FY22 Annual Results Announcement
Results announcement
KMD BRANDS LIMITED W kmdbrands.com
Results for announcement to the market
Name of issuer KMD Brands Limited (formerly Kathmandu Holdings Limited)
Reporting Period 12 months to 31 July 2022
Previous Reporting Period 12 months to 31 July 2021
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$979,802 6.2%
Total Revenue $979,802 6.2%
Net profit/(loss) from continuing
operations
$36,828 -40.0%
Total net profit/(loss) $36,828 -40.0%
Interim Dividend
Amount per Quoted Equity
Security
$0.03000000
Imputed amount per Quoted
Equity Security
Nil
Record Date 10 November 2022
Dividend Payment Date 25 November 2022
Current period Prior comparable period
Net tangible assets per Quoted
Equity Security
$0.17 $0.19
A brief explanation of any of the
figures above necessary to
enable the figures to be
understood
The year end results are based on accounts which have been subject
to audit. Refer to accompanying audited financial statements and
media release for further information.
Authority for this announcement
Name of person
authorised to
make this announcement
Frances Blundell
Contact person for this
announcement
Frances Blundell
Contact phone number +64 3 968 6110
Contact email address companysecretary@kmdbrands.com
Date of release through MAP
Tuesday, 20 September 2022
Audited financial statements accompany this announcement.
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KMD BRANDS LIMITED W kmdbrands.com
20 September 2022
(All amounts in NZ$ unless otherwise stated)
KMD Brands delivers record sales and dividend in FY22
KMD Brands Limited (ASX/NZX: KMD, “KMD” or the “Company”) is pleased to announce
its results for the twelve months ended 31 July 2022 (“FY22”).
FY22 key highlights (vs FY21):
• Group sales up 6.2% to $979.8 million, a record for KMD Brands
o Continued growth in Rip Curl sales, highest-ever Kathmandu sales in Q4, and
record order demand for Oboz products
• Gross margin maintained at 58.9% despite input cost pressure
• Underlying EBITDA
1
of $92.0 million reflects the impact of Q1 Australasian lockdowns
and Oboz supply chain COVID disruption
o Record second half Group sales and underlying EBITDA
• Statutory NPAT of $36.8 million; Underlying NPAT
1
of $36.2 million
• Strong balance sheet position supports investment in organic brand growth
• Final dividend of 3 cents per share (fully franked for Australian shareholders); total FY22
dividend of 6 cents per share represents a record $42.5 million dividends declared in
FY22
Commenting on the FY22 results, Group CEO & Managing Director Michael Daly said:
“KMD Brands continued to deliver strong results over the past 12 months while navigating
substantial COVID challenges in the first half. The strength of our brands was evident in
record Group sales of nearly $980 million, with a strong return to sales growth across all of
our brands in the final quarter. In addition, we made significant progress across each of our
strategic pillars to build global brands, elevate our digital presence, leverage our operational
excellence, and be a leader in ESG.”
“Rip Curl achieved sales growth across all channels and key international regions,
particularly Europe, Hawaii and South-East Asia, as we continued to invest in the long-term
value of the brand. Rip Curl’s wholesale order books remain significantly above pre-COVID
levels, allowing us to better manage supply chain disruption through near-term inventory
investment.”
“Although impacted substantially by COVID lockdowns and restricted travel in the first half of
FY22, Kathmandu saw a strong rebound in the second half. The brand achieved its highest-
ever sales result in Australia for the key winter promotion period during Q4, and its highest-
ever second half gross margin result. Oboz continued its strong brand momentum, with
record demand for Oboz products as COVID supply challenges were addressed.”
“With the effects of COVID now largely behind us and international travel returning, we are
very focused on executing our growth strategy through expanding our global footprint,
investing in digital platforms, leveraging operational excellence, and leading the industry
through sustainability and innovation.”
1
Excluding the impact of IFRS 16
KMD BRANDS LIMITED W kmdbrands.com
Group financial performance
Statutory Underlying
2
NZ$ million
3
FY22 FY22 FY21 Var %
Sales 979.8 979.8 922.8 6.2%
Gross Profit 576.7 576.7 541.6 6.5%
Gross margin 58.9% 58.9% 58.7%
Operating Expenses (396.8) (484.7) (432.1) 12.2%
EBITDA 179.9 92.0 109.5 (16.0%)
EBIT 67.4 57.1 80.9 (29.4%)
The FY22 Group results were underpinned by sales growth in Rip Curl and Kathmandu.
Although the Group, like most global consumer companies, experienced elevated
international freight costs and raw material cost pressures, gross margin was maintained at
58.9%. Operating expenses reflect higher wage and rent costs relative to sales, supporting
teams during significant periods of COVID-related store closures, particularly in Q1. The
Group also upweighted investment in brand marketing and ESG to drive future brand growth
(+$18.6 million increase YOY).
Rip Curl: sales growth across all channels
Underlying
2
NZ$ million FY22 FY21 Var%
Sales 536.8 490.4 9.5%
EBITDA 59.1 65.8 (10.1%)
EBIT 43.5 51.4 (15.3%)
Rip Curl’s results were underpinned by sales growth across all channels, with total sales up
9.5% to $536.8 million. Europe, Hawaii, and South-East Asia in particular achieved strong
sales growth.
Wholesale sales were up 16.5% with less COVID disruptions to the 1H FY22 sell-in period,
and continued strong growth in 2H. Rip Curl wholesale forward order books remain
significantly above pre-COVID levels. The wholesale channel now accounts for a similar level
of sales to the retail store channel. The direct-to-consumer (DTC) channel, encompassing
owned retail stores and online, generated same store sales growth of 3.9%.
EBITDA reduced given elevated international freight costs, and planned investment in further
long-term brand building in key markets.
Kathmandu: strong winter season performance
Underlying
2
NZ$ million FY22 FY21 Var %
Sales 381.6 357.4 6.8%
EBITDA 36.4 37.9 (4.1%)
EBIT 18.0 24.3 (26.0%)
2
Excluding the impact of IFRS 16
3
FY22 NZD/AUD conversion rate 0.935 (FY21: 0.931), FY22 NZD/USD conversion rate 0.674 (FY21 0.699)
KMD BRANDS LIMITED W kmdbrands.com
Kathmandu’s performance was underpinned by a strong winter season, with Q4 sales and
gross margin both above FY19 (pre-COVID). Total sales were up 6.8% to $381.6 million,
with a strong rebound after lockdowns. The wholesale channel strategy was launched,
representing a substantial global growth opportunity for the brand, with encouraging early
wholesale orders taken from a select number of retailers in Europe and Canada.
DTC still accounts for nearly all of Kathmandu sales, with DTC same store sales growth up
9.1%. Online sales grew 24.9%, now representing 18.7% of total sales. The sales result was
supported by continued investment in the long-term value of the brand and an embedded
loyalty base of close to 2 million members.
Full year EBITDA reduced slightly, with profitability rebounding in 2H following COVID
lockdowns in 1H. Kathmandu achieved the highest-ever 2H gross margin result. Raw
material and international freight cost pressure was more than offset by currency benefit and
the deliberate strategy to carefully moderate the historic ‘high-low’ pricing model. Brand
momentum is building from a renewed focus on, and investment in, marketing and product.
Oboz: impacted by unprecedented and transitory supply challenges
Underlying
2
NZ$ million FY22 FY21 Var %
Sales 61.3 75.0 (18.2%)
EBITDA 3.3 11.8 (71.7%)
EBIT 2.5 11.3 (78.0%)
Oboz wholesale and online sales were heavily impacted by the three-month COVID closure
of Vietnam factories and compounded by international freight delays, with approximately
40% of FY22 orders unable to be fulfilled. Factories resumed full production during Q3, with
sales growth resuming as inventory levels recovered in Q4.
EBITDA reflected the lower sales level, and elevated international freight costs.
Brand momentum remains strong with forward orders into FY23 supporting the path to
Oboz’s US$100 million medium-term revenue target, and online performance indicates a
significant growth opportunity.
Strong balance sheet
At 31 July 2022, the Group had a net debt position of $40.1 million with significant funding
headroom of c. $260 million.
The strong balance sheet position provided flexibility to secure supply of core technical
products and raw materials to support availability. Increased inventory levels reflected a
strategic decision to temporarily build stock positions to meet forward wholesale orders and
expected retail demand, and to mitigate potential supply challenges. This position is
expected to normalise during FY23, dependent on supply chain conditions.
Operating cash flows were impacted by COVID lockdowns in Q1, and the strategic decision
to build near-term inventory. An unwind of inventory and continued sales growth in FY23,
KMD BRANDS LIMITED W kmdbrands.com
with full trade unimpeded by COVID, are expected to underpin increased cash flow
generation in FY23.
The Company’s strong balance sheet and growth outlook led Directors to declare a final
dividend of 3.0 cents per share (fully franked for Australian shareholders). The record date
for this dividend is 10 November 2022, and the payment date is 25 November 2022.
Becoming a leader in ESG
Commenting on the Group’s sustainability initiatives, Mr Daly said: “Being a leader in ESG is
one of the core pillars of our growth strategy, enabling us to deliver positive growth that’s
good for our people and the communities we operate in.”
“We have now submitted B Corp applications for all of our brands, and we put in place 2030
emission reduction goals aligned with the Paris Climate agreement.”
“Kathmandu was recognised with multiple awards for environmental and product innovation,
including the Deloitte New Zealand Top 200 Sustainable Business Leadership award, and
Outdoor Retailer and ISPO awards for its new BioDown jacket. The BioDown is an industry-
first biodegradable down-filled jacket, demonstrating breakthrough sustainability innovation.”
“Rip Curl recycled around 2,500 wetsuits in Australia by implementing a wetsuit takeback
programme with TerraCycle. Oboz’s One More Tree initiative has seen over 4 million trees
planted since it began in 2007, and the product design process is now fully digital, reducing
material waste.”
Positive start to FY23 and outlook
Commenting on the outlook for the Group, Mr Daly said:
“The momentum from the strong final quarter of FY22 has continued. August sales for the
Group were up 44.2% on August 2021, and 10.3% above pre-COVID August 2019. We are
cycling COVID lockdowns in the first quarter last year, with August underlying EBITDA c. $10
million above last year.”
“With the return of international travel and uninterrupted trade, combined with further
strengthening our Rip Curl, Kathmandu and Oboz brands, KMD Brands is well positioned to
deliver continued sales and earnings growth in FY23.”
“Key growth factors in FY23 include strong wholesale demand for Rip Curl, post-COVID
tourism and footfall increases, as well as further wholesale expansion to Europe and Canada
for Kathmandu; and with Oboz supply challenges now addressed, we can capitalise on
record demand for its products.”
“Heading into FY23, The Group is well capitalised and I’m excited by the opportunities ahead
as we invest in the long-term expansion of our global house of brands, and build a truly
unique global business headquartered in Australia and New Zealand.”
Investor briefing being held today @ 8:30am AEST / 10:30am NZST
Michael Daly (Group CEO & Managing Director) and Chris Kinraid (Group CFO) will be
holding a briefing session for investors and analysts at 8:30am AEST / 10:30am NZST today
KMD BRANDS LIMITED W kmdbrands.com
(Tuesday 20 September). To pre-register and avoid a queue when calling, please follow this
link:
https://event.webcasts.com/starthere.jsp?ei=1567475&tp_key=9b518569b6
If you are unable to pre-register, at the time of the call please dial one of the numbers below
and provide the Participant Code 648518 to the operator.
Australia Toll Free: 1800 590 693
Australia Local: +61 (0) 2 7250 5438
New Zealand Toll Free: 0800 423 972
New Zealand Local: +64 (0) 9 9133 624
United States: +1 323 794 2558
This announcement has been authorised for release to NZX / ASX by the Board of Directors
of KMD Brands Limited.
- ENDS -
For further information, please contact:
Investors
Eric Kuret, Automic Markets
P: +61 417 311 335
E: eric.kuret@automicgroup.com.au
Media
Helen McCombie, Citadel-MAGNUS
P: + 61 2 8234 0103
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KMD Brands Limited
CONSOLIDATED FINANCIAL STATEMENTS
31 July 2022
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
2
Introduction and Table of Contents
Directors’ Approval of Consolidated Financial Statements 3
Consolidated Statement of Comprehensive Income 4
Consolidated Statement of Changes in Equity 5
Consolidated Balance Sheet 6
Consolidated Statement of Cash Flows 7
Notes to the Consolidated Financial Statements 9
Section 1: Basis of Preparation 9
Section 2: Results for the Year 13
Section 3: Operating Assets and Liabilities 21
Section 4: Capital Structure and Financing Costs 35
Section 5: Group Structure 45
Section 6: Other Notes 48
Auditors’ Report 53
In this section ...
The consolidated financial statements have been presented in a style which attempts to make them
less complex and more relevant to shareholders. We have grouped the note disclosures into six
sections: ‘Basis of Preparation’, ‘Results for the Year’, ‘Operating Assets and Liabilities’, ‘Capital
Structure and Financing Costs’, ‘Group Structure’ and ‘Other Notes’. Each section sets out the
accounting policies applied in producing the relevant notes. The purpose of this format is to provide
readers with a clearer understanding of what drives financial performance of the Group. The aim of the
text boxes is to provide commentary on each section or note, in plain English.
Keeping it simple ...
Notes to the consolidated financial statements provide information required by accounting standards or
NZX Listing Rules to explain a particular feature of the financial statements. The notes that follow will
also provide explanations and additional disclosures to assist readers’ understanding and interpretation
of the annual report and the financial statements.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
3
20 September 2022
20 September 2022
Directors’ Approval of Consolidated Financial Statements
For the Year Ended 31 July 2022
Authorisation for Issue
The Board of Directors authorised the issue of these Consolidated Financial Statements on 20 September 2022.
Ap
proval by Directors
T
he Directors are pleased to present the Consolidated Financial Statements of KMD Brands Limited for the year ended 31
July 2022 on pages 4 to 52.
David Kirk Date
Michael Daly Date
For and on behalf of the Board of Directors
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
4
Consolidated Statement of Comprehensive Income
For the Year Ended 31 July 2022
2022 2021
Section NZ$’000 NZ$’000
Restated
Sales 2.2 979,802 922,792
Cost of sales (403,069) (381,170)
Gross profit
576,733 541,622
Other income 2.2 9,857 29,165
Selling expenses (231,460) (217,115)
Administration and general expenses 1.4 (175,196) (149,410)
(396,799) (337,360)
Earnings before interest, tax, depreciation, and amortisation
179,934 204,262
Depreciation and amortisation 1.4, 3.2-3.4 (112,516) (114,972)
Earnings before interest and tax
67,418 89,290
Finance income 394 834
Finance expenses (14,187) (17,311)
Finance costs (net) 4.1.1 (13,793) (16,477)
Profit before income tax
53,625 72,813
Income tax expense 1.4, 2.3 (16,797) (11,468)
Profit after income tax
36,828 61,345
Profit for the year attributable to:
Shareholders of the Company 35,952 60,982
Non-controlling interest 876 363
Other comprehensive income / (expense) that may be recycled through profit or loss:
Movement in cash flow hedge reserve 4.3.2 12,671 559
Movement in foreign currency translation reserve 4.3.2 36,188 (17,527)
Movement in other reserves 4.3.2 - 14
Other comprehensive income / (expense) for the year, net of tax 48,859 (16,954)
Total comprehensive income for the year 85,687 44,391
Total comprehensive income for the year attributable to:
Shareholders of the Company 84,576 44,111
Non-controlling interest 1,111 280
Basic earnings per share 1.4, 2.4 5.1cps 8.6cps
Diluted earnings per share 1.4, 2.4 5.0cps 8.6cps
Weighted average basic ordinary shares outstanding (‘000) 2.4 709,001 709,001
Weighted average diluted ordinary shares outstanding (‘000) 2.4 717,266 713,006
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
5
Consolidated Statement of Changes in Equity
For the Year Ended 31 July 2022
Share
capital
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Share-
based
payments
reserve
Other
reserves
Retained
earnings
Non-
controlling
interest
Total
equity
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
Restated Restated Restated
Balance as at 31 July 2020 626,380 (5,141) (12,018) 608 (61) 163,603 4,007 777,378
Profit after tax - - - - - 60,982 363 61,345
Other comprehensive income - 559 (17,444) - 14 - (83) (16,954)
Dividends paid - - - - - (14,180) - (14,180)
Issue of share capital - - - - - - - -
Share based payment expense - - - 1,798 - - - 1,798
Lapsed share options - - - (58) - 58 - -
Deferred tax on share-based - - - 289 - - - 289
payment transactions
Amounts transferred to initial - 5,923 - - - - - 5,923
carrying amount of hedged items
Acquisition of remaining shares - - - - - (427) (217) (644)
in non-controlling interest
Balance as at 31 July 2021 626,380 1,341 (29,462) 2,637 (47) 210,036 4,070 814,955
Profit after tax - - - - - 35,952 876 36,828
Other comprehensive income - 12,671 35,953 - - - 235 48,859
Dividends paid - - - - - (42,540) - (42,540)
Issue of share capital - - - - - - - -
Share based payment expense - - - 914 - - - 914
Lapsed share options - - - (77) - 77 - -
Deferred tax on share-based - - - (309) - - - (309)
payment transactions
Amounts transferred to initial - (7,794) - - - - - (7,794)
carrying amount of hedged items
Dividends paid to non-controlling - - - - - - (455) (455)
interest
Balance as at 31 July 2022 626,380 6,218 6,491 3,165 (47) 203,525 4,726 850,458
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
6
Consolidated Balance Sheet
As at 31 July 2022
2022 2021
Section
NZ$’000 NZ$’000
Restated
ASSETS
Current assets
Cash and cash equivalents 3.1.2 70,810 142,614
Trade and other receivables 1.4, 3.1.3 105,526 70,062
Inventories 3.1.1 295,522 216,545
Derivative financial instruments 4.2 9,936 5,285
Current tax asset 3,640 3,430
Other current assets 3.1.5 2,434 2,320
Total current assets
487,868 440,256
Non-current assets
Trade and other receivables 3.1.3 1,588 1,549
Property, plant and equipment 3.2 79,243 79,284
Intangible assets 1.4, 3.3 719,322 682,009
Deferred tax assets 1.4, 2.3 14,078 15,492
Right-of-use assets 3.4.1 250,372 242,677
Total non-current assets
1,064,603 1,021,011
Total assets
1,552,471 1,461,267
LIABILITIES
Current liabilities
Trade and other payables 3.1.6 194,034 149,206
Derivative financial instruments 4.2 - 1,079
Current tax liabilities 1,816 10,159
Lease liabilities 3.4.2 75,293 75,572
Total current liabilities
271,143 236,016
Non-current liabilities
Trade and other payables 3.1.6 17,246 14,818
Interest bearing liabilities 4.1 110,881 105,597
Deferred tax liabilities 2.3 93,449 86,182
Lease liabilities 3.4.2 209,294 203,699
Total non-current liabilities
430,870 410,296
Total liabilities
702,013 646,312
Net assets
850,458 814,955
EQUITY
Contributed equity - ordinary shares 4.3.1 626,380 626,380
Reserves 4.3.2 15,827 (25,531)
Retained earnings 1.4 203,525 210,036
Non-controlling interest 4,726 4,070
Total equity
850,458 814,955
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
7
Consolidated Statement of Cash Flows
For the Year Ended 31 July 2022
2022 2021
Section NZ$’000 NZ$’000
Restated
Cash flows from operating activities
Cash was provided from:
Receipts from customers 955,968 920,374
Government grants received 3,407 23,892
Interest received 394 834
Income tax received 448 1,050
960,217 946,150
Cash was applied to:
Payments to suppliers and employees 1.4 843,605 727,582
Income tax paid 22,181 24,987
Interest paid 12,623 15,435
878,409 768,004
Net cash inflow from operating activities
81,808 178,146
Cash flows from investing activities
Cash was provided from:
Proceeds from sale of property, plant and equipment 4 2
4 2
Cash was applied to:
Purchase of property, plant and equipment 3.2 21,567 15,044
Purchase of intangible assets 1.4, 3.3 11,266 15,583
Acquisition of subsidiaries - 1,029
32,833 31,656
Net cash (outflow) from investing activities
(32,829) (31,654)
Cash flows from financing activities
Cash was provided from:
Proceeds from borrowings 99,619 -
99,619 -
Cash was applied to:
Dividends paid 42,995 14,180
Repayment of borrowings 99,619 128,894
Repayment of lease liabilities 82,265 89,749
224,879 232,823
Net cash (outflow) from financing activities
(125,260) (232,823)
Net (decrease) in cash and cash equivalents held
(76,281) (86,331)
Opening cash and cash equivalents 142,614 231,885
Effect of foreign exchange differences 4,477 (2,940)
Closing cash and cash equivalents 3.1.2 70,810 142,614
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
8
Reconciliation of net profit after taxation with cash inflow from operating activities
2022 2021
Section NZ$’000 NZ$’000
Restated
Profit after taxation 36,828 61,345
Movement in working capital:
(Increase) / decrease in trade and other receivables (27,953) 4,472
(Increase) / decrease in inventories (66,555) 8,190
(Increase) / decrease in other current assets 9 431
Increase / (decrease) in trade and other payables 31,736 3,504
Increase / (decrease) in current tax liability (8,518) 398
(71,281) 16,995
Add non-cash items:
Depreciation of property, plant and equipment 3.2 22,572 20,851
Amortisation of intangibles 3.3 12,339 7,739
Depreciation of right-of-use assets 3.4.1 77,605 86,382
Impairment of assets 3.2, 3.4.1 940 1,910
Paycheck Protection Program (PPP) loan forgiveness 4.1 - (4,025)
Foreign currency translation of working capital balances (2,294) (3,319)
Increase / (decrease) in deferred taxation 3,580 (12,867)
Employee share-based remuneration 6.3 914 1,798
Loss on sale of property, plant and equipment and intangibles 3.2, 3.3 605 1,337
116,261 99,806
Cash inflow from operating activities
81,808 178,146
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
9
Notes to the Consolidated Financial Statements
Section 1: Basis of Preparation
1.1 General information
KMD Brands Limited (the Company), formerly known as Kathmandu Holdings Limited, and its subsidiaries (together the
Group) is a designer, marketer, retailer and wholesaler of apparel, footwear and equipment for surfing and the outdoors. It
operates in New Zealand, Australia, North America, Europe, South East Asia and Brazil.
The Company is a limited liability company incorporated and domiciled in New Zealand. KMD Brands Limited is a company
registered under the Companies Act 1993 and is an FMC reporting entity under Part 7 of the Financial Markets Conduct Act
2013. The address of its registered office is 223 Tuam Street, Central Christchurch, Christchurch.
The Company is listed on the NZX and ASX.
The consolidated financial statements of the Group have been prepared in accordance with the requirements of Part 7 of the
Financial Markets Conduct Act 2013 and the NZX Listing Rules.
These audited consolidated financial statements have been approved for issue by the Board of Directors on 20 September
2022.
1.2 Summary of significant accounting policies
These consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Practice.
They comply with the New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and other
applicable Financial Reporting Standards, as appropriate for for-profit entities. The consolidated financial statements also
comply with International Financial Reporting Standards (IFRS).
The consolidated financial statements are presented in New Zealand dollars, which is the Group’s presentation currency.
1.2.1 Basis of preparation
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.
These policies have been consistently applied to all periods presented, unless otherwise stated.
Basis of consolidation
The consolidated financial statements reported are for the consolidated Group, which is the economic entity comprising
KMD Brands Limited and its subsidiaries.
The Group is designated as a for-profit entity for financial reporting purposes.
Subsidiaries are consolidated from the date on which control is obtained to the date on which control is lost.
Non-controlling interests are measured at their proportionate share of the acquiree’s identified net assets at the acquisition
date. Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity
transactions.
In preparing the consolidated financial statements, all material intra-group transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts
reported by subsidiaries have been adjusted to conform to the Group’s accounting policies.
Historical cost convention
These consolidated financial statements have been prepared under the historical cost convention, as modified by the
revaluation of certain assets as identified in the specific accounting policies provided below.
In this section ...
This section sets out the Group’s accounting policies that relate to the consolidated financial statements
as a whole. Where an accounting policy is specific to one note, the policy is described in the note to
which it relates.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
10
Critical accounting estimates
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current market
conditions and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
Further explanation as to estimates and assumptions made by the Group can be found in the following notes to the
consolidated financial statements:
Area of estimation Section
Goodwill and brand – assumptions underlying recoverable value
3.3
Foreign currency translation
The results and financial position of all the Group entities (none of which have the currency of a hyper-inflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet;
• Income and expenses for each statement of comprehensive income are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions);
and
• All resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of
borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity.
Changes in accounting policies and prior period restatements
Details about changes in accounting policies applied during the period are included in the following notes to the financial
statements:
Other comprehensive income
Other comprehensive income reported in the consolidated statement of comprehensive income for the year ended 31 July
2021 has been restated to remove the component of cash flow hedge reserve which was transferred to the initial carrying
value of the hedged items as separately disclosed in the statement of changes in equity ($5,923,000). The restatement is
limited to the statement of changes in equity and other comprehensive income and has no impact on profit, cash flow or the
balance sheet of the Group.
Use of non-GAAP disclosures
At times non-GAAP disclosures have been used in the consolidated financial statements. These disclosures have been
included as they are key measurement criteria on which the Group and operating segments are reviewed by the Group Chief
Executive Officer, Group Executive Management team and the Board of Directors. The following non-GAAP measures are
relevant to the understanding of the Group's financial performance:
• Earnings before interest, tax, depreciation and amortisation (EBITDA) represents earnings before income taxes
excluding interest income, interest expense, depreciation, and amortisation, as reported in the financial statements.
• Earnings before interest and tax (EBIT) represents EBITDA less depreciation and amortisation.
• Net debt represents cash and cash equivalents less interest-bearing liabilities. Net debt does not include lease
liabilities.
Non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be
comparable to similar financial information presented by other entities. The non-GAAP information within the consolidated
financial statements is subject to audit.
Section
Impact of change in accounting policy
1.4
New standards and interpretations first applied in the period 6.8
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
11
1.3 Impact of COVID-19
COVID-19 has continued to have an impact on the Group, with local and global restrictions on movement, travel and
gatherings resulting in a sustained reduction in footfall. Stores across Australia and New Zealand were significantly impacted
by government mandated lockdowns and closures during the first quarter.
There continues to be uncertainties due to the COVID-19 pandemic that may affect the Group’s ability to achieve future
forecasts and the consequential impacts on the carrying value of goodwill and other finite life intangible assets (note 3.3).
Despite the continuing impact of COVID-19, the Directors are satisfied that there will be adequate cash flows generated from
operating and financing activities to meet the obligations of the Group for a period of at least 12 months from the date of
approving the consolidated financial statements.
The Group was fully compliant with all banking covenants during the year and, based on the current cash flow forecasts, the
Group expects to remain compliant with all covenants for at least 12 months from the date of approving the consolidated
financial statements.
Taking into consideration the current trading results, the net debt of $40,071,000 (2021: net cash $37,017,000) and undrawn
cash facilities of $195,290,000 (2021: $187,115,000) as at 31 July 2022 (note 4.1), the financial statements continue to be
prepared on a going concern basis.
1.4 Impact of change in accounting policy
During the year ended 31 July 2022 the Group revised its accounting policy in relation to configuration and customisation
costs incurred in implementing Software-as-a -Service (SaaS) cloud computing arrangements.
This was in response to the IFRIC agenda decision, issued in April 2021, clarifying its interpretation of how current
accounting standards apply to these types of arrangements.
The IFRIC decision has clarified that because SaaS arrangements are service contracts that provide the Group with the right
to access the cloud provider’s application software over the contract period, costs to configure or customise this software
should be recognised as operating expenses when the services are received, unless the criteria for recognising a separate
intangible asset that the Group controls are met. If the costs to customise the software are significant and not distinct from
the underlying use of the SaaS software, they are expensed over the SaaS contract term.
The Group’s previous accounting policy was to record these configuration and customisation costs as part of the cost of an
intangible asset and amortise these costs over the useful life of the software assets. The revised accounting policy is
included in note 3.3.
As a result of the change in this accounting policy the Group has restated the prior period financial statements. A summary
of the impact of the change in accounting policy on the Group’s consolidated financial statements is provided below.
Previously
reported
Change in
accounting
policy
Restated
NZ$’000 NZ$’000 NZ$’000
Consolidated Statement of Comprehensive Income
Year ended 31 July 2021
Administration and general expenses (145,641) (3,769) (149,410)
Depreciation and amortisation (115,847) 875 (114,972)
Profit before income tax 75,707 (2,894) 72,813
Income tax expense (12,278) 810 (11,468)
Profit after income tax
63,429 (2,084) 61,345
Basic earnings per share
8.9cps (0.3cps) 8.6cps
Diluted earnings per share
8.8cps (0.2cps) 8.6cps
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
12
Previously
reported
Change in
accounting
policy
Restated
NZ$’000 NZ$’000 NZ$’000
Consolidated Balance Sheet
As at 1 August 2020
Intangible assets 689,935 (2,517) 687,418
Deferred tax assets 5,380 705 6,085
Total assets
1,587,405 (1,812) 1,585,593
Retained earnings 165,415 (1,812) 163,603
Total equity
779,190 (1,812) 777,378
As at 31 July 2021
Current trade and other receivables 68,931 1,131 70,062
Intangible assets 688,551 (6,542) 682,009
Deferred tax assets 13,977 1,515 15,492
Total assets
1,465,163 (3,896) 1,461,267
Retained earnings 213,932 (3,896) 210,036
Total equity
818,851 (3,896) 814,955
Consolidated Statement of Cash Flows
Year ended 31 July 2021
Payments to suppliers and employees 722,656 4,926 727,582
Net cash inflow from operating activities
183,072 (4,926) 178,146
Purchase of intangibles 20,509 (4,926) 15,583
Net cash (outflow) from investing activities
(36,580) 4,926 (31,654)
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
13
Section 2: Results for the Year
2.1 Segment information
An operating segment is a component of an entity that engages in business activities that earns revenue and incurs
expenses and where the chief decision maker reviews the operating results on a regular basis and makes decisions on
resource allocation.
The Group has three operating segments, representing three brands owned by the Group and a corporate segment. These
segments have been determined based on the reports reviewed by the Group Chief Executive Officer and Group Executive
Management team.
These segments have changed from those reported as at 31 July 2021 to reflect changes in the Group’s internal
organisation and reporting, and to include the Software-as-a-Service restatement described in note 1.4. Comparative
information has been restated accordingly.
Rip Curl – designer, manufacturer, wholesaler and retailer of surfing equipment and apparel.
Kathmandu – designer, retailer, and wholesaler of apparel, footwear, and equipment for outdoor travel and adventure.
Oboz – designer, wholesaler and online retailer of outdoor footwear.
The corporate segment represents Group costs, holding companies and consolidation eliminations and constitutes other
business activities that do not fall within the brand segments.
31 July 2021 – Restated
Rip Curl Kathmandu Oboz Corporate Total
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
Total segment sales 490,439 357,363 78,350 - 926,152
Sales to internal customers - - 3,360 - 3,360
Sales to external customers 490,439 357,363 74,990 - 922,792
EBITDA 103,441 94,958 11,830 (5,967) 204,262
Depreciation and amortisation (49,895) (64,497) (575) (5) (114,972)
EBIT 53,546 30,461 11,255 (5,972) 89,290
Income tax expense (2,286) (10,335) (2,885) 4,038 (11,468)
Total segment assets 651,938 665,724 136,158 7,447 1,461,267
Total assets include:
Non-current assets 435,245 480,554 105,195 17 1,021,011
Additions to non-current assets 53,458 51,645 2,357 21 107,481
Total segment liabilities 261,204 262,455 18,769 103,884 646,312
In this section ...
This section focuses on the results and performance of the Group. On the following pages you will find
disclosures explaining the Group’s results for the year, segmental information, taxation and earnings per
share.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
14
31 July 2022
Rip Curl Kathmandu Oboz Corporate Total
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
Total segment sales 536,830 381,628 62,298 - 980,756
Sales to internal customers - - 954 - 954
Sales to external customers 536,830 381,628 61,344 - 979,802
EBITDA 95,462 87,642 3,641 (6,811) 179,934
Depreciation and amortisation (48,700) (62,555) (1,255) (6) (112,516)
EBIT 46,762 25,087 2,386 (6,817) 67,418
Income tax expense (11,839) (7,017) (772) 2,831 (16,797)
Total segment assets 740,778 649,205 158,793 3,695 1,552,471
Total assets include:
Non-current assets 465,152 482,873 116,578 - 1,064,603
Additions to non-current assets 55,629 55,159 975 - 111,763
Total segment liabilities 293,804 270,479 26,843 110,887 702,013
The default basis of allocating shared costs is percentage of revenue with other bases being used where appropriate.
Sales to external customers by region
2022 2021
NZ$’000 NZ$’000
Australia
508,258 477,054
New Zealand
113,943 120,746
North America
195,713 195,317
Europe
99,747 90,418
Rest of world
62,141 39,257
979,802 922,792
Sales to external customers by channel
2022 2021
NZ$’000 NZ$’000
Retail
555,732 538,610
Online
109,556 92,017
Wholesale
302,101 282,517
Licensing
12,000 9,037
Other
413 611
979,802 922,792
Non-current assets by region
2022 2021
NZ$’000 NZ$’000
Restated
Australia
668,544 654,760
New Zealand
180,066 176,634
North America
180,334 162,273
Europe
21,893 15,765
Rest of world
13,766 11,579
1,064,603 1,021,011
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
15
2.2 Profit before tax
Revenue recognition
The Group recognises revenue from the sale of footwear, clothing and equipment for surfing and the outdoors, and brand
licencing arrangements. Revenue comprises the fair value of the consideration received or receivable for the sale of goods
and brand licences, excluding Goods and Services Tax and discounts, and after eliminating sales within the Group.
Retail sales
For sales of goods to retail customers, revenue is recognised when control of the goods has transferred, being at the point
the customer purchases the goods at a retail outlet. Payment of the transaction price is due immediately at the point the
customer purchases the goods.
Online sales
For online sales, revenue is recognised when control of the goods has transferred to the customer, being at the point the
goods are delivered to the customer. Delivery occurs when the goods have been shipped to the customer’s specific location.
When the customer initially purchases the goods online, the transaction price received by the Group is recognised as a
contract liability until the goods have been delivered to the customer.
Wholesale sales
For sales to the wholesale market, revenue is recognised when control of the goods has transferred, being when the goods
have been shipped to the wholesaler’s specific location (delivery). Following delivery, the wholesaler has full discretion over
the manner of distribution and price to sell the goods, has the primary responsibility when on selling the goods and bears the
risks of obsolescence and loss in relation to the goods. A receivable is recognised by the Group when the goods are
delivered to the wholesaler as this represents the point in time at which the right to consideration becomes unconditional, as
only the passage of time is required before payment is due.
Sales returns
Under the Group’s standard contract terms, customers have a right of return, typically within 30 days. At the point of sale, a
returns liability and a corresponding adjustment to revenue is recognised for those products expected to be returned. The
Group uses its accumulated historical experience to estimate the number of returns on a portfolio level using the expected
value method. Given the consistent level of returns over previous years, it is considered highly unlikely that a significant
reversal in the cumulative revenue recognised will occur.
Royalty revenue
Royalty revenue from brand license arrangements is related to the provision of a right to access the license. Revenue from
sales-based royalties is recognised based on a reliable estimate of subsequent sales made by a licensee.
2022 2021
NZ$’000 NZ$’000
Sale of goods
969,161 915,570
Royalty revenue
10,047 6,950
Commission revenue
594 272
979,802 922,792
A breakdown of revenue by operating segment, sales channel and geographical area is provided in note 2.1.
Other income
2022 2021
NZ$’000 NZ$’000
Government grants
9,060 27,918
Other
797 1,247
9,857 29,165
Government grants are not recognised until there is reasonable assurance that the grants will be received and that the
Group will comply with the conditions attached to them. Government grants that compensate the Group for expenses
incurred are recognised as revenue in the statement of comprehensive income on a systematic basis in the same period in
which the expenses are recognised. In the current period Government grants relate to US Employee Retention Credits,
wage and other subsidies received in response to the impact of COVID-19 and Apprenticeship Boost payments.
Government grants of $5,652,000 (2021: nil ) relating to the current year are receivable at balance date and have been
included in other receivables in note 3.1.3.
