BILLABONG chairman Ted Kunkel resigned this afternoon to end a tumultuous day for the Gold Coast-based surf apparel retailer in which new CEO Launa Inman (pictured) announced a $225 million capital-raising venture.
Inman’s announcement was an about-face just weeks after Kunkel publicly ruled out going to the market for funds.
Just hours later, Kunkel announced he would leave the company some time between its Annual General Meeting in October and half yearly guidance in February. The chair of the board audit committee, Allan MacDonald, will also leave.
Inman also announced she would hire an as-yet-unnamed head of retail, who will start in July and report directly to her.
Inman says capital raising was necessary for Billabong after a significant deterioration of market conditions in May and June.
But the announcement was met with scepticism by some analysts as it was done ahead of a planned “deep dive’’ review of the company in August and the prospect of a further deterioration of market conditions.
When questioned why the company couldn’t wait until after the report to raise the money it needed, Inman effectively replied: “Trust me”.
Billabong shares were put in a trading halt this morning until Monday as the company prepares to raise the capital. The new shares will be offered to existing shareholders at just $1.02, a 44 per cent discount on Wednesday’s closing price.
The struggling retailer has already announced an earnings downgrade for the year to June 30, with underlying earnings expected to be about $130 million.
Inman says the cash infusion will be used to pay down some of Billabong’s $350 million debt, while some will be held back as a buffer in case market conditions deteriorate further.
Inman has promised a four-pillar “deep dive” review of the company. She says the results of the review will be announced on August 23.
Inman, who took over from long-serving CEO Derek O’Neill, says Billabong still has huge potential.
“I have only been in the job for six weeks and haven’t seen all the figures, but what I have seen is there is great opportunity and I am comfortable about that,” she says.
“We will come back to the market in August with a proper and professional presentation. I am comfortable what we are raising now will be sufficient.”
The four pillars of the review will be to focus on strengthening the Billabong brand, improving the experience in its retail stores, its online offering and improving supply chains, Inman says.
Inman revealed major shareholder and Billabong founder Gordon Merchant would inject $30 million into the company.
Merchant was a key player in the decision by Billabong to reject a $765 million takeover offer from TPG Capital earlier this year, which valued the company at $3 per share. Today Billabong shares were valued at $1.83.
The company instead sold half of its lucrative Nixon brand to Trilantic Capital Partners (TCP) for $285 million, which it used to pay off debt.
Billabong has also implemented a restructure of its businesses, expected to result in the loss of 400 jobs.
Net profit after tax was down 70.8 per cent to $16.1 million in the six months to December, compared to the previous period.
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