1H FY2018 Preliminary interim report

Kathmandu Holdings Limited

New Zealand Stock Exchange Listing Rules Disclosure
Half Year Report

For the period ending 31 January 2018




Contents
Appendix 1
Media Announcement
Directors’ Report
Interim Report (including Independent Accountants’ Report)

Appendix 1

Kathmandu Holdings Limited

Results for Announcement to the Market

Reporting Period: 6 months to 31 January 2018
Previous Reporting Period: 6 months to 31 January 2017


Amount (000’s)
Percentage
Change
Revenues from ordinary activities $NZ 204,811 4.3%
Profit from ordinary activities after tax
attributable to security holder
$NZ 12,277 22.7%
Net profit attributable to security holder $NZ 12,277 22.7%

Interim Dividend Amount per
Security
Imputed
Amount per
Security
Interim Dividend $NZ 0.04 NIL
Record Date 08 June 2018
Payment Date 22 June 2018

For commentary on the results please refer to the Directors’ Report and Media Announcement
attached.

Financial Information
The Appendix 1 should be read in conjunction with the consolidated interim financial statements
for the 6 months ending 31 January 2018 contained in the Interim Report.

Net Tangible Assets per Security
2018
$
2017
$
Net tangible assets per security 0.22 0.14


Information on Audit or Review
The interim report is based on accounts which have been subject to review.

Loss/Gain of Control over Entities having Material Effect
Kathmandu Holdings Limited does not have any interests in entities which are not controlled
entities.

Kathmandu Holdings Limited
FY2018 first half results

 Sales increased by 4.3% to NZ$204.8m
 Gross profit increased by 7.2% to NZ$129.7m
 EBIT increased by 21.6% to NZ$18.0m
 NPAT increased by 23.0% to NZ$12.3m
 Interim dividend NZ 4.0 cents per share
 KMD announces acquisition of Oboz

Kathmandu Holdings Limited (ASX/NZX: KMD) today announced net profit after tax (NPAT) of
NZ$12.3 million for the six months ended 31 January 2018, an increase of NZ$2.3 million
compared with the prior corresponding period. Earnings before interest and tax (EBIT)
increased from NZ$14.8 million to NZ$18.0 million for the same period.

Summary of Results

NZD $m Change
1H FY2018 1H FY2017 NZD $m %
Sales 204.8 196.3 8.5 4.3%
Gross Profit 129.7 121.0 8.7 7.2%
EBITDA 25.1 21.5 3.6 16.7%
EBIT 18.0 14.8 3.2 21.6%
NPAT 12.3 10.0 2.3 23.0%


Chief Executive Xavier Simonet commented:
“Striking the right balance between generating sales growth and improving our gross margin
has fuelled healthy earnings growth in the first half. Sales momentum improved through the
end of the Christmas trading period and into February and March.”
“Our financial position continued to strengthen during the first half year and we ended the
period with healthy inventory and record low half year net debt.”

Sales, Store Numbers, Gross Margin and Inventory


Sales Growth
Sales grew by 3.7% in Australia, our largest market. New Zealand first quarter sales were
impacted by lower levels of clearance stock. In the last six weeks of the first half-year, New
Zealand same store sales growth was +1.9%. Online sales now comprise 8.0% of group sales.

Total Sales
Growth
Same Store
Sales Growth
Australia 3.7% 1.9%
New Zealand (6.4%) (6.3%)
Group (constant currency) 0.8% (0.8%)
Group (NZD reporting currency) 4.3% 2.7%
Note: Same store sales are for the 26 weeks ending 28 January 2018


Gross Margin
Gross margin increased 1.7% points from 61.6% in 1H FY17 to 63.3% in 1H FY18. Increased full
price sell through and higher average selling prices contributed to the improvement.

Inventory
Total inventory levels decreased by 12.7% (NZ$12.2m) from 1H FY2017 and by 13.8% on a per
store basis.

