Investors continue to like what they see in the full year result from GUD Holdings.
Throw in a bit of Masterchef, some sweet price rises, and then add a stronger Aussie dollar and that’s how GUD Holdings managed to convert a 1.8% rise in revenue into a 24% rise in underlying earnings for the year to June.
GUD shares climbed to their highest level in two months in the wake of the solid profit result, up 3.3% on Monday, and yesterday they kept going, adding another 2.1%, or 19c, as they reached $9.22.
The company, which owns the Sunbeam and Emjoi electrical brands told the market that a stronger Australian dollar and selective price rises helped increase full-year profit 33% to a record $46.4 million.
GUD said underlying net profit after tax increased 24% to $46.4 million after allowing for significant items in the prior corresponding period.
The company shrugged off its failed takeover for rival small appliance group, Breville, in the financial year.
The bid was blocked by the competition regulator, the ACCC.
GUD then launched a bid for Dexion and so far has picked up around 42% of that company’s shares in the offer.
GUD said revenue rose 1.8% to $476.6 million, from $468.3 million in the prior year. As well as the dollar and price rises, the company said continued tight cost control and lower interest costs added to the better margins and the small rise in sales.
Earnings before interest and tax increased 18% from 2009 to $71.6 million, with improvement coming from all business segments; the standout being a 31% increase in the Davey Water Products business.
The EBIT to sales margin at group level improved to 15% from 13% in the prior year and operating cash flow was a record $78.2 million, an improvement of 35% on the 2009 financial year figure.
GUD managing director, Ian Campbell, said there was sales growth across most businesses, despite patchy trading conditions in the second half as consumer confidence in Australia weakened.
"The strong profit result and pleasing cash flow generation reflect the full year impact of the initiatives taken at the outset of the global financial crisis to underpin margins," he said.
"A stronger Australian dollar coupled with these initiatives, which included selective price increases, improved purchasing terms and tight working capital controls, held through the FY10."
He said consumer products business sales fell marginally due to a combination of withdrawal from a number of underperforming personal care categories in small appliances and lower sales of seasonal products due to mild conditions at the start of winter in both Australia and New Zealand.
GUD plans to acquire storage company Dexion by raising $55 million in new shares.
"On completion of the Dexion acquisition, GUD remains well placed to pursue both organic growth and other complementary acquisitions, should opportunities be identified," Mr Campbell said.
GUD says it expects moderate levels of sales growth in the next financial year across all businesses, despite tough trading conditions in major markets.
"The strength of GUD’s brand portfolio should continue to support sales growth in the face of competitive conditions," Mr Campbell said.
"Profit margins in our existing businesses are expected to be maintained, given our focus on tight cost controls, active supplier management and our secured foreign exchange position for FY11.
"However, we remain concerned about cost pressures from offshore suppliers, following recent increases in material and labour costs."
GUD set final dividend at 34c resulting in a total annual dividend of 62c fully franked, up 2c on 2009.