Kmd Brands Limited · NZX:KMD
Kmd Brands — Kathmandu Holdings — H1 FY2019 Earnings Presentation
33 slides from Kmd Brands's earnings presentation, Mar 26, 2019
Slide 1: 1H FY19 Results Presentation
1H FY19 For personal use only Results Presentation March 2019
Slide 2: 1H FY19 results summary
1H FY19 results summary For personal use only » Group Sales up 13.3% to NZD $232.0m Trading » Gross margin improvement in AU +60 bps and NZ +50 bps, North America -40 bps » Operating expenses reduced by 1.8% as a percentage of sales » Normalised EBIT up 10.0% to $19.8m; reported EBIT $20.9m Earnings
Slide 3: Contents
For personal use only Contents 1. Strategy update 2. Result overview 3. Key line items 4. Segment results 5. Balance Sheet, Cash Flow, Dividend 6. Summary 7. Questions A. Appendices 3
Slide 4: 1. Strategy update
For personal use only 1. Strategy update 4
Slide 5: Strategy
Strategy For personal use only Transformation from a leading Australasian retailer to a brand-led global multi-channel business Focus on: Transform through: » Superior customer experience » Accelerate growth opportunities » Authentic and inspirational brand » Diversify brand, channel, product » Dist
Slide 6: Superior customer experience
Superior customer experience For personal use only Customer-centric in everything we do: » Channel agnostic strategy » Create a seamless customer multi-channel experience » Elevate visual merchandising and product presentation » Enhance the customer service experience and staff product knowledge Upd
Slide 7: Authentic and inspirational Brand
Authentic and inspirational Brand For personal use only Authentic and inspirational: » New Zealand heritage with deep roots » Elevate brand distinctiveness through product design and innovation » Focus on our expertise in adventure travel » Inspire our customers and engage with our Summit Club membe
Slide 8: Distinctive Product
Distinctive Product For personal use only We design original, sustainable, engineered and adaptive products: » Recycled materials: REPREVETM helps us divert plastic bottles from going into landfill by upcycling them into fabric. This year we are on track to recycle at least 7.5 million plastic bottl
Slide 9: Oboz
Oboz For personal use only Update: Oboz growth strategy: » Fastest growing major hike footwear brand at REI, North » Grow North America customer base in a controlled way America’s largest outdoor retailer » Expand into adjacent footwear categories » Fastest growing footwear brand in Kathmandu stores
Slide 10: International
International For personal use only International growth: » Build a sustainable business that delivers profitable growth » Commitment to capital light model » Controlled distribution through wholesale and online » Develop brand equity through authentic outdoor channels » Focus on long term partnersh
Slide 11: 2. Result overview
For personal use only 2. Result overview 11
Slide 12: Result overview
Result overview For personal use only NZD $m*1 1H FY19 1H FY18 Var $ Var % SALES 232.0 204.8 27.2 13.3% » North America sales contribution $28.7m GROSS PROFIT 141.9 129.7 12.2 9.4% » Excluding North America, sales increased Gross margin 61.2% 63.3% +1.3% at constant exchange rates OPERATING EXPENSES
Slide 13: 3. Key line items
For personal use only 3. Key line items
Slide 14: Sales
Sales For personal use only SALES: +13.3% to $232.0m Group Sales (NZD $m) » Sales growth by geography (at constant exch. rates): 4yr CAGR 6.6% » AU +2.7% 232.0 204.8 » NZ -1.9% 179.4 196.0 196.3 » Rest of World -1.9% » North America (Oboz pro forma) +38.6% » Sales growth by channel (at constant exch
Slide 15: Same Store Sales result
Same Store Sales result For personal use only SAME STORE SALES: flat at constant rates Australia New Zealand » Flat at constant exchange rates 5.0% 4.8% 4.3% 3.1% » Stores -0.2% 0.9% 1.9% 1.2% 1.2% » Online +2.7% -2.2% » -2.0% actual exchange rates -6.3% 1H FY15 1H FY16 1H FY17 1H FY18 1H FY19 GROUP
Slide 16: Gross Margin
Gross Margin For personal use only GROUP » Retail gross margin long-term target range 61% to 63% remains unchanged 62.8% 63.3% 61.6% 61.2% » 1H FY19 retail gross margin 64.2%. Gross margin improvement from less 59.3% promotional discounting leading to a higher average selling price » 2H FY19 promoti
Slide 17: Cost of doing business
