kathmandu annual report 2012 11 our team  outlook  employee numbers as at 31 July 2012 reduced from  1733 last year to 1722. the reason for this change was  a decrease in causal employees and an increase in full  or part time permanent staff members from 50% to  approximately 62% of the total workforce. our annual  employee engagement survey again delivered pleasing  results for our employees’ support of our brand and their  positive view of Kathmandu as an employer. retention  within our retail management teams remains a specific  objective, and it continues to be challenging, particularly in  the australian market. However, we are making pleasing  progress, and additionally, the depth and competence of  our wider leadership team continues to improve as our  business grows. We hope that the worst impacts from the Christchurch  earthquakes are behind us. We continue to be very  appreciative of the tremendous on-going support and  commitment from our sales, distribution and office staff  located in our home city.  as a result of the impact of the Christchurch earthquakes,  and in the interest of growing the brand in the australian  market, we have continued to grow our Melbourne based  team, focussing on those areas of the business where  australian domiciled roles will best support our growth in  stores, marketing and direct-to-customer sales activity in  the future. In the three years that Kathmandu has been an aSX  and nZX listed company, we have achieved solid same  store sales and profit growth, and continued to roll out  new and profitable stores in australia and new Zealand.  although the economic environment is even more  uncertain today than it was when we listed, we continue  to have confidence that there will be profitable growth for  Kathmandu in both markets in the years ahead. In australia  we have a substantial store rollout programme to complete,  which will underpin achieving market penetration targets  closer to those of new Zealand. our expanded and ever  improving product range and the continuing growth in  Summit Club membership will strengthen our customer  loyalty, and grow sales in both countries. Investment in the Kathmandu brand and increasing  the scale of our business remains critical to delivering  our objectives. each year we will continue to target  15 new stores. We also plan at least 6 relocations or  refurbishments of existing stores as we enhance our brand  positioning, and take up opportunities to optimise earnings  growth. In the year ahead we will open flagship stores in  central Sydney and perth. locations such as these along  with other flagship stores already opened will help define  and lift our brand profile in the medium term. our substantial uplift in product investment over the past  two years as we filled obvious gaps and took up sensible  opportunities for range extension led to an increase in SKu  count of approximately 30% over that period. In the future  we will focus on alignment of our range to our retail stores’  footprint and location. our objective is to increase return  from each SKu in our range through investment in product  growth categories and assortment range planning that will  increase revenue and reduce cost to service ratios. after we complete re-organising the now enlarged  australian distribution centre later this year we anticipate  a period of reduced capital investment in physical  infrastructure relative to our spend in the past two  years. However this will be offset by our commitment to  continuing investment in our stores, both new and existing,  and our systems - including online. this investment is to  ensure we efficiently support our target australasian store  network, and that in the medium and longer term we have  capability to grow profitable global sales. Specifically, the  launch of our new online platform will support wider sales  activity in new markets, and planned investment to come in a new poS and CrM platform will also be critical to  wider international expansion. the medium and long term growth opportunities for  Kathmandu are numerous, but our immediate objective  is to increase earnings in FY2013 above the profit earned  this year despite the continuing uncertainty caused by the  wider economic environment. Given the level of investment  being made in our growth strategies we must be confident  that Kathmandu will deliver improved performance in  FY2013. our team will be working very hard to maximise  the return on the investment being made, not just in the  year ahead, but also in the longer term as we continue to  grow the Kathmandu brand. Peter Halkett Managing Director and  Chief executive officer