Ann: Half Yearly Report and Accounts, page-2

With adoption of AASB16, its a tricky result to decipher.

EBITDA comparisons on pcp are meaningless because lease payments are no longer booked above the EBITDA line, but are, instead, "reflected" in higher depreciation charge, so it all largely washes out at the EBIT line. But then a further lease related charge (non cash) gets raised at the Interest Expense line also as a result of AASB.

In summary, in general and all things being equal, AASB16 has the effect of increasing EBITDA, increasing D&A (so relatively little change at the EBIT level), but the higher increase in the Interest Expense line means that AASB16 has the effect of modestly reducing Profit Before Tax.

So direct comparisons for this result - on a reported basis - with previous corresponding periods is nigh on impossible.

And then there are the added issues of a $1.4m restructuring charges taken in DH2019 and a provision writeback of $0.5m in DH2018 result.

But once one gets one's mind around these issues, then it was actually a result that demonstrated the sheer resilience of the business, with underlying operating results unchanged on pcp, despite the numerous headwinds the business faced during calendar 2019.

Lesser quality companies, faced with similarly tough market conditions, would have reported a far less stable performance.

It is clear to this observer that the business is being run with a laser-like focus on the things that management are able to control.

"Operating fitness and margin management" are typically examples of execu-speak, but in GUD's case there is evidence of them walking the talk.

So lots of bouquets, but the major brickback was the fact that they didn't make any acquisitions during the period.

And if ever there were market conditions that were conducive to elevating vendor motivations to sell - with moderated valuation expectations - those conditions are now...
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