Cost of doing business For personal use only OPERATING EXPENSES: +9.3% to $114.3m NZD $m 1H FY19 1H FY18 Var $ Var % » Channel diversification into wholesale delivering Rent 34.4 33.2 1.2 3.6% overall operating cost structure improvement % of Sales 14.8% 16.2% » Incremental operating expenses from O
Slide 18: Earnings summary
Earnings summary For personal use only EBITDA*1 $27.6m EBIT*1,2 $19.8m NPAT*1 $13.2m +10.0% +10.0% +7.3% 27.6 25.1 21.9 21.5 19.8 18.0 15.1 14.8 13.2 10.0 12.3 9.4 6.8 0.6 -1.8 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 EBI
Slide 19: 4. Segment results
For personal use only 4. Segment results
Slide 20: Australia
Australia For personal use only SALES: +2.7% to $128.7m AUD $m 1H FY19 1H FY18 Var % » Gross margin increased 60bps / 0.6% of sales Sales 128.7 125.3 2.7% » Total operating expenses (incl. depreciation): Same store sales growth 1.2% 1.9% » 1H FY19 60.0% of sales » 1H FY18 59.5% of sales EBIT (tradin
Slide 21: New Zealand
New Zealand For personal use only SALES: -1.9% to $63.1m NZD $m 1H FY19 1H FY18 Var % » Gross margin increased 50bps / 0.5% of sales Sales 63.1 64.3 -1.9% » Total operating expenses (incl. depreciation): Same store sales growth -2.2% -6.3% » 1H FY19 45.6% of sales » 1H FY18 42.0% of sales EBIT (trad
Slide 22: North America
North America For personal use only OBOZ (NZD $m) pro forma 1H FY19 1H FY18 Var % NORTH AMERICA (NZD $m) 1H FY19 Sales 29.2 21.0 38.6% Sales*1 28.7 Gross margin % 39.3% 39.7% EBIT (trading result)*2 3.7 EBIT 4.7 2.7 77.1% EBIT margin % 12.9% EBIT margin % 16.2% 12.7% » Oboz 1H FY19 pro forma sales g
Slide 23: Rest of World
Rest of World For personal use only SALES: NZD $3.0m in line with last year NZD $m 1H FY19 1H FY18 Var % » Direct to consumer sales $1.8m, c. 60% of total Sales 3.0 3.0 -0.4% sales EBIT (trading result)*2 0.1 (0.2) » Wholesale $1.2m, c. 40% of total sales EBIT margin % 4.9% -6.9% » Gross margin impr
Slide 24: 5. Balance Sheet, Cash Flow, Dividend
5. Balance Sheet, Cash Flow, Dividend For personal use only 24
Slide 25: Balance Sheet
Balance Sheet For personal use only Stock Turns Balance Sheet (NZD $m) 1H FY19 1H FY18 1.87x 1.84x Inventories 130.1 84.2 1.58x 1.57x 1.62x Property, plant and equipment 60.9 64.2 Intangible assets 384.6 283.1 Other assets 37.7 6.2 Total assets (excl. cash) 613.3 437.7 1H FY15 1H FY16 1H FY17 1H FY1
Slide 26: Cash Flow
Cash Flow For personal use only Operating cash flow -$16.2m: Cash Flow (NZD $m) 1H FY19 1H FY18 » Change in working capital includes the increase in NPAT 14.0 12.3 inventory, and timing of supplier and tax payments Change in working capital (39.8) (3.5) Change in non-cash items 9.6 8.1 Capital expen
Slide 27: Dividend
Dividend For personal use only Dividends (NZ cents per share) » NZ 4.0 cents per share interim dividend (1H FY18 NZ 4.0 cps) Interim Final 15 » Dividend will not be imputed for New Zealand shareholders 13 11 » Dividend will not be franked for Australian shareholders 8 11 9 » Record date 7 June 2019
Slide 28: Foreign currency
Foreign currency For personal use only FORWARD HEDGING POSITION FY18 FY19 FY20 AUD/USD Effective Rate 0.759 0.764 0.726 NZD/USD Effective Rate 0.709 0.707 0.678 » 1H FY19 USD hedging rates c. 1% above 1H FY18 » 2H FY19 USD hedging rates level with 2H FY18 » 1H FY20 USD hedging rates c. 5% below 1H F
Slide 29: 6. Summary
For personal use only 6. Summary 29
Slide 30: Summary
Summary For personal use only » By fuelling growth and diversifying our group, the Oboz acquisition has advanced our transformation from a leading Australasian retailer to a brand-led global multi-channel business » We have made significant progress to move Kathmandu from being a retailer to being a
Slide 31: 7. Questions
For personal use only 7. Questions 31
Slide 32: Appendix – Reconciliation of reported results
Appendix 1 – Reconciliation of reported results For personal use only 1H FY19 1H FY19 NZD $m Abnormals*2 Reported*1 Normalised SALES 232.0 232.0 GROSS PROFIT 141.9 141.9 Gross margin 61.2% 61.2% OTHER INCOME 1.1 (1.1) - OPERATING EXPENSES (114.3) (114.3) % of Sales 49.3% 49.3% EBITDA 28.7 (1.1) 27.6
Slide 33: Appendix – Reconciliation of segment EBIT trading results
Appendix 2 – Reconciliation of segment EBIT trading results For personal use only New North Rest of 1H FY19 ($’000) Australia Other Total Zealand America World EBIT per financial statements (NZD) 7,649 10,933 3,699 144 (1,501) 20,924 Abnormals*1 (NZD) (1,115) - - - (1,115) Internal charges not tradi