5.1.1 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 $40,921 (2014: $50,180) were
paid to Chapman Tripp for services provided to the Group
(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 2015, the Group owed
outstanding legal fees of $754 (2014: $5,437).
During the year, operating lease costs of $238,536 (2014:
$238,407) were paid to Chalmers Properties Limited, a
subsidiary of Port Otago Limited. John Harvey is a Director of
both of these companies.
All subsidiaries within the Group are related parties. No
amounts owed to related parties have been written off or
forgiven during the year.
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.
62
Key management personnel include the following employees:
Foreign exchange contracts and interest rate swaps
Executive Directors:
• Chief Executive Officer
• Chief Operating Officer
Other Key Management Personnel:
• Chief Financial Officer
• GM, Product
• GM, Marketing, Online and International
• GM, Supply Chain
• GM, Human Resources
• Chief Information Officer
• GM, Retail
Remuneration Detail – refer to section 5.3.
5.2 FAIR VALUES
The following methods and assumptions were used to estimate
the fair values for each class of financial instrument:
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. The fair value of term liabilities equates to their current
carrying value.
The fair value of these instruments is determined by using
valuation techniques (as they are not traded in an active
market). These valuation techniques maximise the use of
observable market data where it is available and rely as little as
possible on entity specific estimates.
Specific valuation techniques used to value financial
instruments include the fair value of interest rate swaps
calculated as the present value of the estimated future cash
flows based on observable yield curves and the fair value of
forward foreign exchange contracts determined using forward
exchange rates at the balance sheet date, with the resulting
value discounted back to present value.
These derivatives have all been determined to be within level
2 (for the purposes of NZ IFRS 13) of the fair value hierarchy as
all significant inputs required to ascertain the fair value of these
derivatives are observable.
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
approximately nil. All guarantees are payable on demand.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 63
5.3 REMUNERATION DETAIL
2015
SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
SHARE BASED PAYMENTS
CASH
SALARY
AND FEES
$
CASH
BONUS
$
NON-
MONETARY
BENEFITS
$
SUPER-
ANNUATION
$
PERFORMANCE
RIGHTS
$
EQUITY
RELATED
%
TOTAL
$
PERFORMANCE
RELATED
%
NAME
Non-Executive Directors
David Kirk
John Harvey
John Holland
Sandra McPhee
Christine Cross
Executive Directors
Xavier Simonet 1
Peter Halkett 2
Mark Todd 3
242,230
125,449
125,449
125,449
125,449
744,026
77,283
297,909
690,701
-
-
-
-
-
-
56,831
-
-
1,065,893
56,831
Other Key Management Personnel
Reuben Casey
Other Management 4
Total
311,025
2,105,366
4,226,310
-
91,803
148,634
-
-
-
-
-
-
-
-
2,655
2,655
2,599
12,311
17,565
-
-
-
-
-
-
2,153
6,588
22,183
30,924
9,926
65,492
106,342
-
-
-
-
-
-
-
4,367
1,541
5,908
-
2,593
8,501
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
1.4%
0.2%
0.5%
0.0%
0.1%
0.2%
242,230
125,449
125,449
125,449
125,449
744,026
136,267
308,864
717,080
1,162,211
323,550
2,277,565
4,507,352
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
1. CEO from 29 June 2015. Cash bonus paid is a sign on bonus. 2. Resigned as CEO effective 25 November 2014. 3. Acting CEO 6 October 2014 to 28 June 2015. Resigned as Executive Director effective 24
August 2015. 4. Cash bonus paid relates to sign on bonus.
2014
SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
SHARE BASED PAYMENTS
CASH
SALARY
AND FEES
$
CASH
BONUS
$
NON-
MONETARY
BENEFITS
$
SUPER-
ANNUATION
$
PERFORMANCE
RIGHTS
$
EQUITY
RELATED
%
PERFORMANCE
RELATED
%
TOTAL
$
NAME
Non-Executive Directors
David Kirk
John Harvey
John Holland
Sandra McPhee
Christine Cross
Executive Directors
Peter Halkett
Mark Todd
144,853
196,039
128,069
128,069
128,069
725,099
888,846
488,860
-
-
-
-
-
-
87,568
48,750
1,377,706
136,318
Other Key Management Personnel
Total
1,949,221
4,052,026
167,539
303,857
-
-
-
-
-
-
10,637
3,909
14,546
31,676
46,222
-
-
-
-
-
-
22,057
17,066
39,123
83,577
122,700
-
-
-
-
-
-
129,976
73,633
203,609
7,883
211,492
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
11.4%
11.6%
11.5%
144,853
196,039
128,069
128,069
128,069
725,099
1,139,084
632,218
1,771,302
0.4%
4.5%
2,239,896
4,736,297
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
7.7%
7.7%
7.7%
7.5%
6.4%
64
5.4 EMPLOYEE SHARE BASED REMUNERATION
Executive Share Option Plan 16 October 2009
Accounting policy
(i) 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
Statement of comprehensive income 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.