In the prior year $4,025,000 of government grants income recognised related to US Paycheck Protection Program loans as
disclosed in note 4.1. No further amounts have been recognised as income in the current period in respect of these loans.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
16
Employee entitlements
2022 2021
NZ$’000 NZ$’000
Wages, salaries, and other short-term benefits
189,864 187,700
Post-employment benefits
10,483 9,692
Employee share-based remuneration
914 1,798
201,261 199,190
Lease expense
The Group is a lessee. Refer to note 3.4 for further details around the Group’s leases and lease accounting policies.
Lease amounts recognised in the consolidated statement of comprehensive income:
2022 2021
NZ$’000 NZ$’000
Short-term lease expense
7,987 4,398
Low-value lease expense
546 378
Variable lease expense
754 (431)
Rent concessions and abatements
(3,588) (7,306)
Lease outgoings
15,423 12,938
Depreciation right-of-use asset (note 3.4.1)
77,605 86,382
Interest expense related to lease liabilities (note 3.4.2) 8,476 8,879
107,203 105,238
Some of the property leases in which the Group is the lessee contain variable lease payment terms that are linked to sales
generated from the leased stores. Variable payment terms are used to link rental payments to store cash flows and reduce
fixed cost.
Overall, the variable payments constitute up to 0.7% (2021: 0.4%) of the Group's entire lease payments. The variable
payments depend on sales and consequently on the overall economic development over the next few years. Considering the
development of sales expected over the next 3 years, variable rent expenses are expected to continue to present a similar
proportion of store sales in future years.
The Group has adopted the practical expedient in paragraph 46A of NZ IFRS 16 and elected not to account for any rent
concessions granted as a result of the COVID-19 pandemic as a lease modification. The amounts are recognised in profit or
loss due to changes in lease payments arising from such concessions, within the selling, administration, and general
expenses in the consolidated statement of comprehensive income.
The total cash outflow for leases amounts to $109,163,000 (2021: $121,291,000).
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
17
2.3 Taxation
Accounting policies
Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated statement of
comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in
equity. In this case, the tax is recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the balance sheet
date in the countries where the Company and the Company’s subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes provisions where appropriate based on amounts expected to be
paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax
is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination, that at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax
liability is not recognised if it arises from the initial recognition of goodwill. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the
related deferred income tax asset is realised, or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of
the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.
Goods and Services Tax (GST)
The consolidated statement of comprehensive income and the consolidated statement of cash flows have been prepared so
that all components are stated exclusive of GST. All items in the consolidated balance sheet are stated net of GST, except
for receivables and payables, which include GST invoiced.
Taxation – Consolidated statement of comprehensive income
The total taxation charge in the consolidated statement of comprehensive income is analysed as follows:
2022 2021
NZ$’000 NZ$’000
Restated
Current income tax charge
13,354 24,334
Deferred income tax charge / (credit)
3,443 (12,866)
Income tax charge reported in the consolidated statement of
comprehensive income
16,797 11,468
To understand how, in the consolidated statement of comprehensive income, a tax charge of $16,797,000 (Restated 2021:
$11,468,000) arises on profit before income tax of $53,625,000 (Restated 2021: $72,813,000), the taxation charge that
would arise at the standard rate of New Zealand corporate tax is reconciled to the actual tax charge as follows:
Keeping it simple ...
This section lays out the tax accounting policies, the current and deferred tax charges or credits in the
year (which together make up the total tax charge or credit in the consolidated statement of
comprehensive income), a reconciliation of profit before tax to the tax charge and the movements in
deferred tax assets and liabilities. The Group is subject to income taxes in multiple jurisdictions. As a
result there is complexity and judgement involved in determining the worldwide provision for income
taxes.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
18
2022 2021
NZ$’000 NZ$’000
Restated
Profit before income tax
53,625 72,813
Income tax calculated at 28%
15,015 20,388
Adjustments to taxation:
Adjustments due to different rate in different jurisdictions 999 1,608
Non-taxable income
(2,025) (2,537)
Expenses not deductible for tax purposes
2,901 2,973
Utilisation of tax losses by group companies
43 (1,362)
Tax expense transferred to foreign currency translation
- (811)
Adjustments in respect of prior years
(136) 787
Historic tax losses and deferred tax assets recognised - (9,578)
Income tax charge reported in the consolidated statement of
comprehensive income
16,797 11,468
Adjustments for prior periods primarily arise where an outcome is obtained on certain tax matters which differs from
expectations held when the related provision was made. Where the outcome is more favourable than the provision made,
the difference is released, lowering the current year tax charge. Where the outcome is less favourable than the provision, an
additional charge to the current year tax will occur.
During the year the Group did not recognise any previously unrecognised tax losses (2021: $9,578,000).
The tax credit / (charge) relating to components of other comprehensive income is as follows:
2022 2021
NZ$’000 NZ$’000
Movement in cash flow hedge reserve before tax 13,298 5,685
Tax credit / (charge) relating to cash flow hedge reserve (627) (5,126)
Movement in cash flow hedge reserve after tax
12,671 559
Foreign currency translation reserve before tax 36,188 (17,527)
Tax credit / (charge) relating to foreign currency translation
reserve
- -
Movement in foreign currency translation reserve after tax 36,188
(17,527)
Other reserves before tax - 14
Tax credit / (charge) relating to other reserves - -
Movement in other reserves after tax
- 14
Total other comprehensive income / (expense) before tax 49,486 (11,828)
Total tax credit / (charge) on other comprehensive income (627) (5,126)
Total other comprehensive income / (expense) after tax 48,859 (16,954)
Current tax
- -
Deferred tax
(627) (5,126)
Total tax credit / (charge) on other comprehensive income (627) (5,126)
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
19
Taxation – Balance sheet
The following are the major deferred taxation liabilities and assets recognised by the Group and movements thereon during
the current and prior year:
Employee
obligations
Intangibles Leases Other
temporary
differences
Reserves Tax
losses
Total
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
Restated Restated
As at 31 July 2020 3,493 (115,887) 11,247 17,924 2,907 - (80,316)
Recognised in the consolidated
statement of comprehensive
income
1,243 1,401 1,695 1,449 - 7,078 12,866
Recognised in other
comprehensive income
- - - - (5,126) - (5,126)
Recognised directly in equity 289 - - - - - 289
Foreign exchange (67) 2,258 (202) (300) 27 (119) 1,597
As at 31 July 2021 4,958 (112,228) 12,740 19,073 (2,192) 6,959 (70,690)
Recognised in the consolidated
statement of comprehensive
income
570 1,682 (893) (5,544) - 742 (3,443)
Recognised in other
comprehensive income
- - - - (627) - (627)
Recognised directly in equity (309) - - - - - (309)
Foreign exchange 187 (5,753) 496 536 (111) 343 (4,302)
As at 31 July 2022
5,406 (116,299) 12,343 14,065 (2,930) 8,044 (79,371)
The deferred tax balance relates to:
• Property, plant and equipment temporary differences arising on differences in accounting and tax depreciation rates
• Employee benefit accruals
• Brands and customer relationships
• Unrealised foreign exchange gain / loss on intercompany loans
• Realised gain / loss on foreign exchange contracts not yet charged in the consolidated statement of comprehensive
income
• Lease accounting
• Inventory provisioning
• Temporary differences on the unrealised gain / loss in hedge reserve
• Employee share schemes
• Historic tax losses recognised
• Other temporary differences on miscellaneous items
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
2022 2021
NZ$’000 NZ$’000
Deductible temporary differences
- -
Tax losses
3,879 5,548
3,879 5,548
The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of overseas subsidiaries where it is not yet probable that future taxable profit will be generated in
those territories to utilise these benefits.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
20
Imputation credits
2022 2021
NZ$’000 NZ$’000
Imputation credits available for use in subsequent reporting
periods based on a tax rate of 28%
75 66
The above amounts represent the balance of the imputation account as at 31 July 2022, adjusted for:
• Imputation credits that will arise from the payment of the amount of the provision for income tax.
• Imputation debits that will arise from the payment of dividends recognised as a liability at the reporting date.
• Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The balance of Australian franking credits able to be used by the Group in subsequent periods as at 31 July 2022 is
A$7,497,000 (2021: A$11,502,000).
2.4 Earnings per share
2022 2021
’000 ’000
Weighted average number of basic ordinary shares in issue 709,001 709,001
Adjustment for:
Share options / performance rights
8,265 4,005
717,266 713,006
Keeping it simple ...
Earnings per share (‘EPS’) is the amount of post-tax profit attributable to each share.
Basic EPS is calculated by dividing the profit after tax attributable to equity holders of the Company of
$35,952,000 (Restated 2021: $60,982,000) by the weighted average number of ordinary shares in
issue during the year of 709,001,384 (2021: 709,001,384).
Diluted EPS reflects any commitments the Group has to issue shares in the future that would decrease
EPS. In the current year, these are in the form of share options / performance rights. To calculate the
impact, it is assumed that all share options are exercised / performance rights taken, and therefore,
adjusting the weighted average number of shares.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
21
Section 3: Operating Assets and Liabilities
3.1 Working capital
3.1.1 Inventory
Accounting policies
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average cost method
and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In
the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads
based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business,
less applicable variable selling expenses. Inventory is considered in transit when the risk and rewards of ownership have
transferred to the Group.
The Group assesses the likely residual value of inventory. Inventory provisions are recognised for inventory that is expected
to sell for less than cost, and for the value of inventory likely to have been lost to the business through shrinkage between
the date of the last applicable stocktake and balance sheet date. In recognising the provision for inventory, judgement has
been applied by considering a range of factors including historical results, stock shrinkage trends and product lifecycle.
Inventory is broken down into trading stock and goods in transit below:
2022 2021
NZ$’000 NZ$’000
Raw materials and consumables
4,563 3,297
Work in progress
3,377 1,324
Trading inventory
251,043 189,221
Goods in transit
36,539 22,703
295,522 216,545
Inventory has been reviewed for obsolescence and a provision of $5,849,000 (2021: $5,393,000) has been made.
3.1.2 Cash and cash equivalents
2022 2021
NZ$’000 NZ$’000
Cash on hand
446 489
Cash at bank
68,806 140,617
Short term investments convertible to cash
1,558 1,508
70,810 142,614
In this section ...
This section shows the assets used to generate the Group’s trading performance and the liabilities
incurred as a result. Liabilities relating to the Group’s financing activities are addressed in Section 4.
Deferred tax assets and liabilities are shown in note 2.3.
Keeping it simple ...
Working capital represents the assets and liabilities the Group generates through its trading activity. The
Group therefore defines working capital as inventory, cash, trade and other receivables, other financial
assets, other current assets and trade and other payables and other financial liabilities.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
22
The carrying amount of the Group's cash and cash equivalents are denominated in the following currencies:
2022 2021
NZ$’000 NZ$’000
AUD
18,175 82,056
USD
17,810 27,350
EUR
15,746 10,455
THB
5,122 3,241
NZD
4,010 9,626
IDR
3,806 2,852
BRL
2,100 2,112
GBP
1,234 1,897
CAD
1,502 1,476
Other currencies
1,305 1,549
70,810 142,614
3.1.3 Trade and other receivables
Accounting policies
Trade and other receivables are recognised initially at the value of the invoice sent to the customer (fair value) and
subsequently at the amounts considered recoverable (amortised cost). The collectability of trade and other receivables is
reviewed on an on-going basis.
An allowance for lifetime expected credit losses is recognised for trade and other receivables based on the Group’s historical
credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions, and an assessment
of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where
appropriate. The expected credit loss is estimated as the difference between all contractual cash flows that are due to the
Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original
effective interest rate.
2022 2021
NZ$’000 NZ$’000
Restated
Current
Trade receivables
87,626 61,084
Allowance for expected credit losses
(5,964) (5,680)
Prepayments
12,928 8,830
Other receivables
10,936 5,828
105,526 70,062
Non-current
Other debtors
1,588 1,549
1,588 1,549
Other non-current debtors include debtors on extended credit terms and security deposits paid in relation to store leases.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
23
The carrying amount of the Group’s trade and other receivables are denominated in the following currencies:
2022 2021
NZ$’000 NZ$’000
Restated
USD
56,539 30,551
EUR
11,950 11,449
AUD
11,375 12,858
NZD
6,750 3,123
THB
5,977 3,125
BRL
4,950 3,645
CAD
4,882 2,402
GBP
3,045 2,163
IDR
895 1,122
JPY
631 1,173
Other currencies
120 -
107,114 71,611
Allowance for expected credit losses
2022 2021
NZ$’000 NZ$’000
Opening balance
(5,680) (10,329)
Additional allowance recognised in the consolidated
statement of comprehensive income
(2,171) (3,104)
Receivables written-off during the year
484 5,186
Unused provision released to the consolidated statement of
comprehensive income during the year
1,751 2,173
Foreign exchange
(348) 394
Closing balance
(5,964) (5,680)
3.1.4 Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations.
Risk Exposure arising from Monitoring Management
Credit risk Cash and cash equivalents Credit ratings Obtaining customer credit
Trade and other receivables Aging analysis rating information
Derivative financial instruments Review of exposure with Confirming references
regular terms of trade Setting appropriate credit
limits
Exposure to credit risk
The below balances are recorded at their carrying amount after any allowance for expected credit loss on these financial
instruments. The maximum exposure to credit risk at reporting date was (carrying amount):
2022 2021
NZ$’000 NZ$’000
Cash and cash equivalents
70,364 142,125
Trade receivables (net)
81,662 55,404
Other receivables
11,220 7,158
Derivative financial instruments
9,936 4,206
173,182 208,893
As at balance sheet date the carrying amount is considered to approximate fair value for each of the financial instruments.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
24
The credit quality of cash and cash equivalents can be assessed by reference to external credit ratings, such as Standard &
Poors or Moody’s (if available) or to historical information about counterparty default rates:
2022 2021
NZ$’000 NZ$’000
Cash and cash equivalents:
Standard & Poors - AA-
29,148 104,885
Standard & Poors - A+
14,114 25,919
Standard & Poors - A
599 1,768
Standard & Poors - A-
1,709 197
Standard & Poors - BBB+
14,256 3,359
Standard & Poors - BBB
6,986
Standard & Poors - BBB-
- 2,912
Standard & Poors - BB
1,456 978
Standard & Poors - BB-
2,096 2,107
70,364 142,125
Trade and other receivables consist of a large number of customers spread across diverse geographical regions, which
reduces credit risk.
As at balance sheet date, trade and other receivables of $28,737,000 (2021: $15,931,000) were past due. A provision of
$5,964,000 (2021: $5,680,000) is held against these overdue amounts. This provision is based on expected life time credit
losses, taking into account historic loss rates, age of the outstanding balances, customer payment history and any
arrangements, leverage or security in place with the customer. Interest is charged on overdue debtors in some instances.
The ageing analysis of these past due trade receivables is:
2022 2021
NZ$’000 NZ$’000
0 to 30 days
11,637 5,301
30 to 60 days
4,412 2,926
60 to 90 days
4,625 2,311
90 days and over
8,063 5,393
28,737 15,931
The Group considers a financial asset to be in default when the debtor is unlikely to pay its credit obligations in full, without
recourse by the Group. The gross carrying amount of a financial asset is written off when the Group has no reasonable
expectations of recovering a financial asset in its entirety or a portion thereof.
3.1.5 Other assets
Accounting policies
Other assets relate to rights of return assets. Rights of return recognises the estimated returned sales under the Group's
returns policies. Management estimates the returned sales based on historical sales return information and any recent
trends that may suggest future claims could differ from historical amounts. For sales that are expected to be returned, the
Group recognises a returns provision as disclosed in note 3.1.6. The associated inventory value for sales that are expected
to be returned is recognised as a right of return asset. The costs to recover the products are not material because the
customers usually return them in a saleable condition.
2022 2021
NZ$’000 NZ$’000
Right of return assets
Opening balance
2,320 2,799
Additional amounts recognised
10 -
Amounts incurred and charged
(19) (431)
Foreign exchange
123 (48)
2,434 2,320
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
25
3.1.6 Trade and other payables
Accounting policies
Trade payables, sundry creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing
costs. Trade and other payables are initially measured at fair value and subsequently measured at amortised cost, using the
effective interest method. The carrying value of trade payables is considered to approximate fair value as amounts are
unsecured and are usually paid by the 30th of the month following recognition.
Employee entitlements relates to benefits accruing to employees in respect of wages and salaries, annual leave, and long
service leave when it is probable that settlement will be required, and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months are measured at their nominal
values using the remuneration rate expected to apply at the time of settlement. Provisions made in respect of employee
benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future
cash outflows to be made by the Group in respect of services provided by employees up to the reporting date.
2022 2021
NZ$’000 NZ$’000
Current
Trade payables
102,296 72,230
Employee entitlements
25,619 27,642
Sundry creditors and accruals
56,600 42,502
Provisions
8,306 6,832
Revenue received in advance
1,213 -
194,034 149,206
Non-current
Employee entitlements
2,946 3,076
Provisions
11,394 11,742
Sundry creditors and accruals
2,906 -
17,246 14,818
The carrying amount of the Group’s trade and other payables are denominated in the following currencies:
2022 2021
NZ$’000 NZ$’000
USD
81,917 47,776
AUD
71,484 68,465
NZD
25,863 17,239
EUR
15,690 15,254
THB
7,774 4,751
BRL
4,325 6,138
IDR
2,464 2,334
Other currencies
1,763 2,067
211,280 164,024
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
26
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
The warranties provision represents the present value of the estimated future outflow of economic benefits that will be
required under the Group’s obligations for warranties under local sale of goods legislation. The provision relates to wetsuits,
watches and footwear and is based on estimates made from historical warranty data associated with similar products and
services.
A restructuring provision is recognised when the Group has approved a detailed and formal restructuring plan, and the
restructuring has either commenced or has been announced publicly at balance date.
Lease restoration provision represents the present value of the estimated cost to restore leased properties to their original
condition upon expiry of the lease.
Where a customer has a right to return a product within a given period, the Group recognises a returns provision for the
consideration received that will be required to be refunded to customers on return of the product. The Group also recognises
a right to the returned goods as disclosed in note 3.1.5.
Other provisions relate to miscellaneous amounts that meet the definition of a provision and do not relate to the other
categories.
