Billabong profits wiped out by write-downs

Troubled surfwear retailer Billabong has reported a $536.6 million half-year loss on massive write-downs.

In the six months to the end of December, Billabong reported an after-tax loss of $536.6 million, which compares to the company's $16.1 million profit during the same period the year before.

The net result takes into account $567 million in one-off write-downs in the value of many of Billabong's brands and assets.

The company's underlying half-year profit, excluding these write-downs, roughly halved from $38.3 million to $19.2 million.

The company has downgraded its expected underlying earnings for the full-year, from its previous guidance of $85-92 million, to between $74-85 million.

The company has also admitted it is in breach of its debt covenants, because of the write-downs.

Billabong's chief executive, Launa Inman says the result is a huge wake-up call.

"If anyone within or outside of Billabong still believes we don't need to radically change the way we run this business, today's half-year results end that illusion," she said.

"Billabong is undergoing significant structural change.

To unlock the opportunities within the group, it must be transparent and directly address and learn from the events of the past." Launa Inman says it is an "unacceptable" result, despite retail conditions still being extremely challenging, particularly in Europe, where Billabong's earnings before interest and tax are down 78 per cent.

However, she also says there are a number of strategies in place to save money.

"Costs are being reduced, in particular through the store closure program, with 119 stores already closed," Launa Inman added.

Billabong says it is still negotiating with the two parties that currently have tentative takeover bids for the company on the table.

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