AUSTRALIA: Billabong seeks capital injection as trading worsens
Billabong is looking to raise some AU$225m (US$228m) through a share issue after the Australian surfwear brand put out another profit warning amid deteriorating trading conditions.
Following the departure of chief executive Derek O'Neill, chairman Ted Kunkel will step down in October, as will Allan McDonald, chairman of the company's audit committee.
The company said the proceeds of the share offer will be used to strengthen its balance sheet by paying down a US$143m financing facility due in July 2013, with the balance to be used to reduce overall leverage.
"Today's capital raising is a vital step forward for Billabong," said recently appointed CEO Launa Inman.
"It not only further strengthens the balance sheet, but also assists in continuing to execute on previously announced initiatives and to execute on the transformation strategy, announced today.
"The board and management have taken prudent action to restore the balance sheet and add financial flexibility. With the right focus and execution, Billabong will once again become a growing, profitable business."
The company said that since it announced its half-year results in the middle of February, it has continued to face challenging trading conditions, particularly in Europe, Australia and Canada.
In Europe, it said sovereign debt issues are having a significant adverse impact on consumer confidence and demand, especially in southern European territories, which has led to delays in shipment of summer product.
In Australasia, consumers continue to be very cautious given the weak global macroeconomic climate, Billabong said.
"This has resulted in a significant reduction in summer product shipments in the important trading month of June. Furthermore, a highly promotional retail environment is adversely impacting company owned retail performance."
Meanwhile, the company said its Canadian performance "remains subdued and below expectations".
Excluding the impact of the partial sale of its Nixon accessory brand, Billabong was forecasting EBITDA of $157m for the year. It now expects EBITDA to be in the range of $130-135m on a comparable basis.
Including the impacts of the partial sale of Nixon, it expects reported EBITDA to reach $120-125m.
Inman has identified some key focus areas that will form the foundation of a three-year transformation strategy. Areas identified so far include strengthening the balance sheet; right-sizing of the business, including a focus on costs, supply chain, streamlining and working capital; and reactivating the business, including a focus on brand, retail, online and supply chain.
The company will release further details of the plan on 24 August.
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