FY18 Full Year Result Announcement

Appendix 1 Kathmandu Holdings Limited Results for announcement to the market Reporting Period: 12 months ending 31 July 2018 Previous Reporting Period: 12 months ending 31 July 2017 Amount (000's) Percentage change Revenues from ordinary activities $NZ 497,437 11.7% Profit from ordinary activities after tax attributable to security holder $NZ 50,532 32.8% Net profit attributable to security holders $NZ 50,532 32.8% For commentary on the results please refer to the Media Announcement attached. Dividends (NZ $) Amount per security Imputed amount per security Interim Dividend (paid 22 June 2018) $NZ 0.04 - Final Dividend $NZ 0.11 $NZ 0.04277778 Record Date for Final Dividend 19 November 2018 Payment date for Final Dividend 30 November 2018 Financial Information The Appendix 1 should be read in conjunction with the consolidated financial statements for the year ended 31 July 2018. Net tangible assets per security 2018 $0.13 2017 $0.24 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). Information on Audit or Review The report is based on financial statements which have been audited. The audit report, which is unqualified, is on page 45 of the financial statements. Loss/Gain of Control over Entities having Material Effect Kathmandu Holdings Limited does not have any interests in entities which are not controlled entities, nor does it have any interests in associate or joint venture entities. Control has been gained over Kathmandu US Holdings LLC (20 March 2018) and Oboz Footwear LLC (4 April 2018). Further information is available on page 35 and 36 of the consolidated financial statements. Kathmandu Holdings Limited FY2018 full year results ? Record year for sales, profit, operating cash flow and full-year dividend payout ? Sales increased by 11.7% to NZ$497.4m ? Gross profit increased by 14.2% to NZ$315.5m ? EBIT increased by 30.9% to NZ$74.6m ? NPAT increased by 32.9% to NZ$50.5m ? Oboz acquisition successful ? $1,000 one-off bonus to all Kathmandu permanent team members Kathmandu Holdings Limited (ASX/NZX: KMD) today announced net profit after tax (NPAT) of NZ$50.5 million for the year ended 31 July 2018, an increase of NZ$12.5 million compared with the prior year. Earnings before interest and tax (EBIT) increased by 30.9% to NZ$74.6 million for the same period. A final dividend of NZ 11.0 cents per share will be paid, bringing the full year payout to a record NZ 15.0 cents per share. Summary of Results NZD $m Change FY2018 FY2017 NZD $m % Sales 497.4 445.3 52.1 11.7% Gross Profit 315.5 276.2 39.3 14.2% EBITDA 89.8 70.8 19.0 26.8% EBIT 74.6 57.0 17.6 30.9% NPAT 50.5 38.0 12.5 32.9% Chief Executive Xavier Simonet commented: "We were delighted to achieve record profits this year as we balanced sales growth with gross margin improvement. Sales growth was supported by the success of our key product groups, improved promotional execution, inspiring digital content, and an enhanced in-store customer experience. Top line growth combined with a focus on cost control, resulted in excellent profit growth." Oboz acquisition During the year we acquired Oboz, a premium US based outdoor footwear brand. Chief Executive Xavier Simonet commented: "The Oboz acquisition provides us with the opportunity to accelerate our international growth, and diversify our product mix, geography, and channels to market. Kathmandu and Oboz are well aligned in core principles of brand development, innovation, quality, customer service, and sustainability. As we grow our Kathmandu wholesale business, we welcome Oboz, an outdoor footwear wholesaler with a customer base primarily in North America. We are excited by the opportunity to develop complementary international wholesale channels for both the Oboz and Kathmandu brands." Sales, Gross Margin and Inventory Sales Sales grew by 9.6% in Australia, our largest market. First half New Zealand sales were impacted by lower levels of clearance stock, however this was more than offset by gross margin improvement, with New Zealand gross profit 2% above FY2017. Online sales now comprise 9.4% of Kathmandu sales. Sales Growth 1H FY2018 Same stores 2H FY2018 Same stores FY2018 Same stores FY2018 Total sales Australia (AUD) 1.9% 11.6% 7.5% 9.6% New Zealand (NZD) -6.3% 1.2% -2.4% -2.3% Kathmandu Group (excl. Oboz) (constant exchange rates) -0.8% 8.5% 4.4% 6.1% Note: Same store sales are for the 52 weeks ending 29 July 2018 Gross Margin Gross margin increased 1.4% points from 62.0% in FY2017 to 63.4% in FY2018, which sits above the long-term target range 61% to 63%. Increased full price sell through and higher average selling prices contributed to the improvement. Inventory levels Total inventory levels increased by $22.7m this year to $111.9m. Included in this balance is $17.9m to support Kathmandu international and Oboz. FY2018 NZD $m FY2017 NZD $m Change NZD $m Change % Inventory 111.9 89.2 22.7 25.4% Operating Expenses Operating expenses decreased by 0.7% as a percentage of sales compared to FY2017. They include $2.0m transaction costs for the Oboz acquisition, plus $2.0m for an exceptional bonus to Kathmandu employees who are not already on a bonus scheme. Xavier Simonet commented: "We are delighted to pay out an exceptional $1,000 one-off bonus to all Kathmandu permanent team members who are not part of an incentive program. This is an acknowledgement of the contribution of all Kathmandu team members to the continued performance and success of our company over the last 3 years. FY18 is a record year in terms of sales, profit, and operating cash flow and we believe it is important to recognise the role our team has played." Efficiencies were achieved in distribution labour following last year's automation investment in Australia, targeted promotional spend, and retail labour productivity improvements. Rent increased by NZ$5.2m. Excluding $1.4m year-on-year exchange rate translation movement, the constant currency rent increase was 6.1%. Operating expenses (excluding depreciation) FY2018 NZD $m FY2017 NZD $m Rent 67.4 62.2 % of Sales 13.6% 14.0% Other operating expenses 158.3 143.2 % of Sales 31.8% 32.1% Total operating expenses 225.7 205.4 % of Sales 45.4% 46.1% Other Financial Information We generated record operating cash flow of $75.6m this year, and invested NZ$16.7m in capital projects, primarily in expanding and updating our store network. Net debt was $31.4m at year end, following $60m additional bank funding for the Oboz acquisition in April 2018. FY2018 NZD $m FY2017 NZD $m Capital Expenditure 16.7 13.3 Operating Cash Flow 75.6 67.3 Net Debt 31.4 6.9 Net Debt to Equity 6.9% 2.1% Final Dividend A final dividend of NZ 11.0 cents per share will be paid to shareholders on the register as at 19 November 2018. This brings the full year dividend to 15.0 cents per share, a 15.4% increase on the prior year. The dividend will be fully franked for Australian shareholders and fully imputed for New Zealand shareholders. Chief Executive Xavier Simonet commented: "It is highly motivating for our team to have achieved three years of strong profit growth in our core Australasian business. Our customers have reacted positively to innovative products and engaging brand content. Being an inspiring brand and bringing to market original, sustainable, engineered and adaptive products represent Kathmandu's company ethos. Continuing to drive sales growth in our core market remains a key management focus. It's an exciting time for the business as we welcome Oboz to the Group and accelerate our international growth. In Kathmandu and Oboz, we have two great brands with significant growth potential in North America and Europe." ENDS Media: Helen McCombie Citadel-MAGNUS Tel: + 61 2 8234 0103 Investors: Reuben Casey Chief Operating and Financial Officer Tel: +64 3 968 6166 End CA:00324008 For:KMD Type:FLLYR Time:2018-09-18 09:40:19