GUD Holdings: Nice dividend, shame about the business

What: GUD Holdings Limited (ASX:GUD) today, 24 Jan 2012, announced their results for the 6 months to 31 December 2012. Reported net profit after tax was down 1% to $23m, compared to $23.3m in the prior year, but the company has reported declines in all its retail focused business divisions.

Underlying net profit (i.e. net profit adjusted to exclude one off items) was down 13% to $23.8m. The company also reported margin declines in its Consumer and Water businesses. “Prices were reduced to maintain competitiveness and volumes,” said Managing Director Ian Campbell.

Despite the slump in first half profit, GUD Holdings expects to report a full year underlying EBIT slightly ahead of 2011’s result with stronger second half contributions from Dexion and solid performance from the automotive business. The company also reported a fully franked dividend of 30 cents.

The Company
GUD Holdings was listed on the ASX in June 1962 and operates in four business segments. The Consumer Products division produces and markets Sunbeam small electrical appliances and Oates cleaning products. The Automotive Products division produces and markets Ryco, Wesfil and Goss branded products for cars, trucks, agricultural and mining equipment and associated products for the automotive after-market. The Water Products division makes pumps and pressure systems, and the Industrial Products division manufactures industrial storage and automation solutions plus locks and safe locking systems under the Dexion and Lock Focus Brands.

GUD Holdings also holds a 20% stake in Breville Group Limited (ASX:BRG).

So What: This is not a bad result considering the severe conditions many retailers are facing. Margins are being squeezed as GUD Holdings’ competitors, who are also facing the same tough conditions, reduce their prices to maintain volumes and get rid of shelf stock.

GUD Holdings has paid an average dividend yield of 7 per cent since 1998, and has a very high payout ratio (88% for the current period). Here at The Motley Fool, we have mentioned on several occasions the importance of dividends. If GUD Holdings pays out 60 cents in total for dividends for the 2012 financial year, this represents a net dividend yield of over 8 per cent, fully franked.  This doesn’t appear to be too hard for GUD Holdings to achieve, and the second half dividend is likely to be slightly higher than 30 cents.

Now What: If you are looking for a solid retail stock with a depressed price which should recover, paying good fully franked dividends, GUD Holdings may be the stock for you.  It has a good level of diversification so is somewhat insulated from the severe retail downturn. One for your watchlist.

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Motley Fool contributor Mike King owns shares in GUD Holdings. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool’s disclosure policy.


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