#1DuluxGroup Half Year Results 2016 17 May 2016 Imagine a better place DuluxGroup Dulux SELLEYS tes parchem Cyy automatic LINCOLN DGL CAMEL#2Agenda Outline ■ Results Overview Segment Performance ■ Other Financial Information Strategic Growth Priorities ■ Outlook Appendices DuluxGroup Imagine a better place 2#3Results Overview DuluxGroup Imagine a better place 3#4Overview ■ ◉ Sales and profit growth (NPAT up 3.7%) Continued strong performance from Paints & Coatings, despite a short term correction in retail channels in Australia and the impact of the H2 FY15 Mitre 10 NZ exit Fundamentals sound in other heritage businesses with growth in Yates and Asia. Short term pressures in Selleys (Woolworths hardware destocking) and PNG (economy) Good growth in Lincoln Sentry and continued revenue & gross margin improvement in GDO, offset by one-off costs. Weaker H1 for Parchem (market), largely mitigated by prior period cost saving initiatives Markets and businesses generally well positioned for the second half Balance sheet metrics solid, with net debt to EBITDA at 1.4x Interim dividend up 4.5% ◉ Supply chain projects on track Reaffirm that we expect FY16 NPAT will be higher than FY15 equivalent of $124.7M Numbers in this presentation are subject to rounding. Refer Appendix for definitions. DuluxGroup Imagine a better place 4#5Half Year Financial Performance A$ million Sales H1 16 H1 15 % 851.1 836.9 1.7 EBIT excluding non-recurring items 98.3 94.1 4.5 NPAT excluding non-recurring items 63.7 61.4 3.7 Operating cash flow excluding non-recurring items 28.2 38.5 (26.8) EBIT 98.3 77.0 27.7 NPAT 63.7 49.5 28.7 Net debt to EBITDA 1.4 1.5 6.7 Interim dividend (cps) 11.5 11.0 4.5 Positive earnings and net debt metrics Operating cash flow impacted by higher tax payments and working capital (largely inventory driven) - H2 improvement in working capital expected Refer to Appendix for definitions. DuluxGroup Imagine a better place 5#6Core home improvement market is sound End Market Exposure¹ Commercial & Infrastructure 15% Industrial 5% New Housing 15% Maintenance & Home Improvement 65% Comments Home Improvement Market - 65% Underlying demand fundamentals of market remain generally strong • GDP growth stable • Interest rates low • House prices high • • Consumer confidence mixed Short term correction in retail channel in the first half Underlying consumer demand remains sound, consistent with history (11.5% volume growth) New Housing Market - 15% New housing approvals have peaked in Australia but there is a strong pipeline of work given lag between approvals and commencements • Commercial and Infrastructure Market - 15% Commercial markets are relatively strong Infrastructure markets are still weak (especially energy and resources projects) with civil infrastructure growth not expected until 2017 10 million dwellings in Australia and approximately 70% are older than 20 years 2. 1. Based on FY 15 results and consistent with H1 16 2. 2011 Census and other ABS data DuluxGroup Imagine a better place 6#7Safety & Sustainability Rolling 12 months versus prior period March 2016 Sept 2015 Recordable Injury Rate ✓ 1.67 1.84 Waste Generation (% change) ✓ -5% -6% Water Consumption (% change) ✓ -1% -6% Focus remains on strategic pillars of disaster prevention, fatality prevention, injury prevention and sustainability Disaster prevention activities include further risk studies and actions to ensure rigorous control of chemical processes, ignition sources and fire mitigation is sustained Implementation of six 'protocols' to establish a clear standard for our highest fatality risks (forklifts, racking, traffic management, driver safety, electrical safety, working at heights) is now well advanced Reduction in recordable injury rate DuluxGroup Imagine a better place 7#8Segment Performance DuluxGroup Imagine a better place 8#9Segment EBIT (excluding FY15 non-recurring items) A$ million H1 16 H1 15 % Paints & Coatings ANZ 82.6 78.7 5.0 Consumer & Construction Products (C&CP) 12.3 13.2 (6.8) Garage Doors & Openers (GDO) 5.5 5.5 0.0 Cabinet & Architectural Hardware 5.0 3.6 38.9 Other businesses Business EBIT Corporate 7.3 7.2 1.4 112.7 108.2 4.2 (14.4) (14.1) (2.1) Total EBIT excluding