Dexion on right path but struggles to make mark and may be divested
GUD, the parts and appliances manufacturer with automotive and warehousing exposure, has reported a net first half profits rise on last financial year’s first half.
Net profit after interest and tax (NPAT) at $24.7 million was affected by the sales of the Sunbeam and Lock Focus brands, thereby marking a rise of 26 per cent on last year or 8 per cent “on a like-for-like basis”.
“The performance of our automotive business remains the highlight of our financial results, with double digit growth in both revenue and EBIT reflecting the favourable industry dynamics coupled with substantial internal programs centred on new product introductions and securing new customers,” MD Jonathan Ling says.
Automotive drove much of this with ‘underlying’ earnings before interest and tax (EBIT) up 10 per cent to $124.9 million, with further growth in Brown & Watson from new Narva products launched in conjunction with the 2016 catalogue and growing sales of Ryco Japanese truck filters from gains in user numbers and distribution.
Ryco also introduced FireGuardian air filters for emergency services vehicles, which have gained broad market acceptance, while, late in the half, Wesfil introduced a spark plug program into its independent reseller market channel.
“All Automotive businesses continue to increase their user base and customer numbers as evidenced by Ryco continuing with its workshop ‘Conquest’ program which now encompasses truck as well as automotive workshops, while Brown & Watson gained a major new distributor and expanded into new market segments,” the company says.
The group result included a $2.5 million restructuring charge in Dexion, which also saw revenues down 8 per cent to $79.6 million.
Sale of that arm, which contributes about a quarter of group revenues, continues to be explored.
“While sales in the franchise channel and for small project work grew, the lack of large projects both in Australia and Asia, resulted in revenue declining by 8 per cent to $80 million,” GUD says.
“Large projects have been subject to decision delays and Dexion received indications from customers late in the period that several will be confirmed in the second half.
“Dexion remains in a turnaround mode and is showing regular month-by-month improvement in profitability.”
Although underlying EBIT was a small loss in the half, operational efficiencies generated a $1.9 million improvement.
Ling expects the full year underlying EBIT to be around $85 million.