KEY POINTS:
Billabong
Billabong is a surf, snow and street-wear retailer that most teenagers know well. This is a superb growth company which just seems to get better.
The business was founded in 1973 by Gordon and Rema Merchant at Burleigh Heads on the Gold Coast of Queensland, as a supplier of quality surf apparel. The group has expanded into broader youth-oriented categories to include snowboarding and skateboarding and expanded to the US, Canada, NZ, Europe, Japan and Brazil. This week it reported a net profit of A$167.2 million for 2006-07, compared with $145.89 million last year. Sales grew 20.1 per cent to A$1.22 billion.
With a company like Billabong - which has a unique brand in its niche markets and a very strong culture of its own - the formula either works worldwide or it doesn't. And clearly the formula is working wherever the company opens its doors.
Contact Energy
Contact Energy has reported a 15 per cent drop in net profit to $231.2 million in the year to June 30.
It was a tough year with wholesale electricity prices down 42 per cent on average and gas costs rising 20 per cent, resulting in more expensive power transmission costs. Contact shares rose initially on the news as investors considered the big picture, in particular the progress made on Contact's $2 billion renewable energy projects, including two proposed geothermal plants and two wind farms.
With half of their generation plants already producing renewable energy, Contact was well placed to embrace the changing environment. The result was around the consensus forecast but it is difficult to justify the rise in the share price, given that CEN is already a very expensive share. The dividend yield is slim, with limited appeal for income investors. Nevertheless, this is a quality recession-proof share.
* Views expressed in this article are those of IRG, not the Weekend Herald.
