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Ellen PetrilloEllen Petrillo ACG2021 ACG2021
- 004- 004
International Limited
Executive Executive SummarySummaryBillabong International Limited has just completed a big Billabong International Limited has just completed a big financial year with a sequence of noteworthy highlights. financial year with a sequence of noteworthy highlights.
This is huge for a growing company like Billabong. This is huge for a growing company like Billabong. Billabong’s athletes dominate in their sport, but the Billabong’s athletes dominate in their sport, but the
Company is still working on global domination. During the Company is still working on global domination. During the past year, the Company has added two new businesses, past year, the Company has added two new businesses,
saw developing brands grow 35-40%, hit growth in net profit saw developing brands grow 35-40%, hit growth in net profit after tax, earnings per share and shareholders dividend. after tax, earnings per share and shareholders dividend.
Along with these amazing triumphs, Billabong International Along with these amazing triumphs, Billabong International Limited finally hit the $1 billion mark in global sales! It is Limited finally hit the $1 billion mark in global sales! It is
clear from the annual report that they are well on their way clear from the annual report that they are well on their way to becoming a top producer. With a strong competitive to becoming a top producer. With a strong competitive
drive, smart investments and a dedicated team, Billabong drive, smart investments and a dedicated team, Billabong International Limited will continue to see further growth International Limited will continue to see further growth
impact throughout the years. impact throughout the years. http://www.billabongcorporate.com/investors-reports.phphttp://www.billabongcorporate.com/investors-reports.php
IntroductionIntroduction Derek O’Neill – Chief Executive OfficerDerek O’Neill – Chief Executive Officer Location: 1 Billabong PlaceLocation: 1 Billabong Place
Burleigh HeadsBurleigh Heads QLD 4220 AustraliaQLD 4220 Australia
Fiscal Year Ending on June 30, 2006Fiscal Year Ending on June 30, 2006 Marketing, distribution, wholesaling and retailing Marketing, distribution, wholesaling and retailing
apparel, accessories, eyewear, wetsuits and hard apparel, accessories, eyewear, wetsuits and hard goods (surfboards, skateboards, surf camps, goods (surfboards, skateboards, surf camps, footwear, etc) under the Billabong, Element, Von footwear, etc) under the Billabong, Element, Von Zipper, Honolua Surf Company, Custom, Palmers Surf Zipper, Honolua Surf Company, Custom, Palmers Surf and Nixon brands and Nixon brands
Billabong is a Global Company with businesses in Billabong is a Global Company with businesses in Africa, Australia, Europe, North America and South Africa, Australia, Europe, North America and South America. Their products are distributed in over 100 America. Their products are distributed in over 100 countries with the majority of its revenue generating countries with the majority of its revenue generating from wholly-owned operations in Australia, Brazil, from wholly-owned operations in Australia, Brazil, Europe, Japan, New Zealand and North America.Europe, Japan, New Zealand and North America.
Audit ReportAudit Report Pricewaterhouse CoopersPricewaterhouse Coopers
Waterfront PlaceWaterfront Place1 Eagle St.1 Eagle St.Brisbane QLD 4000 Brisbane QLD 4000
Pricewaterhouse Coopers stated that Billabong Pricewaterhouse Coopers stated that Billabong International Limited was well-positioned to International Limited was well-positioned to maintain its growth profile. Over the past year, maintain its growth profile. Over the past year, Billabong International Limited has experienced Billabong International Limited has experienced exceptional growth in Australia and strong growth exceptional growth in Australia and strong growth everywhere else. They expect to see a robust everywhere else. They expect to see a robust revenue growth in Europe and the Americas for revenue growth in Europe and the Americas for 2007. Billabong International Limited is seen as 2007. Billabong International Limited is seen as beneficial to its stockholders due to the attraction beneficial to its stockholders due to the attraction of high-caliber executives and sustained growth.of high-caliber executives and sustained growth.