(ii) 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 Statement of
comprehensive income 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.
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 expired 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 (2014:
nil) to Executive Directors and senior executives. The fair value
of options issued during the financial year is $0 (2014: $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 pay-out 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
statement of comprehensive income of $0 (2014: $0) which
represents this amortisation.
Movements in the number of share options outstanding and
their related weighted average exercise price are as follows:
2015
2014
AVERAGE EXERCISE PRICE
$ PER SHARE
OPTIONS
‘000
AVERAGE EXERCISE PRICE
$ PER SHARE
OPTIONS
‘000
Balance at beginning of year
Issued
Exercised
Forfeited
Balance at end of year
2.1333
-
2.1333
-
-
685
-
(685)
-
-
2.1333
-
2.1333
-
2.1333
956
-
(271)
-
685
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION
KATHMANDU ANNUAL REPORT 2015 65
Share options outstanding at the end of the year have the following expiry date, exercise dates and exercise prices.
FIRST VESTING MONTH
EXPIRY
MONTH
LAST VESTING
MONTH
EXERCISE
PRICE
2015
‘000
October 2010
October 2011
October 2012
December 2014
October 2013
December 2014
October 2013
December 2014
October 2013
$2.1333
$2.1333
$2.1333
-
-
-
-
2014
‘000
229
228
228
685
Executive and Senior Management Long Term Incentive Plan
On 20 November 2013, shareholders approved at the Annual General Meeting the continuation of an Employee Long Term Incentive
Plan (LTI) (previously established 24 November 2010) 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 (29 Nov 2010 only) are summarised below:
GRANT DATE*
12 Dec 2014
11 Dec 2013
11 Dec 2012
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
-
285,987
261,009
147,946
114,839
809,781
110,891
-
-
-
-
110,891
-
-
(43,502)
(25,891)
(96,246)
(165,639)
-
(186,834)
(152,875)
(94,581)
(18,593)
(452,883)
110,891
99,153
64,632
27,474
-
302,150
* From 2011 Performance Rights granted to Executive Directors only.
The performance rights granted on 11 December 2014 are Long Term Incentive components only.
Long Term Incentive performance rights vest in equal tranches. In each tranche the rights are subject to a combination of a relative
Total Shareholder Return (TSR) hurdle and/or an EPS growth hurdle. The relative weighting and number of tranches for each grant
date are shown in the table below:
GRANT DATE
12 Dec 2014
11 Dec 2013
11 Dec 2012
30 Nov 2011
29 Nov 2010
TRANCHES
EPS WEIGHTING
TSR WEIGHTING
1
3
3
3
3
0%
50%
50%
50%
50%
100%
50%
50%
50%
50%
66
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. The
percentage of TSR related rights vest according to the following
performance criteria:
Kathmandu Holdings Limited’s EPS relative to the year ending
31 July 2014. The applicable performance periods are:
TRANCHE
2015 PERFORMANCE
PERIOD
2014 PERFORMANCE
PERIOD
KATHMANDU HOLDINGS LIMITED
RELATIVE TSR RANKING
Below the 50th percentile
50th percentile
51st – 74th percentile
75th percentile or above
Tranche 1
% VESTING
Tranche 2
0%
50%
Tranche 3
N/A
N/A
N/A
FY15 EPS relative to
FY13 EPS
FY16 EPS relative to
FY13 EPS
FY17 EPS relative to
FY13 EPS
50% + 2% for each
percentile above the 50th
100%
The percentage of the EPS growth related rights scales
according to the compound average annual EPS growth
achieved as follows:
The TSR performance is calculated for the following
performance periods:
TRANCHE
Tranche 1
Tranche 2
Tranche 3
2015
2014
36 months to 1
December 2017
N/A
N/A
24 months to 1
December 2015
36 months to 1
December 2016
48 months to 1
December 2017
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 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:
Fair value of TSR rights
Current price at issue date
Risk free interest rate
Expected life (years)
Expected share volatility
2015
$221,782
$3.05
3.70%
3
38.5%
2014
$233,556
$3.10
3.65%
2-4
38%
The estimated fair value for each tranche of rights issued is
amortised over the vesting period from the grant date.
