Billabong sees strong sales revenue growth

18 Feb '11

6 min read

The Americas segment delivered strong sales revenue growth of 38.2% in constant currency terms, driven principally by the acquisition of West 49 but also by good improvement in company owned retail operations in the important US market.

The European segment continued to deliver strong sales revenue growth of 14.3% in constant currency terms, driven principally by the Element, Nixon and DaKine brands in Germany, France and central European countries and improved performance in company owned retail, offset by continued softness in some key southern territories, including Spain which is traditionally a strong area for the Billabong brand. Overall, company owned retail EBITDA margins in Europe improved to 14.5% (10.4% in the pcp in constant currency terms).

Sales revenues in the Australasian segment lifted 13.0% in constant currency terms, reflecting the addition of new company owned retail, including the acquisitions of SDS/Jetty Surf and Rush Surf in Australia. However, the performance of the underlying Australian business weighed on the region.

The number of company owned stores lifted to 635 as at 31 December 2010 compared to 380 at 30 June 2010, principally reflecting the acquisitions of West 49, SDS/Jetty Surf and Rush Surf. Collectively, company owned retail represented approximately 40% of Group sales revenues for the half year ended 31 December 2010. At a Group level, company owned retail EBITDA margins were 13.6% (14.9% in the pcp in constant currency terms), reflecting the combined impact of an improvement in margins in the Americas and European segments offset by weaker margins in Australia and the initial dilutive impact of the above mentioned acquisitions.

The Group's online operations in Australia and the US continued to show very strong growth and work was completed on the upgrade of a key operating platform to facilitate lower cost expansion into other international territories. The Group continues to invest in its online businesses and this includes the planned rollout of an in-store application that is designed to facilitate greater online business opportunities for bricks and mortar retail.

Outlook
As previously stated, the Group views the 2010-11 financial year as a transition year, with the strong sales revenue growth in the first half primarily reflecting the execution of various strategic moves to enhance the route to market for the Group's compelling brand portfolio.

Group sales revenues for the full financial year ending 30 June 2011 are expected to be in the order of $1.7 billion at current exchange rates, representing an increase in the order of 25% in constant currency terms over the pcp. This strong revenue growth, driven in part by the acquisitions of West 49, SDS/Jetty Surf and Rush Surf, provides a solid base for EBITDA margin expansion over time as full vertical margins on company owned branded product are realised.

In line with previous guidance provided on 15 December 2010 and in the absence of any unforeseen, exceptional circumstances impacting the global boardsports market, the Group expects NPAT to be flat in constant currency terms3 for the full financial year ending 30 June 2011 and, thereafter, assuming global trading conditions gradually improve, in particular in the Australian consumer environment, the Group expects to return to more historic EPS growth rates in excess of 10% per annum in constant currency terms.

Billabong International Limited

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