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View Annual Report BED 2 garage driveway dining + lounge BED 1 KITCHEN DuluxGroup Annual Report 2013 Annual Report DuluxGroup Annual Report 2013 Highlights 1 About DuluxGroup 2 Chairman's Report 8 Managing Director's Report 10 Operating and Financial Review 12 Strategy and Growth 12 Material Business Risks 14 Result Summary 16 Financial Performance 17 Segment Detail 23 Corporate Costs 30 Non-recurring Items 31 Future Financial Prospects 32 Sustainability Report 33 Board Members 38 Group Executive 40 Corporate Governance Statement 42 Financial Report 52 Shareholder Statistics 152 Shareholder Information 153 Bed2 dulux wash and wear for bedroom ABN 42 133 404 065 DuluxGroup Limited is an Australian company that owns the Dulux® trade mark in Australia, New Zealand, Papua New Guinea, Samoa and Fiji only and the Cabot’s® trade mark in Australia, New Zealand, Papua New Guinea and Fiji only. DuluxGroup Limited is not associated with, and has no connection to, the owners of the Dulux® and Cabot's® trade marks in any other countries, nor does it sell Dulux® and Cabot's® products in any other countries. DuluxGroup Annual Report 2013 2013 Highlights A strong operating result in Strong cash generation, with net debt generally weak markets was to EBITDA underpinned by profitable market share growth in core segments, 1.95x solid input cost control and good Strong cash generation, with net debt to EBITDA at 1.95x, cash management. post the Alesco acquisition. Strengthened market leadership positions and Final dividend continued investment in key capabilities and longer term growth options have developed solid foundations for the future. 9.5cents NPAT, before non-recurring items Final dividend of 9.5 cents per share fully franked, taking the full year dividend to 17.5 cents, which represents a 70% payout ratio on NPAT, before non-recurring items. M l > 18.2% Resilience and financial discipline $94.1 • Strong underlying profit growth NPAT, before non-recurring items, of $94.1 million, • Grew revenue despite generally flat markets an increase of 18.2% over the 2012 equivalent NPAT • Profitable market share gains in core markets of $79.6 million.* • Good input cost control and strong cash generation • Alesco corporate cost synergies delivered ahead Earnings before interest and tax (EBIT) of schedule excluding non-recurring items* Investing for growth • Continued to invest in the fundamentals of brands, innovation and customer service to build on our > M l premium branded, market leading positions in % core markets $156.2 24.7 • Progressed the integration of the new businesses – Parchem Construction Chemicals and Equipment, B&D Garage Doors and Openers, and Lincoln Sentry Cabinet and Architectural Hardware Sales revenue growth • Invested in sales and marketing capability in our new businesses to capitalise on their market leading positions and premium brands l > • Shaped the China business to capitalise on growth B opportunities for Selleys, AcraTex and paints. $1.485 39.0% Heritage DuluxGroup businesses grew 5.5% in generally flat markets, due largely to market share gains, with the remainder of the growth due to the addition of the former Alesco businesses, which were acquired in December 2012. * Details of non-recurring items can be found on page 31. DuluxGroup Annual Report 2013 1 About DuluxGroup Products, Customers and End Markets DuluxGroup is a leading marketer Our Products Whether you are sitting in a family room brought to and manufacturer of premium life through your own choice of colour and texture, relaxing on your garden deck coated to seamlessly branded products that enhance, blend with the indoors, enjoying a back garden brimming with spring vegetables or marvelling at the protect and maintain the places ease with which your garage door silently glides up to reveal a beautifully matched driveway, DuluxGroup and spaces in which people live Salesproducts by business are at work.sectors From the specialty coatings that protect landmarks and work. such as the Sydney Harbour Bridge and Auckland’s iconic Princess Wharf building to concrete products for community infrastructure such as the new Royal Adelaide Hospital, DuluxGroup products are at work. Our products are woven into the fabric of our communities, helping us live better and more comfortable lives. Sales by Business Sectors Sales by business sectors Retail Paints 21% Trade Paints 23% A broad Specialty Coatings 13% Parchem Construction Chemicals and portfolio of Equipment 8% Garage Doors products and and Openers 10% Cabinet and Architectural Hardware 9% markets. Yates Garden Care 7% Selleys Home Care Retail9% Paints 21% Trade Paints 23% Specialty Coatings 13% Parchem Construction Chemicals and Equipment 8% Garage Doors and Openers 10% Cabinet and Architectural Hardware 