Business SummaryBillabong International Limited (BBG) is involved in the marketing,distribution, wholesaling and retailing of apparel, accessories, eyewear,wetsuits and hardgoods in the boardsports sector. BBG's products arelicensed and distributed in more than 100 countries and are available inapproximately 10,000 doors worldwide. The Group operates 407 retail storesas at 30 June 2016 in regions/countries around the world including but notlimited to: North America(55 stores), Europe (104 stores), Australia (127stores), New Zealand (29 stores), Japan (47 stores) and South Africa (28stores).

Brands: BBG's operates under the following brands The Group's brands atyear-end included Billabong, Element, RVCA, Kustom, Palmers, Honolua,Xcel, Tigerlily, and Von Zipper.

Operation: BBG comprises of both wholesale and retail operations. Theretail business comprises a mix of multi branded stores selling product frommany of the boardsport sector's leading brands, along with singlebrandedstores operating under banners, outlet stores to support the self-liquidation ofend-of-season stock and various shop-in-shop concepts in areas where thereis an underdeveloped specialty store distribution channel.

On 29 June 2016, the Group announced the sale of Sector 9 to an affiliate ofBravo Sports, a portfolio company of Transom Capital Group.

Latest ResearchBillabong’s Last Result As Listed Company – 1H18 Result

Deal likely to proceed — Billabong reported 1H18 EBITDA of $19 million,down 34%. Adjusting for discontinued businesses, EBITDA fell 19%. BothEurope and Asia Pacific were weak with declining sales and some timingissues around wholesale orders. Given the balance sheet position andweak earnings outlook, the probability of the takeover offer proceeding isvery high. We adjust our target price to $1.00 to reflect the takeover offer(from $1.05 previously).

For more information see research 26 Feb 2018.

GICS - Consumer Dur/App

Billabong International Limited

ASX Code: BBG Price: $1.045 12 Mth Target Price: $1.00 Rating: Neutral - High

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

26 April 2018$207m198.1m$1.18$0.49

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Neutral - High Risk$1.00-4.3%NA%-4.3%

Investment FundamentalsFYE 30 Jun 2017A 2018F 2019F 2020F

Profit $m -13.0 -5.0 8.0 15.0Profit (norm)* $m -13.0 -5.0 8.0 15.0

EPS* ¢ -7.0 -3.0 4.0 8.0EPS Growth % 0.0 0.0 0.0 100.0P/E* x 0.0 0.0 26.1 13.1P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 0.0 0.0 0.0 0.0Yield % 0.0 0.0 0.0 0.0Franking % 0.0 0.0 0.0 0.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2013A 2014A 2015A 2016A 2017A

Sales Revenue 1,341 1,121 1,052 1,100 978Total Revenue ex. Int. 1,360 1,135 1,065 1,111 982EBITDA 77 97 69 61 -178Depreciation & Amort. -42 -35 -29 -28 -24Goodwill Amortisation -- -- -- -- --EBIT 35 62 40 32 -202Net Interest -26 -81 -32 -42 -37Profit Before Tax 10 -19 8 -9 -240Income Tax -33 -75 12 -8 -10Outside Equity Int. 3 6 2 -- --Profit after Tax -22 -118 32 -17 -196Significant Items after Tax -838 -116 -28 -7 119Reported Profit after Tax -860 -234 4 -24 -77Preferred Dividends -- -- -- -- --

Cash Flow ($M)2013A 2014A 2015A 2016A 2017A

Receipts from Customers 1,477 1,357 1,137 1,173 1,085Funds from Operations 26 23 14 -5 33Net Operating Cashflow 12 -77 -15 -22 9Capex -40 -25 -28 -38 -21Acquisitions & Investments -70 -42 -- -- 58Sale of Invest. & Subsid. -- 84 38 16 -2Net Investing Cashflow -109 18 11 -34 34Proceeds from Issues 67 182 -- -- --Dividends Paid -- -- -- -- --Net Financing Cashflow -112 94 0 -11 -58Net Increase Cash -209 35 -4 -68 -14Cash at Beginning 316 113 145 153 89Exchange Rate Adjust. 7 -3 12 3 -3Cash at End 113 145 153 89 72

Ratios and Substantial Shareholders2013A 2014A 2015A 2016A 2017A

Profitability RatiosEBITDA Margin % 5.76 8.65 6.58 5.52 -18.24EBIT Margin % 2.64 5.50 3.82 2.94 -20.69Net Profit Margin % -1.46 -7.82 2.05 -1.55 -25.51Return on Equity % -7.19 -32.47 7.67 -6.57 -142.31Return on Assets % -0.09 -3.93 5.67 1.70 -38.54

Debt/Safety RatiosNet Debt/Equity % 77.37 28.69 40.32 71.43 84.79Interest Cover x 1.38 0.76 1.24 0.78 -5.40

Top 5 Substantial ShareholdersOCM Clean Wave Holdings B.V. 19.2%CCP II Dutch Acquisition E B.V. 19.2%Gordon Stanley Merchant & Gordon Merchant No. 2 Pty Ltd 12.8%Ryder Investment Management Pty Ltd 10.3%Adam Smith Asset Management 5.0%

Balance Sheet ($M)2013A 2014A 2015A 2016A 2017A

Cash & Equivalent 114 145 153 89 72Receivables 204 154 165 172 169Inventories 267 180 187 186 162Other Current Assets 37 17 19 18 18Current Assets 622 496 524 464 422Prop. Plant & Equipment 119 94 90 86 73Intangibles 213 144 162 165 58Other Non-Current Assets 46 27 26 26 26Non-Current Assets 390 256 280 280 156Total Assets 1,013 752 804 744 578Interest Bearing Debt 320 219 267 274 220Other Liabilities 425 273 256 211 183Total Liabilities 746 493 522 485 403Net Assets 267 259 282 259 175Share Capital 886 1,072 1,073 1,074 1,074Reserves -102 -100 -95 -94 -94Retained Earnings -513 -701 -697 -721 -804Outside Equity Int. -5 -11 -- -- --Total Shareholders Equity 267 259 282 259 175

Price vs. EPS Principals & DirectorsPrincipals

Company Secretary Ms Joanna BrandMs Tracey Wood

Directors

Mr Gordon Stanley Merchant(Non-Executive Director)Mr Ian Alfred Pollard(Non-Executive Chairman,Non-ExecutiveDirector)Mr Elliott Weinstein(Non-Executive Director)Ms Kim Anderson(Non-Executive Director)Mr Howard Leonard Mowlem(Non-Executive Director)Mr Neil Fiske(Chief Executive Officer,Managing Director)

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