The proportion of rights subject to the EPS growth hurdle
is dependent on the compound average annual growth in
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 67
Key Management Personnel and Senior Management
Performance rights granted to Key Management Personnel and Senior Management, all Short Term Incentives under the
shareholder approved Employee Long Term Incentive Plan are summarised below:
GRANT DATE
12 Dec 2014
05 Dec 2013
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
-
-
-
426,029
436,182
862,211
-
-
-
(426,029)
(436,182)
(862,211)
-
-
-
Short Term Incentive performance rights vest:
• upon the Company achieving non-market 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 – Key Management Personnel
Vesting Date – Senior Management
2015
12 Dec 2014
31 Jul 2015
31 Jul 2016
31 Jul 2016
2014
05 Dec 2013
31 Jul 2014
31 Jul 2016
31 Jul 2015
The fair value of the rights were 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$2.72 per right
(2014: $3.16 for Key Management Personnel and $3.29 for Senior Management).
The non-market performance hurdles set for the year ending 31 July 2015 were not met and accordingly:
• no expense has been recorded in the statement of comprehensive income; and
• all of these rights have lapsed.
Expenses arising from equity settled share based payments transactions
Share Option Plan 2009
Executive Directors and Key Management Personnel
Senior Management
2015
NZ$’000
2014
NZ$’000
-
9
-
9
-
211
-
211
68
5.5 CONTINGENT LIABILITIES
Keeping it simple
A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision
where uncertainty may exist regarding the outcome of future events.
2015
NZ$’000
2014
NZ$’000
1,871
1,301
Audit fees
During the year the following fees were paid or payable for
services provided by the auditor of the parent entity, its related
practices and other network audit firms:
Liabilities outstanding
under letters of credit
5.6 CONTINGENT ASSETS
2015
NZ$’000
2014
NZ$’000
126
30
26
182
126
30
7
163
There are no contingent assets in 2015 (2014: nil).
Audit services - PricewaterhouseCoopers
5.7 EVENTS OCCURRING AFTER THE BALANCE DATE
Statutory audit
Half year review
There are no events after balance date which materially affect
the information within the financial statements.
Other assurance services*
Total remuneration for audit services
5.8 SUPPLEMENTARY INFORMATION
Directors fees
2015
NZ$’000
2014
NZ$’000
Directors' fees
744
725
Directors fees for the Parent company were paid to
the following:
• David Kirk (Chairman)
• Sandra McPhee
• John Harvey
• John Holland
• Christine Cross
* Other assurance services relate to the preparation of revenue certificates and a system
implementation review.
5.9 NEW ACCOUNTING STANDARDS
New standards first applied in the year
There are no standards or amendments adopted by the
Group since 1 August 2014 that have a significant impact on
the Group.
Standards, interpretations and amendments to published
standards that are not yet effective
NZ IFRS 15, 'Revenue from contracts with customers' deals
with revenue recognition and establishes principles for
reporting useful information to users of financial statements
about the nature, amount, timing and uncertainty of revenue
and cash flows arising from an entity’s contracts with
customers. Revenue is recognised when a customer obtains
control of a good or service and thus has the ability to direct
the use and obtain the benefits from the good or service.
The standard replaces NZ IAS 18 'Revenue' and NZ IAS 11
'Construction contracts' and related interpretations. The
standard is effective for annual periods beginning on or after
1 January 2017 and earlier application is permitted. The group
intends to adopt NZ IFRS 15 on 1 July 2017 and is currently
assessing its full impact. This standard is not expected to
significantly impact the Group.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 69
NZ IFRS 9, ‘Financial instruments’, addresses the classification,
measurement and recognition of financial assets and
financial liabilities. The complete version of NZ IFRS 9 was
issued in September 2014. It replaces the guidance in NZ
IAS 39 that relates to the classification and measurement of
financial instruments. NZ IFRS 9 retains but simplifies the
mixed measurement model and establishes three primary
measurement categories for financial assets: amortised cost,
fair value through other comprehensive income and fair value
through profit or loss. The basis of classification depends on
the entity's business model and the contractual cash flow
characteristics of the financial asset. Investments in equity
instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present
changes in fair value in other comprehensive income not
recycling. There is now a new expected credit losses model
that replaces the incurred loss impairment model used in
NZ IAS 39. For financial liabilities there were no changes to
classification and measurement except for the recognition of
changes in own credit risk in other comprehensive income,
for liabilities designated at fair value through profit or loss. NZ
IFRS 9 relaxes the requirements for hedge effectiveness by
replacing the bright line hedge effectiveness tests. It requires
an economic relationship between the hedged item and
hedging instrument and for the ‘hedged ratio’ to be the same
as the one management actually use for risk management
purposes. Contemporaneous documentation is still required
but is different to that currently prepared under NZ IAS 39.