non-recurring items 98.3 94.1 4.5 ■ Continued growth from Australian Paints & Coatings - share gains and good cost control ☐ C&CP decline due to Parchem (tough markets) and flat EBIT from Selleys (Woolworths hardware destocking) Strong revenue growth in GDO and flat EBIT, impacted by customer service centralisation costs Strong revenue and earnings growth in Cabinet & Architectural Hardware Modest growth in Other businesses due to positive performances from Yates, China and SE Asia largely offset by PNG (market) DuluxGroup Imagine a better place 9#10Paints & Coatings - ANZ A$ million H1 16 H1 15 % % of H1 16 Group Sales and Business EBIT Sales 452.5 442.4 2.3 EBITDA excl non-recurring items 91.1 87.6 4.0 53% EBIT excl non-recurring items 82.6 78.7 5.0 دد 73% EBIT margin excl non-recurring items 18.3% 17.8% 0.5pts % Sales % EBIT Non-recurring items (13.8) ◉ Australian sales growth of 4%, driven by market share gains and modest price gains (mix-driven). Market flat - short term retail 'correction' offset by new housing growth. EBIT growth reflects sales growth and good cost control ■ New Zealand sales and EBIT declined due to Mitre 10 exit (H2 15), in line with guidance (~10% of segment) FY16 EBIT margin expected to be slightly higher than FY15 End Markets 1 % sales Industrial 5% Commercial & Infrastructure 15% New Housing 15% Maintenance & Home Improvement 65% 1. Based on FY15 results and consistent with H1 16 Refer to Appendix for definitions. EBITDA, EBIT and EBIT margin excluding non-recurring items are adjusted for the one-off restructuring provisions relating to the supply chain projects. Figures are directly extracted from the Financial Statements. DuluxGroup Imagine a better place 10#11Consumer & Construction Products - ANZ A$ million H1 16 H1 15 % % of H1 16 Group Sales and Business EBIT Sales 125.7 132.6 (5.2) EBITDA excl non-recurring items 13.9 15.0 (7.3) 15% 11% EBIT excl non-recurring items 12.3 13.2 (6.8) EBIT margin excl non-recurring items 9.8% 10.0% (0.2)pts % Sales % EBIT Non-recurring items (3.2) Selleys sales and EBIT were flat due largely to destocking in Woolworths hardware group Parchem EBIT declined due to weak Australian infrastructure and Christchurch markets, largely offset by cost saving initiatives One-off costs of $0.5M - exit from equipment manufacturing Commercial & Infrastructure 30% New Housing 10% End Markets 1 % sales Maintenance & Home Improvement 60% 1. Based on FY15 results and consistent with H1 16 Refer to Appendix for definitions. EBITDA, EBIT and EBIT margin excluding non-recurring items are adjusted for the one-off restructuring provisions relating to the supply chain projects. Figures are directly extracted from the Financial Statements. DuluxGroup Imagine a better place 11#12Garage Doors and Openers A$ million Sales EBITDA EBIT EBIT margin H1 16 H1 15 % % of H1 16 Group Sales and Business EBIT 84.3 78.8 7.0 8.8 8.8 10% 5% 5.5 5.5 6.5% 7.0% (0.5)pts % Sales % EBIT Solid revenue growth assisted by positive markets and complemented by the acquisition of Gliderol's Western Australian assets Operating gross margins held EBIT flat reflecting $0.5M costs of customer service centralisation - EBIT grew 9% excluding these costs Positive outlook for seasonally stronger second half End Markets 1 % sales Commercial & Infrastructure 15% New Housing 35% Maintenance & Home Improvement 50% 1. Based on FY15 results and consistent with H1 16 DuluxGroup Imagine a better place 12#13Cabinet and Architectural Hardware A$ million Sales EBITDA EBIT EBIT margin H1 16 H1 15 % % of H1 16 Group Sales and Business EBIT 88.9 82.2 8.2 6.2 4.8 29.2 10% 4% 5.0 3.6 38.9 5.6% 4.4% 1.2pts % Sales % EBIT Strong sales growth led by cabinet hardware business EBIT growth due to fixed cost leverage and margin improvement initiatives Well positioned for second half End Markets 1 Commercial & Infrastructure 15% % sales 1. Based on FY15 results and consistent with H1 16 New Housing 25% Maintenance & Home Improvement 60% DuluxGroup Imagine a better place 13#14Other businesses A$ million Sales EBITDA EBIT EBIT margin H1 16 H1 15 % % of H1 16 Group Sales and Business EBIT 105.9 107.0 (1.0) 8.7 8.9 (2.2) 12% 6% 7.3 7.2 1.4 6.9% 6.7% 0.2pts % Sales % EBIT Meaningful profit growth delivered by: Yates EBIT growth in soft markets DGL Camel China - EBIT improvement in soft markets South East Asia - EBIT growth due to strong growth in Vietnam Largely offset by: - Papua New Guinea - EBIT decline due to very soft economic conditions DuluxGroup Imagine a better place 14#15Other Financial Information DuluxGroup Imagine a better place 15#16Other Profit & Loss items ☐ There were no non-recurring items recognised during the first half - The cash impact of the provisions taken in 2015 will occur largely in the second half of FY16 for the distribution centre provision and in late FY17 and/or early FY18 for the Rocklea restructuring provision Corporate costs increased 2.1% for the half and are expected to be $27M for the full year Tax rate was 28.2%, slightly above the prior period, and is expected to revert to our target 29-30% range in the second half DuluxGroup Imagine a better place 16#17Capital Management – Key Measures - Balance Sheet (A$ million) Mar 16 Sept 15 Mar 15 Net debt inclusive of USPP hedge value 326.2 276.9 329.0 Rolling Trade Working Capital (TWC) to sales 15.7% 15.2% 15.3% Х Net Debt: EBITDA (times) 1.4 1.2 1.5 EBIT Interest Cover 9.3 9.0 8.7 Cash Flow and P&L (A$ million) Operating cash flow excluding non-recurring items Cash conversion excluding non-recurring items Net finance costs Average net interest rate H1 16 H1 15 28.2 38.5 52% 56% 10.6 10.8 4.9% 5.3% Rolling trade working capital ratio increased due to inventory - ~50% of increase related to deliberate stock build (new Wash & Wear, strike planning); the rest related to inventory in businesses impacted by lower revenue (eg. Parchem) Operating cash flow impacted by tax payment timing ($7M) and TWC (inventory) Cash conversion of 80%+ targeted for full year Refer to Appendix for definitions. DuluxGroup Imagine a better place 17#18Capital Expenditure Outlook¹ A$ million H1 16 2016 2017 2018 New paint factory 17.4 60 75 25 Other projects 7.3 20-25 20-30 20-30 Total capital expenditure 24.7 80-85 95-105 45-55 Depreciation and amortisation 16.8 32-35 New paint factory capital expenditure remains unchanged at $165M 1. Outlook excludes asset sales which are expected to occur following the commissioning of the new paint factory eg Glen Waverley site. FY16 estimate is within +/- $10M DuluxGroup Imagine a better place 18#19New Paint Factory Dulux MERRIFIELD Status update - - All planning and building approvals received Site works commenced in December 2015 Pricing firm on 50% of capital - Building construction commenced March 2016 VAUGHAN Dulux On time and budget Commissioning (mid 2017) Production (late 2017) Benefits of new factory - Emerging paint technologies - Lower costs - At least NPV neutral - Reduced fire and flood risk vs. Rocklea DuluxGroup Imagine a better place 19#20New Distribution Centre Status update - Building works largely complete Development of site operating systems Planning for transition from Selleys Moorebank and Dulux Padstow distribution centres On time and budget - - Commence transition (July 2016) Go live (3rd quarter calendar 2016) Key features - Strong financial payback and positive NPV Facility built, owned and operated by Linfox (to DuluxGroup specification) DuluxGroup Imagine a better place 20#21Strategic Growth Priorities DuluxGroup Imagine a better place 21#22Our Strategy and Focus Paint, Specialty Coatings & Adhesives (ANZ) Strategy Continue to build on premium, branded, market-leading positions via retail (DIY) and trade (DIFM) channels focused primarily on existing homes ■ Extend into the wider construction chemicals and specialty coatings markets . . Current Focus • Paints & Selleys - continue to drive profitable market share growth supported by granular growth projects Parchem - re-focus on civil infrastructure Capability-led Home Improvement (ANZ) Focused on premium, branded consumer products predominantly for existing homes Transferring our core marketing, innovation, sales and supply chain capabilities | • Yates-brand-led growth supported by M&A (eg. Munns) . . • B&D - extend 'front end' capability; fine tune 'back end' • Lincoln – systems to support further growth Offshore ☐ Paint and Selleys