Dulux Group has lifted annual dividend with a higher final payout after reporting a 5.4% rise in full-year profit to $150.7 million for the year to the end of September.
The market responded with a modest rise in the share price to $7.45.
But in the afternoon sell of the shares came back to close at $7.39, down 0.1% on the day, which wasn’t too bad given the widespread weakness in the broader market yesterday that saw more than $30 billion, or 101 points (1.8%) wiped from the market for a second day in a row.
Investors seemed to like the assurance from the company that its core business in the maintenance and home renovation sectors will help it weather the downturn in new Australian property construction.
Revenue across Dulux’s Australian and New Zealand businesses – which includes Dulux paints, Selley’s and Parchem, B&D group, and Lincoln Sentry – was up 3.3% to $1.84 billion.
The company will pay a final dividend of 14 cents, 30% franked, up 0.5 cents from the same time last year, making for a full year payout of 28 cents a share, 5.8% above the 2016.17 level.
Dulux managing director Patrick Houlihan said the result was particularly pleasing given increases in raw material costs and higher depreciation due to the new 22,000 square-metre, $165 million Merrifield paint factory that was opened in May.
The company said maintenance work on existing homes – which accounts for 66% of Dulux Group revenue – would continue to provide profitable growth.
“Although new construction approvals are expected to moderate in FY19, completions are expected to remain at FY18 levels given the pipeline of work,” the company said in a release.
“Non-residential commercial construction markets are expected to continue to grow, while relevant engineering construction and maintenance markets are expected to be flat overall.”
“EBIT growth of 4.2% was driven by solid results across all of our Australian and New Zealand business segments, led by the continued strong performance from our Dulux ANZ business,” Mr. Houlihan said in yesterday’s statement.
The Dulux ANZ business, which contributes approximately 70% of Group business EBIT (Earnings Before Interest and Tax), increased sales revenue by 4.8% and EBIT by $7.8 million or 4.7%, maintaining EBIT margin at 17.6%.
“We believe that the Dulux ANZ result was excellent. Given significant increases in raw material costs and the higher depreciation due to the new Merrifield factory, holding EBIT margin reflected pricing discipline and a strong focus on costs,” said Mr. Houlihan.
DuluxGroup’s other ANZ segments – Selleys & Parchem ANZ, B&D Group, and Lincoln Sentry – collectively grew EBIT by $3.1m or 4.7%.
EBIT in the “Other businesses” segment declined by $0.6m or 5.3%. Growth in Yates and PNG was more than offset by investment in DuluxGroup’s UK business and Indonesian joint venture.
Looking to 2018-19 Dulux said that “Subject to economic conditions, and excluding non-recurring items, 2019 net profit after tax is expected to be higher than the 2018 equivalent of $150.7million.”
“Lead indicators for DuluxGroup’s key markets in Australia and New Zealand remain generally positive.
Our core market, which accounts for approximately two-thirds of DuluxGroup revenue, is the maintenance and renovation of existing homes. This market has historically proven to be relatively resilient throughout housing and economic cycles and we expect it to continue providing profitable growth.
“Recent favourable comments on GDP from the Reserve Bank, continued low interest rates and low unemployment support this view.
“The new housing market accounts for approximately 15% of DuluxGroup revenue. Although new construction approvals are expected to moderate in FY19, completions are expected to remain at FY18 levels given the pipeline of work. Non-residential commercial construction markets are expected to continue to grow, while relevant engineering construction and maintenance markets are expected to be flat overall.”
