GUD Holdings Limited (ASX: GUD) has reported an uninspiring set of half-yearly results across three of its four operating divisions. GUD owns a number of well-known brands across a range of sectors, including the Sunbeam brand of consumer appliances.
Results by division
1) Consumer Products – Within this division, the Sunbeam business recorded an 8% decline in revenue to $61 million and worryingly an 86% decline in earnings to just $800,000. Overall the decline in divisional results was limited to a 4% decline in revenue and a 44% decline in underlying earnings, thanks to a strong performance by the Oates brand of cleaning products.
2) Industrial Products – The division's results were exacerbated by a number of structural changes during the half year to realign the cost base away from the high costs of manufacturing in Australia. Revenues declined by 12% and underlying earnings fell by 86%.
3) Water Products – The Davey brand of pumps is a key product in this division and the lower Australian dollar helped limit competing imports, while improving exports of Davey products. Overall divisional revenue was up 1%, however underlying earnings fell 7%.
4) Automotive Products – This division comprises the market-leading Ryco and Wesfil brands and was the stand-out performer during the half. Revenues grew 9% and underlying earnings shot up 11% to a record first-half result of $15.4 million.
Outlook
With a market capitalisation of $400 million GUD is not on the radar of many investors, however with such a broad range of products exposed to a broad range of sectors, the company is something of a barometer of the wider economy.
Management maintained the guidance provided in December that it expects earnings to be around 20% lower for the 2014 financial year.
Foolish takeaway
As investors saw last week with Super Retail Group Ltd (ASX: SUL), the retailing sector as a whole continues to face pressures. Breville Group Ltd (ASX: BRG), whose appliances compete directly with the Sunbeam brand, has so far avoided the full brunt of the slowdown in domestic retailing thanks to its expansion into offshore markets. The revenue decline and intense margin pressure which GUD has obviously experienced in its domestically focused Sunbeam consumer appliances division provides a barometer for investors across a range of retailing businesses, including Breville and Harvey Norman Limited (ASX: HVN). This suggests the upcoming reporting season will continue to show the sector is facing headwinds.
