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Billabong raises $225m as retail worsens


Troubled surfwear company Billabong has launched a $225 million fund raising venture and issued another profit warning amid tough trading conditions in the retail sector.

Billabong on Wednesday said it had experienced a further deterioration of retail conditions in Europe, Australia and Canada.

It now expects underlying earnings, which exclude one-off costs from the restructure, to be $130 million to $135 million for the year to June 30.

That's down from its forecast provided in February of earnings slightly above $157 million.

The company's new chief executive Laura Inman said founder and director Gordon Merchant would invest $30 million in the capital raising.

She expects the offer will serve as buffer in case conditions decline further.

However, analysts are unconvinced about the overall value of the fundraising for shareholders.

Billabong will issue new shares to existing shareholders at a 44 per cent discount to current prices, and use the funds to reduce its debt from $325 million to about $100 million.

It has also extended its loans to ensure repayments are not due until least July 2014.

Ms Inman, who has been in the top job for just six weeks, said she would wait until August 24 to announce detailed financial plans to rebuild the company over 36 months.

"I'm committed to taking a hard-headed approach," Ms Inman told analysts on Thursday.

"There are no sacred cows as we look for ways to improve the business."

Despite her pledged to do whatever was necessary to maximise shareholder returns, analysts were still worried about continued poor results after difficult trading in May and June.

"You're really asking investors take a leap of faith that the strategy will be a sound one," JP Morgan analyst Shaun Cousins said.

Credit-Suisse analyst Grant Saligari said it was hard to see how Billabong could ask shareholders for $250 million with no clear strategy.

"There's nothing in the presentation that would suggest the shareholders are going to get a return on that," he said.

Billabong also announced it has appointed a new head of retail to start in July and report directly to Ms Inman.

In February Billabong announced a major restructure in response to its declining financial performance.

The moves included the closure of stores and 400 job cuts, which the company says are on track.

It also involved the partial sale of its accessories brand Nixon Inc which the company will retain.

The sale produced $US285 million, which Billabong used to pay down its debt.

Billabong had so far closed 45 stores, with another nine expected to go by the end of June, and then a further 84 by the end of June 2013.

Shares in the company went into a trading halt before the announcement. They closed at $1.83 on Wednesday.