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Billabong reports larger than forecast profit, shares soar


Industry News:

Billabong reports larger than forecast profit, shares soar

Surfersvillage Global Surf News, 22 October 2004: - - Billabong's CEO Derek O'Neill rode the wave of market approval after forecasting a 30 per cent increase in profit this year. Billabong's last market guidance in August was for a 20 per cent profit increase, but Mr O'Neill told yesterday's annual general meeting of the company on the Gold Coast that the market for surfwear, particularly in Australia, was proving very strong.

"There's a very strong retail environment at the moment, and our product has continued to improve," Mr O'Neill said. "Men's (wear) is extremely strong right now - board shorts are very, very strong, the T-shirt and tops business continues to be strong, but our key right now is board shorts. "I think we've got one of the best board shorts range we've ever had and that's really a big part of it." The Gold Coast has been starved of good waves for the past few months but the surfing gods had been "sending them down" in the past few days," he said.

However, Mr O'Neill, a former champion surfer tries to catch the waves each morning. I went in on Wednesday he said, adding that he was looking forward to the weekend. Mr O'Neill may have missed riding waves but Billabong's ride on the market yesterday was sure and spectacular, rising from an opening of $10 to a high of $10.90 before closing at $10.79, a rise of 7.9 per cent during the day.

Mr O'Neill also signalled a greater retail presence for the company in its key market of the US, especially in the highly competitive Californian market. Earlier this year the company took over the Honolua Surf Company, which has 23 retail outlets in Hawaii, and yesterday Mr O'Neill announced that the company had bought a chain of retail outlets in southern California to help the Honolua brand break into the US mainland.

"There's no question that the southern California-Orange County region is the centre of the map for new sports apparel, and we saw this as a way of introducing Honolua into that market," Mr O'Neill said. "Those stores will remain branded as Beach Access for the moment - we don't think the Honolua brand is strong enough now to just open Honolua stores - but there's no question we would like to see Honolua stores on the mainland at some stage.

"It sounds like retail is growing overall but within the context of the business it's still a relatively small part, and we expect that in the near future it will remain a relatively small part." Mr O'Neill said that while Billabong was performing strongly in Australia and the US - particularly Australia - the company's other key market of Europe was steady. "Europe's going okay ... it's not setting the world on fire ... but it's progressing," he said.

Yesterday was also the last board meeting of company chairman Gary Pemberton, and the meeting confirmed that former Foster's head Ted Kunkel would take over from Mr Pemberton at the start of 2005. The meeting also confirmed a share incentive scheme, which Mr Pemberton said would be aimed at about 35 key employees of the company around the world.

The Billabong share incentive scheme will cost about $5 million over three years, but Mr Pemberton said the Billabong scheme differed from similar schemes in that it was based on increases in earnings per share rather than the share price.

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