KMD - Kathmandu

[Waltzing]

usually buy a big travel trolley bag for accessories and sports equipment.

still got the same gear from 2019....

havnt bought anything from KMD except a big surf beach dual designed tent umbrella..

cant see this share going anywhere for a while.

cant see its safe to travel by air anywhere yet if you value your VO2 Max.

most high performance athletes will still be in hiding or have retired if there is even going to be a next Olympics..

[Habits]

On 23 Feb I sold virtually all of my holding at 1.33 each. There has been no movement in the month since, which is good that the sp has held firm. The bad news is out of the way and hopefully sales and profits will ramp up. GLTAH

[Recaster]

This company has had an especially difficult time of it during the Covid period. Lots of optimistic noises from management and they even paid a large dividend despite losing money in the latest interim period.

My analysis:

https://recastinvestor.substack.com/...-brands-kmdnzx

[Ferg]

This company has had an especially difficult time of it during the Covid period. Lots of optimistic noises from management and they even paid a large dividend despite losing money in the latest interim period.

My analysis:

https://recastinvestor.substack.com/...-brands-kmdnzx

Thanks for sharing Recaster and nice work.

3 things that possibly require further comment:
1) How is the latest dividends being funded? Is operating cashflow enough to cover the dividend? Or is this being funded out of debt?**
2) Inventories have increased on reduced sales. Does this mean there will be inventory provision problems in future? Or is there a trend we are not seeing in just the last 2 years?
3) Why did the Kathmandu segment make a loss? I am surprised by that.

Another thing that would be good to see in your analysis is how we get from Revenues to EBIT, at both the total and operating division levels, i.e. Revenues less Variable Costs (being COGS & selling & dist. costs if published) gives gross margin less overheads (admin, depreciation etc) gives EBIT with YoY % changes like the rest of the P&L. That will provide insights as to issues with margins and/or overheads etc.

Nice work. Keep it up!

**I see you touched on this in your analysis. Given debts were also reduced in that period, the historical dividend was paid from cash reserves. Given operating cash flow was negative without the prior dividend payment, then the next dividend is coming from cash again, or being funded by debt. That raises questions around sustainability of future dividends.

[Waltzing]

Look over priced at present and maybe they expect a big bounce back FY23.

[nztx]

Anyone remember the following announcement:

1 April 2020 to strengthen their balance - what got paid back that they had on board then ?

http://nzx-prod-s7fsd7f98s.s3-websit...066/320084.pdf

Equity Raising highlights

• Kathmandu Holdings is taking pre-emptive action to fortify its balance sheet in conjunction with the
aggressive and significant cost savings and structural cost reduction initiatives the Group is implementing
in response to the global COVID-19 pandemic (COVID-19).

• The Group has launched a fully underwritten $207 million Equity Raising at an offer price of $0.50 per share
via a $30 million Placement to certain institutional investors, together with an approximately $177 million
1.2 for 1 pro-rata accelerated Entitlement Offer (together, the Equity Raising).

• Post-raising, the Group will be strongly capitalised through the current market uncertainties caused by the
global COVID-19 pandemic.

Kathmandu Holdings has announced that it intends to raise approximately $207 million to strengthen its balance
sheet and ensure the Group is strongly capitalised through the current market uncertainties caused by COVID19.

Any guesses on why there is mayhem in the KMD engine room ?

ie: Sell Product in volume, Make good margin, optimise retailing expenses to produce a glowing bottom line

Wasn't a fair chunk of debt supposed to be gone with last Cap Raise ?

Or did more get reborrowed courtesy of trying to bridge the Covid troughs on a hope ?

Buying screw up issues, Supply issues ? Store costs issues ? Natural events ? Time to start weeding out poor performing store issues, or other issues ?

With Inventory management systems etc today, these guys should in real time how their weeks & months
are going - make no mistake about that

If Management don't get on top of it - another Cap Raise ? or worse perhaps ?

Do Board have it in them to navigate in anything other than smooth waters fully provisioned
with heaps of stakeholder loot stashed away ? Sure any amount of money in kitty can at times
come handy to fog over glaring issues in the lower decks, until things become really telling..

Perhaps the older inhouse store brands are getting a bit tired - some possibly should have been retired
with the last acquisition, which for sure is showing up the lesser performing ones it joined onboard

In case of a further CR who wants to throw a further handful of bucks at something that has already
swallowed a fair bundle and the Board still haven't come up with results to suggest everything is sailing
smoothly, is under control , but instead may be sailing close to the wind Dividend/profitability wise ??

[Recaster]

Thanks for sharing Recaster and nice work.

3 things that possibly require further comment:
1) How is the latest dividends being funded? Is operating cashflow enough to cover the dividend? Or is this being funded out of debt?**
2) Inventories have increased on reduced sales. Does this mean there will be inventory provision problems in future? Or is there a trend we are not seeing in just the last 2 years?
3) Why did the Kathmandu segment make a loss? I am surprised by that.

Another thing that would be good to see in your analysis is how we get from Revenues to EBIT, at both the total and operating division levels, i.e. Revenues less Variable Costs (being COGS & selling & dist. costs if published) gives gross margin less overheads (admin, depreciation etc) gives EBIT with YoY % changes like the rest of the P&L. That will provide insights as to issues with margins and/or overheads etc.

Nice work. Keep it up!

**I see you touched on this in your analysis. Given debts were also reduced in that period, the historical dividend was paid from cash reserves. Given operating cash flow was negative without the prior dividend payment, then the next dividend is coming from cash again, or being funded by debt. That raises questions around sustainability of future dividends.

Thanks so much Ferg for the comments and encouragement. It's appreciated!

I'm transitioning from credit analysis to equity analysis and there are differences.

I'll amend my analysis to take into account your suggestions (which are all excellent) and provide the extra information in future analyses.

Cheers.

[Waltzing]

"In case of a further CR "

next 6 months will tell but not sure KMD will return to anything like pre C until tourism is big again?

Yep the P&L looks like it took a hit alright.

[Rawz]

KMD a bit of a dogs breakfast, has been for years.

Should have let Rod Duke buy it and shareholders get shares in BGP. Would have worked out far far better for them.

Worst nzx retail stock!

[nztx]

Wonder if MHJ want to lend KMD their expert on "how to breathe life into a Dog hobbling along on three legs" ?