re: News: DuluxGroup boosts H1 profit, foreca... Donsky,It's...

re: News: DuluxGroup boosts H1 profit, foreca... Donsky,

It's expensive because its a good business. Surely you are aware that paying up for quality is an axiom of the equity market?

As for your cashflow assessment, I'm afraid looking at hte cash flow statement for one random six-month period in order to make deterministic conclusions about the company's inherent cash generating capability, is analytically flawed.
The reason 6-month cash flow analysis is not representative of underlying cash generation ability is it overlooks the impacts of things like business seasonality, working capital movements and the timing of tax payments)

If you looked at the company's TOTAL cash flows since it was spun out from Orica some 4 years ago, you will see that it has generated around $350m in Operating Cash Flow, Spent about $130m on capital expenditure, and paid $155m in dividends.

Meaning that the surplus (after keeping shareholders happy) was around $60m.

Viewed another way, after paying around $150m to buy Alesco, Net Debt-to-EBITDA for the company was 2.3x and EBITDA-to-Net Interest was 5.4x. Today, a mere 12 months later, and those solvency indicators have improved to 1.89x and 7.0x, respectively. That is testimony to the true cash generation over full-year time periods.

DLX's cash flows are typically seasonal, with most of the cash flow being recorded in the second half of their financial year (i.e., the September half).

Last financial year, cash flow conversion in the first half was 61%. For the full-year it was 86%, confirming that second half cash flow conversion was over 100%. For the first half of this year, cash flow conversion was 58% (in line with the pcp, and management confirms that it expects it to be above 80% for the full-year.