Shares crunched more than 25 per cent yesterday after poor full-year profit.
BILLABONG shares were crunched more than 25 per cent yesterday when its full-year profit came in at the bottom end of guidance.
Heavy selling of its stock was further fuelled by the surfwear company scrapping its 2012 earnings guidance in the face of a lurching global economy and plummeting sharemarkets. Billabong said the rapid and sustained appreciation of the dollar against the US dollar and the euro had undermined earnings.
Its forecast a year ago that it would generate earnings-per-share growth of 10 per cent in 2011-12 was consigned to the bin given flat forward-order books across Australia, North America and Europe as consumers reined in spending. A higher effective tax rate would also shrink profits.
Although Billabong still expects financial benefits from cost cutting and a string of acquisitions to feed into its 2011-12 pre-tax results, it said the bottom-line profit would be squeezed by particularly poor sales from its European operations.
''We saw a definite drop-off from the European consumer as soon as the latest round of the Greek debt crisis started [in May],'' said chief executive Derek O'Neill. ''It started being a little bit more contagious to countries like Spain and even Italy.
''It's a bit like what you see in Australia. Frankly the headlines every day and the 6 o'clock news bombarding you with that financial information, and at some point that feeds down into the consumer psyche and that is what we have definitely felt in Europe.''
Combined with the failure of a global economic recovery to take hold, and conditions actually deteriorating outside of North America and Asia, Billabong said it was now unable to offer any guidance on earnings per share.
On a day when investors were reeling from sharp falls on Wall Street and across European markets, the poor result and discarded earnings outlook triggered panic selling of Billabong shares, with more than $330 million in value wiped off its market capitalisation by the close of trade. Shares ended on the day's low, down $1.35, or 26.1 per cent, at $3.82.
The company, which owns a portfolio of popular surf, diving, swimwear and footwear brands, posted an annual profit of $119.139 million for the year to June 30, down 18.4 per cent despite a 13.5 per cent lift in revenue to $1.688 billion. Earnings before interest, tax, depreciation and amortisation were down 16.2 per cent in constant-currency terms, and down 24.3 per cent in reported terms.
It declared a final dividend of 13?, 3.25? franked, down from 18? in 2009-10 and payable on October 21.
Frequently Asked Questions about this Article…
Why did Billabong shares plunge more than 25%?
Billabong shares crashed after the surfwear group reported full‑year profit at the bottom end of guidance and then scrapped its 2012 earnings outlook. The poor result, weak global markets and heavy selling wiped more than $330 million off market capitalisation, with the stock ending the day down about 26% at $3.82.
What caused Billabong to scrap its 2012 earnings guidance?
Billabong cited a lurching global economy and plunging sharemarkets, flat forward‑order books across Australia, North America and Europe, a higher effective tax rate, and a rapid appreciation of the local dollar against the US dollar and euro — factors that together made it unable to provide earnings‑per‑share guidance.
How did currency movements hit Billabong’s earnings?
The company said the rapid and sustained appreciation of the dollar against the US dollar and the euro undermined earnings, reducing the benefit from sales and pressuring reported profits.
How did the European debt crisis affect Billabong’s sales?
Billabong’s CEO said sales weakened after the latest round of the Greek debt crisis in May, with the impact spreading to countries like Spain and Italy. Negative headlines and consumer uncertainty in Europe contributed to a noticeable drop‑off in demand there.
What were Billabong’s key full‑year financial results?
For the year to June 30, Billabong posted an annual profit of $119.139 million, down 18.4%. Revenue rose about 13.5% to $1.688 billion, while EBITDA fell — down 16.2% in constant‑currency terms and down 24.3% in reported terms.
Did Billabong change its dividend and when is it payable?
Billabong declared a lower final dividend compared with the prior year; the company said the dividend is payable on October 21.
Was Billabong optimistic about future profit despite the setback?
The company said it still expects some financial benefit from cost‑cutting and a series of acquisitions to flow into its 2011‑12 pre‑tax results, but warned that particularly poor European sales would squeeze bottom‑line profit.
Why did Billabong say it could not give earnings‑per‑share guidance?
Billabong pointed to the failure of a global economic recovery to take hold and deteriorating conditions outside North America and Asia. Those uncertainties, combined with weak orders and currency headwinds, meant it was unable to offer EPS guidance.
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