KATHMANDU HOLDINGS LIMITED
Annual
Report 2019
KATHMANDU ANNUAL REPORT 2019
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At Kathmandu, our purpose is to inspire and equip
the adventurer in all of us.
For 30 years, we have designed our gear to take
on the rugged landscapes of our homeland and to
outfit the adventurous spirit of our people.
With Kiwi ingenuity, and an open mind, we
continuously adapt our gear to endure different
weather conditions, diverse terrains, and the ever-
changing needs of travellers.
Sustainability is in our DNA. We act with people and
the planet in mind – from the creative minds of our
designers, to the careful hands of our suppliers, to
the backs of our customers all around the world.
We’re adventurers, explorers and travellers – every
one of us. From our team in-store to our brand
ambassadors, athletes and Summit Club members,
we share a curiosity for the world we love to explore.
We believe that adventure begins when you
pack your bag.
.
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KATHMANDU ANNUAL REPORT 2019
Highlights 2019
Sales $
Same store sales growth
545.6m 0.6%
9.7%
AU 2.7%
NZ (3.9%)
Gross margin
Operating costs % of sales
60.9%
42.9%
AU 50bps
NZ 90bps NA 40.8%
2.5% lower than 2018
EBIT $
Net profit after tax $
84.3m
12.7%
Full year dividend
16cps
1 cps
Online % of direct to
consumer sales
10.1%
9.2% online sales growth at
constant exchange rates
57.6m
13.7%
Operating cash flow $
61.7m
$13.9m
Summit Club members
2.2m
0.2m active members
KATHMANDU ANNUAL REPORT 2019
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Contents
Chairman and CEO’s Letter
Result and Financial Performance
Sustainability Highlights
The Board
Management Team
Corporate Governance
Remuneration Report
Financial Statements
Statutory Information
Directory
Notice of Annual Meeting 2019
11.00am Friday
22 November 2019
Link Market Services,
Level 11, Deloitte Centre,
80 Queen Street, Auckland
KATHMANDU ANNUAL REPORT 2019 CHAIRMAN AND CEO'S LETTER
KATHMANDU ANNUAL REPORT 2019
5
Chairman and
CEO’s Letter
We have delivered another year of
record sales and profit. The key growth
drivers were a positive contribution
from the Australian business, and rapid
sales and profit growth from Oboz.
Australian sales growth was achieved
on top of strong sales in our key
winter period last year. At the same
time as delivering sales growth,
we maintained our focus on cost
control, and benefited from wholesale
operating cost efficiencies that saw us
grow earnings faster than revenue.
Oboz has provided a significant
first full year contribution to group
sales and profits. Oboz is enabling
us to diversify our channels,
brands, products and markets.
Our team are proud to have delivered
four years of sales and profit growth.
Over the last four years, we have
achieved strong operating cash flows
and generated significant value for
our shareholders. We have delivered
these strong financial results while
continuing our transformation from a
leading Australasian retailer to a brand-
led global multi-channel business.
Growth Strategies
Kathmandu is well positioned
to deliver on the next level of
growth opportunities. Our growth
strategy can be summarised into
four strategic imperatives, each
with a set of key initiatives.
Firstly, we will focus on growing the
core markets of Australia and New
Zealand. We see opportunities to
supercharge the Summit Club loyalty
programme, and continue the dramatic
optimisation of our store network.
We are also working to diversify
by growing the contribution of the
Summer season, and elevating the
performance of our key metro markets.
Secondly, we recognise that distinctive
product will set us apart from our
competitors. We will focus on extending
our market leadership in key product
categories, while accelerating growth
in other high potential categories.
At the same time, we will work to
scale the the growth opportunity
in key women's categories.
Thirdly, we will continue to enhance
the customer experience through
digital. We aim to make it easy for
customers by enhancing product
information, payment options, and
fulfilment solutions. Technology
provides opportunities for us to
leverage digital touchpoints and
social channels to enhance brand
and product perception. We will also
focus on maximising mobile as a key
method of customer engagement.
David Kirk
Chairman
Xavier Simonet
Managing Director and
Chief Executive Officer
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KATHMANDU ANNUAL REPORT 2019
Finally, we aim to become a global
business. In particular, we see an
opportunity to build the Kathmandu
brand to ignite demand in North
America. We will work to build
strategic wholesale partnerships,
leveraging Oboz relationships to
establish the Kathmandu brand.
Alongside wholesale growth, we have
an opportunity to accelerate the
North America direct to consumer
business. In addition to North America,
we will continue to explore other
international market opportunities.
All of these strategic imperatives are
underpinned by a focus on inspiring
and enabling our team, and a drive to
demonstrate sustainability leadership.
Sustainability Leadership
Sustainability is a core value for
both Kathmandu and Oboz, and
is an integral part of how we do
business. We have made significant
progress toward our goal of industry
leadership thanks to the care and
dedication of our passionate team.
We are very proud to become a
certified B Corporation, meeting the
highest verified standards of social
and environmental performance.
We have also released our ‘Best for
the World’ 2025 sustainability goals.
Full details can be found in our 2019
Sustainability Report, produced in
conjunction with our Annual Report
and prepared in accordance with the
Global Reporting Initiative (GRI).
People
Summary
Kathmandu and Oboz are two well
established and distinctive brands,
with strong financial fundamentals,
delivering great quality products
to our loyal customers.
In North America we are leveraging
Oboz, and starting to build
Kathmandu brand equity through
authentic outdoor wholesale
channels. Kathmandu and Oboz are
two great brands with significant
international growth potential.
David Kirk
Chairman
Xavier Simonet
Managing Director and
Chief Executive Officer
Director Sandra McPhee has retired
from the board in September.
Sandra has brought significant
non-executive director experience
and knowledge of a wide range
of consumer facing sectors to the
board. Her insight and judgement
has been extremely beneficial for
the company. We thank Sandra very
much for her service and wish her all
the best for her future endeavours.
Joining the board is Andrea Martens,
appointed after an extensive search
internationally and in Australia and
New Zealand. We are very pleased that
Andrea has agreed to join the board.
She brings first rate experience and
knowledge of consumer brand strategies.
Her appointment adds important skills
and experience to the board as we
continue to implement our Australasian
and global growth strategies.
The board would like to thank
management and the wider team
for their passion and determination
to deliver another successful year.
Dividend
The Directors have declared a final
dividend of 12 cents per share, which
with the 4 cents interim dividend
makes a record payout of 16 cents
per share, an increase of 1 cent per
share compared to last year. The
final dividend will be fully imputed for
New Zealand shareholders and fully
franked for Australian shareholders.
CHAIRMAN AND CEO'S LETTER
KATHMANDU ANNUAL REPORT 2019
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Result and
Financial Performance
Key performance indicators
2019
2018
% Change
Sales
Same store sales growth
$545.6m
0.6%
$497.4m
4.4%
Gross profit
Gross margin
$332.5m
60.9%
$315.5m
63.4%
Operating expenses
Operating expenses % of sales
($234.0m)
42.9%
($225.7m)
45.4%
EBITDA
EBITDA margin
EBIT
EBIT margin
NPAT
$99.6m
18.3%
$84.3m
15.5%
$89.8m
18.1%
$74.8m
15.0%
$57.6m
$50.7m
Earnings per share
25.5cps
24.0cps
Dividend
Net debt
Share price (NZX)
Summit Club members
Store count
16.0cps
15.0cps
$19.3m
$31.4m
$2.13
2.2m
168
$3.08
2.0m
167
9.7%
5.4%
10.9%
12.7%
13.7%
6.3%
6.7%
12.4%
+1
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KATHMANDU ANNUAL REPORT 2019
"Group sales of $545.6m increased by
9.7% overall, with the first full year
inclusion of Oboz in North America."
We were pleased to achieve record high sales and profit results again in FY2019. The key contributors to the
record result were Australian sales growth, and a full year impact of Oboz ownership. Oboz grew strongly
this year, with a sales increase of 30.0%, and an EBIT increase of 38.6% on a $USD pro forma basis. Oboz
growth is also enabling us to diversify our channels, brands, products and geography.
leverage showed a benefit of channel
diversification into wholesale.
Operating expenses also include
$1.3m set-up costs for the Kathmandu
North America wholesale business.
Capital expenditure of $15.7m was
$1.0m below last year. $10.3m was
invested to further optimise the store
network, with 4 new stores opened, and
12 major refurbishements completed. A
further $5.4m was invested in growth
enabler projects such as the online
platform upgrade and a new market
leading warehouse management
system to be operational in FY2020.
Depreciation and amortisation
remained relatively flat, increasing by
2.1% to $15.3m.
Net finance costs increased by
$1.9m, reflecting a full year of Oboz
ownership. The Oboz acquisition in
April 2018 added approximately $60m
to net debt. Strong operating cash
flows in the subsequent 16 months
have reduced the net debt balance
to $19.3m by the end of July 2019.
Taxation The effective tax rate
returned to c. 29% from c.31% in
the prior year. The high effective tax
rate last year was caused by non-
deductible expenditure, in particular
acquisition costs in relation to Oboz.
Group sales of $545.6m increased
by 9.7% overall, with the first full
year inclusion of Oboz in North
America. Excluding North America,
sales increased by 2.1% at constant
exchange rates. Same store sales
increased by 0.6%, measured at
constant exchange rates. By country
the change in same store sales was:
• Australia +2.7%
• New Zealand -3.9%
Gross profit increased by $17.0m
(5.4%). Gross margin (60.9%) was
250bps lower than last year. This
reflects the increased North American
wholesale contribution. Kathmandu
only gross margin was 63.6%. This
sits above our long-term target
range 61% to 63%. By country the
change in gross margins were:
• Australia -50 bps
• New Zealand -90 bps
Our foreign currency forward hedging
policy is on a 12 month basis with
prescribed levels of maximum
hedging beyond 6 months.
Operating expenses excluding
depreciation, amortisation and
financing costs increased by $8.3m
(3.7%), however as a percentage
of sales decreased from 45.4% to
42.9%. The improved operating
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KATHMANDU ANNUAL REPORT 2019CHAIRMAN AND CEO'S LETTER 10
Our top 5
sustainability
highlights.
At Kathmandu, sustainability
isn’t a department, it’s a way
of doing things. Here are some
of our highlights from last year.
KATHMANDU ANNUAL REPORT 2019 11
BECAME A B CORP, MEETING
THE HIGHEST VERIFIED
STANDARDS OF SOCIAL AND
ENVIRONMENTAL
PERFORMANCE
A
SCORED AN 'A' IN THE
ETHICAL FASHION REPORT
TWO YEARS RUNNING
RANKED SECOND IN THE
TEXTILE EXCHANGE REPORT
THREE YEARS RUNNING
2
LAUNCHED OUR NEW 'BEST
FOR THE WORLD' FIVE YEAR
SUSTAINABILITY PLAN
RECYCLED 9.7 MILLION
PLASTIC BOTTLES INTO
OUR GEAR
KATHMANDU ANNUAL REPORT 2019SUSTAINABILITY HIGHLIGHTS 12
KATHMANDU ANNUAL REPORT 2019
The Board
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1 David Kirk Chairman
Mr Kirk is 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.
2 Xavier Simonet Managing Director and
Chief Executive Officer
Mr Simonet 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.
3 Philip Bowman Non-executive Director
Mr Bowman has extensive experience in retail including
roles as CFO of Bass, CEO of Bass Taverns, executive
Chairman of Liberty PLC, CEO of Allied Domecq, Chairman
of Coral Eurobet, CEO of Scottish Power and CEO of Smiths
Group. He has held office as an independent director of
BSkyB, Scottish & Newcastle and Berry Bros. & Rudd. He
currently sits on the boards of several entities, including,
Ferrovial SA, and is Chairman of Sky Network Television.
4 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.
5 Brent Scrimshaw Non-executive Director
Mr Scrimshaw has held a number of senior executive roles
with Nike Inc across marketing, commerce and general
management. He was the Regional GM for Nike North
America, the Chief Marketing Officer for Nike EMEA, and also
served as Vice President and Chief Executive of Nike Western
Europe. He is a Non-Executive Director of Rhinomed Limited
(ASX:RNO) and Catapult International Limited (ASX:CAT),
and was the CEO & Co-Founder of Unscriptd which was
acquired in 2018 by Google Ventures backed 'The Players
Tribune’ in New York. He was previously a Director at Fox
Racing Action Sports in Irvine, California USA.
6 Sandra McPhee Non-executive Director
(ceased September 2019)
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.
7 Andrea Martens Non-executive Director
(appointed 1 August 2019)
Ms Martens has substantial executive leadership
experience having spent over 20 years working with some
of the world’s best known-brands and organisations. She
is currently the CEO of ADMA and has previously held
roles as the Global Chief Marketing Officer for Jurlique
International, and Managing Director and VP Marketing,
Home and Personal Care for Unilever Australia and New
Zealand. She previously held positions on the board of
Unilever Australia and New Zealand, Deputy Chair of the
Australian Association of National Advertisers and as a
Board Member of the Advertising Standards Bureau.
MANAGEMENT TEAM
KATHMANDU ANNUAL REPORT 2019
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Management Team
Xavier Simonet
Chief Executive Officer
Reuben Casey
Chief Operating Officer
Chris Kinraid Chief Financial Officer,
Company Secretary
Paul Stern General Manager,
Marketing & Online
Ben Ryan
General Manager, Product
Rebecca Edwards
General Manager, Human Resources
Stephen Domancie General
Manager, Retail Stores & Operations
Caleb Nicolson
General Manager, Supply Chain
Jolann Van Dyk
Chief Information Officer
Mark Handy
General Manager, Merchandising
Amy Beck President Oboz /
Kathmandu North America
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KATHMANDU ANNUAL REPORT 2019
Corporate
Governance
The board and management of
Kathmandu Holdings Limited
and its related companies (“the
Kathmandu Group” or “Kathmandu”)
are committed to implementing
best practice governance principles
and maintaining the highest ethical
standards. The board is responsible for
the overall corporate governance of
Kathmandu, including adopting the
appropriate policies and procedures and
guiding Directors, management and
employees of Kathmandu to fulfil their
functions effectively and responsibly.
Kathmandu regularly examines its
governance arrangements against
national and international standards.
As an entity listed on both the New
Zealand Stock Exchange (NZX)
and the Australian Stock Exchange
(ASX), Kathmandu has developed
its corporate governance policies
and practices in line with the
principles and recommendations
set out in both the NZX Corporate
Governance Code 2019 (NZX Code)
and the ASX Corporate Governance
Principles and Recommendations
(Third Edition) (ASX Code).
Kathmandu converted its admission
category on ASX from an ASX Listing
to an ASX Foreign Exempt Listing on
19 September 2019. This means that
Kathmandu will primarily be regulated
by its home exchange, NZX, and is
exempt from complying with most
of the ASX's Listing Rules, and the
ASX Code. For the purposes of this
Corporate Governance Statement,
which is in respect of the period
ending 31 July 2019, Kathmandu has
reported against the ASX Code.
governance arrangements. Where
Kathmandu's governance arrangements
differ from a recommendation in the
NZX Code or the ASX Code, the relevant
recommendation is separately identified
and accompanied by an explanation for
the reasons why the recommendation
has not been followed and a summary
of the alternative governance
arrangements in place at Kathmandu.
For the duration of the reporting
period, Kathmandu has followed the
recommendations set out in each
Code where appropriate, having regard
to the size of Kathmandu and the
board, the resources available and the
activities of Kathmandu. After due
consideration, the board considers
that the only significant departures of
Kathmandu’s corporate governance
practices from the recommendations
set out in each Code during the
reporting period are in relation to:
(a) the recommendation to
maintain a nomination
committee of the board1; and
(b) the recommendation to disclose
its internal audit function.2
Information about Kathmandu’s
approach in these areas is
separately identified in this
corporate governance statement.
Kathmandu’s relevant charters
and policies are available in the
Governances section of Kathmandu’s
investor website https://www.
kathmanduholdings.com/
investor-relations/governance/
The information in this statement
is current as at 31 July 2019 (except
where otherwise specified).
This corporate governance statement
details Kathmandu's key corporate
This corporate governance statement
has been approved by the board
of Kathmandu in accordance
with ASX Listing Rule 4.10.3.
Kathmandu’s Board
Responsibilities
The board is responsible for the overall
supervision and governance of the
Kathmandu Group. A framework for
the effective operation of the board
is set out in the board charter, which
includes the following responsibilities:
•
the long-term growth and
profitability of Kathmandu;
• developing the strategic and
financial objectives for Kathmandu;
• monitoring management’s
implementation of key policies,
strategies and financial objectives;
• directing, monitoring and assessing
Kathmandu’s performance
against strategic business plans;
• approving and monitoring
the progress of major capital
expenditure, capital management
and acquisitions and divestitures;
•
•
identifying the principal risks
of Kathmandu’s business;
reviewing and ratifying
Kathmandu’s systems of internal
compliance and control, risk
management, legal compliance,
corporate governance practices,
financial and other reporting;
• appointing and removing the
Chief Executive Officer (“CEO”);
•
ratifying the appointment,
and where appropriate, the
removal of the senior executives
of the Kathmandu Group;
1. ASX Code – Recommendation 2.1; NZX Code – Recommendation 3.4
2. ASX Code – Recommendation 7.3; NZX Code – Recommendation 7.3
CORPORATE GOVERNANCE
KATHMANDU ANNUAL REPORT 2019
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• approving the remuneration
framework for the
Kathmandu Group; and
• monitoring and reviewing
board succession planning.
