Shares in paints group, DuluxGroup hit another all time high yesterday in the wake of the release of a solid half year report and higher interim dividend.
The company lifted its interim dividend to 13 cents a share from 11.5 cents a year ago.
Dulux Group reported 14.2% rise in net after tax profit to $72.7 million for the six months ended March 31, 2017, on sales 3.5% higher at $881 million.
The bottomline result included a $3.1 million write-back of a tax provision, and when that was stripped out, the net profit rose by 9.3%.
The higher interim will take up 70% per cent of net profit after tax.
The company’s shares hit a new intra day high of $6.89 before ending a rough day’s trading for the wider market up 0.7% at $6.78.
CEO Patrick Houlihan said in yesterday’s statement and later briefings that the robust home renovation spending and Do It Yourself (DIY) painting maintenance will continue to strengthen even if there is a broader slowdown in Australia’s housing market.
He said that odd jobs and touch ups of painted surfaces and new colour schemes are now one of the staples of life and no longer considered part of discretionary spending.
Mr Houlihan says the company has 46% of the Australian paint market as well as the Selleys range of handyman products.
He says 65% of the company’s end market exposure was from maintenance, home improvement and renovations, and the prospect of cooling house prices would have little impact.
Dulux began selling the Selleys brand in the United Kingdom in the past few months through the Bunnings stores and plans to expand their reach through the UK hardware business which Wesfarmers bought in early 2016.
Mr Houlihan said the turnover of Australian housing is as people held on to their properties longer, underlying spending on maintenance and renovations was strong and set to keep on delivering solid growth.
The sharp rise in house prices in Sydney and Melbourne and slow rise in household incomes (slower than debt) and wages will see people hanging onto houses for even longer periods.
Dulux will open later in 2017 a new $165 million paint factory in the Melbourne suburb of Merrifield.
Mr Houlihan said new housing had peaked in Australia but there was still a solid pipeline of work given the lag between approvals and building starts. Also, because Dulux targets the premium to high end of the new housing market, the company expects its sales will be less volatile than the mass market.
DuluxGroup expects its 2016-17 full-year net profit will be higher than the $130.4 million profit in 2015-16, subject to economic conditions.