1H FY2018
NZD $m
1H FY2017
NZD $m
Change
NZD $m
Change
%
Change
per store %

Inventory

84.2

96.4

(12.2)

(12.7%)

(13.8%)

At the start of the financial year, clearance inventory levels were c. 40% below last year. While
this impacted clearance sales performance, particularly in the first quarter in New Zealand,
there were benefits to both gross margin and inventory handling costs. By the end of the first
half, the reset clearance stock levels were more in line with last year.

The reduction in total inventory continues to demonstrate the benefits of investments made in
forecasting and planning technology.

Operating Expenses

On a constant currency basis, operating expenses increased by $1.5m (1.5%) in 1H FY2018.
Operating expenses (excluding Rent) decreased by 0.3% as a percentage of sales, with supply
chain efficiencies from lower inventory handling costs achieved following automation of the
Australian distribution centre last year.

Rent increased on a constant currency basis by NZ$1.4m, primarily from key store relocations
and new stores opened.

Operating expenses (excluding depreciation)

1H FY2018
NZD $m
1H FY2017
NZD $m
Rent 33.2 30.5
% of Sales

16.2% 15.5%
Other operating expenses 71.4 69.0
% of Sales

34.9% 35.2%
Total operating expenses 104.6 99.5
% of Sales 51.1% 50.7%


Other Financial Information

NZ$8.7m was invested in capital projects, primarily in re-positioning and updating our store
network.

Continued working capital efficiency led to record low half year net debt and subsequent lower
financing costs. Gearing remains very conservative.

1H FY2018
NZD $m
1H FY2017
NZD $m
Capital Expenditure 8.7 6.8
Operating Cash Flow 16.9 10.0
Net Debt 17.0 48.9
Net Debt to Equity 4.9% 13.8%

Interim Dividend

An interim dividend of NZ$ 4.0 cents per share will be paid to shareholders on the register as at
8 June 2018. The dividend will be fully franked for Australian shareholders. The interim
dividend will not be imputed for New Zealand shareholders. The final dividend is expected to
be fully franked and fully imputed.

Trading Update

For the six weeks ending 11 March 2018, Group Sales were 7.9% above last year at constant
exchange rates. Same store sales growth was 7.5% for Australia and 5.1% for New Zealand.
February gross margins were also above last year in both countries.

Oboz acquisition

Kathmandu has agreed to acquire US-based Oboz Footwear LLC for a base cash consideration
of US$60 million, and earn-out of up to US$15 million. Oboz designs, sources, and sells
footwear for backpacking, hiking, travel, winter and general outdoor wear. Oboz distributes its
products directly to North American outdoor chains, specialty outdoor retailers, limited online
sellers, shoe stores and sporting goods retailers. For more information, please refer to the
Oboz acquisition announcement released on the ASX and NZX.

Outlook

Chief Executive Xavier Simonet commented:

“We are focused on delivering profit growth in our core markets for the second half of FY18.
The Australasian business provides the foundation for our brand to expand internationally. As
always the success of our full year result is still very dependent on the key promotion periods
to come.

We will continue to inspire our customers by creating distinctive, sustainable, quality products
and by promoting our brand authenticity.

As our wholesale business in Europe is expanding, we are now very pleased to announce the
acquisition of Oboz, an innovative outdoor footwear brand based in North America. This is a

significant event for the company, accelerating our international growth, and diversifying our
product mix, geography and channels to market.”



ENDS

Media:
Helen McCombie
Citadel-MAGNUS
Tel: + 61 2 8234 0103
Investors:
Reuben Casey
Chief Operating and Financial Officer
Tel: +64 3 968 6166

KATHMANDU HOLDINGS LIMITED

INTERIM REPORT 2018

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

2

DIRECTORS’ REPORT

The Directors of Kathmandu Holdings Limited present the interim report for the Company and its controlled entities for the half
year ended 31 January 2018.
Review of Operations
The consolidated net profit for the period was NZ$12.277 million (2017: NZ$10.009 million). Sales for the period were
NZ$204.811 million (2017: NZ$196.316 million).
A review of the operations of the Company and its controlled entities is set out in the accompanying Company’s media release
of 20 March 2018. The key line items in the half year results were:
 Sales up 4.3% to NZ$204.8m,
 EBIT up NZ$3.2m to NZ$18.0m,
 NPAT up NZ$2.3m to a profit of NZ$12.3m.
Seasonality
Due to the seasonal nature of the Company and its controlled entities activities, the activities in the second half of each year
are expected to provide a larger portion of the sales and net profit for the full year.

