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 preliminary results yesterday with revenue up 55.4% to €71.5m and operating profit up 53.6% to €27.3m, although operating margin down slightly by 44bps to 38.2%.
EPS increased by 42.3% to €0.074 and importantly free cash flow (FCF) was €5.2m up from €1.7m last year. Net cash increased by €28.6m to €42.8m following net proceeds of €27.3m from a placing and €3.9m of the FCF spent on an acquisition. Although these FCF amounts are small in comparison to the earnings, the last two years are a substantial improvement on the company's history of burning cash. Globo will need to continue this trend in a more substantive way, before the share price reflects the true worth of the business; which will also dissuade some traders from taking short positions in the stock on the basis that they believe the business model is unsustainable.
Management commented on the outlook for the business stating that the current year trading has started strongly and they anticipate that as IT budgets from customers start to be deployed and BYOD and mobile app needs increase further, Globo will have the opportunity to deliver another year of excellent growth and market penetration.
At 57p Globo is rated at about 7 times 2014 expected earnings, which does look good value, but the risks still remains until stronger cash flows are generated.
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