Ann: FLLYR: KMD: KMD Media Release July 2014

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• Summary: FLLYR: KMD: KMD Media Release July 2014
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					KMD
23/09/2014 09:24
FLLYR

REL: 0924 HRS Kathmandu Holdings Limited

FLLYR: KMD: KMD Media Release July 2014

KATHMANDU HOLDINGS LIMITED (ASX/NZX: KMD)

ASX/NZX/Media Announcement
23 September 2014

Kathmandu Holdings announces FY2014 full year results:

- Sales NZ$392.9m, up NZ$8.9m, +2.3%,
- EBIT NZ$64.3m, up 1.4%,
- NPAT NZ$42.2m, down 4.5%,
- Earnings per share 21.0 cps (NZ$), down 1.1c (NZ$)

Final dividend 9.0 cents per share (NZ$), full year payout 12.0 cents per
share (NZ$).

Kathmandu Holdings Limited (ASX/NZX: KMD) today announced earnings before
interest and tax (EBIT) of NZ$64.3 million, for the year ended 31 July 2014,
an increase of NZ$0.9 million compared with the prior corresponding period.
Net profit after tax (NPAT) decreased from NZ$44.2 million to NZ$42.2 million
for the same period.

RESULTS OVERVIEW
Year ending 31 July 2014  NZ $m Growth
 FY2014 FY2013 NZ $m %
Sales 392.9 384.0 8.9 2.3%
Gross Profit 248.1 242.0 6.1 2.5%
EBITDA 74.5 74.0 0.5 0.7%
EBIT 64.3 63.4 0.9 1.4%
NPAT 1 42.2 44.2 (2.0) (4.5%)
1. FY2014 NPAT includes NZ$0.8m (2013: NZ$3.1m) taxation expense benefit from
Australian intercompany loan revaluation.

Kathmandu Holdings Limited Chief Operating Officer, Mark Todd (soon to become
acting Chief Executive following the recent resignation of long term CEO
Peter Halkett) said it was a satisfactory overall result. "Given the reduced
customer demand experienced during our key selling period in June, and the
NZ$5.8m adverse impact of exchange rates, a small increase in EBIT was a good
performance."

For the full year, same store sales growth was 4.2% at comparable exchange
rates
(-2.7% at actual exchange rates). The company opened 15 new permanent stores;
ten of these in the second half. Online sales grew by over 35% at comparable
exchange rates and contributed 5.1% of total sales.

SALES, STORE NUMBERS AND GROSS PROFIT MARGIN

Year ending 31 July 2014
NZ $m FY2014  % of Total Total sales growth %*1Same store growth %FY2014 #
new stores
Sales - Australia 247.3 62.9% 14.8% 6.9% 14
Sales - New Zealand 141.0 35.9% 2.9% (0.1%) 1
Sales - United Kingdom 4.6 1.2% (22.6%) 12.7% 0
Total 392.9 100.0% 2.3% 4.2% 15
1  Calculated on local currency sales results (not affected by year-on-year
exchange rate variation)

Australia performed strongly, delivering good same store sales growth
throughout the year. New Zealand same store sales were generally ahead of
FY2013 levels, apart from a substantial downturn during the key winter
trading period in June.

The United Kingdom also delivered same store sales growth. The overall sales
reduction in that market reflected the first period of trading after closure
of loss making stores.

Permanent stores open 31 July 2014
       FY2014 FY2013
Australia 100 87
New Zealand 45 44
United Kingdom 4 5
Total Group 149 136

In the second half year Kathmandu opened ten new stores (following five in
the first half):
- Australia: Melbourne (Chadstone, Emporium), Regional VIC (Shepparton,
Traralgon), Brisbane (Indooroopilly), Regional QLD (Rockhampton, Hervey
Bay), Perth (Belmont), Regional WA (Bunbury), Regional NSW  (Charlestown).

During the year Kathmandu closed one store in Australia (Chatswood Outlet,
Sydney) and one store in the United Kingdom (White City, London) as part of
the re-organisation of that business.

During the year four stores were relocated; Napier, Onehunga and Wellington
Outlet in New Zealand, Pacific Fair in Australia. Major refurbishments were
completed in Brisbane CBD, Petone (Wellington), Queen St (Auckland) and
Spitalfields (London) stores.

In the first half of FY2015, eight new stores are already confirmed to open,
all in Australia:
- Burwood, Miranda (Sydney)
- Byron Bay, (NSW)
- Mt Gravatt (Brisbane)
- Essendon DFO, Watergardens (Melbourne)
- Cockburn, Joondalup (Perth)

Sales growth in the online channel has continued strongly. "We expect more
sales growth as we invest in internal capability and introduce more customers
to the brand globally," said Mr Todd. He further commented that "we will
achieve this through our ongoing focus on increasing Kathmandu brand
awareness and growing Summit Club membership in both existing and new global
markets. This will support online sales growth via our own platform and
web-based marketplaces such as NEXT and Amazon, the first marketplaces we
traded on successfully in the United Kingdom during FY2014. We are expanding
our product offering and entering more online marketplace sites to generate
further international sales."