The board delegates the responsibility
for day to day management and
operation of the Kathmandu Group to
the CEO, who in turn delegates parts
of these functions to senior executives
and management personnel. Matters
reserved for the board and the scope
and limitations of delegations to the
CEO and management are set out in
a delegated authority policy approved
by the board on an annual basis.
Board Composition
At 31 July 2019, the board was
comprised of six Directors, namely
David Kirk, John Harvey, Sandra
McPhee, Xavier Simonet, Philip
Bowman and Brent Scrimshaw. The
Chairperson of the board is David
Kirk. Andrea Martens was appointed
effective 1 August 2019. Xavier Simonet
(managing Director and CEO) is the
only executive Director on the board.
All other Directors are non-executive.
A brief biography of each board
member is set out on page 12
of this Annual Report and in the
“Board of Directors” section of the
Kathmandu investor website.
Nomination and Selection
New Directors are selected through
a nomination and appointment
procedure administered by the board,
as outlined in the board charter.
As will be discussed in more detail
below, the board has not maintained
a separate nomination committee
as recommended by the principles.
The board has systems in place which
require that appropriate checks are
conducted before appointing any new
Director or senior executive, or putting
a candidate forward to Kathmandu
shareholders for election as a Director.
Kathmandu enters into written
agreements with each newly appointed
Director or senior executive establishing
the terms of their appointment.
Board and Executive
Performance
The board undertakes an annual
performance evaluation of its
performance in comparison with the
requirements and expectations of
the board charter. The performance
of the board’s committees and each
individual Director is also reviewed
on an annual basis, alongside the
goals and objectives for the board for
the upcoming year and effects any
changes needed to the board charter.
The board makes appropriate training
available to all Directors to enable
them to remain current on how best
to discharge their responsibilities
and to keep up to date on changes
in areas relevant to their roles.
The board has undertaken a review of
its performance during the reporting
period by the anonymous completion
by each Director of evaluation
questionnaires relating to board
and committee composition and
performance, and individual interviews
of Directors with the Chairperson.
Kathmandu has a robust process
for annual evaluation of its senior
executives that compares the
performance of each individual
executive against the goals and
objectives set for the year. The board
approves the criteria for assessing
annual performance of the CEO and
senior executives. A performance
evaluation of the CEO and each senior
executive member took place during
the reporting period in accordance
with this assessment process.
Skills Matrix
The board benefits from a combination
of the different skills, experiences and
expertise that Kathmandu’s Directors
bring to their roles and the insights that
result from this diversity. The board is
satisfied that the current composition
of the board reflects an appropriate
range of the skills, experience,
knowledge and diversity needed
to discharge the board’s functions
and responsibilities and to achieve
the strategic aims of Kathmandu.
The board continues to monitor and
review board composition. The board
has developed a skills matrix which
it uses to assist in developing plans
for long-term succession to identify
current and future skills gaps.
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KATHMANDU ANNUAL REPORT 2019
The following chart summarises the skills, attributes and experience held by the Directors of
Kathmandu during the reporting period. Percentages are determined as at 31 July 2019.
Executive Leadership
International Business
Capital Projects, Mergers and Acquisitions
Retail and Consumer Experience
Remuneration
Governance
Strategy
Financial Acumen
Marketing and Product Development
Technology and Data
0%
20%
40%
60%
80%
100%
Retail and Consumer Experience:
Experienced in retail and consumer
sectors, understanding multi-channel
retailing and brand development.
Marketing and Product Development:
Expertise and senior executive
experience in marketing and new
media marketing metrics and tools.
Remuneration: Experience in
remuneration design to drive
business success.
Technology and Data: Expertise
and experience in the adoption of
new technology and use of data
analytics in a consumer environment.
Executive Leadership: Experienced
and successful leadership at a senior
executive level of large organisations.
Governance: Knowledge and
experience of high standards of
corporate governance, including ASX/
NZX Listing Rules and practices.
International Business: Experienced
in multi-national, complex
environments, including multi-
channel business development.
Strategy: Expertise in the development
and implementation of strategic
plans and risk management to
deliver investor returns over time.
Capital Projects, Mergers and
Acquisitions: Experience in
evaluating and implementing
projects involving large-scale
financial commitments, investment
horizons and major transactions.
Financial Acumen: Expertise in
understanding financial accounting
and reporting, corporate finance and
internal financial controls, including
an ability to probe the adequacies
of financial and risk controls.
CORPORATE GOVERNANCE
KATHMANDU ANNUAL REPORT 2019
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Independence of Directors
The tenure of appointment of the board as at 31 July 2019 is set out below:
The board assesses the independence
of its Directors in accordance
with the requirements set out
in the board charter and the
NZX and ASX Listing Rules.
Xavier Simonet, as managing
Director, is employed by Kathmandu
in an executive capacity and is not
considered to be an independent
Director. All other Directors are
considered independent Directors,
namely David Kirk, John Harvey, Sandra
McPhee, Philip Bowman and Brent
Scrimshaw (and Andrea Martens).
Tenure
Directors are appointed and retire
by rotation in accordance with
Kathmandu’s constitution and the
NZX Listing Rule requirements.
Director tenure is taken into account
by the board when considering the
independence of each Director.
The average tenure for non-
executive Directors is 6 years
with the following tenure mix:
40%
40%
%
20%
0 - 3 Years
4 - 6 Years
7 - 9 Years
Name
Originally appointed Last reappointed/elected
David Kirk (Chairperson)
21 November 2013
23 November 2018
Xavier Simonet
John Harvey
Sandra McPhee
Brent Scrimshaw
Philip Bowman
29 June 2015
16 October 2009
24 November 2017
16 October 2009
23 November 2018
2 October 2017
24 November 2017
2 October 2017
24 November 2017
In accordance with the updated
NZX Listing Rules, Xavier Simonet,
as Managing Director, is no longer
exempt from the requirement for
Directors to retire by rotation. Xavier
Simonet will retire and stand for
reappointment at the next Annual
Meeting of Kathmandu, along with
Andrea Martens, who was appointed
by the board effective 1 August
2019. Ms. Martens will retire at the
next Annual Meeting and stand
for election in accordance with the
requirements of the Company’s
constitution and the NZX Listing Rules.
Director Shareholdings
Kathmandu considers that Directors
should generally be encouraged to
hold securities in Kathmandu to
align the interests of Directors with
those of Kathmandu security holders.
Director ownership interests are set
out in the “Statutory Information”
section of this Annual Report.
Company Secretary
The Company Secretary is appointed
by the board in accordance with
the board charter. The Company
Secretary is accountable directly to
the board, through the Chairperson,
on all matters to do with the proper
functioning and affairs of the board. At
the date of this Annual Report, Chris
Kinraid is the Company Secretary.
Board Committees
The board has established and
maintains two committees of the
board; the Audit and Risk Committee
and the Remuneration Committee, to
assist in the discharge of the board’s
responsibilities. The board may establish
other committees as and when required
based on the needs of Kathmandu.
Each Committee is governed by its own
Charter, which has been adopted by
the board, and is reviewed periodically.
The Committee charters are available
in the “Governance” section of
Kathmandu’s investor website.
Membership of each Committee is
based on the needs of Kathmandu,
relevant legislative and other
requirements and the skills and
experience of individual Directors.
Meetings of the Committees are
scheduled to coincide with the board
meeting timetable. Each Committee
makes recommendations to the full
board for consideration and decision-
making as and when required.
As noted above, Kathmandu does not
maintain a nomination committee
and therefore does not comply with
Recommendation 3.4 of the NZX
Code / Recommendation 2.1 of the
ASX Code. Due to the size of the
Kathmandu board, the board as
a whole retains the responsibility
for recommending new Director
18
KATHMANDU ANNUAL REPORT 2019
appointments. The board considers that it is able to deal efficiently and effectively with the processes of appointment
and reappointment of Directors to the board and considerations of board composition and succession planning. The
board draws on the experience and advice of external recruitment specialists for assistance when required.
The board will continue to review the needs of Kathmandu in relation to the Director nomination process and whether a change
of approach in this area is needed.
A summary of the role, responsibilities and membership of these two Committees (as at 31 July 2019) is set out below.
Audit and Risk Committee
Remuneration Committee
Roles and
responsibilities
Overseeing the process of financial reporting,
internal control, continuous disclosure,
financial and non-financial risk management
and compliance and external audit;
Overseeing the development and application
of the Group Human Resources strategy, the
remuneration framework and associated policies;
Monitoring Kathmandu’s compliance with
laws and regulations and Kathmandu’s
own codes of conduct and ethics;
Assisting the board in relation to matters
concerning remuneration of senior executives,
non-executive Directors and Directors;
Membership
Encouraging effective relationships
with, and communication between,
the board, management and
Kathmandu’s external auditor; and
Evaluating the adequacy of processes
and controls established to identify and
manage areas of potential risk and to
seek to safeguard Kathmandu’s assets.
At least three members, a majority of
whom must be independent Directors
and all of whom must be non-executive
Directors. An independent chairperson
and at least one member with an
accounting or financial background
Current members:
John Harvey (Chair)
David Kirk
Sandra McPhee
Philip Bowman
Brent Scrimshaw
Providing effective remuneration
policies and programs to motivate high
performance from all employees; and
Implementing appropriate and effective
policies for managing the performance and
development of employees at all levels.
At least three members, a majority of
whom must be independent Directors
and all of whom must be non-executive
Directors, and the chairperson to be an
independent, non-executive Director.
Current members:
Sandra McPhee (Chair)
David Kirk
John Harvey
Philip Bowman
Brent Scrimshaw
CORPORATE GOVERNANCE
KATHMANDU ANNUAL REPORT 2019
19
Attendance
The number of meetings of the board of Directors and the board Committees held
during the year ended 31 July 2019 and the number of meetings attended by each
Director were:
Director
Meetings
Audit and Risk
Committee
Meetings
Remuneration
Committee
Meetings
A
8
8
7
8
8
8
B
8
8
8
8
8
8
A
3
XX
3
3
3
3
B
3
XX
3
3
3
3
A
5
XX
4
5
5
5
B
5
XX
5
5
5
5
Director
David Kirk
Xavier Simonet
John Harvey
Sandra McPhee
Brent Scrimshaw
Philip Bowman
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
Takeover offer protocols
The board has appropriate protocols
in place that set out the procedure
to be followed if there is a takeover
offer for Kathmandu. A committee
of independent Directors would be
formed who would have responsibility
for managing the takeover process in
accordance with the board protocols
and the New Zealand Takeovers Code.
Policies, practices
and processes
The main policies and practices
adopted by Kathmandu are
summarised below. A copy of
each policy is available at www.
kathmanduholdings.com/investor-
relations/governance/
A culture of acting lawfully,
ethically and responsibly
One of Kathmandu’s core values is
Integrity; to conduct the Kathmandu
business in an ethical and honest
manner, and to always strive to do the
right thing. Kathmandu is committed
to promoting a culture of corporate
compliance and ethical behaviour and
therefore expects its board, senior
executives and all employees to act
in accordance with the Kathmandu
values, policies and legal obligations.
All Directors and employees
joining the Kathmandu Group are
provided with information on the
Kathmandu values, and the following
policies, updates and refreshers
are provided on a regular basis.
Code of Conduct
The board recognises the need
to observe the highest standards
of ethical corporate practice and
business conduct. Accordingly, the
board has a formal code of conduct,
to be followed by all Directors, senior
executives and employees. Any
material breaches of the Code of
Conduct are reported to the board.
The key aspects of the Code
of Conduct are to:
• act with honesty, integrity
and fairness and in the best
interest of Kathmandu;
• declare conflicts of interest
and proactively advise of
any conflicts of interest;
• act in accordance with all
applicable laws, regulations,
policies and procedures;
•
follows procedures around
the receiving of gifts;
• adhere to any procedures
about whistle blowing; and
• use Kathmandu resources
and property properly.
Kathmandu maintains a formal
whistleblowers policy, recognising
that the protection of whistleblowers
is integral to fostering transparency,
promoting integrity and detecting
misconduct. The best way to fulfil
this commitment is to create an
environment in which employees who
have genuine concerns about improper
conduct, unacceptable behaviour,
or wrong doing, and feel safe to
report it without fear of reprisal.
Securities Trading Policy
Kathmandu has a policy for the dealing
in Kathmandu securities by Directors
and employees, which provides
transparency about expectations and
requirements. The policy is not designed
to prohibit Directors and employees
from investing in Kathmandu securities,
but recognises that there are times
when Directors or employees cannot,
or should not, deal in those securities.
Subject to the overriding restriction
that persons may not deal in
Kathmandu securities while they are
in possession of material information,
Directors and employees will only be
20
KATHMANDU ANNUAL REPORT 2019
permitted to deal in securities during
certain ‘window periods’; being the
periods immediately following the
release of Kathmandu’s full and half
year financial results or the release of a
disclosure document offering securities
in Kathmandu Holdings Limited.
Directors, senior executives and key
management personnel must receive
clearance from the Chairperson of the
board before any proposed dealing in
Kathmandu securities in each instance.
Where a Director or senior executive is
subject to exceptional circumstances
(such as severe financial hardship),
written approval may be granted by the
independent Directors for the disposal
of Kathmandu securities, provided
the individual concerned is not in
possession of any material information.
The policy prohibits Directors, senior
executives, key management personnel
and all other employees from entering
into hedging or other arrangements
that have the effect of limiting the
economic risk in connection with
unvested securities issued pursuant to
any employee option or share plan.
Reporting and Disclosure
Kathmandu is committed to
promoting investor confidence
by providing all stakeholders with
timely, accurate and balanced
disclosure of information regarding its
financial and operational matters.
Continuous Disclosure Policy
Kathmandu has a policy that
establishes procedures that are aimed
at ensuring that Directors, executives
and all employees are aware of and
fulfil their obligations in relation to
the timely disclosure of material
information. The policy explains the
respective roles and responsibilities,
procedures and processes in place
to ensure Kathmandu observes its
continuous disclosure obligations
under the Listing Rules. The policy
is available and accessible to all
Kathmandu employees and training
on its contents is provided regularly.
CEO and CFO Declaration
Before the board approves financial
statements for the Kathmandu group
for a financial period, it receives
from the CEO and CFO a declaration
that, in their opinion, the financial
records of the Group have been
properly maintained and that the
financial statements comply with the
appropriate accounting standards and
present fairly the financial position
and performance of Kathmandu, and
that this opinion has been formed on
the basis of a sound system of risk
management and internal control
which is operating effectively.
Economic, Environmental
and Social Sustainability
Kathmandu recognises the importance
of sharing information about its journey
to becoming a more sustainable
business. Kathmandu is committed
to protecting workers’ rights,
minimising waste and lowering the
environmental impacts of its business
operations through understanding its
supply chain. Kathmandu prepares
a separate sustainability report in
accordance with the Global Reporting
Initiative (GRI) Standards framework.
It is available online at https://
www.kathmanduholdings.com/
about-us/corporate-responsibility/
Recognising and Managing
our Risks
The identification and proper
management of Kathmandu’s material
risks is an important priority of the
board. Kathmandu has a central risk
management framework in place to
identify, oversee, manage and control
risks, and the board regularly reviews
this framework and how the material
risks are impacting its business. The
board recognises that some element
of risk is inherently necessary in
order to achieve the strategic aims
for the Kathmandu business and
deliver value to shareholders.
Risk Management Policy
The purpose of the Kathmandu
risk management policy is to
highlight the risks relevant to
Kathmandu’s operations, and
Kathmandu’s commitment to
designing and implementing
systems and methods appropriate
to minimise and control its risks.
The Audit and Risk Committee
assists the board in discharging its
responsibility for monitoring risk
management and that Committee is
responsible for establishing procedures
which seek to provide assurance that
major business risks are identified,
consistently assessed and appropriately
addressed. This Committee oversees
the implementation of the risk
management framework, monitors
its ongoing effectiveness and
regularly reports to the board. The
Committee undertook a formal review
of the risk management framework
during the reporting period.
Auditor Independence
The Audit and Risk Committee
is responsible for making
recommendations to the board about
the appointment or replacement of,
and for monitoring the effectiveness
and independence of, the Group’s
external auditors. The Committee
Charter requires that the external
auditor or lead audit partner is
changed at least every five years.
The Committee reviews and assesses
the independence of the external
auditor on an annual basis.
CORPORATE GOVERNANCE
KATHMANDU ANNUAL REPORT 2019
21
Kathmandu does not currently have an
internal audit function and therefore
does not comply with Recommendation
7.3 of the NZX Code / Recommendation
7.3 of the ASX Code. Kathmandu
considers that the external advisors it
currently engages provide a sufficient
system for evaluating and continually
improving the effectiveness of risk
management for Kathmandu and
delivers appropriate objective assurance
on risk management. The Committee
will continue to monitor whether
this current practice is sufficient
for Kathmandu’s requirements.
