Latest / Best of Business / Jeremy Hutton: Milford Asset Management expert on KMD Brands announcing an equity raise drive following multimillion-dollar loss

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Jeremy Hutton: Milford Asset Management expert on KMD Brands announcing an equity raise drive following multimillion-dollar loss · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk sed be
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  Speaker 1: iHeartRadio to the Iran.
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  Speaker 2: We'll just quick update on that. Iran says that if
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  Speaker 2: to target Apple, Google, Meta, Tesla businesses like that. Quarter
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  Speaker 2: past six with us. Now is Jeremy Hutton of Milford
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  Speaker 2: Asset Management.
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  Speaker 3: Jeremy, Hello, Hi Heaver, how you doing.
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  Speaker 2: Sorry I briefly forgot your name. How about that for
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  Speaker 2: being on the whole life listen? Talk to me about
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  Speaker 2: km D Brands, right, So they've had a deeply discounted
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  Speaker 2: capital raise on the cards. What's driven this?
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  Speaker 3: Yeah, KMD Brands. That's the owner of some very well
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  Speaker 3: known retail brands like Catman Do and surf brand Rip Curl,
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  Speaker 3: and they've had a fairly brutal spell and that's that's
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  Speaker 3: continued for a bit more with this capital raise on
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  Speaker 3: the cards. But effectively its debt position had become untenable.
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  Speaker 3: I mean, the leverage in the business was well above
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  Speaker 3: their target range. So the lenders have told them to
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  Speaker 3: get on out there and re sym equity and tripay
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  Speaker 3: down some of this excess debts. So the company's under pressure,
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  Speaker 3: but I suppose hopefully this takes up off a little
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  Speaker 3: bit of pressure in the short term for the business.
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  Speaker 2: Yeah, this is a business that has some really big
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  Speaker 2: household names as brands in there. So what has been
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  Speaker 2: going wrong for them?
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  Speaker 3: Yeah, it's come from multiple angle angles really over the
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  Speaker 3: past few years. I mean, initially we had the COVID period,
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  Speaker 3: we had we had lockdowns, and then we had that
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  Speaker 3: high inflationary environment which was awful for costs. But arguably
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  Speaker 3: the company traded reasonably well through this period as consumer
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  Speaker 3: spending was still strong. But the next was a real
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  Speaker 3: crunch and that was obviously huge interest rate increases in
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  Speaker 3: New Zealand and that cyclical pressure coming through, and it
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  Speaker 3: really was a horrible retail operating environment. But then there's
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  Speaker 3: also some structural issues. There's intense competition in that outdoor
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  Speaker 3: category with mac Pack and Katmandu going head to head,
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  Speaker 3: and then in the surf category two in the key
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  Speaker 3: North American market. I mean there's been a lot of
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  Speaker 3: competitive stress and some irrational behavior there as well. So
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  Speaker 3: you know, in summary, the backdrop, you know, has led
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  Speaker 3: to a rapid deterioration and earnings and profits in twenty
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  Speaker 3: twenty one were over sixty five million, and earnings last
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  Speaker 3: year in twenty twenty five were negative twenty eight so
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  Speaker 3: a huge drop, and unfortunately negative earnings are likely to
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  Speaker 3: stay negative for this year as well.
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  Speaker 2: So it seems like it's quite a tough time to
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  Speaker 2: be doing a capital raise. How's this going to go?
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  Speaker 3: Yeah? It is with the global share market weakness, and
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  Speaker 3: I mean it just sort of highlights some of the
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  Speaker 3: risks that businesses have just trying to muddle through for
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  Speaker 3: a while, and then things can be going okay and
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  Speaker 3: then all of a sudden, a few things can go
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  Speaker 3: against you and it turns very quickly. In the km
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  Speaker 3: D business, I mean, it was starting to come under
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  Speaker 3: some stress. The market knew this, it got reflected in
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  Speaker 3: the share price, and then sort of outside of their control,
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  Speaker 3: you've had their own conflict in the background at the moment,
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  Speaker 3: and that's sent financial markets into a tailspin. So you've
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  Speaker 3: had the situation of a distress company trying to raise
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  Speaker 3: capital in in a stressed market backdrop, and that is
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  Speaker 3: a bit of an ugly situation.
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  Speaker 2: Yeah, is that do you think why they priced the
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  Speaker 2: raise so low?
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  Speaker 3: Yeah? I mean it was a whopping discount and it
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  Speaker 3: had to be offered to get investors in the market
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  Speaker 3: interested in the rays. The offer price is six cents.
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  Speaker 3: I mean it's almost a seventy percent discount to the
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  Speaker 3: last closed price. But for longer term investors has been
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  Speaker 3: even more painful. I mean the share price was at
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  Speaker 3: a dollar fifty dollars sixty back in twenty twenty one,
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  Speaker 3: so those investors have been pretty much wiped out over
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  Speaker 3: the past five years.
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  Speaker 2: Do you think that this is the bottom for km D,
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  Speaker 2: the business and the share price.
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  Speaker 3: Yeah, it's interesting. I mean it is at a real
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  Speaker 3: low point. I mean they released their financial results. There
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  Speaker 3: were a few green shoots in there. I mean off
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  Speaker 3: a low base. I mean profits were still negative as
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  Speaker 3: I mentioned earlier, but getting less bad. So I suppose
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  Speaker 3: moving in the right direction. But you know, it's going
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  Speaker 3: to continue to be a very hard slog for the
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  Speaker 3: business and particularly in the retail environment, if this Middle
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  Speaker 3: Eastern conflict drag on and consumer confidence continues to fall.
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  Speaker 2: Yeah, good stuff, Hey, Jeremy, thank you so much. Enjoy
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  Speaker 2: Easter weekend. That's Jeremy Hutton, Milford Asset Management.
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