Yep, the ever present elephant in the room: Leverage your equity...

Yep, the ever present elephant in the room: Leverage your equity and your ROE goes up ... and the management might meet performance targets. This is of course meaningless, since Mssrs Brown are sort of "selfemployed". Without them, I wonder if investor would look at it the same way.

But seriously, an ROE of 20 with (!) the current equity situation - that is the interesting thing.

BTW, it is arguable to take up a loan in this historically low interest rate environment. I am sure banks would fall over to have ARB on their books.

3 more remarks:

a) on page 1 they said:

"The Board has declared an interim fully franked dividend of 29.0 cents per share compared with 18.5
cents per share fully franked last year. The interim dividend payout ratio of 43% is well below ARB’s
historical payout ratio of between 53% and 58% over the last five years. The Board has decided to reduce
the dividend payout ratio to enable the Company to increase investment in its business for future growth."

To me, the above sounds bullish. Reading between the lines, I don't there is a special dividend coming up anytime soon, rather an announcement of a largish investment.- especially since there is a past history of special dividends.

b) on page 5 and 7 of the report:

"Exchange differences on translation of foreign operations (10,295)"

The reserves took a hit of more than $10mio from (I guess) currency translation. I may have overlooked further explanation, so I am speculating that this is revaluation of US operations is due to strenghtening of the AUD vs USD.

and finally on forex on page 3:

"ARB’s growth in profit after tax achieved during the first half of the financial year comfortably exceeded
sales growth and was driven by increased sales demand, cost containment, improved efficiencies and a
stronger Australian dollar, particularly against the Thai baht."

Yes, the value of THB has a good amount of influence over the financial performance of ARB.

Well, .... my 5 cents worth