Dividends
On 19 March 2018, the Directors declared a dividend of NZ 4.0 cents per share. This will not be imputed for New Zealand
shareholders and will be fully franked for Australian shareholders.





Signed in accordance with a resolution of the directors:



David Kirk Xavier Simonet
Director Director

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

3

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


Unaudited
Six Months
Ended
31 January
2018
Unaudited
Six Months
Ended
31 January
2017
Audited
Year
Ended
31 July
2017

Note


NZ$’000 NZ$’000 NZ$’000



Sales revenue 204,811 196,316 445,348
Cost of sales (75,117) (75,327) (169,165)
Gross profit 129,694 120,989 276,183

Selling expenses 4 (74,939) (69,980) (143,740)
Administration and general expenses 4 (29,659) (29,548) (61,613)

(104,598) (99,528) (205,353)
Earnings before interest, tax, depreciation and amortisation
25,096 21,461 70,830


Depreciation and amortisation 4 (7,092) (6,631) (13,826)
Earnings before interest and tax
18,004 14,830 57,004


Finance income 13 15 28
Finance expenses (237) (1,211) (2,058)
Finance costs - net 4 (224) (1,196) (2,030)


Profit before income tax
17,780 13,634 54,974


Income tax expense (5,503) (3,625) (16,935)

Profit after income tax
12,277 10,009 38,039


Other comprehensive income that may be recycled through
profit and loss:


Movement in cash flow hedge reserve 502 2,649 209
Movement in foreign currency translation reserve 5,475 (2,613) 209
Other comprehensive income for the period, net of tax
5,977 36 418


Total comprehensive income for the period attributable to
shareholders
18,254 10,045 38,457




Basic earnings per share
6.1 cps 5.0 cps 18.9 cps
Diluted earnings per share
6.0 cps 4.9 cps 18.7 cps
Weighted average basic ordinary shares outstanding (‘000)
202,087 201,485 201,489
Weighted average diluted ordinary shares outstanding (‘000)
203,701 203,045 203,324

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

4

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


Unaudited
Six Months
Ended
31 January
2018
Unaudited
Six Months
Ended
31 January
2017
Audited
Year
Ended
31 July
2017




NZ$’000 NZ$’000 NZ$’000

Total equity at the beginning of the period
327,100 311,683 311,683

Total comprehensive income for the period
18,254 10,045 38,457

Dividends paid (18,195) (16,119) (24,179)
Issue of share capital 971 - 18
Movements in share based payments reserve (570) 269 1,121

Total equity at the end of the period
327,560 305,878 327,100

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

5

CONSOLIDATED BALANCE SHEET


Unaudited
As at
31 January
2018
Unaudited
As at
31 January
2017
Audited
As at
31 July
2017
Note


NZ$’000 NZ$’000 NZ$’000
ASSETS

Current assets

Cash and cash equivalents 3,001 2,659 3,537
Trade and other receivables 4,937 5,399 6,284
Derivative financial instruments 23 - -
Current tax asset 1,205 2,773 -
Inventories 84,241 96,371 89,206
Total current assets 93,407 107,202 99,027

Non-current assets

Property, plant and equipment 10 64,228 61,172 61,026
Intangible assets 13 283,084 276,995 279,014
Total non-current assets 347,312 338,167 340,040

Total assets
440,719 445,369 439,067

LIABILITIES

Current liabilities

Trade and other payables 51,046 48,731 56,735
Derivative financial instruments 6,444 3,199 7,034
Current tax liabilities - - 3,475
Total current liabilities 57,490 51,930 67,244

Non-current liabilities

Derivative financial instruments 109 313 265
Interest bearing liabilities 6 20,014 51,595 10,431
Deferred tax 13 35,546 35,653 34,027
Total non-current liabilities 55,669 87,561 44,723

