Kathmandu : Annual Shareholder Meeting

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23 November 2021

Kathmandu Holdings Limited Annual Shareholder Meeting

Chairman's' Address

The first item on today's agenda is for me, as Chairman, to make some comments on the 2021 financial year.

The Group ended the 2021 financial year in a strong financial position, while continuing to navigate the impacts of the COVID pandemic.

Following the acquisition of Rip Curl in 2019, the Group has three iconic brands, and our results for the 2021 financial year show the benefit of the Group's diversified channels to market, geographies, and product categories.

We are excited by the growth prospects of all our brands, and are investing in digital infrastructure, our store network, and continued brand development to maximise opportunities as we look to a post-COVID world.

The Group moved quickly at the onset of the COVID pandemic to raise capital to strengthen the balance sheet, reduce costs and adjust operating structures, all of which has left us well-positioned for the recovery in travel and the opening of economies.

The Group ended the 2021 financial year with a net cash position of $37.0 million, providing significant funding headroom with a total bank facility of approximately $300 million.

Following the suspension of dividends last year, the directors declared a final dividend of 3 NZ cents per share. With the 2 cents per share interim dividend, this will make a total payout for the 2021 financial year of 5 NZ cents per share.

Moving on to people, the Board appointed a new Group Chief Executive Officer during the year.

Former Group CEO Xavier Simonet resigned after five and a half years with the company. Xavier led the Group through an important period of growth and diversification, including the acquisitions of the Oboz and Rip Curl brands.

After an extensive international search, the Board appointed Michael Daly as the new Group CEO. Michael has led Rip Curl for eight years with a relentless focus on brand, product, people and the bottom line. We are confident he will bring the same focus and energy to the wider Group.

Under the leadership of Michael, our refreshed Group strategy ensures we are focused on the things that matter most as we move forward:

• building global brands focused on active outdoor activities,
• investing in digital platforms to provide consumers with a truly world class unified commerce experience,
• leveraging the operational excellence of our brands, and
• leadership in ESG.

Michael will talk more about these strategic imperatives in his address.

The Board would like to thank Michael and his teams for their outstanding resilience and flexibility navigating the ongoing impacts of COVID.

I would also like to thank my Board colleagues for their continuing commitment to making Kathmandu Holdings successful. It has been a very busy year and I thank you all for your support in navigating our way through it.

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Finally, thank you shareholders for your continued investment in Kathmandu Holdings Limited. I will now ask our Group CEO, Michael Daly, to address you.

ENDS

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23 November 2021

Kathmandu Holdings Limited Annual Shareholder Meeting 2021

Group CEO presentation

Slide 4: Group CEO's address

Thank you, David. Good morning everyone, and thank you for joining us at today's Annual Meeting.

Slide 5: Owner of leading global outdoor active brands

Beginning on slide five, we aspire to be a leading owner of global brands, appealing to an active, outdoor consumer. This slide outlines the strengths and collective competitive advantages of our three brands.

Rip Curl is among the top three global surf brands, Kathmandu is the leading outdoor brand in Australasia, and Oboz is a fast-growing North American hike footwear brand.

We are highly engaged with our loyal and active consumer base, achieving a net promoter score that exceeds 70. We have 2.1 million active Summit Club members and 44,000 Rip Curl Search GPS watch users.

One of our key strengths is the development of purpose-built technical products. Research and development drives our innovation, and we are focused on using sustainable materials.

A leader in sustainability and ESG. Kathmandu was an early B-Corp adopter, and we are working towards extending B-Corp accreditation across all our brands. This year, we also committed to the largest syndicated sustainability linked loan in New Zealand.

Most importantly, we have built a diversified business with global reach. We are employing a multi- channel approach to appeal to a wide range of customer buying preferences and having both a winter and summer focus. We now appeal to customers across seasons and across the globe.

Slide 6: Financial highlights

Turning to slide six, I would like to discuss in more detail the Group's 2021 financial year highlights. The Group benefited from a full 12 months of Rip Curl ownership in the 2021 financial year, compared to nine months of ownership last year.

Total Group sales were $922.8 million, up 15.1% on the prior year. Pleasingly our underlying EBITDA was up 35.9% to $113.3 million, underpinned by a gross margin improvement of 40 basis points.

Underlying net profit after tax for the financial year was $66.3 million and we delivered strong underlying operating cash flow of $93.3 million.

As David mentioned, we ended the period with a strong net cash balance of $37 million.

Slide 7: Operational highlights

Moving to slide seven, I want to touch on some of the key operational highlights during the year.

