BILLABONG TO RIDE RECOVERY WAVE AFTER NPAT WIPEOUT

Written on the 28 August 2012

BILLABONG TO RIDE RECOVERY WAVE AFTER NPAT WIPEOUT

BILLABONG will attempt to grow its earnings by 250 per cent over the next three years as it today posted its first loss since listing in 2001.

The company’s weak performance was laid bare this morning, with a net loss of $276.6 million reported for the full-year.

A huge one-off cost of $336.1 million was blamed for the result, but Billabong would only describe the expense as “significant and exceptional items” without further detail.

Billabong CEO Launa Inman (pictured) has released her highly-anticipated transformation strategy, which aims to increase pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) from $84 to $210 million by fiscal 2016.

There was no mention of the $694 million hostile takeover offer from private equity group TPG.

The plan focuses on efficiencies, building key brands, improving retail offerings, building e-commerce and improving global supply chains.

Billabong confirms it will close 82 unprofitable stores this year after having already wound up 52 in FY12.

The Billabong brand is also in for a makeover, with the company planning to strengthen its relationship with core surfers while also entering the active lifestyle and boys markets.

The company has earmarked Element, Dakine and RVCA as its most promising sub-brands and will invest in their growth and development.

Meanwhile, the company will continue to develop its e-commerce offering. The platform increased online sales by 50 per cent in FY12 and will continue building on Billabong sales and investing in back-end technology.

The booming SurfStitch online business, 20 per cent owned by Billabong, is also part of Inman’s turnaround plan.

Co-founder Lex Pedersen recently told Gold Coast Business News Billabong was investigating how to integrate online with bricks and mortar sales. The company will develop its multi-channel service by 2015, according to the plan.

Despite retail woes, Billabong will work to improve profitable stores and open new shopfronts. It will also create a uniform global banner and refurbish.

The company will find greater efficiencies in its global supply chain by defining sources and integrating them.

Organisational structure has gone under the microscope and will be reformed over the next two years. Inman has already made a number of key appointments to build the company’s retail expertise and will improve systems and processes.

Inman says the group remains profitable at the underlying trade level.

She also says the company will take a conservative approach. Difficult conditions are expected to continue this financial year with a forecast EBITDA of $100 to 110 million.

“The group is well on track in implementing the initiatives outlined in the previously announced strategic capital structure review and will continue to implement a number of new strategic initiatives announced today as part of Billabong’s transformation strategy,” says Inman.

“These initiatives will target both cost savings and revenue growth.”

Billabong reported global sales revenue of $1.55 billion, down 7.9 per cent and EBITDA was down 40.9 per cent in Australian dollar terms to $120.6 million.

The rising value of the dollar hit Billabong hard, costing the company $51.8 million in sales revenue, $5 million EBITDA and $3.3 million net profit after tax.

Billabong shares remained stable today with the mixed news, up 0.52 per cent to $1.352.


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