Following solid financial results for the six months ended December 31, electrical and lighting product distributor ARB Holdings will turn its focus to acquisitions during the second half of the 2014 financial year, ARB CEO Byron Nichles said on Monday.

Speaking at a presentation on the group’s interim results, he pointed out that ARB had made no new acquisitions during the period under review as it was focused on integrating and bedding down its prior acquisitions.

During the period, ARB achieved a 20% overall increase in revenue to R1.15-billion, while operating profit grew by 31% to R100-million and headline earnings per share were 35% higher at 24.88c.

Further, ARB remained strongly cash generative, ending the period with no debt and net cash resources of R116.4-million.

In terms of its acquisitions focus, Nichles stated that geographic footprint would continue to be an important consideration for ARB in buying businesses, as opposed to simply buying businesses for the sake of consolidating market share.

“We have driven our acquisitions, to date, so that we have a proximity to the market in all nine provinces. Now that we have that, I think our attention will move more towards ensuring that we can adequately service that whole region, either through the roll-out of connect branches, opening bigger branches or acquisitions,” he explained.

He stated that the company’s approach to acquisitions in the electrical segment of its business tended to involve  small businesses, under R50-million, being acquired as a result of the highly fragmented market, adding that purchasing prices were mainly driven by net tangible asset value.

“The reason for that is [because] we are going to rebrand the business, therefore, there is not much need to buy the brand,” he explained.

Further, the businesses ARB considered were typically cash funded.

Nichles said, taking these factors into account, there were currently a limited number of suitable acquisition targets for ARB.

“We want to buy businesses that have some critical mass, that give us something to work with, that have some strategic capability, [such as] geography or a particular market segment,” he noted, adding that since there were not many of these businesses available, the rate of acquisition on the ARB electrical side could slow down.

Meanwhile, Nichles said the lighting side of ARB’s business did not truly lend itself to acquisitions.

“[In this industry], there are key players with highly branded products, so we do not really see too many opportunities for acquisitions,” he stated.

Meanwhile, with regard to its related diversification strategy, of which the company’s acquisition of Eurolux in January 2012 was the first step, ARB aimed to buy trading and distribution businesses that operated in similar or related product categories to itself.

Nichles added that, typically, in this segment, ARB was looking for larger deals, of R100-million or more, that would be funded by a combination of cash, debt and/or shares.