The shares of GUD Holdings Limited (ASX: GUD) have rocketed higher in morning trade following the release of its half-year result. At the time of writing the retail conglomerate's share price is up over 7% to $10.41.
I'm quite surprised to see its shares rally so strongly, as I can't help but feel the result is not as great as it first appears.
Although the company headlined with underlying net profit after tax growth of 26% to $24.7 million on last year's reported result, on a like-for-like basis (following the sale of the struggling Sunbeam and Lock Focus businesses) that growth reduces to just 8%.
Once again it has been GUD's Automotive business which saved the day with a 10% jump in sales thanks partly to new product launches.
Elsewhere the company's Davey, Oates, and Dexion businesses all posted a reasonably significant drop in sales.
It was a similar story on the bottom line as well with the Davey and Oates businesses each posting a 34% drop in earnings before interest and tax (EBIT).
As a water-related products business, Davey was adversely affected by the prolonged cold and wet spring weather.
Whereas its Oates cleaning products business took a hit due to the closure of Masters stores and the withdrawal of its product range from Woolworths Limited (ASX: WOW).
Overall underlying EBIT from continuing operations increased just 1% on the same period last year to $39.1 million.
However, managing director Jonathan Ling is optimistic that the company's trading performance will improve in the second half. He has reaffirmed full-year guidance of underlying EBIT of around $85 million.
Judging by its first-half performance, I'm not hugely confident the company will deliver on its guidance.
Because of this I would suggest investors avoid GUD Holdings for now and consider industry peer Bapcor Ltd (ASX: BAP) as an alternative.
