ARB Holdings, one the largest distributors of electrical products in Southern Africa, is betting on an increase in electrification projects as Eskom strives for universal access to power by 2025.
Amid a bleak outlook for infrastructure spend, and a generally weak construction sector, the government-backed electrification projects offer a glimmer of hope for ARB.
“We believe that this sector will show growth, as the need to electrify rural areas remains a priority of national government,” ARB CEO Billy Neasham said.
Neasham said, through its recent acquisition, GMC Powerlines, ARB was well-placed to take advantage of an increase in the number of electrification projects. GMC supplies overhead line material and equipment to contractors, municipalities and Eskom.
Speaking on the group’s results for the year ended June 30, Neasham singled out the negative effect of the low economic growth environment and that these conditions were unlikely to change soon.
“Given that our prospects are driven by the performance of the general economy, and that our outlook for the South African economy in the short to medium term is ‘more of the same’, we will need to remain cautious and look at rightsizing the operational structures, particularly in the electrical division. A period of consolidation makes sense in the current trading environment.”
ARB’s full-year revenue increased 4.5% to R2.7bn. The company said revenue got a boost from the contribution of acquisitions – CraigCor for a full year, and Radiant for six months. Craigcor is a distributor of industrial automation, control and instrumentation equipment, while Radiant supplies lighting.
The company’s headline earnings per share were down 18.8% to 58.20c.
ARB maintained dividend per share of 25c.
“The challenges that have occurred with the major companies in the construction sector also negatively impacted the electrical wholesale operation during the year under review,” Neasham said.
He said the company, which has an appetite for acquisitions, would prioritise bedding down its recent acquisitions in the new financial year.
He said the company would not actively pursue acquisitions, despite R180m cash on hand.
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