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Largest Kathmandu shareholder not taking part in $201 million capital raising

Kathmandu shares last traded at 98¢ after entering a trading halt on Tuesday.

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Institutional investors will be tapped for $NZ30 million of the raise, with a total of 413 million new shares being issued. The deal is scheduled to be completed by April 9.

“The board is taking pre-emptive action with the capital raising announced today, to ensure our group remains strongly capitalised during the current market uncertainties,” chief executive Xavier Simonet said.

Briscoe’s refusal to participate in the equity raise will also likely nix any lingering takeover ambitions the company may have had. It made a failed $324 million bid for the retailer in 2015.

Proceeds will be used to pay $NZ86 million of debt, and bolster the company’s balance sheet by $NZ115 million, providing Kathmandu with total liquidity of $NZ315 million.

It’s the third time Kathmandu has gone cap in hand to shareholders in the last three years, with the retailer tapping the market to fund its two recent acquisitions: $NZ145 million last October for Australian surfwear brand Rip Curl and $NZ40 million in 2018 for hiking boots brand Oboz.

Kathmandu will raise $201 million from investors as it looks to shore up its balance sheet.

Kathmandu will raise $201 million from investors as it looks to shore up its balance sheet.

In the business’ half-year results, also released on Wednesday, Rip Curl proved its worth to Kathmandu shareholders, adding an additional $NZ134 million of sales and $NZ15.7 million in earnings before interest and tax (EBIT) from three months of operation.

This caused Kathmandu’s overall sales to jump 58.8 per cent to $NZ363.7 million for the half, and underlying EBIT to grow 46.5 per cent to $NZ29 million.

However, $NZ10.3 million in transaction costs relating to the Rip Curl acquisition saw the company’s net profit after tax plunge 45 per cent to $NZ7.7 million.

Comparable sales for the company’s outdoor segment, which includes Kathmandu and Oboz, grew 1.5 per cent, returning to interim growth for the first time since the 2018 financial year. Comparable sales online shot up 33.1 per cent.

Comparable sales for the three months of Rip Curl’s operations were up 2.7 per cent, and online grew 19.5 per cent.

Mr Simonet said the company’s solid first-half results reflect what could have been if not for the impact of the coronavirus pandemic, which has wreaked havoc on retailers globally. Last week, Kathmandu closed its 165 Australian and New Zealand stores and stood down 1300 staff.

“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,” he said.

Kathmandu expects the coronavirus to have a material and adverse impact on its second-half results, though it did not provide any guidance. Macquarie analysts predict earnings for the 2021 financial year to drop as much as 40 per cent.

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