DLX (ASX) Full-Year Result Expectations

Originally posted by madamswer ↑

Just_a_Guy,

Apologies, I didn't quite answer your question fully.

The difference between my net debt forecast and the reported outcome is due to two major variances:

1. Working capital, the company ending the period with some $8m less of it than I had forecast (essentially, a 40bp difference in Working Cap-to-Sales terms). So, 2H2017 OCF was $116m compared to my $103m forecast.

2. As you rightly deduced, the other major variance was that my capex estimate was for $70m in the second half (it was $49m in 1H2017), while the actual result of $47m was actually less than 1H2017. So there is a further $23m of net debt variance explained, I clearly gauged the timing of the capital expenditure on the new factory incorrectly. But it is really a mere timing issue, because for the current half, I had only $30m of capex in my model, and I now think it will be about $50m. So, really, it's just a 6 month lag of some $20m of capex... largely "forecasting noise".

The significant aspect of what is happening with this company here is testimony to its prolific cash flow generation.

For here is a business that is undertaking a once-a-generational total renewal of its manufacturing base, while continuing to pay out ~75% of its profits to the owners of the business, and yet over the period this is all happening, Net-Debt-to-EBITDA will still have been reduced:

Net Debt-t0-EBITDA (times):
SH2014: 1.7
MH2015: 2.0
SH2015: 1.5
MH2016: 1.7
SH2016: 1.5
MH2017: 1.6
SH2017: 1.5
MH2018: 1.5 (E)
SH2018: 1.4 (E)

Not many companies that can deliver that sort of outcome.

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Think there may be an error with hotcopper today as the post count for this thread is 11 but I'm only seeing 4 (unless that can be explained by crazypunter posting prolifically and I've still got him/her on ignore).

When you look at the 16 result and accompanying forecasts, next to todays result, the capex spend including the new factory was forecast by dulux to be 115-120mil for fy 17 and it ended up being 96 (20mil lower) whereas next year it is now being flagged as being approximately 10mil (not 20 as you mentioned) higher than at the end of fy16, so it looks like dulux is flagging a reduction of an extra 10mil in capex over the 2 year period than originally forecast.

Also why do you have net debt to ebitda of 1.5, when the company reports it as 1.4? Not trying to be pedantic just trying to understand if you have made allowances in your spreadsheet.

I must say the result are about as good across the board as one could hope for, and I realise its probably priced accordingly, but how many times might one of said the same thing about other quality stocks such as csl etc, and the price keeps rising. Wonder when dlx will be initiating it's own share split...

poor old ppt selling down reh and dlx, who's great idea must that be?

Think there may be an error with hotcopper today as the post...