Underlying EBITDA collapsed 74.3% to $3.9m on flat revenue

Reported EBITDA fell 18.1% to $52.7m, and the half-year net loss roughly doubled to -$21.5m from -$10.4m. Gross margin slipped 30bp to 58.5%.

By segment, Rip Curl held revenue flat at $278.5m but its result fell to $16.1m from $19.2m. Kathmandu lifted revenue 3.0% to $156.8m yet its segment loss widened to -$22.0m from -$14.0m. Oboz revenue declined to $35.6m and its loss widened to -$2.6m from -$0.6m.

Cash flow moved the other way: operating cash flow rose 8.5% to $45.8m, OCF/EBITDA improved to 86.7% from 65.5%, and net debt fell $20m to $76.2m. No interim dividend was declared.

Reported EBITDA fell 18.1% and underlying EBITDA – which removes lease impacts and any non-recurring items – fell 74.3% to $3.9m, while gross margin was only 30bp lower. The implication is that operating expenses grew materially faster than sales, leaving very little earnings cushion at current top-line levels.

Kathmandu is the primary drag in its seasonally strong half. The flagship brand grew revenue 3.0% but its segment loss deepened by $8m to -$22m, so the entire incremental sales contribution was more than offset by cost or margin pressure. This matters because 1H is Kathmandu's peak trading period; it should be the largest positive contributor and is instead the biggest economic drag.

The cash and balance-sheet narrative diverges from the P&L. OCF was up 8.5% and net debt fell $20m year-on-year, supported by a $9.9m inventory reduction and a 4.4-day decline in inventory days to 117.4. The leverage improvement is real, but its durability depends on operating recovery rather than further stock unwinding, which is finite.

With 1H FY25 underlying EBITDA of just $3.9m and a deeper net loss than the prior comparable, the bar for the second half to deliver any meaningful FY25 result is now materially higher than the typical seasonal lift implies.

No FY25 financial target has been disclosed in this release. Investors are therefore reliant on the reported 1H trajectory and segment-level commentary, rather than a stated guidance anchor, to assess whether the historical 2H seasonality will be sufficient to recover the year.

The OCF lift came alongside a $9.9m inventory reduction and trade debtors down 1.9%, releasing working capital rather than reflecting better trading. Because inventory days are already 4.4 lower, the scope for further release is finite, which means sustained net debt reduction now requires earnings recovery, not more stock unwind.

Capex rose 12.1% to $14.1m (3.0% of revenue), giving FCF before lease payments of $31.7m. FCF/NPAT of -146.9% reflects positive cash against a reported loss, so the headline cash figures overstate underlying economic earnings. ROE deteriorated to -2.8% from -1.3%. Underlying EBITDA of $3.9m is the cleaner economic read, and at that level the group is operating with minimal cushion if 2H trading does not materially improve. The withheld interim dividend is consistent with that read: management is conserving cash rather than rewarding the optical OCF improvement.

This briefing cannot assess the specific reconciliation items between reported and underlying EBITDA, segment-level cost initiatives, or current-quarter trading momentum, as none are disclosed in the supplied release.