Monday 23 September 2013

Globo interims



A technology innovator delivering mobile, telecom and e-business software products and services. I have a holding in my growth portfolio (epic code: GBO).

 



Globo announced their interim results today showing revenues up by 52% to €32.03m,  Profit before tax up 74% to €14.47m and EPS increasing by 58% to €0.041.

The company has secured a €20m 3-year revolving credit line, with a €5m extension option, with Barclays Bank plc.  This is critical to the company as they continue to be in a cash-burn stage, with free cash flow consumption of €3.7m for the half year, which reduced their net cash to €10.8m.  In their trading update on 25 July though they thought their net cash was €9.2m, where they appear to have overstated their debt by 15% (as gross cash was identical), which is a concern. 

Management state that positive trading so far in the normally stronger second half, with their international business continuing to grow strongly, and the prospect of a significant contribution from Enterprise Mobility in a Box in North America gives them confidence in achieving market forecasts for the year.  This implies approximate revenue growth of 40% for the second half.

Although the future of Globo will be reliant on their ability to succeed in North America, it is currently just over 20% of sales and with the exception of Greece was the slowest growing territory during the six month period.

Click on chart to enlarge
 
The summary from my very first post on Globo is still relevant: "...an exciting growth company in an expanding market at a cheap price. The risks are - that it has yet to turn results into FCF; that a much larger competitor such as Cisco affects their growth aspirations, or causes them to enter a price war and they then spend inordinate amounts of expenditure on R&D or marketing to protect their position – with the result that substantial FCF is never generated..."

In early August, since my investment in the company had doubled in value, I halved my holding so that I'm just exposed to the profit I have made and thereby protecting my capital.

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