One Last Time! Billabong Reports Its Half Yearly Earnings.

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Thursday’s earnings call by Billabong for the six months ended 31 December 2017 was its last unless something unexpected happens.  With an anticipated late April closing of the acquisition of Billabong by Boardriders for $1.00 a share, with Billabong ending up private, we won’t be seeing any more of the company’s numbers.

Everybody knows that and as a result the call, in a word, was perfunctory.  Current CEO Neil Fiske and CFO Jim Howell went through the numbers without some of the usual details, explanations, and nuances.  I think there was only one analyst with any questions.  I wonder how many even listened.

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Insights on the Sale of Billabong to Boardriders

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On February 14th, Billabong released a 194 page document explaining the deal under which Boardriders (formerly Quiksilver and owned by Oaktree) will buy it for $1.00 a share (all number in Australian dollars unless otherwise noted).  You can go to this page and click on “Court Orders Convening of Scheme Meeting” to download the document as a PDF.  It includes the independent expert’s report prepared by Grant Samuel & Associates Pty Ltd (“Samuel”) explaining and justifying the purchase price.

Perhaps the best way to start is to review a little industry history.  I posted a link to “Subcultural enterprises, brand value, and limits to financialized growth: The rise and fall of corporate surfing brands” last year.  Here’s the link again.  Those of you who didn’t read this study ought to take the time.

We learn that the deal is expected to close on April 24th.  In a strategic sense, despite the length of the document we don’t learn much that’s new.  Some of the comments on possible synergies from the combination are interesting and there are some new facts/opinions we’ll get to.  Let’s get started.

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Speaking of Consolidation- Boardriders’ Acquisition of Billabong

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Back in September of 2013, when Centerbridge and Oaktree invested in Billabong, there was some discussion/consternation about the possibility of Oaktree combining Quiksilver, which it already controlled with Billabong.  Quiksilver’s name, as you know, was changed to Boardriders.  It owns the Quiksilver, Roxy and DC brands.  Billabong’s three largest brands are Billabong, RVCA, and Element.  It also owns some smaller brands which I continue to expect will be sold.  Probably easier to do that once Billabong is not a public company.

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Billabong Receives an Offer to be Taken Private

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Well, it appears I’ve done it again.  After having published just this morning an article in which I said, “Billabong would be better off as a private company, but I don’t see a path to privatization that makes sense to Oaktree,” Billabong has received an offer to have its outstanding shares acquired for $1.00 each (Australian dollars) from Boardriders (formerly Quiksilver), in which Oaktree has a majority interest.  Guess I should have added, “to which Billabong could be expected to agree.”  I may still turn out to be right with that caveat.  Here’s the announcement.

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Billabong and Rip Curl; A Tale of Two Surf Companies and Their Interesting Juxta Positioning

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A few weeks ago, you no doubt saw the reports that Billabong (which would mean Oaktree Capital Management– the controlling investor in Billabong) was doing due diligence on Rip Curl as a possible acquisition.  Oaktree, of course, is also a major investor in Quiksilver.

When Oaktree invested in Billabong, there were some rumblings about combining it with Quiksilver, but nothing ever happened.

Meanwhile, we have a bit of information on Rip Curl’s earnings and last week, and Billabong held its annual shareholders meeting where Chairman Ian Pollard and CEO Neil Fiske reviewed the full year results.  Those results were released back in the middle of August and I wrote this article about them.

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Core Versus More; A History of the Surf Industry

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Perhaps I bring the most value to the industry when a reader sends me something they think is important but that they don’t want to be directly associated with.  And they figure, “Send it to Jeff!  He’ll publicize anything.”

Most of the time, they’re right and this is one of those times.

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More of the Same; Billabong’s Results for the Year

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Here’s what I said six months ago about Billabong:

“Six months ago [talking about a year ago], reporting on Billabong’s results for the whole year, I said this was a challenging turnaround, Billabong was doing things right, they were starting to see results, but the market was tough, and implementing their plan was taking longer and costing more (perhaps because it’s taking longer) than they’d initially expected.  That’s all still true…”

And it’s still, still true as we review the results for the year ended June 30, 2017.  I thought the delay was especially highlighted in Billabong’s July 28 “Omni Update” press release where they noted they’d “…terminated the agreement with the Omni-channel solution provider…” and taken a write down of AU $11.7 million as a result.  Billabong continues to try and change the engine oil while driving the car.  Tough task- but it’s what they have to do.

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Billabong’s Six Month Report: The More Things Change, the More They Stay the Same

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Six months ago, reporting on Billabong’s results for the whole year, I said this was a challenging turnaround, Billabong was doing things right, they were starting to see results, but the market was tough, and implementing their plan was taking longer and costing more (perhaps because it’s taking longer) than they’d initially expected.

That’s all still true for the six months ended December 31, 2016.

I’ll start with the numbers as reported (numbers in Australian dollars).

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Billabong’s Annual Meeting: The Future’s Still Coming

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Billabong held its annual meeting on November 22.  Back in August, I reported on Billabong’s results for the year ended June 30.  Here’s the link to that article.  The headline numbers then (all numbers in Australian dollars) were revenue from continuing operations of $1.10 billion and a net loss after tax of $23.7 million.  I started that article with these points which seem just as relevant now as they did then.

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The Future Isn’t Here Yet: Billabong’s Results for the Year

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Billabong published its results for the year ended June 30th last week.  The headline numbers (all numbers in Australian dollars) are revenue from continuing operations of $1.10 billion and a net loss after tax of $23.7 million.  The numbers for last year (pcp- prior calendar period) were revenue of $1.06 billion and a profit of $4.15 million.  Pretax loss actually declined from $20.2 to $15.9 million.  Those are the numbers from the consolidated income statement.

However, those summary numbers are not the whole story.  There are the usual discussions to be had and adjustments to be made (or not) with regards to taxes, exchange rates, discontinued and sold operations and the inclusion or exclusion of the “significant” items.  Before we have fun with all that, how about we take a moment and look at Billabong’s overall situation?  It’s kind of like I’m doing my conclusion first, but I think having this stuff in mind will help you understand Billabong’s challenges and opportunities when we start to get down into some of the weeds.

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