The standard is effective for accounting periods beginning
on or after 1 January 2018. Early adoption is permitted. The
Group intends to adopt NZ IFRS 9 on 1 July 2018 and has yet to
assess its full impact.
70
Independent Auditors’ Report
to the shareholders of Kathmandu Holdings Limited
Report on the Financial Statements
We have audited the Group financial statements of Kathmandu Holdings Limited (“the Company”) on
pages 31 to 69, which comprise the balance sheet as at 31 July 2015, the statement of comprehensive
income, the statement of changes in equity and the statement 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 the Group. The Group comprises the Company and the entities it controlled
at 31 July 2015 or from time to time during the financial year.
Directors’ Responsibility for the Financial Statements
The Directors are responsible for the preparation and fair presentation of these financial statements in
accordance with New Zealand Equivalents to International Financial Reporting Standards 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). 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’s preparation and fair presentation of the financial statements 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’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 are independent of the Group. Other than in our capacity as auditors and providers of other related
assurance services we have no relationship with, or interests in, the Group.
Opinion
In our opinion, the financial statements on pages 31 to 69 present fairly, in all material respects, the
financial position of the Group as at 31 July 2015, and its financial performance and cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards.
Restriction on Use of our Report
This report is made solely to the Company’s shareholders, as a body, in accordance with the Companies
Act 1993. Our audit work has been undertaken so that we might state 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
29 September 2015
Christchurch
PricewaterhouseCoopers
5 Sir Gil Simpson Drive, Canterbury Technology Park, PO Box 13244, Christchurch 8053, New Zealand
T: +64 3 374 3000, F: +64 3 374 3001, pwc.co.nz
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 71
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 284 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 11 September 2015.
There are no restricted securities or securities subject to
voluntary escrow on issue.
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 if a shareholder holds 90% or more of the shares
of the Company.
(c) 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.
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
170,001
180,001
190,001
200,001
230,001
240,001
260,001
300,001
310,001
320,001
350,001
410,001
710,001
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
110,000
120,000
130,000
140,000
150,000
160,000
180,000
190,000
200,000
210,000
240,000
250,000
270,000
310,000
320,000
330,000
360,000
420,000
720,000
8
5
7
5
2
4
2
2
1
2
1
1
1
1
1
1
1
1
1
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS
NUMBER OF
HOLDERS
% NUMBER OF
ORDINARY
SHARES
%
0%
3%
3%
9%
1 to 999
1,000 to 4,999
5,000 to 9,999
10,000 to 99,999
100,000 and over
Total
1,235
2,117
814
698
63
25%
43%
17%
14%
1%
700,248
5,902,610
6,229,948
17,708,275
170,943,502
85%
4,927
100%
201,484,583
100%
The details set out above were as at 11 September 2015.
72
(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 11 September 2015, were as follows:
Briscoe Limited (30 June 2015)
The Goldman Sachs Group In (22 May 2015)
ORDINARY SHARES
%
40,095,432
19.9%
25,932,630
12.9%
Accident Compensation Corporation (2 July 2015)
15,185,721
National Nominees Limited as Custodian for UniSuper Limited (25 May 2015)
14,538,721
7.5%
7.2%
As at 11 September 2015, the Company had 201,484,583 ordinary shares on issue.