Kathmandu’s external auditor
attends the annual meetings of
the company and is available to
answer any questions from investors
relevant to the external audit.
Health and Safety
Kathmandu is dedicated to cultivating
a strong safety culture and awareness
of health and safety risks, performance
and management within the
Kathmandu Group. Kathmandu has
adopted an integrated approach to
safety and wellbeing, which recognises
that workplace safety, health and
mental health all contribute to an
employee’s overall wellbeing.
Kathmandu maintains a Safety and
Wellbeing intranet site ‘Destination
Safe’ which contains a range of
resources, tools and information
employees can access to assist in
keeping workplaces safe covering
incident and emergency response
and hazard and risk management.
Lag indicators of health and safety
risks during the reporting period:
Lost time injury* frequency rate (number
of lost time injuries per 1,000,000 hours
worked): 4.35 (2018: 5.0)
* A lost time injury is an injury resulting
in time lost greater than 1 shift
More information on Health, Safety and
Wellbeing in the Group can be found in
the Kathmandu Sustainability Report,
a copy of which is available through
the Kathmandu investor website.
Our Team
Kathmandu’s goal is to attract, retain
and engage a world-class team of
passionate professionals to drive the
success of the Kathmandu business.
Kathmandu strives to support each
team member to further develop his or
her skill-set, to be fairly rewarded for
his or her efforts, and to feel supported
by an inclusive and progressive culture.
Remuneration Policy
Kathmandu maintains a remuneration
policy in relation to its Directors,
executives and employees which
provides for remuneration at fair and
reasonable levels throughout the
Kathmandu Group. The purpose of
the policy is to provide for coherent
remuneration practices which enable
the attraction and retention of high
calibre individuals who contribute
positively to the achievement of
Kathmandu’s strategy and objectives,
and ultimately create value for
Kathmandu shareholders. The
remuneration of executive and non-
executive Director remuneration is
clearly differentiated in the policy.
Kathmandu is committed to rewarding
its employees with compensation and
benefit programmes that are based on
performance merit and experience. In
2019, 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 is conducted annually.
Further information on Director
and Officer remuneration, including
the arrangements in place for
remuneration of the Group’s CEO, is
set out in the “Remuneration Report”
section of this Annual Report.
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 the business into
the future. Different perspectives
arising from diversity encourage an
innovative, responsive, productive and
competitive business and create value
for our customers and shareholders.
Kathmandu is dedicated to
leveraging the diverse backgrounds,
experiences and perspectives of its
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.
Kathmandu has established a diversity
policy in accordance with the principles,
including the NZX Diversity Policies and
Disclosure Guidance note. This policy
encompasses Kathmandu’s Diversity
Principles, which affirm Kathmandu’s
commitment to harnessing differences
to encourage an innovative, responsive
and productive workplace, creating
value and rewards for customers, the
team, shareholders and the community.
As part of its diversity policy,
Kathmandu has established
measurable objectives for achieving
diversity, including across the Gender,
22
KATHMANDU ANNUAL REPORT 2019
Generation and Culture profiles of
the Group. Kathmandu carries out
an annual assessment of its diversity
objectives and measures its progress
towards achieving these objectives.
In relation to its Generation and
Culture profiles, Kathmandu has made
progress towards achieving its age
profile and cultural diversity objectives.
Kathmandu is proud of its ethnic and
cross-generational diversity, which
reflects the diversity of its customers,
business partners and community.
In relation to gender diversity,
Kathmandu’s objective is to improve
representation of women at senior
leadership levels. As at 31 July 2019,
in relation to Kathmandu’s:
• Board of Directors, one out
of six Directors is female (this
is the same as FY18)*
• Executive management, two out
of eleven positions were held
by women (for FY18 this was
one out of nine positions).
• Across the entire organisation:
58% of all team members
are female, 42% male. (FY18,
59% female, 41% male)
*Andrea Martens has been appointed
as a Director effective 1 August 2019.
The board has been actively searching
for new candidates with the right
skills and experience to take up a
position as a Director of Kathmandu
and has recently appointed Andrea
Martens, effective 1 August 2019. The
board continues to strive towards
achieving its gender diversity targets.
Interacting with our Investors
Kathmandu is committed to keeping
our stakeholders and owners effectively
and comprehensively informed of
all relevant information affecting
Kathmandu in accordance with all
applicable laws and Kathmandu’s
communication strategy.
Information is communicated to
investors through the lodgement of all
relevant financial and other information
with ASX and NZX, publishing
information on the Kathmandu investor
website, annual shareholder meetings,
annual and interim reporting, analyst
and investor briefings and roadshows.
Website
The Kathmandu investor website (www.
kathmanduholdings.com) contains
all key communications concerning
the company, along with information
about Kathmandu’s core values,
corporate social responsibility, profiles
of its board and management, key
governance policies, the Charters
of the board Committees, copies of
current and past annual reports and
transcripts of annual meetings.
All relevant announcements made
to the market are shown on the
Kathmandu investor website as soon
as they have been released to ASX
and NZX. Announcements lodged
during the past five years can also be
accessed through the investor website.
Communication
Kathmandu encourages investors
to communicate with the company
electronically. Investors can contact
the company through the investor
website at www.kathmanduholdings.
com/contact/. Investors have the option
of receiving their communications,
which includes the annual report,
from Kathmandu electronically.
Kathmandu actively engages
with its investors through annual
meetings, meeting with stakeholders
on request and responding to
enquiries from time to time.
Approach to Seeking
Additional Equity Capital
The board acknowledges
Recommendation 8.4 of the NZX Code
which suggests that where Kathmandu
requires additional equity capital, where
practical, the board should favour
capital raising methods that provide
existing equity security holders with
an opportunity to participate in the
offer on a pro-rata basis. The board
will take Recommendation 8.4 into
account, along with a number of other
factors when considering options for
any potential capital raising. Ultimately
the board will chose methods to
raise equity, when needed, which are
necessary and desirable to achieve the
best outcomes for Kathmandu in the
context of any anticipated transaction
or proposal for which additional
equity capital may be required.
Meetings and Voting
Where voting by shareholders on
a matter concerning Kathmandu
is required, the board encourages
investors to attend the shareholders
meeting or to send in a proxy
vote. All voting at the company’s
annual shareholder meetings is
conducted by way of poll on the
basis of one share, one vote.
Kathmandu’s annual meetings are
held primarily in New Zealand, and
periodically in Australia, in order
to maximise the opportunity for
shareholders to participate. Webcasts
of annual meetings are also available
to allow participation where a
shareholder is unable to attend in
person. The company’s notice of
meeting will be available at www.
kathmanduholdings.com/investor-
relations/nzx-announcements/
REMUNERATION REPORT
KATHMANDU ANNUAL REPORT 2019
23
Remuneration
Report
1. Summary
Kathmandu’s financial results
for FY2019 reflect a continuation
of a return to sustainable long-
term profitable growth.
Earnings before interest and tax
(EBIT) was $84.3m an increase of
12.7% and Net Profit after Tax was
$57.6m, a 13.7% increase over FY2018.
FY2019 remuneration
• Non-Executive Directors
fees increased by 2.0%.
• Executive base salary increases
were limited to 2.0%.
• Short term incentives (cash) were
paid to all eligible Executives
(including the CEO) for partially
meeting the Group financial
performance target (EBIT).
• Short term incentives (equity)
were not earned by any eligible
Executive (excluding CEO and COO).
2. 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
Reuben Casey
– Chief Operating Officer
(Chief Financial Officer to 14 May 2019)
Chris Kinraid
– Chief Financial Officer, Company
Secretary (from 14 May 2019)
Other Management Team
(Executive) members:
Currently Employed:
Ben Ryan
– General Manager, Product
Rebecca Edwards
– General Manager, Human Resources
Stephen Domancie
– General Manager, Retail
Stores & Operations
Caleb Nicolson
– General Manager, Supply Chain
Paul Stern
– General Manager, Marketing & Online
Jolann van Dyk
– Chief Information Officer
Mark Handy
– General Manager, Merchandising
(from 4 September 2017)
Amy Beck
– President Oboz / Kathmandu
North America (from 1 April 2019)
The Group employed all of the
above Executives for the full
years ended 31 July 2018 and
2019, unless otherwise stated.
Throughout their period of
employment, Reuben Casey, Chris
Kinraid, Caleb Nicolson, Jolann Van
Dyk, Rebecca Edwards, Mark Handy
and Ben Ryan were employees of
Kathmandu Limited (New Zealand),
Xavier Simonet, Paul Stern, and
Stephen Domancie were employees of
Kathmandu Pty Limited (Australian)
and Amy Beck was an employee of
Oboz Footwear LLC (American).
3. Principles used to
determine the nature and
amount of remuneration
The Company’s Remuneration
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 14 of this annual report. The
Committee adopts a series of principles
in determining remuneration related
decisions. The principles used are:
• 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;
• Executive remuneration should
be market competitive, and
generally account for market
practice including consideration
of employee place of domicile;
• Executives’ remuneration
package should have:
- a substantial portion of their
total remuneration that is “at
risk” and aligned with reward
for creating shareholder value,
- an appropriate balance
between short and long-
term performance focus
and outcomes,
- a mix of cash and equity
based remuneration;
24
KATHMANDU ANNUAL REPORT 2019
• The CEO, 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 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;
• 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
interests of shareholders, the
current market environment
and Group performance.
4. Remuneration
framework
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.
The Executive remuneration
structure has three components:
a) Base salary and benefits
b) 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.
c) Long term incentives via
participation in the Company’s
Long Term Incentive plan.
a) Base salary and benefits
Base salary for Executives is
reviewed annually to assess
appropriateness to the position and
competitiveness with the market.
b) Short term incentives (STI)
Executives are eligible to participate
in an annual STI that delivers rewards
by way of cash and/or deferred equity.
Group Earnings before interest and
tax (EBIT), has been determined as
the appropriate financial performance
target to trigger payment of STI.
The amount of any STI paid in
a year is dependent upon:
a. the level of performance
achieved against the Group’s
financial performance target
(EBIT) for the year; and
b. the outcome of individual
value adding performance,
measured by achievement of
individual KPI’s, subject to a
minimum level of performance
achieved by the Group relative
to the financial performance
target (EBIT) for the year.
The weighting of STI between Group
financial performance, individual
KPI’s, cash and deferred equity is:
Short term incentive weighting:
CEO
Executives
Group financial performance target
Individual KPI achievement
Total
Cash
Equity
Cash
Equity
70%
30%
100%
-
-
-
29%
25%
54%
46%
-
46%
For Executives where a short-term equity incentive is earned, vesting is subject to
ongoing employment by the Group for a period of one year following the end of the
financial year in which the incentive is earned.
REMUNERATION REPORT
KATHMANDU ANNUAL REPORT 2019
25
c) Long Term Incentive Plan (LTI)
The Board resolved to grant nil cost performance rights that:
Shareholders reapproved the current
LTI at the Company’s 2016 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 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.
Rights granted are dependent upon
the Company achieving Earnings
per Share (EPS) and/or relative Total
Shareholder Return (TSR) targets over
specified performance periods, with
the value of rights 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
a comparator group of ASX listed
companies (other than metal and
mining stocks) ranked 101 to 200 in the
S&P/ASX200 as at the date of the grant.
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.
In FY2019, grants were
made to the CEO and COO.
• Were measurable for a single specified performance period of three years; and
• Required achievement of relative TSR targets and EPS growth targets over
a single specified performance period of three years with the value of rights
allocated 50:50 between EPS and relative TSR.
Performance measurement under either criterion is at the end of the performance
period with no ability to re-test.
5. CEO Remuneration details:
CEO remuneration comprises a mixture of base salary, STI and LTI:
CEO 2019 Remuneration package
Fixed
(Base salary, superannuation)
STI (60% of fixed)
LTI (70% of fixed) *
Maximum potential remuneration
A$’000
827
496
579
1,902
* Vesting dependent on achievement of performance hurdles measured over a three-year period.
Vesting date 1 December 2021.
• More than half (57%) the total remuneration for the CEO is at risk;
• Over 85% of the 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 Fixed Annual Remuneration) will be measured on
a single 3-year performance period.
Remuneration Structure – CEO and Executives:
CEO
44%
26%
30%
COO/CFO
56%
19%
25%
Executives
66%
34%
Fixed
STI
LTI
26
KATHMANDU ANNUAL REPORT 2019
FY2019 STI outcomes
For the year ended 31 July 2019 the Group financial performance targets were
met and as a result, short-term cash incentives were paid to the extent of 15%
(26% of potential) of fixed annual remuneration for the Chief Executive Officer.
5 Year CEO Remuneration
Details of the remuneration of the
Directors and Key Management
Personnel and total remuneration
of other Executives of the Group,
for the current and prior financial
years are set out in Note 6.3 of
the financial statements.
Single Figure
Remuneration1
% STI
Achieved
Against
Maximum
Percentage
Vested LTI's
Against
Maximum
Span of LTI
Performance
Period
6. Executive Service
agreements
2019 Xavier Simonet
1,003,5582
2018 Xavier Simonet
1,408,315
2017 Xavier Simonet
1,290,026
2016 Xavier Simonet
1,391,983
2015 Xavier Simonet
Mark Todd3
136,267
715,539
26%
100%
86%
100%
-
-
100%
2015-2018
N/A
N/A
N/A
N/A
54%
N/A
N/A
N/A
N/A
2010-2014
1. Comprises of cash salary and fees, non-monetary benefits, superannuation (excludes any
accounting expense for LTI).
2. On 14 December 2018 407,463 shares vested at a market value of $1,120,631 which is in addition to
the single figure remuneration disclosed above.
3. Acting CEO during FY2015.
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).
REMUNERATION REPORT
KATHMANDU ANNUAL REPORT 2019
27
7. Non-Executive Directors’ fees
The current aggregate limit for non-Executive Directors’ fees is $A1,000,000 per annum. In FY2019 the base fee payable
(including superannuation if applicable) to the Chairman was $A234,000 and to a non-Executive Director $A122,000 per annum.
No additional fees are paid for sub-committee attendances. Overall, Directors fees for FY2019 have increased 2.0% from
the fees payable in FY2018.
Any Executive Directors do not receive Directors’ fees. The amounts approved 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.
The Board reviews Directors’ fees annually seeking advice from external independent remuneration consultants as necessary.
Non-Executive Directors do not participate in the Company short or long term incentive schemes.
The following fees apply per annum:
Total Fees
Chairman
Other non-Executive Directors
Actual fees paid in year ended 31 July 2019 (converted to reporting currency)
Chairman
Other non-Executive Directors
AUD $
234,000
122,000
NZD $
255,006
133,629
8. Details of share-based compensation
The Company Long term incentive plan entitles the Board to grant performance rights for no cash consideration, at intervals
determined by the Board.
The number of rights granted and the applicable performance period over which EPS and relative TSR is measured is set out
below, along with the fair value of the rights at the grant date.
Grant Date
Rights Granted
during the year
Date
Exercisable
Expiry Date
Total fair value of
Performance Rights
at Grant Date $
Executive Director – Xavier Simonet
2018
2017
2016
2015
20 Dec 2018
20 Dec 2017
19 Dec 2016
16 Dec 2015
204,739
1 Dec 2021
1 Dec 2021
292,809
1 Dec 2020
1 Dec 2020
293,078
1 Dec 2019
1 Dec 2019
407,463
1 Dec 2018
1 Dec 2018
387,736
488,420
378,071
433,9481
Shares issued to Directors, Other Executives and Senior Management on Vesting of Performance Rights:
2018
2018
2017
2017
Date Granted
Date Shares Issued
Number of Shares Issued
16 Dec 2015
6 Dec 2016
18 Dec 2015
18 Dec 2015
14 Dec 2018
10 Aug 2018
22 Aug 2017
29 Mar 2017
407,463
466,249
669,669
12,537
1. Shares 100% vested and were issued 14 December 2018.
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.
28
KATHMANDU ANNUAL REPORT 2019
9. Additional information, Performance Rights Vesting
Performance rights granted, the percentage that vested, the percentage that forfeited and future potential vesting periods are
shown in the table below:
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
Executive Director – Xavier Simonet
FY2019
FY2018
FY2017
FY2016
0.0%
0.0%
0.0%
100%
Other Executives and Senior Management:
FY2019
FY2019
FY2018
FY2018
FY2017
FY2017
0.0%
0.0%
0.0%
90.0%
0.0%
84.9%
1. Shares 100% vested and were issued 14 December 2018.
2. Shares were issued on 14 August 2019.
3. Shares were issued on 10 August 2018
0.0%
0.0%
0.0%
0.0%
0.0%
100%
0.0%
10.0%
0.0%
15.1%
FY2022
FY2021
FY2020
FY20191
FY2022
FY2021
FY2021
FY20202
FY2020
FY20193
204,739
292,809
293,078
407,463
56,649
496,734
81,628
551,186
82,732
466,249
387,736
488,420
378,071
433,948
108,131
-
136,159
1,181,463
106,724
797,286
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.
