Billabong manages to book profits in four years

Billabong International announcing its full-year financial results to June 30, 2015, said turnaround accelerating with net profit after tax, including significant items and discontinued businesses (NPAT) of 4.2 million Australian dollars (2.9 million dollars) compared to a 233.7 million Australian dollars (166.2 million dollars) loss for the previous corresponding period. Excluding significant items and discontinued businesses, EBITDA for the period was up 8.8 percent on the pcp.

“Two years into our turnaround Billabong is back to full-year profit and back to doing what it does best - building great global brands,” said Billabong CEO Neil Fiske, adding, “Growth has returned in the key United States market and Europe is again profitable. Challenges remain but this result confirms our confidence in the resilience of our brands and provides the conviction to see through the complex changes we’re undertaking globally to deliver sustained, long-term profitable growth.”

Reports revenue rise of 2.6 percent

Global revenue was up 2.6 percent on the pcp. Brand Billabong grew sales 13.1 percent in the United States wholesale market on a constant currency basis. RVCA sales were up 12.6 percent on constant currency basis globally. Europe EBITDA increased 7 million Australian dollars on the constant currency basis on the pcp with Element growing sales in its largest wholesale market by 5.6 percent.

Asia Pacific EBITDA of was down 4.1 million Australian dollars on constant currency (2.9 million dollars) on the pcp impacted by retail and currency affecting input prices. Key projects to drive earnings improvement have progressed to implementation stage.

Overall retail sales were down slightly on the back of store closures, with a 3.7 percent decline in brick and mortar comparable sales offset by a 35 percent constant currency growth in ecommerce revenue. As reported at the interim results, the prior year earnings include a wholesale contribution from the West 49 business prior to its sale in February 2014.

Major regions maintained growth momentum

The restructuring that has driven the improvement in Europe’s earnings after more than five years of decline has continued. The focus on better quality channels and sales continues to drive gross margin up 650 bps for the year and despite a planned contraction in wholesale sales the region has achieved retail sales growth of 2.9 percent on a comp store basis. These results have been achieved despite operational challenges with the Paris distribution facility.

Asia Pacific revenue was 418.9 million Australian dollars (297.9 million dollars). The region represents the Group’s largest retail footprint and will be the first market to adopt the new omni-channel platform. In advance of the roll out, the store fleet is being rationalised with the closure of 20 underperforming stores and consolidation of multi-brand stores in Australia under the Surf Dive ‘n’ Ski banner. At the same time, the Group opened 17 stores – 12 Billabong, four Tigerlily and one multi-brand which have positively contributed to the overall retail performance for the region. Retail comp store sales for the year were down 3.2 percent across Asia Pacific.

Projects implemented to drive growth

The Group has also provided an update on four major projects driving the turnaround. “These projects are aligned with our seven-part turnaround strategy and are interlinked in ensuring that we quickly get the right product to the right markets in tune with what our customers want,” said Fiske, adding, “They are not only about driving a better brand experience for our followers but also providing operational savings that can be invested in marketing and growing those brands. To date we have identified 30 million Australian dollars (21.3 million dollars) in potential annual profit improvement from our global sourcing and logistics initiatives.”

Since the end of the financial year in the wholesale channel, the Group continues to see growth in forward order books around the globe consistent with the view that the big three brands are making progress. In retail, trading has been more mixed. In North America, the early part of back to school saw a slow start, not just for the Group, but for the sector as a whole. Europe, on the other hand, has been above expectations. The trend in Asia Pacific has been improving since year-end with trading broadly in line with the prior year.

Meanwhile, Joanna Brand resigned from the office of Company Secretary effective from August 27, 2015 as Tracey Wood has returned from maternity leave and will resume her role as International General Counsel and Company Secretary.