Financial Analysis of Billabong International Limited Essay

Title OF ASSIGNMENT/ PROJECT/ CASE STUDY:Fiscal Analysis of Billabong International Limited


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2285Due DATE: 27/05/2015Date SUBMITTED: 27/05/2015

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FINANCIAL ANALYSIS OF BILLABONG INTERNATIONAL LIMITED

Contentss

History… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .. 4

Description OF THE CORE BUSINESS OF THE COMPANY INCLUDING FULL DETAILS OF ITS OPERATING ACTIVITIES… … … … … … … … … … … … … … .. 4

SIGNIFICANT ISSUES EMERGING FROM THE DIRECTORS’ REPORT… … .5

Discussion ON THE CORPORATE GOVERNANCE STATEMENT… … … … … 6

RATIO ANALYSIS… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .. 8

Decision… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … 14

Mentions… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .15

Company History

The Surfer and surfboard shaper Mr. Gordon merchandiser and his so spouse Rena used to plan the boards at place and cut them on kitchen tabular array and used to sell to the local breaker stores as a finished good in Gold Coast in 1973. The concern boomed because of the superior functionality of the boardshots. They were lasting because of ternary sewing technique urbanized by Gordon.

The following measure was to market the boards with the aid of some local best surfboarders, the company even sponsored some of the events and held competitions to advance itself. In 1980’s the company has held its topographic point in Australia and was ready for the planetary enlargement with an oculus on the North American Market, where the trade name once more gained a success. The offshore market in other states ( New Zealand, Japan, South Africa ) were licence was granted, saw a rise in the gross revenues of the boards, in late 1980’s a new beachhead was introduced in Europe.

In 1900’s the breaker industry has grown and Billabong has diverse into other board athleticss markets like skate, snow and aftermath. In center of 2000 the company has floated IPO and got listed on ASX in August that twelvemonth. It besides has e-retail including the web sites www.swell.com and www.surfstitch.com

Core Business & A ; Operating Activities

Billabong International Limited nucleus concern is selling, distribution, wholesaling and retailing of dresss, accoutrements, eyewear, wetsuits and difficult goods in the boardsports sector under the Billabong, Palmers Surf, Kustom, Element, Honolua Surf Company, Von Zipper, Nixon, Sector 9 Xcel, Tigerlily, and DaKine trade names. Billabong merchandise are licensed and distributed over 100 states. The company’s trade names are promoted by international jocks, junior jocks and professional events.

Billabong runing theoretical account is determined on guaranting each of the groups division has a really strong organisation direction capableness and a twenty-four hours to twenty-four hours working liberty overseen by divisional boards. Due to a major part of operations being operated outside Australia, the company is exposed to foreign exchange fluctuation hazard i.e. the hazard that the company’s offshore net incomes and assets fluctuate when reported in Australian Dollars. The Net loss after Tax has dropped to $ 233.7 million in 2014 to 859.5 million in 2013.The group has a turnaround scheme to better its hereafter public presentation by

  • Constructing a strong merchandiser front terminal to the concern,
  • Constructing the company strong planetary trade names.
  • To construct a planetary graduated table in Finance, Supply Chain, IT and Direct to client platform
  • To develop 12 month selling calendar for each part
  • Prioritise capital outgo towards consumer facing and enabling undertakings

Significant Issues Emerging From the Directors’ Report

During the twelvemonth the chief ongoing activities of the Group consisted of the wholesaling and merchandising of breaker, skate, snow and athleticss garb, accoutrements and hardware, and the licensing of the company’s hallmarks to declared parts of the universe. No dividends were paid to the stockholders for the fiscal twelvemonth 2014. The company has non announced a concluding ordinary dividend for the fiscal twelvemonth 2014. The Dividend Reinvestment Plan was put off. During fiscal twelvemonth the Group sold its portion in the DaKine trade name ( sale completed 23 July 2013 ) and its Canadian retail concatenation West 49. Pre-tax of import points for the twelvemonth ended 30 June 2014 of $ 146.2 million includes $ 17.7 million of just value accommodation of West 49 as held for sale during the twelvemonth, $ 29.3 million damage charges and $ 99.2 million of points impacting EBITDAI. For the old ages ended 30 June 2014 and 30 June 2013 these points together resulted in a entire impairment charge of $ 29.3 million and $ 766.5 million severally. The addition in net involvement disbursal from $ 12.4 million to $ 34.2 million was chiefly by the new funding steps that have been entered into during fiscal twelvemonth 2014. On 21 August 2014 the Company declared the result of the strategic reappraisal of its multi-brand ecommerce concern Surfstitch.com in Australia and Europe. The manager addresses this hazard by concentrating on new merchandise development and trade name construction to advance consumer trueness and paying employees reasonably. A alteration in stuff or break in the company’s merchandise sourcing and distribution activities could hold a negative impact on the Group trade name image.