Warranties Restructuring Lease
restoration
Sales
returns
Other Total
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
Year ended 31 July 2021
Opening balance 1,349 1,675 11,048 6,291 622 20,985
Additional provisions recognised 686 70 1,391 - - 2,147
Provisions used during the year (301) (1,324) (195) (135) (41) (1,996)
Provisions re-measured during the year - - (723) (1,359) - (2,082)
Foreign exchange (41) (61) (273) (105) - (480)
Closing balance 1,693 360 11,248 4,692 581 18,574
As at 31 July 2021
Current
1,693 360 - 4,692 87 6,832
Non-current
- - 11,248 - 494 11,742
1,693 360 11,248 4,692 581 18,574
Year ended 31 July 2022
Opening balance 1,693 360 11,248 4,692 581 18,574
Additional provisions recognised 606 163 457 29 289 1,544
Provisions used during the year (473) (45) - - (87) (605)
Provisions re-measured during the year - (23) (826) 136 - (713)
Foreign exchange 126 (10) 515 258 11 900
Closing balance 1,952 445 11,394 5,115 794 19,700
As at 31 July 2022
Current
1,952 445 - 5,115 794 8,306
Non-current
- - 11,394 - - 11,394
1,952 445 11,394 5,115 794 19,700
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
27
3.2 Property, plant and equipment
Accounting policies
Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any
gains / losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
The assets’ residual value and useful lives are reviewed and adjusted if appropriate at each balance sheet date.
Capital work in progress is not depreciated until available for use.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Depreciation
Depreciation of property, plant and equipment is calculated using straight line and diminishing value methods to expense the
cost of the assets over their useful lives. The rates are as follows:
Buildings 5 – 10%
Leasehold improvements 5 – 50%
Office, plant and equipment 5 – 50%
Furniture and fittings 10 – 50%
Computer equipment 10 – 50%
Impairment of assets
Property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal
and value in use.
Keeping it simple ...
The following section shows the physical assets used by the Group to operate the business, generating
revenues and profits. These assets include store and office fit-out, as well as equipment used in sales
and support activities.
Assets are recognised only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
28
Property, plant and equipment
Property, plant and equipment can be analysed as follows:
Land &
buildings
Leasehold
improvements
Office, plant
& equipment
Furniture &
fittings
Computer
equipment
Total
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
As at 31 July 2020
Cost 9,722 95,149 45,612 99,855 20,251 270,589
Accumulated depreciation (4,095) (63,383) (30,516) (68,072) (16,065) (182,131)
Closing net book value 5,627 31,766 15,096 31,783 4,186 88,458
Year ended 31 July 2021
Opening net book value 5,627 31,766 15,096 31,783 4,186 88,458
Additions 63 3,752 694 7,576 2,959 15,044
Disposals (1) (865) (74) (374) (23) (1,337)
Depreciation (596) (8,369) (1,289) (8,978) (1,619) (20,851)
Impairment - - - (16) - (16)
Transfers between categories 52 1,228 (2,169) 771 118 -
Foreign exchange (379) (512) (307) (705) (111) (2,014)
Closing net book value 4,766 27,000 11,951 30,057 5,510 79,284
As at 31 July 2021
Cost 8,691 92,270 30,130 101,699 21,175 253,965
Accumulated depreciation (3,925) (65,270) (18,179) (71,642) (15,665) (174,681)
Closing net book value 4,766 27,000 11,951 30,057 5,510 79,284
Year ended 31 July 2022
Opening net book value 4,766 27,000 11,951 30,057 5,510 79,284
Additions 342 8,210 1,335 10,227 1,453 21,567
Disposals - (101) (7) (475) (12) (595)
Depreciation (353) (9,434) (1,338) (9,553) (1,894) (22,572)
Impairment - - - (12) - (12)
Transfers between categories (15) (1,426) (20) 1,535 (74) -
Transfers to intangibles - - - - (1,507) (1,507)
Foreign exchange (105) 1,195 559 1,300 129 3,078
Closing net book value 4,635 25,444 12,480 33,079 3,605 79,243
As at 31 July 2022
Cost 8,832 101,681 31,253 115,582 19,293 276,641
Accumulated depreciation (4,197) (76,237) (18,773) (82,503) (15,688) (197,398)
Closing net book value 4,635 25,444 12,480 33,079 3,605 79,243
Depreciation expense is excluded from administration and general expenses in the consolidated statement of
comprehensive income.
Sale of property, plant and equipment
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
consolidated statement of comprehensive income.
2022 2021
NZ$’000 NZ$’000
Loss on sale of property, plant and equipment
591 1,337
Capital commitments
Capital commitments contracted for at balance sheet date include property, plant and equipment of $868,000 (2021:
$4,110,000).
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
29
3.3 Intangible assets
Accounting policies
Goodwill
Goodwill arises on the acquisition of subsidiaries. Goodwill represents the excess of the cost of the acquisition over the
Group’s interest in the net fair value of the assets and liabilities of the acquiree. Separately recognised goodwill is tested
annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. It is
carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the business combination in which the
goodwill arose.
Brand
Acquired brands are carried at original cost based on independent valuation obtained at the date of acquisition. The brand
represents the price paid to acquire the rights to use the Kathmandu, Oboz or Rip Curl brand. The brand is not amortised.
Instead, the brand is tested for impairment annually or more frequently if events or changes in circumstances indicate that it
might be impaired and is carried at cost less accumulated impairment losses.
Customer relationships
Acquired customer relationships are carried at original cost based on independent valuation obtained at the date of
acquisition less accumulated amortisation. They are amortised on a straight-line basis over a useful life of five to ten years.
The estimated useful life and amortisation period is reviewed at the end of each annual reporting period.
Software costs
Software costs have a finite useful life. Software costs are capitalised and amortised over the useful economic life.
Costs associated with maintaining computer software programs are recognised as an expense when incurred. Costs that are
directly associated with the creation or acquisition of an identifiable software asset controlled by the Group, and that will
probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs
include the costs of software development employees and contractors.
Software is amortised over the estimated useful economic life of the asset ranging from two to ten years.
Software-as-a Service (SaaS) arrangements
SaaS arrangements are arrangements in which the Group does not currently control the underlying software used in the
arrangement.
Where implementation costs for SaaS arrangements result in the creation of an identifiable software asset, and where the
Group has the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access
of others to those benefits, such costs are recognised as a separate intangible software asset and amortised over the useful
life of the software on a straight-line basis.
Where costs incurred to configure or customise SaaS arrangements do not result in the recognition of an intangible software
asset, then those costs that provide the Group with a distinct service (in addition to access to the SaaS software) are
recognised as expenses when the supplier provides the services. When such costs incurred do not provide a distinct
service, the costs are recognised as expenses over the duration of the expected renewable term of the arrangement.
Other intangibles
Other intangibles relate to lease rights expenditure associated with acquiring existing lease agreements for stores where
there is an active market for key money. They are carried at original cost less accumulated impairment losses. Other
intangibles have an indefinite useful life and are tested annually for impairment.
Keeping it simple ...
The following section shows the non-physical assets used by the Group to operate the business,
generating revenues and profits. These assets include brands, customer relationship, software
development and goodwill.
This section explains the accounting policies applied and the specific judgements and estimates made
by the Directors in arriving at the net book value of these assets.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
30
Impairment
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. Intangible assets that have an indefinite useful life, including goodwill, are not subject to amortisation and
are tested annually for impairment irrespective of whether any circumstances identifying a possible impairment have been
identified. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows e.g., cash generating units.
Intangible assets
Goodwill Brand Customer
relationship
Software Other
intangibles
Total
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
Restated Restated
As at 31 July 2020
Cost 283,030 357,123 41,495 51,487 4,552 737,687
Accumulated amortisation (1,271) - (4,213) (43,173) (1,612) (50,269)
Closing net book value 281,759 357,123 37,282 8,314 2,940 687,418
Year ended 31 July 2021
Opening net book value 281,759 357,123 37,282 8,314 2,940 687,418
Additions - - - 15,583 - 15,583
Disposals - - - - - -
Amortisation - - (5,203) (2,536) - (7,739)
Foreign exchange (5,358) (6,996) (695) (78) (126) (13,253)
Closing net book value 276,401 350,127 31,384 21,283 2,814 682,009
As at 31 July 2021
Cost 277,672 350,127 40,621 67,004 4,358 739,782
Accumulated amortisation (1,271) - (9,237) (45,721) (1,544) (57,773)
Closing net book value 276,401 350,127 31,384 21,283 2,814 682,009
Year ended 31 July 2022
Opening net book value 276,401 350,127 31,384 21,283 2,814 682,009
Additions - - - 14,885 - 14,885
Disposals - - - (14) - (14)
Amortisation - - (5,188) (7,151) - (12,339)
Transfers from property, plant and - - - 1,507 - 1,507
equipment
Foreign exchange 13,600 18,040 1,532 228 (126) 33,274
Closing net book value 290,001 368,167 27,728 30,738 2,688 719,322
As at 31 July 2022
Cost 291,272 368,167 42,892 84,471 4,162 790,964
Accumulated amortisation (1,271) - (15,164) (53,733) (1,474) (71,642)
Closing net book value 290,001 368,167 27,728 30,738 2,688 719,322
Sale of intangibles
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
consolidated statement of comprehensive income.
2022 2021
NZ$’000 NZ$’000
Loss on sale of intangibles
14 -
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
31
Impairment tests for goodwill and brand
The aggregate carrying amounts of goodwill and brand allocated to each unit for impairment testing are as follows:
Goodwill Brand
2022 2021 2022 2021
NZ$’000 NZ$’000 NZ$’000 NZ$’000
Kathmandu 122,936 121,383 153,336 148,151
Oboz 72,572 65,315 39,859 35,873
Rip Curl 94,493 89,703 174,972 166,103
290,001 276,401 368,167 350,127
For the purposes of goodwill and brand impairment testing, the Group operates as three cash generating units, Kathmandu,
Rip Curl and Oboz, which are now aligned to the Group’s operating segments as outlined in note 2.1.
Previously impairment testing for Kathmandu was reported separately for Australia and New Zealand. Impairment testing
continues to be conducted at this level and no indicators of impairment exist.
The recoverable amount of each cash generating unit (CGU) has been determined based on the fair value less cost of
disposal (FVLCOD). Five-year projected cash flows are used to determine the FVLCOD.
The discounted cash flow valuations were calculated using post tax cash flow projections based on financial budgets
prepared by management and approved by the Directors for the year ended 31 July 2023. Cash flows beyond July 2023 are
based on three-year business plans presented to the Directors.
The key assumption used:
• The FVLCOD model assumes the COVID-19 trading disruption experienced during the prior and current years will
continue for a portion of FY23 and then return to more normalised trading in FY24 and beyond. The Group believes
the assumptions used in cash flows reflect a combination of the Groups experience and uncertainty associated with
COVID-19.
• While temporary store and market closures may impact short term results, these are not expected to impact the
long-term performance of each CGU. Several scenarios have been assessed where trading conditions do not
normalise until FY24, and in each scenario the fair value for the CGU exceeds the carrying value.
Other assumptions used:
2022 2021
Kathmandu Rip Curl Oboz Kathmandu Rip Curl Oboz
Pre-tax WACC rate 12.9% 12.8% 14.5% 11.3% 11.3% 11.3%
Post-tax WACC rate 9.1% 9.0% 10.5% 7.9% 7.9% 8.2%
Terminal growth rate 2.4% 2.5% 2.2% 2.0% 2.0% 2.0%
The terminal growth rate assumption is based on a conservative estimate considering the current inflation targets and do not
exceed the historical long-term average growth rate for each CGU. Pre-tax discount rates are calculated based on a market
participant expected capital structure and cost of debt to derive a weighted average cost of capital.
The calculations confirmed that there was no impairment of goodwill and brand during the year (2021: nil). The Directors
believe that any reasonably possible change in the key assumptions used in the calculations would not cause the carrying
amount to exceed its recoverable amount.
The expected continued promotion and marketing of the Kathmandu, Oboz and Rip Curl brands supports the assumption
that the brand has an indefinite life.
The Group has considered the impact of climate change on the key assumptions included in its impairment testing and has
concluded that it will not have a material impact on the key assumptions.
Capital commitments
Capital commitments contracted for at balance sheet date include intangible assets of $2,962,000 (2021: $7,271,000).
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
32
3.4 Leases
Accounting policies
The Group assesses whether a contract is or contains a lease, at inception of a contract. The Group recognises a right-of-
use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-
term leases (defined as leases with a term of 12 months or less) and leases of low value assets. For these leases, the
Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are
consumed.
Lease liability
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its
incremental borrowing rate. The Group’s incremental borrowing rate has been determined as the rate of interest that the
Group would have to pay to borrow over a similar term and with a similar security the funds necessary to obtain an asset of
a similar value to the right-of-use asset in a similar economic environment.
Lease payments included in the measurement of the lease liability comprise:
• fixed lease payments (including in-substance fixed payments), less any lease incentives; and
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
• the lease term has changed in which case the lease liability is remeasured by discounting the revised lease
payments using a revised discount rate;
• the lease payments change due to changes in an index or rate or a change in expected payment under a
guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease
payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used);
• a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the
lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
Right of use asset
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or
before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is
located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is
recognised and measured under NZ IAS 37. The costs are included in the related right-of-use asset.
Right-of-use assets are depreciated over the lease term and including expected renewals. The depreciation starts at the
commencement date.
The Group applies NZ IAS 36 Impairment of Assets to determine whether a right-of-use asset is impaired and accounts for
any identified impairment loss.
Keeping it simple ...
The following section shows the assets leased by the Group to operate the business, generating
revenues and profits. These assets include the lease of retail stores.
This section explains the accounting policies applied and the specific judgements and estimates made
by the Directors in arriving at the carrying value of these assets and the corresponding lease liability.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
33
Variable rents
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-
of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers
those payments occurs and are included in the selling expenses line in the consolidated statement of comprehensive
income.
Group as a lessee
The Group leases several assets including buildings and motor vehicles. Some of the existing lease arrangements have
right of renewal options for varying terms. Renewal options are included within the lease if the Group is reasonably certain to
take up the option. The average lease term for property leases, including expected rights of renewal, is 9 years (2021: 8
years). The average lease term for vehicle leases is 3 years (2021: 3 years).
3.4.1 Right-of-use assets
The movements in right of use assets were as follows:
2022 2021
NZ$’000 NZ$’000
Opening net book value
242,677 258,699
Additions and modifications to right-of-use asset
75,311 76,853
Depreciation for the period
(77,605) (86,382)
Impairment for the period
(928) (1,894)
Foreign exchange
10,917 (4,599)
Closing net book value
250,372 242,677
Cost
439,852 391,327
Accumulated amortisation & impairment
(189,480) (148,650)
Closing net book value
250,372 242,677
3.4.2 Lease liabilities
The movements in lease liabilities were as follows:
2022 2021
NZ$’000 NZ$’000
Opening lease liabilities
279,271 298,622
Additions and modifications to lease liability
75,816 75,601
Interest expense on lease liabilities
8,476 8,879
Repayment of lease liabilities (including interest)
(91,247) (98,694)
Foreign exchange
12,271 (5,137)
Closing lease liabilities
284,587 279,271
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
34
Lease liability maturity analysis
Gross lease
payments
Interest Carrying
amount
NZ$’000 NZ$’000 NZ$’000
As at 31 July 2021
Within one year
82,639 (7,067) 75,572
One to five years
180,207 (12,559) 167,648
Beyond five years
38,433 (2,382) 36,051
301,279 (22,008) 279,271
Current
75,572
Non-current
203,699
279,271
As at 31 July 2022
Within one year
82,992 (7,699) 75,293
One to five years
184,404 (13,683) 170,721
Beyond five years
40,849 (2,276) 38,573
308,245 (23,658) 284,587
Current
75,293
Non-current
209,294
284,587
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
35
Section 4: Capital Structure and Financing Costs
4.1 Interest bearing liabilities
Accounting policies
Interest bearing liabilities are the Group’s borrowings. Borrowings are initially recognised at fair value, net of transaction
costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in the consolidated statement of comprehensive income over
the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date.
The table below separates borrowings into current and non-current liabilities:
2022 2021
NZ$’000 NZ$’000
Current portion
- -
Non-current portion
110,881 105,597
110,881 105,597
Group Facility Agreement
The Group has a multi-option syndicated facility agreement, with a sustainability linked loan of A$100 million, a revolving
cash advance facility of A$115 million and NZ$24 million, trade finance sub-facilities of A$30 million and NZ$10 million, and
instruments sub-facilities of A$20 million and NZ$4 million. All facilities are repayable in full on 26 May 2024.
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 1.25%. The debt is secured by the assets of the
guaranteeing group in accordance with the Security Trust Deed dated 25 October 2019 as amended 26 May 2021. The
guaranteeing group comprises entities operating in New Zealand, Australia, North America and the United Kingdom. The
carrying value of the assets pledged as security is $1,408,254,000 (2021: $1,451,186,000).
The covenants entered into by the Group require specified calculations of Group earnings before interest, tax, depreciation
and amortisation (EBITDA) plus lease rental costs to exceed total fixed charges (net interest expense and lease rental costs)
at the end of each half during the financial year. Similarly, EBITDA must be no less than a specified proportion of total net
debt at the end of each six-month interim period. The calculations of these covenants are specified in the bank facility
agreement of 25 October 2019 as amended and restated on 26 May 2021. The Group has complied with its banking
covenants at all measurement points during the year.
The current interest rates, prior to hedging, on the term loans ranged between 0.99% - 3.20% (2021: 0.95% - 1.05%).
In this section ...
This section outlines how the Group manages its capital structure and related financing costs, including
its balance sheet liquidity and access to capital markets.
Capital structure is how an entity finances its overall operations and growth by using different sources
of funds. The Directors determine and monitor the appropriate capital structure of the Group,
specifically how much is raised from shareholders (equity) and how much is borrowed from financial
institutions (debt) to finance the Group’s activities both now and in the future.
The Directors consider the Group’s capital structure and dividend policy at least twice a year ahead of
announcing results and do so in the context of its ability to continue as a going concern, to execute
strategy and to deliver its business plan.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
36
Reconciliation of movement in borrowings
2022 2021
NZ$’000 NZ$’000
Opening balance
105,597 241,270
Net cash flow movement
- (128,894)
Loans forgiven
- (4,025)
Capitalised borrowing costs
(340) -
Foreign exchange movement
5,624 (2,754)
Closing balance
110,881 105,597
Paycheck Protection Program (PPP) loans
As part of the US government response to COVID-19 the Group’s US resident companies applied for Paycheck Protection
Program (PPP) loans of US$2,814,000 in the year ended 31 July 2020.
Included within the Group’s interest bearing liabilities as at 31 July 2020 was US$2,814,000 relating to the PPP loans that
were recognised as other income in the year ended 31 July 2021 on the basis that the Group had either received
forgiveness or believed it had met the conditions for forgiveness. During the year the Group obtained formal forgiveness for
all outstanding PPP loans. The forgiveness during the year has had no impact on the Group’s balance sheet, statement of
comprehensive income or cash flows for the year ended 31 July 2022.
Borrowings maturity analysis
2022 2021
NZ$’000 NZ$’000
Principal of interest-bearing liabilities:
Payable within 1 year
- -
Payable 1 to 2 years
110,881 -
Payable 2 to 3 years
- 105,597
Payable 3 to 4 years
- -
110,881 105,597
4.1.1 Finance costs
2022 2021
NZ$’000 NZ$’000
Interest income
(394) (834)
Interest expense on interest bearing liabilities
1,809 2,370
Interest on lease liabilities
8,476 8,879
Other finance costs
3,057 5,358
Net exchange loss / (gain) on foreign currency
845 704
13,793 16,477
Other finance costs relate to facility fees on banking arrangements and debt underwriting costs.
4.1.2 Cash flow and fair value interest rate risk
Interest rate risk is the risk that fluctuations in interest rates impact the Group’s financial performance.
Risk Exposure arising from Monitoring Management
Interest rate risk Interest bearing liabilities at Cash flow forecasting Interest rate swaps
floating interest rates Sensitivity analysis
Refer to note 4.2 for notional principal amounts and valuations of interest rate swaps outstanding at balance sheet date. A
sensitivity analysis of interest rate risk on the Group’s financial assets and liabilities is provided in the table below.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
37
At the reporting date the interest rate profile of the Group's banking facilities was (carrying amount):
2022 2021
NZ$’000 NZ$’000
Total secured borrowings
110,881 105,597
Less Principal covered by interest rate swaps
- -
Net principal subject to floating interest rates
110,881 105,597
Interest rate swaps have the economic effect of converting borrowings from floating to fixed rates. The cash flow hedge loss
on interest rate swaps at balance sheet date was nil (2021: nil).
Interest rate sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
A sensitivity of 1% (2021: 1%) has been selected for interest rate risk. The 1% is based on reasonably possible changes
over a financial year, using the observed range of historical data for the preceding five-year period.
Amounts are shown net of income tax. All variables other than applicable interest rates are held constant. The impact on
equity is presented exclusive of the impact on retained earnings.
Carrying -1% +1%
amount Profit Equity Profit Equity
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
As at 31 July 2021
Financial assets
Cash and cash equivalents 142,614 (1,027) - 1,027 -
Financial liabilities
Interest bearing liabilities (105,597) 760 - (760) -
Net increase / (decrease) (267) - 267 -
Carrying -1% +1%
amount Profit Equity Profit Equity
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
As at 31 July 2022
Financial assets
Cash and cash equivalents 70,810 (510) - 510 -
Financial liabilities
Interest bearing liabilities 110,881 798 - (798) -
Net increase / (decrease) 288 - (288) -
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
38
4.1.3 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Risk Exposure arising from Monitoring Management
Liquidity risk Trade and other payables Cash flow forecasting Active working capital
Interest bearing liabilities management
Flexibility in funding
arrangements
The Group has borrowing facilities of $332,772,000 (2021: $317,831,000) and operates well within this facility. This includes
short term bank overdraft requirements, and at balance sheet date no bank accounts were in overdraft.
Less than
1 year
Between
1 - 2 years
Between
2 - 5 years
Over 5
years
NZ$’000 NZ$’000 NZ$’000 NZ$’000
As at 31 July 2021
Trade payables and accrued expenses 106,583 - - -
Interest bearing liabilities 1,045 1,045 106,456 -
107,628 1,045 106,456 -
As at 31 July 2022
Trade payables and accrued expenses 152,278 1,771 1,136 -
Interest bearing liabilities 2,239 112,716 - -
154,517 114,487 1,136 -
The Group enters into forward exchange contracts to manage the risks associated with the purchase of foreign currency
denominated products.
The table below analyses the Group’s derivative financial instruments that will be settled on a gross basis into relevant
maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows. They are expected to occur and affect the profit or loss at
various dates between balance sheet dates and the following five years.
Less than
1 year
Between
1 - 2 years
Between
2 - 5 years
Over 5
years
NZ$’000 NZ$’000 NZ$’000 NZ$’000
As at 31 July 2021
Forward foreign exchange contracts
Inflow 169,991 - - -
Outflow (165,785) - - -
Net inflow / (outflow) 4,206 - - -
As at 31 July 2022
Forward foreign exchange contracts
Inflow 180,362 - - -
Outflow (170,426) - - -
Net inflow / (outflow) 9,936 - - -
Keeping it simple ...
The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities
into relevant maturity groupings based on the remaining period at the balance sheet date to the
contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash
flows, so will not always reconcile with the amounts disclosed on the balance sheet.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
39
4.2 Derivative financial instruments
Accounting policies
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-
measured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain
derivatives as hedges of highly probable forecast transactions (cash flow hedges).
At inception of the hedging relationship, the Group documents the economic relationship between hedging instruments and
hedged items, including whether changes in the cash flows of the hedging instruments are expected to offset changes in the
cash flows of the hedged items. The Group also documents its risk management objectives and strategy for undertaking its
hedge transactions.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in
the consolidated statement of comprehensive income.
Amounts accumulated in equity are recycled in the consolidated statement of comprehensive income in the periods when
the hedged item will affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a
non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are
transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the consolidated statement of comprehensive income. When a forecast transaction is
no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the
consolidated statement of comprehensive income.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
the consolidated statement of comprehensive income, except when deferred in other comprehensive income. Translation
differences on monetary financial assets and liabilities are reported as part of the foreign exchange gain or loss.
Keeping it simple ...
A derivative is a type of financial instrument typically used to manage risk. A derivative’s value
changes over time in response to underlying variables such as exchange rates or interest rates and is
entered into for a fixed period. A hedge is where a derivative is used to manage an underlying
exposure.
The Group is exposed to changes in interest rates on its borrowings and to changes in foreign
exchange rates on its foreign currency (largely USD) purchases. The Group uses derivatives to hedge
these underlying exposures.
Derivative financial instruments are initially included in the balance sheet at their fair value, either as
assets or liabilities, and are subsequently re-measured at fair value at each reporting date.
An interest rate swap is an instrument to exchange a fixed rate of interest for a floating rate, or vice
versa, or one type of floating rate for another.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
40
Derivative financial instruments
2022 2021
NZ$’000 NZ$’000
Foreign exchange contracts
Current asset
9,936 5,285
Current liability
- (1,079)
Net foreign exchange contracts - cash flow hedge (asset / 9,936 4,206
(liability))
Interest rate swaps
Current liability
- -
Non-current liability
- -
Net interest rate swaps - cash flow hedge (asset / (liability)) - -
Total derivative financial instruments
9,936 4,206
The above table shows the Group’s financial derivative holdings at year end.
Interest rate swaps - cash flow hedge
Interest rate swaps are to exchange a floating rate of interest for a fixed rate of interest. The objective of the transaction is to
hedge the core floating rate borrowings of the business to minimise the impact of interest rate volatility within acceptable
levels of risk thereby limiting the volatility on the Group's financial results. The notional amount of interest rate swaps at
balance sheet date was nil (2021: nil ). The fixed interest rate is nil (2021: nil ). Refer to note 4.1.3 for timing of contractual
cash flows relating to interest rate swaps.
Foreign exchange contracts - cash flow hedge
The objective of these contracts is to hedge highly probable anticipated foreign currency purchases against currency
fluctuations. These contracts are timed to mature when import purchases are scheduled for payment. The notional amount
of foreign exchange contracts amounts to US$106,730,000 / NZ$159,303,000 (2021: US$117,650,000 / NZ$164,706,000).
No material hedge ineffectiveness for interest rate swaps or foreign exchange contracts exists as at balance sheet date
(2021: nil).
Refer to note 4.2.1 for a sensitivity analysis of foreign exchange risk associated with derivative financial instruments.
4.2.1 Foreign exchange risk
Foreign exchange risk is the risk that fluctuations in exchange rates will impact the Group’s financial performance. The
Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the AUD, USD and EUR.
Risk Exposure arising from Monitoring Management
Foreign exchange risk Foreign currency purchases Forecast purchases USD foreign exchange
(over 90% of purchases in USD) Reviewing exchange rate derivatives
movements
The Group is exposed to currency risk on any cash remitted between entities in different jurisdictions. The Group does not
hedge for such remittances. Interest on borrowings is typically denominated in either New Zealand dollars or Australian
dollars and is paid for out of surplus operating cashflows generated in New Zealand or Australia.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
41
Foreign currency sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to foreign exchange risk.
A sensitivity of -10% / +10% (2021: -10% / +10%) for foreign exchange risk has been selected. While it is unlikely that an
equal movement of the New Zealand dollar would be observed against all currencies, an overall sensitivity of -10% / +10%
(2021: -10% / +10%) is reasonable given the exchange rate volatility observed on a historic basis for the preceding five-year
period and market expectation for potential future movements.
Amounts are shown net of income tax. All variables other than applicable exchange rates are held constant. The impact on
equity is presented exclusive of the impact on retained earnings.
Carrying -10% +10%
amount Profit Equity Profit Equity
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
As at 31 July 2021
Financial assets
Cash and cash equivalents 142,614 10,639 - (8,705) -
Trade and other receivables 62,562 4,967 - (4,064) -
Foreign exchange contracts – cash 5,285 - (14,026) - 11,476
flow hedge
Financial liabilities
Trade and other payables (164,024) (11,743) - 9,608 -
Interest bearing liabilities (105,597) (8,448) - 6,912 -
Foreign exchange contracts – cash (1,079) - (4,729) - 3,870
flow hedge
Net increase / (decrease) (4,585) (18,755) 3,751 15,346
Carrying -10% +10%
amount Profit Equity Profit Equity
NZ$’000 NZ$’000 NZ$’000 NZ$’000 NZ$’000
As at 31 July 2022
Financial assets
Cash and cash equivalents 70,810 3,806 - (3,114) -
Trade and other receivables 92,882 7,303 - (5,975) -
Foreign exchange contracts – cash 9,936 - (16,764) - 13,716
flow hedge
Financial liabilities
Trade and other payables (211,280) (14,823) - 12,128 -
Interest bearing liabilities (110,881) (8,870) - 7,258 -
Foreign exchange contracts – cash - - (86) - 70
flow hedge
Net increase / (decrease) (12,584) (16,850) 10,297 13,786
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
42
4.3 Equity
Accounting policies
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.
Dividends
Dividends are recognised through equity following the approval by the Company’s directors.
4.3.1 Contributed equity - ordinary shares
2022 2021
NZ$’000 NZ$’000
Ordinary shares fully paid
626,380 626,380
Opening balance
626,380 626,380
Shares issued under Executive and Senior Management
Long-Term Incentive Plan
- -
Shares issued under share entitlement offers and share
placement
- -
Closing balance
626,380 626,380
Number of issued shares
2022 2021
’000 ’000
Opening balance 709,001 709,001
Shares issued under Executive and Senior Management
Long-Term Incentive Plan
- -
Shares issued under share entitlement offers and share
placement
- -
Closing balance
709,001 709,001
As at 31 July 2022 there were 709,001,384 (2021: 709,001,384) ordinary issued shares in KMD Brands Limited and these
are classified as equity.
No shares (2021: nil ) were issued under the ‘Executive and Senior Management Long Term Incentive Plan 24 November
2010’ during the year.
All ordinary shares carry equal rights in respect of voting and the receipt of dividends. Ordinary shares do not have a par
value.
Refer to note 6.3 for employee share-based remuneration plans.
Keeping it simple ...
This section explains material movements recorded in shareholders’ equity that are not explained
elsewhere in the financial statements. The movements in equity and the balance at 31 July 2022 are
presented in the consolidated statement of changes in equity.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
43
4.3.2 Reserves and retained earnings
Cash flow hedging reserve
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised
directly in other comprehensive income, as described in the accounting policy in note 4.2. The amounts are recognised in
profit or loss when the associated hedged transaction affects profit or loss.
Foreign currency translation reserve
The foreign currency translation reserve is used to record foreign currency translation differences arising on the translation
of the Group entities results and financial position. The amounts are accumulated in other comprehensive income and
recognised in profit or loss when the foreign operation is partially disposed of or sold.
Share based payments reserve
The share-based payments reserve is used to recognise the fair value of share options and performance rights granted but
not exercised or lapsed. Amounts are transferred to share capital when vested options are exercised by the employee or
performance rights are vested.
Reserves
2022 2021
NZ$’000 NZ$’000
Cash flow hedging reserve
Opening balance 1,341 (5,141)
Realised (gains) / losses transferred to hedged asset
(7,794) 5,923
Revaluation movement 13,298 5,685
Deferred taxation movement 2.3 (627) (5,126)
Closing balance
6,218 1,341
Foreign currency translation reserve
Opening balance (29,462) (12,018)
Currency translation differences – gross 35,953 (17,444)
Currency translation differences – taxation 2.3 - -
Closing balance
6,491 (29,462)
Share-based payments reserve
Opening balance 2,637 608
Change during the year 914 1,798
Deferred taxation movement 2.3 (309) 289
Transfer to share capital on vesting of shares to
employees
- -
Share options / performance rights lapsed (77) (58)
Closing balance
3,165 2,637
Other reserves
Opening balance (47) (61)
Current year expense recognised in other
comprehensive income
- 14
Deferred taxation movement 2.3 - -
Closing balance
(47) (47)
Total reserves
15,827 (25,531)
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
44
4.3.3 Dividends
2022 2021
NZ$’000 NZ$’000
Prior year final dividend paid
21,270 -
Current year interim dividend paid
21,270 14,180
Dividends paid 42,540 14,180
Dividends paid represent NZ$0.06 per share (2021: NZ $0.02).
4.3.4 Capital risk management
The Group’s capital includes contributed equity, reserves and retained earnings.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order
to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
To maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt or draw down more debt.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
45
Section 5: Group Structure
5.1 Subsidiary companies
Subsidiaries are all entities over which the Group has control. Control is achieved when the Group:
• has power over the entity;
• is exposed to, or has rights to, variable returns from its involvement with the entity; and
• can use its power to affect returns.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. All subsidiaries in the Group have a balance date of 31 July.
The following entities comprise the significant trading and holding companies of the Group:
Companies Parties to Deed of Country of Parent % holding
Cross Guarantee incorporation 2022 2021
Parent entity:
KMD Brands Limited
✔
New Zealand
Subsidiaries:
Kathmandu Group Holdings Limited (formerly
Milford Group Holdings Limited)
✔
New Zealand 100% 100%
KMD Brands Investments Limited New Zealand 100% 100%
KMD Brands Finance (NZ) Limited New Zealand 100% 100%
KMD Brands Managed Services (NZ) Limited New Zealand 100% 100%
KMD Brands Managed Services (AU) Pty Ltd Australia 100% 100%
Kathmandu Limited New Zealand 100% 100%
Kathmandu Pty Ltd
✔
Australia 100% 100%
Kathmandu (U.K.) Limited United Kingdom 100% 100%
Kathmandu US Holdings LLC United States of America 100% 100%
Oboz Footwear LLC United States of America 100% 100%
Barrel Wave Holdings Pty Ltd
✔
Australia 100% 100%
Rip Curl Group Pty Ltd
✔
Australia 100% 100%
Rip Curl International Pty Ltd
✔
Australia 100% 100%
PT Jarosite Indonesia 100% 100%
Rip Curl Pty Ltd
✔
Australia 100% 100%
Onsmooth Thai Co Ltd Thailand 100% 100%
Rip Curl Investments Pty Ltd Australia 100% 100%
Blue Surf Pty Ltd Australia 100% 100%
RC Surf Pty Ltd Australia 100% 100%
Rip Curl Airport & Tourist Stores Pty Ltd Australia 100% 100%
JRRC Rundle Mall Pty Ltd Australia 100% 100%
Rip Curl (Thailand) Ltd Thailand 50% 50%
RC Airports Pty Ltd Australia 100% 100%
Ozmosis Pty Ltd
✔
Australia 100% 100%
RC Chermside Pty Ltd Australia 100% 100%
Bondi Rip Pty Ltd Australia 100% 100%
Rip Curl Japan
Japan 100% 100%
Curl Retail No 1. Pty Ltd
Australia 100% 100%
RC Surf Sydney Pty Ltd
Australia 100% 100%
RC Surf South Pty Ltd
Australia 100% 100%
RC Surf NZ Limited New Zealand 100% 100%
Keeping it simple ...
This section provides information about the entities that make up the KMD Brands Limited Group and
how they affect the financial performance and position of the Group.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
46
Rip Curl Finance Pty Ltd
✔
Australia 100% 100%
Rip Curl Europe S.A.S
France 100% 100%
Rip Curl Spain S.A.U
Spain 100% 100%
Rip Curl Suisse S.A.R.L
Switzerland 100% 100%
Rip Surf LDA Portugal 100% 100%
Rip Curl UK Ltd United Kingdom 100% 100%
Rip Curl Germany GMBH Germany 100% 100%
Rip Curl Nordic AB Sweden 100% 100%
Rip Curl Inc United States of America 100% 100%
Rip Curl Canada Inc Canada 100% 100%
Rip Curl Brazil LTDA Brazil 100% 100%
5.2 Deed of Cross Guarantee
Pursuant to ASIC Corporations (wholly owned Companies) Instrument 2016/785, the Australian-incorporated wholly owned
subsidiaries listed in note 5.1 as parties to the Deed of Cross Guarantee are relieved from the Corporations Act 2001
requirements for preparation, audit and lodgement of financial reports and directors’ reports in Australia.
It is a condition of the ASIC Corporations Instrument that the Company and each of the subsidiaries listed enter a Deed of
Cross Guarantee. The effect of the Deed is that each party guarantees to each creditor of each other party payment in full of
any debt in the event of winding up of the other party under certain provisions of the Corporations Act 2001. If a winding up
occurs under other provisions of the Act, the guarantee will only apply if after six months after a resolution or order winding
up any creditor has not been paid in full.