14.23/share14.23/share 12-Month Range: 15.3 – 12.912-Month Range: 15.3 – 12.9 Dividend per share: 44.0 cents Dividend per share: 44.0 cents Information found on October 10, 2006Information found on October 10, 2006 Personally, I would buy and hold onto Personally, I would buy and hold onto
Billabong International Limited. In the Billabong International Limited. In the past two years, their shareholders have past two years, their shareholders have benefited in its solid growth and will benefited in its solid growth and will continue to do so. Billabong continue to do so. Billabong International Limited appears to be a International Limited appears to be a great investment. great investment.
Stock Market InformationStock Market Information
Industry Situation & Company Industry Situation & Company PlansPlansBillabong International Limited is a versatile company in the competitive world of Billabong International Limited is a versatile company in the competitive world of
extreme sports. By sponsoring a variety of athletes all over the world who extreme sports. By sponsoring a variety of athletes all over the world who compete in skateboarding, snowboarding, surfing and wakeboarding, they are compete in skateboarding, snowboarding, surfing and wakeboarding, they are able to draw in people from all different backgrounds. The 2005-2006 financial able to draw in people from all different backgrounds. The 2005-2006 financial year was the first time Billabong International Limited “surpassed more than $1 year was the first time Billabong International Limited “surpassed more than $1 billion in reported global sales, more than $500 million in reported sales in the billion in reported global sales, more than $500 million in reported sales in the Americas and more than $200 million in reported sales in Europe.” Billabong Americas and more than $200 million in reported sales in Europe.” Billabong
International Limited is proud of their “strong and stable sales base in Australia” International Limited is proud of their “strong and stable sales base in Australia” and their improving stats in Europe along with its strong progression in the and their improving stats in Europe along with its strong progression in the
Americas (http://www.billabongcorporate.com/investors-reports.php). In the late Americas (http://www.billabongcorporate.com/investors-reports.php). In the late 70’s, two surfers designed and made Billabong board shorts and sold them to a 70’s, two surfers designed and made Billabong board shorts and sold them to a
local surf shop in Australia. Once local surfers realized the “superior local surf shop in Australia. Once local surfers realized the “superior functionality” of these board short, they were sold. To this day, Billabong functionality” of these board short, they were sold. To this day, Billabong
International Limited strives to stay true to its roots and provide “design-relevant International Limited strives to stay true to its roots and provide “design-relevant and functional products” (http://www.billabongcorporate.com/about-and functional products” (http://www.billabongcorporate.com/about-
billabong.php). This company plans on remaining consistent in all areas of billabong.php). This company plans on remaining consistent in all areas of marketing, manufacturing and distributing. Billabong International Limited will marketing, manufacturing and distributing. Billabong International Limited will
continue to commit to the “global boardsports sector through athlete continue to commit to the “global boardsports sector through athlete sponsorship, event staging and support of industry bodies” sponsorship, event staging and support of industry bodies”
(http://www.billabongcorporate.com/company-history.php). According to Derek (http://www.billabongcorporate.com/company-history.php). According to Derek O’Neill, Chief Executive Officer, the Company is excited to “build some of the O’Neill, Chief Executive Officer, the Company is excited to “build some of the
strongest youth brands in the world” strongest youth brands in the world” (http://www.billabongcorporate.com/investors-reports.php).(http://www.billabongcorporate.com/investors-reports.php).
Income StatementIncome Statement
Billabong International Limited Billabong International Limited uses a Single Step Format.uses a Single Step Format.
20052005 20062006
Gross ProfitGross Profit 434,583434,583 541,918541,918
Income from OperationsIncome from Operations 122,317122,317 107,675107,675
Net IncomeNet Income 125,232125,232 145,889145,889
There was an expansion in Gross Profit and Net Income from 2005 to 2006, but there was a decline in the Income of Operations.