REMUNERATION REPORT
KATHMANDU ANNUAL REPORT 2019
29
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
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
NPAT Growth
$9.4m
NA
$39.1m 316.0%
$34.9m (10.7%)
$44.2m 26.6%
$42.2m
(4.5%)
$20.4m (51.7%)
$33.5m 64.2%
$38.0m 13.4%
$50.7m 33.4%
$57.6m 13.7%
Basic EPS
cents per
share
Basic EPS
growth
Share price
at start of
year
Share price
at end of
year
Share price
growth
Ordinary
dividends paid or
declared per share
0.3
19.5
17.4
22.1
21.0
10.1
16.6
18.9
24.0
25.5
NA
65x
0.9x
1.3x
1.0x
0.5x
1.6x
1.1x
1.3x
1.1x
$2.13
$2.05
$2.20
$1.59
$2.37
$3.33
$1.70
$1.80
$2.27
$3.08
$2.05
$2.20
$1.59
$2.37
$3.33
$1.70
$1.80
$2.27
$3.08
$2.13
(3.8%)
7.3%
(27.7%)
49.1%
40.5%
(48.9%)
5.9%
26.1%
35.6%
(30.8%)
$0.07
$0.10
$0.10
$0.12
$0.12
$0.08
$0.11
$0.13
$0.15
$0.16
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.
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.
30
KATHMANDU ANNUAL REPORT 2019
10. Remuneration of Auditors
Details of remuneration of Auditors is set out in Note 6.8 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
• 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
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
31
Financial
Statements
For the Year Ended 31 July 2019
In this section...
The consolidated 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
six sections: ‘Basis of Preparation’, ‘Results for the Year’, ‘Operating Assets and Liabilities’, ‘Capital
Structure and Financing Costs’, ‘Group Structure’ 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 disclosures to assist readers’ understanding and interpretation
of the annual report and the financial statements
Table of Contents
Directors’ Approval of Consolidated Financial Statements ... 32
Consolidated Statement of Comprehensive Income ............ 33
Consolidated Statement of Changes in Equity .................... 34
Consolidated Balance Sheet ............................................... 35
Consolidated Statement of Cash Flows ............................... 36
Notes to the Consolidated Financial Statements
Section 1: Basis of Preparation ..................................... 38
Section 2: Results for the Year...................................... 40
Section 3: Operating Assets and Liabilities ................... 47
Section 4: Capital Structure and Financing Costs ......... 54
Section 5: Group Structure .......................................... 63
Section 6: Other Notes ................................................ 65
Auditors’ Report ................................................................ 74
32
KATHMANDU ANNUAL REPORT 2019
Directors’ Approval of
Consolidated Financial Statements
For the Year Ended 31 July 2019
Authorisation for Issue
The Board of Directors authorised the issue of these Consolidated Financial Statements on 18 September 2019.
Approval by Directors
The Directors are pleased to present the Consolidated Financial Statements of Kathmandu Holdings Limited for the year ended
31 July 2019 on pages 33 to 73.
David Kirk
Xavier Simonet
For and on behalf of the Board of Directors
18 September 2019
Date
18 September 2019
Date
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
33
Consolidated Statement
of Comprehensive Income
For the Year Ended 31 July 2019
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
Section
2019
NZ$’000
2018
NZ$’000
2.2
2.2
2.2
3.2/3.3
4.1.1
2.3
545,618
(213,125)
332,493
1,130
(160,581)
(73,477)
(232,928)
99,565
(15,272)
84,293
37
(2,952)
(2,915)
81,378
(23,745)
497,437
(181,961)
315,476
-
(155,677)
(70,038)
(225,715)
89,761
(14,958)
74,803
47
(1,106)
(1,059)
73,744
(23,073)
57,633
50,671
Other comprehensive income/(expense) that may be recycled through profit or loss:
Movement in cash flow hedge reserve
Movement in foreign currency translation reserve
4.3.2
4.3.2
620
(3,297)
8,820
10,518
Other comprehensive income/(expense) for the year, net of tax
(2,677)
19,338
Total comprehensive income for the year attributable to shareholders
54,956
70,009
Basic earnings per share
Diluted earnings per share
Weighted average basic ordinary shares outstanding (‘000)
Weighted average diluted ordinary shares outstanding (‘000)
2.4
2.4
2.4
2.4
25.5cps
25.3cps
226,024
227,989
24.0cps
23.8cps
211,261
213,187
34
KATHMANDU ANNUAL REPORT 2019
Consolidated Statement
of Changes in Equity
For the Year Ended 31 July 2019
Cash Flow
Hedge
Reserve
NZ$’000
Foreign
Currency
Translation
Reserve
NZ$’000
Share
Based
Payments
Reserve
NZ$’000
Share
Capital
NZ$’000
Retained
Earnings
NZ$’000
Total
Equity
NZ$’000
Balance as at 31 July 2017
200,209
(5,322)
(19,493)
1,813
149,893
327,100
Profit after tax
Other comprehensive income
Dividends paid
Issue of share capital
Share based payment expense
Deferred tax on share-based payment
transactions
-
-
-
-
-
49,673
8,820
-
-
-
-
-
10,518
-
-
-
-
-
-
-
-
50,671
-
50,671
19,338
(27,208)
(27,208)
(971)
1,489
429
-
-
-
48,702
1,489
429
Balance as at 31 July 2018
249,882
3,498
(8,975)
2,760
173,356
420,521
Profit after tax
Other comprehensive income
Dividends paid
Issue of share capital
Share based payment expense
Lapsed share options
Deferred tax on share-based payment
transactions
1,231
-
-
-
-
-
-
-
-
620
(3,297)
-
-
-
-
-
-
-
-
-
-
-
-
-
57,633
57,633
-
(2,677)
(33,883)
(33,883)
(1,231)
721
(14)
(253)
-
-
-
14
-
721
-
(253)
Balance as at 31 July 2019
251,113
4,118
(12,272)
1,983
197,120
442,062
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
35
Consolidated Balance Sheet
As at 31 July 2019
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other financial assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Derivative financial instruments
Current tax liabilities
Other financial liabilities
Total current liabilities
Non-current liabilities
Derivative financial instruments
Interest bearing liabilities
Deferred tax
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity - ordinary shares
Reserves
Retained earnings
Total equity
Section
2019
NZ$’000
2018
NZ$’000
3.1.2
3.1.3
3.1.1
4.2
3.1.4
3.2
3.3
3.1.5
4.2
3.1.6
4.2
4.1
2.3
4.3.1
4.3.2
6,230
14,206
122,773
4,964
-
148,173
60,319
386,061
446,380
594,553
74,560
113
6,458
-
81,131
9
25,500
45,851
71,360
8,146
13,453
111,929
5,076
22,180
160,784
63,514
386,906
450,420
611,204
72,770
156
9,968
21,994
104,888
62
39,500
46,233
85,795
152,491
190,683
442,062
420,521
251,113
(6,171)
197,120
442,062
249,882
(2,717)
173,356
420,521
36
KATHMANDU ANNUAL REPORT 2019
Consolidated Statement
of Cash Flows
For the Year Ended 31 July 2019
Cash flows from operating activities
Cash was provided from:
Receipts from customers
Income tax received
Interest received
Cash was applied to:
Payments to suppliers and employees
Income tax paid
Interest paid
Section
2019
NZ$’000
2018
NZ$’000
546,499
502,703
207
621
156
47
547,327
502,906
455,743
26,673
3,237
485,653
406,508
18,710
2,087
427,305
Net cash inflow from operating activities
61,674
75,601
Cash flows from investing activities
Cash was provided from:
Proceeds from sale of property, plant and equipment
Proceeds from investment in other financial assets
Cash was applied to:
Purchase of property, plant and equipment
Purchase of intangibles
Acquisition of subsidiaries
Investments in other financial assets
3.1.4
3.2
3.3
5.1
3.1.4
1
22,321
22,322
11,345
4,351
22,321
-
38,017
-
-
-
14,300
2,394
82,746
22,180
121,620
Net cash outflow from investing activities
(15,695)
(121,620)
Cash flows from financing activities
Cash was provided from:
Proceeds of loan advances
Proceeds from share issues
Cash was applied to:
Dividends paid
Repayment of loan advances
92,606
-
92,606
33,883
106,606
140,489
148,815
48,702
197,517
27,208
119,907
147,115
Net cash inflow / (outflow) from financing activities
(47,883)
50,402
Net increase / (decrease) in cash held
Opening cash and cash equivalents
Effect of foreign exchange rates
Closing cash and cash equivalents
(1,904)
8,146
(12)
6,230
4,383
3,537
226
8,146
3.1.2
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
37
Reconciliation of net profit after taxation with
cash inflow from operating activities
Profit after taxation
57,633
50,671
Section
2019
NZ$’000
2018
NZ$’000
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
Foreign currency translation of working capital balances
Increase / (decrease) in deferred taxation
Employee share based remuneration
Loss on sale of property, plant and equipment
(379)
(13,042)
3,662
(3,260)
(13,019)
11,920
3,352
(286)
539
721
814
17,060
5,272
(13,873)
10,884
6,405
8,688
11,576
3,382
(430)
(1,891)
1,489
2,116
16,242
3.2
3.3
6.4
3.2
Cash inflow from operating activities
61,674
75,601
Reconciliation of movement in term loans
Balance 31 July 2018
Net cash flow movement
Foreign exchange movement
Balance 31 July 2019
39,500
(14,000)
-
25,500
38
KATHMANDU ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements
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
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.
Basis of consolidation
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 for profit entity for financial
reporting purposes.
Subsidiaries are consolidated from the date on which control
is obtained to the date on which control is lost.
In preparing the Group financial statements, all material
intra-group 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 to 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 the specific accounting
polices provided below.
Kathmandu Holdings Limited (the Company) and its
subsidiaries (together the Group) is a designer, marketer,
retailer and wholesaler of clothing, footwear and equipment
for travel and adventure. It operates in New Zealand,
Australia, United Kingdom and United States of America.
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 223
Tuam Street, Central Christchurch, 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.
These audited consolidated financial statements have
been approved for issue by the Board of Directors on
18 September 2019.
1.2 Summary of significant
accounting policies
These consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting
Practice. They comply with the New Zealand Equivalents
to International Financial Reporting Standards (NZ IFRS)
and other applicable Financial Reporting Standards, as
appropriate for profit-oriented entities. The financial
statements also comply with International Financial Reporting
Standards (IFRS).
The financial statements are presented in New Zealand
dollars, which is the Company’s functional currency and
Group’s presentation currency.
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
39
Critical accounting estimates
The Group makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
Estimates and judgements are continually evaluated and
are based on historical experience as adjusted for current
market conditions and other factors, including expectations
of future events that are believed to be reasonable under
the circumstances.
Further explanation as to estimates and assumptions made
by the Group can be found in the following notes to the
financial statements:
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
Area of Estimation
Section
• All resulting exchange differences are recognised in other
Business Combinations – purchase price
allocation
Goodwill and Brand – assumptions underlying
recoverable value
Inventory – estimates of obsolescence
Fair value of derivatives – assumptions underlying
fair value
5.1
3.3
3.1.1
4.2
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.
40
KATHMANDU ANNUAL REPORT 2019
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 four operating segments, depicting the four geographical regions the Group operates in. The
New Zealand segment has been represented to exclude holding company balances. Other represents holding companies and
consolidation eliminations.
31 July 2019
Total segment sales
Inter-segment sales
Sales from external customers
EBITDA
Depreciation and software amortisation
EBIT
Income tax expense
Total segment assets
Total assets includes:
Non-current assets
Australia
NZ$’000
New
Zealand
NZ$’000
North
America
NZ$’000
Rest of
World
NZ$’000
Other
NZ$’000
Total
NZ$’000
339,189
139,228
66,744
5,808
(501)
(637)
(2,698)
(1,515)
338,688
138,591
59,513
33,897
8,983
50,530
14,482
5,765
28,132
7,594
64,046
10,090
484
9,606
2,388
-
-
-
550,969
(5,351)
545,618
4,293
(958)
(2,977)
99,565
40
(998)
(327)
-
15,272
(2,977)
84,293
(392)
23,745
243,161
304,849
132,742
3,520
(89,719)
594,553
Additions to non-current assets
Total segment liabilities
6,626
85,521
8,541
47,911
521
16,417
16,684
(14,042)
152,491
167,244
26,778
110,024
6
8
142,328
446,380
-
15,696
31 July 2018
Total segment sales
Inter-segment sales
Sales from external customers
EBITDA
Depreciation and software amortisation
EBIT
Income tax expense
Total segment assets
Total assets includes:
Non-current assets
Additions to non-current assets
Total segment liabilities
Australia
NZ$’000
New
Zealand
NZ$’000
North
America
NZ$’000
Rest of
World
NZ$’000
Other
NZ$’000
Total
NZ$’000
335,876
143,167
16,785
6,932
(2,193)
(190)
(666)
(2,274)
333,683
142,977
57,744
35,154
8,687
49,057
14,566
6,125
29,029
8,129
16,119
2,535
116
2,419
761
-
-
-
502,760
(5,323)
497,437
4,658
(685)
(4,987)
89,761
30
(715)
(225)
-
14,958
(4,987)
74,803
(158)
23,073
246,178
297,700
123,993
8,591
(65,258)
611,204
177,540
11,298
82,916
23,943
5,352
99,945
99,934
-
-
148,992
450,420
-
116,584
59,060
25,312
21,227
2,168
190,683
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
41
EBITDA represents earnings before income taxes (a non-
GAAP measure), excluding interest income, interest expense,
depreciation and amortisation, as reported in the financial
statements. EBIT represents EBITDA less depreciation and
amortisation. EBITDA and EBIT are key measurement criteria
on which operating segments are reviewed by the Chief
Operating Decision Maker (the Executive Management Team).
sell the goods, has the primary responsibility when onselling
the goods and bears the risks of obsolescence and loss
in relation to the goods. A receivable is recognised by the
Group when the goods are delivered to the wholesaler
as this represents the point in time at which the right
to consideration becomes unconditional, as only the
passage of time is required before payment is due.
The Group operates in one industry being the sale of outdoor
clothing, footwear and equipment.
Revenue is allocated based on the country in which the
customer is located. The Group has no reliance on any single
major customer.
Costs recharged between Group companies are calculated on
normal commercial terms. 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.
Sales Returns
Under the Group’s standard contract terms, customers
have a right of return within 30 days. At the point of
sale, a refund liability and a corresponding adjustment
to revenue is recognised for those products expected to
be returned. The Group uses its accumulated historical
experience to estimate the number of returns on a
portfolio level using the expected value method. It is
considered highly probable that a significant reversal in
the cumulative revenue recognised will not occur given
the consistent level of returns over previous years.
2.2 Profit before tax
Accounting policies
Revenue recognition
The Group recognises revenue from the sale of
footwear, clothing and equipment for travel and
adventure. Revenue comprises the fair value of the
consideration received or receivable for the sale of
goods, excluding Goods and Services Tax and discounts,
and after eliminating sales within the Group.
Retail Sales
For sales of goods to retail customers, revenue is recognised
when control of the goods has transferred, being at the
point the customer purchases the goods at a retail outlet.
Payment of the transaction price is due immediately
at the point the customer purchases the goods.
Online Sales
For online sales, revenue is recognised when control
of the goods has transferred to the customer, being
at the point the goods are delivered to the customer.
Delivery occurs when the goods have been shipped to
the customer’s specific location. When the customer
initially purchases the goods online, the transaction price
received by the Group is recognised as a contract liability
until the goods have been delivered to the customer.
Wholesale Sales
For sales to the wholesale market, revenue is recognised
when control of the goods has transferred, being when
the goods have been shipped to the wholesaler’s specific
location (delivery). Following delivery, the wholesaler has
full discretion over the manner of distribution and price to
Summit Club Loyalty Program
The Group operates a Summit Club loyalty program through
which retail customers accumulate points on purchases
that entitles them to discounts on future purchases.
These points provide a discount to customers that they would
not receive without purchasing the goods (i.e. a material
right). The promise to provide the discount to the customer
is therefore a separate performance obligation.
The transaction price is allocated between the product
and the points on a relative stand-alone selling price basis.
The stand-alone selling price per point is estimated based
on the discount to be given when the points are redeemed
by the customer and the likelihood of redemption, as
evidenced by the Group’s historical experience. A contract
liability is recognised for revenue relating to the loyalty
points at the time of the initial sales transaction.
Revenue from the loyalty points is recognised when the
points are redeemed by the customer. Revenue for points
that are not expected to be redeemed is recognised in
proportion to the pattern of rights exercised by customers.
Note 2.1 provides a breakdown of revenue by geographical region.
Operating expenses
Employee entitlements
Wages, salaries and other
short term benefits
Post-employment benefits
Employee share based
remuneration
2019
NZ$’000
86,325
2018
NZ$’000
85,090
4,989
721
4,934
1,489
42
KATHMANDU ANNUAL REPORT 2019
The number of full-time equivalent employees (excluding
short-term contractors), as at 31 July was:
Rent expenses reported in these financial statements relate to
non-cancellable operating leases. The future commitments on
these leases are as follows:
Due within 1 year
Due within 1-2 years
Due within 2-5 years
Due after 5 years
2019
NZ$’000
2018
NZ$’000
52,793
43,786
83,271
26,626
54,727
45,037
85,719
34,726
206,476
220,209
Some of the existing lease agreements have right of renewal
options for varying terms. The Group leases various properties
under non-cancellable lease agreements. These leases are
generally between 1 - 10 years.
