What better day to go to the Annual General Meeting of a Greek company (Globo Plc – GBO) than the day that Greece closed its banks and stock exchange for as long as a week? At least it used to be a Greek company and although it still has a lot of software development staff in Greece most of its operations are now in the rest of the world. Indeed it has ambitions to be a major global business based on a strategy of more acquisitions and taking on debt to finance them.
Before the meeting commenced I asked the CEO (Costis Papadimitrakopoulos) whether his staff could survive on 60 Euros per day which is all apparently they will be allowed to take out of a bank but did not get an answer – perhaps he was not aware of the latest announcements. He did say that the Greek Government needed to resolve the situation but any exit from the Eurozone might actually reduce their costs because there would presumably be some implied devaluation on the adoption of a new currency. They only have 87,000 Euros in Greek banks.
Costis decided to give us a specific pep talk on the Greek situation later which he introduced by saying “today is a big day”. He explained that the group has minimal exposure to Greece. People are still working, coding, and generating sales. Contingency plans have been made [as well they might have been as this crisis has been a very long running story]. Power and telecoms have back-ups and they are using cloud services in many areas but some 45% of employees still reside in Greece. Last year only 12% of revenues came from Greece and it will be below 10% this year. Most of that is to large enterprises. Receivables will be devalued on Euro exit but so will payables.
He emphasised that the Greek people wish to stay in Europe. The referendum on Sunday might drive a new cycle of negotiation. [Comment: it is clear that there is considerable brinkmanship going on and forcing some resolution is surely the way to go. It might not be positive for Greece to exit the Euro in the short term, but there seems to be a lack of facing up to reality on both sides. Levels of Greek debt are unsustainable and surely some needs to be written off, but nobody wants to permit that when there is lack of acceptance of the need for fundamental change in the Greek economy].
Globo is a company that has generated some debate on bulletin boards because of its high debtor levels, high and increasing debt (while holding cash), and large software development capitalisation. I will be writing a more extensive report on the AGM and covering some of those issues as soon as possible.
But the Greek crisis has certainly not helped the share price today – down 6% at the time of writing, which seems somewhat irrational based on the information above. That’s a lot more than the general market falls. If Greece does devalue, doing software development there may prove even more economical than it is now.
Roger Lawson
A benefit from devaluation would imply that the Greek staff would be paid less when translated into euros, perhaps a lot less. However, that assumes that the staff will just accept the devalued salary, rather than asking for more to maintain their lifestyle, or indeed asking to continue to be paid in euros.