Ann: ADDRESS: KMD: KMD Chairman address to AGM 16

• Release Date: 16/11/12 14:59
• Summary: ADDRESS: KMD: KMD Chairman address to AGM 16 November 2012
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KMD
16/11/2012 12:59
ADDRESS

REL: 1259 HRS Kathmandu Holdings Limited

ADDRESS: KMD: KMD Chairman address to AGM 16 November 2012

KATHMANDU HOLDINGS LTD 11 NOVEMBER 2012
CHAIRMAN'S ADDRESS TO ANNUAL GENERAL MEETING

Good morning shareholders. I am pleased to report on another successful year
for Kathmandu Holdings Limited. Although Kathmandu was unable to match its
record earnings result of 2010/2011, the solid increase in same store sales
and uplift in second half year profits was a good result for the Company in
particularly difficult economic times.

Economic conditions globally are likely to continue to inhibit discretionary
consumer spending for some time. Coinciding with this time of economic
uncertainty is the accelerating development of multichannel retailing and
this is providing Australasian consumers with enhanced and ever increasing
opportunities to buy international brands online.

The combination of these two factors has had a very significant impact on the
buying behaviour across most discretionary retail categories. As Kathmandu is
a fully vertical brand with total control over how we develop and distribute
our products we are well positioned to compete in these circumstances, and to
do so we must continue to invest in our business, whilst managing our costs
to maintain profit growth.

Our primary growth opportunity remains to grow our business and market share
in Australasia, and particularly Australia, through increased and sustained
investment in our brand, product and retail channels. By this investment we
will maintain our leadership in the outdoor travel and adventure sector, and
the profit growth available to us will enhance shareholder value.

Financial Results for 2011/12

A 13.4% increase in sales to NZ$347.1 million, offset by a reduction in gross
profit margin to 63.2% and an 18.4% increase in operating expenses resulted
in a decrease in Earnings Before Interest and Tax in the year of 10.9%,  from
NZ$64 million to NZ$57 million. Whilst first half earnings were down by 43%
on the prior year, there was an increase in our earnings in the second half
and over 80% of the full year profit was earned in this period.

We achieved satisfactory same store sales growth in both Australia (6.5%) and
New Zealand (9.2%), but the smaller UK business same store sales result was
negative. Although operating costs increased at a higher rate than sales,
this was primarily as a result of non-recurring first half expenditure and
expenses associated with investment in infrastructure. Store numbers
increased by 10%, slightly below our target for the year.

Overall our EBIT margin reduced from 20.9% to 16.4%.

Growth Strategies

Kathmandu continues to focus overall on the 5 key growth strategies outlined
at the time of our IPO in 2009, specifically:
o  Continuing our new store rollout in Australia and New Zealand;
o  Improvement of our existing store network;
o  Enhancing the Kathmandu product offering;
o  Growing our Summit Club, and
o  Developing and growing our online and digital channel capabilities.

Peter Halkett will talk to you about our progress in these areas following my
address. We are confident that successful execution will differentiate
Kathmandu from competitors who either do not control their own brand or who
are unable to adequately invest for growth in the current environment.

New store opportunities, particularly in Australia, remain our most
significant and immediate growth opportunity. New stores and future growth in
Summit Club membership will underpin increasing our market penetration in
Australia, and similarly ongoing product development and investment in
inventory will remain focused on what is appropriate to grow share in this
market.

Looking to our wider opportunities, the online channel and the associated
development of direct to customer communication and marketing opportunities
through electronic and social media have already driven fundamental changes
in retailing strategy globally. Our new online platform is a significant step
in the development of our capability to sell and service customers across the
world, 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 through online and other related channels.

Capital Investment

The uplift in capital expenditure in 2011/2012 included substantial
investment in new physical infrastructure with enlarged and improved
distribution facilities in both Christchurch and Melbourne, the establishment
of a new office in Melbourne for our Australian domiciled support team, and
completion of the bulk of our rollout of the new brand identity to our
stores. Whilst most of planned physical infrastructure investment not
directly related to our store network is now complete, Kathmandu will
continue to be investing in store refurbishments and relocations as well as
our ongoing commitment to a target of 15 new store rollouts per annum. Our
investment in improved information systems is also continuing, with our prime
focus now being on enhancing the customer experiences both in store and
on-line and ensuring we have the foundation to be able to deliver to the
global market.

The investment strategy for Kathmandu is not just in capital assets and
product. We continue to grow the depth and competency of our team in all the
countries that where we operate, and we welcomed a number of them as
shareholders for the first time this year under our long term incentive plan.
Recruitment over the past year has included specialist leadership roles and
team establishment in areas as diverse as technical fabric development and
quality control, retail training and development, and online customer
service. Our growth strategies can only be delivered by talented people with
passion for the Kathmandu brand.

Outlook

Economic prospects both globally and in Australasia have to be viewed with
caution. Our approach to the U.K. exemplifies the care that we are taking in
future expansion, but there is no change to our 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 and grow the business and build the Kathmandu
brand in the Australasian market. As we grow profitably in this market we
will also be investing in the wider capabilities your Company requires in
order to pursue new growth opportunities for Kathmandu brand further afield,
when the time is right to do so.

James Strong
Chairman
End CA:00229846 For:KMD    Type:ADDRESS    Time:2012-11-16 12:59:48