Australia
New Zealand
United Kingdom
United States of America
2019
684
432
6
22
2018
672
435
6
20
(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled within 12
months of the reporting date are recognised in other payables
in respect of employees’ services up to the reporting date
and are measured at the amounts expected to be paid when
the liabilities are settled. Liabilities for non-accumulating sick
leave are recognised when the leave is taken and measured
at the rates paid or payable. The liability for employee
entitlements is carried at the present value of the estimated
future cash flows.
Rental and operating leases
The Group is a Lessee. Leases in which a significant portion
of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made
under operating leases (net of any incentives received from
the lessor) are charged to the consolidated statement of
comprehensive income on a straight-line basis over the period
of the lease.
Rental and operating lease expenses
69,187
67,429
2019
NZ$’000
2018
NZ$’000
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
43
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 consolidated statement of
comprehensive income), a reconciliation of profit before tax to the tax charge and the movements in
deferred tax assets and liabilities.
Accounting policies
Current and deferred income tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the consolidated 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 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
and 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 liability is not recognised if it arises from the initial
recognition of goodwill. 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, 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.
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 consolidated statement of comprehensive income
and the consolidated statement of cash flows have
been prepared so that all components are stated
exclusive of GST. All items in the consolidated balance
sheet are stated net of GST, with the exception of
receivables and payables, which include GST invoiced.
Taxation – Consolidated statement of
comprehensive income
The total taxation charge in the consolidated statement of
comprehensive income is analysed as follows:
2019
NZ$’000
2018
NZ$’000
Current income tax charge
23,206
24,964
Deferred income tax charge / (credit)
539
(1,891)
Income tax charge reported in
the consolidated statement of
comprehensive income
23,745
23,073
In order to understand how, in the consolidated statement
of comprehensive income, a tax charge of $23,744,580 (2018:
23,073,435) arises on profit before income tax of $81,377,631
(2018: $73,744,312), the taxation charge that would arise at
the standard rate of New Zealand corporate tax is reconciled
to the actual tax charge as follows:
44
KATHMANDU ANNUAL REPORT 2019
Profit before income tax
Income tax calculated at 28%
Adjustments to taxation:
Adjustments due to different rate in different jurisdictions
Non-taxable income
Expenses not deductible for tax purposes
Tax legislation enacted for employee share schemes
Utilisation of tax losses by group companies
Tax expense transferred to foreign currency translation reserve
Adjustments in respect of prior years
Income tax charge reported in the consolidated statement of comprehensive income
2019
NZ$’000
81,378
22,786
741
(327)
1,152
(506)
27
2
(130)
23,745
2018
NZ$’000
73,744
20,648
1,011
(246)
725
(87)
(26)
1,173
(125)
23,073
Adjustments for prior periods primarily arise where an outcome is obtained on certain tax matters which differs from
expectations held when the related provision was made. Where the outcome is more favourable than the provision made,
the difference is released, lowering the current year tax charge. Where the outcome is less favourable than the provision, an
additional charge to the current year tax will occur.
The tax charge / (credit) relating to components of other comprehensive income is as follows:
Movement in cash flow hedge reserve before tax
Tax impact relating to cash flow hedge reserve
Movement in cash flow hedge reserve after tax
Foreign currency translation reserve before tax
Tax credit / (charge) relating to foreign currency translation reserve
Movement in foreign currency translation reserve after tax
Total other comprehensive income/(expense) before tax
Total tax credit / (charge) on other comprehensive income
Total other comprehensive income/(expense) after tax
Current tax
Deferred tax
Total tax credit / (charge) on other comprehensive income
2019
NZ$’000
2018
NZ$’000
13
607
620
(3,297)
-
(3,297)
(3,284)
607
(2,677)
-
607
607
12,180
(3,360)
8,820
10,518
-
10,518
22,698
(3,360)
19,338
-
(3,360)
(3,360)
Unrecognised tax losses
The Group has estimated tax losses to carry forward from Kathmandu (U.K.) Limited of £10,314,275 (NZ$19,759,147) (2018:
£10,172,139 (NZ$19,561,807)) which can be carried forward to be offset against future profits generated within the UK. These losses
do not expire and no benefit has been recognised in respect to these losses
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
45
Imputation credits
Imputation credits available for use in subsequent reporting periods based on a tax rate of 28%
2019
NZ$’000
1,615
2018
NZ$’000
4,424
The above amounts represent the balance of the imputation account as at the end of July 2019, 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 2019 is A$6,513,756
(2018: A$3,891,706).
Taxation – Balance sheet
The following are the major deferred taxation liabilities and assets recognised by the Group and movements thereon during the
current and prior year:
Tax
depreciation
NZ$’000
Employee
obligations
NZ$’000
Brand
NZ$’000
Foreign
exchange
NZ$’000
Other temporary
differences
NZ$’000
Reserves
NZ$’000
Total
NZ$’000
As at 31 July 2017
Recognised in the
consolidated statement of
comprehensive income
Recognised in other
comprehensive income
Recognised directly in equity
Exchange differences
Deferred tax on business
combinations (5.1)
As at 31 July 2018
Recognised in the
consolidated statement of
comprehensive income
Recognised in other
comprehensive income
Recognised directly in equity
Exchange differences
As at 31 July 2019
48
157
-
-
-
-
205
16
-
-
(2)
219
1,722
(43,580)
(185)
6,211
1,757
(34,027)
942
17
(212)
987
-
1,891
-
429
30
-
-
-
(1,387)
(9,973)
-
-
(5)
-
-
-
169
-
(3,360)
(3,360)
-
-
-
429
(1,193)
(9,973)
3,123
(54,923)
(402)
7,367
(1,603)
(46,233)
(523)
51
(1,173)
1,090
-
(539)
-
(253)
(68)
-
-
868
-
-
-
2,279
(54,004)
(1,575)
-
-
(231)
8,226
607
607
-
-
(253)
567
(996)
(45,851)
The deferred tax balance relates to:
• Realised gain/loss on foreign exchange contracts not
• Property, plant and equipment temporary differences arising
on differences in accounting and tax depreciation rates
yet charged in the consolidated statement of
comprehensive income
• Employee benefit accruals
•
Inventory provisioning
• Kathmandu brand and Oboz brand and customer
• Temporary differences arising from landlord contributions
relationship
and rent free periods
• Unrealised foreign exchange gain/loss on intercompany
• Temporary differences on the unrealised gain/loss
loan (Kathmandu Pty Ltd)
in hedge reserve
• Employee share schemes
• Other temporary differences on miscellaneous items.
46
KATHMANDU ANNUAL REPORT 2019
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 $57,633,052 (2018: $50,670,877) by the weighted average number of ordinary shares in issue during
the year of 226,023,935 (2018: 211,260,697).
Diluted EPS reflects any commitments the Group has to issue shares in the future that would
decrease EPS. In 2019, these are in the form of share options / performance rights. To calculate the
impact it is assumed that all share options are exercised / performance rights taken, and therefore,
adjusting the weighted average number of shares.
Weighted average number of shares in issue
Adjustment for:
- Share options / performance rights
2019
NZ$’000
226,024
1,965
227,989
2018
NZ$’000
211,261
1,926
213,187
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
47
Section 3 Operating Assets and Liabilities
In this section
This section shows the assets used to generate the Group’s trading performance and the liabilities
incurred as a result. Liabilities relating to the Group’s financing activities are addressed in Section 4.
Deferred tax assets and liabilities are shown in note 2.3.
Keeping it simple
Working capital represents the assets and liabilities the Group generates through its trading activity.
The Group therefore defines working capital as inventory, cash, trade and other receivables, other
financial assets, trade and other payables and other financial liabilities.
3.1.2 Cash and cash equivalents
Cash on hand
Cash at bank
2019
NZ$’000
192
6,038
6,230
2018
NZ$’000
178
7,968
8,146
The carrying amount of the Group's cash and cash equivalents
are denominated in the following currencies:
NZD
AUD
GBP
USD
EUR
738
2,832
306
2,238
116
6,230
298
1,931
789
4,905
223
8,146
3.1 Working capital
3.1.1 Inventory
Accounting policies
Inventories are stated at the lower of cost and net realisable
value. Cost is determined on a weighted average cost method
and includes expenditure incurred in acquiring the inventories
and bringing them to their existing location and condition.
Net realisable value is the estimated selling price in the
ordinary course of business, less applicable variable selling
expenses. Inventory is considered in transit when the risk and
rewards of ownership have transferred to the Group.
The Group assesses the likely residual value of inventory. Stock
provisions are recognised for inventory which is expected to
sell for less than cost and also for the value of inventory likely
to have been lost to the business through shrinkage between
the date of the last applicable stocktake and balance sheet
date. In recognising the provision for inventory, judgement
has been applied by considering a range of factors including
historical results, stock shrinkage trends and product lifecycle.
Inventory is broken down into trading stock and goods in
transit below:
Trading stock
Goods in transit
2019
NZ$’000
105,161
17,612
122,773
2018
NZ$’000
89,802
22,127
111,929
Inventory has been reviewed for obsolescence and a provision
of $294,742 (2018: $627,362) has been made.
48
KATHMANDU ANNUAL REPORT 2019
3.1.3 Trade and other receivables
3.1.5 Trade and other payables due within one year
Accounting policies
Trade receivables are recognised initially at the value of the
invoice sent to the customer (fair value) and subsequently
at the amounts considered recoverable (amortised cost).
The collectability of trade receivables is reviewed on an on-
going basis.
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.
An allowance for lifetime expected credit losses is recognised
for trade receivables based on the Group’s historical credit
loss experience, adjusted for factors that are specific to
the debtors, general economic conditions and an assessment
of both the current as well as the forecast direction of
conditions at the reporting date, including time value of
money where appropriate.
The expected credit loss is estimated as the difference
between all contractual cash flows that are due to the Group
in accordance with the contract and all the cash flows that
the Group expects to receive, discounted at the original
effective interest rate. The allowance currently held is $114,829
(2018: $212,610).
Trade receivables
Other receivables
and prepayments
2019
NZ$’000
9,619
4,587
2018
NZ$’000
8,251
5,202
14,206
13,453
Other receivables and prepayments includes balances in
relation to landlord incentives.
The carrying amount of the Group’s trade and other
receivables are denominated in the following currencies:
NZD
AUD
USD
GBP
CAD
2,097
1,935
9,326
140
708
1,959
2,918
8,488
88
-
14,206
13,453
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can
be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Trade payables
Employee
entitlements
Sundry creditors
and accruals
Provisions
2019
NZ$’000
30,504
8,582
2018
NZ$’000
24,001
13,957
34,397
33,659
1,077
74,560
1,153
72,770
The carrying amount of the Group's trade and other payables
are denominated in the following currencies:
NZD
AUD
GBP
EUR
USD
2019
NZ$’000
11,227
40,475
679
137
22,042
74,560
2018
NZ$’000
12,648
45,419
925
32
13,746
72,770
Provisions primarily relate to the restoration of leased
properties. These provisions are expected to be fully utilised
within the next 12 months.
3.1.6 Other financial liabilities
3.1.4 Other financial assets
Other financial assets
2019
NZ$’000
-
2018
NZ$’000
22,180
Other financial liabilities
2019
NZ$’000
-
2018
NZ$’000
21,994
In 2018 other financial assets related to the USD $15,000,000
term deposit and associated earned interest held in escrow in
relation to the Oboz acquisition (Note 5.1).
In 2018 other financial liabilities related to the fair value of the
USD $15,000,000 contingent earn out in relation to the Oboz
acquisition which was paid out fully in April 2019 (Note 5.1).
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
49
3.1.7 Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations.
Risk
Exposure
arising from
Credit
risk
Cash and cash
equivalents
Trade and other
receivables
Other financial
assets
Derivative
financial
instruments
Monitoring
Management
Credit ratings,
aging analysis
and review
of exposure
within regular
terms of trade
Credit is given
to customers
following
obtaining
credit rating
information,
confirming
references
and setting
appropriate
credit limits
Concentration of credit risk is within the geographic segment
of North America, where the 5 largest customers represent
55% of trade receivables.
Exposure to credit risk
The below balances are recorded at their carrying amount
after any allowance for expected credit loss on these
financial instruments. The maximum exposure to credit risk at
reporting date was (carrying amount):
Cash and cash equivalents
Trade receivables
Other receivables
Other financial assets
Derivative financial instruments
2019
NZ$’000
2018
NZ$’000
6,038
9,619
1,741
-
4,842
22,240
7,968
8,251
2,255
22,180
4,858
45,512
As at balance sheet date the carrying amount is also
considered to approximate fair value for each of the financial
instruments. There are no impaired balances.
The credit quality of cash and cash equivalents can be
assessed by reference to external credit ratings (if available)
or to historical information about counterparty default rates:
Cash and cash equivalents:
Standard & Poors - AA-
Standard & Poors - A+
Standard & Poors - BBB+
Total cash and cash equivalents
2019
NZ$’000
2018
NZ$’000
3,783
1,861
394
6,038
2,403
4,570
995
7,968
Past due but not impaired
As at balance sheet date, trade receivables of $848,064 (2018:
$1,441,212) were past due but not impaired. These relate to
wholesale customers where there is no history of default.
Interest is not charged on overdue debtors. The ageing
analysis of these past due trade receivables is:
0 to 30 days
30 to 60 days
60 to 90 days
90 days and over
2019
NZ$’000
2018
NZ$’000
548
217
73
10
848
883
297
134
127
1,441
50
KATHMANDU ANNUAL REPORT 2019
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.
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
5 – 50 %
8 – 50 %
10 – 50 %
10 – 60 %
Impairment of assets
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 of
disposal and value in use.
Property, plant and equipment can be analysed as follows:
Year ended 31 July 2018
Opening net book value
Additions
Acquisition of businesses (Note 5.1)
Disposals
Depreciation charge
Exchange differences
Closing net book value
As at 31 July 2018
Cost
Accumulated depreciation
Closing net book value
Year ended 31 July 2019
Opening net book value
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book value
As at 31 July 2019
Cost
Accumulated depreciation
Closing net book value
Leasehold
improvement
NZ$’000
Office, plant &
equipment
NZ$’000
Furniture &
fittings
NZ$’000
Computer
equipment
NZ$’000
Total
NZ$’000
40,003
7,897
132
(1,370)
(7,006)
736
40,392
78,824
(38,432)
40,392
40,392
5,690
(394)
(7,536)
(1,196)
36,956
79,218
(42,262)
36,956
1,533
149
441
(10)
(266)
42
1,889
6,263
(4,374)
1,889
1,889
554
(7)
(356)
1
2,081
6,692
(4,611)
2,081
17,392
5,772
-
(655)
(3,745)
337
19,101
39,640
(20,539)
19,101
19,101
4,447
(383)
(3,394)
(597)
19,174
41,726
(22,552)
19,174
2,098
482
90
(3)
(559)
24
2,132
9,243
(7,111)
2,132
2,132
654
(18)
(634)
(26)
2,108
9,633
(7,525)
2,108
61,026
14,300
663
(2,038)
(11,576)
1,139
63,514
133,970
(70,456)
63,514
63,514
11,345
(802)
(11,920)
(1,818)
60,319
137,269
(76,950)
60,319
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
51
Depreciation
Leasehold improvement
Office, plant and equipment
Furniture and fittings
Computer equipment
Total depreciation
2019
NZ$’000
7,536
356
3,394
634
11,920
2018
NZ$’000
7,006
266
3,745
559
11,576
Depreciation expenditure is excluded from administration and general expenses in the consolidated statement of
comprehensive income.
Sale of property, plant and equipment
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
consolidated statement of comprehensive income.
Loss on sale of property, plant and equipment
Capital commitments
2019
NZ$’000
814
2018
NZ$’000
2,116
Capital commitments contracted for at balance sheet date include property, plant and equipment of $1,877,276 (2018: $2,461,029).
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, customer relationship, 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 or more frequently if events or changes in circumstances indicate that it might be impaired. It is 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 or Oboz 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.
52
KATHMANDU ANNUAL REPORT 2019
Customer Relationship
Acquired customer relationships are carried at original cost based on independent valuation obtained at the date of acquisition
less accumulated amortisation. They are amortised on a straight line basis over a useful life of 10 years. The estimated useful life
and amortisation period is reviewed at the end of each annual reporting period.
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 when 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 at rates of 20-67%.
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 of disposal 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.
