The GUD Holdings Limited (ASX: GUD) share price has sunk lower in morning trade after the manufacturer of cleaning products and household appliances announced its full-year result.
At the time of writing GUD's shares are down 1% to $12.06.
Here are key highlights from the result:
- Revenue up 4% year-on-year to $426.3 million.
- Reported net loss after tax of $7.3 million.
- Underlying profit from continuing operations before interest and tax up 2% to $83.5 million.
- Diluted underlying earnings per share of 59.9 cents, compared to 54.2 cents in FY 2016.
- Final dividend of 25 cents fully franked, bringing its full-year dividend to 46 cents.
- Net debt down slightly to $160 million.
Overall I felt this was a bit of a mixed result and I'm not sure it really justifies the 16% gain by its shares year-to-date.
Whilst it is good to see that the company has offloaded the struggling Lock Focus and Dexion businesses which were largely the cause of the reported net loss after tax of $7.3 million, the rest of the business is hardly firing on all cylinders.
Both its Davey and Oates businesses had a disappointing FY 2017. Despite only a small drop in sales, the two businesses posted underlying segment EBIT decreases of 24% and 15%, respectively, year-on-year.
But thankfully for the company and its shareholders the Automotive segment managed to offset these declines.
Underlying earnings from the Automotive segment grew 11% to $73.8 million thanks to strong organic growth from a combination of new product introductions, improved market share, and an entry into new market segments.
This segment now contributes a massive 88% of its earnings before interest and tax.
Should you invest?
Based on its underlying result, GUD's shares are changing hands at approximately 20x earnings today.
I feel this is a little expensive for a company which grew its underlying earnings before interest and tax by just a paltry 2%.
In light of this, I would suggest investors look at better value shares in the consumer discretionary sector such as Super Retail Group Ltd (ASX: SUL) or Premier Investments Limited (ASX: PMV).
