Share Investor: Kathmandu's 2011 Results Under Pressure from Jan Cameron

Monday, June 7, 2010

Kathmandu's 2011 Results Under Pressure from Jan Cameron

I have given Kathmandu Holdings Ltd [KMD.NZ] alot of criticism since its IPO and float back in November 2009 and its result 2010 interim result out in March doesn't really change much for me.

Its results for this period are largely academic because they cannot be accurately compared to last years figures with were calculated using pro-forma figures. Pro-forma accounting is calculated by removing "irregular" business transactions and smoothing out the balance sheet to make things look better to investors - a great way to hide bad news. Pro-forma is generally accepted as misleading.

The increases in revenue and profit for the 2010 half year look spectacular at first glance but the comparison to last year means little as I have outlined above and the headline figures of the NZX release omit significant IPO costs - $21.3 million, $6.3 million more than budgeted. The profit result then is a $13.3 million dollar loss not an $8 million profit.

Of particular interest to shareholders should be the figure tucked away in the 2010 Interim Report of the net tangible asset backing per share. It is 12c.

A better comparison on how well Kathmandu is going will be able to be made this time next year when we can accurately compare like for like figures (we still have to add the IPO costs to get a good comparison) and then perhaps I will stop my criticism if it is a good result.

Of further concern to Kathmandu shareholders will be the possible re-entry of the former owner of the Company, Jan Cameron, back into the same retail sector sometime in 2011.

She is currently in talks with Macpac, an outdoor equipment and clothing retailer, to establish some kind of competition against the former brand that she built up and as I have said before she is one smart cookie whose business acumen in retailing should never be underestimated by her competitors.

Kathmandu as a strong in your face brand have the outdoor sector mostly to themselves in New Zealand and Cameron's expertise and contacts in retail will be a formidable challenge to Kathmandu if she decides to make a move back into this area of retailing.

Kathmandu shares have traded as high as NZ$2.56 earlier in 2010 but finished trading last Friday at $1.90.