What changed
Revenue held nearly flat at NZ$471.0m, up just 0.5% on HY24's NZ$468.6m — a meaningful contrast to the prior period's 14.5% decline, but not a recovery in earnings terms. The same flatness in the top line concealed a sharp divergence below it: EBITDA fell NZ$11.6m (-18.1%) to NZ$52.7m, and PBT widened from a loss of NZ$12.8m to a loss of NZ$26.3m. NPAT deteriorated from -NZ$10.4m to -NZ$21.5m, though this is a less clean read than PBT — in HY24 the tax line produced a NZ$3.1m credit, whereas HY25 incurred a NZ$5.5m charge, so the tax swing alone accounts for roughly NZ$8.6m of the NPAT widening.
Gross margin slipped 30 bps to 58.5%, driven by promotional intensity at Kathmandu and Oboz inventory clearance. At segment level, Rip Curl (≈59% of revenue) remained the only profitable brand but saw EBIT fall from NZ$19.2m to NZ$15.3m. Kathmandu's EBIT loss widened from -NZ$14.0m to -NZ$18.7m despite a NZ$4.5m revenue gain, while Oboz swung from a small -NZ$0.6m loss to -NZ$3.0m on a NZ$2.4m revenue decline. Corporate overhead rose from -NZ$4.1m to -NZ$6.3m.
On the balance sheet, gross borrowings fell NZ$27.1m to NZ$103.1m, bringing net debt to NZ$76.2m versus NZ$96.2m a year earlier. Operating cash flow improved to NZ$45.8m from NZ$42.2m — the OCF-to-EBITDA ratio actually strengthened to 87% from 66%, assisted by a NZ$33.6m reduction in net working capital. No dividend was declared (consistent with HY24).
What matters
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Margin erosion beneath a stable revenue line is the key concern. Revenue flat-lining while EBITDA falls 18% implies operating cost deleverage or price/mix deterioration. The 30 bps gross margin decline is not catastrophic in isolation, but combined with higher corporate costs and the operational losses at both Kathmandu and Oboz, the group's ability to convert revenue into profit is clearly weaker than it was twelve months ago — which was itself already a weak base. Kathmandu's EBIT margin of approximately -11.9% on NZ$156.8m of revenue is the single largest drag.
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Working capital release is supporting cash, but it is finite. The improvement in operating cash flow relative to EBITDA is almost entirely inventory-driven: inventories fell NZ$9.9m and net working capital was NZ$33.6m lower year-on-year. Management signals further moderation through 2H FY25 and into FY26. This is a genuine positive for liquidity, but once inventory normalises, cash generation will need to be supported by operating profitability rather than balance-sheet unwinding. The timing of that transition is material.
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Oboz deterioration adds a second brand problem. In HY24 Oboz was a marginal drag; it is now a more significant one, with an EBIT loss of -NZ$3.0m on shrinking revenue and active inventory clearance. If Oboz requires sustained promotional activity to clear stock, it will continue to compress group gross margins. Whether this is a cyclical wholesale-channel reset or something more structural is not resolved by the filing.
Expectations
No numerical targets or formal full-year guidance were disclosed in the filing. The assessment below therefore relies on seasonality and the FY24 full-year anchor.
In FY24, HY24 contributed 60% of full-year EBITDA and only 21% of the full-year NPAT loss (because 2H FY24 was considerably more loss-heavy). That pattern — EBITDA more first-half weighted, NPAT losses more second-half weighted — is structurally important context. On the current trajectory, HY25 EBITDA of NZ$52.7m against a full-year FY24 EBITDA of NZ$107.2m suggests the second half will need to deliver around NZ$54.5m just to match the prior year, and the implied 2H FY24 EBITDA was only NZ$42.9m. So even on a flat-year scenario, HY25 is running marginally behind pace, and there is no guide to whether management expects improvement.
On revenue, the annualised HY25 run-rate is approximately NZ$941.9m, about 3.8% below FY24's NZ$979.4m, consistent with the improving direct-to-consumer trend being insufficient to offset wholesale softness, particularly in Oboz.
The funding headroom of NZ$215m means solvency risk is not the near-term concern. The question is whether earnings can stabilise rather than whether the group can survive the current trough.
Quality of result
The operating result has limited durable quality at this stage:
- The EBITDA decline is real and largely trading-driven — a margin squeeze from promotional activity and inventory clearance, not a one-off charge. There are no identified non-recurring items, which makes the deterioration harder to dismiss.
- The cash flow improvement is genuine in terms of cash received, but it is primarily balance-sheet-assisted: the working capital release (especially inventory) is doing the heavy lifting. Cash conversion will narrow once inventory reaches normalised levels.