Total liabilities
113,159 139,491 111,967


Net assets

327,560 305,878 327,100


EQUITY

Contributed equity - ordinary shares 201,180 200,191 200,209
Reserves (17,595) (24,235) (23,002)
Retained earnings 13 143,975 129,922 149,893
Total equity

327,560 305,878 327,100

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

6

CONSOLIDATED STATEMENT OF CASH FLOWS


Unaudited
Six Months
Ended
31 January
2018
Unaudited
Six Months
Ended
31 January
2017
Audited
Year
Ended
31 July
2017

Note


NZ$’000 NZ$’000 NZ$’000


Cash flows from operating activities

Cash was provided from:

Receipts from customers 206,288 195,909 444,100
Income tax received 156 - -
Interest received 13 15 28
206,457 195,924 444,128

Cash was applied to:

Payments to suppliers and employees 178,780 177,888 360,122
Income tax paid 9,907 6,730 14,571
Interest paid 856 1,273 2,162
189,543 185,891 376,855

Net cash inflow from operating activities
16,914 10,033 67,273

Cash flows from investing activities

Cash was provided from:

Proceeds from sale of property, plant and equipment - - 1

Cash was applied to:

Purchase of property, plant and equipment 7,386 5,700 11,419
Purchase of intangibles 1,331 1,092 1,857
8,717 6,792 13,276

Net cash (outflow) from investing activities
(8,717) (6,792) (13,275)

Cash flows from financing activities

Cash was provided from:

Proceeds of loan advances 49,626 41,921 90,330

Cash was applied to:

Dividends 18,195 16,119 24,179
Repayment of loan advances 40,296 33,421 123,533
58,491 49,540 147,712

Net cash (outflow) from financing activities
(8,865) (7,619) (57,382)

Net (decrease) in cash held
(668) (4,378) (3,384)


Opening cash and cash equivalents 3,537 6,891 6,891
Effect of foreign exchange rates 132 146 30
Closing cash and cash equivalents
3,001 2,659 3,537

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

7

RECONCILIATION OF NET PROFIT AFTER TAXATION WITH CASH INFLOW FROM OPERATING
ACTIVITIES

Unaudited
Six Months
Ended
31 January
2018
Unaudited
Six Months
Ended
31 January
2017
Audited
Year
Ended
31 July
2017
NZ$’000 NZ$’000 NZ$’000



Profit after income tax
12,277 10,009 38,039

Movement in working capital:

(Increase) / decrease in trade & other receivables 1,475 (408) (1,249)
(Increase) / decrease in inventories 6,971 (2,176) 6,283
Increase / (decrease) in trade and other payables (7,207) (1,555) 5,596
Decrease in tax liability (4,729) (3,988) 2,257
(3,490) (8,127) 12,887
Add non cash items:

Depreciation 5,486 4,965 10,630
Amortisation of intangibles 1,606 1,666 3,196
Foreign currency translation of working capital balances (30) (1,907) (816)
Increase in deferred taxation 481 2,832 733
Employee share based remuneration 402 269 1,139
Loss on disposal of property, plant and equipment 182 326 1,465
8,127 8,151 16,347



Cash inflow from operating activities
16,914 10,033 67,273

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

8

1 GENERAL INFORMATION
Kathmandu Holdings Limited (the Company) and its subsidiaries (together the Group) is a designer, marketer and retailer of
clothing and equipment for travel and adventure. It operates in New Zealand, Australia and the United Kingdom.
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, Christchurch.
These consolidated interim financial statements have been approved for issue by the Board of Directors on 20 March 2018,
and have been reviewed, not audited.
Seasonality

