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available to Kathmandu. The starting point for this is our re- organised UK business, where we are focused on online selling and the introduction of Kathmandu product to the market in other web based channels rather than further store rollout. Our experience in the UK and the performance of that business unit will be an important benchmark for your Board in the pathway to further expansion of the Kathmandu brand globally. 

## CAPITAL INVESTMENT 

We are continuing to budget for a substantial capital expenditure programme with a focus on delivering our store network plan, including a planned programme for store refurbishment and replenishment, along with investment in systems improvements. Over the past year we completed a record number of new and re-located store projects, and we have invested in the capability to continue this pace of store network expansion as we work towards a target of at least 170 stores in Australia and New Zealand. Additionally, we have a substantial investment continuing in systems development, in particular on the retail platform, to integrate with compatible applications such as our online engine. Our planning and prioritisation for systems upgrades will place us in a strong position to pursue strategic expansion opportunities for the Kathmandu brand. 

## DIVIDEND 

The Directors have declared an increase in the final dividend to 9 cents per share, which with the 3 cents interim dividend makes a total payout for the year of 12 cents per share, a 20% increase on the previous year. The final dividend will be fully imputed for New Zealand shareholders, and fully franked for Australian shareholders. 

This dividend reflects the growth in earnings per share, and represents a payout ratio of over 54%, which is in the middle of the payout range previously advised by the Board. 

## PEOPLE 

Whilst it is pleasing to be writing this report after such a successful year, it is also very sad to recognise that it coincided with the tragic loss of our founding Chairman, 

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James Strong AO. James died in March 2013 and the recognition he received from the business, sporting, arts and the wider community reflected his position as an outstanding Australasian of his generation. Kathmandu was very privileged to have had his leadership and guidance during our formative years as a listed company. In May, we were very pleased to announce the James Strong Memorial Project in his honour, which will provide additional education funding to benefit children in the Solu Khumbu, one of the most remote parts of Nepal. This project is being initiated in association with the Australian Himalayan Foundation, an organisation that James and Kathmandu have worked with in recognition of the source of our heritage as an outdoor brand. 

I have had the privilege to act as Interim Chairman for the period since James’ death, and your Board expects to be in a position to announce the appointment of an additional independent Director at our Annual General Meeting. The Board again thanks Kathmandu’s Chief Executive Officer, Peter Halkett, and his team for the results achieved by the Company in FY2013. The Kathmandu team successfully support and deliver the growth opportunities we target year after year, in a working and business environment where change is the norm rather than the exception. This reflects their capabilities and commitment to the long term success of our brand. 

## OUTLOOK 

Your Board believes there are sound reasons to remain confident about Kathmandu’s prospects for continued growth. The New Zealand economy is in relatively good shape, and despite the recent slow-down in the Australian economy, we consider most Australian consumers spending money in our category are still benefitting from a relatively strong exchange rate and they retain reasonable confidence in general. Economic indicators globally are more positive than a year ago, even if that improvement is relatively small. 

We believe that the Kathmandu brand has the opportunity and genuine potential to develop a significant global presence in the outdoor, travel and adventure market. However we are still very clear that the short term key growth strategy remains to invest and grow Kathmandu’s business and brand in the Australasian market. We anticipate a solid performance again next year as Kathmandu maintains its pre-eminent position as the brand of choice for outdoor, travel and adventure customers in Australia and New Zealand. 

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