focus primarily Transferring our core marketing, innovation, sales and supply chain capabilities into new geographies Explore growth opportunities for strategic partnerships, targeted acquisitions and distribution arrangements - China Camel Professional in Hong Kong and China + Selleys • Asia - localised Selleys growth . • (Vietnam, Indonesia focus) PNG - hold share, tighten costs given economic pressures Progress opportunities in other markets outside Asia DuluxGroup Imagine a better place 22#23A$M 1,000 750 500 250 Paint & Coatings - Track record & focus A Long History of Consistent Growth Paints & Coatings ANZ 20-year history Building on momentum 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Revenue (LHS) EBIT (RHS) A$M 200 150 100 50 Growth Focus Continue to set the benchmark for retail and trade marketing of our brands (the best in the market) Strengthen brands and consumer engagement through use of digital technologies Relentless product innovation (eg. new Wash & Wear) Continue to grow profitable market share in decorative paint via the best retail partners, the strongest trade network and the best service Extend product offering to access new markets (eg. Porter's and other specialty paint &coatings) DuluxGroup Imagine a better place 23#24◉ Garage Doors and Openers - Progress Progress is good on improving the front end of the business: ✓ Re-launch the brand ✓ Refresh the product range and launch new products Relaunch B&D brand home b&d safe home. ✓ Step up sales and marketing capability ✓ Re-introduce pricing disciplines ✓ Tighten up the distribution network New Website PEOPLE PASSIONS PRODUCT PLACES & SPACES Panelift Icon with new Lock Smart Phone Control Gen 2 GARAGE smart phone control kit. Have you ever wondered if you have lot the garage door open after leaving the house? Problem solved: 880's smart phone control it takes garage door control fo the next loval by allowing you to monitor and control your garage door from home or while you are away from home. Contents an optional extra on all 880 A Door oponors. watch the video bed Panelift Icon. with Lock Pansion Nullarbor Smooth in Eute Decor Medium Bon Panelift® Icon™ includes all the key features of Panelift and more. All new wireless lock technology delivers a new level of protection and security. App Store Google play BSD Smart Hub ENHANCED SECURITY FOR THE THINGS THAT ARE PRECIOUS TO YOU Our smart keyless technology allows you to lock your garage door every time you close it using nothing but your regular remote control. The lock more than doubles the force required at the lock poht to lift the door from a closed position, helping protect your home and loved ones! ESS/DRY DOTECTION DuluxGroup Imagine a better place 24#25FY16 Outlook Markets ☐ Lead market indicators for our key markets remain largely positive - - - Existing Home segment (~65% of revenue) is expected to provide resilient and profitable growth New Housing (~15% of revenue, late cycle) is expected to remain strong throughout FY16 Commercial & Infrastructure (~15% of revenue) is expected to be subdued (infrastructure weak) China growth rates relatively weak & PNG market outlook is poor Business Segments ☐ ☐ ☐ Paints and Coatings ANZ - we expect consistent consumer demand to continue; NZ to return to growth; YTD margin advantage expected to continue C&CP targeting second half growth over pcp GDO positive outlook given strong sales momentum in H1 and seasonally stronger H2 ■ Cabinet & Architectural Hardware - well positioned Overall Corporate costs for FY16 to be ~$27M; Targeting 80%+ cash conversion ☐ Expect to maintain ~70% dividend payout ratio on NPAT before non-recurring items Subject to economic conditions and excluding non-recurring items, we expect that 2016 net profit after tax will be higher than the 2015 equivalent of $124.7M Disclaimer: Statements contained in this presentation, particularly those regarding possible or assumed future performance, estimated company earnings, potential growth of the company, industry growth or other trend projections are or may be forward looking statements. Such statements relate to future events and expectations and therefore involve unknown risks and uncertainties. Actual results may differ materially from those expressed or implied by these forward looking statements. DuluxGroup Imagine a better place 25#26Questions DuluxGroup Imagine a better place 26#27Appendices DuluxGroup Imagine a better place 27#28End-markets, Products, Channels. 