Globo: Positive 2012 trading statement. 2013 to be a defining year.

Globo (LON:GBO) (27.75p and 1.9% of JIC portfolio) has issued a positive trading update for the year ended 31st December 2012 in which it says it pleased to report that it has achieved a financial performance ahead of market expectations. Revenue was up 285 to €58m. However, if one strips out the Greek business which was divested in early December and compare the like for like numbers for the continuing business was up 66% at €46m.

The Company says EBITDA (earnings before interest, tax, depreciation and amortisation or the bad bits!) were up 42% to at least €29m with the continuing operations contributing the substantial majority total profits. This was driven mainly by the Group's mobile software products which account for 90% of the continuing operations.

The consumer offerings achieved revenue of €29m, up 25% on 2011 and the "strategically more important" GO!Enterprise recorded sales of €12m up from €2m in 2011. The Company addresses one area that has been of concern: operating cash flow for the year increased significantly to €13m but this is an area that investors will want to keep an eye on. Over the year as a whole the Group achieved organic free cash, (excluding acquisitions and disposals) for the year of €1.6m.

The outlook statement was positive with the Company confident that its acquisition of Dialect Technologies in February 2012 will see GO!Enterprise breakthrough in the US market and become a significant contributor to Group performance.

Conclusion: The key to Globo's future success rests on its ability to accelerate sales of GO!Enterprise. It has had some success, most notably with its 24th December announcement of a new contract with a European Tier-! mobile network operator. I bought the shares on 28th December 2012 since when they have risen 34%. However, I'm not tempted to sell as on consensus forecasts they are valued at 10x 2013 earnings (21% growth) and only 6.8x 2014 for 45% growth. Further progress should be made when the Group announces new contracts.