Discussion on the Corporate Governance Statement

Board of Directors are accountable to stockholders for the public presentation of the company and believes that a high criterion of corporate administration strengthens the Company’s intent in maximizing the net incomes to stockholders. As a mandatary in the ASX Listing Rules, this statement sets out the graduated table to which the Company has acted in conformity with the“ASX Corporate Governance Principles and Recommendations”( 2nd Edition )for the financial twelvemonth ended June 30 2014. The Board of Directors consider that the group has complied with ASX Recommendations except for those explained below.

Board

Principle 1: Lay solid foundations for direction and inadvertence

The Board of Directors are straight accountable to stockholders for the public presentation of the company both in long and short term. They set the vision and mission for each of the major concern units.

Principle 2: Structure the board to add value

The Board comprises of Executive and Non-Executive Directors, with a majority of Non-Executive Directors. They guarantee that their ranks represents a balance between Directors with an apprehension and cognize -how of the Group and Directors with an outside position and the size of the Board are helpful to effectual treatment and direction.

Ethical motive

Principle 3: Promote ethical and responsible decision-making

The policy reflects Company’s values of truth, honestness, trust, teamwork, regard and a desire for glare in all the Company does.

Disclosure

Principle 4: Safeguard unity in fiscal coverage

To safeguard the unity and dependability of the Company ‘s fiscal statements and all other information published by the Company.

PRINCIPLE 5 and 6: Make seasonably and balanced revelation and esteem the rights of stockholders

The Company has framed guidelines for timely revelation of material information about the Company. It includes internal coverage events to guarantee that any sensitive information is reported to the Company in a timely mode.

RISK MANAGEMENT

Principle 7: Recognise and manage hazard

To place all of import predictable hazards associated with concern in a timely and changeless mode. Build extenuation programs for hazard countries where the residuary hazard is greater than sensible hazard degree

Wage

Principle 8: Remunerate reasonably and responsibly

Enabling the group to pull and maintain clasp of Executive and Non-Executive Directors who will make good value for stockholders and stakeholders. Incentive Executives and Directors holding clasp to the Group ‘s overall program and aims, the public presentation of the Group and Executive and the general market atmosphere within Australia and any other locations where the Group has operations.

RATIO ANALYSIS

Liquidity Ratios

Liquidity ratios are used to estimate if the company is able to run into its short term debt duties. These ratios assess the ability of a company to pay out off its short term liabilities.

  1. Current ratio=Current Assets / Current Liabilitiess

2014

2013

495801/225671

= 2.2: 1

622368/612495

= 1.02: 1

The Current Ratio is better in 2014 as compared to last twelvemonth and the company is a better place.

  1. Acid-test ( speedy ) ratio =Quick Asset/ Current Liabilitiess

2014

2013

495801 – 180222 / 225671

= 1.4: 1

622368 – 266806 / 612495

=0.58: 1

The ratio in 2014 is better than 2013 and this shows the company is in a good place.

  1. Receivables turnover =Net Credit Gross saless /Average Net Receivables

2014

2013

1125454 / 153850+204429 ) /2

= 6.28 times

1107492/ ( 266806+293201 ) /2

= 3.96times

The ratio indicates how many clip of the history receivables that collected in a twelvemonth. And in 2014 is better that 2013.

  1. Inventory turnover=Cost of Goods Sold / Average Inventory

2014

2013

555758/ ( 180222+266806 ) /2

= 2.49 times

541466/ ( 266806+293201 ) /2

= 1.93times

This ratio is about the figure of times that inventory sold or used in a given clip, and it is good in 2014.

Profitability Ratios

Profitability ratios assess the net income of a company for a given period of clip. Profitableness is frequently used as the concluding trial of direction operating effectivity.

  1. Net income border =Net income / Net Gross salessX 100

2014

2013

( 135236 ) / 1125454

= -12.1 %

( 653871 ) / 1107492

= -59.04 %

This ratio measures the net income and loss for the company, and the company got negative value in PM, but compared to 2013, 2014 became much better.

