Kathmandu to raise $200 million to cushion Covid-19 blow, first-half earnings down

Kathmandu expects Covid-19 to have "material adverse impact" on its full-year earnings. Photo / NZME

Kathmandu Holdings' earnings dropped by almost $6 million in the 26 weeks to January 31 and the company has concerns about its second-half performance.

The dual-listed retailer posted an $8.1m net profit after tax in the first half of the financial year, down $5.8m from the $14m posted the same time last year.

Its net profit after tax for the period excluding acquisitions costs associated with the takeover of surfing brand Rip Curl was $18m.

The outdoor equipment and apparel retailer made $363.7m in sales in its first six months of trade, up almost 57 per cent on the same time last year.

Kathmandu sales in the period were up 0.4 per cent in the period while Rip Curl sales were up 3.7 per cent.

While the company says the progress was encouraging, its earnings for the remainder of the year will likely take a big hit due to disruption caused by Covid-19 as its 340 Kathmandu and Rip Curl stores remain closed due to the outbreak.

Kathmandu was placed into a trading halt yesterday morning ahead of a $200 million equity capital raise.

The company confirmed this today, announcing to the NZX that it intended to launch a fully underwritten $207m equity raise at an offer price of 50 cents per share to keep it going if disruption from Covid-19 continues.

Xavier Simonet, Kathmandu group chief executive, said the raise was intended to strengthen the group's balance sheet and "ensure the group is strongly capitalised" through current market uncertainties caused by the pandemic.

"The group's first-half financial results highlight the strength of our three global brands, Kathmandu, Rip Curl and Oboz. These results also show the strong position we would have been in to drive the next wave of our growth in line with our long-term diversification strategy had the global COVID-19 pandemic not occurred," Simonet said in the market announcement.

"In this situation of uncertainty and challenges, the health and wellbeing of our team and customers is paramount, while we maintain business continuity and ensure we are well positioned to bounce back quickly when more normal operating conditions return."

Simonet said the funds raised would provide liquidity and funding in the medium-term should it experience prolonged effects of the pandemic.

The company expected Covid-19 to have "material adverse impact" on its earnings over the next 12 months, he said.

The second half of the financial year for Kathmandu is typically its most important due to the seasonal nature of the company's products, such as its winter jackets. Its second-half of trade has historically provided a larger portion of sales and net profit for the full year.

Kathmandu last week announced it had implemented a number of strategies to reduce its costs following disruption from Covid-19. It senior management team took a 20 per cent salary reduction and a large number of its incoming inventory orders were cancelled.

It has reduced its employees working hours and ceased working with its casual staff.