9% Yates Garden Care 7% Selleys Home Care 9% 2 Our Customer Channels DuluxGroup invests in its iconic brands and focuses on providing Almost two thirds of DuluxGroup’s business is delivered via trade channels, comprising an extensive innovative product solutions to network of customers including painters, specifiers, architects, engineers, designers, builders, concreters, drive growth and success through cabinet makers, garage door dealers, project and facilities managers. our retail and trade customers. Sales by channel In addition to our own extensive company store network, DuluxGroup’s products are sold through thousands of retail customer outlets ranging from large national home improvement and grocery retailers to specialist paint and decorating and smaller family-owned hardware stores. Sales by ChannelSales by channel Retail 37% Trade 63% Our End Markets Approximately two thirds of DuluxGroup’s business is focused on the maintenance and improvement of existing homes. Throughout economic cycles consumers have continued to invest in making their DuluxGroup's primary focus homes ‘a better place’, whether it be through do-it-yourself (DIY) projects or engaging a trade is on residential markets, with professional. a strong bias towards existing DuluxGroup also has some focus on new housing, with a bias towards the premium end of the market where homes. This is complemented Salesconsumer by end-market choice of brands plays a greater role. When consumers are deciding which products to use in their by a presence in commercial own living spaces – whether it be in an existing or a new home – they seek out brands they know and trust. and industrial markets. Approximately one-fifth of DuluxGroup’s business comes from commercial construction, infrastructure and industrial markets. Sales by End-marketSales by end-market Maintenance and Home Improvement 64% New Housing 16% Commercial Infrastructure 16% Industrial 4% Maintenance & Home Commercial DuluxGroup Annual Report 2013 3 Improvement 64% Construction 10% New Housing 16% Industrial 4% About DuluxGroup Business Fundamentals Our Core Purpose At DuluxGroup we help our consumers to imagine and create better places and spaces in which to live and work. We call this ‘Imagine a Better Place’. Our Strengths Our People and Culture Premium brands DuluxGroup’s people span many geographies and marketing and cultural backgrounds. They have developed industry-leading expertise and deep experience in areas as diverse as marketing, chemistry, colour trends, finance, horticulture, sales, engineering and materials handling. They have united to develop a common set of values that guide them in delivering our core purpose. Those values, which underpin DuluxGroup’s success, are: BE CUSTOMER FOCUSED AND CONSUMER DRIVEN IMAGINE INNOVATE AND GROW – unleaSH OUR POTENTIAL VALUE PEOPLE, WORK SAFELY AND RESPECT THE ENVIRONMENT RUN THE BUSINESS AS YOUR OWN A BETTER Driven by these values, DuluxGroup people continue to finder smarter, market-leading solutions for consumers and our retail and trade customers. This quest to improve – our standards, our products, our services – is supported by an entrenched culture of operating with integrity, strong financial discipline and a commitment to care for the safety of colleagues and the PLACE communities within which we operate. Broad product portfolio Our people and culture 4 Comprehensive distribution and customer relationships across trade and retail channels Innovation and technology Proven Business Fundamentals IMAGINE DuluxGroup maintains and develops market-leading positions by building strong relationships with consumers who know and trust our brands. Our world-class research and technology centres take input from consumers and a global knowledge base to develop product innovations that surprise and delight consumers. We invest in world-class manufacturing plants where those innovations are A BETTER brought to life in products that are rigorously tested to ensure they are worthy of bearing the badge of our iconic brands. Our sales force – the biggest and most effective in the business – supports a network of trade professionals and our retail customers in meeting the needs of our consumers in store. PLACE All of those elements work to ensure a strong and sustainable competitive advantage, a stable Financial discipline earnings profile and provide a platform for compelling growth options. We seek leadership positions in premium, higher-margin segments. We build those positions by investing in our key capabilities to ensure sustainable competitive advantage and to stimulate growth. We maintain a relentless focus on financial discipline and productivity improvement. Leading We continue to reinvest in the customer service right assets to enable growth. DuluxGroup
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