Balance SheetBalance Sheet
== 2005 20062005 2006
51,022 67,85551,022 67,855
172,705 231,981172,705 231,981
111,815 161,982111,815 161,982
4,731 12,1904,731 12,190
340,255 340,255 474,008474,008
7,906 10,7677,906 10,767
39,040 92,66139,040 92,661
539,155 654,255539,155 654,255
11,582 22,64511,582 22,645
----------- 3,396----------- 3,396
597,683 783,724597,683 783,724
937,938 1,257,732937,938 1,257,732
LiabilitiesLiabilities
Current LiabilitiesCurrent Liabilities
Trade and other PayablesTrade and other Payables
BorrowingsBorrowings
Current Tax LiabilitiesCurrent Tax Liabilities
ProvisionsProvisions
Total Current LiabilitiesTotal Current Liabilities
Non-Current LiabilitiesNon-Current Liabilities
BorrowingsBorrowings
Deferred Tax LiabilitiesDeferred Tax Liabilities
ProvisionsProvisions
Deferred PaymentDeferred Payment
Total Non-Current Total Non-Current LiabilitiesLiabilities
Total LiabilitiesTotal Liabilities
AssetsAssets
Current AssetsCurrent Assets
Cash and Cash EquivalentsCash and Cash Equivalents
Trade and other ReceivablesTrade and other Receivables
InventoriesInventories
OtherOther
Total Current AssetsTotal Current Assets
Non-Current AssetsNon-Current Assets
ReceivablesReceivables
Property, Plant and EquipmentProperty, Plant and Equipment
Intangible AssetsIntangible Assets
Deferred Tax AssetsDeferred Tax Assets
OtherOther
Total Non-Current AssetsTotal Non-Current Assets
Total AssetsTotal Assets
++ 2005 20062005 2006
108,706 135,403108,706 135,403
2,854 6,2112,854 6,211
17,370 27,20417,370 27,204
7,715 11,9307,715 11,930
136,645 180,748136,645 180,748
113,016 257,353113,016 257,353
49,417 90,47849,417 90,478
1,526 1,0301,526 1,030
----------- 16,000----------- 16,000
163,959 364,861163,959 364,861
300,604 545,609300,604 545,609
Stockholders Stockholders EquityEquity
Contributed EquityContributed Equity
Treasury Shares Treasury Shares
Option ReserveOption Reserve
Other ReservesOther Reserves
Retained ProfitsRetained Profits
Parent Entity InterestParent Entity Interest
Minority InterestMinority Interest
Total EquityTotal Equity
2005 20062005 2006
309,911 313,528309,911 313,528
5,763 11,9825,763 11,982
1,356 4,3361,356 4,336
11,088 61911,088 619
342,918 403,949342,918 403,949
637,334 710,450637,334 710,450
----------- 1,673----------- 1,673
637,334 712,123637,334 712,123
2005: 937,938 = 300,604 + 637,334 2006: 1,257,732 = 545,609 + 712,123___________________________________________________________
There were increases in all categories. For Assets, it was mostly due to “Non-Current Assets”. Overall, Liabilities had a huge increase.
Statement of Cash FlowsStatement of Cash Flows
The cash flows from operations was larger than the net The cash flows from operations was larger than the net income by 115,750 in 2005 and 96,829 in 2006. There was income by 115,750 in 2005 and 96,829 in 2006. There was a decrease in this change between 2005 and 2006 due to a decrease in this change between 2005 and 2006 due to the increase in the net income. the increase in the net income. Billabong International Limited is growing through Billabong International Limited is growing through investing in other brands that share their interests and investing in other brands that share their interests and activities such as marketing in the core boardsport activities such as marketing in the core boardsport channels, athletes and much more. channels, athletes and much more. Billabong International Limited’s primary source of Billabong International Limited’s primary source of financing is the stock sales. However, with the large financing is the stock sales. However, with the large increase in stock sales between 2005 and 2006, there was increase in stock sales between 2005 and 2006, there was also a small increase in borrowings.also a small increase in borrowings.Overall, the cash has increased over the past two years.Overall, the cash has increased over the past two years.
Accounting PoliciesAccounting PoliciesCash and Cash Equivalents: Cash and Cash Equivalents: These include cash on hand, deposits held at call with financial These include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts (shown within borrowings in current liabilities on balance changes in value and bank overdrafts (shown within borrowings in current liabilities on balance sheet). It is done this way for cash flow statement presentation purposes.sheet). It is done this way for cash flow statement presentation purposes.
