ARB Holdings Limited (JSE:ARH) News - CANCELLATION OF S457125 Unaudited interim results for the six months ended 31 December 2021

ARB Holdings Limited
Registration number: 1986/002975/06
Share code: ARH
ISIN: ZAE000109435
("ARB" or "the company" or "the group")

Unaudited interim results for the six months ended 31 December 2021
KEY FINANCIALS:

•    Revenue up 7.5% to R1 605m
•    Profit after tax down 3.2% to R106m
•    Earnings per share down 4.9% to 39.00 cents
•    Headline earnings per share down 5.0% to 39.07 cents
•    Operating profit up 1.9% to R172m
•    Tangible net asset value per share down 1.0% to 507.28 cents
•    Cash on hand of R337m (2020: R305m)
•    No interim dividend declared

Overview

The six-month period under review will be remembered for the riots experienced in
July 2021, where significant violence and looting took place, impacting businesses
in both KwaZulu-Natal and Gauteng. This challenging period was exacerbated by the
continued impact of measures implemented to control the COVID-19 pandemic, despite
the fourth wave of the pandemic and the Omicron variant being relatively mild in
South Africa.

ARB’s major divisions were directly affected by the riots, with all of the
electrical division’s KwaZulu-Natal branches being closed for the week, and 200 of
the lighting division’s customers’ stores affected, some to the extent that they
are unlikely to ever reopen.

The record performance of the lighting division for the year to 30 June 2021 was
not something the group was able to repeat in the first six months of the current
financial year. While the electrical division continued to perform well, with an
increase in both revenue and operating profit, the lighting division experienced a
slowdown as the well-documented discretionary spending with major retailers after
the initial lockdowns in 2020 subsided.

DIVISIONAL REVIEW
Electrical division (revenue increased by 16.0% and operating profit improved by
16.4%)

This division comprises ARB Electrical Wholesalers, GMC Powerlines, ARB Global,
CraigCor and Consolidated Electrical Distributors (CED).

Gross margin in Rands improved by 16.4%, predominantly due to the increase in
revenue during the period. With the increase in overheads Operating margin remained
consistent at 8.7%.

The electrical division’s CED operation has secured an alternative range of
switchgear, following the termination of the previous supplier agreement in 2021.
The new product, TosunLux, was launched recently and is expected to be as much of
a contributor to results going forward within a short space of time.

The division acquired the remaining 25% of the Craigcor subsidiary in August 2021
and the Put Option relating to this investment was settled during the period. This
had no major effect on the results as the Put Option was adequately accounted for
in the prior period.
Lighting division (revenue decreased by 15.3% and operating profit decreased by
26.4%)

This division comprises Eurolux, Radiant and Cathay Lighting.

The drop of 15.3% in revenue was partially offset by an improved gross margin.
Overhead costs were static but the net effect was a drop in operating margin to
11.2% (2020: 12.9%).

The decrease in revenue is predominantly attributable to the impact of the July
riots on the division’s customers, the slowdown in discretionary spending
experienced by our retail customers and the continuation of the supply chain
challenges over the past 12 months.

The working capital management improvement achieved in the previous financial year
could not be maintained, largely due to ongoing supply chain issues, where delays
of up to seven months have been experienced as a result of pandemic-driven shipping
issues, container shortages and local port inefficiencies.

Whilst the division has secured enough stock to ensure uninterrupted supply to its
customers, this in turn has put pressure on in-house logistics, particularly in
terms of storage space, creating pressure on cash flow. The start of the Chinese
New Year early in January is expected to further negatively impact this situation.

Corporate division (revenue increased by 6.9%, operating profit was up by 13.0 %)

This division comprises the group’s property portfolio and the Xact ERP Solutions
business. For the financial period under review, the performance of both has been
in line with expectations, given the fixed nature of both income and costs.

OUTLOOK
The focus for both the electrical and the lighting divisions for the foreseeable
future will remain on managing both working capital and supply chain challenges.
Unfortunately, the expected increase in infrastructure development from which the
electrical division should benefit, has not yet materialised, although the proposed
restructuring of South Africa’s energy utility Eskom into three separate divisions
holds potential opportunities, particularly for the overhead line (OHL) business.

The challenges in the local market in terms of the subdued economy and the lingering
effects of the pandemic are also expected to continue for the foreseeable future.

CHANGES TO THE BOARD
On 1 July 2021 Blayne Burke was appointed to the board and Billy Neasham retired
as executive CEO and became a non-executive director on 1 January 2022, at which
date Mr Burke was appointed executive CEO.

FINANCIAL ASSISTANCE TO RELATED OR INTER-RELATED COMPANIES (s45)
The holding company has continued to provide financial guarantees and cessions of
loan accounts to the group’s bankers on behalf of its subsidiary companies as
securities for facilities granted to them.

SUBSEQUENT EVENTS
On 27 January 2022 the group issued a SENS notification of the receipt of a firm
intention offer (“FIA”) from Masimong Group Holdings (Pty) Ltd. This SENS can be
obtained from our website at https://arbhold.co.za/index.php/2013-06-04-06-33-
35/sens or by sending an e-mail to mariol@arbhold.co.za. The details of this offer
are set out in full in this SENS and are not repeated here.

The Covid-19 pandemic continues to have an influence on our economy (albeit reducing
continuously) with the last remnants of the fourth wave currently being experienced
at the moment. While it is possible that trading operations and results may be
negatively impacted in the future, it is not possible to reliably estimate the
duration and severity of these consequences, as well as the impact on the financial
position and results of the group for future periods.

The directors are not aware of any other material event or circumstance arising
since the end of the reporting period and up until the date of this report, not
otherwise disclosed in these consolidated financial statements which significantly
affects the financial position, results or cash flows of the group.

DIVIDENDS
ARB’s policy is to distribute a single annual dividend for the full year up to a
maximum of 40% of net profit after taxation attributable to ordinary shareholders.
In line with this policy, no interim dividend has been declared.

RESPONSIBILITY AND AVAILABILITY
The information in this report has been extracted from the unaudited condensed
consolidated interim financial statements for the six months ended 31 December
2021, which have not been audited nor reviewed by the company’s auditors.

This short-form announcement is the responsibility of the directors of ARB. This
short-form announcement is only a summary of the information in the full
announcement and does not contain full or complete details. Any investment decision
by investors and/or shareholders should be based on consideration of, inter alia,
the full announcement. The full announcement has been released on SENS on 11
February 2022 and is available for viewing on ARB’s website document
https://arbhold.co.za/index.php/2013-06-04-06-33-35/sens and at
https://senspdf.jse.co.za/documents/2022/jse/isse/ARH/ARHHY2021.pdf.

The full announcement is available for inspection at the offices of ARB (10 Mack
Road, Prospecton, Durban, KwaZulu-Natal, 4133) and the offices of the Sponsor,
Grindrod Bank Limited (Grindrod Tower, 8A Protea Place, Sandton, 2196), at no
charge during normal office hours on business days from 11 February 2022 or may be
requested by emailing info@arbhold.co.za

11 February 2022
Sponsor Grindrod Bank Limited

Date: 14-02-2022 07:29:59
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.