PRINCIPAL SHAREHOLDERS
The names and holdings of the twenty largest shareholders as at 11 September 2015 were:
NAME
ORDINARY SHARES
%
1
2
3
4
5
6
7
8
9
NEW ZEALAND CENTRAL SECURITIES DEPOSITORY LIMITED
BRISCOE GROUP LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
FORSYTH BARR CUSTODIANS LIMITED
10 NEW ZEALAND DEPOSITORY NOMINEE LIMITED
11
12
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
13 WARBONT NOMINEES PTY LTD
14 WARBONT NOMINEES PTY LTD
15
FNZ CUSTODIANS LIMITED
16 UBS NEW ZEALAND LIMITED
17
18
LEVERAGED EQUITIES FINANCE LIMITED
FORSYTH BARR CUSTODIANS LIMITED
19 ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
20 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
40,496,720
40,095,432
34,941,552
22,121,674
5,999,974
5,279,070
3,010,224
1,766,326
1,374,078
1,128,260
1,093,706
845,202
842,192
751,373
734,810
605,000
530,650
517,155
425,934
393,491
20.10%
19.90%
17.34%
10.98%
2.98%
2.62%
1.49%
0.88%
0.68%
0.56%
0.54%
0.42%
0.42%
0.37%
0.36%
0.30%
0.26%
0.26%
0.21%
0.20%
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 73
DIRECTORS’ SHAREHOLDINGS
Directors held interests in the following shares of the Company at 31 July 2015:
Mark Todd
beneficially owned
John Holland
beneficially owned
David Kirk
beneficially owned
Sandra McPhee
beneficially owned
John Harvey
beneficially owned
571,494
122,033
62,150
58,823
51,563
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 2014 and 31 July 2015, the details of those
dealings were entered in the Company’s interests register. The particulars of such disclosures are:
DIRECTOR
NATURE OF INTEREST
SHARES ACQUIRED / (SOLD)
CONSIDERATION
DATE
Mark Todd 1
John Holland
David Kirk
Beneficial
Beneficial
Beneficial
42,235
20,000
37,850
-
NZD $1.48
AUD $1.33
17/12/2014
4/02/2015
6/02/2015
1 Shares were issued as part of the Long Term Incentive Plan (refer section 5.4 of the financial statements).
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 2015.
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 2015, 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 2015, and those who ceased to hold office during the
year ended 31 July 2015, are as follows:
Milford Group Holdings Limited
Mark Todd, Reuben Casey, Xavier Simonet, Peter Halkett (resigned 25 November 2014)
Kathmandu Limited
Mark Todd, Reuben Casey, Xavier Simonet, Peter Halkett (resigned 25 November 2014)
Kathmandu Pty Limited
Mark Todd, Paul Stern, Reuben Casey, Xavier Simonet, Peter Halkett (resigned 25 November 2014)
Kathmandu (U.K.) Limited
Mark Todd, Reuben Casey, Xavier Simonet, Peter Halkett (resigned 25 November 2014)
74
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 2015 are as follows:
DAVID KIRK
TradeMe Group Limited
Food Share Limited
Standard Media Index Limited
Sydney Grammar School Board of Trustees
NZ Rugby Players Association
Bailador Investment Management Pty Limited
Bailador Technology Investments Limited
Forsyth Barr Group Limited
NZPH Limited
Sydney Medical School Foundation
Online Ventures Pty Limited (trading as SiteMinder)
Viocorp International Limited
David Kirk Pty Limited
Kirk Family Trust Pty Limited
Ocean Beach Wilderness Property Limited
JOHN HARVEY
New Zealand Opera Limited
DNZ Property Fund Limited
Port Otago Limited
Heartland Bank Limited
Ballance Agri-Nutrients Limited
Resource Coordination Partnership Limited
SANDRA MCPHEE
AGL Energy Limited
Tourism Australia
Fairfax Media Limited
JP Morgan Advisory Council
St Vincents and Mater Health Sydney Community Advisory Council
Australian Public Service Commission
JOHN HOLLAND
Chairman
Chairman
Chairman
Chairman
Chairman
Managing Partner
Director
Director
Director
Member
Director
Director
Director
Director
Director
Chairman
Director
Director
Director
Director
Advisor to the Board
Director
Director
Director
Member
Member
Advisor
Chapman Tripp
Southbase Construction Limited
Financial Markets Authority Capital Markets Disclosure Consideration Panel
Carter Group
Partner
Chairman
Member
Advisor
CHRISTINE CROSS
Sonae Group Plc
Woolworths Limited
Plantasjen ASA
Brambles Limited
Fenwick Limited
Warburg Pincus LLC
Apax Private Equity
MARK TODD
City Care Limited
Director
Director
Director
Director
Director
Retail Advisor
Retail Advisor
Director
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION KATHMANDU ANNUAL REPORT 2015 75
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
David Kirk
Xavier Simonet
Mark Todd
John Harvey
Christine Cross
John Holland
Sandra McPhee
EXECUTIVES’ DETAILS
Chairman, Non-Executive Director
Managing Director and Chief Executive Officer (Appointed 29 June 2015)
Finance Director and Chief Operating Officer (Resigned as Director 24 August 2015)
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Xavier Simonet
Mark Todd
Chief Executive Officer
Chief Operating Officer (Resigned as Executive 25 September 2015)
76
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
SHARE REGISTRY
In New Zealand:
Link Market Services (LINK)
Physical Address:
Postal Address:
Level 16, Brookfields House,
19 Victoria Street West, Auckland 1010
New Zealand
PO Box 91976,
Auckland, 1142
New Zealand
Telephone:
+64 9 375 5999
Investor enquiries:
+64 9 375 5998
Facsimile:
+64 9 375 5990
Internet address:
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:
+61 2 8280 7111
Investor enquiries:
+61 2 8280 7111
Facsimile:
+61 2 9287 0303
Internet address:
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.