- Gross margin at 58.5% is still structurally resilient by retail standards, suggesting the underlying brand positioning has not collapsed. However, sustaining it has required increased promotional activity, which is a durable quality concern rather than a positive.
- Rip Curl's continued profitability at NZ$15.3m EBIT provides a genuine earnings floor. Without it, the group result would be substantially worse.
- The leverage improvement (net debt/EBITDA falling to approximately 1.44x) is a positive, but it reflects the working capital unwind more than earnings recovery. ROE has deteriorated further to approximately -2.8%.
On balance, the cash result looks better than the P&L, but the P&L is the more forward-looking indicator here.
Unresolved
- Kathmandu's path to profitability. With an EBIT margin of approximately -11.9% and higher promotional activity, it is unclear whether Kathmandu's losses reflect a temporary consumer sentiment trough or a more persistent structural misalignment of cost base and revenue. No turnaround metrics or targets were disclosed.
- Oboz inventory clearance endpoint. The filing signals further moderation but does not quantify the residual overhang or the margin cost of clearing it. The size of the remaining problem is opaque.
- Corporate cost increase. Overhead rose NZ$2.2m to NZ$6.3m with no explanation in the excerpts. Whether this is investment in the recovery or a structural step-up is unknown.
- 2H FY25 gross margin trajectory. If promotional activity at Kathmandu continues and Oboz clearance persists, gross margin pressure could extend; the filing is not specific on the duration.
- FX exposure and cost-of-goods sensitivity. Given Oboz and Rip Curl's international procurement exposure, NZD and USD movements are relevant but not quantified in the filing.
This briefing cannot assess the recoverability of Kathmandu's brand and consumer positioning relative to its fixed cost base, nor the strategic optionality being considered for Oboz.
Key metrics
| Metric | HY25 | HY24 | Change |
|---|---|---|---|
| Revenue | $470.9m | $468.6m | +0.5% ↑ |
| EBITDA | $52.7m | $64.4m | -18.1% ↓ |
| Net profit after tax | −$21.5m | −$10.4m | -106.6% ↓ |
| Net cash inflow from operating activities | $45.8m | $42.2m | +8.5% ↑ |
| Declared dividend per share | 0.0c | 0.0c | flat |
| Operating profit | −$12.7m | $0.5m | -2748.1% ↓ |
| Profit before tax | −$26.3m | −$12.8m | -105.5% ↓ |
| Cash and cash equivalents | $26.9m | $34.0m | -20.9% ↓ |
| Total assets | $1471.7m | $1505.5m | -2.2% ↓ |
Segment breakdown
| Segment | Current revenue | Prior revenue | Current result | Mix shift |
|---|---|---|---|---|
| Rip Curl | $278.5m | $278.3m | $15.3m | -0.2pp |
| Kathmandu | $156.8m | $152.3m | −$18.7m | +0.8pp |
| Oboz | $35.6m | $38.0m | −$3.0m | -0.5pp |
| Corporate | — | — | −$6.3m | n/a |
Analytical metrics
| Metric | HY25 | HY24 | Context |
|---|---|---|---|
| OCF / EBITDA (cash conversion) | 86.7% | 65.5% | stable |
| FCF pre-lease | $31.7m | $29.6m | +$2.1m |
| FCF / NPAT | -146.9% | -283.8% | complementary conversion metric |
| Capex % revenue | 3.0% | 2.7% | — |
| Capex | $14.1m | $12.6m | +$1.5m |
| Debtor days | 22.6 | 23.1 | -0.5 days |
| Inventory days | 117.4 | 122.0 | -4.6 days |
| Trade debtors | $58.3m | $59.5m | −$1.1m |
| Net debt | $76.2m | $96.2m | −$20.0m |
| Net debt / EBITDA | 1.44x | 1.49x | Strengthening |
| Gross borrowings | $103.1m | $130.2m | −$27.1m |
| Payout ratio vs NPAT | 0.0% | — | — |
| Payout ratio vs FCF pre-lease | 0.0% | — | covered |
| ROE (annualised) | -2.8% | -1.3% | Weakening |
| HY24 share of FY24 revenue | 47.8% | — | Other half was 52.2% |
| HY24 share of FY24 EBITDA | 60.0% | — | Other half was 40.0% |
| HY24 share of FY24 NPAT | 21.0% | — | Other half was 79.0% |
| Profit from continuing operations | −$20.7m | −$9.7m | −$11.0m |
This analysis was generated using Annolyse, an AI-powered tool that extracts and analyses NZX/ASX company announcements. The underlying data is extracted from official company filings and verified against source documents. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.