• The company is an Australia-based company in the business of wholesaling and retailing of surf, skate, snow and sports apparel, accessories and hardware, and the licensing of trademarks to specified regions of the world. The  brands include Billabong, Element, Von Zipper, Kustom, Palmers, Honolua, Xcel, Tigerlily, Sector 9, DaKine and RVCA. It also has online retail operations primarily trading on the sites www.swell.comand www.surfstitch.com. It operates in geographical segments include Australasia, Americas, Europe and Rest of the World. Australasia segment includes Australia, New Zealand , Japan , South Africa , Singapore and Indonesia.

• The turnaround is accelerating with NPAT including significant items and discontinued businesses of $ 4.2 million compared to a loss of $ 233.7 million in the previous year. Excluding significant items and discontinued businesses, EBITDA was up 8.8% over the previous year to $ 65.7 million on global revenues up 2.6% to $ 1.05 billion. Brand Billabong increased sales in the US wholesale market by 13.1% on a constant currency basis and RVCA sales were up by 12.6% on a global basis. EBITDA in Europe increased by $ 7 million to $ 5.5 million and Element increased sales in its largest wholesale market by 5.6%. Asia-Pacific EBITDA was down $ 4.1 million to $ 29.4 million because input prices were affected by retail and currency. Key projects in the drive for earnings improvement have progressed to the stage of implementation.,

     
      Results Summary (Source - Company Reports)

• Company CEO Neil Fiske said that two years into the turnaround, the company is back to a full-year profit and is now concentrating on what it does best, building its brands. Growth has returned to the key US market and Europe is profitable again. Challenges remain but the result confirms the company's confidence in its brands and reinforces its conviction that the complex initiatives that are being undertaken will result in sustained and long-term profitable growth. Retail around the globe was mixed as the company continues to refine the fleet in advance of the multichannel rollout by exiting underperforming stores, consolidated multi-brand banners and investing in new stores as well as store refurbishment.

• In the Americas, EBITDA came to $ 27.2 million with the second-half up 17.5% driven by revenue growth from Billabong and RVCA in the crucial US wholesale market. Overall retail sales were down because of store closures and a 3.7% decline in brick and mortar comparable sales was offset by a 35% growth in e-commerce. Earnings for the previous year included the wholesale contribution from the West 49 business prior to its sale but only the first half was really affected and there was minimal impact on the second half. European EBITDA came to $ 5.6 million compared to a loss of $ 1.4 million in the previous year despite a 1.7% decline in revenues. The restructuring that has driven Europe after more than five years of decline has continued the trend of improvement and the focus on better quality channels and sales has resulted in an improvement in the grass margin of 650 basis points. Despite the planned decline in wholesale sales, retail sales have grown by 2.9% on a comparable store basis. These results have been achieved despite operating problems with the distribution facility in Paris. Asia-Pacific revenue at $ 418.9 million was flat compared to the previous year but is the largest retail footprint for the company and will be the first to introduce the omni channel platform. Before the rollout, the stores are being rationalised with the closure of 20 underperforming stores and the consolidation of multi-brand stores in Australia. At the same time, the group has opened 17 new stores which have had a positive impact on the retail business in this region. Retail comparable revenues were down 3.2% leading to an overall $ 4.1 million decline in EBITDA. Despite the adverse effect of a stronger USD on input prices, the group was able to maintain its overall gross margins.
   

     

 BBG Brands (Source - Company Reports)

• The turnaround projects are aligned with the seven part turnaround strategy and are interlinked to ensure that the company gets the right product to the right market in tune with customer needs and requirements. They are not only about providing a better brand experience for customers but are also intended to provide operational savings which can be reinvested in marketing and growing brands. To date, $ 30 million in potential profit improvements have been identified from global sourcing and logistics and the company will start to see the benefits in FY 2016 though the timing means that it will take several years for the benefits to be fully realised.
   

     

        BBG Daily Chart (Source - Thomson Reuters)

• The omni channel project is a global infrastructure rollout which will fully integrate retail, wholesale and e-commerce operations across all brands. It will provide a single global view of customers, inventory and merchandising needs as well as a single state-of-the-art global e-commerce platform to provide a seamless shopping experience for multichannel customers. The platform and planning software partners have been identified, the global team is in place and the pilot will be launched from Australia in FY 2016. The concept to customer project is focused on improving speed in the market and will implement more productive merchant assortments, identify and produce for emerging trends, shorten the time for order to delivery and focus on made to order rather than made to forecast. It has been rolled out in the North American market for Billabong and will be rolled out globally for the big three brands in 2016. The sourcing and supply chain project is about reducing cycle times and costs while improving the quality of products. It is expected to produce more than $ 20 million in annual savings on completion and improve product quality and time to market through partnerships with preferred suppliers. The consolidation of suppliers is largely complete with a reduction in numbers in excess of 50% and production has been diversifying outside of China. Finally, the distribution and logistics project has the objective of streamlining the international distribution network and is targeting $ 10 million annually on savings after implementation. Contracts for consultation centres have been signed for new facilities in China and Singapore and existing warehouses are being rationalised.
   

• Since the end of FY 2015, the group has continued to see growth in orders and believe that the big three brands are making progress. In retail, the results have been mixed with a slow start in North America but Europe has been above expectations. The trend in Asia-Pacific has been improving and is broadly in line with the previous year. However, the benefits of supply chains and other initiatives should start to make their presence felt in the second half of FY 2016.