ARB Holdings posts flat half-year profits
ARB Holdings reported slight growth in revenue and flat profits for the six months to end-December.
ARB’s interim revenue increased 3.1% to R1.27bn from the R1.24bn reported in 2015. ARB said this was largely the result of its electrical division increasing its turnover by expanding its branch network, despite challenging market conditions.
The group said its electrical division stood to gain from Eskom’s target of adding 200,000 households to its grid by the end of March 2018.
Its lighting division expanded its Johannesburg outlet by leasing the neighbouring property. It has expanded its Crabtree branded range and launched its Euro Nouveau range in November.
This expansion of its product offering along with increased trading discipline was behind the increase in profit margin to 22.8% from 22.4% in 2015, ARB said. Despite this, the group’s operating profit fell from R104.8m to R104.4m with a decline in operating margin of revenue down 0.3% to 8.2% from 8.5% previously.
The group reported cash on hand of R174.8m, down from R190.9m in 2015, despite dividend payments reported at R93.4m. ARB also said that through the stricter management of cash it was able to increase net interest received by 30% to R6.6m from R5.1m the previous year.
ARB’s net working capital as a proportion of revenue increased to 24.3% from 20.9% but remained within the target band of 20%-25%. ARB said strikes at suppliers to the electrical division, which had reduced inventories, were the reason that net working capital was so low the previous year. Gross capital expenditure for the period was reported at R13.6m, with the majority going towards vehicle replacement, the addition of three connect stores within the electrical division and the purchase of computer-related equipment within the lighting division.
ARB Holdings is an investment group that specialises in electrical distribution companies. ARB said its main interests were a 74% stake in ARB Electrical Wholesalers and 60% of the lamp and light fitting company Eurolux.
The electrical business reported revenue growth of 1.9%, due to the additional connect stores, while reporting a 2.1% decline in operating profit, which ARB attributed to tough trading conditions. The lighting division reported increases in both revenue and operating profit, of 5.7% and 8.9% respectively.
ARB said that despite the pressure from an unsteady exchange rate the division was able to perform well through the expansion of its product range and improved management of overheads.