Thursday 31 October 2013

Globo 3rd qtr update



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 issued a third quarter update and some additional information that had been requested by investors.

Revenues for the nine months were up 58 per cent on last year to €50.01m, compared to growth at the half-year stage of 52% and sales of €32.03m.  Management state that this performance is ahead of their expectations.

They state that positive free cash flow (FCF) of €0.4m has been generated, resulting in a net cash position for the Group of €11.2m up from €10.8m at the half year.


The additional information re-confirmed that capitalisation of development is in accordance with IFRS, revenue recognition conforms to IFRS and follows the policies set out in its annual report and the rationale behind the disposal of 51% of its Greek facility.  The main new information disclosed - was that the Greek associate is on track and Globo is expecting to receive the second instalment of €500,000 principal plus interest by the end of this year and management also disclosed detailed payment terms for its various forms of trading, which can run for some considerable periods well in excess of 90 days.

Management recognise the risk they are exposed to in extended payment terms, but have stated that as they penetrate more mature markets this will improve the rate of collection of receivables.

There is not much new in the additional information and of course the continuing low level of FCF will still cause some concern, but not surprising in a high growth company with extended terms of payment. 

I cannot see an end to the highly volatile nature of the SP, but the investment case is not much changed from that of a high risk, but potentially high reward stock that requires managing accordingly.  The first rule for any long term investor is protection of capital; so locking in profits on a partial sale to protect your capital while maintaining an exposure is sensible.




 


  
 
 


 

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