GUD Holdings (GUD), the kitchen appliance to pumps, storage and water business has given shareholders a surprisingly upbeat outlook for 2015-16 after a solid rebound in earnings in the year to June and a higher final and full year dividend.
The result, dividend and outlook could in fact be one of the more upbeat from an Australian listed company this reporting season – especially after it notched up record sales in the year to June 30.
That confidence was reflected in the near 11% jump in GUD’s shares yesterday to a closing quote of $9.38.
GUD 1Y – GUD profit soars
A final dividend of 22 cents per share fully franked was declared by directors, up from 18 cents a share a year ago, bringing the total year’s dividend to 42 cents per share, an increase of 17% on the prior year’s 36 cents a share.
GUD said net profit jumped to $33.2 million in the year to June 30, after underlying earnings before interest and tax at its Sunbeam appliance division soared 383% to $7.3 million, and the company started reaping the benefits of some tough restructuring decisions made over the past year to 18 months.
“GUD has come through its recent period of transition, where the emphasis was on profit improvement driven by cost initiatives, to now be in a position where the focus can change to revenue and profit growth stemming from the integration of the BWI acquisition and our reinvigorated, group-wide new product innovation activities,” CEO Jonathan Ling said yesterday.
“Whilst we have been extremely pleased with the progress made in FY15 we expect a further substantial uplift in financial performance in FY16. This will come from a continuation of the sales momentum evident across the group in the second half of FY15 and from the BWI acquisition, which was completed on 1st July.
“Building on this momentum we are also expecting a contribution from the planned launches of the first products coming from our recent innovation initiatives. In addition we are maintaining our cost-focused profit improvement programs.
“In particular, we are expecting that Dexion will generate a full year’s gain from the FY15 manufacturing restructures along with the cost-down initiatives implemented in the Australian racking business towards the end of year.
"Revenue growth is expected as conditions remain favourable in the Asian and New Zealand racking markets and as the Commercial business seeks growth offshore.
“We anticipate that Sunbeam in Australia and New Zealand will deliver an improved level of sales and profitability through the benefits from the joint venture and from our internal new product activities.
We expect that the Asian joint venture operations should show improvement as they come under a single management structure led primarily by Sunbeam’s management team,” Mr Ling said.
This result included $1.6 million post-tax of transaction costs and $2 million representing Jarden’s minority interest in the Sunbeam business. The prior period included $13.3 million in restructuring costs after tax.
The underlying profit after tax was up 19% to $36.9 million.
Record sales of $612 million were recorded, a growth of 3% over FY14. In the second half revenue was up 7% on the previous corresponding period with all businesses contributing, GUD directors said in yesterday’s statement.
The rebound in the Sunbeam appliance business – the best known part of GUD’s products (but something of a financial sorer spot especially when the dollar was around parity with the US dollar) – was striking.
Mr Ling attributed the improvement to better logistics, and its joint venture, signed in 2014, with US consumer products giant Jarden. The deal – which involved Jarden taking a 49% stake in Sunbeam in return for GUD taking a 49% stake in Jarden’s Asian business – allowed GUD to tap into Jarden’s brand and product portfolio, including the Oster Blender.
Mr Ling said the introduction of the popular US product helped lift Sunbeam’s earnings, despite a 2% drop in sales in the 2015 financial year.
He said the sales drop was recorded mostly in the first half, which recorded a 7% decline. With the second half introduction of the Oster Blender, sales rose 3%.
“The Oster launch is a direct outcome of the arrangements entered into with Jarden in November 2014 and is indicative of the benefits that will accrue through the joint ventures," Mr Ling said.