KMD BRANDS LIMITED Appendix 4E Media Announcement Financial Statements
Auditors' Report
(ARBN 139 836 918)
(Incorporated in New Zealand) For the year ending 31 July 2015
Reporting Period
Reporting Period: 12 months ending 31 July 2015
Previous Reporting Period: 12 months ending 31 July 2014
Results for Announcement to the Market (all comparisons to the year ended 30 June 2014) | $NZ'000 | Up/Down | Movement % |
1. Revenues from ordinary activities | 409,372 | Up | 4.2% |
2. Profit from ordinary activities after tax attributable to members | 20,419 | Down | 51.6% |
3. Net profit for the period attributable to members | 20,419 | Down | 51.6% |
4. Dividends (distribution) | Amount per | Franked amount |
Security | per security | |
NZ cents | NZ cents | |
Interim Dividend per share (paid 19 June 2015) | 3.0 | 3.0 |
Final Dividend per share (to be paid 20 November 2015) | 5.0 | 5.0 |
5. The record date for final dividend | 9 November 2015 |
6. For commentary on the results refer to the following Media Announcement. | |
Financial Information
The appendix 4E should be read in conjunction with the following consolidated financial statements for the year ended 31 July 2015, specifically:
Statements of financial performance - page 4 Statement of financial position -page 6 Statements of cash flows - page 7
Statement of retained earnings - page 5 Notes to the financial statements - page 9
Dividends - Ordinary Shares
Dividends | Amount per Security NZ cents | Franked amount per security NZ cents |
Interim Dividend | 3.0 | 3.0 |
Final Dividend | 5.0 | 5.0 |
The record date for determining entitlements to the final dividend | 9 November 2015 | |
Final Dividend payment date: | 20 November 2015 | |
There is no foreign sourced dividend or distribution included.
Dividend reinvestment plan
Not applicable.
Net Tangible Assets per Security
2015 NZ $ | 2014 NZ $ | |
Net tangible assets per security | 0.36 | 0.32 |
Entities over which control has been gained or lost
Control has not been gained or lost in relation to any entity during the period.
Details of associates and joint venture entities
Not applicable.
Other significant information
Not applicable.
Accounting Standards
These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand. They comply with the New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statements also comply with International Financial Reporting Standards (IFRS).
Commentary on results for the period
Refer to media announcement and consolidated financial statements following.
Information on Audit
The report is based on financial statements which have been audited. The audit report, which is unqualified, is on page 42 of the financial statements.
Kathmandu FY15 Full Year Results
Kathmandu Holdings Limited (ASX/NZX: KMD) today announced earnings before interest and tax (EBIT) of NZ$33.2 million for the year ended 31 July 2015, a decrease of NZ$31.1 million compared with the prior corresponding period. Net profit after tax (NPAT) decreased from NZ$42.2 million to NZ$20.4 million for the same period. A final dividend of NZ 5.0 cents per share will be paid, bringing the full year payout to NZ 8.0 cents per share.
Summary of Results
NZD $m | Change | |||
FY2015 | FY2014 | NZD $m | % | |
Sales | 409.4 | 392.9 | 16.5 | 4.2% |
Gross Profit | 251.9 | 248.1 | 3.8 | 1.5% |
EBITDA | 47.1 | 74.5 | (27.4) | (36.8%) |
EBIT | 33.2 | 64.3 | (31.1) | (48.4%) |
NPAT | 20.4 | 42.2 | (21.8) | (51.7%) |
NPAT excluding non-recurring items | 21.8 | 41.2 | (19.4) | (47.1%) |
Kathmandu's FY2015 result was a disappointing outcome from a challenging year. The key contributing factors to the reduction in earnings were:
Excess inventory entering FY2015 requiring aggressive clearance activity in Q1 FY2015 at compressed margins;
Pricing and promotional activity during the first three quarters of FY2015 caused customer confusion, and was compromised by clearance activity;
The rate of operating cost increases in anticipation of sales growth that did not eventuate;
Subdued consumer sentiment impacting on the Australian retail environment; and
Weakening foreign exchange rate increasing the cost of goods. Chief Executive Xavier Simonet commented:
'The results for FY2015 were disappointing and well below our expectations. After a challenging first three quarters, our Winter promotion delivered improved same store sales and gross margin results year on year, which was a significantly better outcome than our
Christmas and Easter promotions. Summit Club members responded to a shift in promotional strategy which focused on new products and highlighted features and benefits, rather than a price and discount message.'
