GUD Outlook Underwhelms Investors

Investors punished diversified industrial, GUD yesterday, sending the shares down sharply (they were off over 12% at one stage) after it reported an interim result that fell a little short of expectations.

The shares ended down 9% at $11.10 – that’s well under the $14.96 peak in early September of last year. There must be quite a few shareholders nursing some annoying losses.

In fact, at yesterday’s close, GUD shares are down sharply from their close on January 30, 2018, of $12.37.

Not even a small, one cent lift in the interim dividend to 25 cents a share was enough to satisfy investors.

GUD reported a half-year net profit after tax of $29.3 million, up 3% from $28.4 million in the December half of 2017-18.

The previous corresponding half included a $2.5 million contribution from the Oates business which the company sold off.

On an underlying basis, net profit after tax from continuing operations rose a solid 14% higher to $29.6 million thanks to a strong performance from its Automotive businesses.

The company’s Automotive Products segment had sales growth of 18% during the half thanks to a combination of organic growth and contributions from acquired businesses such as Disc Brakes Australia and AA Gaskets. Segment EBIT increased a solid 10% to $44.3 million.

This helped offset a weak performance from its Davey business. Although the water products business grew its market share, sales remained flat. This was largely due to a reduction in demand in key-selling months due to drought conditions.

Segment EBIT slumped a disappointing 23% to $3.6 million, or 13% to $4.1 million on an underlying basis, due to cost inflation pressures and increased expenditure relating to the commercialisation and market introduction of the Microlene Dairy.

Newish CEO Graeme Whickman, was upbeat about the second half, saying in yesterday’s statement.

“From the Automotive businesses we are expecting similar ongoing performance, with further organic growth across the businesses and a full twelve months’ contribution from Disc Brakes Australia.

“Davey is seeing some early signs of improved sales performance and continues to focus on strengthening their platform for mid-term growth in innovative product segments,” he said.

But investors would have liked some harder guidance for the rest of the year and the full 12 months. The lack of that was worrying.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →