ARB Corporation Limited (ASX: ARB) today released their half-year results to 31 December 2018, with profit before tax up 5.1% to $37.5 million.

ARB Corporation started in 1975 when founder Anthony Ronald Brown began making products out of his family garage. The products were well engineered and durable, perfect for the extreme conditions experienced in the outback. Today ARB Corporation is the largest manufacturer and distributor of 4×4 accessories in Australia.

Key results

ARB Corporation reported:

  • Revenue up 5.5% to $219 million
  • Profit before tax up 5% to $37.5 million
  • Net profit after tax (NPAT) up 14% to $27 million
  • EPS up 16% to 34.4 cents
  • An interim dividend of 18.5 cents per share fully franked

Management cautioned against looking at the 14% increase in NPAT. They cited a $3 million expense for under-provision of taxes in the prior year as making this year’s percentage increase look impressive. Management recommended adding the expense to the prior year for comparative purposes and in doing so the increase in NPAT is 3%, instead of 14%.

Sales

ARB Corporation has three key segments for its sales with:

  • Sales to the Australian Aftermarket up 3.2% for the year, comprising 64.7% of the group’s revenue
  • Sales to the Exports market up 7.3% for the year, comprising 27.1% of the group’s revenue
  • Sales to Original Equipment Manufacturers up 21.5% for the year, comprising 8.1% of the group’s revenue.

Distribution Channels

In the Australian aftermarket the company distributes through:

  • its ARB store network to retail customers
  • ARB stockists
  • new vehicle dealers
  • various fleet operators

The group added an extra 4 ARB stores from last year bringing the total to 65 and expects to add a further 3 before the end of the financial year.

ARB has also commenced building a 20,000 sqm global warehousing facility in Thailand. It is expected to help increase the efficiency of the global distribution network by directly supplying a broader range of products at a lower cost from a more central location.

Rask Perspective

There is no doubt that ARB Corporation is a great company with competent and able management. The only reason ARB shares are not in my portfolio is valuation – it’s too high for me at current prices.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).