1
00:00:00,080 --> 00:00:01,840
Speaker 1: To the Iran. We'll just quick update on that. Iran

2
00:00:01,960 --> 00:00:04,399
Speaker 1: says that if any of more of its leaders are assassinated,

3
00:00:04,440 --> 00:00:08,600
Speaker 1: it's going to target Apple, Google, Meta, Tesla businesses like that.

4
00:00:08,680 --> 00:00:13,560
Speaker 1: Quarter past six with us Now is Jeremy Hutton of

5
00:00:13,600 --> 00:00:14,680
Speaker 1: Milford Asset Management.

6
00:00:14,760 --> 00:00:17,560
Speaker 2: Jeremy, Hello, Hi Heaver, how you doing?

7
00:00:17,640 --> 00:00:19,639
Speaker 1: Sorry I briefly forgot your name. How about that for

8
00:00:19,680 --> 00:00:22,759
Speaker 1: being on the whole life listen? Time talk to me

9
00:00:22,840 --> 00:00:25,400
Speaker 1: about km D Brands, right, So they've had a deeply

10
00:00:25,440 --> 00:00:27,600
Speaker 1: discounted capital raise on the cards. What's driven this?

11
00:00:29,360 --> 00:00:32,080
Speaker 2: Yeah, KMD Brands, that's the owner of some very well

12
00:00:32,120 --> 00:00:35,440
Speaker 2: known retail brands like Catman Do and surf brand Rip Curl,

13
00:00:35,560 --> 00:00:38,480
Speaker 2: and they've had a fairly brutal spell and that's that's

14
00:00:38,520 --> 00:00:40,839
Speaker 2: continued for a bit more with this capital raise on

15
00:00:40,840 --> 00:00:44,640
Speaker 2: the cards. But effectively its debt position had become untenable.

16
00:00:45,120 --> 00:00:47,560
Speaker 2: I mean, the leverage in the business was well above

17
00:00:47,560 --> 00:00:49,640
Speaker 2: their target range. So the lenders have told them to

18
00:00:50,600 --> 00:00:52,760
Speaker 2: get on out there and raise some equity and try

19
00:00:52,760 --> 00:00:55,840
Speaker 2: pay down some of this excess debts. So the company's

20
00:00:55,880 --> 00:00:58,840
Speaker 2: under pressure, but I suppose hopefully this takes up off

21
00:00:58,840 --> 00:01:00,960
Speaker 2: a little bit of pressure. And the term for the business.

22
00:01:01,120 --> 00:01:03,400
Speaker 1: Yeah, this is a business that has some really big

23
00:01:03,400 --> 00:01:05,720
Speaker 1: household names as brands in there. So what has been

24
00:01:05,760 --> 00:01:06,600
Speaker 1: going wrong for them?

25
00:01:08,600 --> 00:01:11,160
Speaker 2: Yeah, it's come from multiple angle angles really over the

26
00:01:11,160 --> 00:01:14,080
Speaker 2: past few years. I mean, initially we had the COVID period,

27
00:01:14,200 --> 00:01:16,959
Speaker 2: we had, we had lockdowns, and then we had that

28
00:01:17,040 --> 00:01:20,840
Speaker 2: high inflationary environment which was awful for costs. But arguably

29
00:01:20,840 --> 00:01:24,560
Speaker 2: the company traded reasonably well through this period as consumer

30
00:01:24,640 --> 00:01:27,600
Speaker 2: spending was still strong. But the next was a real

31
00:01:27,640 --> 00:01:30,640
Speaker 2: crunch and that was obviously huge interest rate increases in

32
00:01:30,680 --> 00:01:34,040
Speaker 2: New Zealand and that cyclical pressure coming through, and it

33
00:01:34,080 --> 00:01:37,920
Speaker 2: really was a horrible retail operating environment. But then there's

34
00:01:37,920 --> 00:01:41,880
Speaker 2: also some structural issues. There's intense competition in that outdoor

35
00:01:41,920 --> 00:01:45,039
Speaker 2: category with mac Pack and Katmandu going head to head,

36
00:01:45,920 --> 00:01:48,440
Speaker 2: and then the surf category two in the key North

37
00:01:48,480 --> 00:01:51,640
Speaker 2: American market. I mean, there's been a lot of competitive

38
00:01:51,640 --> 00:01:54,800
Speaker 2: distress in some irrational behavior there as well. So you know,

39
00:01:54,880 --> 00:01:57,480
Speaker 2: in summary, the backdrop, you know, has led to a

40
00:01:57,560 --> 00:02:00,920
Speaker 2: rapid deterioration in earnings I mean profit in twenty twenty

41
00:02:00,920 --> 00:02:04,400
Speaker 2: one or over sixty five million, and earnings last year

42
00:02:04,400 --> 00:02:06,640
Speaker 2: in twenty twenty five were negative twenty eight, so a

43
00:02:06,720 --> 00:02:10,680
Speaker 2: huge drop and unfortunately negative earnings are likely to stay

44
00:02:10,680 --> 00:02:11,960
Speaker 2: negative for this year as well.