CHAIRMAN’S REPORT | CEO REPORT | BOARD | MANAGEMENT | DIRECTORS' REPORT | CORPORATE GOVERNANCE | FINANCIALS | STATUTORY INFORMATION
STORE LOCATIONS
AUSTRALIA kathmandu.com.au
VIC
Ballarat
Bendigo
Blackburn
Camberwell
Chadstone Inner
Chadstone Outer
Doncaster
Emporium
Essendon DFO Outlet Store
Fitzroy
Fountain Gate
Frankston
Geelong
Hampton East
Highpoint
Knox
Melbourne (Bourke Street)
Moonee Ponds
Moorabbin DFO Outlet Store
Northland
Nunawading Outlet Store
Prahran (Chapel Street)
Richmond
Shepparton
Smith Street Outlet Store
South Wharf DFO Outlet Store
Southland
Spencer Street Outlet Store
The Glen
Traralgon
Uni Hill Outlet Store
Warrnambool
Watergardens
NSW
Albury
Birkenhead Point Outlet Store
Bondi Junction
Burwood
Byron Bay
Castle Towers
Charlestown
Chatswood
Coffs Harbour
Cronulla
Eastgardens
Erina Fair
Hornsby
Macarthur
Macquarie
Miranda
Newcastle
Orange
Parramatta
Penrith
Sydney City (Kent Street)
Sydney City (Pitt Street)
Redyard (Auburn)
Rouse Hill
Shellharbour
Tamworth
The Rocks
Tuggerah
Wagga Wagga
Warringah
Wetherill Park
Wollongong
SA
Adelaide Harbour Town Outlet Store
Adelaide (Rundle Street)
Glenelg
Marion
Tea Tree
West Lakes
ACT
Belconnen
Canberra Centre
Canberra Outlet Store
Woden
NEW ZEALAND kathmandu.co.nz
NORTH ISLAND
Albany
Auckland (Queen Street)
Auckland (Victoria Street)
Botany
Broadway
Coastlands
Gisborne
Hamilton
Hastings
Lyall Bay
Manukau
Masterton
Napier
New Plymouth
Onehunga Outlet Store
Otaki Outlet Store
Palmerston North
Petone
Pukekohe
Rotorua
St Lukes
Sylvia Park
Takapuna
Taupo
Tauranga CBD
Tauranga (Fraser Cove)
Te Rapa
Waitakere
Wanganui
Whakatane
Whangarei
UNITED KINGDOM kathmandu.co.uk
Bristol
London (Covent Garden)
London (High Street Kensington)
London (Spitalfields)
QLD
Brisbane City
Cairns
Carindale
Chermside
Fortitude Valley
Hervey Bay
Indooroopilly
Jindalee Outlet Store
Kawana
Logan
Mackay
Mt Gravatt
Pacific Fair (Broadbeach)
Robina
Rockhampton
Southport
Toowoomba
Townsville
TAS
Devonport
Hobart (Salamanca Square)
Hobart CBD (Elizabeth Street)
Launceston
WA
Belmont
Bunbury
Carousel
Cockburn
Cottesloe
Fremantle
Innaloo
Joondalup
Morley
Perth CBD
Perth Harbourtown Outlet Store
Whitford
NT
Casuarina
Wellington
Westgate
Willis Street Outlet Store
SOUTH ISLAND
Ashburton
Blenheim
Christchurch (Cashel Street)
Dunedin
Invercargill
Nelson
Papanui
Queenstown
Riccarton Outlet Store
The Palms
Timaru
Tower Junction
This report is printed on FSC Certified paper pulp sourced
from sustainably grown and managed forests, using Elemental
Chlorine Free (ECF) bleaching. Inks used carry Eco Mark
certification from the Japan Environment Association (JEA).
Design & Print Production - Mosha
KATHMANDU HOLDINGS LIMITED
ANNUAL REPORT 2015
kathmanduholdings.com