A consolidated statement of comprehensive income and balance sheet are prepared for the Company and controlled entities
that are parties to the Deed of Cross Guarantee, which eliminate all transactions between parties to the Deed of Cross
Guarantee. These financial statements are included as a separate disclosure within the Consolidated Financial Statements
in order to meet the Group’s Australian statutory reporting obligations.
Consolidated Statement of Comprehensive Income and Retained Earnings
for the year ended 31 July 2022
2022 2021
NZ$’000 NZ$’000
Sales
530,199 492,039
Expenses
(484,712) (439,194)
Finance costs – net
1,965 (13,601)
Profit before income tax
47,452 39,244
Income tax expense
(12,848) (13,077)
Profit after income tax
34,604 26,167
Other comprehensive income 14,837 (2,245)
Total comprehensive income for the year
49,441 23,922
Opening retained earnings (48,708) (60,753)
Profit for the year after income tax 34,604 26,167
Dividends paid (42,540) (14,180)
Share options / performance rights lapsed 77 58
Closing retained earnings
(56,567) (48,708)
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
47
Consolidated Balance Sheet
as at 31 July 2022
2022 2021
NZ$’000 NZ$’000
ASSETS
Current assets
Cash and cash equivalents 23,201 100,627
Trade and other receivables 23,453 14,524
Inventories 136,195 115,886
Derivative financial instruments 4,948 4,044
Current tax asset 660 116
Other current assets 770 546
Total current assets
189,227 235,743
Non-current assets
Trade and other receivables 87,736 61,711
Investments 354,777 348,611
Property, plant and equipment 40,357 43,230
Intangible assets 477,908 460,819
Right-of-use assets 133,171 133,901
Total non-current assets
1,093,949 1,048,272
Total assets
1,283,176 1,284,015
LIABILITIES
Current liabilities
Trade and other payables 86,931 73,797
Derivative financial instruments - 534
Current tax liabilities - 9,037
Current lease liabilities 50,301 53,388
Total current liabilities
137,232 136,756
Non-current liabilities
Non-current trade and other payables 7,542 7,635
Interest bearing liabilities 110,881 105,597
Loans with related parties 267,033 289,129
Deferred tax 76,073 65,874
Non-current lease liabilities 104,125 106,239
Total non-current liabilities
565,654 574,474
Total liabilities
702,886 711,230
Net assets 580,290 572,785
EQUITY
Contributed equity – ordinary shares 626,380 626,380
Reserves 10,477 (4,887)
Retained earnings (56,567) (48,708)
Total equity 580,290 572,785
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
48
Section 6: Other Notes
6.1 Related parties
All transactions with related parties were in the normal course of business and provided on commercial terms. No amounts
owed to related parties have been written off or forgiven during the period.
Key management personnel compensation
2022 2021
NZ$’000 NZ$’000
Salaries
5,189 3,930
Other short-term employee benefits
468 452
Post-employment benefits
201 75
Termination benefits
468 -
Share-based payments expense
308 (196)
6,634 4,261
6.2 Fair values
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 estimated based on current market rates available to the Group for debt of
similar maturity. The fair value of term liabilities equates to their current carrying value.
Foreign exchange contracts and interest rate swaps
The fair value of these instruments is determined using valuation techniques (as they are not traded in an active market).
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on
entity specific estimates.
Specific valuation techniques used to value financial instruments include the fair value of interest rate swaps. These are
calculated at the present value of the estimated future cash flows, based on observable yield curves and the fair value of
forward foreign exchange contracts, as determined using forward exchange rates at the balance sheet date, with the
resulting value discounted back to present value.
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.
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 are approximately nil. All guarantees are payable on demand.
6.3 Employee share-based remuneration
Accounting policy
Equity settled long term incentive plan
The Executive and Senior Management Long Term Incentive plan grants Group employee’s performance rights subject to
performance hurdles being met. The fair value of rights granted is recognised as an employee expense in the consolidated
statement of comprehensive income with a corresponding increase in the employee share-based payments reserve. The fair
value is measured at grant date and amortised over the vesting periods. The fair value of the rights granted is measured
using the KMD Brands Limited share price as at the grant date less the present value of the dividends forecast to be paid
prior to each vesting date. At each balance sheet date, the Company revises its estimates of the number of shares expected
to be distributed. It recognises the impact of the revision of original estimates, if any, in the consolidated statement of
comprehensive income, and a corresponding adjustment to equity over the remaining vesting period.
Executive and Senior Management Long Term Incentive Plan
On 20 November 2013, shareholders approved at the Annual General Meeting the continuation of an Employee Long Term
Incentive Plan (LTI) (previously established 24 November 2010) to grant performance rights to Executive Directors, Senior
Managers, Other Key Management Personnel and Wider Leadership Management.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
49
Executive Directors and Senior Managers
Performance rights granted to Executive Directors and Senior Managers are summarised below:
Opening
balance
Granted
during the
year
Vested
during the
year
Lapsed
during the
year
Closing
balance
Grant date
20 Dec 2021 - 1,961,064 - (449,524) 1,511,540
22 Dec 2020 1,351,890 - - (525,357) 826,533
9 Jul 2020 321,359 - - (161,418) 159,941
20 Dec 2018 56,649 - - (56,649) -
1,729,898 1,961,064 - (1,192,948) 2,498,014
Long Term Incentive performance rights vest in equal tranches. In each tranche the rights are subject to a combination of a
relative Total Shareholder Return (TSR) hurdle and / or an EPS growth hurdle. The relative weighting and number of
tranches for each grant date are shown in the table below:
Grant date Tranche EPS
weighting
TSR
weighting
20 Dec 2021 Tranche 1 50% 50%
22 Dec 2020 Tranche 1 50% 50%
9 Jul 2020 Tranche 1 0% 100%
20 Dec 2018 Tranche 1 50% 50%
The proportion of rights subject to the relative TSR hurdle is dependent on KMD Brands Limited’s TSR performance relative
to a defined comparable group of companies in New Zealand and Australia listed on either the ASX or NZX. The percentage
of TSR related rights vest according to the following performance criteria:
KMD Brands Limited
relative TSR ranking
% vesting
Below 50
th
percentile 0%
50
th
percentile 50%
51
st
– 74
th
percentile 50% + 2% for each percentile
above the 50
th
75
th
percentile or above 100%
The TSR performance is calculated for the following performance periods:
Tranche 2022 2021
Tranche 1 36 months to 1
December 2024
36 months to 1
December 2023
The fair value of the TSR rights have been valued under a Monte Carlo simulation approach predicting KMD Brands
Limited’s TSR relative to the comparable group of companies at the respective vesting dates for each tranche. The fair value
of TSR rights, along with the assumptions used to simulate the future share prices using a random-walk process are shown
below:
2022 2021
Fair value of TSR rights $1.03 $0.89
Current price at grant date $1.47 $1.26
Risk free interest rate 2.02% 0.28%
Expected life (years) 3 3
Expected share volatility 71.5% 73.0%
The estimated fair value for each tranche of rights issued is amortised over the vesting period from the grant date.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
50
The proportion of rights subject to the EPS growth hurdle is dependent on the compound average annual growth in KMD
Brands Limited’s EPS relative to the year ending 31 July 2021 (2021: 31 July 2020). The applicable performance periods
are:
Tranche
2022 2021
Tranche 1 FY24 EPS relative to
FY21 EPS
FY23 EPS relative to
FY20 EPS
The percentage of the December 2020 EPS growth related rights scales according to the compound average annual EPS
growth over three years. Each year’s target is set annually, and an average is taken over the three years to determine
overall achievement.
The EPS growth targets for financial year ended 31 July 2022 were set before the impact of COVID-19 related lockdowns
during the financial year were known. Consideration has been given to adjusting these targets, however currently it has been
determined that the EPS growth criteria has not been met and the 2022 achievement is zero.
The fair values of the EPS rights have been assessed as the KMD Brands Limited share price as at the grant date less the
present value of the dividends forecast to be paid prior to each vesting date. The estimated fair value for each tranche of
options issued is amortised over the vesting period from the grant date.
Vesting of Long Term Incentive performance rights also require remaining in employment with the Company during the
performance period.
Other Key Management Personnel and Wider Leadership Management
Performance rights granted to Other Key Management Personnel and Wider Leadership Management are all Short Term
Incentives under the shareholder approved Employee Long Term Incentive Plan, and are summarised below:
Opening
balance
Granted
during the
year
Vested
during the
year
Lapsed
during the
year
Closing
balance
Grant date
20 Dec 2021 - 3,322,092 - - 3,322,092
22 Dec 2020 3,466,688 - - (197,014) 3,269,674
3,466,688 3,322,092 - (197,014) 6,591,766
Short Term Incentive performance rights vest:
• upon the Company achieving non-market performance hurdles; and
• the employee remaining in employment with the Company until the vesting date.
The performance period and vesting dates are summarised below:
2022 2021
Grant date 20 Dec 2021 22 Dec 2020
Performance period (year ending) 31 July 2022 31 Jul 2021
Vesting date 31 July 2023 31 Jul 2022
The fair values of the rights were assessed as the KMD Brands Limited share price at the grant date less the present value
of the dividends forecast to be paid prior to the vesting date.
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
51
The non-market performance hurdles set for the year ending 31 July 2022 were not met and accordingly no expense (2021:
$1,994,000) was recognised in the consolidated statement of comprehensive income in respect of Short Term Incentive
performance rights granted 20 December 2021. The expenses incurred in the current period relate to rights granted 22
December 2020.
Expenses arising from equity settled share-based payments transactions
2022 2021
NZ$’000 NZ$’000
Executive Director and Senior Managers
308 (196)
Other Key Management Personnel and Wider Leadership
Management
606 1,994
914 1,798
Of the performance rights granted on 22 December 2020 under the Short Term Incentives for Key Management Personnel
and Wider Leadership Management plan, 923,339 performance rights have been cash settled after balance date. The
expense disclosed above excludes cash settled performance rights, with a cumulative expense of $1,086,000. This expense
is included in wages, salaries, and other short-term benefits in note 2.2.
6.4 Contingent liabilities
The Group is subject to litigation incidental to its business, none of which is expected to be material. No material provision
has been made in the Group’s consolidated financial statements in relation to any current litigation and the Directors believe
that such litigation will not have a material effect on the Group’s consolidated financial position, results of operations or cash
flows. There are $662,000 of contingent liabilities as at 31 July 2022 (2021: $558,000).
6.5 Contingent assets
There are no contingent assets as at 31 July 2022 (2021: nil).
6.6 Events occurring after balance sheet date
On the 20 September 2022 the Board of Directors have announced that they will pay a final dividend of 3.0 cents per share,
fully franked for Australian shareholders, and not imputed for New Zealand shareholders. This dividend is not recorded in the
consolidated financial statements.
6.7 Supplementary information
Directors’ fees
2022 2021
NZ$’000 NZ$’000
Directors’ fees 942 790
Directors’ fees for the Company were paid to the following:
• David Kirk (Chairman)
• John Harvey
• Philip Bowman
• Brent Scrimshaw
• Andrea Martens
• Abby Foote
KMD BRANDS LIMITED – FINANCIAL STATEMENTS 2022
52
Audit fees
During the year, the following fees were paid or payable for services provided by the auditor of the Company, its related
practices and other network audit firms:
2022 2021
NZ$’000 NZ$’000
Audit services – Group auditor
Group audit - KPMG New Zealand 386 -
Group audit - KPMG Australia 131 -
Group audit - PwC New Zealand - 407
Half year review - PwC New Zealand - 75
France statutory audit - KPMG France 51 -
Thailand statutory audit - KPMG Thailand 33 -
UK statutory audit - KPMG New Zealand 20 -
621 482
Audit services - other audit firms 106 174
Total fees for audit services
727 656
Non-audit services – Group auditor
Taxation services - KPMG US 167 -
Taxation services - PwC France & PwC UK - 46
Employee Retention Credits application - KPMG US 135 -
Revenue certificates - PwC New Zealand - 6
Banking compliance certificates – PwC New Zealand - 3
302 55
On 6 December 2021 the Group appointed KPMG as its external auditor for the year ending 31 July 2022 (2021: PwC).
6.8 New accounting standards and interpretations
New standards and interpretations first applied in the period
There are no new accounting standards or interpretations first applied in the period.
A change in accounting policy was made in response to the IFRIC agenda decision on Software-as-a-Service (SaaS) cloud
computing arrangements as described in note 1.4.
Standards, interpretations and amendments to published standards that are not yet effective
There are no standards or amendments published but not yet effective that are expected to have a significant impact on the
Group.
© 2022 KPMG, a New Zealand Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a
private English company limited by guarantee. All rights reserved.
Independent Auditor’s Report
To the shareholders of KMD Brands Limited
Report on the audit of the consolidated financial statements
Opinion
In our opinion, the consolidated financial
statements of KMD Brands Limited (the ’company’)
and its subsidiaries (the 'group') on pages 4 to 52:
i. present fairly in all material respects the Group’s
financial position as at 31 July 2022 and its
financial performance and cash flows for the
year ended on that date in accordance with New
Zealand Equivalents to International Financial
Reporting Standards and International Financial
Reporting Standards.
We have audited the accompanying consolidated
financial statements which comprise:
— the consolidated balance sheet as at 31 July
2022;
— the consolidated statements of comprehensive
income, changes in equity and cash flows for
the year then ended; and
— notes, including a summary of significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the group in accordance with Professional and Ethical Standard 1 International Code of
Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the
New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International Independence
Standards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the group in relation to tax compliance services. Subject to certain
restrictions, partners and employees of our firm may also deal with the group on normal terms within the
ordinary course of trading activities of the business of the group. These matters have not impaired our
independence as auditor of the group. The firm has no other relationship with, or interest in, the group.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $4.1 million determined with reference to a benchmark of group revenue. We
chose the benchmark because, in our view, this is a key measure of the group’s performance that incorporated
the impact of one-off events.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements in the current period. We summarise below those matters and our key
audit procedures to address those matters in order that the shareholders as a body may better understand the
process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely
for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not
express discrete opinions on separate elements of the consolidated financial statements
The key audit matter How the matter was addressed in our audit
Impairment assessment of indefinite life intangible assets – Goodwill and Brands (note 3.3)
The group has goodwill and brand assets
of $290.0 million and $368.2 million
respectively. These assets are a result of
the historical acquisitions of the
Kathmandu, Oboz and Rip Curl
businesses.
Impairment assessment of Goodwill and
Brand assets is considered to be a key
audit matter due to the significance of
these assets to the group’s financial
position and the level of management
judgement involved in the impairment
assessment.
These judgements include:
— Determination of cash generating
units (CGUs), or group of CGUs, to
consider for testing;
— Forecast future performance for each
CGU, or group of CGUs; and
— Assessment of discount and terminal
growth rates.
Our audit procedures included:
— Assessing the consistency of management’s approach
against the requirements of the accounting standards,
including assessment of the CGU level at which to test the
intangible assets;
— Utilising our corporate finance specialists to challenge and
assess management’s assumptions, including the terminal
growth rates and independently developing a discount rate
range based on market data to challenge discount rates;
— Assessing the integrity and mechanical accuracy of the
impairment models;
— Challenging the impairment models’ results by assessing
against EBITDA multiple analysis from publicly available
market data;
— Challenging the forecast cash flows in light of current market
conditions and past performance of the group; and
— Considering the sensitivity of key assumptions to changes
within a reasonably possible range and associated financial
statement disclosures.
We did not identify any material misstatements in relation to the
impairment assessment of indefinite life intangible assets or
associated disclosures.
Software as a Service (‘SaaS’) cloud computing arrangements (note 1.4)
As a result of the IFRIC agenda decision
that was issued in April 2021, during the
year the group has revised their
accounting policy in relation to
implementation costs on SaaS cloud
computing arrangements. This has
resulted in the Group restating $6.5
million of expenditure previously
recognised as an intangible asset as at 31
July 2021, to operating expenditure or
prepayments.
This is considered a key audit matter due
to the complexity involved in assessing
Our audit procedures included:
— Analysing management’s assessment of SaaS cloud
computing arrangements;
— Examining source contracts and other correspondence with IT
vendors to understand contractual arrangements and consider
the impacts of these arrangements on the group’s control of
software assets;
— Utilising our accounting technical specialists to assess the
consistency of management’s approach against the
requirements of the accounting standards and IFRIC agenda
decision; and
The key audit matter How the matter was addressed in our audit
the software systems, there is a risk that
expenditure on computer software is
incorrectly recorded as an asset due to
the technical complexity of determining
whether an asset is created which is
controlled by the Group.
— On a sample basis, vouching expenditure back to supporting
documentation, such as invoices, to assess whether the
expenditures have been appropriately treated.
We did not identify any material misstatements in relation to the
change in accounting policy or associated disclosures.
Other information
The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual
Report. Other information comprises the information in the Annual Report that is not the financial statements or
independent auditor’s report. Our opinion on the consolidated financial statements does not cover any other
information and we do not express any form of assurance conclusion thereon.
The Annual Report is expected to be made available to us after the date of this Independent Auditor's
Report. Our responsibility is to read the Annual Report when it becomes available and consider whether the
other information it contains is materially inconsistent with the consolidated financial statements, or our
knowledge obtained in the audit, or otherwise appear misstated. If so, we are required to report such matters to
the Directors.
Other matter
The consolidated financial statements of the group, for the year ended 31 July 2021, were audited by another
auditor who expressed an unmodified opinion on those statements on 21 September 2021.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders those matters we are required to state to them in the
independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent
auditor’s report, or any of the opinions we have formed.
Responsibilities of the Directors for the consolidated financial
statements
The Directors, on behalf of the company, are responsible for:
— the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards;
— implementing necessary internal control to enable the preparation of a consolidated set of financial
statements that is fairly presented and free from material misstatement, whether due to fraud or error ; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial
statements
Our objective is:
— to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error ; and
— to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance
with ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at
the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Peter Taylor.
