Billabong’s Australian earnings disappoint

Weak consumer spending and an outmoded bikini range in Australia has weighed on surfwear retailer and wholesaler Billabong’s annual earnings, the group’s chief executive Neil Fiske says.

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The group’s $51.1 million in earnings before interest, tax, depreciation and amortisation (EBITDA) was up 2.8 per cent, in constant currency terms, on the prior year, excluding significant items and the discontinuation of swimwear brand Tigerlily which was sold in April.

However, this was below Billabong’s forecast of EBITDA between $52 million and $57 million.

Revenue from continuing operations was down nine per cent to $979.5 million in the year to June 30, while sales revenue fell 6.7 per cent, in constant currency terms.

Mr Fiske said the major drag on the result was Australia.

“If it was not for the widely reported weak retail conditions in Australia we would have been well up in the guidance range,” Mr Fiske said.

“Not all of the weakness can be attributed to market conditions.

“We had some misses in our execution that weighed on our result, notably in brand Billabong and to a lesser extent Element.”

He said the group had stuck to a successful formula it had used in the prior year in women’s swimwear in Australia, only to fall behind the trends, something they were ahead of in the US.

“Recognising this, we quickly tested the US range in our Billabong stores and got a stronger outcome,” he said.

Mr Fiske said the group had continued the turnaround in its largest market, the Americas, which had shown significant improvement in sales and gross margins in the second half.

The group made an $8.4 million loss before significant items but this ballooned to $77.1 million when total impairment charges of $106.5 million and the discontinuation of Tigerlily were included.

The majority of significant items were related to brands and goodwill writedowns while $11.7 million was linked to the termination of a contract with an omni-channel provider.

Mr Fiske said market conditions remain challenging, particularly in Australia, but the group expects sustained earnings growth driven by increasing gross margins.

Billabong expects EBITDA for the current financial year to exceed the 2017 financial year’s, subject to reasonable trading conditions and currency markets remaining relatively stable.

Shares in Billabong gained half a cent to 75.5 cents.

IMPAIRMENTS WEIGH ON BILLABONG:

* Loss of $77.1m vs $23.7m loss

* Revenue down 8.9pct to $979.45m

* No dividend

Infrastructure ‘tsunami’ to boost Boral

Building materials maker Boral expects Australia’s property market to ease this financial year but predicts strong growth on the back of a wave of major infrastructure projects.

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The company boosted profit in the year to June 30 by 16 per cent to $296.9 million, helped by higher building activity in Australia and improved earnings from its US operations.

Excluding significant items, its full-year profit rose 27.9 per cent to $343 million, while revenue was up 1.8 per cent per cent to $4.4 billion.

Chief executive Mike Kane said the results were underpinned by growth in each of Boral’s divisions: Australia, North America and the USG Boral joint venture.

Boral Australia in the 2018 financial year is expected to deliver higher earnings before interest and tax (EBIT) than in FY17, excluding property, which is tipped to be in the lower end of the historic range of $8 million to $46 million.

Value of work done in its roads, highways, subdivisions and bridges segment increased by 14 per cent year-on-year in FY17 and is tipped to grow by a further 15 per cent this financial year.

Boral Construction Materials and Cement managing director Joe Goss said several major projects were moving from the engineering stage into construction.

“We have been talking about … this big tsunami coming on involving projects where we are finally getting into the phase where the engineering work is done and we’re actually putting a lot of materials on the ground,” he said.

Boral is involved in projects such as the Warrego Highway stage 2 and Kingsford Smith Drive in Queensland, and Sydney Metro, while it is tendering for a range of work including Melbourne Metro.

It expects housing starts in Australia to fall around 12 per cent to about 190,000 in FY18, while housing starts in the US are forecast to lift eight per cent to 1.29 million.

Mr Kane said Boral anticipated greater savings through synergies following its $US2.6 billion acquisition of North American building products and fly ash company Headwaters than its earlier forecast $US100 ($A125 million) a year within four years of the deal’s closing.

“I am more optimistic today than I was when we announced this deal,” he said.

Boral shares dropped 20 cents, or 2.9 per cent, to a three month low of $6.63.

