Billabong sees strong sales revenue growth

18 Feb '11

6 min read

Billabong International Limited Chief Executive Officer announced its first half financial performance for the six months to 31 December 2010. Reported Group sales revenue of $834.9 million was up 24.4% in constant currency1 terms (up 15.8% in reported Australian dollar (AUD) terms) compared to the prior year corresponding period (pcp). Reported net profit after tax (NPAT) of $57.2 million was down 9.8% in constant currency terms or down 18.0% in reported AUD terms.

The strength of the AUD, principally against the Euro and the US dollar (USD), had a significant adverse impact on the translation of the Group's reported results. On a constant currency basis, that is in the absence of the overall adverse impact of the strong AUD, sales revenue would have been approximately $49 million higher and NPAT approximately $6 million higher than the reported results.

Earnings per share of 22.8 cents was down 18.3%, in line with the decline in reported NPAT, compared to the pcp. Directors declared an interim dividend of 16 cents per share, partially franked to 50%. The record date for the dividend is 21 March 2011 and the payment date is 21 April 2011.

Americas:
- Sales revenue of $408.4 million was up 38.2%;
- Operational earnings before interest, tax, depreciation and amortization (operational EBITDA2) of $46.6 million was up 12.5%; and
- Operational EBITDA margins were 11.4% (from 14.0%), in part reflecting the initial dilutive impact of the recent acquisition of Canadian retailer West 49 whose results are yet to reflect the benefit of wholesale margins on company owned branded product.

Europe:
- Sales revenue of $157.2 million was up 14.3%;
- Operational EBITDA of $30.8 million was up 7.7%; and
- Operational EBITDA margins were 19.6% (from 20.8%), principally reflecting higher product input costs.

Australasia:
- Sales revenue of $269.3 million was up 13.0%;
- Operational EBITDA of $51.8 million was down 22.9%; and
- Operational EBITDA margins were 19.3% (from 28.2%), principally reflecting the combined impact of a very weak retail environment in Australia and the initial dilutive impact of the recent acquisitions of Australian retailers SDS/Jetty Surf and Rush Surf whose results are yet to reflect the benefit of wholesale margins on company owned branded product.

As noted above, the strong sales revenue growth for the six months to 31 December 2010 of 24.4% in constant currency terms compared to the pcp, primarily reflects the execution of various strategic moves to enhance the route to market for the Group's compelling brand portfolio. While dilutive to EBITDA margins in the short term, reflecting the absence of full vertical margins, including wholesale margins, on company owned branded product, these moves provide key platforms to drive EBITDA margin expansion over time as various strategic and operational synergies are realised.

These include increased Group brand share in acquired retail stores generating higher vertical margins, including wholesale margins, improved third party brand supplier terms, migration of company owned retail stores to common systems and greater interaction between wholesale and company owned retail operations to ensure timely design and delivery of on-trend product to market.

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