Non-recurring items incurred in FY2015 relate to the relocation of the Australian distribution centre and Christchurch support office, along with costs arising due to the Briscoe takeover process.
Sales, Store Numbers, Gross Margin and Inventory
Sales Growth FY2015
Sales growth in Australia was due to the expansion of the store network. Same store sales reduced by 2.7% in Australia and 1.1% in New Zealand.
In the UK growth was recorded in both total and same stores sales during the period.
Total Sales
Total Sales Growth
Same Store Sales Growth
NZD $m
Local currency
NZD
Local currency
NZD
Australia
264.6
6.3%
7.0%
(2.7%)
(2.0%)
New Zealand
139.1
-1.3%
-1.3%
(1.1%)
(1.1%)
United Kingdom
5.7
17.3%
21.4%
15.7%
19.7%
Total
409.4
3.7%
4.2%
(1.9%)
(1.4%)
Note: Same store sales are for the 53 weeks ending 2 August 2015
Online Sales Growth
Online sales growth continued to be strong in all countries, with overall growth of c.28% led by an uplift of over 79% in the UK. Online sales are now 6.2% of total sales.
Permanent Store Openings
Kathmandu opened eight new permanent stores in the first half of FY2015, and two more in the second half of FY2015, all in Australia.
Gross Margin
Gross margin declined 1.6% pts from 63.1% in FY2014 to 61.5% in FY2015. In 2H FY2015 gross margin improved by 0.7% pts from 62.6% to 63.3%. This improvement, driven by less discounting, was particularly evident in the Winter sale promotion where margins improved by over 3.5% pts year on year.
1H FY2015 margins declined as a result of a combination of factors including the sale of a large amount of clearance stock, below target sales of higher margin summer apparel product groups, and price pressure in some key product categories.
Inventory levels
Total inventory levels increased by 9.2% (NZ$9.5m) on last year and by 2.3% on a per store basis at actual exchange rates.
FY2015
NZD $m
FY2014
NZD $m
Change NZD $m
Change
%
Change per store %
Inventory
113.3
103.8
9.5
9.2%
2.3%
The timing of new season deliveries, fewer new store openings than planned and stock investment required to support online growth have contributed to this increase. The level of clearance stock was a particular focus throughout the year, and we ended FY2015 with c.40% less aged stock than last year. Clearance stock on hand was 15% below last year following the conclusion of Winter sale.
Operating Expenses
Operating expenses have increased by NZ$29.8m and by 5.5% as a percentage of sales compared to FY2014. The primary increases are:
Over half is attributable to retail stores and online operating costs including the full year effect of the 15 stores opening during FY2014, and part year costs of the 10 new stores opened during FY2015;
UK growth investment expenditure (NZ$2.8m);
Increased promotional activity; and
Non-recurring items relating to the relocation of the New Zealand support office, Australian distribution centre and costs from the Briscoe takeover process (NZ$1.9m).
Following a structural review, cost savings of c.NZ$7.0m have been planned and are being implemented during FY2016.
Operating expenses (excluding depreciation)
FY2015 NZD $m | FY2014 NZD $m | |
Rent | 53.0 | 44.5 |
% of Sales | 12.9% | 11.3% |
Other operating costs | 151.8 | 130.5 |
% of Sales | 37.1% | 33.2% |
Total | 204.8 | 175.0 |
% of Sales | 50.0% | 44.5% |
Other Financial Information
Capital expenditure decreased by NZ$4.2m compared to the prior period due to reduced investment in new and refurbished stores and a reduction in core systems investment as the upgrade project was completed in the first half of FY2015.
Operating cash flow was NZ$1.6m or 5.1% lower than FY2015. However, cash conversion was improved year on year. Gearing has increased from FY2014 but remains conservative.
FY2015 NZD $m | FY2014 NZD $m | |
Capital Expenditure | 20.0 | 24.2 |
Operating Cash Flow | 29.6 | 31.2 |
Net Debt | 69.3 | 55.3 |
Net Debt: Net Debt + Equity | 18.1% | 15.5% |
Final Dividend
A final dividend of NZ5.0 cents per share will be paid to shareholders on the register as at 9 November 2015. The dividend will be fully franked for Australian shareholders and fully imputed for New Zealand shareholders.
