Our eldest repeated kinder and it was by far the best thing we could have done for him. He's pretty switched on academically, but socially/emotionally he desperately needed that extra year. (And I'm slightly excited at the prospect of him doing the school run occasionally in year 12. I hope it'll be allowed!)
Can the teacher help you with breaking the news? They might have some experience with others who've had to repeat prep and might have some thoughts on the best way to explain it? Is it the type of school where kids from different year levels play together? If it's a smallish school, he'll still see his old friends in the schoolyard.