Billabong International: Result 2012
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Billabong International’s full year result was always going to be bad; the company had flagged as much when it raised $225m in June. So it was no great surprise that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) collapsed a massive 44% to $84m (excluding Nixon) as management wrote down inventory, receivables and brands. No dividend was declared.
| Year to 30 June | 2012 | 2011 | Change (%) |
|---|---|---|---|
| Revenue ($bn) | 1.55 | 1.68 | -8 |
| EBITDA ($m)^ | 84 | ~150 | -44 |
| DPS | n/a | 16 | n/a |
| Divisional results ($m - sales revenue, constant currency) | |||
| Australasia | 522 | 497 | 5 |
| Americas | 750 | 816 | -8 |
| Europe | 278 | 318 | -13 |
| ^Underlying EBITDA excludes Nixon which, if included for the full year, would have contributed ~$40m EBITDA. The estimated 2013 net profit contribution from Nixon (post sale) is ~$8-$10m. | |||
That’s yesterday’s story. The focus for today’s investor is new chief executive Launa Inman’s turnaround strategy. Here we were reasonably impressed. Inman outlined a comprehensive plan to rejuvenate the core Billabong brand, refocus the company’s product range, rationalise its retailing operations and tighten its global supply chain.
Inman’s plan will weed out deep inefficiencies; for example, over one third of Billabong’s products generate a mere 1% of sales.Through fixing basic retail issues like this—and many others—Inman expects Billabong to earn an additional $155m of EBITDA by 2016.
Her plan wasn’t just for shareholders. It’s also aimed squarely at demonstrating the company’s potential value to current private equity bidder TPG, and any other party considering a bid. The share price has risen slightly since 24 Jul 12 (Hold – $1.32) and, with a potential takeover in the offing, there’s no need to do anything yet. Look out for a more detailed review of the turnaround strategy after reporting season. HOLD.
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