GUD Holdings Limited

ASX code: GUD www.gud.com.au
Image of a line graph titled “G.U.D.—monthly,” in which years are marked on the x-axis and share prices in dollars are marked on the y-axis. The line graph shows that after dipping at the beginning of 2016, share prices generally increased steadily.
Share price ($)   8.77
12-month high ($)   15.04
12-month low ($)   8.43
Market capitalisation ($mn)   758.5
Price-to-NTA-per-share ratio   26.2
5-year share price return (% p.a.)   7.2
Dividend reinvestment plan   No
Sector: Consumer discretionary Company Sector
Price/earnings ratio (times) 12.5 13.7
Dividend yield (%) 6.4 3.9

GUD, based in Melbourne and founded in 1940, is a manufacturer and distributor of a diversified range of auto and industrial products. Following a series of acquisitions and divestments, its main automotive brands now include Ryco, Wesfil, Goss, BWI — incorporating the Narva and Projecta brands — Griffiths Equipment, IM Group, AA Gaskets and Disc Brakes Australia. The company also manufactures and distributes Davey water pumps and water treatment products.

Latest business results (June 2019, full year)

Revenues and profits rose once more, despite a slowdown in the second half. The Automotive division saw sales up by nearly 12 per cent, though only 1 per cent of this was attributed to organic growth, with the remainder due to recent acquisitions. Underlying EBIT rose by 5 per cent. This division contributes about three-quarters of company sales, but is responsible for more than 90 per cent of profit. Wesfil and Ryco enjoyed another good year, and there was a particularly strong performance from Disc Brakes Australia, which was acquired in July 2018. But AA Gaskets, IM Group and BWI were hurt by disappointing sales and some rising costs, although the company was generally able to implement price increases to offset the increasing expense of imported products. The Davey water products business reported a 3 per cent increase in sales and underlying EBIT, with growth in all key geographic regions.

Outlook

Having divested itself of a series of businesses that included Sunbeam home appliances, Oates cleaning products, Dexion storage products and Lock Focus locking systems, GUD is now focused on the steadily growing Australian automotive after-market sector. It continues to broaden the product ranges for its various brands and it is also seeking to expand exports. It hopes to secure further acquisitions and has developed a set of new acquisition criteria that it believes will boost profitability. It has also nurtured a pool of potential managers for newly acquired businesses. Nevertheless, a concern is the rise of private-label brands among some of its customers. The company estimates that this reduced June 2019 revenues by around $4 million. It has also expressed concern about growing competition for its important Ryco filtration business. It has developed a new strategic plan to boost profitability at its low-margin Davey business, and expects to see progress in this division over the coming two years. GUD forecasts just modest growth for all its businesses in the June 2020 year, though it believes the long-term outlook is rosy.

Year to 30 June 2018 2019
Revenues ($mn) 396.7 434.1
  Automotive (%) 75 76
  Davey (%) 25 24
EBIT ($mn) 83.8 89.4
EBIT margin (%) 21.1 20.6
Gross margin (%) 49.4 48.6
Profit before tax ($mn) 76.8 82.1
Profit after tax ($mn) 55.2 60.9
Earnings per share (c) 64.09 70.39
Cash flow per share (c) 68.61 74.21
Dividend (c) 52 56
  Percentage franked 100 100
Net tangible assets per share ($) 0.35 0.33
Interest cover (times) 11.9 12.2
Return on equity (%) 23.7 22.4
Debt-to-equity ratio (%) 34.8 47.6
Current ratio 2.8 2.9