Globe International : APPENDIX 4D - HALF YEAR ACCOUNTS 31 DEC 2021

For personal use only

Globe International Limited

ABN 65 007 066 033

Appendix 4D

Half-Year Report for the period ended 31 December 2021

Lodged with the ASX under Listing Rule 4.2A

Contents	Page
Results for announcement to the market	2
Directors' Report	3
Auditor's independence declaration	5
Income statement	6
Statement of comprehensive income	7
Balance sheet	8
Statement of changes in equity	9
Statement of cash flows	10
Notes to the accounts	11
Directors' declaration	18
Independent Auditor's review report to members	19

This interim financial report includes the consolidated financial statements of the consolidated entity consisting of Globe International Limited and its subsidiaries. Unless otherwise noted, all financial information relates to the consolidated group.

1

For personal use only

Globe International Limited

ABN 65 007 066 033

Appendix 4D

Half-Year Report - 31 December 2021

Results for Announcement to the Market

Consolidated Entity

				Half-year		Half-year		Movement		Movement
				2021		2020
						$'000		%
				$'000			$'000
	Net sales		142,874		124,819		18,055			14.5
	Revenue from ordinary activities		142,957		124,863		18,094			14.5
	Earnings before interest and tax (EBIT)		18,193		21,023		(2,830)			(13.5)
	EBIT as a percentage of net sales		12.7%		16.8%		(4.1 points)		(24.4)
	Net profit after tax attributable to members (NPAT)		12,447		15,260		(2,813)			(18.4)
	NPAT as a percentage of net sales		8.7%		12.2%		(3.5 points)		(28.9)
	Dividends			Amount		Franked portion			Franked amount
			per security			of dividend			per security
	Interim dividend			16 cents				100%					16 cents
Record date for determining entitlements to the dividend
						11 March 2022
	NTA Backing			Current Period		Previous Period
		31 December 2021			30 June 2021
	Net tangible asset backing per ordinary security		$1.81					$1.69

Explanation of Result

Please refer to attached Company Announcement for a review and explanation of the financial results.

2

GLOBE INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES

Directors' Report

Your directors present their report on the consolidated entity of Globe International Limited ("the Company") and its controlled entities (collectively "the consolidated entity") as at the end of, or during, the half-year ended 31 December 2021.

DIRECTORS

onlyThe following persons were directors of the Company during the whole of the half-year period:

William Crothers

Peter Hill

Stephen Hill

REVIEW OF OPERATIONS

The consolidated entity reported solid sales growth for the half-year and strong profitability despite challenging operating conditions. The key business metrics for the half- year were as follows:

use	∙ Reported net sales for the half-year of $142.9 million were 15% higher than the prior comparative period (pcp).
	∙ Earnings before interest and tax (EBIT) were $18.2 million, representing 12.7% of net sales. This was lower than the 16.8%
	return on sales that was achieved in pcp.
	∙ Net profit after tax (NPAT) was $12.5 million, compared to $15.3 million reported in the pcp.
	∙ Cash-flows used in operations were $12.7 million, driven by a change in business mix and inventory build.
personal	∙ The fully franked interim dividend of 16 cents per ordinary share is 33% higher than the interim dividend paid in the 2021 financial
year.

The demand for the consolidated entity's key brands held up well during Q1 and continued into Q2, with the exception of the hardgoods market which softened towards the end of the calendar year. Despite this strong demand for its products, the consolidated entity's profits were negatively impacted by surging logistics costs on top of significant shipping delays which resulted in cancelled orders. These unprecedented logistics conditions were most pronounced in the USA, where shipping costs during the peak Summer period were 5-10 times historical levels, and extended shipping windows of 8-12 weeks occurred. As a result of these conditions, there was a significant one-off build in inventories during the second quarter, which will be addressed in the next half-year. In addition to these factors, margins were also negatively impacted by inflationary pressures and a shift in sales mix. The fact that the business has been able to deliver a 12.7% EBIT return on net sales, despite the combined impact of these multiple factors, is reflective of the more diverse and robust business model.

Net Sales grew by 15% during the half-year, driven by the consolidated entity's four main brand pillars of FXD, Impala, Salty Crew and Globe. Together, these brands comprise all the consolidated entity's core product categories of apparel, footwear, workwear and hardgoods. Regionally, North America continued to be the most significant contributor to the growth in sales, experiencing a 32% increase in sales on the back of the 141% growth in the 2021 financial year. European sales also grew solidly by 24%, while the more established Australian business was relatively flat on the prior corresponding half-year with sales growth of just 1%.

The $18.2 million EBIT reported for the half-year generated a return of 12.7% on net sales, compared to 16.8% in the previous corresponding half- year. The reduction in profitability was greater than anticipated due to the excessive and sustained shipping delays and increase in freight costs during the half-year. Other factors that impacted profitability were sales mix and upward pressure on the cost base, both of which were largely

Foranticipated. Steps have been taken to improve underlying margins in the second half of the 2022 financial year and beyond.

The consolidated entity's reported cash position, net of working capital funding, was $10.3 million at 31 December 2021, compared to $36.1 million at the start of the half-year. Cash utilization was driven by a $19.0 million increase in working capital, tax payments and capital expenditure. The increase in working capital was driven by a $16.3 million increase in inventories over the half-year due to an increase in months stock on hand, part of which is due to excess inventory. The inventory excess was caused by extended shipping delays that resulted in a cancellation of sales orders and a softening of demand in the hardgoods market. Management have plans to work through this excess inventory in a sustainable and controlled manner over the coming months. Capital expenditure during the half year was $12.9 million, or $4.2 million net of related borrowings. This included the acquisition of a property close to the Australian headquarters which will provide additional warehouse space, as well as fit-out costs for the office and warehouse at the new North American headquarters.

Looking ahead, in the second half of the financial year the consolidated entity plans to address the underlying gross profit margin erosion by increasing wholesale and retail prices and negating the impact of higher freight costs. Meanwhile, it will embark on sales programs in some parts of the business to move through categories with excess stock. From a sales perspective, the downturn in the hardgoods market will have an impact on overall sales growth, although it is expected that other brands and categories will hold up well to largely fill that gap. Any more detailed outlooks are not possible to provide, other than to say full-year sales are expected to hold up fairly well compared to the 2021 financial year, while profits and profitability will be lower.

3

GLOBE INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES

Directors' Report

MATTERS SUBSEQUENT TO THE END OF THE HALF-YEAR

There are no matters to report subsequent to the end of the half-year.

onlyDIVIDENDS

During the half-year, the Company paid a franked final dividend of 20 cents per share, in respect of the 2021 financial year. This dividend, amounting to $8.3 million, was paid to shareholders on 16 September 2021. The payment of this dividend took total dividends paid in respect of the 2021 financial year to 32 cents, amounting to $13.8 million paid to shareholders.

In respect of the half-year ended 31 December 2021, the Directors have determined that an interim dividend of 16 cents per share will be paid to shareholders on 25 March 2022. This dividend, amounting to $6.6 million will be fully franked (2021: $5.0 million franked) and paid out of the Company's profit reserves.

AUDITOR'S INDEPENDENCE DECLARATION

useA copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5 and forms part of the Directors' Report for the half-year ended 31 December 2021.

ROUNDING OF AMOUNTS

The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest $1,000, or in certain cases, to the nearest dollar.

personalThis report is made in accordance with a resolution of directors pursuant to section 306(3) of the Corporations Act 2001.

...........................................................

William Crothers

Chairman

Melbourne

24 February 2022

For

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For personal use only

Auditor's Independence Declaration

As lead auditor for the review of Globe International Limited for the half-year ended 31 December 2021, I declare that to the best of my knowledge and belief, there have been:

1. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
2. no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Globe International Limited and the entities it controlled during the period.

Jon Roberts	Melbourne
Partner	24 February 2022
PricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757

2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.