Ann: Half Year Report 2017 - Appendix 4D, page-2

Even by DLX's standards, a very good quality result, with growth in all business units (yes, even the garage doors division):

1H2017 EBIT Growth:
Paints & Coatings [84% of Group EBIT]: +7.7% (Rev +4.7%, Margin +50bp to 18.7%)
Consumer & Construction [13% of Group EBIT]: +11.9% (Rev +0.1%, Margin +110bp to 10.9%)
Garage Doors & Openers [6% of Group EBIT]: +5.8% (Rev +2.4%, Margin +20bp to 7.1%)
Cabinet and Architectural Hardware [6% of Group EBIT]: +22.4%  (Rev +5.3%, Margin +70bp to 7.7%)
Other [6% of Group EBIT]: -19.6%  (Rev +2.3%, Margin -150bp to 5.4%)
Corporate Expenses [-14% of Group EBIT]: +5.3%

The only blemish was the contraction in the "Other" segment but I'll wager this was overwhelmingly due to cost investment to support future growth in the recently-acquired UK paint business.  If you "normalise" for this ~$1.0m cost investment then that division's EBIT declined by 5%.

On the other hand, the result was boosted by higher than normal "Other Revenue" (no details provided) which was $2.5m in the half, compared to normal levels that average around $1.0m per half-year.

In terms of cash flow, the company still managed to break even at the Free cash flow level, despite:

- the March half-years being seasonally weaker in Operating Cash Flow terms  (usually, just 25% of OCF is generated in Marhc half-years, and 75% of OCF is generated in September halves), and
- the increased capex for the new paint factory, which is on track, on time and within budget.

As a result of the strong cash flow performance, Net Debt came in at $399m (compared to my expectation of between $420m to $440m).

Consequently, NIBD-to-EBITDA now looks like it will peak at an undemanding 1.5x (compared to my earlier forecast of 1.7x)

This all led to the board declaring a 13% increase in the dividend, to 13c.

It is truly a high-quality, durable business with a wide (and widening) commercial moat.

Only trouble, I think,  is that - at 20x P/E and 12x EV/EBITDA - it is sort of priced that way.

So while I think the market will be very happy with yet another excellent DLX result, I don't think the stock price will be going anywhere in a hurry.

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