The majority of Kathmandu’s annual sales are derived from three major sales promotions each year, occurring in a portion of
the months of December and January (Christmas), March and April (Autumn) and June and July (Winter). Two of these sales
occur in the second half of the financial year, and the Winter Sale is the largest of these three promotions. As a consequence, a
greater proportion of Kathmandu’s sales and EBITDA are derived in the second half of each financial year, with the proportion
in any given year dependent on the relative success of each of these promotions.
2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These general purpose financial statements for the six months ended 31 January 2018 have been prepared in accordance with
NZ IAS 34, Interim Financial Reporting. In complying with NZ IAS 34, these consolidated interim financial statements also
comply with IAS 34.
These consolidated interim financial statements do not include all the notes of the type normally included in an annual financial
report. Accordingly, this report should be read in conjunction with the audited financial statements of Kathmandu Holdings
Limited for the year ended 31 July 2017 which have been prepared in accordance with the New Zealand equivalents to
International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
The Group is designated as a profit-oriented entity for financial reporting purposes.
3 ACCOUNTING POLICIES
All significant accounting policies have been applied on a basis consistent with those used in the audited financial statements
of Kathmandu Holdings Limited for the year ended 31 July 2017.
4 EXPENSES

Unaudited
Six Months
Ended
31 January
2018
Unaudited
Six Months
Ended
31 January
2017
Audited
Year
Ended
31 July
2017
NZ$’000 NZ$’000
NZ$’000
Profit before tax includes the following expenses:




Depreciation 5,486 4,965 10,630
Amortisation 1,606 1,666 3,196
Employee benefit expense 43,508 41,243 84,074
Rental expense 33,219 30,492 62,205


Finance costs – net consist of:


Interest income (13) (15) (28)
Interest expense 518 982 1,887
Other finance costs 224 186 360
Net exchange loss on foreign currency borrowings (505) 43 (189)
224 1,196 2,030

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

9




5 RELATED PARTY DISCLOSURES
Parent and Ultimate Controlling Party
Kathmandu Holdings Limited is the immediate parent, ultimate parent and controlling party.
During the period, operating lease costs of $107,163 (2017: $112,268) were paid to Chalmers Properties Limited, a subsidiary
of Port Otago Limited. John Harvey retired as a Director of both of these companies on 8 December 2017.

No amounts owed to related parties have been written off or forgiven during the period.


6 INTEREST BEARING LIABILITIES

Unaudited
As at
31 January
2018
Unaudited
As at
31 January
2017
Audited
As at
31 July
2017
NZ$’000 NZ$’000 NZ$’000



Non-current portion

20,014 51,595 10,431




The Group has a multi option facility agreement with Commonwealth Bank of Australia and ASB Bank Limited, repayable in full
on 30 June 2019, and a facility agreement with Bank of New Zealand and National Bank of Australia, repayable in full on 23
March 2018.
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.
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 agreement of 19
December 2011 and have been complied with at 31 January 2018.
The current interest rates, prior to hedging, on the term loans ranged between 2.35% - 2.48% (2017: 2.27% - 2.74%).

7 CONTINGENT LIABILITIES
There are no contingent liabilities as at 31 January 2018 (2017: nil).


8 CONTINGENT ASSETS
There are no contingent assets as at 31 January 2018 (2017: nil).

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

10

9 COMMITMENTS
(a) Operating lease commitments
Group as lessee:
Rent expenses reported in these financial statements relate to non-cancellable operating leases. The future commitments on
these leases are as follows:

Unaudited
As at
31 January
2018
Unaudited
As at
31 January
2017
Audited
As at
31 July
2017
NZ$’000 NZ$’000 NZ$’000



Due within 1 year

61,149 51,848 55,089
Due within 1-2 years

50,733 43,127 46,827
Due within 2-5 years

87,751 73,248 81,088
Due after 5 years

37,570 33,889 41,192


237,203 202,112 224,196






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.

