FY20 Results Presentation 23 September 2020

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FY20 Results Presentation 23 September 2020 Kathmandu Holdings FY20 Results Presentation 23 September 2020 Tyler Wright 2 x WSL World Surfing Champion 2016, 2017 Well positioned in response to COVID-19 Prudent operational and capital management Long-term brand strength • COVID-19 response was swift and strong • Consumer trends towards outdoor and recreation activities • $207m capital raised to provide balance sheet strength, • Retail sales performed strongly once lockdowns eased and enable investment for the future, net debt of $9.4m • Online fulfilment and customer service capacity in place to • Accelerated synergies across the Group with c. $15m meet online shift in consumer preference annualised cost savings • Strong cash generating brands support future returns 2 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION COVID-19 short-term impact Short-term business impact Immediate response • FY20 revenue impact estimated at c. $135m • Senior management and support office wage (Retail c. $80m and Wholesale c. $55m) reductions through lockdown period • Full global retail store network closures during initial • Rental negotiations are ongoing, with c. 70% of stores lockdowns settled with landlords, relationships remain strong • During July, Melbourne stores continued to trade, but with • Inventory well controlled by deferring orders impacted footfall due to a second wave • Non-essential capital projects delayed during lockdowns • Rip Curl wholesale sales most affected • Dividend suspended. No interim dividend paid, and no final • Reduced demand for Kathmandu and Rip Curl travel-related FY20 dividend declared products due to border restrictions • Government wage subsidies were passed directly through to • Certain locations remain impacted, in particular Melbourne, team members Hawaii, Bali, and airport stores 3 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION Brand strengths more relevant than ever before • Iconic, inspirational, and • Leading outdoor brand in • Established and distinctive authentic brand Australasia American Montana-based brand • Renowned for high quality • Original, sustainable, engineered, • Focused, efficient product range technical surfing products and adaptive products with significant expansion potential • Global distribution • Loyal customers with 2.2 million active Summit Club members • Positive operating cash flow • Diversified revenue streams across both wholesale and retail • Omni channel capability • Efficient operating structure channels • Proven track record of long-term • Direct to consumer online • Strong cash contribution, $34m sales and profit growth channel launching FY21 for 9 months of ownership • History of significant cash generation • Positioned for international expansion (post COVID-19) 4 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION Brands with global reach Total Group RC KMD Oboz Total Europe RC KMD Oboz Total Owned stores 160 165 - 325 Owned stores 20 - - 20 Licensed stores 196 - - 196 Licensed stores 2 - - 2 JV stores 22 - - 22 Online sites 1 1 - 2 Online sites 6 4 - 10 Wholesale doors 2,146 28 97 2,271 Wholesale doors 5,786 28 1,749 7,563 Asia RC Oboz Total Owned stores 2 - 2 Licensed stores 54 - 54 JV stores 20 - 20 Online sites 1 - 1 North America RC KMD Oboz Total Wholesale doors 565 152 717 Owned stores 30 - - 30 Licensed stores 10 - - 10 Online sites 1 1 - 2 Africa / Middle East RC Wholesale doors 1,206 - 1,500 2,706 Licensed stores 21 South America RC RC Rip Curl Owned stores 3 AU & NZ RC KMD Total KMD Kathmandu Licensed stores 90 Owned stores 105 165 270 Oboz Oboz Online sites 1 Licensed stores 19 - 19 Wholesale doors 815 JV stores 2 - 2 Owned regions Online sites 2 2 4 Licensed regions Wholesale doors 1,054 - 1,054 5 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION Rapid acceleration in online sales 140.0 18.0% Group online sales up 63% to $106.4m 15.7% Online sales Growth year % of DTC 16.0% (NZD $m) on year sales 120.0 Online sales (NZD $m) 14.0% 100.0 % of DTC sales 106.4 12.0% 80.0 8.8% 10.0% 7.6% 25.5 52% 10.6% 8.0% 60.0 5.8% 5.2% 65.1 56.7 6.0% 40.0 41.0 4.0% 34.4 20.0 2.0% 80.9 67% 18.5% 0.0 0.0% FY16 FY17 FY18 FY19 FY20 Omni channel strategy leverages brand strength • Consumer preference moved towards online during lockdown. Capacity and capability to rapidly scale up to meet demand • Kathmandu online sales growth during COVID-19 from April to July +96% above last year, delivering a step change in online penetration from 10.1% of DTC sales in FY19 to 18.5% of DTC sales in FY20 • Rip Curl online sales growth during COVID-19 from April to July +115% above last year, delivering a step change in online penetration from 6.5% of DTC sales in FY19 to 10.6% of DTC sales in FY20 1. Direct to consumer (“DTC”) sales include all sales from Rip Curl and Kathmandu