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our capability to sell and service customers globally and growing our online business in the uK is a first step in this strategy. We intend to invest further to support the international growth opportunity for Kathmandu that this, and other related channels will provide us. 

Kathmandu’s product range growth in the past two years has supported sales growth over that time. Investment in new and innovative product will always be a focus, but our strategy in the near term will be to align our ranging to our store network and the variations that we have in the regions we sell to and the formats of those stores. at the same time we expect inventory levels (units and $) will grow in line with overall sales growth, as compared to the lift in levels in FY2012 and FY2013 that were primarily range growth related. 

## capital inVestment 

the uplifted three year capital expenditure programme that was initiated last year has involved substantial investment in enlarged and improved distribution facilities, the establishment of a new office in Melbourne for our australian domiciled support team, and completion of the targeted portion of the rollout of the new brand identity to our stores. the bulk of planned physical infrastructure investment that is not directly related to our store network is now complete, but we will be investing greater amounts in store refurbishments and relocations going forward, as well as new store rollouts. our investment in improved information systems continues, with our prime focus now being on enhancing the customer experience in store and online and ensuring we have the foundation to be able to deliver to the global market. 

## diVidend 

the Directors are again recommending a final dividend of 7 cents per share, with the 3 cents interim dividend making a total payout for the year of 10 cents per share. 

the final dividend will be fully imputed for new Zealand shareholders, and fully franked for australian shareholders. 

this dividend represents a payout ratio of 57% and the Board continues to expect the payout ratio will remain in 

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the 50% to 60% range during the period in which capital expenditure also runs at a similar ratio. 

## people 

the Board thanks Kathmandu’s Chief executive officer, peter Halkett and his team for the result achieved by the Company in a challenging year. It is pleasing to be writing this report with a positive outlook for our team domiciled in Christchurch after the challenging last two years, and the opening of our new Zealand distribution centre in august was a highlight in the recovery now underway in our home city. We continue to grow the depth and competency of our team in all the countries that Kathmandu operates in, and we welcomed a number of them as shareholders for the first time this year under our long term incentive plan. our future growth is being supported by a diverse and talented team of people. 

## outlook 

the economic prospects both globally and in australasia have to be viewed with real caution. our approach to the uK exemplifies the care that your Board is taking in future expansion, but there is no change to your Board’s view that the Kathmandu brand has genuine potential to be a significant global presence in the outdoor travel and adventure market. We are very clear that in the short term our key strategy remains to invest to grow the business and build the Kathmandu brand in the australasian market. 

It is essential that we both grow profitably and maintain our strategic competitive advantage, and we will thus ensure our investment in growth opportunities continues to focus primarily on this market where we know we can deliver further profit growth. We expect this investment, in conjunction with effective management of operating expenses, will result in an improved performance next year and further develop the wider capabilities the Company requires in order to pursue new growth opportunities for Kathmandu. 

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