65% of business is related to the existing home segment End Markets Products and Channels Industrial 5% Commercial & Infrastructure 15% New Housing 15% Yates, 7% Cabinet & Architectural Hardware 10% Retail Paints 21% Garage Doors Maintenance & Home Improvement 65% & Openers 10% Selleys 9% Geography Asia/PNG 7% New Zealand 11% Australia 82% Note: Indicative DuluxGroup revenue splits based on FY15 revenue % Paint, coatings & adhesives Paint, coatings & adhesives 73% Parchem 8% Specialty Coatings 13% Retail/Trade Trade 60% Retail 40% Trade Paints 22% DuluxGroup Imagine a better place 28#29NPAT and Dividend Growth Rolling 12 mths NPAT (before non-recurring items) and Dividend A$M 150 125 100 75 50 25 0 FY11 H1 12 FY12 H1 13 FY13 H114 FY14 H115 FY15 H1 16 DPS (RHS) NPAT excl NRIs (LHS) cps 25.0 20.0 15.0 10.0 5.0 NPAT growth in every half year on pcp since demerger DuluxGroup Imagine a better place 29#30250 200 150 100 50 Debt Facility Maturity Profile Sep 26 Sep '24 Sep '21 ■ In mid-May the AUD150M Nov 2016 tranche was extended under the AUD400M facility for a further 3 years to Nov 2019 The chart shows the debt maturity profile as at 31 March 2016, as well as the maturity profile with the newly extended tranche ■Inclusive of the extension, the weighted average debt facility tenure is just over 4.6 years 0 Nov-16 Nov-17 Nov-18 Nov-19 >5Years $400M Syndicated Loan Facility $201M (US 149.5M + AUD 40M) USPP Debt DuluxGroup Imagine a better place 30#31Definitions of non-IFRS terminology ☐ ☐ ☐ Average net interest rate is calculated as net interest expense as a percentage of average daily debt, adjusted for discounting of provisions Capital expenditure represents payments for property, plant and equipment and payments for intangible assets Cash conversion is calculated as EBITDA less non-recurring items, add/less movement in working capital and other non cash items, less minor capital spend, as a percentage of EBITDA less non-recurring items EBIT Margin is calculated as EBIT as a percentage of sales revenue EBITDA is calculated as EBIT plus depreciation and amortisation EBIT Interest cover is calculated using EBIT excluding non-recurring items, divided by net interest expense ☐ Minor capital expenditure is capital expenditure on projects under A$5M Net debt is calculated as interest bearing liabilities, less cash and cash equivalents Net debt inclusive of USPP hedge value is calculated by taking closing net debt adjusted to include the asset balance relating to the cross currency and interest rate exposures relating to the US Private Placement (USPP) debt Net debt: EBITDA is calculated by using year end net debt (adjusted to include the asset balance relating to the cross currency interest rate swap established to hedge the USD currency and interest rate exposures relating to the USPP) divided by pro forma EBITDA before non-recurring items ☐ Net interest expense is equivalent to 'Net finance costs' ☐ ■ Net profit after tax or NPAT represents 'Profit for the year attributable to ordinary shareholders of DuluxGroup Limited' NPAT excluding non-recurring items - represents NPAT, excluding the non-recurring items. Directors believe that the result excluding these items provides a better basis for comparison from year to year. Non-recurring items are outlined within the presentation Operating cash flow is the equivalent of 'Net cash inflow from operating activities'. Operating cash flow excluding non-recurring items – the equivalent of 'Net cash inflow from operating activities', less the cash component of the non-recurring items Recordable Injury Rate is calculated as the number of injuries and illnesses per 200,000 hours worked Rolling TWC to sales is calculated as a 12 month rolling average trade working capital, as a percentage of annual sales Trade Working Capital (TWC) is the sum of trade receivables plus inventory, less trade payable DuluxGroup Imagine a better place 31