THE Covid-19 lockdown cast a dark pall across most business sectors, but it seems that industries involved in supplying home improvement products are managing to display bright profits.
The theory is that with most South African locked at home during the early stages of the Covid-19, there was an inevitable turning of attention to house and garden. So many households busied themselves with home improvements…
For instance, a company like Cashbuild – which supplies affordable building supplies – has seen its share price accelerating in anticipation of strong profits.
The ‘lockdown home improvement’ phenomenon is also abundantly clear in the latest results of electrical goods supplier ARB Holdings – most particularly its Cape Town based lighting subsidiary.
The lighting division – comprising Eurolux, Cathay Lighting and Radiant – increased revenue by almost 6% and operating profit by a whopping 95%.
ARB directors said profitability improved substantially over prior years largely due to the effects of the rationalisation from the integration of the Eurolux and recently acquired Radiant facilities. These were now starting to reflect significant savings.
They said the restructuring of the lighting division was now finalised – with the right-sizing of the business for the “next normal” resulting in a substantial reduction in the cost base.
This included the rationalisation of the Johannesburg warehouses, retrenchments, and a reduction in contract workers. In addition, transport costs were put out to tender, which should result in further savings.
Reading between the lines, it seems the home improvement boom helped the lighting division solve a pesky over-stocking problem, which was inherited from Radiant.
ARB directors confirmed that the previously overstocked position had positively affected the results in the period – and had even resulted in a slight increase in market share.
The stock level has been reduced by almost R90m and directors reckoned it was more balanced than the situation at the end of June 2020.
Directors did warn, however, that given the long procurement lead times of this business, stock management would need to remain a major focus.