Billabong's $500 million dumper

Surfwear maker takes writedowns of $567 million

a woman

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Surfwear maker, Billabong International (ASX: BBG) has reported a $537 million loss for the six months to December 2012, after including impairment charges, and other writedowns of $567 million.

Billabong wrote down the value of its investment in Nixon by $107 million, and took a $428 million impairment on goodwill and brands. The company has now written off around $1 billion from intangible assets over the past 12 months – mainly the result of a string of overvalued acquisitions.

Excluding significant items, net profit for the half year halved from $38 million in 2011 to $19 million in 2012. Profit was hit by falling earnings in Europe and the Americas, primarily as a result of store closures and weak trading conditions in Europe.

Having previously guided to full year earnings before interest, tax, depreciation and amortisation (EBITDA) of between $85 to $92 million, Billabong has now revised that forecast down to between $74 to $85 million, before significant items.

Like Fairfax Media Holdings (ASX: FXJ), APN News & Media Limited (ASX: APN), and Seven West Media (ASX: SWM), Billabong has been forced to restructure  its business. The company has been closing unprofitable stores, cutting the number of its suppliers and improving its e-commerce platforms and infrastructure, as it faces increasing competition from online only retailers.

Foolish takeaway

Despite having two takeover offers on the table at $1.10 per share, investors have punished Billabong over today's results, with shares falling more than 4% to less than 90 cents at lunch time. The takeover overs are expected to finalised next month, but given recent disappointing results, it appears they are less likely to go ahead.

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