Acquisition of businesses (Note 5.1)
62,898
34,541
Goodwill
NZ$’000
Brand
NZ$’000
Customer Relationship
NZ$’000
Software
NZ$’000
Total
NZ$’000
121,536
148,664
-
-
-
-
-
-
4,874
4,723
189,308
187,928
-
-
1,696
-
(60)
111
8,814
2,394
92
(78)
(3,322)
23
279,014
2,394
99,227)
(78)
(3,382)
9,731
1,747
7,923
386,906
Intangible assets
Year ended 31 July 2018
Opening net book value
Additions
Disposals
Amortisation
Exchange differences
Closing net book value
As at 31 July 2018
Cost
190,579
187,928
1,807
29,109
409,423
Accumulated amortisation/impairment
(1,271)
-
(60)
(21,186)
(22,517)
Closing net book value
189,308
187,928
1,747
7,923
386,906
Year ended 31 July 2019
Opening net book value
Additions
Disposals
Amortisation
Exchange differences
Closing net book value
As at 31 July 2019
Cost
189,308
187,928
-
-
-
-
-
-
1,013
(2,847)
190,321
185,081
1,747
-
-
(184)
55
1,618
7,923
4,351
(13)
(3,168)
(52)
386,906
4,351
(13)
(3,352)
(1,831)
9,041
386,061
191,592
185,081
1,868
33,206
411,747
Accumulated amortisation/impairment
(1,271)
-
(250)
(24,165)
(25,686)
Closing net book value
190,321
185,081
1,618
9,041
386,061
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
53
Impairment tests for goodwill and brand
The aggregate carrying amounts of goodwill and brand allocated to each unit for impairment testing are as follows:
Group
New Zealand
Australia
Oboz
Goodwill
Brand
2019
NZ$’000
45,484
75,564
69,273
190,321
2018
NZ$’000
45,484
76,785
67,039
189,308
2019
NZ$’000
51,000
96,034
38,047
185,081
2018
NZ$’000
51,000
100,108
36,820
187,928
For the purposes of goodwill and brand impairment testing, the Group operates as three groups of cash generating units, New
Zealand, Australia and Oboz. The recoverable amount of each cash generating unit has been determined based on value in use.
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. The key assumptions used for the value in use calculation are as follows:
Terminal growth rate
New Zealand CGU pre-tax discount rate
Australia CGU pre-tax discount rate
Oboz CGU pre-tax discount rate
2019
1.0%
11.2%
10.5%
12.7%
2018
1.0%
12.4%
12.2%
-
The terminal growth rate assumption is based on a conservative estimate considering the current inflationary environment.
Pre-tax discount rates are calculated based on a market participants expected capital structure and cost of debt to derive a
weighted average cost of capital.
The calculations confirmed that there was no impairment of goodwill and brand during the year (2018: nil). The Board believes
that any reasonably possible change in the key assumptions used in the calculations would not cause the carrying amount to
exceed its recoverable amount.
The expected continued promotion and marketing of the Kathmandu and Oboz brands supports the assumption that the brand
has an indefinite life.
Capital commitments
Capital commitments contracted for at balance sheet date include intangible assets of $703,611 (2018: $748,139).
54
KATHMANDU ANNUAL REPORT 2019
Section 4 Capital Structure and Financing Costs
In this section
This section outlines how the Group manages its capital structure and related financing costs,
including its balance sheet liquidity and access to capital markets.
Capital structure is how a company finances its overall operations and growth by using different
sources of funds. The Directors determine and monitor the appropriate capital structure of
Kathmandu, specifically how much is raised from shareholders (equity) and how much is
borrowed from financial institutions (debt) in order to finance the Group’s activities both now
and in the future.
The Directors consider the Group’s capital structure and dividend policy at least twice a year ahead
of announcing results and do so in the context of its ability to continue as a going concern, to
execute strategy and to deliver its business plan.
4.1 Interest bearing liabilities
Accounting policies
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in the consolidated statement of
comprehensive income over the period of the borrowings
using the effective interest method.
Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date.
The table below separates borrowings into current and non-
current liabilities:
2019
NZ$’000
2018
NZ$’000
Current portion
Non-current portion
Total term loans
-
25,500
25,500
-
39,500
39,500
The Group has a multi-option facility agreement with
Commonwealth Bank of Australia and ASB Bank Limited, with
A$45 million repayable in full on 1 August 2022, A$15 million
repayable in full on 1 August 2021, and a multi-option facility
agreement with Bank of New Zealand with $40 million and
$30 million repayable in full on 21 March 2020 and 21 March
2021, respectively.
Interest is payable based on the BKBM rate (NZD borrowings),
the BBSY rate (AUD borrowings), or the applicable short term
rate for interest periods less than 30 days, plus a margin of up
to 1.30%. There are no assets pledged as security in relation to
the unsecured debt in the 2019 financial year (2018: nil).
The covenants entered into by the Group require specified
calculations of Group earnings before interest, tax,
depreciation and amortisation (EBITDA) plus lease rental costs
to exceed total fixed charges (net interest expense and lease
rental costs) at the end of each half during the financial year.
Similarly EBITDA must be no less than a specified proportion
of total net debt at the end of each six month interim period.
The calculations of these covenants are specified in the bank
facility agreements of 19 December 2011 and have been
complied with at 31 July 2019.
The current interest rates, prior to hedging, on the term loans
ranged between 2.31% - 2.47% (2018: 2.60% - 3.17%).
Section 4 Capital Structure and Financing Costs
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
55
The principal of interest bearing liabilities is:
Payable within 1 year
Payable 1 to 2 years
Payable 2 to 3 years
Payable 3 to 4 years
4.1.1 Finance costs
Interest income
Interest expense
Other finance costs
Net exchange loss/(gain) on foreign currency borrowings
2019
NZ$’000
2018
NZ$’000
-
-
15,000
10,500
25,500
-
39,500
-
-
39,500
2019
NZ$’000
2018
NZ$’000
(37)
1,877
886
189
2,915
(47)
1,389
652
(935)
1,059
Other finance costs relates to facility fees on banking arrangements.
4.1.2 Cash flow and fair value interest rate risk
Interest rate risk is the risk that fluctuations in interest rates impact the Group’s financial performance.
Risk
Interest rate risk
Exposure arising from
Monitoring
Interest bearing liabilities at
floating rates
Cash flow forecasting
Sensitivity analysis
Management
Interest rate swaps
Refer to section 4.2 for notional principal amounts and valuations of interest rate swaps outstanding at balance sheet date. A
sensitivity analysis of interest rate risk on the Group’s financial assets and liabilities is provided in the table below.
At the reporting date the interest rate profile of the Group's banking facilities was (carrying amount):
Total secured loans
less Principal covered by interest rate swaps
Net Principal subject to floating interest rates1
2019
NZ$’000
25,500
(23,263)
2,237
2018
NZ$’000
39,500
(37,587)
1,913
1. Debt levels fluctuate throughout the year and as at 31 July, are at a cyclical low. Forecast debt levels are expected to remain in excess of the interest rate
swaps for a significant majority of the year.
Interest rate swaps have the economic effect of converting borrowings from floating to fixed rates. The cash flow hedge loss on
interest rate swaps at balance sheet date was $111,252 (2018: $117,340).
56
KATHMANDU ANNUAL REPORT 2019
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% (2018: 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 2019
Carrying amount
$’000
Derivative financial instruments (asset) / liability
(4,842)
Financial assets
Cash
Financial liabilities
Borrowings
Total increase / (decrease)
6,230
25,500
31 July 2018
Carrying amount
$’000
Derivative financial instruments (asset) / liability
(4,858)
Financial assets
Cash
Financial liabilities
Borrowings
Total increase / (decrease)
4.1.3 Liquidity Risk
8,146
39,500
-1%
+1%
Profit
$’000
(235)
Equity
$’000
154
(45)
(45)
255
255
(25)
-
-
-
-
154
Profit
$’000
235
45
45
(255)
(255)
25
-1%
+1%
Profit
$’000
(376)
Equity
$’000
323
(59)
(59)
395
395
(40)
-
-
-
-
323
Profit
$’000
376
59
59
(395)
(395)
40
Equity
$’000
(151)
-
-
-
-
(151)
Equity
$’000
(312)
-
-
-
-
(312)
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Risk
Liquidity risk
Exposure arising from
Monitoring
Management
Interest bearing and other
liabilities
Forecast and actual cash
flows
Active working capital
management and flexibility in
funding arrangements
The Group has borrowing facilities of NZD $137,849,687 / AUD $132,060,000 (2018: NZD $140,729,053 / AUD $129,330,000 AUD)
and operates well within this facility. This includes short term bank overdraft requirements, and at balance sheet date no bank
accounts were in overdraft.
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
57
Keeping it simple
The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities
into relevant maturity groupings based on the remaining period at the balance sheet date to the
contractual maturity date. The amounts disclosed in the table are the contractual undiscounted
cash flows, so will not always reconcile with the amounts disclosed on the balance sheet.
Group 2019
Trade and other payables
Other financial liabilities
Borrowings
Group 2018
Trade and other payables
Other financial liabilities
Borrowings
Less than 1 year
NZ$’000
Between
1 and 2 years
NZ$’000
Between
2 and 5 years
NZ$’000
Over
5 years
NZ$’000
62,075
-
600
62,675
55,492
21,994
1,116
78,602
-
-
599
599
-
-
40,619
40,619
-
-
25,751
25,751
-
-
-
-
-
-
-
-
-
-
-
-
The Group enters into forward exchange contracts to manage the risks associated with the purchase of foreign currency
denominated products.
The table below analyses the Group’s derivative financial instruments that will be settled on a gross basis into relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in
the table are the contractual undiscounted cash flows. They are expected to occur and affect the profit or loss at various dates
between balance sheet dates and the following five years.
Less than 1 year
NZ$’000
Between
1 and 2 years
NZ$’000
Between
2 and 5 years
NZ$’000
At 31 July 2019
Forward foreign exchange contracts
- Inflow
- Outflow
Net Inflow / (Outflow)
Net settled derivatives – interest rate swaps
Net Inflow / (Outflow)
At 31 July 2018
Forward foreign exchange contracts
- Inflow
- Outflow
Net Inflow / (Outflow)
Net settled derivatives – interest rate swaps
Net Inflow / (Outflow)
118,968
(114,015)
4,953
(46)
147,505
(142,530)
4,975
-
-
-
9
-
-
-
(81)
(24)
-
-
-
-
-
-
-
-
58
KATHMANDU ANNUAL REPORT 2019
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).
At inception of the hedging relationship, the Group
documents the economic relationship between hedging
instruments and hedged items, including whether changes
in the cash flows of the hedging instruments are expected
to offset changes in the cash flows of the hedged items. The
Group also documents its risk management objectives and
strategy for undertaking its hedge transactions.
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 consolidated statement of comprehensive income.
Amounts accumulated in equity are recycled in the
consolidated 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
consolidated 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 consolidated 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 consolidated 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.
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
59
Derivative financial instruments
Foreign exchange contracts
Current asset
Current liability
Net foreign exchange contracts – cash flow hedge (asset / (liability))
Interest rate swaps
Current liability
Non-current liability
Net interest rate swaps – cash flow hedge (asset / (liability))
Total derivative financial instruments
2019
NZ$’000
2018
NZ$’000
4,964
(11)
4,953
(102)
(9)
(111)
4,842
5,076
(101)
4,975
(55)
(62)
(117)
4,858
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 sheet
date was $23,263,048 (2018: $37,586,507). The fixed interest rates range between 1.32% and 2.63% (2018: 2.12% and 3.05%). Refer
section 4.1.3 for timing of contractual 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$79,350,000, NZ$115,606,572 (2018: US$102,300,000, NZ$144,562,936).
No material hedge ineffectiveness for interest rate swaps or foreign exchange contracts exists as at balance sheet date (2018: nil).
Refer to section 4.2.1 for a sensitivity analysis of foreign exchange risk associated with derivative financial instruments.
4.2.1 Foreign exchange risk
Foreign exchange risk is the risk that fluctuations in exchange rates will impact the Group’s financial performance. 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.
Risk
Exposure arising from
Monitoring
Management
Foreign exchange risk
Foreign currency purchases
– over 90% of purchases are
in USD
Forecast purchases
Reviewing exchange rate
movements
USD foreign exchange
derivatives
The Group is exposed to currency risk on any cash remitted between Australia, the United Kingdom, United States of America
and New Zealand. The Group does not hedge for such remittances. 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.
60
KATHMANDU ANNUAL REPORT 2019
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% (2018: -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% (2018: -10% /
+10%) is reasonable given the exchange rate volatility observed on a 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.
-10%
+10%
31 July 2019
Carrying amount
$’000
Profit
$’000
Equity
$’000
Derivative financial instruments (asset) / liability
(4,842)
-
(13,339)
Financial assets
Cash
Trade receivables and other receivables
Other financial assets
Financial liabilities
Trade payables
Other financial liabilities
Borrowings
6,230
11,360
-
439
(806)
-
(367)
74,560
(5,067)
-
25,500
-
-
(5,067)
-
-
-
-
-
-
-
-
Total increase / (decrease)
(5,434)
(13,339)
Profit
$’000
-
(359)
706
-
347
4,145
-
-
4,145
4,492
Equity
$’000
10,915
-
-
-
-
-
-
-
-
10,915
31 July 2018
Carrying amount
$’000
Profit
$’000
Equity
$’000
Derivative financial instruments (asset) / liability
(4,858)
-
(16,456)
Profit
$’000
-
Equity
$’000
13,464
-10%
+10%
Financial assets
Cash
Trade receivables and other receivables
Other financial assets
Financial liabilities
Trade payables
Other financial liabilities
Borrowings
Total increase / (decrease)
8,146
10,506
22,180
72,770
21,994
39,500
628
(802)
(1,774)
(1,948)
(4,810)
(1,760)
-
(6,570)
(8,518)
-
-
-
-
-
-
-
-
(16,456)
(514)
656
1,452
1,594
3,935
1,440
-
5,375
6,969
-
-
-
-
-
-
-
-
13,464
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
61
4.3 Equity
Keeping it simple
This section explains material movements recorded in shareholders’ equity that are not explained
elsewhere in the financial statements. The movements in equity and the balance at 31 July 2019 are
presented in the consolidated statement of changes in equity.
Accounting policies
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as
a deduction, net of tax, from the proceeds.
Dividends
Dividends are recognised through equity following the approval by the Company’s directors.
4.3.1 Contributed equity - ordinary shares
Ordinary shares fully paid ($)
Balance at beginning of year
Issue of shares under Executive and Senior Management Long Term Incentive Plan
Shares issued under share placement and share purchase 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
Shares issued under share placement and share purchase plan
Ordinary shares issued at end of the year
2019
NZ$’000
251,113
249,882
1,231
-
251,113
2019
’000
225,315
874
-
226,189
2018
NZ$’000
249,882
200,209
971
48,702
249,882
2018
'000
201,497
670
23,148
225,315
As at 31 July 2019 there were 226,188,531 ordinary issued shares in Kathmandu Holdings Limited and these are classified as equity.
873,712 shares (2018: 669,669) were issued under the “Executive and Senior Management Long Term Incentive Plan 24 November
2010” during the year.
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 6.4 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 or loss
when the associated hedged transaction affects profit or loss.
62
KATHMANDU ANNUAL REPORT 2019
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 or 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 vested.
Reserves
(i) Cash flow hedging reserve
Opening balance
Revaluation - gross
Deferred taxation on revaluation
Transfer 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
Deferred taxation on share options
Transfer to Share Capital on vesting of shares to Employees
Share Options / Performance Rights lapsed
Closing balance
Total Reserves
4.3.3 Dividends
Prior year final dividend paid
Current year interim dividend paid
Dividends paid ($0.15 per share (2018: $0.13))
4.3.4 Capital risk management
2.3
2.3
2.3
2019
NZ$’000
2018
NZ$’000
3,498
(9,772)
607
9,579
206
4,118
(8,975)
(3,297)
-
(12,272)
2,760
721
(253)
(1,231)
(14)
1,983
(6,171)
2019
NZ$’000
24,836
9,047
33,883
(5,322)
13,865
(3,360)
(1,757)
72
3,498
(19,493)
10,518
-
(8,975)
1,813
1,489
429
(971)
-
2,760
(2,717)
2018
NZ$’000
18,195
9,013
27,208
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.
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
63
Section 5 Group Structure
In this section
This section provides information about the entities that make up the Kathmandu Group and how
they affect the financial performance and position of the Group.
5.1 Acquisition of Ob
z Footwear LLC
ō
In April 2018 Kathmandu Holdings Limited through its wholly-owned subsidiary Kathmandu US Holdings LLC acquired 100% of
the equity interests in Oboz Footwear LLC based out of Bozeman, Montana. The total purchase price was USD$60,000,000 plus a
proportionate contingent earn out of up to USD$15,000,000 based on an EBITDA target for the year ending 31 December 2018.
In accordance with the sale and purchase agreement the full contingent earn out of NZD$22,321,000 (USD$15,000,000) was paid
in April 2019. This cash consideration was paid using funds held in escrow on term deposit since acquisition.
The acquisition accounting fair value adjustments were on a provisional basis in the Group’s 31 July 2018 consolidated financial
statements. The acquisition accounting adjustments have now been finalised and updated to reflect independent valuations
performed on the net assets recognised on acquisition. As a result, the following adjustments (in NZD) have been recognised in
the prior period; a decrease in the customer relationship ($11,984,000), a decrease in the deferred tax liability ($3,552,000), an
increase in retained earnings ($139,000), and a corresponding increase in goodwill ($8,571,000).
