Billabong International Limited today announced a net profit after tax (NPAT) of $146.0 million for the financial year ended 30 June 2010. The result, built on the back of a strong second half performance, is up 8.1% in constant currency terms compared with the 2008-09 year (the prior year). Excluding the after tax impact of an impairment charge expense of $7.4 million in the prior year, NPAT for the year ended 30 June 2010 increased 3.1% in constant currency terms compared with the prior year. After adding back one-off post-tax acquisition transaction costs of $2.7 million, which under new accounting standard requirements now have to be expensed and cannot be capitalised, constant currency NPAT growth lifts to the Group’s previously-advised guidance of 5.0% compared with the prior year excluding the prior year impairment charge.

When translated into Australian dollars, the reported NPAT was down 4.5% compared with the prior year when including the prior year’s impairment charge or down 8.9% when excluding this impairment charge. Reported NPAT was adversely impacted by the unfavourable effect of the continued appreciation of the AUD against the Group’s 16 functional currencies, in particular against the USD and the Euro, relative to the prior year.

Total Group sales of $1.48 billion were flat in constant currency terms and down 11.2% in reported terms compared with the prior year, again reflecting the negative impact of foreign exchange movements when translating the result into Australian dollars.

European sales of $344.0 million were up 5.2% in constant currency terms, but down 11.3% in reported terms. Sales of $712.6 million in the Americas were down 1.2% in constant currency terms, or down 14.8% in reported terms. Australasian sales of $425.7 million were down 1.9% in constant currency terms, or down 4.2% in reported terms.

Gross margins strengthened to 54.4% from 53.2% in the prior year, reflecting a less promotional retail environment, primarily in the USA.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) of $253.3 million was down 0.9% in constant currency terms and down 11.1% in reported terms compared with the prior year. There was significant improvement across all regions in the second half, with EBITDA lifting 9.0% in constant currency terms following a 9.5% first-half decline. EBITDA margins for the full year remained steady at 17.1%.

Earnings per share of 58.3 cents was down 15.8%, principally reflecting the lower reported NPAT result and the increase in the weighted average number of shares on issue following the capital raising in May 2009.

Directors declared a final ordinary dividend of 18.0 cents per share, franked to 50%. This takes the full year dividend to 36.0 cents per share, representing a full year EPS payout ratio of approximately 62%.

The Group’s Dividend Reinvestment Plan (DRP) remains in place. For the final dividend to be paid on 22 October 2010, the DRP is optional and offers ordinary shareholders the opportunity to acquire fully paid ordinary shares which rank equally with all other shares issued, without transaction costs, at the prevailing market value. The DRP in relation to the 2010 final dividend will not be underwritten.

Billabong International Limited chief executive officer Derek O’Neill said the result was in line with expectations and reflected a good performance in a challenging global consumer environment.

“The Group sells in more than 100 countries and the consumer environment generally remained volatile and difficult to predict. Against this backdrop, the Group performed well,” said Mr O’Neill.

“Overall, the Group had an improved second half performance as the key market of the United States began to show signs of improvement and Europe remained solid, but there was a marked deterioration in trading in Australia late in the period that took some of the gloss off the result.

“The difficult trading environment also precipitated an acceleration in the evolution of the global action sports sector and the Group proactively evolved its business to meet the change.

“While the next 12 months are expected to remain challenging, a number of new initiatives were implemented and, coupled with a range of acquisitions, these have positioned the Group well for future growth.”

Looking ahead, in the absence of any further unforeseen, exceptional circumstances impacting the global boardsports market, the Group is providing a range within which it expects to perform in the 2010-11 financial year. At this time, NPAT in constant currency terms is expected to grow in the range of 2% to 8% compared with the prior year as an improving outlook in the Americas and continued strength in Europe is offset by a challenging market in the key territory of Australia. This earnings guidance, which reflects a reasonably flat expected EBIT result, higher interest costs and a lower effective tax rate, is expressed as a range due to continued volatility in the global markets in which the Group operates, in particular the Australian consumer market.

The Company views the 2010-11 financial year as a transition year, with various strategic moves enhancing its route to market to deliver its target consumer the compelling branded portfolio offer that the Company has developed over the past 10 years.

Thereafter, as the anticipated global recovery gradually takes hold, and given the successful execution of various strategic and operational initiatives, the Group expects to return, in the absence of further unforeseen, exceptional circumstances, to more historic EPS growth rates in excess of 10% per annum in constant currency terms.

Additionally, Billabong also announces today that it has reached conditional agreement to acquire the 36-door Rush Surf retail chain in Australia.

Rush primarily operates stores throughout regional Queensland and is one of the Billabong Group’s larger Australian customers. Billabong plans to retain the business as a multi-branded retailer and it will continue to be operated by its founder, Wade James.

It is anticipated the purchase will complete in October 2010 and will be earnings per share positive in year one.