BORAL’S FULL-YEAR PROFIT RISES:

* Net profit up 16pct to $296.9m

* Revenue up 1.8pct to $4.4b

* Final 50-per cent franked dividend of 12 cents a share, up 0.5 cents

Australian hospitals drive Ramsay’s growth

Private hospital operator Ramsay Health Care expects its Australian operations will remain the group’s powerhouse as demand for hospital services continues to grow.

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Managing director Craig McNally says demand for hospital services is underpinned by a growing and ageing population, increased chronic disease, innovative treatments and new technology.

Ramsay operates hospitals in Australia, France, the UK, Malaysia and Indonesia, and lifted its net profit by nine per cent to $488.9 million in the 2016/17 financial year.

Growth in admissions and procedural volumes boosted revenue in its Australian operations by seven per cent, and earnings rose 14 per cent to $650 million.

“Australia remains the powerhouse of the business,”‘ Mr McNally said.

He expects strong growth in the Australian hospital business to continue in the 2017/18 financial year, fuelled by ongoing growth in hospital utilisation rates, upgrades of existing hospitals and new facilities.

“Strong growth in our Australian business will continue, but we do anticipate more challenging environments in Europe – tariff environments are going to get more difficult for FY18,” Mr McNally said.

He said Ramsay’s operations in the UK and France performed to expectations in 2016/17 as governments in both countries made changes to their respective national tariff, which governs the pricing of healthcare services.

Ramsay is not expecting earnings growth in the UK and France in 2017/18.

Mr McNally said the company is continuing to expand its pharmacy franchise network, and will have 55 retail pharmacies once current contracts are completed.

The expansion of the pharmacy network proved slower than anticipated in 2016/17 because of regulatory processes.

Ramsay is targeting core earnings per share growth of between eight and 10 per cent in 2017/18.

Equities researcher Citi said Ramsay’s net profit was in line with expectations but its revenue was slightly weaker, as was its earnings per share and guidance for earnings per share.

Ramsay shares dropped $3.78, or 5.3 per cent, to $68.10, their lowest level since March.

AUSSIE HOSPITALS DRIVE RAMSAY HEALTH’S PROFIT GROWTH:

* Net profit up 8.6pct to $488.9m

* Revenue up 0.2pct to $8.7b

* Final fully-franked dividend up 9.5 cents to 81.5 cents

Brad Scott continues as North’s AFL coach

Feeling the job’s only half done, newly re-signed coach Brad Scott says he never contemplated leaving North Melbourne.

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Scott will become the longest serving coach of the Kangaroos, surpassing Denis Pagan, if he sees out his new two-year deal that takes him through until the end of the 2020 AFL season.

Already signed for next year, Scott said the extension was backing from the club of the current rebuild, which saw them finish 15th this season with just six wins.

“I’ve been extremely impressed with the way the club has stuck to the strategy this year through periods of adversity,” Scott told reporters on Wednesday.

“When the wins aren’t mounting and the losses start to stack up, people can falter at times – even if you do have a solid strategy but the football club has been rock solid.”

Scott’s new deal ends speculation he had topped the wishlist of rivals Gold Coast.

The 41-year-old, who became coach in 2010, said he had always remained committed to North despite media speculation linking him elsewhere.

“I would expect people would approach my management … but I was certainly not keen to explore any other options,” Scott said.

“The media speculation was out of control … I have been very clear in telling everyone exactly the process we would go through.

“It was purely to work out I was still the best fit for North Melbourne and as soon as they came to that conclusion it very quickly got to this result.”

Scott refused to buy into talk about North being frontrunners to steal Richmond star Dustin Martin with a seven-figure offer or lure Josh Kelly from the Giants.

He did say that the future of a number of their players, including veteran Jarrad Waite, were on hold.

“There are some really tough decisions you have got to make on individuals and we have a really strong philosophy that we’re club-first,” he said.

“We can’t give Jarrad and the others exact scenarios because we’re very fluid in our list build at the moment.”

Scott said he couldn’t put a timeline on when the Kangaroos would again play finals because he felt it was dependent on the other 17 AFL clubs.

But he was confident North had the right plans in place.

“We’ve got a really clear strategy and we’ve got to stick to that and I’m confident if we follow that through success will come,” he said.