BILLABONG INTERNATIONAL LIMITED ABN 17 084 923 946 2 Contents
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BILLABONG INTERNATIONAL LIMITED ABN 17 084 923 946 2 Contents 2 Chairman’s report 22 retail 4 Ceo’s report 23 GovernanCe overview 6 FinanCial overview 24 Board oF direCtors 9 KeY hiGhliGhts 26 GroUp operatinG Centres 10-21 Brand marKetinG 28 Corporate direCtorY hiGhliGhts 10 BillaBonG 11 element 12 tiGerlilY 13 rvCa 14 KUstom 15 niXon 16 daKine 17 vonZipper 18 XCel 19 honolUa 20 seCtor 9 21 palmers all results are in aUd terms unless otherwise stated. detailed information on the financial performance of Billabong international limited and the remuneration of senior executives is available in the Full Financial report 2010-11 located on the Company’s website www.billabongbiz.com. 1 the 2010-11 finanCial year, while suCCessful from a strategiC positioning and development perspeCtive, ultimately proved quite Challenging for BillaBong international limited. the Group’s transition from a surf dive ‘n’ ski (sds), Jetty surf wholesale-focused business to and rush surf. together, these an operation with more balanced helped lift direct-to-consumer exposure to wholesale and retail sales revenue to 38% of total coincided with a harsh external Group revenue (from 24% in the environment characterised by prior corresponding period). the extreme macroeconomic and strategy behind these acquisitions currency volatility. there was also a was to enhance the route to downturn in consumer sentiment market to provide the end flowing from events such as consumer with greater access to sovereign debt issues in the Us and europe and a run of natural the Group’s branded products disasters throughout australasia. and counter the increasing the Group’s reweighting between margin demands from some wholesale and retail was most large action sports retailers who, apparent through the acquisition at the same time, were increasing of Canada’s largest specialty their vertical product offers and boardsport retailer, west 49, thereby reducing the available and leading australian retailers shelf space for the Group’s brands. airman’s report h C 2 as a reminder, in august 2010 the retail margins. it is for this reason international limited. Following Group nominated the 2010-11 that the profit contribution from direct shareholder consultation financial year as one of transition. acquired retail assets generally and expert external advice, a this language was designed to starts to flow from year two.t here comprehensive remuneration reflect the move deeper into retail is also a one-off timing delay in review was undertaken. this has and its immediate consequences, the recognition of sales and profit led to a number of changes, which being a significant lift in revenue due to the difference in sales are outlined in the director’s with little or no immediate reporting between wholesale report in Billabong international’s contribution to profit and initial and retail businesses. 2010-11 Full Financial report, in margin dilution. this is due to the relation to the future structure while the general consumer fact that the Group has acquired of remuneration to better align environment in australia and businesses with relatively low executive and shareholder interests. Canada slowed some of the standalone margins and there is clearing of inventory in acquired Finally, on behalf of the Board of little immediate ability to change retail and caused a wholesale directors i thank all shareholders the product mix due to the inventory build-up in certain for their support of Billabong need to sell through all existing parts of the business, these issues international limited in an inventory – whether it be in are short term and the Group’s extremely challenging year of store, in the retailer’s warehouse broader strategic vision to build change and i also thank our or on order from suppliers. this a more sustainable business employees for their ongoing sell-through process generally model remains firmly on track. commitment to building the takes nine to 12 months. it is only the Group has an unrivalled suite world’s premier boardsport after this period that the Group of brands and retail assets and company. has the ability to bring new the platform is now set to deliver excitement into store by focusing growth into the future. on its preferred mix of third party brands and the introduction during the year, the Board of higher levels of the Group’s of directors responded to brands into store. this, ultimately, shareholder concerns about delivers margin expansion given the structure of executive ted Kunkel the inclusion of wholesale and remuneration within Billabong Chairman 3 Ceo’s report strong revenue growth underpinned by strategic retail acquisitions and the integration of the exciting rvCa brand were key highlights for the Billabong group in the 2010-11 financial year. Global sales revenue of $1.68 the Group’s focus through the billion was up 23.8% in constant 2010-11 financial year extended currency terms or up 13.6% well beyond the retail acquisitions, in reported australian dollar with other highlights