(b) Capital commitments
Capital commitments contracted for at balance date are:

Unaudited
As at
31 January
2018
Unaudited
As at
31 January
2017
Audited
As at
31 July
2017
NZ$’000 NZ$’000 NZ$’000


Property, plant and equipment

1,162 1,725
2,093
Intangible assets

1,424 850
850



10 PROPERTY PLANT & EQUIPMENT

Unaudited
Ended
31 January
2018
Unaudited
Ended
31 January
2017
Audited
Ended
31 July
2017

NZ$’000 NZ$’000 NZ$’000



Additions

7,386 5,700
11,419

Disposals

(182) (326)
(1,466)

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

11

11 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

(a) Financial risk factors

The Group’s activities expose it to a variety of financial risks, market risk (including currency risk and interest rate risk), credit
risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial
instruments such as foreign exchange contracts and interest rate swaps to manage certain risk exposures. Derivatives are
exclusively used for economic hedging purposes, i.e. not as trading or other speculative instruments, however not all derivative
financial instruments qualify for hedge accounting.
Risk management is carried out based on policies approved by the Board of Directors. The Group treasury policy provides
written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk.
The consolidated interim financial statements do not include all financial risk management information and disclosures required
in the annual financial statements; they should be read in conjunction with the Group’s annual financial statements as at 31
July 2017. There have been no changes in the risk management department or in any risk.

(b) Fair value estimation

The only financial instruments held by the Group that are measured at fair value are over-the-counter derivatives. 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.
There were no changes in valuation techniques during the period.
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 approximately carrying value.
Foreign exchange contracts and interest rate swaps
The forward foreign exchange contracts have been fair valued using forward exchange rates that are quoted in an active
market. Interest rate swaps are fair valued using forward interest rates extracted from observable yield curves. The effects of
discounting are insignificant for these derivatives.
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 is approximately nil. All guarantees are repayable on demand.

The following table presents the group’s assets and liabilities that are measured at fair value at 31 January 2018.


Total

NZ$' 000
Assets

Derivative financial instruments 23
Total assets
23
Liabilities

Derivative financial instruments 6,553
Total liabilities
6,553

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

12

12 SEGMENTAL INFORMATION
The Group operates in three geographical areas: New Zealand, Australia and International.

31 January 2018 Australia
New
Zealand International Other Total
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000

Total segment sales 138,362 65,099 4,352 - 207,813
Inter-segment sales (803) (849) (1,350) - (3,002)
Sales from external customers 137,559 64,250 3,002 - 204,811
EBITDA 12,552 14,075 (206) (1,325) 25,096
Depreciation and software amortisation (4,134) (2,957) (1) - (7,092)
EBIT 8,418 11,118 (207) (1,325) 18,004
Income tax expense 2,662 3,217 (74) (302) 5,503
Total segment assets 237,219 238,944 1,802 (37,246) 440,719
Total assets includes:

Non-current assets 178,660 25,415 - 143,237 347,312
Additions to non-current assets 5,847 2,870 - - 8,717
Total segment liabilities 96,809 15,572 14,436 (13,658) 113,159


31 January 2017 Australia
New
Zealand International Other Total
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000

Total segment sales 126,338 69,206 2,011 - 197,555
Inter-segment sales (208) (552) (479) - (1,239)
Sales from external customers 126,130 68,654 1,532 - 196,316
EBITDA 7,276 15,884 (184) (1,515) 21,461
Depreciation and software amortisation (3,574) (3,055) (2) - (6,631)
EBIT 3,702 12,829 (186) (1,515) 14,830
Income tax expense 259 3,743 (69) (308) 3,625
Total segment assets 233,047 236,838 481 (24,997) 445,369
Total assets includes:

Non-current assets 167,627 27,300 3 143,237 338,167
Additions to non-current assets 4,673 2,119 - - 6,792
Total segment liabilities 161,169 35,322 11,498 (68,498) 139,491

The New Zealand segment has been represented to exclude holding company balances. Other represents holding companies
and consolidation eliminations.
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.
The Group operates in one industry being retailer of clothing and equipment for travel and adventure.
Revenue is allocated based on the country in which the customer is located.
Costs recharged between Group companies are calculated on an arms-length basis. The default basis of allocation is % of
revenue with other bases being used where appropriate.
Total assets / liabilities are allocated based on where the assets / liabilities are located.

