Full-Year Result Expectations, page-18

"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."

Thanks, I never saw that.

"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."

Not precisely sure how they get 1.4, but I can make a bit of a guess:

Most of their non-current borrowings, and more than half of their total borrowings, is in the form of US Private Placement debt.

I'll bet that in arriving at their 1.4x figure, they are netting off the mark-to-market gains on the cross currency and interest rate hedges on that US debt.

By contrast, I simply worked off the financial statements, without making any adjustments for hedge gains/losses.


"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...

This result was actually of impeccable quality, even by DLX's standards. They met market expectations, despite a +$5m EBIT drag from DGL Camel China/HK losses. And the expenses incurred in the UK expansion - and these would not be immaterial - are being fully expensed.

I suspect that, had they been of a more... shall we say, er... promotional disposition (like many other companies), they could have reported an underlying operating profit number $7m or $8m higher. But that's not their style.

I'm guessing that the reason the market liked his result is because this is the first result announcement where a strategy of growing outside of Australia is being articulated. And, like me, I suspect the market likes the prudent, conservative and capital-light manner that they are going about it.

If anyone ever asked me to distil the DLX investment thesis in just a few words, I would direct them to Slide 25 in today's presentation pack. That slide - I feel - encapsulates the essence of the Dulux pedigree (coupled with the strong free cash flow generation).
(Personally, I wish they wouldn't educate the market like that, because I prefer it when people think it is a cyclical business exposed to the housing cycle, and they aggressively sell it off on that basis every few years. I don't want everyone to realise that it is actually a growth stock, and immune to cyclical forces.)


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

That's why I never take my cues from what others are doing, even so-called "reputable" institutional investors, because their selling might have nothing whatsoever to do with fundamental valuation, but could be for a host of technical factors relating to portfolio construction, risk management, mandate changes and a plethora of other technical constraints to which investment funds need to comply.