Buoyant home renovation market pushing retail sales growth

Zoe FieldingNovember 18, 20140 min read

A buoyant home renovation market has helped paint, building and home improvement products company DuluxGroup lift profits by 21.4% in the year to 30 September.

The company last week reported a $111.9 million net profit after tax, which managing director Patrick Houlihan attributed to profitable sales growth in strengthening Australian and New Zealand home building and renovation markets.

Source: Westpac

“Consistent with our long-term strategy, we have continued to focus on more profitable market segments, limiting our exposure to lower margin sectors. Our premium brand positions, predominantly centred around the improvement of existing homes, continue to be resilient and provide a stable platform for generating ongoing growth,” Houlihan said.

The value of residential renovations approved rose 0.7% in trend terms in September, according to the latest Australian Bureau of Statistics data.

The alternations and additions market expanded by 10.1% over the year to the end of September and 3.4% for the quarter, Westpac’s analysis of the ABS data found.

“The state breakdown shows renovation activity rising strongly in NSW and Victoria and on a flatter and lower trajectory in Queensland and Western Australia,” Westpac senior economist Matthew Hassan said.

Increased housing activity led to solid sales growth in both trade and retail channels for DuluxGroup. Other companies selling to the home improvement market have also benefited from the lift in housing activity.

Wesfarmers-owned home and hardware business Bunnings recently reported 11% sales growth for the first quarter of 2015.

Woolworths’ home improvements sales, mainly through its Masters business, increased 20.7% on the previous year, the company reported at the start of November.

Masters, which has been clearing stock to refine its range, achieved 30.8% higher sales in the first 14 weeks of the 2015 financial year compared with the same period in 2014. Sales from Woolworths’ recently-refurbished Home Timber and Hardware stores increased by 12% in the same timeframe.

DuluxGroup reported sales in its Paints and Coatings business in Australia and New Zealand increased by 6.1% to $821.6 million as increased housing activity expanded the market. Profit from that division improved by 12.1% to $139.8 million.

Earnings from the consumer and construction products, marketed to consumers under the Selley's brand, increased by 3.1% to $29.8 million.

Sales in the company’s Garage Doors and Openers business, including B&D, grew by 5.8%. Sales in the Cabinet and Architectural Hardware business grew by 8.5%. Yates garden care business also improved.

The company is forecasting that subject to economic conditions and excluding non-recurring items, its net profit after tax for 2015 will be higher than the 2014 equivalent of $111.9 million.

A full-year of contribution from Alesco Corporation, a manufacturer and distributor of building and renovation products, also boosted the company’s profit. DuluxGroup completed its acquisition of Alesco in January 2013.

The board declared a final dividend of 10.5c per share fully franked taking the total dividend for the year to 20.5 cents, 17.1% up on 2013 and representing a 70.2% payout ratio. 

Zoe Fielding

I am a freelance journalist and editor with more than 15 years experience specialising in personal finance, property, financial services and financial technology. A skilled writer and researcher, I have extensive experience producing high quality content for corporate and media clients. I am used to working to tight deadlines and tailoring the pieces I produce to suit a variety of audiences and formats.
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Renovation
Retail
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