AFTER three years racking up losses of more than $1.3 billion, Billabong International (ASX: BBG) has finally scratched out a profit posting a $25.7 million surplus for the December half-year.

The result, which compares to a $126.2 million loss a year ago, comes on the heels of one of the most turbulent periods in the Gold Coast company's 40-year history as it reinvents itself in a challenging retail landscape.

But, according to its US-based CEO Neil Fiske, there is more work to be done.

Fiske has spent the past year refocusing the surfwear group's business, which included the sale of former key online assets SurfStitch and Swell, and the Canadian retail operation West 49.

While the newly listed SurfStitch yesterday revealed it was on track to growing its business strongly over the next few years, Billabong has offered a more tepid view of the years ahead with Fiske warning that it will take time for all the elements of the company's turnaround strategy to filter through to the bottom line.

Billabong also warns that the December half may be as good as it gets this financial year. It says the lower Australian dollar will put pressure on prices for imported products, while a ports dispute in California could hamper the flow of new products into the US and disrupt what it describes as positive momentum there.

Total revenue for the half year slumped 19.2 per cent to $541.1 million, reflecting the sale of business assets and adverse currency movements. However, revenue from continuing business was down only 1.1 per cent to $522.1 million in constant currency terms.

Drilling down to the core of the business by excluding significant items and discontinued operations, Billabong posted EBITDA (earnings before interest, tax depreciation and amortisation) of $42.8 million in the half year, down from $45.02 million.

From a regional perspective, the Americas saw revenue fall 32 per cent to $200.7 million and EBITDAI (which also excludes impairments) claw back from a $16.8 million loss to an $8.4 million profit. The result was impacted by the lower conversion of the Australian dollar against the US dollar as well as the sale of businesses.

European revenue slid 8.6 per cent to $89.9 million, while EBITDAI surged to $26.6 million from a $7.8 million loss. Gross margins in Europe are up from 49.4 per cent to 55.9 per cent due to restructuring and a focus on more profitable markets.

Element is showing double digit growth, says Billabong, aided by the opening of a new format store in London late last year.

The Asia Pacific was hit by softer conditions in Australia, pushing revenue down 9.4 per cent to $246.8 million, although EBITDAI rose 3.2 per cent to $16.9 million.

Fiske says Australian sales weakened ahead of Christmas, leading to a 4.5 per cent drop in sales across the Asia-Pacific division on a comparable store basis.

While Asia-Pacific margins have improved, consolidated gross margins for the group edged lower to 54.9 per cent from 55.4 per cent.

Among the positives for the group is net interest expense, which fell to $13.39 million from $19.23 million as the term loan facility was cut to $US203.8 million from $US360 million following capital raisings early last year.

"A year into our turnaround it's encouraging to see the group return to profitability for the first time in three years," says Fiske.

"There remains though significant operational reform to be undertaken. Where our effort is being concentrated we are seeing positive signs of brand growth and improved margins.

"In the US, the group's biggest market, brand Billabong's sales are up near double digits for the half in the wholesale market, and RVCA sales are also growing in this market. Meanwhile, Element has experienced strong double-digit growth in Europe, its largest region.

"However, as expected in what is a complex global turnaround, there is not yet universal progress across our operations and these results are impacted by changes to our portfolio."

While Billabong last year sold its online business SurfStitch to the company's founders, Billabong says it is now focusing its attention on an "omni-platform" strategy which is expected to kick off in Australia by mid-2016.

"We have historically underinvested in direct to consumer platforms for our brands," says Fiske.

"Regaining full ownership of our e-commerce sites in this half allows us to implement a true omni-channel platform that will create a seamless and superior experience anywhere our consumers choose to shop.

"In building those platforms our approach is to build it once, build it right and leverage our global scale to lower costs while improving functionality.

"Starting in Australia, a staged roll-out of a new direct to consumer omni-channel platform will for the first time support all customer facing channels across the group's operations including brick and mortar retail, digital commerce, wholesale accounts and licensed stores.

"Multi-channel customers typically drive two to three times the sales of retail or e-commerce-only customers, giving us a huge opportunity to build on our leading action sports position in Australia before rolling out the strategy globally."

Fiske says Billabong's return to profitability is an "encouraging signpost in the turnaround strategy".

"We are, though, a little more than a year into this turnaround implementation and little more than six months into having the global leadership team in place to fully execute on it."

Fiske says changes will take time to flow to the bottom line.

Investors were unmoved by today's result, pushing Billabong's shares down 3c to 61c on heavy volume of more than six million shares.

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