Kathmandu and Rip Curl’s parent company KMD Brands has hit a net debt of NZ$94 million, which is above its recent expectations, and comes amid growing concern about the company’s balance sheet as it attempts to secure funding through an equity raise.
In a trading update today, KMD Brands reported a total sales lift of 7.3 per cent to NZ$505.4 million for the first half of FY26. The jump up in sales slightly helped its statutory net loss, which improved by 36 per cent to a loss of NZ$13.1 million. In underlying terms, NPAT improved by 28.4 per cent to an NZ$11.5 million loss.
On the balance sheet, the company’s net working capital ended the first half NZ$13.4 million lower than January 31, 2025. However, its group net debt grew to NZ$94 million, above its recent expectations in early February that this would be between NZ$85 million to NZ$90 million.
That is also above market expectations. Analysts at Jarden were expecting this to be NZ$91 million.
Meanwhile, KMD’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew to positive NZ$11.5 million, slightly above what KMD was expecting. Underlying EBITDA in the first half of FY25 was NZ$3.9 million.
Jarden told analysts in February that the maiden underlying EBITDA guidance issued by KMD indicated growth in underlying cost of doing business.
“The company is part way through a cost out programme, although a combination of reinvestment, underlying cost inflation, and FX headwinds are likely to more than offset this,” they shared last month. “Group net debt is expected to be NZ$85m to NZ$90m (JARDe NZ$91m), up y/y from NZ$76m, which while in part is explainable by FX impacts on conversion puts some question around the >NZ$10m reduction targeted for FY26.”
All this comes as the group attempts to secure more funding through an equity raise. The company is aiming to raise approximately NZ$65.3 million. This is just over 1 billion new shares being issued, representing just over 150 per cent of the existing shares on issue.
A recent story by the Australian Financial Review reported that the NZ$65 million equity raise is below what it was calling for over a week ago of NZ$200 million.
The equity raise comes after KMD Brands extended its existing debt facility term and adjusted the fixed charge cover ratio on January 30, 2026.
The group also reduced its total syndicated bank facilities by NZ$49 million to approximately NZ$283 million, consisting of an A$207 million and NZ$43 million multi-currency revolving facility.
As part of a longer-term refinance plan, KMD has now secured a refinanced debt facility, provided by a majority of its existing banking syndicate for a new multi-year bank debt facility with an approximately NZ$205 million capacity.
KMD told shareholders this refinanced facility, and the equity raise, should provide sufficient liquidity to continue its ‘Next Level’ transformation and fund working capital requirements.
According to the group, the new facility term of up to 2.5 years should provide them with funding stability through to October 1, 2028.
“After securing a short-term extension to our debt facilities in January 2026, it was important for our continued execution to strengthen our balance sheet, accelerate our path to our leverage target, and secure a longer-term debt facility to support our ongoing transformation,” KMD Brands chairman David Kirk said. “With the balance sheet now strengthened through the debt refinancing and the launch of the equity raise, KMD Brands is well positioned to continue executing its Next Level strategy.
“Having worked closely with the board and management through this critical phase, and been on the board for 13 years, I believe this is the right time to signal my intention to step down as chairman in the coming months. The board has commenced an orderly succession process.”