GUD: Conglomerate to pure play

GUD Holdings (ASX:GUD) listed on the ASX in 1962. The business has never fit neatly into a classification as it has undergone multiple transformations throughout its life. In 2010, 44% of EBIT came from the consumer products division. This included the electrical appliances brand Sunbeam and Oates cleaning products. 28% of EBIT was from the automotive division and 25% from Davey Water Products. The remainder was from the security division. Prior to that they even owned Victa Mowers. Today, GUD is a pure play automotive parts and accessories business having sold the Davey Water Products business last year to complete the transition from conglomerate to pure play. Initially, this has led to a substantial uptick in margins and returns. Over the last 18 months, the Quality score has gone from 67 to 97. The underlying factors contributing to this include: The Health score has gone from 3 to 8 Return on equity has doubled from 6% to 12%Operating margin has gone from 10.6% to 16.4% Turning to the Bankruptcy risk, the Z-score was previously in the distress zone, but has now moved into the cautious zone….