The GUD Holdings Limited (ASX: GUD) share price is on course to end the week on a positive note.
In afternoon trade the diversified products company's shares are up 6% to $11.87.
This makes it the third-best performer on the ASX 200 index behind Avita Medical Ltd (ASX: AVH) and Link Administration Holdings Ltd (ASX: LNK).
Why is the GUD share price storming higher?
Investors have been buying GUD's shares following the release of its first half result.
According to the release, during the first half the company's modest organic growth and business fitness initiatives combined to offset Automotive currency headwinds.
This led to GUD delivering an underlying EBIT (pre AASB 16) 0.1% ahead of the prior corresponding period at $44 million. This was in line with management's expectations and means the company is tracking to its FY 2020 guidance.
On the bottom line, the company reported an underlying NPAT (pre AASB 16) down 2.4% to $29 million.
Despite this slight decline in underlying NPAT, the GUD board has held firm with its dividend. It has declared a fully franked 25 cents per share interim dividend.
Segment performance.
During the half the company's Automotive segment delivered a 4% increase in revenue to $173.6 million and a 3% decline in underlying EBIT (pre AASB 16) to $43.1 million.
Whereas the Davey segment only grew revenue by 2% to $53.5 million but managed to deliver a 7% increase in underlying EBIT (pre AASB 16) to $4.4 million.
Management commentary.
Managing Director, Graeme Whickman, was pleased with the half given the challenging trading conditions.
He said: "The result is both in line with management expectations and consistent with our Investor Day remarks in October. We knew the first half would be challenging for the Automotive businesses with the impact of a weaker $AUD and domestic cost inflation balanced against the quantum and timing of our initial price increases."
Mr Whickman advised that the Davey business continues to improve. This has been driven by a combination of sales growth, business fitness, and product initiatives consistent with the mid‐term strategy.
The managing director appears confident on the company's prospects in the second half.
He said: "I am pleased to note that we achieved the desired improvement in Net Working Capital across the Group and remain confident in the team's efforts on cost management. In addition, the market's acceptance of a second round of Automotive price increases leaves us well positioned for the second half of the financial year."
In addition to this, the company advised that it remains on the lookout for further acquisitions. This includes both logical bolt‐on acquisitions and substantial acquisitions focused on the Automotive segment.
