Despite the weird name, GUD Holdings (ASX:GUD) has been a stalwart of the ASX for almost 60 years. That sort of longevity implies it must be doing something right. It has undergone a lot of change over the years, buying and selling businesses. Revenue has almost doubled over the last two years as a result of acquisitions.
GUD is now primarily an automotive parts and accessories business with 89% of revenues in the most recent interim results coming from this segment. The balance comes from the water segment.
The water business consists of Davey Water Products which supplies water-related products for farming and irrigation, home and garden applications, pools and spas, commercial and water treatment purposes. Revenue declined a bit in this segment as export sales were severely impacted by destocking activities, especially in Europe. Margins are also quite low for this part of the business at sub 5%.
The automotive sector consists of a host of different brands and products. It includes APG Group which was acquired in January 2022 and accounted for 27% of total revenue in the most recent half.
Source: GUD, H1 FY23 Financial Results, 15/2/23
GUD manufactures a lot of its own products as well as being a distributor.
The fortunes of GUD are tied closely to those of the car industry. New car sales have rebounded since the depths of the pandemic, but are still 9% below their highs in 2017 and 7% below the 5 year pre-Covid average.
Source: GUD, H1 FY23 Financial Results, 15/2/23
In calendar year 2022, the overall market for new cars was up 3.0%, but the top 20 models for GUD sales rose by 4.7%. GUD’s products are more targeted at pickups (utes) and SUVs. Sales of particular vehicles have been very volatile as supply has fluctuated wildly. Wait times have pushed out to as much as 250 days. These trends have a flow on effect for GUD, as people often kit out their 4wds with a bunch of cool accessories when they pick them up from the showroom floor.
But GUD is not entirely at the mercy of new car sales. In fact, 80% of the automotive revenue (excluding APG) comes from non-discretionary spend, that is replacement parts for wear and tear.…