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

13

13 RESTATEMENT OF PRIOR YEAR
In October 2006, on acquisition of the Kathmandu business, the Group recognised an indefinite life brand with a fair value of
$160.3m. No deferred tax was recognised in relation to the asset at the time of acquisition. This was based on the assumption
that because an indefinite life brand is not amortised, its carrying amount is not expected to be consumed, rather, its carrying
amount is expected to be recovered entirely through sale.
In November 2016, the IFRS Interpretations Committee (IFRS IC) issued an agenda decision regarding the determination of
the expected manner of recovery of intangible assets with indefinite useful life for the purposes of measuring deferred tax, in
accordance with IAS 12 Income Taxes. This provided additional guidance on how an entity recovers the carrying value of such
assets and the consequences for the measurement and recognition of deferred tax.
Following this additional guidance, the Group reviewed the expected manner of recovery of the carrying amount of indefinite life
Kathmandu brand and concluded that its carrying amount is expected to be recovered through use of the brand within its
business. As a result, comparatives for goodwill, deferred tax liability and retained earnings at 31 January 2017 have been
restated as follows:

NZ$’000
Goodwill 45,490
Deferred tax liability 42,940
Retained earnings 2,550

This adjustment has no impact on profit in the reported period.
At the date of acquisition the tax rates in New Zealand and Australia were 33% and 30% respectively. As the New Zealand tax
rate has reduced from 33% to 28% over the period the deferred tax liability has been measured at the new tax rate. This has
resulted in a release of the liability through the income tax expense and ultimately increased retained earnings in the period of
the change in tax rate.
As the restatement amount only affects three line-items in the balance sheet as described above, an opening comparative
balance sheet has not been provided.

14 EVENTS OCCURRING AFTER BALANCE DATE
On 19 March 2018, Kathmandu Holdings Limited entered into an unconditional agreement to acquire 100% of US-based Oboz
Footwear LLC, for a base consideration of US$60 million, and a contingent earn out of up to US$15 million based on an
EBITDA target for the year ended 31 December 2018. The purchase will complete in April 2018. Oboz designs, sources, and
sells footwear for backpacking, hiking, travel, winter and general outdoor wear. Oboz distributes its products directly to North
American outdoor chains, specialty outdoor retailers, limited online sellers, shoe stores and sporting goods retailers.
Associated acquisition costs are expected to be circa $2.0 million. Sufficient bank facilities have been secured to the fund the
acquisition, and the Directors will explore further sources of funding, including capital raising in due course.

Kathmandu Holdings Limited has secured committed funding of A$90 million, subject to conditions precedent, under its multi
option facility agreement with Commonwealth Bank of Australia and ASB Bank Limited, with A$60 million expiring on 1 August
2019 and A$30 million with a 1 year term from drawdown.
Kathmandu Holdings Limited has secured committed funding of NZ$90 million, subject to conditions precedent, under its multi
option facility agreement with Bank of New Zealand, with NZ$20m expiring in 1 year, NZ$40 million expiring in 2 years and
NZ$30 million expiring in 3 years.

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

14

STATUTORY INFORMATION

GROUP STRUCTURE
Kathmandu Holdings Limited owns 100% of the following companies:
Milford Group Holdings Limited
Kathmandu Limited
Kathmandu Pty Limited
Kathmandu (UK) Limited

DIRECTORS’ DETAILS
David Kirk Chairman, Non-Executive Director
Xavier Simonet Managing Director and Chief Executive Officer
John Harvey Non-Executive Director
Sandra McPhee Non-Executive Director
Philip Bowman Non-Executive Director (appointed 2 October 2017)
Brent Scrimshaw Non-Executive Director (appointed 2 October 2017)
Christine Cross Non-Executive Director (retired 2 October 2017)
John Holland Non-Executive Director (retired 2 October 2017)

EXECUTIVES’ DETAILS
Xavier Simonet Chief Executive Officer
Reuben Casey Chief Operating and Financial Officer and Company Secretary

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

KATHMANDU HOLDINGS LIMITED - INTERIM REPORT 2018

15

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.co.nz


In Australia: Link Market Services (LINK)

Physical Address: Level 1, 333 Collins Street
Melbourne, VIC 3000
Australia

Postal Address: 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.

16

17