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Rip Curl delivered strong direct to consumer sales, with same store sales growth of 19.2% including online sales growth of 31.3%. Online growth was underpinned by changing consumer preferences brought about by the COVID lockdown periods.

We successfully relaunched Kathmandu's new brand platform in May, reminding people that being outside changes us and that as human beings, we are hardwired to be outside. The relaunch was very well received and pleasingly Kathmandu achieved an exceptionally high net promoter score of 76.

Oboz successfully launched their online store in April, and the wholesale business is well positioned with double-digit growth in forward orders.

Slide 8: Sustainability highlights

Looking at slide eight, sustainability is at the core of each of our brands, and I would like to highlight some notable achievements.

In conjunction with our key stakeholders, we completed a Group ESG materiality assessment which has helped us identify the key areas of focus for development of our ESG strategy. This year, we also committed to the largest sustainability linked loan in New Zealand at the time of its signing.

During 2021, Rip Curl launched a wetsuit take-back program with TerraCycle. The business also sources its sustainable cotton in line with the Better Cotton Initiative. These are important sustainability initiatives for the Rip Curl brand.

The Kathmandu brand meets the highest standards of environmental and social performance as certified by its B-Corp status. The Kathmandu brand has offset its operational carbon footprint to obtain certified carbon neutrality.

For Oboz, over 4 million trees have been planted since the company's inception, with the company planting a tree for every pair of footwear sold. Oboz has 95% environmentally preferred leather materials in its product range.

Slide 9: Group strategy

Moving to our Group strategy on slide nine, you can see a summary of the four key components we are focussing on as a group.

We have been building a portfolio of global brands and aim to further expand our global footprint as we invest in world class brands and customer experiences.

We will elevate our digital capabilities by investing in Group digital platforms to deliver a world class unified commerce experience.

We will also leverage and deliver operational excellence to all our brands across shared Group support functions.

Finally, we will continue to demonstrate leadership across environmental, social and governance to drive long-term value for our shareholders.

Given the uncertainties associated with COVID, it is important for us to maintain balance sheet flexibility, allowing for capital return options and the capacity for future M&A.

I will now go into each of these strategic components in a little more detail.

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Slide 10: Build global brands

Onto slide ten, a key part of our strategy focuses on building global brands.

Our goal is for Rip Curl to be the number one surf brand in Australasia and a top three brand in North America and Europe. We will be building Rip Curl's North American presence and see the potential to double the North American business across our own stores, online and wholesale channels.

Kathmandu is the leading outdoor brand in Australasia, with 2.1 million loyal and engaged Summit Club members, which we aim to further leverage. There is significant market opportunity to expand into Europe and North America, and we aim to launch in both Canada and Europe during FY22. We have an attractive new product pipeline, which includes an enhanced summer product offering.

Oboz is undergoing the expansion of its product range into adjacent footwear categories, and we aim to grow Oboz into a US $100 million business in the medium-term with growth opportunities in the recently launched online store and further expansion of the business in Canada and also Europe, in time.

Slide 11: Elevate digital

Moving to slide 11, with the current COVID situation accelerating a move to online sales, significant investments have been made to elevate our digital capabilities.

Our goal is to increase Group online sales to 25% of direct-to-consumer sales in the medium-term by enhancing our digital capability.

With this goal in mind, a new Group online platform is being rolled out across our brands. We also are making further enhancements to our omnichannel foundations, including making point of sale upgrades to support unified commerce and click and collect functions for contactless purchases. In time, we aim to exceed our consumers' minimum expectations in these areas.

We see loyalty as an important growth driver for our brands. We are investing in our loyalty programs, including the launch of Rip Curl's first loyalty programme, and the relaunch of Kathmandu's more advanced loyalty programme in the coming year.

Finally, a key area of focus for us is to make sure we understand our consumers better, through data insights and analysis. Pricing and promotions are being enhanced based on data algorithms, and we have developed personalised consumer contact to encourage digital purchases, and really leverage the relationships with our consumers.

Slide 12: Leverage operational excellence

Moving on to slide 12. Whilst a lot of work has been done to bring our three brands together, in reality there is still a lot of work to be done to leverage the operational excellence of our brands.

We plan to accelerate cross-brand revenue growth opportunities where appropriate, and aggressively pursue ongoing realisation of margin and cost saving opportunities over time.

Investments will be made to optimise our supply chain, efficiently manage our fixed cost base, collaborate on product innovation between brands and to enhance core systems to unlock growth potential across loyalty programs and online.

Overall, we have set a target to improve our underlying EBITDA margin to 15% of sales in the medium-term.

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