First, some v. good posts on this board - the diversity of...

First, some v. good posts on this board - the diversity of opinions is excellent and really appreciated.  thanks very much all.  

I think we can agree that ARB remains an excellent company, and excellently managed.  Year after year this company delivers good performance with few surprises and seemingly minimal risk! But my first reaction was v. similar to Travelightor.  I was still underwhelmed, esp. by the sales growth achieved.  Yes, exports and OEM (to a lesser degree) was good, but looking at the australian market:
- The number of 4wds continues to increase in absolute terms - so more vehicles and owners to sell to (admittedly many would not want or need ARB accessories);
- ARB continues to develop more products and a broader range - so it can sell more gear per vehicle;
- ARB continues to increase distribution and build its brand - so should be able to reach more of the population more conveniently/confidently;
BUT Australian sale growth is insipid (with declining growth rates).   Yes, I know the mining states are still in the doldrums (but that's now new news),  yes there is consumer uncertainty (but new car sales were up 2% YoY, and SUV sales now account for 37.4 per cent of the market, up from 35.4 per cent in 2015 - ie, all of the market growth was in SUV), yes not all of the growth is in the segments which matter most to ARB,  but I think that we can look for, and offer, excuses for why ARB's growth is better;  but really the company could do better.  all IMHO.

re: the deteriorating ROE.  Madamswer's analysis is very useful, and I agree with Madamswer's conclusions. I break -down the historical ROE into NPAT margins, revenue/capital employed and capital employed/equity (a la du pont).  The results from 1998 to 2017 are summarised in the table below.   

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9	Column 10	Column 11	Column 12	Column 13	Column 14	Column 15	Column 16	Column 17	Column 18	Column 19	Column 20	Column 21	Column 22	Column 23	Column 24	Column 25	Column 26	Column 27	Column 28	Column 29	Column 30	Column 31	Column 32	Column 33	Column 34	Column 35	Column 36	Column 37	Column 38	Column 39	Column 40	Column 41	Column 42	Column 43	Column 44	Column 45	Column 46	Column 47	Column 48	Column 49	Column 50	Column 51	Column 52	Column 53	Column 54	Column 55	Column 56	Column 57	Column 58	Column 59	Column 60	Column 61	Column 62	Column 63	Column 64	Column 65	Column 66	Column 67	Column 68	Column 69	Column 70	Column 71	Column 72	Column 73	Column 74	Column 75	Column 76	Column 77	Column 78	Column 79	Column 80	Column 81	Column 82	Column 83	Column 84	Column 85
0	Column 1 0	ROE	NP / R	R / CE	CE / E1998	#DIV/0!	8.0%	209%	#DIV/0!1999	#DIV/0!	7.9%	194%	#DIV/0!2000	22.2%	8.7%	205%	124.5%2001	24.2%	9.6%	215%	117.9%2002	26.1%	10.5%	235%	106.2%2003	27.5%	11.6%	215%	110.5%2004	27.3%	12.0%	211%	107.9%2005	24.5%	11.2%	170%	129.4%2006	21.8%	10.6%	193%	107.0%2007	22.9%	10.7%	194%	110.0%2008	25.3%	11.3%	201%	111.4%2009	24.5%	11.7%	212%	98.6%2010	29.5%	14.4%	252%	81.2%2011	29.3%	14.9%	258%	76.3%2012	25.5%	14.3%	228%	78.0%2013	23.9%	14.5%	218%	75.4%2014	22.1%	14.7%	187%	80.4%2015	19.9%	13.6%	151%	96.4%2016	19.5%	13.6%	151%	94.5%2017	18.5%	13.2%	156%	89.8%

[/table]

As Madamswer notes, margins remain strong, the decline in ROE is largely due to (i) ARB generating less revenue per dollar of capital and (ii) less use of debt (surplus cash at the moment).  The latter I'm unconcerned with -  but the declining revenue per dollar of capital employed is more concerning.  The segments analysis in today's results shows that there is not a lot of fixed capital investment into the overseas segments (excl Thailand which is essentially a manufg operation).  Ie, in both of the last two years the fixed capital into USA and Middle East / Europe was less than $1m in total.  But the total assets grew much more strongly - presumably working capital investment as Madamswer identifies (as FX impact on fixed capital was minimal (per note 10)).

I think I define net working capital / revenue differently form Madamswer.  Ie, I exclude cash and short term borrowings - which I include in net debt.  But comparing Net working capital / revenue over time highlights the adverse trends here.  See the Table below.  The last two columns show inventory as a % of sales, and receivables as a % of sales.  The increase in NWC is clearly due to growing inventories per dollar of revenue.  It is a very interesting question whether this is the cost of: i.  growing the Aust. distribution network (more sales outlets requiring stock); ii. growing global sales;  iii insufficient warehousing requiring stores to carry more stock; and/or iv. a larger and more diverse product offer (more SKUs coupled with efficient manufg runs requiring more stock to be held). ???   If there is good news, is that the ratio declined in the 2017 result hence the v. good FCF generation in FY17.  But can it be maintained/improved?

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9	Column 10	Column 11	Column 12	Column 13	Column 14	Column 15	Column 16	Column 17	Column 18	Column 19	Column 20	Column 21	Column 22	Column 23	Column 24	Column 25	Column 26	Column 27	Column 28	Column 29	Column 30	Column 31	Column 32	Column 33	Column 34	Column 35	Column 36	Column 37	Column 38	Column 39	Column 40	Column 41	Column 42	Column 43	Column 44	Column 45	Column 46	Column 47	Column 48	Column 49	Column 50	Column 51	Column 52	Column 53	Column 54	Column 55	Column 56	Column 57	Column 58
0	Column 1 0	NWC	Invty	Rcvbles	As % of revs	As % of revs	As % of revs			2002	12.6%	15.6%	15.0%2003	13.9%	15.3%	13.3%2004	15.1%	17.7%	14.6%2005	17.3%	16.9%	16.8%2006	19.3%	17.7%	17.3%2007	21.6%	19.4%	17.3%2008	20.9%	18.9%	16.2%2009	19.8%	18.5%	14.5%2010	15.4%	17.7%	13.9%2011	15.4%	16.6%	12.5%2012	19.3%	18.9%	13.8%2013	19.0%	20.1%	12.7%2014	23.0%	23.7%	13.4%2015	25.2%	23.6%	12.8%2016	26.3%	24.4%	12.4%2017	24.0%	23.0%	13.3%

[/table]

yours etc
a happy (but demanding) long term holder!