ELECTRICAL wholesaler and lighting distributor ARB says lack of Eskom work and general state-infrastructure spend has crimped its operating environment.

But spending on electricity infrastructure by municipalities ahead of municipal elections had helped the company to a solid set of interim results for the six months ended December, the group said on Wednesday.

Revenue rose 12.4% year on year to R1.24bn, as operating profit increased 10.9% to R108m. Headline earnings per share were up 12.1%, and the group was ungeared with R191m net cash on hand.

"(The result) is reasonable in tough times," CEO Billy Neasham said.

"The lack of Eskom and infrastructure spend is a challenge for us like for a lot of businesses in SA," he said.

But, he said, municipalities were funding projects that Eskom previously would have implemented, including electrification of mainly rural areas using wooden poles and overhead cables made of aluminium.

"This keeps us busy on the overhead lines," Mr Neasham said.

The company indirectly derives 25%-30% of its work from the government.

ARB, as a holding company, has a 74% stake in ARB Electrical Wholesalers, a level three empowerment company that operates 19 electrical wholesale branches across SA.

It also holds 60% of Eurolux, which imports and distributes light fittings, lamps and related accessories.

The company also holds exclusive rights to distribute various top international electrical products into the Southern African Development Community region.

It said that it had followed customers into the region so far, but wanted to find "reliable business partners". Business from across SA’s borders was still less than 5% of earnings.

"We are definitely actively trying to grow that market," Mr Neasham said.

He said that ARB had managed to extend certain payment terms to 120 and 150 days with both customers and international suppliers, relieving late payment pressures.

"Because of (suppliers’) low interest rates, they are much more amenable to extended terms," he said.

While debtors grew 43% to R428.5m as a result of extended terms to specific contractors, similar extended terms had been negotiated with suppliers, resulting in a 38% increase in creditors, Mr Neasham said.

The weak rand and low world copper prices had offset each other, helping ease the cost of imports.

"The lighting division continued to show pleasing market share gains, while the electrical division was able to grow its turnover in what has been an extremely challenging market," Mr Neasham said.

"Moreover, the group maintained trading discipline, which ensured that the gross profit margin remained unchanged at 22.4%." He said the group continued to be cash generative and had a strong focus on the management of working capital. Net working capital improved to 20.8% of annualised turnover, and notwithstanding the payment of dividends of R89.9m during the period, net interest received rose 18% to R8.9m.

Referring to a R78m summons received by ARB Electrical Wholesalers in December as a third defendant from a major listed construction company, Mr Neasham said that the claim was primarily against the construction company’s insurer in terms of a professional indemnity policy, with the claim on ARB Electrical being an alternative claim.

"Attorneys have been appointed to defend the matter as management believe there is no reasonable justification for this claim."