The good:

• GM recovery, 43 bps higher than previous quarter (nods smugly at using "bps" *EDIT* Considerably less smug after realising I did a Lyft and got a decimal point wrong - real change in GM% was 430 bps). Still lower than pre-COVID so possibly further opportunity to grow this.
• Cost discipline with third consecutive half of opex reduction.
• Combination of above has resulted in earnings turn around, from small loss in pcp to $5 million profit this half.
• All regions are profitable with a big turnaround in Europe.
• Working capital unwind results in cash earnings being even better, generating $15 million of FCF in the half.
• No net debt and plenty of cash means no existential threat.
• Management expect higher profit in 2H.

The less good:

• Fourth consecutive half of revenue decline.
• Probably fairly valued, even assuming this is the bottom of the cycle.

Overall, it's a pretty good result and management tend to deliver what they say (and aren't shy about telling you so when the outlook isn't so good). I just wonder whether there's better opportunities from a valuation perspective.

[Held]

It's a about time I got around to writing part 2 (of 2) of Stocks in my portfolio that deservedly went belly up in the last reporting season. I've been putting this one off as the market has been depressing enough of late but I found myself using a knife and fork to eat a pork and gravy roll earlier today, so I definitely deserve some self-flagellation.

In part 1 I stated that AFL had given plenty of hints at the half year result that a spectacular full year might not have been on the cards. Globe didn't just give hints - it took investors by the hand, walked them out to the woodshed, put a hatchet in their hands and invited them to go postal.

While many companies were on the lookout for inflationary impacts six months ago, Globe were already flagging margin compression and significant supply chain issues leading to inventory blowouts "which will be addressed in the next half-year". A specific outlook wasn't provided "other than to say we expect full-year sales to hold up...while profits and profitability will be lower". Plain speaking and lesson 1) when management talks themselves down it pays to take note.

However, by then the share price was well off its peak, which brings on lesson 2) just because a share price is down doesn't mean it can't go lower...heaps lower. Also it was down so far it was almost back to my buy price, which cues up lesson 3) the market doesn't give a crap what you paid.

Sure, I reasoned, they're incurring some short-term logistical issues but that doesn't change the fact that they're selling what the peeps want. It seemed like every time I passed a workwear store they were advertising "FXD sold here" - not a bad thing when your customers do your marketing for you. Sure, that's just one product line but the rest of their gear is pretty cool and hip too. I should know because I'm also cool and hip. Lesson 4) I am not cool and hip.

Come year end results it turns out management were right. Revenue was up (slightly) and profit was down (heaps). The inventory blowout that was to be addressed in 2H wasn't and FY23 shaped up as tough year with "downward pressure on our sales trajectory, profits and dividends".

So where does that leave me? Still holding - after all 2023 could surprise and the share price must be close to its low. I might sell when it gets back to my buy price. Kids these days love their stuff. I should know, I used to be one...

From the GLB release today (not sure why they're always put out their results around lunchtime) - 

The key business metrics for the full financial year were as follows:

• Reported net sales for the financial year of $266.5 million were 76% higher than the prior comparative period (pcp).
• Earnings before interest and tax (EBIT) were $46.7 million, more than 5 times the $7.3 million reported in the pcp.
• Net profit after tax (NPAT) of $33.3 million for the financial year was $27.2 million higher than the $6.1 million reported in the pcp.
• Cash-flows generated from operations were $22.5 million, as cash was invested in working capital to support the growth in revenues over the year.
• Dividends, paid or determined, in relation to the 2021 financial year were 32 cents per share, almost 3 times the 11 cents paid in relation to the 2020 financial year.

End Ctl-C Ctl-V.  It's a stonking result - even better than they flagged in June.  I haven't read the whole annual report but it's clear that while all regions traded strongly, the U.S. was the standout (up 115% at the top line YoY).  They're no ProMedicus though - it's a good company but how long do you want to hold a business whose only moat is their brand among millenials?  I suspect there's another really strong half to come but I'm not sure the reward outweighs the risk here...

[Held in RL and here...but might take some off the table]

MELBOURNE, 10 June 2021: Globe International Limited (the Company), designer, producer and distributor in the board sports, street fashion, outdoor and workwear markets, is providing this update to the market regarding trading conditions since it last the addressed the market at the time of its half year results announcement on 25 February 2021.

At that time, the Company advised that sales growth in the second half of the year was expected to continue to be robust, subject to the reliability of the supply of goods, predominantly from China. The Company also advised that, subject to the reliable supply of goods, profitability would remain strong but was expected to be lower in the second half of the financial year, compared to the first half-year, due to rising product costs and investments to support and fuel sales growth. As the end of the financial year approaches, the reliable supply of incoming goods continues to be a challenge, with the latest issue being significant delays in key global logistics routes. However, the Company has so far been able to overcome these COVID related sourcing and logistics challenges, resulting in a strong performance for the half-year which is ahead of expectations.

The Company can confirm that sales in the second half of the year will be approaching double the same period last year. As a result, full year sales are expected to be in excess of $250 million, compared to sales of $152.8 million in the prior financial year. Due to the strength in top-line growth in the second half of the financial year, profitability is also ahead of expectations. The Company now expects the full year EBIT percentage return on net sales to be in the mid-high teens. This compares to EBIT returns of 4.8% in the prior financial year, and 16.8% in the first half of the current financial year.

***

Talk about burying the lead!  The first part of this announcement reads like a Mea Culpa disclosure...but in reality this is a monster result.  Globe are going to sell more in 2H than they did in the Xmas half.  Truly phenonmenal sales and the EBIT % suggests they're maintaining cost discipline.  They will be cyclical so it's worth keeping a close eye on them but the overall trend from this company for more than a decade has been in the right direction.

[Held]