  1. Cash return on gross revenues = Net hard currency from runing activities / net gross revenues

2014

2013

( 76619 ) / 1125454

= -6.8 %

11935 / 1107492

= 1.08 %

This ratio explains about how much net income an entity makes after paying the variable cost of production like rewards, purchase.

  1. Gross net income border =Gross Profit / Net Gross saless

2014

2013

1125454 – 555758 / 1125454

= 50.6 %

1107492 – 541466 / 1107492

= 51.1 %

Compared to 2014, the company controlled the cost better in 2013, because the GPM is higher.

  1. Expense ratio = Expenses ( excepting revenue enhancement ) / Net gross revenues X 100

2014

2013

466634+166722+82366 / 1125454

= 0.64 times

457098+748385+24532 / 1107492

= 1.1 times

  1. Asset turnover = Net Gross saless / Average Entire Assetss

2014

2013

1125454 / ( 751866+1019292 ) /2

= 1.28 times

1107492 / ( 1019292+2080684 ) /2

= 0.71times

This ratio indicates how the company manages the plus expeditiously at its disposal to advance gross revenues. Based on the two ratios, it was good direction in 2014.

  1. Tax return on plus = Profit / Average Total Assets

2014

2013

( 135236 ) / ( 751866+1019292 ) /2

= -15.3 %

( 653871 ) / ( 1019292+2080684 ) /2

= -42.2 %

ROA offers the account of the capital strength in the company and in 2013 the company acquire more loss.

  1. Tax return on equity = Profit / Average Total Equity

2014

2013

( 135236 ) / ( 259036 + 312067 ) /2

= -47.3 %

( 653871 ) / ( 312067+ 1072261 ) /2

= -94.4 %

Roe shows how much the company earns comparing to the entire sum of stockholder equity based on the balance sheet and in 2013 and 2014, ROE are negative, but it became better in 2014.

  1. Net incomes per portion = Profit Availability to Ordinary Share Holder / Weighted Avg Number of Ordinary Shares Issued

2014

2013

( 233,712 – 0 ) / Ten

= $ 0.24 per portion

X= 233,712/0.249= 938602

( 859,541 – 0 ) / Ten

= $ 1.04 per portion

X= 859,541/1.04=826,482

  1. Price-Earnings ratio = Market Price per Share/ Earnings Per Share

2014

67 / ( 24.91 )

= -2.69 times

Price Net incomes ratio helps the investor to make up one’s mind whether to buy portions of a peculiar group. It is calculated to gauge the grasp in the market value of equity portions and higher value means, that market is more willing to pay more for the net incomes of the company in hereafter.

  1. Payout ratio = Cash Dividends / Profit ( Net )

2014

2013

0 / 233,712= 0

0 / 859, 541= 0

In both old ages, the company didn’t wage any kind of dividends.

Gearing Ratios

Gearing ratio Judgess the ability of the company to last over a long period of clip.

  1. Debt to entire assets ratio = Total Liabilities / Total Assetss

2014

2013

492830/ 751866

= 65 %

622368 / 1019292

= 61 %

This ratio shows the proportion of the company’s debt to its entire assets, the higher ratio they get and the higher hazard they have. As can be seen between the two ratios, it is higher in 2014 compared to 2013.

  1. Time involvement earned = Net income before Income Taxes And Interest And Taxes Expenses / Interest Expenses

2014

2013

135236 + 82366 / 82366

= 2.64 times

653871 + 24532 / 24532

= 26.7 times

  1. Cash debt coverage = Net Cash Flow Used by Operating Activities / Average Entire Liabilitiess

2014

2013

– 76619 / ( 492830 + 707225 ) /2

= 32 %

11935 / ( 707225 + 1008432 ) /2

= 1.4 %

Decision

From the above we can state that billabong bong is a well-established company in Australia, United States of America and Europe. From 2008 loss the group is demoing loss, the ground is it has acquired few companies overseas. The group launched different merchandises to better its fiscal public presentation, but still it is running under on loss. Though the loss per centum has decreased from 2008 to 2014, it may better in the following fiscal twelvemonth. At this minute for short term investing it’s non good, but for long term investing we can put in this group. The group will seek to reenforce its bing concern and to happen new growing chances.

Bibliography

( 2014, August 28 ) . Retrieved May 23, 2015, from Billabongbiz: hypertext transfer protocol: //www.billabongbiz.com/phoenix.zhtml? c=154279 & A ; p=irol-reportsannual

( 2015 ) . Retrieved May 23, 2015, from Billabongbiz: hypertext transfer protocol: //www.billabongbiz.com/phoenix.zhtml? c=154279 & A ; p=irol-history