When Billabong reported their financial results for the year ended June 30, 2012 this week there weren’t many surprises. The company reported a $275.6 million loss, according to a story in the Business Spectator. But CEP Launa Inman is still confident.
Chief executive officer Launa Inman said that at an underlying trading level, the group remained profitable. . . “As previously flagged to the market, the group’s results have been adversely impacted by various significant and exceptional items,” Ms Inman said. . . “In recording the various significant and exceptional costs and charges, the Group has endeavoured to adopt a conservative position.” . . “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.”
According to Inman’s new plan (click here to dowload) the company “will focus on simplifying the retailer’s business, leveraging its brands, expanding its online business and globalising its supply chain.” Billabong has closed 58 retails stores since February 2012 and 82 more shops are set to close this year. Ouch.
Follow the jump for the official word from Billabong.Billabong International Limited Full Year Results for the 12 months ended 30 June 2012 and announcement of Transformation Strategy
GOLD COAST, 27 August 2012: Billabong International Limited (“Billabong” or the “Group”) today announces its financial results for the 12 months ended 30 June 2012 and its Transformation Strategy for the Group.
Full Year Results for the 12 months ended 30 June 2012
The Group incurred a net loss after tax of $275.6 million. As flagged in the half year results, significant and exceptional items have resulted in costs of $336.1 million, net of the gain on sale of Nixon of $201.4 million, of which 99% is non-cash.
Excluding the impact of significant and exceptional items Adjusted1 Net Profit After Tax (NPAT) was $33.5 million on reported global sales revenue of $1.55 billion. Revenue was down 7.9% in reported Australian dollar (AUD) terms (down 5.0% in constant currency terms) compared to the prior corresponding period (pcp), including online sales growth of approximately 50%.
CEO Launa Inman said: “At an underlying trading level, the Group remains profitable. As previously flagged to the market, the Group’s results have been adversely impacted by various significant and exceptional items. In recording the various significant and exceptional costs and charges, the Group has endeavored to adopt a conservative position. 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. These initiatives will target both cost savings and revenue growth.”
Adjusted1 Earnings Before Interest, Tax, Depreciation, Amortisation and Impairment (EBITDA) of $120.6 million was down 40.9% in reported AUD terms (39.4% in constant currency terms) and within the guidance range.
The continued appreciation of the AUD against the Group’s operating currencies, in particular the Euro and USD, adversely affected reported consolidated results, specifically by $51.8 million in respect of sales revenue, $5.0 million in respect of EBITDA and $3.3 million in respect of NPAT.
While the Group’s profit and loss results have been adversely impacted by the above- mentioned significant and exceptional items, the Group is pleased to report a significant reduction in working capital, both in dollar terms as well as a percentage of sales. In addition, the Group has achieved a strong improvement in cash flow from operating activities and a reduction in net debt, primarily from proceeds received from the partial sale of Nixon and equity capital raising in June.
Specifically:
– Working capital as reported reduced:
o 39.7% to $284.1 million from $471.2 million in the pcp; and
o to 19.7% of sales from 27.8% in the pcp.
– Net cash flow from operating activities increased by 224.2% to $78.9 million, from
$24.3 million in the pcp.
– Net debt reduced to $160.9 million or $94.2 million when adjusting for the net
proceeds of the retail entitlement offer2.
Billabong has made good progress on the initiatives announced in February 2012 as part of its Strategic Capital Structure Review, including the partial sale of Nixon, the closure of underperforming stores and its cost reduction program.
1 Excluding Significant and Exceptional Items but including Nixon trading for the period 1 July 2011 to 16 April 2012, plus the Group’s 48.5% share of the after tax profit of the Nixon JV for the period thereafter to 30 June 2012.
2 Retail proceeds of entitlement offer net of fees amounted to approximately $66.7m that was received in July 2012.
Specifically:
– US$285m in proceeds from the partial sale of Nixon
– 58 non-performing stores closed as at 30 June 2012, with a further 82 non-performing
stores identified for closure in FY13, expected to realize incremental EBITDA in FY13
of approximately $6 million (approximately $8 million on an annualized basis)
– Cost savings of approximately $30 million per annum expected to be realized in FY13
from cost reduction initiatives undertaken in FY12
These, together with the Transformation Strategy announced today, are expected to return the Group to growth and to significantly strengthen the Company’s financial position.
Transformation Strategy
Billabong today announces its Transformation Strategy which provides a clear pathway to unlocking the inherent value within the Billabong Group. Over the next four years, the Transformation Strategy aims to return the Group to positive sales growth and is targeted to deliver EBITDA greater than 2.5x FY12 pro-forma EBITDA of $84.0 million, excluding 100% of Nixon and significant and exceptional items.
Specifically, Billabong will achieve these objectives by focussing on the following key strategic priorities:
– Simplifying its business
– Leveraging Brand Billabong
– Leveraging other key brands
– Realising the strategic potential of retail
– Continuing to expand Billabong’s global e-commerce platform
– Globalising and integrating the supply chain
Further details of Billabong’s Transformation Strategy and the key strategic priorities outlined above can be found in the accompanying Transformation Strategy presentation.
Outlook and dividend
The Group expects the current challenging trading conditions to continue during FY13. Assuming no further deterioration in these conditions, FY13 EBITDA is currently expected to be in the range of $100 million to $110 million in constant currency terms. This compares to pro-forma FY12 EBITDA of $84.0 million, excluding 100% of Nixon and significant and exceptional items.
This result is expected to be driven by:
– The benefits from the previously announced Strategic Capital Structure Review;
– The additional benefits realized under the Transformation Strategy announced today;
and
– Recognition of Billabong’s share of after tax Nixon associate profits.
The Board has not declared a final dividend in respect of FY12 and does not expect to pay an interim dividend in respect of 1H FY13. The dividend policy will be reviewed thereafter.
Too big not to fail, with their strategy there was no way that this would not happen. They really should have taken the $3.30/share back in February. My recommendations: Sell off the rest of Nixon their best asset. Fire all of the old dead weight (former Gotcha employees first and then former O’Neil and Pac Sun exec’s) to appease the Retail Gods, anyone who was making high 6 figures during this mess must go. Then beg Bob Hurley to take it back (never going to happen).
We sold at $20 these jokers would be lucky to get out at $1. I would not recommend buying in until it gets downgraded to junk bond status, $.30 would be the earliest I would try to get back in.
Time to flush the shitter Billabong.
The strategic plan seems rational and ambitious. It looks like very high class PowerPoint. I wonder if it will be enough to steer the ship away from the rocks.
Time will tell….but man, $275 million is a lot of money to lose
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