Not Too Bad, But Not Too Good. And Generally Uninformative. Globe’s Annual Results

Globe is no more immune to economic conditions than any other company.  But what I’ve always liked about them is they seem to be in touch with reality and have a positive attitude about it.  They haven’t always been right (me neither) but they’re not slow to realize when something should change and in making it happen.  Their results for the year ended June 30, 2017 demonstrate that.

As usual, we don’t get very much useful information in their statutory report, and nothing by brand, but I’ll give you what I’ve got.

Revenue for the year fell 7% from $151 to $140 million (all numbers in Australian dollars).  But they boosted their gross margin from 44.3% to 45.8% while cutting SG&A expenses by 5.8% from $38.8 to $36.6 million.  Pretax profit declined 12.1% from $5.89 to $5.18 million.

Net income rose from $4.74 to $5.08 million, but only because of a big decline in income tax expense from $1.15 million to $101,000.

There’s no long-term debt on the balance sheet, and the current ratio improved from 1.95 to 2.19.  Cash, at $10.8 million, was up about $1.8 million from the end of the previous year.  What I really like is the 23% decline in inventories to $20.9 million from $27.2 million.  I would have liked to see a decline in receivables rather than the increase from $17.0 to $17.8 million.

Trade payables rose very slightly to $22.4 million, but borrowings went from $4.95 million to $0.00.  What I particularly like to see in any company these days is an improvement in cash flow.  Globe’s cash provided by operating activities improved from a negative $3.36 million to a positive $10.57 million.

By segment, Australasia revenues rose 13.6% from $67.9 to $77.1 million.  EBITDA for the segment was up 32.6% from $9.08 to $12.04 million.  Revenue in Australia alone rose 15.5% from $61.8 to $71.4 million.  Basically, all the growth in the segment was in Australia.

North American revenues fell 14.8% from $49.3 to $42 million.  EBITDA was a loss of $1.4 million compared to a loss last year of $1.5 million.  Revenues in the United States rose a bit (2.9%), from $21.6 to $22.2 million.  That’s interesting bordering on confusing.  If the US was up a bit, what part of North America dropped 15%?  How is that even possible?  Some debacle in Canada?

Globe bought 50% of Salty Crew effective January 1, 2017.  That “…contributed to second half sales being 2% higher than the prior corresponding period.”  I don’t know which segment those revenues showed up in.  I guess I can conclude that their sales for the year, without Salty Crew, would have fallen more than 7%.  Wonder how Salty impacted their gross margin?

European revenue took a tumble from $33.6 to $21.4 million.  That’s 36.3%.  EBITDA fell from $4.23 million to $464,000.

Globe had its butt saved by the Australian results.  I like that they met a decline in revenues with an improvement in their gross margin, a reduction in expenses, and a strengthened balance sheet and cash flow.  Hopefully, that all implies a strengthening in their brands’ positioning.

I assume the North American numbers are correct, but I can’t offer even a hypothesis as to how it turned out that way.  Maybe I’ll call them Monday and ask.

Well, that’s all I know which is not much.  I have no idea how you would make an investment decision in Globe based on this information.  Apparently, they don’t care.  Good for them for being in that position.

I’ve never written an article on a public company’s results for the year based on their required filings that’s this short.  But it’s all I’ve got.