Results in: Are GUD Holdings Limited shares a buy?

The GUD Holdings Limited (ASX:GUD) share price has fallen into the red following the release of its half-year results…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In morning trade the GUD Holdings Limited (ASX: GUD) share price has fallen over 1.5% to $12.17 following the release of its half-year results.

Here are key highlights from the release:

  • Half-year revenue increased 11% on the prior corresponding period to $194.7 million.
  • Underlying profit from continuing operations after tax up 16% to $26 million.
  • Underlying earnings per share of 30 cents.
  • Operating cash flows up 37% to $20.6 million.
  • Interim fully franked dividend of 24 cents per share, up from 21 cents.
  • Outlook: Underlying EBIT for the full-year to be around $90 million. (Previous guidance: $90 million to $94 million.)

I felt this was a reasonably solid first-half result from the conglomerate and it appears to demonstrate that the offloading of its non-core businesses has been an early success.

The company's continuing operations now include just its Automotive businesses and the Davey water pump business.

The Automotive division was the highlight of the half in my opinion, posting a 14% increase in revenue to $142.4 million and a 12% increase in earnings before interest and tax (EBIT) to $40.2 million. The increase in revenue was driven by a combination of organic growth and growth from acquisitions.

The results included one month's contribution from the AA Gaskets business and six months from IM Group. In addition to this, its Griffiths Equipment business contributed to two month's financial performance in the first half of FY 2017 and a full six months this year.

Its Davey division saw revenue increase 2% to $52.3 million and EBIT grow 9% to $4.7 million. A focus on improving the water pump specialist's cost position resulted in a significant improvement in its product costs and a meaningful lift in margins.

Looking ahead, the company continues to be on the lookout for further potential acquisitions in the automotive industry. As such, I believe there's a good chance that it could offload the Davey business in the not so distant future in order to focus purely on the automotive industry.

Should you invest?

At approximately 20x annualised earnings I'm not a buyer of GUD Holdings' shares just yet. If it were trading at a lower multiple I would be interested, especially given the early success of its recent investments and divestments.

But for now, I would prefer to gain exposure to the retail sector through Baby Bunting Group Ltd (ASX: BBN) or Premier Investments Limited (ASX: PMV).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »