A couple of news items from Thursday’s ASX trading session, with GUD Holdings announcing a late profit downgrade and The Reject Shop filling a vacant key management role.
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Shares in medium cap industrial GUD Holdings (ASX: GUD) will no doubt come under pressure today after the company shovelled out a solid earnings downgrade after trading ended on Thursday.
GUD shares closed down 1.4% at $9.61 before the statement came at 4.42pm. That’s more than 16% down from $11.54 on June 1. The shares will fall further when trading resumes later Friday.
GUD is in water and automotive aftermarket products and it’s the latter where many of the problems appear to be coming from.
GUD told the ASX in the late statement that that because of rising costs, supply chain problems and volatility in new vehicle supplies it is now looking at lower earnings for the year to June 30 of around $147 million on an underlying EBITA basis, against earlier guidance of a range from $US155 million to $160 million given at an investor day on April 8
Directors said that the company’s supply chains “remain volatile, and, in some cases, pressures have intensified.”
“In recent months, volatility in new vehicle supply has increased. These supply constraints have led to year over year new vehicle sales declines as order backlogs grow, which in the short term are negatively impacting sales in its various automotive businesses.
“Costs continue to be challenging but price increases have been rolled out across all businesses to protect margins – further price rises are in place for July and August to offset the inflationary pressures,” directors said.
GUD said that while the company has seen continuing solid demand and the benefits from its “strategically higher inventory level”, supply chain lead times remain elevated and, in some cases, have increased since the April update.
“This is primarily due to impacts of the protracted Ukraine conflict and the strict southern China lockdowns that are only just beginning to abate. Consequently, inventory levels are not expected to moderate, at least into H1 of 2022-23.
CEO Graeme Whickman said in the statement “While frustrating in the near term, we remain positive on the underlying customer demand profile of the GUD businesses that serve the new vehicle market, noting many industry commentators are reporting order backlogs well in excess of 12 months…the automotive aftermarket is expected to remain robust and GUD believes its growing portfolio is in a strong position to continue to leverage the domestic momentum and further capitalise on the opportunities presented by the prospective offshore markets.“
The company plans to release its full year results on August 15.
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Thursday saw a nice little freshener for the share price of small discount retailer The Reject Shop (ASX: TRS), with a new CEO named and a big hint that shareholders can expect some capital management activity later in the year – perhaps with the full year results in August.
Shares in the tiny business jumped more than 20% at one stage before settling back to be up 19% at $3.39.
TRS provided a sort of update for trading with a month to go in its 2021-22 financial year, saying in Thursday’s statement:
“The Company continues to trade in line with management’s expectations and consistent with broker consensus estimates of FY22 pre AASB-16 EBIT.”
The New CEO, Phillip (“Phil”) Bishop was named and introduced. He starts July 11.
But more importantly for shareholders, the company updated its capital management plans, saying in Thursday’s statement:
“As part of its capital management strategy, the Company confirms that it is assessing an on-market share buy-back.
“If the Board formally resolves to proceed with a buy-back, it is expected that an announcement of such a decision will be made next month or in August at which time the Company will disclose further details of the size of the buy-back and the proposed timing (as well as further required documentation such as the Appendix 3C (notification of buy-back)).
On the new CEO, the company described Mr Bishop as “an experienced retailer with 30 years of experience, most recently holding senior roles at Bunnings, including the role of Director Merchandise & Marketing, and prior to that in various senior roles at Officeworks, including the role of Chief Operating Officer.”
“In these various roles, Phil has helped to deliver sustained growth through successfully developing and implementing strategies focused on the needs of customers.
“Phil joins The Reject Shop at a time when the Company has executed on the initial phases of its turnaround strategy. The Company is now well positioned with a lower cost base, an experienced and talented senior leadership team and growing national store network supported by a strong balance sheet, all of which will underpin the growth phase of the turnaround strategy,” the company said in Thursday’s statement to the ASX.
