Loss narrowed 43.5% but $65.3m raise signals balance-sheet stress

Revenue rose 7.3% to $505.4m, EBITDA lifted 20.0% to $63.3m, and the PBT loss narrowed 43.5% to -$14.8m (NPAT loss -$13.9m, an improvement of 35.4%).

Operating cash flow, however, fell 44.0% from $45.8m to $25.6m even though working capital balances were lower than a year ago. Net debt rose to $94.0m from $76.2m, gross borrowings rose 17.8% to $121.4m, and total equity contracted 11.5% to $689.3m. Gross margin slipped 170bps to 56.8%.

OCF/EBITDA dropped from 86.8% to 40.5%, and FCF pre-lease fell from $31.7m to $12.5m. This matters because the headline EBITDA recovery did not translate into the cash needed to service rising debt — the gap between the accounting improvement and the cash result is wide enough to be the central tension in this report.

The capital action signals the balance sheet is the operative constraint. Net debt rose roughly $17.8m year-on-year against an EBITDA base of $63.3m, leverage moved from 1.4x to 1.5x, and management is raising $65.3m of equity while refinancing facilities. For investors, this means the read on "improved trading" must be combined with dilution and recapitalisation rather than treated as standalone good news.

Segment mix is moving in opposite directions inside the group. Kathmandu revenue grew with its H1 loss narrowing from -$22.0m to -$10.2m, while Rip Curl's segment result fell from $16.1m to $10.5m on a segment margin decline from 5.8% to 3.6%. Rip Curl remains 57.7% of group revenue, so margin compression in the dominant brand is more economically material than the improvement in the smaller Kathmandu loss.

The historical seasonality shape is unusual: HY25 contributed 47.6% of FY25 revenue but 104.3% of full-year EBITDA, meaning the prior second half delivered an EBITDA loss of -$2.2m and an NPAT loss of -$73.5m. Annualising HY26 revenue gives $1b, only marginally above FY25's $989.0m.

This matters because investors cannot rely on a simple "double the first half" framework. If H2 FY26 repeats the FY25 pattern, the EBITDA gains visible at the half may not flow proportionally to the full-year outcome. The simultaneous equity raise and debt refinancing suggest management is also not relying on second-half cash generation to fix the balance sheet.

Operating cash flow of $25.6m supported capex of $13.1m for FCF pre-lease of $12.5m — positive but well below prior and short of the $17.8m year-on-year increase in net debt. Inventories declined 9.8% to $274.1m and inventory days improved by 18.6 days, which helped absolute working capital, but did not protect operating cash flow because the cash benefit from inventory drawdown was larger in HY25.

The 170bps gross margin contraction inside +7.3% revenue growth suggests the top line is being supported by price or promotion, not by margin expansion. ROE remained negative at -2.0% (prior -2.8%). The effective tax rate moved from 21.1% to 11.7%, which flatters the NPAT growth print versus PBT — the +43.5% PBT improvement is the cleaner operating read. Combined with the equity raise, the durable conclusion is that trading is improving from a low base but is not yet sufficient to fund the group's capital structure organically.

This briefing cannot assess the pricing, dilution, or market reception of the equity raise, nor the specific covenants and tenor of the refinanced debt facilities, because those terms are not in the supplied excerpts.