retail stores and direct online sites and marketplaces 2. All years include both Kathmandu and Rip Curl online and total DTC sales for comparability over time. FY20 also includes a full financial year of Rip Curl sales for comparability, including $3.7m online sales for the three months pre-acquisition 3. Rounding differences may arise in totals, both $ and % 6 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION Group Financials 7 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION Profit results reflect COVID-19 impact GROUP Statutory *1 Underlying *3,4 NZD $m *2 FY20 FY20 FY19 Var % SALES 801.5 801.5 538.9 48.7% • FY20 result includes 9 months of Rip Curl GROSS PROFIT 467.0 467.0 332.5 40.5% • Government wage assistance (globally) contributed a net benefit to Gross margin 58.3% 58.3% 61.7% operating expenses of c. $16m OPERATING EXPENSES (318.1) (383.7) (234.0) 63.9% % of Sales 39.7% 47.9% 43.4% • Operating expenses include restructuring savings of $4.7m in FY20, delivering annual savings of c. $15m, as support office synergies EBITDA 148.9 83.4 98.4 (15.3%) start to be realised EBITDA margin % 18.6% 10.4% 18.3% EBIT 45.9 56.2 83.2 (32.5%) • Statutory depreciation includes $75.8m depreciation of IFRS 16 right EBIT margin % 5.7% 7.0% 15.4% of use assets NPAT 8.9 31.5 56.8 (44.5%) 1. FY20 Statutory results include the impact of IFRS 16 leases. For comparability, the impact of IFRS 16 is excluded from Underlying results. Refer to Appendix 1 for a reconciliation of Statutory to Underlying results 2. FY20 NZD/AUD conversion rate 0.939 (FY19: 0.949), FY20 NZD/GBP conversion rate 0.504 (FY19: 0.522), FY20 NZD/USD conversion rate 0.636 (FY19 0.670) 3. In FY20, $11.6m has been incurred in relation to the acquisition and integration of Rip Curl, including establishment of a new Group structure. Further one-off costs of $4.6m have been incurred in relation to restructuring support office roles. Refer to Appendix 1 for a reconciliation of Statutory to Underlying results 4. FY19 Underlying profit excludes abnormal income $1.1m from a tax refund relating to the GST treatment of reward vouchers ($0.8m after tax). Refer to Appendix 1 for a reconciliation of Statutory to Underlying results 5. Rounding differences may arise in totals, both $ and % 8 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION Strong cash generating brands Cash Flow (NZD $m) FY20 FY19 NPAT 8.9 57.6 Change in working capital 55.6 (13.0) Non-cash items 28.6 17.1 Adjusted operating cash flow*1 93.1 61.7 Key Line Items: Net interest paid (including facility fees)*2 (12.7) (2.6) Income taxes paid (15.5) (26.5) Capital expenditure (19.8) (15.7) Dividends paid (27.2) (33.9) • Positive impact from working capital management - inventory well controlled by deferring orders • Non-essential capital projects delayed during lockdowns • Dividend suspended. No interim dividend paid, and no final FY20 dividend declared • Increase in net interest paid and increase in borrowings due to the Rip Curl acquisition 1. Adjusted for impacts of adopting IFRS 16 2. Includes debt underwrite costs of $6.3m in relation to the Rip Curl acquisition 3. Rounding differences may arise in totals, both $ and % 9 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION Balance sheet well positioned Balance Sheet (NZD $m) as at 31 July FY20 FY19 • Inventory well placed in uncertain demand environment, with low Kathmandu Inventories 228.8 122.8 clearance stock levels Property, plant and equipment 90.7 60.3 Right of Use Asset (IFRS 16) 258.0 - • Current liabilities elevated by rent accruals c. $15m pending final agreements with Intangible assets 682.6 386.1 landlords on rent abatements Other assets 81.5 19.2 Total assets (excl. cash) 1,341.6 588.4 Net interest bearing liabilities and cash (9.4) (19.3) Lease Liability (IFRS 16) (297.9) - Other non-current liabilities (95.9) (45.9) Current liabilities (159.2) (81.1) Total liabilities (net of cash) (562.4) (146.3) Net assets 779.2 442.1 Key Ratios*1 FY20 FY19 Leverage Ratio*2 0.10x 0.20x Net Debt to Equity*3 1.2% 4.2% ROIC*4 8.2% 18.3% Fixed Charge Cover*5 1.70x 2.35x Stock Turns*6 1.68x 1.82x 1. FY20 key ratios calculated using 12 month rolling P&L measures, including a full 12 months of Rip Curl P&L results, and excluding transaction costs. FY19 key ratios as reported for Kathmandu last year 2. Net Debt / EBITDA 3. Net Debt / (Net Debt + Equity) 4. EBIT/(Net Debt + Equity) 5. (EBITDA + Rent)/(Rent + Net Finance Costs excl. FX) 6. COGS / Average Inventories YOY 7. Rounding differences may arise in totals, both $ and % 10 | KATHMANDU HOLDINGS FY20 RESULTS PRESENTATION Net debt reduced by capital raise and strong cash flows 32.0% • Net Debt of $9.4m at year-end 300.0 Net Debt 33.0% Net Debt • Cash generation in 2H FY20 $63.8m despite lockdowns 250.0 273.2 28.0% • Significant headroom to current facility of c.
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