ARP reports its financial results tomorrrow (I think).Even on...

ARP reports its financial results tomorrrow (I think).

Even on conservative cash flow modelling, which includes:

1. record capital expenditure of $10m for the past 6 months for the commencement of the construction of the new factory in Thailand,
2. an extra $6m working capital investment, taking Working Capital-to-Sales to 22.5%, compared to 20% averaged for the past several financial periods,

this will still see the company finish the year with a Net Cash balance of almost $35m, I estimate.

This will be at a record level for ARP, with the net cash (net debt) having trended as follows:

DH03: ($8.0m)
JH04: ($3.5m)
DH04: ($12.8m) (20cps special dividend paid in the half)
JH05: ($15.4m) (first Thai factory built)
DH05: $0.6m
JH06: ($4.3m)
DH06: ($3.2m)
JH07: ($6.9m)
DH07: ($14.0m)
JH08: ($8.8m)
DH08: ($8.2m)
JH09: $1.3m
DH09: $11.1m
JH10: $20.9m
DH10: $17.5m
JH11: $30.7m
DH11: $32.5m
JH12 (forecast): $35m

Or viewed another way, look at what the Current Ratio (Current Assets-to-Current Liabilities) has done over time:

DH03: 0.91
JH04: 0.99
DH04: 0.84
JH05: 0.82
DH05: 1.24
JH06: 1.06
DH06: 1.20
JH07: 1.28
DH07: 1.23
JH08: 1.23
DH08: 1.26
JH09: 1.26
DH09: 1.55
JH10: 1.67
DH10: 1.67
JH11: 1.75
DH11: 1.81

[That this company has - purely organically - almost trebled sales revenue, and almost quadrupled profits, over that period - without recourse to shareholders for any capital - and still the Current Ratio has ballooned like that, speaks volumes for the high degree surplus capital generation of the business.]

With the franking credit balance likely to be well over 40cps at the June 31 balance date, I think another 20cps special dividend is well on the cards tomorrow.

(Recall that this company expunged surplus franking credits by paying a special dividend right in the middle of the GFC...not too many companies paing special dividends in the heart of the GFC - most were RAISING capital from their shareholders, not giving it back to them!)