including: terms compared to the prior corresponding period. the lift - The enhancement of the in revenues was apparent in the Group’s brand portfolio with the Group’s three regional segments, addition of rvCa, the winner of with constant currency growth of the surf industry manufacturers 32.5% in the americas, 11.5% in association 2010 men’s apparel europe and 19.5% in australasia. Brand of the Year award. rvCa however, net profit after tax (NPAT) is a lifestyle brand that provides in constant currency terms was a platform of expression for the down 6.9%, primarily as a result subcultures of art, music, fashion of challenging global trading and sport. it performed very conditions and the initial impact strongly in its home market of the store in Japan had reopened. of strategic investments made by Us in its first year in the Group and the Group during its transition year. its growth potential is significant - The Group has been building NPAT was down 18.4% in reported as it pushes into newer markets its online retail presence in australian dollar terms, reflecting including australia and europe. recent years and, in the 2010-11 the substantial appreciation of - The opening up of new markets financial year, sales doubled to the australian dollar throughout throughout asia continued. now approach $50 million. the the year. the Group achieved constant Group’s premier sites were swell. com in the Us and surfstitch.com the integration of acquired retail currency revenue growth in assets in Canada and australia excess of 30% and strong margin in australia, with each stocking is progressing to plan, with the growth in asia. the profitable and product from more than 200 Group removing back office and measured expansion strategy is brands and viewed as a leader in warehouse costs by consolidating being led by the Billabong and the boardsports category in their those functions into existing nixon brands, principally through respective countries . the Group operations where appropriate. their presence in company also continued to roll out other the space available to the owned retail stores and shop- multi-branded online initiatives Group’s own brands is starting in-shop concepts. Growth in in locations including the United to increase, exciting third party the established market of Japan Kingdom, Canada and south brands are being supported but was impacted through the year africa and a number of brand- on better terms and stores are in the wake of the devastating specific sites in other markets. being rebranded and refreshed. earthquake and tsunami that - Surfstitch.com was relocated in australia, it systems for the struck the region. a total of 19 from sydney to Burleigh heads acquired retail assets are also company owned stores were on the Gold Coast. this positions being progressively migrated to a directly impacted by the natural surfstitch alongside the common platform. these actions disasters and were temporarily headquarters of the Group’s ultimately help the Group deliver closed. pleasingly, no employees australian operations, leading to higher retail margins and this were injured in the disasters. By enhanced operational efficiencies. should become evident from the the close of the financial year all 2011-12 financial year. but one company owned retail - A range of new retail concepts 4 were opened in australia, with currency hedge rates for product banners and more than 630 bricks showcase stores for element purchases in the second half. and mortar company owned retail established on the Gold Coast there was double-digit sales doors in markets including Canada, and in melbourne and the first growth in markets including the Us, south america, the UK, nixon concept store unveiled at Germany and France, while France, spain, Germany, australia, Bondi Junction in sydney. while newer markets within eastern new Zealand, south africa, Japan the australian retail market was europe experienced very strong and greater asia. it is a strong very challenging, these stores growth. Consumer sentiment business and, with its transition year highlight the strong product and sales softened throughout now complete, one with strong offer and enhance the growth europe in the final two months of underlying growth prospects. prospects of the two brands. the financial year on the back of while the external consumer - volatility in the Us, the Group’s concerns around sovereign debt environment remains challenging, largest sales market, eased issues throughout the region. the developments within the through the year and this led to stepping back and looking at the business have established a the emergence of what appeared overall business, the Billabong stronger base on which future to be a soft recovery. order Group is strategically well growth will be built. i thank all Billabong Group employees for patterns within the wholesale positioned to compete effectively, their commitment and drive as account base were generally deliver sustainable growth and, the Group seeks to deliver on its cautious, but company owned over time, improve its return on retail remained well inventoried strategic goals.