Globo trading 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 trading update ahead of their full year results today.  Revenues for the full year from continuing operations grew 57% to €72 million, this compares to growth of 58% at the nine month stage.  Fourth quarter sales at €22m were 22% above the third quarter sales.


Management expect that profits will be in line with market expectations, although there was also a head line that stated "...The Board is pleased to report that Globo has achieved a strong financial performance for 2013, ahead of market expectations..." this may refer to the strong free cash flow in the quarter, but without any explanation it is rather confusing 


The company stated that growing sales of GO!Enterprise resulted in an increased operating profit cash conversion ratio of around 80% for the full year, contributing to a net cash position that was €42m, this also included the share placing proceeds of €23m, a further €1m of proceeds on the sale of 51% of its Greek subsidiary, reduced by $5m spent on the acquisition of Notify Technology Inc.


Based on the starting net cash position and the items mentioned above, I would estimate that the free cash flow (FCF) for the year was €8m, although it would be good to see the final results for confirmation of this.  If this number is confirmed, then this is a substantial improvement in the profile of the business, which has suffered historically from negative FCF (there was a small positive FCF in 2012).  


Management state that "...Current year trading has started very strongly and we anticipate that as IT budgets from customers start to be deployed and BYOD and mobile apps needs increase further, Globo will have the opportunity to deliver another year of excellent growth and market penetration..."

A  good trading update from a company that is clearly in a high growth phase within growing markets - they state that the Mobile Enterprise Management and Mobile Application Development Platform markets are expected to grow by 21.9% and 38.7% respectively over the next 4 years.  Shares were up almost 15% at 65p during the morning which still only puts them on an historic P/E (2013 earnings) of 9.6 and less than 7.5 on 2014 expected earnings.