For and on behalf of
KPMG
Christchurch
20 September 2022
---
FY22
RESULTS
PRESENTATION
20 SEPTEMBER 2022
(Formerly Kathmandu Holdings Limited)
CONTENTS
1.OUR GROUP
2.HIGHLIGHTS
3.GROUP FINANCIALS
4.RIP CURL
5.KATHMANDU
6.OBOZ
7.OUTLOOK
8.APPENDICES
3
9
13
19
22
25
28
32
2
F Y 2 2 R E S U L T S P R E S E N T A T I O N
OUR GROUP
3
SECTION 1
F Y 2 2 R E S U L T S P R E S E N T A T I O N
OWNER OF
LEADING GLOBAL
OUTDOOR BRANDS
4
OUR PURPOSE
Inspiring people to explore
and love the outdoors
OUR VISION
To be the leading family of
global outdoor brands -
designed for purpose, driven
by innovation, best for people
and planet
F Y 2 2 R E S U L T S P R E S E N T A T I O N
BRANDS WITH GLOBAL REACH
5
EUROPE
~$100m Sales
22 Owned Stores
16 Licensed Stores
+2,200 Wholesale Doors
AUSTRALASIA
~$650m Sales (~80% Australia)
261 Owned Stores
18 Licensed Stores
+900 Wholesale Doors
ASIA
~$30m Sales
73 Licensed and JV stores
+600 Wholesale Doors
We operate over 300 stores globally, and our brands are sold in over 8,500 locations
SOUTH AMERICA
~$20m Sales
3 Owned Stores
103 Licensed Stores
+900 Wholesale Doors
NORTH AMERICA
~$200m Sales
30 Owned Stores
16 Licensed Stores
+3,900 Wholesale Doors
AFRICA / MIDDLE EAST
28 Licensed Stores
F Y 2 2 R E S U L T S P R E S E N T A T I O N
Global office locations
GROUP STRATEGY
6
BUILD GLOBAL
BRANDS
LEAD IN
ESG
ELEVATE
DIGITAL
LEVERAGE
OPERATIONAL
EXCELLENCE
Expand global footprint and
invest in world class brand and
customer experiences
Invest in Group digital
platforms to deliver a truly
world-class experience to
consumers, wholesale
customers, suppliers, and our
employees
Deliver operational excellence
to all brands across shared
group support functions
Lead in environmental, social
and governance through
transparency and accountability,
focusing on our Communities,
Climate, and Circularity
Maintain balance sheet flexibility to support organic growth and M&A opportunities
F Y 2 2 R E S U L T S P R E S E N T A T I O N
B CORP UPDATE
F Y 2 2 R E S U L T S P R E S E N T A T I O N
7
WHAT IS A B CORP?
•B Corp certified companies are for-profit organisations that use the power of
business to build a more inclusive and sustainable economy
WHY BECOME A CERTIFIED B CORP?
•Certified B Corps meet stringent standards of verified social and environmental
performance, public transparency, and legal accountability to balance profit and
purpose
•Customers, investors, suppliers, and employees have confidence that certified B
Corps align with their own values
CERTIFICATION UPDATE
•Kathmandu became a certified B Corp in 2019. Re-certification application
submitted in Aug 22
•Rip Curl and Oboz initial applications for B Corp certification submitted in Aug 22
•Verification and re-certification process is now underway for all three of the
Group’s brands
ESG STRATEGY
F Y 2 2 R E S U L T S P R E S E N T A T I O N
8
Positively impact the wellbeing of people and placesTransition to a low carbon futureEliminate the take-make-waste approach to business
FOCUS AREAS: Transparency
People-centred, equitable, and inclusive workplace culture
Protect human rights through transparency with strategic
suppliers
Engage, inspire and protect our communities by
supporting local community projects
Reduce emissions aligned to Paris Agreement goals by:
•Reducing Scope 1 and 2 emissions by at least 47% by
2030
1
•Reducing Scope 3 emissions by at least 28% by 2030
1
Commercialise circular business models
Responsible materials sourcing
Reduce operational andpackaging waste
ACHIEVEMENTS: Accountability
29% board and 44% group executive female representation
91% of Tier 1 suppliers accountable to KMD Brands code of
conduct
Over $1m invested with our local community partners,
including over 2,200 volunteer hours
2
Investment in LED lighting upgrades across our store
network
Installation of solar panels at Onsmooth wetsuit factory in
Thailand
Rip Curl 40% of produced cotton responsibly sourced
Kathmandu 65% of wool products using Responsible Wool
Standard
Oboz 95% of finished leather from Leather Working Group
certified tanneries
1.From a 2019 base year
2.Includes company financial donations, product donations, partnership fees, employee donations, and volunteer hours
HIGHLIGHTS
9
SECTION 2
F Y 2 2 R E S U L T S P R E S E N T A T I O N
FY22 GROUP SUMMARY
F Y 2 2 R E S U L T S P R E S E N T A T I O N
10
HIGHLIGHTS
•Record Group sales result:
oKathmandu highest-ever sales for Q4
oRip Curl sales +9.5% to $536m
oRecord order demand for Oboz with a scaling up of supplier capacity
•Record 2H Group sales and underlying EBITDA
•Gross margin maintained, despite elevated international freight costs and raw
material cost pressure
•Highest ever gross margin and earnings for Kathmandu in Q4
•Digital transformation: online sales +19%, comprising >16% of direct-to-consumer
sales
•Strong balance sheet supports investmentin organic brand growth:
oInvestment in brand marketing and ESG +$18.6m increase YOY
oStrategic inventory investment to temporarily build stock positions
•Record dividend payout, $43m returned to shareholders
COVID DISRUPTION IN FY22
•Kathmandu and Rip Curl 1H EBITDA impact year-on-year c. $35m due to Q1
Australasian lockdowns resulting in over 11,000 lost trading days
•Oboz unable to meet unprecedented customer demand, with three-month COVID
closure of Vietnam factories and international freight delays impacting c. 40% of
customer orders. EBITDA $8m below last year
Q4 RETURN TO STRONG SALES GROWTH
11
-3.1%
11.6%
12.2%
18.1%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Q1Q2Q3Q4
RIP CURL
Following Q1 lockdowns in Australasia, the
final three quarters of the year have shown
consistent sales growth YOY
Q4 total sales growth of +18.1% YOY,
cycling Australasian lockdowns last year
-19.0%
12.1%
-11.6%
24.5%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Q1Q2Q3Q4
9.0%
-80.2%-41.3%
17.2%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Q1Q2Q3Q4
KATHMANDU
Following Q1 lockdowns in Australasia, Q2
rebounded strongly
Q3 was impacted by ongoing COVID
interruption to footfall and staff availability,
particularly in New Zealand
Q4 record revenue and earnings, with total
sales growth +24.5% YOY
OBOZ
Q2 and Q3 were heavily impacted by the
three-month COVID closure of Vietnam
factories, and compounded by
international freight delays
Q4 total sales growth +17.2% YOY as
supply challenges addressed
F Y 2 2 R E S U L T S P R E S E N T A T I O N
OPERATIONAL ACHIEVEMENTS IN FY22
12
BUILD GLOBAL
BRANDS
ELEVATE
DIGITAL
LEVERAGE OPERATIONAL
EXCELLENCE
LEAD IN
ESG
Leaders appointed in North America
and Europe to oversee growth of all
three brands in our key international
markets
New Loyalty Management System
software implemented across Rip
Curl and Kathmandu in ANZ
Group Executives appointed to
oversee and optimise efficiencies
across all brands in Commercial,
HR, and ESG
B Corp applications submitted for all
brands
Science-based targets submitted to
SBTi, 2030 emission reduction goals
aligned to Paris Climate agreement
Sponsored the first ever WSL finals,
held in the USA, with the men's
event won by a Rip Curl surfer
Club Rip Curl membership
programme launched in Australia
Consolidation of point of sale and
retail ERP systems across Rip Curl
and Kathmandu in Australasia
Recycled around2,500 wetsuits in
Australia by implementing a wetsuit
takeback programme with
TerraCycle
Europe wholesale launch success
with two seasons sold-in ahead of
initial expectations
Strong customer engagement with
NPS 73 across all customer groups
+24.9% online sales growth,
comprising 18.7% of sales
Group Customer Data platform
implemented, leveraging data for
c. 2 million members
Europe and Canada launches
leveraging Rip Curl infrastructure
Planning for USA launch in FY23 to
leverage Rip Curl sales force and
Oboz distribution network
BioDown product, winner of Outdoor
Retailer Innovation and ISPO awards
Deloitte New Zealand Top 200
Sustainable Business Leadership
award
Additional factories onboarded,
diversifying supply base, and
increasing capacity
Sawtooth X core product update:
orders up 45% in Fall / Winter 22
Online sales exceeding expectations
once inventory levels recovered
Online enhancements: Shoe Finder
and Shop Locater tools
Group business intelligence tool
implemented for Oboz
Product design process now fully
digital, using 3D designs to reduce
material waste
F Y 2 2 R E S U L T S P R E S E N T A T I O N
GROUP FINANCIALS
13
SECTION 3
F Y 2 2 R E S U L T S P R E S E N T A T I O N
PROFIT & LOSS
14
RETURN TO SALES GROWTH FOLLOWING COVID DISRUPTION
•Positive Q4 for all brands, particularly Kathmandu
•Rip Curl achieved solid annual sales growth across all channels
•Oboz heavily impacted by temporary closure of Vietnam factories
GROSS MARGIN HELD DESPITE INPUT COST PRESSURE
•Maintained at 58.9% of sales, despite elevated international freight costs and raw
material cost pressure
•Kathmandu gross margin increase +90 bps (0.9% of sales), with record 2H margins
driven by careful promotional management
OPERATING EXPENSES REFLECT COVID IMPACT AND BRAND INVESTMENT
•Higher wage and rent costs relative to sales, supporting teams during significant
periods of COVID-related store closures, particularly in Q1
•Upweighted investment in brand marketing and ESG to drive future brand growth:
$18.6m increase YOY
•FY23 operating expenses as a % of sales expected to improve towards FY21 levels
1.Statutory results include the impact of IFRS 16 leases. For comparability, the impact of IFRS 16 is excluded
from Underlying results. Refer to Appendix 1 for a reconciliation of Statutory to Underlying results
2.FY22 NZD/AUD conversion rate 0.935 (FY21: 0.931), FY22 NZD/USD conversion rate 0.674 (FY21 0.699)
KMD BRANDSStatutoryUnderlying
NZ $m
*2
FY22FY22FY21Var %
SALES979.8979.8922.86.2%
GROSS PROFIT576.7576.7541.66.5%
Gross margin58.9%58.9%58.7%
OPERATING EXPENSES(396.8)(484.7)(432.1)12.2%
% of Sales40.5%49.5%46.8%
EBITDA179.992.0109.5(16.0%)
EBITDA margin %18.4%9.4%11.9%
EBIT67.457.180.9(29.4%)
EBIT margin %6.9%5.8%8.8%
NPAT36.836.254.6(33.7%)
F Y 2 2 R E S U L T S P R E S E N T A T I O N
SALES GROWTH THROUGH DIVERSIFIED CHANNELS
15
AU & NZ
64%
North
America
20%
Europe
10%
Rest of World
6%
BY
REGION
DTC
Retail
Stores
57%
DTC
Online
11%
Wholesale
31%
Other
1%
BY
CHANNEL
Rip Curl
55%
Kathmandu
39%
Oboz
6%
BY
BRAND
492.9
538.9
801.5
922.8
979.8
FY18
incl. 4 months of
Oboz
FY19FY20
incl. 9 months
of Rip Curl
FY21FY22
TOTAL GROUP REPORTED SALES (NZ $m)
DIVERSIFIED BY:
•Brands
•Channels
•Geography
•Record Group sales result, with sales growth achieved across all channels
•Retail +3.2% sales growth despite over 11,000 lost trading days during
Australasian COVID lockdowns in Q1
•Wholesale +6.9% sales growth despite Oboz COVID supply challenges
F Y 2 2 R E S U L T S P R E S E N T A T I O N
DIGITAL ACCELERATION
16
57.1
65.4
105.9
92.0
109.6
7.7%
8.9%
15.8%
14.7%
16.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
FY18FY19FY20FY21FY22
ONLINE SALES (NZ $m)
Online sales% of DTC sales
Online
Sales
(NZ $m)
YOY
Var %
% of DTC
FY22
Rip Curl36.96.7%13.0%
Kathmandu71.524.9%18.7%
Oboz1.2
1.Direct-to-consumer (“DTC”) sales include all sales from retail stores, online sites and marketplaces
2.All years include a full twelve months of Kathmandu, Rip Curl, and Oboz online and total DTC sales for
comparability over time, including pre-acquisition
F Y 2 2 R E S U L T S P R E S E N T A T I O N
ONLINE SALES GROWTH BEYOND COVID STEP-CHANGE
•Kathmandu +47.1% online sales growth since FY19 (pre-COVID), and now
comprising 18.7% of sales
•Rip Curl record online sales at full margin, more than double FY19 (pre-
COVID), and highest-ever penetration at 13.0% of DTC sales
•Oboz online sales exceeded expectations in Q4 once inventory levels
recovered. Significant growth opportunity, supported by inventory depth and
product range expansion
STRONG BALANCE SHEET
17
INVENTORY
•Strategic decision to temporarily build stock positions to:
oMeet forward wholesale orders and expected retail demand. Wholesale makes
up almost one-third of Group sales
oMitigate increased production lead times and international shipping delays.
International supply challenges have eased recently
•The strong balance sheet position allows flexibility to secure supply of core, technical
products (incl. insulation, wetsuits and neoprene) to support availability
•Clearance stock levels are below last year. Inventory obsolescence provisions
represent 1.9% of gross inventory on hand, 50 bps lower YOY
•Inventory balances are expected to normalise through management of FY23 buys,
dependent on supply chain conditions
•Jul 22 balance includes $36m goods in transit to support future season sales
•Jul 22 balance includes +$11m increase YOY from translation of regional inventory
balances to NZD reporting currency
WORKING CAPITAL
•Trade receivables increase YOY related to wholesale sales growth in Q4
•Trade payables increase YOY indicates the level of temporary stock build at year end
to mitigate the impact of production and shipping delays
•Long-term net working capital target 18% of sales
DEBT
•Significant funding headroom of c. $260m
•Long-term leverage ratio target c. 0.5x Net Debt / EBITDA
1.Key ratios calculated using 12 month underlying P&L measures
2.COGS / Average Inventories YOY
3.Net Debt / EBITDA
4.Net Debt / (Net Debt + Equity). At July 21, the net cash position means this measure is
not meaningful (“n.m.”)
5.(EBITDA + Rent)/(Rent + Net Finance Costs excl. FX)
Key Balance Sheet items and ratios
*1
NZ $mJul 22 Jul 21
Net working capital207.0 137.4
Inventories295.5 216.5
Curent trade and other receivables105.5 70.1
Current trade and other payables(194.0) (149.2)
Net work ing capital % of sales21.1% 14.9%
Stock Turns
*2
1.57x 1.71x
Net cash / (Net interest bearing liabilities)(40.1) 37.0
Leverage Ratio
*3
0.4x -0.3x
Net Debt to Equity
*4
4.5% n.m.