Year ending 31 July 2014
FY2014 FY2013
Gross margin % 63.1% 63.0%

Gross margin remained within Kathmandu's target range of 62% to 64%. Margins
remained unchanged in Australia and improved in New Zealand (up 50bps). In
the United Kingdom, margins were lower than FY2013 by 230 bps due to the
impact of clearance activity associated with store closures.

OPERATING COSTS

Operating Expenses
NZ $m & % of Sales(excluding depreciation)
FY2014 FY2013
Rent 44.5m 43.8m
% of sales 11.3% 11.4%
Other operating costs 130.5m 124.5m
% of sales 33.2% 32.4%
Total 175.0m 168.3m
% of sales 44.5% 43.8%

Kathmandu's operating expenses increased by 70 bps as a % of sales. Expenses
as a % of sales were adversely impacted by sales being below expectations.
Following increased promotional activity in the second half, advertising
increased as a % of sales. Continued investment in internal capability to
support increased online business and systems development also drove
operating cost increases.

"Operating cost leverage remains a key priority for Kathmandu, in tandem with
investment for growth. We are confident Kathmandu will achieve further
efficiency improvements in the future as we transition onto the Microsoft
Dynamics AX platform, improve core systems and realign supply chain
facilities and technology, both in New Zealand and Australia," said Mr. Todd.

EBIT margin decreased from 16.5% to 16.4% of sales. Earnings per share
decreased by 5.0% to 21.0 cents per share (FY2013: 22.1 cents per share).

OTHER FINANCIAL INFORMATION
Year ending 31 July 2014
NZ $m FY2014 FY2013
Capital Expenditure 24.2 17.4
Operating Cashflow 31.2 45.7
Inventories 103.8 80.0
Net Debt 55.3 40.2
Net Debt : Net Debt + Equity 15.5% 12.0%
Interim Dividend (cents per share) 3 cents 3 cents
Final Dividend proposed (cents per share) 9 cents 9 cents

The increase in capital expenditure year on year was primarily investment in
new core systems built upon the Microsoft Dynamics AX platform. Also more
store relocation and refurbishment projects were completed in FY2014 than in
the prior year.

Total inventories have increased by $23.8m (29.8%). The growth in operating
inventory required to support an increased number of stores and investment in
higher price point categories for sale throughout winter contributed to this
increase. One month after balance date, the year on year percentage increase
in inventory on a stock per store basis has reduced from 18.5% to 11.8%, as
the implementation of new forecasting and planning software takes effect.

Total net debt at 31 July increased by NZ$15.1m (37.6%) on the previous year
as a result of reduced operating cash flow and increased capital expenditure.
The ratio of net debt to net debt plus equity at 31 July increased to 15.5%.

FINAL DIVIDEND

Kathmandu confirms that a final dividend of NZ 9.0 cents will be paid,
bringing the total dividend payout for FY2014 to 12.0 cents (FY2013: 12.0
cents). The dividend will be fully imputed for New Zealand shareholders and
fully franked for Australian shareholders. A supplementary dividend of
0.15882 cents will be paid to non-resident shareholders.

FUTURE OUTLOOK AND INVESTMENT IN GROWTH

Chairman David Kirk confirmed that Kathmandu's key growth strategies remain
robust and sustainable. "Kathmandu has done well in 2014. In particular our
performance in Australia of 6.9% same stores sale growth and 14.8% total
sales growth in Australian dollars is very pleasing. We expect similar sales
growth in the year ahead."

Mr. Kirk highlighted the commitment now made by the Kathmandu Board to invest
in the brand's international growth aspirations. "Given this strong position
and the scale of our business, now is the right time to begin taking
Kathmandu to the world. In FY2015 we will invest an incremental NZ$5m in the
United Kingdom and Europe to build our brand, acquire Summit Club members and
grow online sales. We are excited to be beginning a new stage in Kathmandu's
development," said Mr. Kirk.

He concluded by saying that "providing there is no deterioration in economic
conditions we expect improved earnings from the Australasian business in
FY2015, however the overall outcome will be impacted by the UK investment."

For further information please contact:

Mark Todd, Chief Operating Officer or Reuben Casey Company Secretary
+64 3 3736110

Media Enquiries to Helen McCombie, Citadel PR +61 2 9290 3033
End CA:00255559 For:KMD    Type:FLLYR      Time:2014-09-23 09:24:28