45
00:02:12,240 --> 00:02:14,000
Speaker 1: So it seems like it's quite a tough time to

46
00:02:14,000 --> 00:02:15,840
Speaker 1: be doing a capital raise. How's this going to go?

47
00:02:18,040 --> 00:02:21,200
Speaker 2: Yeah? It is with the global share market weakness, and

48
00:02:21,760 --> 00:02:23,239
Speaker 2: I mean it just sort of highlights some of the

49
00:02:23,360 --> 00:02:26,600
Speaker 2: risks that businesses have just trying to muddle through for

50
00:02:26,639 --> 00:02:28,520
Speaker 2: a while, and then things can be going okay and

51
00:02:28,560 --> 00:02:31,160
Speaker 2: then all of a sudden, a few things can go

52
00:02:31,160 --> 00:02:33,919
Speaker 2: against you and it turns very quickly. In the km

53
00:02:34,000 --> 00:02:36,639
Speaker 2: D business, I mean, it was starting to come under

54
00:02:36,680 --> 00:02:39,000
Speaker 2: some stress. The market knew this, it got reflected in

55
00:02:39,080 --> 00:02:42,799
Speaker 2: the share price, and then sort of outside of their control,

56
00:02:42,840 --> 00:02:45,680
Speaker 2: you've had their own conflict in the background at the moment,

57
00:02:45,720 --> 00:02:49,440
Speaker 2: and that sent financial markets into a tailspin. So you've

58
00:02:49,440 --> 00:02:52,160
Speaker 2: had the situation of a distressed company trying to raise

59
00:02:52,200 --> 00:02:55,359
Speaker 2: capital and in a stressed market backdrop, and that is

60
00:02:55,400 --> 00:02:56,520
Speaker 2: a bit of an ugly situation.

61
00:02:56,680 --> 00:02:59,239
Speaker 1: Yeah. Is that do you think why they priced the

62
00:02:59,320 --> 00:02:59,959
Speaker 1: raise so low?

63
00:03:01,440 --> 00:03:03,480
Speaker 2: Yeah? I mean it was a whopping discount and it

64
00:03:03,520 --> 00:03:05,959
Speaker 2: had to be offered to get investors in the market

65
00:03:06,000 --> 00:03:09,320
Speaker 2: interested in the rays. The offer price is six cents.

66
00:03:09,360 --> 00:03:12,160
Speaker 2: I mean it's almost a seventy percent discount to the

67
00:03:12,240 --> 00:03:15,720
Speaker 2: last closed price. But for longer term investors has been

68
00:03:15,720 --> 00:03:17,920
Speaker 2: even more painful. I mean the share price was at

69
00:03:17,960 --> 00:03:20,799
Speaker 2: a dollar fifty dollars sixty back in twenty twenty one,

70
00:03:20,919 --> 00:03:23,960
Speaker 2: so those investors have been pretty much wiped out over

71
00:03:23,960 --> 00:03:25,079
Speaker 2: the past five years.

72
00:03:25,440 --> 00:03:27,240
Speaker 1: Do you think that this is the bottom for KMD,

73
00:03:27,320 --> 00:03:28,440
Speaker 1: the business and the share price.

74
00:03:29,919 --> 00:03:32,120
Speaker 2: Yeah, it's interesting. I mean it is at a real

75
00:03:32,200 --> 00:03:34,720
Speaker 2: low point. I mean they released their financial results. There

76
00:03:34,720 --> 00:03:36,800
Speaker 2: were a few green shoots in there. I mean off

77
00:03:37,080 --> 00:03:39,440
Speaker 2: a low base. I mean profits were still negative as

78
00:03:39,440 --> 00:03:42,040
Speaker 2: I mentioned earlier, but getting less bad. So I suppose

79
00:03:42,520 --> 00:03:44,800
Speaker 2: moving in the right direction. But you know, it's going

80
00:03:44,880 --> 00:03:47,640
Speaker 2: to continue to be a very hard slog for the

81
00:03:47,680 --> 00:03:50,800
Speaker 2: business and particularly in the retail environment, if this Middle

82
00:03:50,800 --> 00:03:54,120
Speaker 2: Eastern conflict drags on and consumer confidence continues to fall. Yeah.

83
00:03:54,160 --> 00:03:56,040
Speaker 1: Good stuff, Hey, Jeremy, thank you so much. Enjoy your

84
00:03:56,040 --> 00:03:59,960
Speaker 1: Easter weekend. That's Jeremy Hutton, Milford Asset Management. For more

85
00:04:00,080 --> 00:04:03,360
Speaker 1: from Heather Duplessy Allen Drive, listen live to News Talks

86
00:04:03,400 --> 00:04:06,560
Speaker 1: it B from four pm weekdays, or follow the podcast

87
00:04:06,680 --> 00:04:07,680
Speaker 1: on iHeartRadio,