August 30, 2017 – Billabong International Limited – home to iconic brands RVCA, Element, Von Zipper, Honolua Surf Company, Kustom, Palmers Surf, and Xcel – presented results for the full-year ended 30 June 2017 today.
Billabong reported an increase of key metrics during the second half of FY17 as well as gross margins growth in all key regions from a year-on-year perspective.
The company’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) excluding significant items and discontinued business was A$51.1 million, a 2.8% year-on-year increase in constant currency.
“At the Annual General Meeting we said we were confident that our strategy would produce a strong second half and drive overall EBITDA growth for the year, despite a first half that was behind the prior period We have achieved those ambitious goals,” said said Billabong CEO Neil Fiske, adding: “This result marks a turning point for the Company, and one on which we can build.”
Putting it in perspective
These financial results are encouraging for a number of reasons. “In the second half, EBITDA on a constant currency basis was up 50%, by far the best growth we have reported for any period since the recapitalisation in 2013,” said CEO Neil Fiske.
And as we all know, the global boardsports business as a whole has been facing a difficult market environment over recent years, which mostly affects big conglomerates the size of Billabong.
This is why over the last years, Billabong has been following a seven point turnaround strategy announced in December 2013. The main goal has been getting back to profitability and focusing resources on building the profile of core brands.
Milestones of the strategy include the sale of e-commerce website Surfstitch and the sale of brand assets such as longboard company Sector 9 and most recently women’s swimwear brand Tigerlily for A$60 million. The FY17 full year result mark the next milestone as the brand proclaims its turnaround.
Key take-aways for Billabong’s business during the full year ended 30 June 2017 include:
- The strong second-half results – and business turnaround – are mainly thanks to the Americas business with full year EBITDA up 46.9% before global allocations (excluding significant items and discontinued businesses). Says CEO Neil Fiske: “We had three core objectives for H2: continue the turnaround in our largest market of the Americas, expand comparable gross margins across all of our regions – a key indicator of brand health – and reduce the Cost of Doing Business (CODB). We hit all three of those targets.”
- The European business also ended its negative trend. “Europe rebounded from a soft first half to post full year EBITDA growth of 8.9% cc, comparable gross margins improved in every region in the second half year-on-year, and operating cash flow improved substantially,” said Fiske. Sales in Europe were down 1.6% for the year, but up 2.8% in the second half. On a comparable basis, gross margins were up 60bps in the second half and 40bps for the full year. Ecommerce performed strongly in Europe, growing 27.5% and now accounts for 4% of total sales.
- Billabong’s Operating cash flow improved by $31 million year-on-year.
- Net Loss after Tax for the entire year was A$8.4 million, compared to A$16.1 million in the first half.
- Total sales of $974.7 million were down 4.7% excluding Tigerlily and Sector 9. But comparable retail revenue (Bricks & Mortar stores + ecommerce) increased 0.1%, and ecommerce sales overall grew 22.0% in FY17.
- Billabong’s inventory was down 7.5% (excluding Tigerlily) and gross margins improved 90bps.
“Looking ahead, market conditions remain challenging, particularly in Australia, but we see opportunities for sustained earnings growth driven by further expansion in gross margins, acceleration of our direct to customer channels, strength in the Americas, growth in our RVCA brand, expanded global distribution, cost efficiencies and the ongoing benefits of our global platforms,” said the company statement.
The overall focus remains on building brand power by investing in key initiatives in digital. “The key to our ongoing success is the relevance of our brands. We continue to strengthen the connection with our customers, with global social media followership up 42% year-on-year to almost 37 million,” said the CEO.
Overall, “the group expects FY18 EBITDA (excluding significant items) to exceed FY17 EBITDA of $51.1 million, subject to reasonable trading conditions and currency markets remaining relatively stable.”
Quotes taken from Billabong’s official press release.