Billabong H1 net loss widens to 18.4 mn Australian dollars

Billabong International Limited reported EBITDA for the six months ended December 31, 2017 was 19.3 million Australian dollars (15 million dollars), compared with 23.9 million Australian dollars (18.6 million dollars) in the prior corresponding period, down 19.1 percent as reported and 15.9 percent in constant currency. Total revenues for the half were 474.5 million Australian dollars (371 million dollars), down 3.1 percent reported and 1.5 percent in constant currency. The company reported a net loss after tax of 18.4 million Australian dollars (14.3 million dollars).

Commenting on the first half results, Billabong Chief Executive Officer Neil Fiske said in a statement: “The results we are reporting today are consistent with the updated guidance given in January – namely that we would be down in the first half, but expect to be up in the second to deliver full year EBITDA of 51.1 to 54 million Australian dollars – at or just above last year. This result and our expectations for the full year reflect the challenge we face in converting our operational improvements into EBITDA growth. The fact that a number of industry participants are currently undergoing a sales process is yet another indication of the tremendous disruption that we are witnessing.”

Billabong’s first half performance across core regions

The Americas, Billabong said, delivered the benefits of change initiatives undertaken in the past four years. EBITDA prior to global allocations was up 34.1 percent to 13.3 million Australian dollars (10.4 million dollars), with total revenue up 3.9 percent. Ecommerce sales grew 19.5 percent, representing 9.6 percent of sales, while brick and mortar comparable store sales were up 0.7 percent on slightly lower margins. Total comparable retail sales, combining comparable stores and ecommerce, were up 5.8 percent and margins were down, by 60bps. The company expects revenue and EBITDA gains in the Americas to level out in the second half as it cycles tougher comparables and operational improvements.

Asia-Pacific (APAC) posted EBITDA prior to global allocations for the region down 9.2 percent in constant currency, a decline of 2.1 million Australian dollars (1.6 million dollars). Total revenues were down 4.5 percent, up 1.3 percent in retail but down 16.6 percent in wholesale reflecting ongoing weak market conditions, but also the lag effect of some assortment and execution issues. Gross margins improved 120bps. APAC brick and mortar retail comps were up 0.9 percent for the half, however, retail conditions remained challenging in Australia, where first half comparable store sales ended down 0.6 percent, but comps during the key December month were up 2 percent in Australia. Ecommerce grew 28.7 percent for the half, 40.2 percent in Australia. Total comparable retail sales for the APAC region were up 1.8 percent for the half and retail margins were up 120bps.

Results in Europe, the company added, were affected by the timing shift in wholesale revenue, and weaker than anticipated retail results. There was a good improvement in margins, and the region is still expected to be ahead in EBITDA for the full year on a relatively flat revenue line. EBITDA prior to global allocations for the first half was down 29.4 percent to 4.9 million Australian dollars (3.8 million dollars), a 2 million Australian dollars (1.5 million dollars) decline on a constant currency basis. Total revenues were down for the region by 6.1 percent in constant currency, while gross margins were up by 100bps. Retail in Europe performed below expectations in the half, with brick and mortar comparables down 2.3 percent. Ecommerce grew 15.1 percent and now represents 5.5 percent of total sales. Total comparable retail sales were down 0.3 percent, but retail margins improved 140bps.

RVCA brand performs well across geographies

The results, the company said, varied among the company’s big three brands of Billabong, RVCA and Element. In wholesale equivalent sales including sales to own retail - Billabong was down 0.5 percent for the half, up in Americas, down in APAC, Element was down 13 percent, impacted by the timing shift in Europe and a change in distribution strategy in Canada and RVCA was up 9.6 percent with growth in every region.

Brand Billabong continued to gain share in the important US specialty channel, strengthening its position as the number one brand within the core market. Element faced a challenging first half in all geographies, but is expected to record modest full year sales growth in Europe, its largest market. RVCA continues to show good share results in its core market in both men’s and women’s categories.

Billabong confirms full year outlook

The company has confirmed the guidance provided in early January that it expects the group’s FY18 EBITDA (excluding significant items) to exceed the prior year, to be in a range between 51.1 million and 54 million Australian dollars (39.9 to 42.2 million dollars), subject to reasonable trading conditions and currency markets remaining relatively stable. The group continues to have a significant bias of second half earnings to the Americas, with a high concentration of sales in the month of June.

On January 5, 2018, the company announced that Boardriders, Inc. will acquire all of the shares in Billabong, other than those already owned by its related entities.

“The first half result we report today and the challenge of the task ahead need to be seen in the context of the proposal from Boardriders, Inc. that is currently before shareholders. The offer of 1 Australian dollar per share represents certainty for shareholders. The Directors unanimously recommend the proposal, with founder Gordon Merchant and a nominee company of cornerstone investor Centerbridge Partners both stating they intend to vote in favour of the scheme, in the absence of a superior proposal,” added Billabong Chairman Ian Pollard.

Picture:RVCA website