The GUD Holdings Limited (ASX: GUD) share price has tumbled lower this morning following the release of its half year results.
At the time of writing the consumer products company's shares are down 6.5% to $11.40.
What happened in the first half?
GUD Holdings announced a reported half year net profit after tax of $29.3 million, up 3% from $28.4 million in the previous corresponding period.
The previous corresponding period included a $2.5 million contribution from the Oates business which the company offloaded to Freudenberg Household Products.
Things were better on an underlying basis, with underlying net profit after tax from continuing operations coming in 14% higher at $29.6 million thanks to a strong performance from its Automotive businesses.
The company's Automotive Products segment achieved sales growth of 18% during the period thanks to a combination of organic growth and contributions from acquired businesses such as Disc Brakes Australia and AA Gaskets. Segment EBIT increased 10% to $44.3 million.
This helped offset a disappointing performance from its Davey business. Although the water products business grew its market share, sales remained flat. This was largely due to a reduction in demand in key-selling months due to drought conditions.
Segment EBIT fell a disappointing 23% to $3.6 million, or 13% to $4.1 million on an underlying basis, due to cost inflation pressures and increased expenditure relating to the commercialisation and market introduction of the Microlene Dairy.
Outlook.
Recently appointed managing director, Graeme Whickman, appears optimistic on the company's prospects in the second half.
He said: "From the Automotive businesses we are expecting similar ongoing performance, with further organic growth across the businesses and a full twelve months' contribution from Disc Brakes Australia. Davey is seeing some early signs of improved sales performance and continues to focus on strengthening their platform for mid-term growth in innovative product segments."
Should you invest?
I thought that GUD's first half performance was a little underwhelming, especially given its strong performance in FY 2018 which saw it post a 20% increase in underlying net profit after tax from continuing operations.
And while its Automotive Products business looks strong, the rest of the business continues to weigh on its performance.
In light of this, I would sooner buy the shares of Bapcor Ltd (ASX: BAP) or Super Retail Group Ltd (ASX: SUL) ahead of it.
