This morning paints and homewares business DuluxGroup Limited (ASX: DLX) reported its results for the year ending September 30, 2018 and below is a summary of the result for investors.
- Full year net profit after tax of $150.7m, up 5.4% on prior year
- Sales revenue of $1.84b, up 3.3% – on a normalised basis sales revenue was up 4.5% on prior year
- EBITDA or operating income up 5% to $257.7m
- EBIT up 4.2% to $223.2m
- Net debt to EBITDA stands at 1.3x
- Final dividend of 14 cents per share fully franked
- Full year dividends of 28 cents per share, up 5.7%, on payout ratio of 72%
- Forecast for a "higher" net profit after tax in FY 2019
- The new $165m, Dulux Merrifield factory now at full production
This is another strong result from a group that has delivered profit and dividend growth every year since its formation after a 2010 demerger. The track record shows how Dulux has a reasonably strong competitive position and some brand power as Australian households and professional painters or 'tradies' still prefer its brand when choosing to renovate.
The track record also suggests Dulux has a good management team that is capable in terms of allocating capital, investing, and maintaining the group's competitive position.
Since 2011 annual dividends per share have risen from 15 cents to 28 cents in FY 2018, which is impressive given this is not a capital light tech business or similar.
Despite its investment in the $165 million Merrifield paint factory that was required due to strong demand, the group's net debt position has only marginally grown to $388.5 million, on 1.3x last year's EBITDA.
The debt is something to put some investors off, although Dulux does offer reasonably defensive revenue streams as buildings regularly require painting irrespective of economic cycles.
Management noted today that around two-thirds of revenue comes from the renovation and maintenance of exisiting homes, with completion of new homes in FY 2019 expected to remain at similar levels to FY 2018.
The group also flagged low interest rates and low unemployment as factors giving it confidence to forecast another year of profit growth in FY 2019.