Outlook
Chief Executive Xavier Simonet commented:
'The FY2015 result has highlighted the need to review our cost structure and we have taken decisive action on this already. It also emphasised the need to optimise our pricing strategy and promotional model in order to improve same store sales growth and profitability in existing stores. These levers will remain a strong focus for management in FY2016.
We are committed to our long term target of 180 stores across Australasia. In FY2016 three new stores are confirmed along with relocations of our flagship stores in Melbourne and Adelaide CBD's.
The Board has taken the decision to exit the UK store network in FY2016. We intend to build on our brand equity and online platform to expand internationally using a capital light model.
I am immensely excited to have joined Kathmandu in July 2015. More than a retail business, Kathmandu is an inspiring brand with a strong heritage. We have already embarked on plans to make the brand more distinctive and engage with its target customers, particularly through Summit Club.
Strengthening the distinctiveness of the brand will also open up opportunities to be relevant in international markets as well as on social, digital and online channels.
Media: Helen McCombie Citadel-MAGNUS Tel: + 61 2 8234 0103 | Investors:Reuben Casey Chief Financial Officer Tel: +64 3 968 6166 |
We remain committed to our FY2016 forecast.' ENDS
KATHMANDU HOLDINGS LIMITED - ANNUAL REPORT 2015
In this section …
The 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 five sections: 'Basis of Preparation', 'Results for the Year', Operating Assets and Liabilities', 'Capital Structure and Financing Costs' 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 financial statements provide information required by accounting standards or Listing Rules to explain a particular feature of the financial statements. The notes which follow will also provide explanations and additional disclosure to assist readers' understanding and interpretation of the annual report and the financial statements.
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
Section 1: Basis of Preparation 9
Section 2: Results for the Year 11
Section 3: Operating Assets and Liabilities 18
Section 4: Capital Structure and Financing Costs 25
Section 5: Other Notes 33
Auditors' Report 42
2
KATHMANDU HOLDINGS LIMITED - ANNUAL REPORT 2015
Directors' Approval of Consolidated Financial Statements For the Year Ended 31 July 2015
Authorisation for Issue
The Board of Directors authorised the issue of these Consolidated Financial Statements on 29 September 2015.
Approval by Directors
The Directors are pleased to present the Consolidated Financial Statements of Kathmandu Holdings Limited for the year ended 31 July 2015 on pages 4 to 41.
29 September 2015
David Kirk Date
29 September 2015
Xavier Simonet Date
For and on behalf of the Board of Directors
3
KATHMANDU HOLDINGS LIMITED - ANNUAL REPORT 2015
Section | 2015 | 2014 | |
NZ$'000 | NZ$'000 | ||
Sales | 409,372 | 392,918 | |
Cost of sales | (157,482) | (144,777) | |
Gross profit | 251,890 | 248,141 | |
Other income | 23 | 1,363 | |
Selling expenses | (142,893) | (116,174) | |
Administration and general expenses | (61,968) | (58,876) | |
(204,861) | (175,050) | ||
Earnings before interest, tax, depreciation and amortisation | 47,052 | 74,454 | |
Depreciation and amortisation | 3.2/3.3 | (13,875) | (10,198) |
Earnings before interest and tax | 33,177 | 64,256 | |
Finance income | 1,450 | 257 | |
Finance expenses | (4,195) | (4,850) | |
Finance costs - net | 4.1.1 | (2,745) | (4,593) |
Profit before income tax | 30,432 | 59,663 | |
Income tax expense | 2.3 | (10,013) | (17,511) |
Profit after income tax | 20,419 | 42,152 | |
Other comprehensive income that may be recycled through profit and loss: | |||
Movement in cash flow hedge reserve | 4.3.2 | 12,415 | (7,122) |
Movement in foreign currency translation reserve | 4.3.2 | 1,034 | (3,794) |
Other comprehensive income/(expense) for the year, net of tax | 13,449 | (10,916) | |
Total comprehensive income for the year attributable to shareholders | 33,868 | 31,236 | |
Basic earnings per share | 2.4 | 10.1cps | 21.0cps |
Diluted earnings per share | 2.4 | 10.1cps | 20.8cps |
Weighted average basic ordinary shares outstanding ('000) | 2.4 | 201,343 | 200,422 |
Weighted average diluted ordinary shares outstanding ('000) | 2.4 | 202,227 | 202,303 |
4
|
distributed by
|
