Globe’s Annual Report; Making a Profit Under Tough Conditions

Globe’s annual report for the year ended June 30 showed up on their web site a couple of days ago. It doesn’t contain much in the way of a detailed analysis of results, but I’ll give you what’s there.   All the numbers are in Australian dollars.  You can read it yourself if you want to.

As reported, sales were down 3.5% from $91.7 million to $88.5 million. Net profit declined from $1.31 million to $1.09 million. Globe’s tax rate fell from 59.4% to 38.7%, keeping the profit decline from being higher.

At June 30, one Australian dollar was about $1.06 U. S.
 
In constant currency, ignoring changes in the exchange rate that is, sales rose 5%. In local currencies, North America and Europe were up 6% and 12% respectively. Australian sales fell 2% “…due to weak trading conditions in the retail sector throughout the year.”
Globe’s gross profit margin declined from 47.5% to 45.9%. Earnings before interest, taxes, depreciation and amortization (EBITDA) fell 47% from $5.5 to $2.9 million.  $735,000 of that decline resulted from an increase in corporate expenses not allocated to the geographic segments.   
 
As reported, sales in all three reporting segments fell during the year. In the Australian segment, they were down from $24.4 million to $24 million. North America went from $50.8 million to $49.3 million. Europe’s numbers dropped from $16.5 million to $15.0 million. The United States, by itself, fell from $34 million to $31.6 million.
 
Over on the balance sheet, current assets are down consistent with the fall in sales. Receivables fell by 13% to $12.2 million. Past due receivables rose a bit from $2.59 to $2.72 million. None of that is more than 91 days past due in either year. More than half is past due only zero to thirty days. In other words, past due doesn’t mean it won’t be collected though no doubt there will be a few problems accounts. There always are. 
 
Inventory rose by 12.7%. While you’d like not to see that with sales falling, we’ve got to remember that higher product costs translates to more dollars in inventory even if the number of units should be the same. Current liabilities were also down. The company has no long term debt and I guess no bank debt of any kind. The current ratio remains more or less unchanged from last year at 3.0. Total debt to equity is also more or less the same at about 35%.
 
Total equity fell from $51.1 million to $46.9 million. Total contributed equity is $144.2 million, but accrued losses of $86.8 million over the life of the company reduce the total equity number.      
 
The strong Australian dollar meant that sales in the U.S. and Europe translated into fewer Australian dollars. Globe had the same problem with higher product costs from China that everybody has. That explained a chunk of the gross margin percentage decline. And the Australian economy took it’s time about going into recession but once it started did a fine job of it.
 
Lower sales and profits, of course, are lower sales and profits no matter what the reasons are, and it doesn’t look like Globe is expecting much improvement next year. “All things being equal, the performance of the business [for fiscal 2012] is expected to be approximately in line with the 2011 financial year.”