Covid boom in car maintenance boosts auto parts maker GUD Holdings

A boom in car maintenance and repairs through the COVID-19 pandemic has helped GUD Holdings maintain its profit trajectory into January.

GUD’s auto arm offset a downturn in its water business. Picture: Kevin Bull

A boom in car maintenance and repairs through the COVID-19 pandemic has helped diversified manufacturer GUD Holdings maintain its profit trajectory into January, countering sluggish demand for its water systems division in the December half that was hurt by deferred tenders and the temporary shutdown of its Melbourne plant.

GUD, which operates two key divisions in auto parts and water, posted an 18 per cent lift in half-year net profit to $31.3m, which was led by the auto division and its bumper sales of key car products from brakes to bullbars — as car owners worked on their vehicles to extend their life or engaged in car projects through extended lockdowns.

GUD reported that revenue for the ­December half rose 11 per cent to $251.47m.

Its auto parts business recorded a 13 per cent increase in sales to $196.7m, with underlying earnings up 21 per cent to $52.4m. It was helped by a spike in car servicing, and parts of its auto division experienced strong car repair activity ahead of pre-COVID-19 levels.

Its Davey water parts division, which sells parts to commercial, residential and farming customers, was impacted by COVID-19 as some tenders were deferred and there was a partial closure of its Victorian factory. The division saw its revenue for the half rise 2 per cent to $54.8m as underlying earnings fell 52 per cent to $2.1m.

GUD took in JobKeeper payments of $2.8m.

Managing director Graeme Whickman said the first half of the financial year had been very active in terms of acquisition-related activity and the automotive business had been a standout. However, its water arm, servicing homes, gardens and farms, had underperformed.

“While there have been deferrals of key modular water tenders, we expect that these contracts will contribute positively to future periods,” he said.

“In addition, Davey has faced significant challenges from an ­operational perspective with COVID-19 resulting in extended factory closures and associated cost-recovery gaps.”

“It has been frustrating that COVID-19 has impacted the delivery of the Davey improvement plan, with the export business masking an otherwise credible (domestic) sales outcome.”

Turning to the outlook, Mr Whickman said it was encouraging that the operating trends ­observed in the first half had continued through January.

Assuming no second half fiscal cliff or significant mobility restrictions, GUD expects underlying EBIT in the $95m-$100m range.

“GUD should be benefiting from once-in-a-lifetime changes to consumer mobility,” said Citi analyst Sam Teeger.

“While the interim result and the midpoint of the guidance was slightly better than what consensus was expecting, it may not be enough to lead to material share price appreciation, particularly given the beat was helped by a lower than expected effective tax rate and unexpected restructuring costs taken below the line.”