Inventories: Inventories: Raw materials, work in progress and finished goods are stated at the lower cost and Raw materials, work in progress and finished goods are stated at the lower cost and net realizable value. For raw materials, cost is determined using the first-in, first-out method and net realizable value. For raw materials, cost is determined using the first-in, first-out method and standard costs approximating actual costs. As for work in progress and finished goods, cost is standard costs approximating actual costs. As for work in progress and finished goods, cost is standard costs approximating actual costs including direct materials, direct labor and an allocation of standard costs approximating actual costs including direct materials, direct labor and an allocation of variable and fixed overhead expenditure.The latter being allocated on the basis of normal operating variable and fixed overhead expenditure.The latter being allocated on the basis of normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts.capacity. Costs of purchased inventory are determined after deducting rebates and discounts.
Property, Plant and Equipment: Property, Plant and Equipment: Land and buildings are shown at cost. Subsequent costs are Land and buildings are shown at cost. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are charged to the income cost of the item can be measured reliably. All repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Land is not depreciated. statement during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost, net of Depreciation on other assets is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives as follows: buildings 20 years, owned and their residual values, over their estimated useful lives as follows: buildings 20 years, owned and leased plant and equipment 3-20 years and furniture, fittings and equipment 3-20 years. The assets’ leased plant and equipment 3-20 years and furniture, fittings and equipment 3-20 years. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount.are determined by comparing proceeds with carrying amount.
Revenue Recognition: Revenue Recognition: Revenue is measured at the fair value of the consideration received or Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognized for Sale of Goods, Interest Income, collected on behalf of third parties. Revenue is recognized for Sale of Goods, Interest Income, Royalty Income and Agent Commissions.Royalty Income and Agent Commissions.
Notes to the Financial Statement:Notes to the Financial Statement:1. Summary of Significant Accounting Policies1. Summary of Significant Accounting Policies2. Financial Risk Management2. Financial Risk Management3. Critical Accounting Estimates and 3. Critical Accounting Estimates and JudgementsJudgements4. Segment Information4. Segment Information5. Revenue5. Revenue6. Other Income6. Other Income7. Expenses7. Expenses8. Income Tax Expense8. Income Tax Expense9. Current Assets – Cash and Cash Equivalents9. Current Assets – Cash and Cash Equivalents10. Current Assets – Trade and other 10. Current Assets – Trade and other ReceivablesReceivables11. Current Assets - Inventories11. Current Assets - Inventories12. Current Assets – Other12. Current Assets – Other13. Non-Current Assets – Receivables13. Non-Current Assets – Receivables14. Non-Current Assets – Other Financial 14. Non-Current Assets – Other Financial AssetsAssets15. Non-Current Assets – Property, Plant and 15. Non-Current Assets – Property, Plant and EquipmentEquipment16. Non-Current Assets – Intangible Assets16. Non-Current Assets – Intangible Assets17. Non-Current Assets – Deferred Tax Assets17. Non-Current Assets – Deferred Tax Assets18. Non-Current Assets - Other18. Non-Current Assets - Other19. Current Liabilities – Trade and other 19. Current Liabilities – Trade and other PayablesPayables20. Current Liabilities – Borrowings 20. Current Liabilities – Borrowings 21. Current Liabilities – Current Tax Liabilities21. Current Liabilities – Current Tax Liabilities22. Current Liabilities - Provisions22. Current Liabilities - Provisions
