Globe Had a Good Year- But It’s Hard to Tell How They Did It

I like Globe.  They’ve always had a good attitude, have been able to spot opportunities, and have acknowledged and moved to correct mistakes when they happened.  They are, as a result, a company I want to write about because I think we might all learn something.

Unfortunately, their required statutory report for the year ended June 30, 2018 is somewhere between not much and no help.  How can a 60-page report not even list the brands they own and tell us at least a bit about how they are doing?

The answer is that Globe is closely held by the Hills, has few shareholders, isn’t closely followed by the analysts and, last but certainly not least, is operating under Australian accounting rules.  I may not like the paucity of information, but in their place, I’d do the same thing.  Let’s see if I can glean a bit of useful data from what they do tell us.  Remember, all numbers are in Australian dollars.  One Australian dollar will cost you around 72 U.S. cents.

Revenue rose $7.2 million (5.16%) from $140.5 to $147.7 million.  All the growth happened in the second half of the year.

Revenues in Australasia rose 1.75% from $77.1 to $78.4 million.  EBITDA grew from $12.2 to $14.6 million, or by 19.7%.  The rise in EBITDA, we are told, was mostly driven by “…sales and profit growth in the workwear division.”

North American revenues were up 10.5% from $42.0 to $46.4 million.  EBITDA in that segment went from a loss of $1.25 million to a profit of $1.56 million.  “This turn-around was a result of the restructuring that was completed during the 2017 financial year, as well as an 11% increase in revenues driven by new apparel initiatives.”

Europe revenues rose from $21.4 to $22.9 million, or by 7.0%.  It’s EBITDA was $636,000, up 0.8% from $631,000.  All they tell us is that “The European business reported modest growth in sales and profitability.”  Well, that’s helpful.

What I hear is that workwear and apparel are responsible for most of the revenue growth.  Does that imply some stagnation in some of the hard goods driven brands?  How are shoes doing?

The gross margin rose 1.4% “…driven by sales mix and favorable foreign exchange impacts.”  Using Globe’s “Revenue from operations” number and what they call “Cost of sales” in Note 4, I calculate a gross margin as having risen from 45.8% to 47.8%.

I am sure they are right and that I don’t understand what “Cost of sales” includes.  But the calculation I did gives a better result than what they report.  Obviously, cost of sales can include more costs than the expenses included in gross margin, but if that was true then wouldn’t my calculated “gross margin” be less than what they reported?

Moan.  I need a footnote to the footnote.

Selling and administrative expenses rose 7.9% from $36.6 million last year to $39.5 in the most recent year.  Employee benefits expense was down very slightly to $21.4 million.  Net income rose 66.1% from $5.08 to $8.4 million.  There’s no discussion of the changes. The balance sheet is solid.

I want to thank Globe for providing a report that made it impossible for me to spend much time analyzing it.  I confess I don’t entirely miss having Billabong’s public filings to try to figure out every six months.

Globe seems to be a company changing its focus to apparel and workwear.  Not a surprise given the current state of growth opportunities in hard goods. They are managing the transition while keeping the balance sheet strong and earning more money.  There is something about their culture that makes them early recognizers of market changes and willing to act on that knowledge.