The company booked a 2.8 per cent increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to $51.1 million for the year ended 30 June on a constant-currency basis (cc), $900,000 short of its February guidance.
EBITDA in Asia Pacific declined 57.4 per cent (cc) to $8.5 million, offsetting a 77 per cent increase in earnings from operations in the Americas to $45.7 million. Earnings from European operations increased 5.9 per cent to $10.4 million (cc).
Excluding a non-cash impairment of $106.5 million, encompassing brand and omnichannel write downs, the Billabong, Vonzipper, Surf Dive’n’Ski and Element brand owner recorded a net loss before tax of $8.4 million was recorded.
Total global sales declined 4.7 per cent (cc) to $974.7 million, with comparable store sales down 5 per cent in Australia driving total comparable revenue growth (combining global store and ecommerce operations) down 4.7 per cent for the year.
Sales in Europe slid 1.6 per cent during the year, despite an increase of 2.8 per cent in the second-half as UK operations struggled to gain traction after the Brexit decision, contributing a 2.5 per cent decline in comparable store sales.
The Americas represented a bright spot for the company, with total comparable sales up 8 per cent excluding the recently sold Tigerlily operation.
CEO Neil Fiske managed to narrow sliding sales in the second-half, with comparable store revenue falling only 1.7 per cent, compared to 2.9 per cent in the first-half, driving a 50.1 per cent increase in earnings over a 24.3 per cent decline in the first six-months of the year.
Gross margins improved by 210 basis points during the second-half, increasing across all regions, as part of a “profit improvement plan” by management, which saw margins increase by 90 basis points through the year.
“These results reflect the tangible progress we are making in implementing our turnaround strategy in all regions, particularly in the Americas and Europe,” Fiske told the market on Wednesday morning, noting highly promotional conditions in Australia.
“The outcome validates our approach and provides a way ahead to address the performance in the Asia Pacific region, where there have been challenges in the broader retail market over the past year, particularly in Australia.
“Looking ahead, market conditions remain challenging … but we see opportunities for sustained earnings growth driven by further expansion in gross margins,” he continued.
Net debt declined from $185 million to $148.6 million through the year as the company used the proceeds from the sale of Tigerlily to pay down debt.
Fiske gave no specific guidance, but said the company expects to exceed FY17 earnings, “subject to reasonable trading conditions and currency markets remaining relatively stable”.
He also signalled a continuation of the shift in earnings contributions towards the Americas and Europe, with first half EBITDA forecasted to be below the prior period, “biasing” growth towards the second-half.
No dividend was declared.
“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,” said Fiske. “We have achieved those ambitious goals. This result marks a turning point for the company, and one on which we can build,” he continued.
“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 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 per cent year-on- year to almost 37 million.
“This half represents the first time in three years that comparable gross margins have improved in every region, year-on-year. Gross margin expansion is a key driver of our profit improvement plan and margins were up 210 basis points for the half, and up 380 basis points in our largest market of the Americas,” he said.
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