23. Non-Current Liabilities - Borrowings23. Non-Current Liabilities - Borrowings24. Non-Current Liabilities – Deferred Tax 24. Non-Current Liabilities – Deferred Tax LiabilitiesLiabilities25. Non-Current Liabilities - Provisions25. Non-Current Liabilities - Provisions26. Contributed Equity26. Contributed Equity27. Treasury Shares, Reserves and Retained 27. Treasury Shares, Reserves and Retained ProfitsProfits28. Dividends28. Dividends29. Derivative Financial Instruments29. Derivative Financial Instruments30. Key Management Personnel Disclosures30. Key Management Personnel Disclosures31. Remuneration of Auditors31. Remuneration of Auditors32. Contingencies32. Contingencies33. Commitments33. Commitments34. Related Party Transactions34. Related Party Transactions35. Business Combinations35. Business Combinations36. Subsidiaries36. Subsidiaries37. Deed of Cross Guarantee37. Deed of Cross Guarantee38. Events Occurring after the Balance Sheet 38. Events Occurring after the Balance Sheet Date Date 39. Reconciliation of Profit after Income Tax to 39. Reconciliation of Profit after Income Tax to Net Cash Flow from Operating ActivitiesNet Cash Flow from Operating Activities40. Non-Cash Investing and Financing 40. Non-Cash Investing and Financing ActivitiesActivities41. Earnings Per Share41. Earnings Per Share42. Share-Based Payments42. Share-Based Payments43. Explanation of Transition to Australian 43. Explanation of Transition to Australian Equvalents to IFRSEquvalents to IFRS
Financial Analysis Liquidity RatiosFinancial Analysis Liquidity RatiosType Type 20052005 20062006
WORKING CAPITALWORKING CAPITAL 203,610203,610 293,260293,260
CURRENT RATIOCURRENT RATIO 2.49%2.49% 2.62%2.62%
RECEIVABLE TURNOVERRECEIVABLE TURNOVER 7.247.24 4.974.97
AVG DAYS’ SALES UNCOLLECTEDAVG DAYS’ SALES UNCOLLECTED 50.4150.41 73.4473.44
INVENTORY TURNOVERINVENTORY TURNOVER 10.0410.04 10.1810.18
AVG DAYS’ INVENTORY ON HANDAVG DAYS’ INVENTORY ON HAND 36.3536.35 36.8536.85
The 2006 year ending Liquidity Ratios show encouraging results.
Overall, 2006 finished up better than 2005. The
working capital shows that at the end of 2006, Billabong
International Limited had more assets than liabilities.
As for the drop off in receivable turnover, this
shows a 2.27 decrease in the average amount of days that
sales are uncollected. On the flip side, there was a
slight increase in inventory turnover which proves that the cost of goods sold in 2006 had improved from
2005.
Financial Analysis Financial Analysis Profitability RatiosProfitability Ratios
20052005 20062006
PROFIT MARGINPROFIT MARGIN 7.81%7.81% 10.65%10.65%
ASSET TURNOVERASSET TURNOVER 8.968.96 8.098.09
RETURN ON ASSETSRETURN ON ASSETS 7%7% 8%8%
RETURN ON EQUITYRETURN ON EQUITY 20.6%20.6% 21.6%21.6%
Billabong International Limited’s Profitability Ratios are increasing in every category except for Asset Turnover. This is not extremely important since it
does not change anything. For the most part, it is a minimal decrease. As for Billabong International Limited’s profit margin, this chart shows that they enhanced their earnings by 10.65% in 2006. Along with this, the net income for every dollar of average total assets increased from 7% in 2005 to 8% in 2006. This chart indicates a positive sign for shareholders since it shows
that the amount of net income for every dollar of shareholders equity improved from 20.6% in 2005 to 21.6% in 2006.
Financial Analysis Solvency Financial Analysis Solvency RatioRatio
Debt to EquityDebt to Equity2005: .972005: .97 2006: 1.72006: 1.7
The Debt to Equity ratio helps determine if the The Debt to Equity ratio helps determine if the shareholders own Billabong International Limited or shareholders own Billabong International Limited or
if the creditors do. In 2005, the shareholders just if the creditors do. In 2005, the shareholders just barely owned the majority of the company. In 2006, barely owned the majority of the company. In 2006,
ownership shifted to the creditors. This can be ownership shifted to the creditors. This can be positive and negative.positive and negative.
Financial AnalysisFinancial AnalysisMarket Strength RatiosMarket Strength Ratios
In 2005, the earnings per share was 61.0 In 2005, the earnings per share was 61.0 cents. In 2006, it rose 16.1% and became cents. In 2006, it rose 16.1% and became 70.8 cents. This is good because the 70.8 cents. This is good because the shareholders benefit by receiving more shareholders benefit by receiving more back from Billabong.back from Billabong.
Dividend YieldDividend Yield
2005: 1.542005: 1.54 2006: 1.652006: 1.65
The rise in dividend yield shows that in 2006 The rise in dividend yield shows that in 2006 investor returns were more than in 2005.investor returns were more than in 2005.