Final Purchase Price Allocation
Purchase price
Less indebtedness settled on acquisition
Plus settlement adjustments
Total net consideration
Recognised amounts of identifiable assets acquired and liabilities assumed;
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets
Property, plant and equipment
Intangible assets
Customer relationships
Brand
Current liabilities
Trade and other payables
Non-current liabilities
Interest bearing liabilities
Deferred tax
Net assets acquired
Goodwill on acquisition
Total net consideration
NZD$’000
103,164
(8,349)
2,253
97,068
600
11,767
6,786
663
92
1,696
34,541
(5,087)
(6,915)
(9,973)
34,170
62,898
97,068
64
KATHMANDU ANNUAL REPORT 2019
5.2 Subsidiary companies
Subsidiaries are all entities over which the Group has control. Control is achieved when the Group:
• has power over the entity;
•
• has the ability to use its power to affect returns.
is exposed to, or has rights to, variable returns from its involvement with the entity; and
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary.
Subsidiary Companies
Principal Activity
Country of
Incorporation
Milford Group Holdings Limited
Holding company
New Zealand
Kathmandu Limited
Outdoor retailer
New Zealand
Kathmandu Pty Limited
Outdoor retailer
Australia
Kathmandu (U.K.) Limited
Outdoor retailer
United Kingdom
Kathmandu US Holdings LLC
Holding company
Oboz Footwear LLC
Footwear wholesaler
USA
USA
Holding
2019
2018 Balance Sheet
100%
100%
100%
100%
100%
100%
Date
100% 31 July
100% 31 July
100% 31 July
100% 31 July
100% 31 July
100% 31 December
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
65
Section 6 Other Notes
6.1 Related parties
6.2 Fair values
All transactions with related parties were in the normal course
of business and provided on commercial terms. No amounts
owed to related parties have been written off or forgiven
during the period.
Key Management Personnel
Salaries
Other short-term
employee benefits
Post-employment
benefits
Employee
performance rights
2019
NZ$’000
3,414
457
117
491
2018
NZ$’000
3,031
1,195
111
929
4,479
5,266
Key Management Personnel include the following employees:
Executive Directors:
• Chief Executive Officer
Senior Managers:
• Chief Operating Officer
• Chief Financial Officer and Company Secretary
Other Key Management Personnel:
• General Manager, Product
• General Manager, Marketing and Online
• General Manager, Supply Chain
• General Manager, Human Resources
• Chief Information Officer
• General Manager, Retail Stores and Operations
• General Manager Merchandising
• President Oboz / Kathmandu North America
Remuneration Detail – refer to section 6.3.
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.
Foreign exchange contracts and interest rate swaps
The fair value of these instruments is determined 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. These
are calculated at the present value of the estimated future
cash flows, based on observable yield curves and the fair
value of forward foreign exchange contracts, as 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
are approximately nil. All guarantees are payable on demand.
66
KATHMANDU ANNUAL REPORT 2019
6.3 Remuneration detail
2019
Short-term benefits
Post-
employment
benefits
Share based payments
Name
Cash
Salary
and fees
$
Cash
bonus
$
Non-
Monetary
benefits
$
Super-
annuation
$
Performance
Rights1
$
Equity
related
%
Performance
related
%
Total
$
Non-Executive Directors
David Kirk
John Harvey
Sandra McPhee
Philip Bowman
Brent Scrimshaw
255,006
133,629
133,629
133,629
133,629
789,522
-
-
-
-
-
-
Executive Directors
Xavier Simonet
854,336
127,587
854,336
127,587
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
255,006
133,629
133,629
133,629
133,629
789,522
21,635
21,635
227,691
18.5% 1,231,249
227,691
18.5% 1,231,249
Senior Managers and Other Key Management Personnel
Reuben Casey
Chris Kinraid2
409,061
51,524
27,846
21,938
Other Management 2,099,024
259,528
Total
4,203,467
436,899
3,440
325
16,367
20,132
12,272
1,546
81,451
116,904
87,441
16.2%
540,060
7,845
9.4%
83,178
167,764
490,741
6.4% 2,624,134
9.3% 5,268,143
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
28.9%
28.9%
21.3%
35.8%
16.3%
17.6%
1. This represents the accounting expense of amortising the value of performance rights during the year (refer to note 6.4). 618,555 performance rights were vested
and issued to key management personnel during FY2019 of which 51,020 related to Reuben Casey and 407,463 related to Xavier Simonet. 2. CFO from 14 May 2019.
2018
Name
Short-Term Benefits
Post-
employment
benefits
Share based payments
Cash
Salary
and fees
$
Cash
bonus
$
Non-
Monetary
benefits
$
Super-
annuation
$
Performance
Rights1
$
Equity
related
%
Performance
related
%
Total
$
Non-Executive Directors
David Kirk
John Harvey
Sandra McPhee
Philip Bowman
Brent Scrimshaw
John Holland
Christine Cross
241,302
126,236
126,236
105,197
105,197
21,039
21,039
746,246
-
-
-
-
-
-
-
-
Executive Directors
Xavier Simonet
858,480
528,091
858,480
528,091
-
-
-
-
-
-
-
-
-
-
Senior Managers and Other Key Management Personnel
Reuben Casey
394,810
136,500
Other Management 1,777,855
519,977
2,791
8,072
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
241,302
126,236
126,236
105,197
105,197
21,039
21,039
0.0% 746,246
21,744
21,744
11,841
77,685
398,637
22.1% 1,806,952
398,637
22.1% 1,806,952
166,055
23.3%
711,997
364,065
13.3% 2,747,654
Total
3,777,391 1,184,568
10,863
111,270
928,757
15.4% 6,012,849
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
51.3%
51.3%
42.5%
32.2%
35.1%
1. This represents the accounting expense of amortising the value of performance rights during the year (refer to note 6.4). 173,271 performance rights
were vested and issued to key management personnel during FY2018 of which 59,167 related to Reuben Casey and nil related to Xavier Simonet.
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
67
6.4 Employee share based remuneration
Accounting policy
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 consolidated
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
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.
Executive and Senior Management Long Term Incentive Plan
On 20 November 2013, shareholders approved at the Annual Meeting the continuation of an Employee Long Term Incentive Plan
(LTI) (previously established 24 November 2010) to grant performance rights to Executive Directors, Senior Managers, Other Key
Management Personnel and Wider Leadership Management.
Executive Directors and Senior Managers
Performance rights granted to Executive Directors and Senior Managers are summarised below:
Grant Date
20 Dec 2018
20 Dec 2017
19 Dec 2016
16 Dec 2015
Balance at
start of year
number
Granted during
the year
number
Vested during
the year
number
Lapsed during
the year
number
Balance at
the end of year
number
-
374,437
375,810
407,463
261,388
-
-
-
1,157,710
261,388
-
-
-
(407,463)
(407,463)
-
-
-
-
-
261,388
374,437
375,810
-
1,011,635
The performance rights granted on 20 December 2018 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
20 Dec 2018
20 Dec 2017
19 Dec 2016
Tranches
EPS Weighting
TSR Weighting
1
1
1
50%
50%
50%
50%
50%
50%
68
KATHMANDU ANNUAL REPORT 2019
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:
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
Kathmandu Holdings Limited’s EPS relative to the year ending
31 July 2018. The applicable performance periods are:
Kathmandu Holdings
Limited relative TSR ranking
Below the 50th percentile
50th percentile
51st – 74th percentile
% Vesting
Tranche
0%
50%
Tranche 1
50% + 2% for each
percentile above the 50th
2019
Performance
Period
2018
Performance
Period
FY21 EPS relative
to FY18 EPS
FY20 EPS relative
to FY17 EPS
75th percentile or above
100%
The TSR performance is calculated for the following
performance periods:
The percentage of the 2019 EPS growth related rights scales
according to the compound average annual EPS growth
achieved as follows:
Tranche
Tranche 1
2019
2018
EPS Growth
36 months to 1
December 2021
36 months to 1
December 2020
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:
2019
2018
Fair value of TSR rights
$205,190
$267,161
Current price at grant date
Risk free interest rate
Expected life (years)
$2.77
1.76%
3
$2.42
2.06%
3
Expected share volatility
28.9%
43.0%
2019 %
Rights
Vesting
0%
EPS
Growth
< 7%
50%
>=7%, < 8%
60% >=8%, < 9%
70% >=9%, < 10%
80% >=10%, < 11%
90% >=11%, < 12%
2018 %
Rights
Vesting
0%
50%
60%
70%
80%
90%
100%
>=12%
100%
< 7%
>=7%, < 8%
>=8%, < 9%
>=9%, < 10%
>=10%, < 11%
>=11%, < 12%
>=12%
The fair value of the EPS 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.
Vesting of Long Term Incentive performance rights also
require remaining in employment with the Company during
the performance period.
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
69
Other Key Management Personnel and Wider Leadership Management
Performance rights granted to Other Key Management Personnel and Wider Leadership Management are all Short Term
Incentives under the shareholder approved Employee Long Term Incentive Plan, and are summarised below:
Grant Date
18 Dec 2018
11 Dec 2017
07 Dec 2016
Balance at start
of year
number
Granted during
the year
number
Vested during the
year
number
Lapsed during
the year
number
Balance at
the end of year
number
-
568,941
466,249
524,220
-
-
-
-
(466,249)
(524,220)
(17,755)
-
-
551,1861
-
1. Remaining performance rights on vesting date 31 July 2019, which were subsequently issued on 14 August 2019.
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 – Other Key Management Personnel and Wider Leadership Management
2019
2018
18 Dec 2018
11 Dec 2017
31 Jul 2019
31 Jul 2020
31 Jul 2018
31 Jul 2019
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$2.54
per right (2018: NZ$2.14).
The non-market performance hurdles set for the year ending 31 July 2019 were met and accordingly an expense has been
recognised in the consolidated statement of comprehensive income.
Expenses arising from equity settled share based payments transactions
Executive Director
Key Management Personnel and Wider Leadership Management
2019
NZ$’000
228
493
721
2018
NZ$’000
399
1,090
1,489
70
KATHMANDU ANNUAL REPORT 2019
6.5 Contingent liabilities
Audit fees
During the year the following fees were paid or payable for
services provided by the auditor of the parent entity, its
related practices and other network audit firms:
2019
NZ$’000
2018
NZ$’000
Audit services - PricewaterhouseCoopers
Group audit - PwC New Zealand
UK Statutory audit - PwC UK
Half year review
186
20
36
Non-audit services - PricewaterhouseCoopers
Revenue certificates
Banking compliance certificates
Total remuneration for
PricewaterhouseCoopers services
12
3
257
155
20
33
16
2
226
There are no contingent liabilities in 2019 (2018: nil).
6.6 Contingent assets
There are no contingent assets in 2019 (2018: nil).
6.7 Events occurring after
balance sheet date
There are no events after balance sheet date which materially
affect the information within the consolidated financial
statements.
6.8 Supplementary information
Directors fees
Directors' fees
2019
NZ$’000
790
2018
NZ$’000
746
Directors fees for the Parent company were paid to the
following:
• David Kirk (Chairman)
• Sandra McPhee
•
John Harvey
• Philip Bowman
• Brent Scrimshaw
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
71
6.9 New accounting standards
New standards first applied in the year
Effective Date
Applicable to
the Group
1 August 2018
New
Accounting
Standard
NZ IFRS 9
Financial
Instruments
Summary of
Changes
Group Impact
Addresses the classification,
measurement and de-
recognition of financial
assets and financial
liabilities and new rules for
hedge accounting.
The Group has reviewed its financial assets and liabilities and
noted no material impact from the adoption of NZ IFRS 9.
The Group has assessed which business models apply to its
financial assets and classified these into the appropriate
categories under NZ IFRS 9. The only reclassification arising
is the financial assets previously classified as loans and
receivables now fall into the amortised cost category.
The financial assets classified in the amortised cost
category are now subject to the new impairment model
which requires the recognition of impairment provisions
based on expected credit losses (ECL). Under NZ IAS 39
an incurred credit loss model was applied. Based on the
Group’s assessment of historical provision rates and forward-
looking analysis, there is no material financial impact on the
impairment provisions.
NZ IFRS 9 does not impact the classification or measurement
of the Group’s financial liabilities.
The new hedge accounting rules align the accounting for
hedging instruments more closely with the Group’s risk
management practices. The Group has confirmed that its
current hedge relationships qualify as continuing hedges
under NZ IFRS 9. Accordingly, there is no significant impact
on the accounting treatment for the Group’s hedging
relationships. The nature and extent of the Group’s disclosure
note in relation to its hedging relationships has been
changed in these consolidated financial statements for the
period ending 31 July 2019.
72
KATHMANDU ANNUAL REPORT 2019
Effective Date
Applicable to
the Group
1 August 2018
New
Accounting
Standard
NZ IFRS 15
Revenue from
Contracts with
Customers
Summary of
Changes
Group Impact
Establishes the reporting
principles relating to the
nature, amount, timing and
uncertainty of revenue and
cash flows arising from a
contract with a customer.
The group has reviewed its revenue recognition policies upon
adoption of NZ IFRS 15 and noted no material impact.
Work focused on segregating the different revenue streams
within the business. The majority of revenue is made up of
in store transactions with 21% earned through online and
wholesale sales.
The following matters were identified to be relevant to the
Group under NZ IFRS 15:
- A customers’ right of return in determining revenue to be
recognised. Return rates for sales were analysed and it
was determined that there was no material impact from
adoption of NZ IFRS 15.
- For online sales and wholesale sales, whether arranging
the delivery of goods is a separate performance
obligation as it may impact the timing, measurement
and classification of revenue recognised. After
assessment of the Group’s current accounting policies
there is no material impact from adoption of NZ IFRS 15.
Standards, interpretations and amendments to published standards that are not yet effective
NZ IFRS 16
Leases
1 August 2019
Introduces a single lessee
accounting model requiring
a lessee to recognise
assets and liabilities for all
leases with a term of more
than 12 months where
they are not considered
low value. A right-of-use
asset will be recognised
representing the right to
use the underlying leased
asset and a lease liability
representing the obligations
to make lease payments.
As a consequence, a lessee
recognises depreciation
of the right-of-use asset
and interest on the lease
liability.
This standard will materially impact the Group’s consolidated
financial statements at transition and in future years, as
the Group’s operating leases (primarily in relation to store,
distribution centre and office leases) are recognised on
balance sheet.
The implementation plan for the new standard is now
complete including;
-
Identification of leases and contracts that include a
lease;
- Collation of lease data required for the calculation of the
impact assessment;
-
Identification of necessary changes to systems and
processes required to enable reporting and accounting in
accordance with the new standard; and
- Selection of appropriate accounting policies around
transition method, discount rates and estimates of
lease-term for leases with options.
The Group will adopt the simplified transition approach
under NZ IFRS 16 in the period ending 31 July 2020 and will
not restate comparative amounts.
FINANCIAL STATEMENTS
KATHMANDU ANNUAL REPORT 2019
73
New
Accounting
Standard
Effective Date
Applicable to
the Group
Summary of
Changes
Group Impact
Note 2.2 reflects that as at 31 July 2019 the Group had lease
commitments for operating leases of $206m.
Based on the current leasing arrangements as at 31 July
2019 the application of NZ IFRS 16 is expected to have the
following impact on the group balance sheet;
- Recognition of a right of use asset of approximately
$177m;
- Recognition of a lease liability of approximately $212m;
- Reduction in trade and other payables of approximately
$13m;
- Reduction in the deferred tax liability of approximately
$10m; and
- Reduction in opening retained earnings of approximately
$12m.
The impact on the consolidated statement of comprehensive
income for the year ended 31 July 2020 is expected to be a;
- Reduction in selling and administration and general
expenses of approximately $59m;
-
Increase in depreciation and amortisation of
approximately $51m; and
-
Increase in finance expenses of approximately $7m.
The impact on each of these line items is expected to
be significant however the overall net profit after tax is
expected to be immaterial.
Operating cash flows for the year ended 31 July 2020 are
expected to increase by $48m under NZ IFRS 16 as result of
reclassifying rent payments to financing activities reflecting
the repayment of lease liabilities.
The above has no effect to the Group and the change is for
financial reporting purposes only.
Current estimates are likely to change for the period ending
31 July 2020, mainly due to;
- Subsequent movements in the discount rate;
- New lease contracts entered into by the Group;
- Any changes to existing lease contracts; and
- Change in management’s judgement to exercise rights
of renewals under lease arrangements.
74
the consolidated balance sheet as at 31 July 2019;
the consolidated statement of comprehensive income for the year then ended;
the consolidated balance sheet as at 31 July 2019;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
the consolidated statement of cash flows for the year then ended; and
accounting policies.
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Independent auditor’s report
To the shareholders of Kathmandu Holdings Limited
Independent auditor’s report
To the shareholders of Kathmandu Holdings Limited
We have audited the consolidated financial statements which comprise:
We have audited the consolidated financial statements which comprise:
Our opinion
In our opinion, the accompanying consolidated financial statements of Kathmandu Holdings Limited
Our opinion
(the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
In our opinion, the accompanying consolidated financial statements of Kathmandu Holdings Limited
financial position of the Group as at 31 July 2019, its financial performance and its cash flows for the
(the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
financial position of the Group as at 31 July 2019, its financial performance and its cash flows for the
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
Basis for opinion
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
further described in the Auditor’s responsibilities for the audit of the consolidated financial
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
statements section of our report.
further described in the Auditor’s responsibilities for the audit of the consolidated financial
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
statements section of our report.
