PBT loss widened 124% to $104.7m on flat revenue as Kathmandu swung to loss

Statutory EBITDA fell 52.9% to $50.5m, and underlying EBITDA disclosed in the release was $17.7m, down 64.7%. Gross margin compressed 240bps to 56.5%.

The deterioration was concentrated in Kathmandu, which swung from a $3.4m segment result in FY24 to a -$19.6m segment loss on essentially flat revenue ($361.9m vs $361.1m). Rip Curl grew sales 2.1% but its result almost halved from $25.7m to $14.3m. Oboz losses narrowed materially to -$4.2m from -$41.8m on slightly lower revenue.

The board declared no final dividend (FY24: nil). Net debt fell to $52.8m from $59.7m, but net debt to EBITDA rose to 1.0x from 0.6x as earnings shrank.

A $23.0m year-on-year deterioration in a segment with flat revenue points to gross margin and operating-cost issues rather than a demand shortfall, and Kathmandu now accounts for a larger swing than the entire group's earnings movement. Until that segment stabilises, group profitability is hostage to a brand that delivered nothing this year.

The second half got worse, not better. HY25 already disclosed underlying EBITDA down 74.3%, but the implied second-half shape is starker still: 2H EBITDA was approximately -$2.2m versus $52.7m in HY25, and 2H NPAT was approximately -$73.5m. For a group whose second half is normally the seasonal earnings half, that reversal is the most important data point in the release.

Leverage is rising even as gross debt falls. Gross borrowings declined to $87.1m and the company cites approximately $235m of funding headroom, but net debt to EBITDA almost doubled to 1.0x because the denominator collapsed. ROE fell to -13.8% from -6.3%, and total equity is down $95.7m to $689.9m. Balance-sheet capacity exists; earnings capacity is the constraint.

What it does establish is a worsening trajectory: HY25 underlying EBITDA was $3.9m and the full-year figure is $17.7m, implying a second half only marginally better despite the seasonal weighting that historically favours 2H earnings.

The release frames the response through a 'Next Level' strategy and outlook section, but until that translates into stabilised gross margin and a positive Kathmandu contribution, the relevant question is whether 2H FY25 was a trough or a new run-rate. The result itself does not resolve that.

Capex was lower at $24.6m (2.5% of revenue), producing pre-lease free cash flow of $101.6m. That cash supported a net debt reduction of $6.9m and helped preserve liquidity, but it is not evidence of underlying earnings durability.

Working capital sends a mixed signal. Inventory was managed lower, with days falling to 93.7 from 99.5. Receivables, however, rose sharply: trade debtors up 35.5% to $92.3m and receivable days extending 8.7 days to 34.1. On flat sales, that receivables build is the line to watch — it suggests timing or channel-mix effects supported reported revenue and may unwind in FY26 cash. Operating working capital rose $11.3m even as the company highlights net working capital reduction.

This briefing cannot assess management's 'Next Level' strategy execution risk or the timing of any recovery in Kathmandu margins, because no quantified FY26 targets or recovery milestones have been supplied.