The Chairman of action board sports, footwear and apparel company Globe International Limited, Mr Paul Isherwood, said today that the company’s half-year result to 31 December 2002 was unacceptable to Globe’s Directors and management and would be disappointing to shareholders. “Whilst Group revenues have increased to $f 16.6m from $97.7m for the same period in the previous year (largely as a result of the recent acquisition of Kubic Marketing), profit after tax has fallen to $0.2m from $7.7117,” Mr Isherwood said.
“Globe’s balance sheet remains sound. Net operating cash fiow for the half year was $6.2 million. However, the Board has decided that it would not be prudent to declare an interim dividend. “This result is dearly not acceptable. It has primarily occurred as a result of the challenges facing the US economy, a cyclical downturn in the American core skate market and the failure of some Globe core brands to maintain their previously high level of sates growth. Decisive action is now being taken to restore shareholder value. “A focus over the remainder of this financial year is to remove costs but not to the detriment of product quality or demand creation. Whilst product development and demand creation costs are likely to increase, other costs will be significantly reduced to levels appropriate for Globe.” AUSTRALASIA Sates in Australia and New Zealand declined by $10.4m to $45.9m in the half year due to a decision to cease unprofitable brands, weakening in the skate hardware and footwear markets generally and a lower than anticipated re-order of some apparel brands. Since the calendar year end, however, an improvement in the market has been observed in the apparel brands. USA The increase in USA sales to $48.2m for the half year has occurred due to the Kubic acquisition. The core business of Globe footwear has experienced both significant difficulty in the softer skate market and shift in styling to simpler lower priced footwear impacting on total sales volumes and profits. Kubic’s current performance is a major concern. The elimination of duplication and inefficiencies in the company’s US operations is underway. Whilst the benefits of the Kubic strategic acquisition are yet to be realised, the strong brands that were acquired will provide opportunities for future growth . IMTERMA TIOMA L International sales, primarily in Europe, have improved modestly to $21.2m for the half year, compared to $19.4m last year, however EBlT margins have come under significant pressure arising from provisioning for doubtful debts in Japan and Norway. Europe is seen as providing significant market opportunities for Globe and an appropriate structure is being examined as a matter of priority. SUMMARY Global conditions in the skate market remain tough due to international uncertainty and changes in consumer spending patterns. “There is much that we are doing internally in order to strengthen and then grow our business in the skate, surf and street fashion sectors,” Mr Isherwood said. “The challenge Globe faces is to get our own house in order to better position the company to benefit from emerging growth opportunities. We are confident that this can be achieved. “Shareholders have a right to expect reasonable returns on funds employed. There is a determination within the business that the road to recovery must commence now. “Globe continues to earn strong gross profit margins which will underpin future EBlT growth . “The current international uncertainty is an issue all global companies have to deal with, and Globe is no different. The decline in profitability that we have reported today is our responsibility, regardless of external factors and we are now addressing it,” Mr Ishemood said. OUTLOOK Given current market volatility, and the considerable internal changes that are now underway, definitive financial guidance on Globe’s earnings for the second half cannot be provided at this stage. It is not anticipated that there will be any significant improvement in second half earnings over the first half. The beneficial impact of Globe’s restructuring will not be reflected in its results in the short to medium term. Trends in the past two months trading have been mixed. Continuing difficult trading conditions in the USA and uncertainty in Europe have offset positive signs in the Australasian market. BOARD FOCUS “The board is determined to restore shareholder value,” Mr Isherwood said. “Directors and management remain dearly focused on what has to be done to return Globe to a position of strength and remain confident that the restructuring process that has commenced will deliver improved performance.” ENDS further information: Chris Uldfietd 0419 309 303
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