Struggling surfwear icon Billabong has warned it cannot carry on business as usual if a takeover by the owner of rival Quicksilver does not proceed, as the company reported worsening revenue and net loss for the first half of the year.
Billabong posted a net loss of $18.4 million for the six months to December 31, worse than $13 million a year earlier, while revenue declined seven per cent to $476.4 million.
The company reiterated it expects full-year earnings of between of $51.1 million and $54 million, just above its result for 2016/17.
Billabong CEO Neil Fiske said the result reflected “ongoing difficult trading conditions in retail and much of the action sports sector”.
Mr Fiske said despite efforts to address costs and streamline the business, the company was facing “systemic, structural” industry issues.
“We have made substantial progress over the last four years, but we have had to confront tens of millions in adverse currency movements on our product costs, industry bankruptcies and account closures across multiple geographies, and fundamental channel shifts away from brick and mortar,” he said.
In December Billabong received a takeover bid from US-based Boardriders, the owner of the Quiksilver and Roxy surf brands, and in January the local group entered into a $1 per share scheme arrangment.
Billabong directors on Friday reiterated their unanimous backing for the deal.
If the buyout falls over, Mr Fiske said on Friday that the company “will not be able to continue on a business-as-usual” basis.
Billabong warned shareholders that the continued absence of any meaningful earnings growth is becoming a more urgent problem as an outstanding loan nears maturity.
CFO Jim Howell said a lot of the cash the company had could not be used for debt reduction as it was earmarked for operational needs.
“We need to acknowledge that our EBITDA (earnings before interest, tax, depreciation and amortisation) has been essentially flat for three years on a like-for-like basis and it cannot support our current strategy at current debt levels with a maturing term loan in under two years,” Mr Howell said.
Over the six months, comparable store sales declined 0.6 per cent in Australia.
The company said full-year earnings will rely heavily on the second half, when the Americas business is expected to improve.
Billabong shares were up 0.5 cents to 96.5 cents at 1431 AEDT.
BILLABONG’S HY LOSSES DEEPEN
* Net loss $18.4m vs (restated) $13m loss
* Revenue down 6.8 pct to $477m
* No interim dividend