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
our opinion.
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
accordance with these requirements.
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
Our firm carries out other services for the Group in the areas of an assurance compliance
accordance with these requirements.
engagement in respect of bank covenant compliance and agreed upon procedures for store turnover
certificates. The provision of these other services has not impaired our independence as auditor of the
Our firm carries out other services for the Group in the areas of an assurance compliance
Group.
engagement in respect of bank covenant compliance and agreed upon procedures for store turnover
certificates. The provision of these other services has not impaired our independence as auditor of the
Group.
PricewaterhouseCoopers
PwC Centre, Level 4, 60 Cashel Street, Christchurch Central, PO Box 13244, Christchurch 8141, New Zealand
T: +64 3 374 3000, F: +64 3 374 3001, pwc.co.nz
PricewaterhouseCoopers
PwC Centre, Level 4, 60 Cashel Street, Christchurch Central, PO Box 13244, Christchurch 8141, New Zealand
T: +64 3 374 3000, F: +64 3 374 3001, pwc.co.nz
KATHMANDU ANNUAL REPORT 2019
Independent auditor’s report
To the shareholders of Kathmandu Holdings Limited
Independent auditor’s report
To the shareholders of Kathmandu Holdings Limited
We have audited the consolidated financial statements which comprise:
the consolidated balance sheet as at 31 July 2019;
We have audited the consolidated financial statements which comprise:
the consolidated statement of comprehensive income for the year then ended;
the consolidated balance sheet as at 31 July 2019;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant
the consolidated statement of cash flows for the year then ended; and
accounting policies.
the notes to the consolidated financial statements, which include a summary of significant
Our opinion
accounting policies.
In our opinion, the accompanying consolidated financial statements of Kathmandu Holdings Limited
Our opinion
(the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
In our opinion, the accompanying consolidated financial statements of Kathmandu Holdings Limited
financial position of the Group as at 31 July 2019, its financial performance and its cash flows for the
(the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
financial position of the Group as at 31 July 2019, its financial performance and its cash flows for the
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
Basis for opinion
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
further described in the Auditor’s responsibilities for the audit of the consolidated financial
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
statements section of our report.
further described in the Auditor’s responsibilities for the audit of the consolidated financial
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
statements section of our report.
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
accordance with these requirements.
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
Our firm carries out other services for the Group in the areas of an assurance compliance
accordance with these requirements.
engagement in respect of bank covenant compliance and agreed upon procedures for store turnover
certificates. The provision of these other services has not impaired our independence as auditor of the
Our firm carries out other services for the Group in the areas of an assurance compliance
Group.
engagement in respect of bank covenant compliance and agreed upon procedures for store turnover
certificates. The provision of these other services has not impaired our independence as auditor of the
Group.
75
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $4 million, which represents approximately 5%
of profit before tax.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark.
We agreed with the Audit and Risk Committee that we would report to
them misstatements identified during the audit above $400,000.
We have determined that there is two key audit matters:
Finalisation of the Oboz Footwear LLC purchase price allocation; and
Inventory valuation and existence
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industries in which the Group operates.
The accounting function for Kathmandu is maintained in New Zealand, the Oboz accounting function
is located in the USA. The Group audit was conducted by a New Zealand based team.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
PwC Centre, Level 4, 60 Cashel Street, Christchurch Central, PO Box 13244, Christchurch 8141, New Zealand
PwC Centre, Level 4, 60 Cashel Street, Christchurch Central, PO Box 13244, Christchurch 8141, New Zealand
PricewaterhouseCoopers
T: +64 3 374 3000, F: +64 3 374 3001, pwc.co.nz
PricewaterhouseCoopers
T: +64 3 374 3000, F: +64 3 374 3001, pwc.co.nz
PwC 46
KATHMANDU ANNUAL REPORT 2019FINANCIAL STATEMENTS
76
Key audit matter
Finalisation of the Oboz Footwear LLC
purchase price allocation
How our audit addressed the key audit matter
In responding to the significant judgements involved in
identifying and valuing the intangible assets acquired we:
As disclosed in note 5.1 of the financial
statements, the Group acquired 100%
of the shares of Oboz Footwear LLC
(Oboz), on 4 April 2018, for
consideration of $103.1 million of
which $22.3 million was contingent on
an EBITDA target being met for the
year ending 31 December 2018.
The purchase price included
identifiable tangible and intangible
assets acquired and liabilities assumed.
Management engaged a third party
(management expert) to assist in a
process to identify and determine the
fair value of these assets and liabilities.
In addition to Goodwill of $62.9
million management identified
intangible assets relating to Brand and
Customer Relationships held by Oboz
valued at $34.5 million and $1.7
million respectively.
Our audit focused on this area because
significant judgement and estimates
are involved in identifying and
determining the fair value of the
intangible assets acquired.
Reviewed the sale and purchase agreement and other
documents related to the acquisition to obtain an
understanding of the transaction and to confirm the
consideration;
Confirmed the final EBITDA target was achieved and
the contingent consideration was paid;
Met with Group and Oboz management to obtain an
understanding of the business process undertaken to
identify and value the assets acquired and liabilities
assumed;
Considered whether identification and recognition of
intangible assets was consistent with the requirements
of the accounting standards;
Engaged our internal valuation expert to assess the
appropriateness of assets identified and the valuation
methodology applied by managements expert;
Discussed the valuation methodology and
assumptions with managements expert; and
Considered whether the relevant disclosures were
appropriate in the consolidated financial statements.
From the procedures performed we have no matters to
report.
PwC 47
KATHMANDU ANNUAL REPORT 2019
Key audit matter
How our audit addressed the key audit matter
Finalisation of the Oboz Footwear LLC
In responding to the significant judgements involved in
purchase price allocation
identifying and valuing the intangible assets acquired we:
which $22.3 million was contingent on
Confirmed the final EBITDA target was achieved and
As disclosed in note 5.1 of the financial
statements, the Group acquired 100%
of the shares of Oboz Footwear LLC
(Oboz), on 4 April 2018, for
consideration of $103.1 million of
an EBITDA target being met for the
year ending 31 December 2018.
Reviewed the sale and purchase agreement and other
documents related to the acquisition to obtain an
understanding of the transaction and to confirm the
consideration;
the contingent consideration was paid;
Met with Group and Oboz management to obtain an
understanding of the business process undertaken to
identify and value the assets acquired and liabilities
The purchase price included
identifiable tangible and intangible
assets acquired and liabilities assumed.
assumed;
Management engaged a third party
(management expert) to assist in a
process to identify and determine the
fair value of these assets and liabilities.
In addition to Goodwill of $62.9
million management identified
intangible assets relating to Brand and
Customer Relationships held by Oboz
valued at $34.5 million and $1.7
million respectively.
Considered whether identification and recognition of
intangible assets was consistent with the requirements
of the accounting standards;
Engaged our internal valuation expert to assess the
appropriateness of assets identified and the valuation
methodology applied by managements expert;
Discussed the valuation methodology and
assumptions with managements expert; and
Considered whether the relevant disclosures were
appropriate in the consolidated financial statements.
From the procedures performed we have no matters to
Our audit focused on this area because
significant judgement and estimates
report.
are involved in identifying and
determining the fair value of the
intangible assets acquired.
77
Key audit matter
Inventory valuation and existence
At 31 July 2019, the Group held
inventories of $122.8 million.
Inventory valuation and existence was
an audit focus area because of the
number of stores/locations that
inventory was held at, and the
judgement applied in the valuation of
inventory to incorporate inventory
shrinkage. As described in note 3.1.1 of
the financial statements, inventories
are carried at the lower of cost and net
realisable value on a weighted average
basis.
The Group has systems and processes
including a barcode inventory
management system to accurately
record inventory movements.
Management engage an independent
third party to complete full stock takes
at each store twice a year. This process
is managed centrally by head office for
consistency. Daily cycle counts are
performed at the New Zealand and
Australian distribution centres. A full
inventory count was performed at the
US Oboz distribution centre at year
end.
There are judgements applied in
assessing the level of provision for
inventory shrinkage. Management
provide for shrinkage each month on a
location by location basis. The level of
provision is based on historical
inventory counts and stocktake
shrinkage trends.
How our audit addressed the key audit matter
We performed a number of audit procedures over
inventory existence and valuation. We
Observed the stocktake process at selected store
locations near period end and undertook our own test
counts;
Attended the year end Oboz distribution centre count
and performed independent test counts;
Validated all stores had been counted twice in the year
by an independent third party by selecting a sample of
locations not visited by us and inspected results of
stock counts held and confirmed variances were
correctly accounted for and approved by head office
management;
Observed the daily stocktake process at the
Christchurch and Melbourne distribution centres near
period end and undertook our own test counts. We
also validated that daily counts occurred by selecting a
sample of days for each location and inspected the
count records for those days;
Assessed the inventory shrinkage provision by
reviewing the level of inventory write downs during
the period. We tested the shrinkage rate used to
calculate the provision for each store since the last
stocktake by comparing it to the actual shrinkage rate
in prior periods;
Assessed store inventory counts performed post year
end to ensure the actual level of shrinkage was
consistent with the year-end provisioning;
Held discussions with management, including
merchandising personnel, to understand and
corroborate the assumptions applied in estimating
inventory provisions;
Evaluated key assumption made by management that
current shrinkage levels were consistent with historical
levels through an analysis of inventory items by
category and age and the level of inventory write-
downs during the period compared to prior periods;
and
Tested that inventory on hand at the end of the period
was recorded at the lower of cost and net realisable
value by testing a sample of inventory items to the
most recent retail price.
From the procedures performed we have no matters to
report.
PwC 47
PwC 48
KATHMANDU ANNUAL REPORT 2019FINANCIAL STATEMENTS
78
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not, and will
not, express any form of assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard, except that not all other information was available to us at the date of our signing.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
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.
The engagement partner on the audit resulting in this independent auditor’s report is Leopino Foliaki.
For and on behalf of:
Chartered Accountants
18 September 2019
PwC 49
Christchurch
KATHMANDU ANNUAL REPORT 2019
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not, and will
not, express any form of assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard, except that not all other information was available to us at the date of our signing.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
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.
The engagement partner on the audit resulting in this independent auditor’s report is Leopino Foliaki.
For and on behalf of:
Chartered Accountants
18 September 2019
PwC 49
Christchurch
STATUTORY INFORMATION
KATHMANDU ANNUAL REPORT 2019
79
Statutory Information
Employee Remuneration
The Group operates in New Zealand, Australia, USA 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, 56% 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
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
220,000
230,000
240,000
250,000
260,000
320,000
350,000
360,000
370,000
400,000
500,000
600,000
2,120,000
$
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
220,000
230,000
240,000
250,000
260,000
270,000
330,000
360,000
370,000
380,000
410,000
510,000
610,000
2,130,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12
12
7
8
11
8
5
7
1
1
2
1
1
4
1
3
2
1
1
2
1
1
1
1
1
Distribution of shareholders and holdings
Number
of
Holders
1,185
1,523
592
623
40
%
30%
38%
15%
16%
Number of
Ordinary
Shares
573,356
4,136,864
4,469,298
15,687,700
%
0%
2%
2%
7%
1% 201,872,499
89%
1 to 999
1,000 to 4,999
5,000 to 9,999
10,000 to 99,999
100,000 and over
Total
3,963 100% 226,739,717 100%
The details set out above were as at 3 September 2019.
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 199 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 3 September
2019.
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 of 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.
80
KATHMANDU ANNUAL REPORT 2019
(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 3 September 2019, were as follows:
Briscoe Group Limited (21 August 2018)
Jarden Partners Limited (3 September 2019)
TA Universal Investment Holdings and others (15 August 2017)
Commonwealth Bank of Australia (24 June 2019)
Accident Compensation Corporation (ACC) (31 July 2019)
Ordinary Shares
42,673,302
30,603,351
24,212,664
14,275,554
11,374,709
%
18.8%
13.5%
10.7%
6.3%
5.0%
As at 3 September 2019, the Company had 226,739,717 ordinary shares on issue.
Principal Shareholders
The names and holdings of the twenty largest shareholders as at 3 September 2019 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 PTY LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
10 FORSYTH BARR CUSTODIANS LIMITED
11 NEW ZEALAND DEPOSITORY NOMINEE LIMITED
12 FNZ CUSTODIANS LIMITED
13 INVESTMENT CUSTODIAL SERVICES LIMITED
14 NEWECONOMY COM AU NOMINEES PTY LIMITED
15 FNZ CUSTODIANS LIMITED
16 PT BOOSTER INVESTMENTS NOMINEES LIMITED
17 MR XAVIER MARIE SIMONET
18 CITICORP NOMINEES PTY LIMITED
19 GUANQUAN LU
20 STRONG MOTORCYCLES PTY LTD
90,395,683 39.87%
42,673,302 18.82%
21,363,861
9.42%
12,763,693
5.63%
9,440,068
4.16%
3,794,467
1.67%
3,368,209
1.49%
2,843,135
1.25%
2,395,776
1.06%
2,061,190
0.91%
2,060,041
0.91%
1,873,350
0.83%
867,920
0.38%
629,735
0.28%
575,625
0.25%
550,194
0.24%
423,725
0.19%
411,868
0.18%
380,300
0.17%
336,898
0.15%
STATUTORY INFORMATION
KATHMANDU ANNUAL REPORT 2019
81
Directors’ Shareholdings
Directors held interests in the following shares of the Company at 31 July 2019:
David Kirk
beneficially owned
Sandra McPhee
beneficially owned
John Harvey
beneficially owned
Xavier Simonet
beneficially owned
68,955
65,767
58,508
423,725
Share Dealings by Directors
In accordance with Section 148(2) of the Companies Act 1993, the Board has not received any disclosures from the Directors in
relation to acquisitions or disposals of relevant interests in the Company between 1 August 2018 and 31 July 2019.
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 2019.
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 2019, 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 2019, and those who ceased to hold office during the
year ended 31 July 2019, are as follows:
Milford Group Holdings Limited
Reuben Casey, Xavier Simonet, Chris Kinraid (appointed 20 May 2019)
Kathmandu Limited
Reuben Casey, Xavier Simonet, Chris Kinraid (appointed 20 May 2019)
Kathmandu Pty Limited
Paul Stern, Reuben Casey, Xavier Simonet, Chris Kinraid (appointed 14 May 2019)
Kathmandu (U.K.) Limited
Reuben Casey, Xavier Simonet, Chris Kinraid (appointed 20 May 2019)
Kathmandu US Holdings LLC
Xavier Simonet, Reuben Casey (appointed 25 March 2019)
Oboz Footwear LLC
Amy Beck (appointed 25 March 2019)
82
KATHMANDU ANNUAL REPORT 2019
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 2019 are as follows:
DAVID KIRK
New Zealand Foodshare Trust
NZ Rugby Players Association
Forsyth Barr Group Limited
Chairman
Chairman
Chairman
Bailador Investment Management Pty Limited
Managing Partner
Bailador Technology Investments Limited (including investee companies)
Chairman
NZ Performance Horses Limited
Lord Howe Island Board
JOHN HARVEY
Stride Property Limited
Investore Property Limited
Heartland Bank Limited
Pomare Investments Limited
Port of Napier Limited
Director
Director
Director
Director
Director
Director
Director
Resource Coordination Partnership Limited
Advisor to the Board
SANDRA McPHEE
JP Morgan Advisory Council
St Vincents and Mater Health Sydney Community Advisory Council
NSW Public Service Commission Advisory Board
Australian Public Service Commission
PHILIP BOWMAN
Majid al Futtaim Properties LLC
Tegel Group Holdings Limited
Sky Network Television Limited
Ferrovial SA
Better Capital PCC Limited
Potrero Distilling Holdings LLC
Majid al Futtaim Holdings LLC
BRENT SCRIMSHAW
Unscriptd Limited
Rhinomed Limited
Catapault Group International Limited
Member
Chairman
Member
Advisor
Chairman
Chairman
Chairman
Director
Director
Director
Director
CEO and Co-Founder
Director
Director
STATUTORY INFORMATION
KATHMANDU ANNUAL REPORT 2019
83
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
Kathmandu US Holdings LLC
Oboz Footwear LLC
Directors’ Details
David Kirk
Xavier Simonet
John Harvey
Philip Bowman
Brent Scrimshaw
Sandra McPhee
Andrea Martens
Chairman, Non-Executive Director
Managing Director and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (ceased September 2019)
Non-Executive Director (appointed 1 August 2019)
Executives’ Details
Xavier Simonet
Chief Executive Officer
Directory
The details of the Company’s principal administrative and registered office in New Zealand is:
223 Tuam Street
Christchurch Central
PO Box 1234
Christchurch 8011
84
KATHMANDU ANNUAL REPORT 2019
Directory
Share registry
In New Zealand:
Link Market Services (LINK)
Physical Address:
Level 11, Deloitte Centre,
80 Queen Street, Auckland 1010
New Zealand
Postal Address:
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.
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