I seldom have reason to criticise or question ARB management,...

I seldom have reason to criticise or question ARB management, but the decision to fully underwrite both the interim and final dividends for FY2020 has left me somewhat perplexed.

Over the 12-months to December 2020 they generated $108m in Operating Cash Flow (including ~$7m in lease payments which get recorded as Investing Cash Flow section of the CF statement, but which I deem prudent to treat as being of an operating nature), of which $23m was re-invested into PP&E and $7.5m was spent on acquisitions.

So that left surplus capital of $77m.

The 2 dividends to be paid in the DH2020 (irt the FY2020 final dividend and the deferred interim dividend) collectively represented some $31.5m.

So they could have funded the dividends from internal cash resources and still exited Dec 2020 with around $45m more cash than the $6.6m cash position at the Dec 2019 balance date.

So,  >$50m net cash, pro forma .

Which itself would already have been an all-time high for this company [*] .

And which, to this observer, would have been more than an ample to fund ongoing organic growth (I mean, its not as if the working capital account has been pilfered over the past 16 months; the 31 Dec 2020 working capital balance is pretty much unchanged on prior periods, at $146m, which is where it was at the end of DH2019 and is a few million higher than at the end of JH2020.

They conserved some $31m in capital by underwriting the dividends - which was self-evidently quite unnecessary - at the cost of the issue of around 1 million additional shares, equity capital which now has to be serviced to perpetuity.

I'm often a bit dim, but I don't get why they did.

(Maybe they are building up a war chest to build yet another factory).


[*]  let alone the actual current $84m net cash level which is off the charts in the context of the company's history and the current calls on capital.)

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