GUD result in line with analyst’s expectations

By Trevor Hoey. Published at Feb 1, 2017, in Features

Diversified industrial, GUD Holdings has delivered an underlying net profit of $24.7 million for the six months to December 31, 2016. This represented a year-on-year increase of 26% and was broadly in line with Macquarie’s expectations of $24.8 million, while shy of Patersons forecast of $26.5 million.

GUD declared an interim dividend of 21 cents per share, short of Macquarie and Patersons expectations of 22 cents per share and 25 cents per share respectively.

From an operational perspective the automotive division was the best performer with growth of 10%, but the Davey Pumps, Oates Cleaning equipment and Dexion storage systems businesses all disappointed.

While net debt reduced from $191 million to $163 million, operating cash flow declined from $19 million to $15 million.

The solid performance by the automotive division continues its strong record of being a consistently reliable business.

The Davey pumps business was affected by the prolonged cold and wet Spring in Australia, but management noted signs of a market recovery in November and December. GUD also pointed to margin improvement within the business.

Closure of the Masters hardware chain negatively impacted the Oates business with revenue falling 5%.

The Dexion business continues to place a drag on the overall group’s earnings, recording an underlying earnings before interest and tax loss of $0.6 million in the first half. Management continues to consider divesting Dexion.

Despite delivering a mixed result which featured underperformance on a number of fronts management reaffirmed its AGM guidance for a full year underlying earnings before interest and tax result of $85 million.

GUD shares opened at $9.96, up approximately 3% on the previous day’s close of $9.71. It could be argued investors were preparing themselves for a sub-par result with the company’s shares falling from circa $11.00 in early January to an intraday low of $9.63 yesterday.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may not be replicated. Those considering this stock should seek independent financial advice.

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