GUD Reported Record Profits for Davey

01.02.2005

GUD Holdings Limited reported a 10% decline in trading EBIT to $30.1 million from $33.4 million in the half year ending 31 December 2004. The lower trading performance followed a 43% increase last year.

Reported net profit of $10.4 million includes the previously announced restructuring charge of $8.8 million after tax for the closure of the Ryco automotive filter manufacturing plant in Melbourne. Directors have increased the interim dividend 35% to 23 cents fully franked from 17 cents previously. The dividend payment is comfortably covered by earnings per share before significant items of 32 cents. The dividend increase lifted GUD’s first half dividend payout ratio to 72%.

“The strong increase in interim dividend is fair reward for our shareholders given our strong balance sheet and reasonable trading performance over the last six months,” Managing Director Ian Campbell said. “Trading EBIT/sales margin dipped to 14.2% compared with 15.8% last year but remains at an acceptable level considering the jump from 11.7% reported in the first half of 2003. Cash value added return, at over 18%, is well above the cost of capital,” he said. “Sunbeam, Ryco/Wesfil, Davey and Lock Focus have all maintained satisfactory returns due to success with new products and offshore sourcing strategies. This has occurred despite higher raw material costs and in the absence of last year’s boost to margins from currency strength. Unfortunately, Victa failed to meet expectations in a difficult trading environment,” Mr Campbell said.

Business Unit Summary

 RevenueReported EBITTrading EBITA
$ million20042003% change20042003% change20042003% change
Sunbeam Victa117.0121.7-4%14.018.2-23%15.119.4-22%
Ryco/Wesfil40.244.2-9%(4.0)6.5-162%8.79.6-9%
Davey46.638.621%6.04.337%6.34.541%
Lock Focus7.27.10%1.21.3-7%1.51.6-7%
Unallocated 0.20.1 0.20.1 
TOTALS210.9211.60%17.430.4-43%31.935.1-9%

Sunbeam Victa

Sunbeam’s performance remained strong while Victa’s disappointed. Sunbeam grew market share in the small appliances sector in Australia and New Zealand following success with new products, especially in the irons, juicers and coffee maker segments. An increased advertising spend has supported new product introductions.

The relocation of electric blanket manufacturing to China from New Zealand is progressing in line with plan and the expected benefits will offset higher raw material prices and assist in the maintenance of solid margins. Victa’s contribution was below expectations due to a combination of drought-induced lower market volumes, heightened low-cost import competition and the effects of industrial action at its primary logistics service provider.

Ryco/Wesfil

Ryco/Wesfil maintained strong margins despite intense import competition and relatively soft demand in the automotive aftermarket. Strong vehicle sales and higher petrol prices have reduced vehicle servicing activity in both Australia and New Zealand.

The business is well positioned to sustain strong returns following completion of the restructuring initiative announced in September 2004. The full benefits of Ryco Australia’s transition from manufacturer to importer/marketer will be reflected in the FY06 year.

Davey

Davey lifted profit to record levels following tight cost control, improved product mix and the benefits of the Spa-Quip acquisition. Export margins remain under pressure due the strength of the Australian dollar but new sourcing strategies will improve margins in future periods.

Lock Focus

Lock Focus performed consistently, compared with prior years, despite patchy market demand. Sales to export customers were strong.

Outlook

“The trading profit result for the second half is expected to be in line with last year. It will reflect the continuing benefits of new product offerings and our offshore sourcing strategies. Cash value added returns will remain well above the cost of capital,” Mr Campbell said.

“Net debt will decline from the December seasonal peak and is likely to be below last year’s level of $17.6 million, excluding any future acquisitions,” he said. “The strength of our balance sheet continues to provide a platform for growth via acquisition and for capital management strategies, including share buy backs and increased dividend payments.”

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