A quality business with strong brands

In our view, Dulux Group's main competitive advantage is its portfolio of brands. Its main brands, including Dulux, Selleys, Yates, Cabot's and B&D Garage Doors & Openers, are some of the most recognised and trusted in the housing industry and also hold market-leading positions in their respective categories. With additional investment, we think there is potential for further share gains in largely low-growth, consolidated markets. DLX's business is strategically skewed towards the more profitable and stable maintenance and home improvement sector (65% of revenue) rather than the more cyclical new housing market (15% of revenue). Underlying volumes in the maintenance and home improvement market have historically tracked at around 1-1.5% pa (ie. at half the rate of GDP growth) and don't tend to have large peaks or troughs. The strength of DLX's business is also highlighted by its strong financial returns and FCF generation. (VIEW LINK)