Fixed Charge Cover
*5
1.77x 1.94x
Equity850.5 815.0
F Y 2 2 R E S U L T S P R E S E N T A T I O N
FULL YEAR DIVIDEND UP 20%
18
•NZ 3.0 cents per share final dividend
•Dividend will be fully franked for Australian shareholders
•Dividend will not be imputed for New Zealand shareholders
•Record date 10 November 2022, payment date 25 November 2022
8.1
9.0
0.0
14.2
21.3
24.8
27.2
-
21.3
21.3
32.9
36.2
35.5
42.5
FY18FY19FY20FY21FY22
Dividends declared (NZ $m)
InterimFinal
Dividends declared (NZ cents per share)
Interim4.04.0-2.03.0
Final11.012.0-3.03.0
Total15.016.0-5.06.0
•Operating cash outflow impacted by COVID lockdowns in Q1, and
inventory build to mitigate increased production lead timesinternational
shipping delays
•Expecting full trade in FY23, and an unwind of inventory to underpin
increased operating cashflow generation in FY23
1.Adjusted for impacts of adopting IFRS 16
2.FY22 Dividends paid include $0.5m to a minority interest partner
F Y 2 2 R E S U L T S P R E S E N T A T I O N
Cash Flow (NZ $m) FY22FY21
NPAT36.861.3
Change in working capital(71.3)17.0
Non-cash items116.399.8
Operating cash flow81.8178.1
Adjusted operating cash flow
*1
(0.4)88.4
Key Line Items:FY22FY21
Net interest paid (including facility fees)
*1
(3.8)(5.7)
Net income taxes paid(21.7)(23.9)
Capital expenditure(32.8)(30.6)
Dividends paid
*2
(43.0)(14.2)
RIP CURL
SECTION 4
19
F Y 2 2 R E S U L T S P R E S E N T AT I O N
RIP CURL PROFIT & LOSS
20
TOTAL SALES +9.5% WITH GROWTH ACROSS ALL CHANNELS
•Europe, Hawaii, and South-East Asia achieved strong sales growth
•North America achieved sales growth despite wetsuit shortages, port
congestion and softer consumer sentiment in Q4
•Wholesale: +16.5% growth, with less COVID interruption to the 1H FY22 sell-
in period than last year. Strong growth continued through 2H
•Wholesale forward order books remain significantly above pre-COVID levels
•Direct-to-consumer same store sales (incl. online) +2.2% adjusted for
lockdowns
*1
; and +3.9% overall
*2
EBIT IMPACTED BY GROSS MARGIN MIX AND BRAND INVESTMENT
•Gross margin: gross margin decreased -100 bps (-1.0% of sales) with
increased wholesale mix post-COVID and elevated international freight costs
•Continued investment in the long-term value of the brand, including
sponsorship of the first ever World Surf League (“WSL”) finals
•Depreciation includes notional amortisation of Rip Curl customer relationships
($5.0m in both FY21 and FY22)
1.Adjusted same store sales removes stores that were not able to open for a comparable period in either year
because of COVID closures
2.Same store sales are for the 52 full weeks ended 31 July 2022, and are measured at constant currency
Pre IFRS 16
NZ $mFY22FY21Var %
SALES536.8490.49.5%
EBITDA (underlying)59.165.8(10.1%)
EBITDA margin %11.0%13.4%
EBIT (underlying)43.551.4(15.3%)
EBIT margin %8.1%10.5%
F Y 2 2 R E S U L T S P R E S E N T A T I O N
AU & NZ
45%
North
America
25%
Europe
18%
Rest of World
12%
BY
REGION
DTC
Retail
Stores
46%
DTC
Online
7%
Wholesale
45%
Other
2%
BY
CHANNEL
SALES MIX FY22
RIP CURL BRAND AND PRODUCT ACHIEVEMENTS
21
WSL FINALS
•2022 Rip Curl World Surf League (‘WSL’)
Finals becomes the most watched day of
surfing in WSL history
•8.5 million live digital views across WSL digital
channels, up+25% vs 2021
•24 million+ organic social views on day of
event via WSL handles
•Strategic brand sponsorship in the key North
American growth market
WOMENS GROWTH
•Women's sales growth +19% YOY
•Long-term goal for Women’s mix to grow to
50% of Rip Curl’s business. In FY22, we
achieved this goal in the key North American
market
•Diversification of gender exposure further
strengthens Rip Curl’s position as the most
authentic surf brand on the market
WETSUIT TAKEBACK GOES GLOBAL
•In 12 months, Australian customers returned
around 2,500 wetsuits for recycling, through
our partnership with TerraCycle
•Launching the global expansion of the ‘Recycle
your wetsuit’ programme during the most
watched surfing event in history, the WSL finals
showcases our commitment to ESG initiatives
•The takeback programme now expands
globally to our customers in France, Spain,
Portugal, and the USA
F Y 2 2 R E S U L T S P R E S E N T A T I O N
KATHMANDU
22
SECTION 5
F Y 2 2 R E S U L T S P R E S E N T AT I O N
KATHMANDU PROFIT & LOSS
23
Best-ever winter season performance, with Q4 sales and gross margin both
above FY19 (pre-COVID)
TOTAL SALES +6.8% WITH STRONG REBOUND AFTER LOCKDOWNS
•Australia +13.2%
*1
. Kathmandu’s largest market saw a strong rebound
following COVID lockdowns and achieved the highest-ever sales result for the
key winter promotion period during Q4
•New Zealand -6.0%, with continued COVID impact on footfall
•Online sales: +24.9% growth, with penetration increasing to 18.7% of sales
•Same store sales (incl. Online) +6.9% adjusted for COVID lockdowns
*2
, and
+9.1% overall
*3
EBITDA RECOVERY WITH RECORD 2H GROSS MARGIN
•Gross margin increased +90 bps (0.9% of sales). Raw material and
international freight cost pressure more than offset by currency benefit and the
deliberate strategy to carefully moderate the historic “high-low” pricing model
•Achieved the highest-ever 2H gross margin result
•Operating expenses carefully controlled through lockdowns, while continuing
to invest for long-term brand growth. Brand momentum is building as a result
of a renewed focus on marketing and product
1.At constant exchange rates
2.Adjusted same store sales removes stores that were not able to open for a comparable period in either year
because of COVID closures
3.Same store sales are for the 52 full weeks ended 31 July 2022, and are measured at constant currency
Pre IFRS 16
NZ $mFY22FY21Var %
SALES381.6357.46.8%
EBITDA (underlying)36.437.9(4.1%)
EBITDA margin %9.5%10.6%
EBIT (underlying)18.024.3(26.0%)
EBIT margin %4.7%6.8%
F Y 2 2 R E S U L T S P R E S E N T A T I O N
195
231
129
228
128
253
1H
FY20
2H
FY20
1H
FY21
2H
FY21
1H
FY22
2H
FY22
SALES (NZ $m)
18
49
1
37
-18
55
1H
FY20
2H
FY20
1H
FY21
2H
FY21
1H
FY22
2H
FY22
EBITDA (NZ $m)
KATHMANDU BRAND AND PRODUCT ACHIEVEMENTS
24
SUMMER CAMPAIGN
•Summer-specific colourful and on-trend
product franchises successfully launched
•Supported by an upweighted summer
marketing campaign to build ‘all season’
perceptions
•Increased consideration of Kathmandu for
summer product amongst younger
Australian consumers
*1
BIO-DOWN JACKET
•Industry-first biodegradable down-filled
jacket. Breakthrough sustainability
innovation
•Winner of the Outdoor Retailer Innovation
and ISPO awards
SUSTAINABILITY LEADERSHIP
•B Corp certified industry leader
•Winner of the Deloitte New Zealand Top
200 Sustainable Business Leadership
award
F Y 2 2 R E S U L T S P R E S E N T A T I O N
1.Kantar brand tracking
OBOZ
SECTION 6
25
F Y 2 2 R E S U L T S P R E S E N T AT I O N
OBOZ PROFIT & LOSS
26
SIGNIFICANT IMPACT FROM UNPRECEDENTED AND TRANSITORY SUPPLY
CHALLENGES
•Wholesale and online sales heavily impacted by three-month COVID closure of
Vietnam factories and compounded by international freight delays
•Despite record demand for its products, Oboz was unable to fulfil c. 40% of customer
orders in FY22
•Factories resumed full production during Q3, and sales growth resumed as inventory
levels recovered in Q4
EBIT IMPACTED BY COVID WHILE CONTINUING BRAND INVESTMENT
•Gross margin decreased -200 bps (-2.0% of sales) heavily impacted by international
freight costs, more than offsetting mix improvement from growth in direct-to-consumer
online sales
•Operating expenses have been carefully managed, while continuing investments to
support brand momentum
•Depreciation includes notional amortisation of Oboz customer relationships ($0.2m in
both FY21 and FY22)
BRAND MOMENTUM REMAINS STRONG
•Forward orders into FY23 support the path to US$100m medium-term revenue target
•Online performance indicates a significant growth opportunity
Pre IFRS 16
NZ $mFY22FY21Var %
SALES61.375.0(18.2%)
EBITDA (underlying)3.311.8(71.7%)
EBITDA margin %5.4%15.7%
EBIT (underlying)2.511.3(78.0%)
EBIT margin %4.0%15.0%
F Y 2 2 R E S U L T S P R E S E N T A T I O N
OBOZ BRAND AND PRODUCT ACHIEVEMENTS
27
DISTRIBUTION EXPANSION
•Online direct-to-consumer sales growth,
with inventory availability, product
campaigns, and connection with new
consumers
•Wholesale account expansion in specialty
outdoor and footwear stores
PRODUCT RANGE EXPANSION
•Fast and Light, and Camp product
launches achieved strong sell-in,
contributing c. 18% of Spring / Summer
2023 order book
•First-to-market arrangements with key
customers (REI and MEC) increased
exposure and storytelling
•Colour strategy in new categories focused
on gaining attention of younger consumers
ONE MORE TREE
•One tree planted for every pair of footwear
sold
•Over 4 million trees have been planted
since Oboz began in 2007
•Working with Trees for the Future in
Tanzania
F Y 2 2 R E S U L T S P R E S E N T A T I O N
OUTLOOK
28
SECTION 7
F Y 2 2 R E S U L T S P R E S E N T A T I O N
STRATEGIC PRIORITIES FY23
29
BUILD GLOBAL
BRANDS
LEAD IN
ESG
ELEVATE
DIGITAL
LEVERAGE
OPERATIONAL
EXCELLENCE
•Rip Curl membership programme
rollout in Australasia
•Kathmanduinternational launch,
leveraging Rip Curl infrastructure.
Initial Europe and Canada
wholesale sell-in ahead of
expectations, withfuture launch in
the USA
•Obozproduct expansion and
connection with new consumers.
New product introductions for Fast
and Light, and Camp categories
•Continue the global rollout of new
Group-wide loyalty management,
customer data, and online trading
platforms
•Kathmandulaunch online sites in
Europe and Canada
•Kathmanduloyalty relaunch, with
exciting new value proposition
•Rip Curl and Oboz B2B dealer
portal platform enhancement,
building out educational and
technical resources
•Merger of fulfilment centres in
Canada and UK, with all brands
benefiting from combined volume
efficiencies
•Kathmanduinternational
wholesale to leverage existing Rip
Curl infrastructure in Europe,
Canada, and USA
•B Corp certification for all brands
•Rip Curl global expansion of
TerraCycle wetsuit takeback
programme
•Kathmandulaunch of trial take-back
and renewal programme
•Obozinnovative use of bio-based
alternatives to EVA midsoles to
reduce the company's carbon
footprint
F Y 2 2 R E S U L T S P R E S E N T A T I O N
OUTLOOK
30
TRADING UPDATE
•Comparisons to last year are clouded by cycling Australasian
lockdowns in Q1 FY22
•Group direct-to-consumer total sales for the first 6 weeks of
FY23 +86.7% YOY
•August 22 sales above August 19 (pre-COVID) by 10.3%,
continuing trajectory of Q4 FY22
•Kathmandu sales for August 22 comparable to August 19
pre-COVID, and strongly above pre-COVID levels for both
Rip Curl and Oboz
•Underlying earnings cycling COVID lockdowns in Q1 FY22.
August c.$10m EBITDA growth above last year
AUG 22
TOTAL SALES
vs AUG 21
(COVID-impacted)
vs AUG 19
*1
(pre-COVID)
Group44.2%10.3%
F Y 2 2 R E S U L T S P R E S E N T A T I O N
POSITIVE FY23 OUTLOOK
•Revenue and earnings growth, continuing momentum from 2H FY22
•Uninterrupted Q1 trade cycling COVID closures last year
•Return of travel to benefit Kathmandu and Rip Curl
•Supply chain conditions improving, with normalised buying timelines to deliver reduction in
working capital and increased cash flow generation in FY23
SUPPORTED BY:
•Gross margin resilience with wholesale price increases actioned in market for FY23, responding
to inflationary cost pressures
•Forward wholesale orders remain at record levels for Rip Curl and Oboz, underpinning growth
•Positive direct-to-consumer trends continue in Australia and Europe
•North America trading performance inconsistent in recent months, with consumer confidence
impacting general discretionary spend, however Rip Curl USA direct-to-consumer sales up
+12.6% YTD
•International expansion of Kathmandu with initial delivery to Europe and Canada
•FY23 operating expenses as a % of sales to improve towards FY21 levels, with unwind of COVID
sales disruption and associated costs offsetting inflation impacts on rent, wages and freight costs
•Capital investment of $35m to support 16 new stores and ongoing digital investment
•The Group is well capitalised, continuing to invest in the long-term international expansion of our
brands
1.Includes Rip Curl results pre-acquisition
QUESTIONS
31
F Y 2 2 R E S U L T S P R E S E N T A T I O N
APPENDICES
32
SECTION 8
F Y 2 2 R E S U L T S P R E S E N T A T I O N
APPENDIX 1: STATUTORY TO UNDERLYING
PROFIT & LOSS
33
1.Statutory results include the impact of IFRS 16 leases. For comparability, the impact of IFRS 16 is excluded from Underlying results
2.FY21 interest costs include $2.1m one-off bank facility underwriting costs ($1.5m net of tax)
3.FY21 NPAT includes $9.6m benefit from the recognition of historical US tax losses, with a future tax benefit of $7.0m remaining at balance date
GROUPFY22FY21
IFRS 16TransactionOtherIFRS 16TransactionUSA
NZ $mStatutoryLeases
*1
CostsAbnormals
UnderlyingStatutoryLeases
*1
Costs
*2
tax benefit
*3
Underlying
SALES
979.8 - - - 979.8 922.8 - - - 922.8
GROSS PROFIT
576.7 - - - 576.7 541.6 - - - 541.6
Gross margin58.9%58.9%58.7%58.7%
OPERATING EXPENSES
(396.8) (87.9) - - (484.7) (337.4) (94.7) - - (432.1)
% of Sales40.5%49.5%36.6%46.8%
EBITDA
179.9 (87.9) - - 92.0 204.3 (94.7) - - 109.5
EBITDA margin %18.4%9.4%22.1%11.9%
EBIT
67.4 (10.3) - - 57.1 89.3 (8.4) - - 80.9
EBIT margin %6.9%5.8%9.7%8.8%
NPAT
36.8 (0.6) 36.2 61.3 1.3 1.5 (9.6) 54.6
F Y 2 2 R E S U L T S P R E S E N T A T I O N
APPENDIX 2: SEGMENT NOTE
34
1.Statutory results include the impact of IFRS 16 leases. For comparability, the impact of IFRS 16 is excluded from Underlying results
FY22FY21FY22
SALES (NZ $'000)Rip CurlKathmanduObozCorporateTotalRip CurlKathmanduObozCorporateTotal
SALES per segment note536,830 381,628 61,344 - 979,802 490,439 357,363 74,990 - 922,792
SALES (Underlying)536,830 381,628 61,344 - 979,802 490,439 357,363 74,990 - 922,792
EBITDA (NZ $'000)Rip CurlKathmanduObozCorporateTotalRip CurlKathmanduObozCorporateTotal
EBITDA per segment note95,462 87,642 3,641 (6,811) 179,934 103,441 94,958 11,830 (5,967) 204,262
IFRS 16 Leases
*1
(36,340) (51,251) (309) - (87,900) (37,681) (57,014) (49) - (94,744)
EBITDA (Underlying)59,122 36,391 3,332 (6,811) 92,034 65,760 37,944 11,781 (5,967) 109,518
EBIT (NZ $'000)Rip CurlKathmanduObozCorporateTotalRip CurlKathmanduObozCorporateTotal
EBIT per segment note46,762 25,087 2,386 (6,817) 67,418 53,546 30,461 11,255 (5,972) 89,290
IFRS 16 Leases
*1
(3,274) (7,112) 91 - (10,295) (2,195) (6,184) 15 - (8,364)
EBIT (Underlying)43,488 17,975 2,477 (6,817) 57,123 51,351 24,277 11,270 (5,972) 80,926
F Y 2 2 R E S U L T S P R E S E N T A T I O N
APPENDIX 3: BALANCE SHEET
35
Balance Sheet (NZ $m)Jul 22 Jan 22 Jul 21
Inventories295.5 249.6 216.5
Property, plant and equipment79.2 79.3 79.3
Right of Use Asset (IFRS 16)250.4 252.3 242.7
Intangible assets719.3 699.2 682.0
Other assets137.3 106.5 98.2
Total assets (excl. cash)1,481.7 1,386.9 1,318.7
Net interest bearing liabilities and cash(40.1) (48.6) 37.0
Lease Liability (IFRS 16)(284.6) (286.8) (279.3)
Other non-current liabilities(110.7) (105.4) (101.0)
Current liabilities(195.8) (132.4) (160.4)
Total liabilities (net of cash)(631.2) (573.2) (503.7)
Net assets850.5 813.7 815.0
F Y 2 2 R E S U L T S P R E S E N T A T I O N
IMPORTANT NOTICE AND DISCLOSURE
36
This presentation prepared by KMD Brands Limited (the “Company” or the “Group”) (ASX/NZX:KMD) provides additional comment on the financial statements of the Company, and
accompanying information released to the market. As such, it should be read in conjunction with the explanations and views inthose documents.
This presentation is not a prospectus, investment statement or disclosure document, or an offer of shares for subscription, or sale, in any jurisdiction.Past performance is not indicative of
future performance and no guarantee of future returns is implied or given.
The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. This presentation
has been prepared without taking into account the investment objectives, financial situation or specific needs of any particularperson. Potential investors must make their own independent
assessment and investigation of the information contained in this presentation and should not rely on any statement or the adequacy or accuracy of the information provided.
This presentation includes certain “forward-looking statements” about the Company and the environment in which the Company operates. Forward-looking information is inherently uncertain
and subject to contingencies, known and unknown risks and uncertainties and other factors, many of which are outside of the Company’s control, and may involve significant elements of
subjective judgement and assumptions as to future events which may or may not be correct. A number of important factors couldcause actual results or performance to differ materially from
the forward-looking statements. No assurance can be given that actual outcomes or performance will not materially differ from the forward-looking statements. The forward-looking
statements are based on information available to the Company as at the date of this presentation.
To the maximum extent permitted by law, none of the Company, its subsidiaries, directors, employees or agents accepts any liability, including, without limitation, any liability arising out of
fault or negligence, for any loss arising from the use of the information contained in this presentation. In particular, no representation or warranty, express or implied, is given as to the
accuracy, completeness or correctness, likelihood of achievement or reasonableness of any forecasts, prospects, statement or returns contained in this presentation. Such forecasts,
prospects, statement or returns are by their nature subject to significant uncertainties and contingencies. Actual future eventsmay vary from those included in this presentation.
The statements and information in this presentation are made only as at the date of this presentation unless otherwise statedand remain subject to change without notice.Some of the
information in this presentation is based on unaudited financial data which may be subject to change. Information in this presentation is rounded to the nearest hundred thousand dollars,
whereas the financial statements of the Company are rounded to the nearest thousand dollars. Rounding differences may arise in totals, both dollars and percentages.
All intellectual property, proprietary and other rights and interests in this presentation are owned by the Company.
All currency amounts in this presentation are in NZD unless stated otherwise.
F Y 2 2 R E S U L T S P R E S E N T A T I O N
---
Distribution Notice
KMD BRANDS LIMITED W kmdbrands.com
Section 1: Issuer information
Name of issuer KMD Brands Limited (formerly Kathmandu Holdings Limited)
Financial product name/description Ordinary Shares
NZX ticker code KMD
ISIN (If unknown, check on NZX website) NZKMDE0001S3
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies
Record date 10/11/2022
Ex-Date (one business day before the
Record Date)
09/11/2022
Payment date (and allotment date for
DRP)
25/11/2022
Total monies associated with the
distribution
1
$21,340,432
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.03000000
Gross taxable amount
3
$0.03000000
Total cash distribution
4
$0.03000000
Excluded amount (applicable to listed
PIEs)
N/A
Supplementary distribution amount $0.00000000
Section 3: Imputation credits and Resident Withholding Tax
5
Is the distribution imputed No imputation
If fully or partially imputed, please state
imputation rate as % applied
6
N/A
Imputation tax credits per financial
product
N/A
Resident Withholding Tax per financial
product
$0.00990000
1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction
of Resident Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution
is fully imputed the imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not
constitute advice as to whether or not RWT needs to be withheld.
6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.
Distribution Notice
KMD BRANDS LIMITED W kmdbrands.com
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
Start date and end date for determining
market price for DRP
Date strike price to be announced (if not
available at this time)
Specify source of financial products to be
issued under DRP programme (new issue
or to be bought on market)
DRP strike price per financial product
Last date to submit a participation notice
for this distribution in accordance with
DRP participation terms
Section 5: Authority for this announcement
Name of person
authorised to make this
announcement
Frances Blundell
Contact person for this announcement Frances Blundell
Contact phone number +64 3 968 6110
Contact email address companysecretary@kmdbrands.com
Date of release through MAP
Tuesday, 20 September 2022
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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