Good afternoon!
Not a great start to the day - I've come down with the lurgy, so have been shivering in bed with a fever and a sore throat. Also it's taken me half an hour to crank a rather temperamental PC into action, further delaying things. So I'll write this report throughout the afternoon, hence if you refresh this page later in the day, more stuff will appear.
Globo (LON:GBO)
Share price: 40.75p
No. shares: 373.7m
Market cap: £152.3m
I had a look at the latest interim accounts from Globo (LON:GBO) last night, and all my concerns remain, indeed have strengthened. It's one of the most bizarre & unreal-looking balance sheets that I've ever seen. Once again the company reports huge profits, but once again the bizarre debit balances on the balance sheet pile up into ever larger & more unbelievable mountains.
Cash & debt - most companies have cash, or debt. There might be a bit of overlap, with some cash in transit, or cash at one subsidiary, and debt at another. Usually though the net picture makes sense. Not here! The group reports cash of E104.4m at 30 Jun 2015.
On the same date, it reports borrowings of E56.9m. Given that interest rates on cash deposits are close to zero, this is a staggeringly inefficient, indeed totally illogical arrangement. The P&L shows E368k of interest income, and E1,981k of interest cost, in just a six month period remember. Therefore, the first job I would if I became CFO of this group would be to repay all the bank debt from the cash pile. That would still leave the group with net cash of E47.5m, which looks ample.
However, by repaying all the bank debt, I would at a stroke have reduced the P&L interest charge by E1,981k * 2 = E3.96m. So there is a cost saving of nearly E4m p.a. interest charges just sitting on a plate, which could be taken today (unless there are early payment penalties on the debt).
The fact that Globo continues to report this huge net cash balance, whilst simultaneously holding significant, and expensive debt, is beyond bizarre. It's highly suspicious, since no rational company would allow this situation to persist for a considerable amount of time, as has happened here.
So the biggest, shiniest red flag is this weird cash & debt…
