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Managing Director’s Report
The 2006/07 financial year was
an important year for Wattyl; we
successfully completed the major
restructure announced in October
2005, surpassing our savings target
of $22 million by $2 million (FY2007
measured against FY2005) and
positioning Wattyl to focus on our
strategic direction and growth.
During this financial year management
finalised the review of operations to
establish a reduced cost platform,
strengthen and fully align the
management team and further refine
the brand and channel strategies.
Sales revenue for Wattyl of
$426.8 million, compared with
$425.3 million last year was a
reflection of the subdued housing
market throughout the year in both
Australia and New Zealand. Slightly
lower volumes were offset by more
disciplined price management and
increased focus on higher value
product mix.
The financial performance measured
at Underlying EBIT (Earnings before
interest and tax – excluding ‘nonrecurring
items’) of $30.6 million, a
47% improvement over last year,
is a clear indication of the successful
focus on our operating costs to reestablish
the baseline of the company.
The cash flow from operating
activities of $33.4 million, compared
with $3.1 million in 2005/06 was
driven by the significantly improved
operating performance and balance
sheet management.
Australia
The Australian housing market
continued to be soft through the
financial year, sales grew by 1% to
$373.2 million, and slightly lower sales
volumes were more than offset by our
focus on pricing discipline and higher
value add product mix across all our
sales channels.
Earnings benefited from the cost
saving initiatives and a focus on
higher value products leading to
a better product/mix combination.
Underlying EBIT of $25.6 million
represents a very pleasing
improvement of 80% over the
last financial year.
During the year Wattyl launched
a complete environmentally enhanced
low VOC paint system, which meets
the green building codes, under the
i.d (interior design) brand. This
system consisting of undercoat,
wall and ceiling products has been
accepted with enthusiasm by
architects, specifiers, master
painters and retail consumers.
New Zealand
The New Zealand market continued
to be impacted by a low housing
market and while sales volume was
slightly ahead of the previous year, the
challenging market conditions made it
difficult to recover the full impact of
increased input costs through higher
sales prices.
New Zealand’s performance was
further impacted by investment in the
company owned distribution network
and the strengthening of our presence
in the south island with an upgraded
dedicated warehouse to better serve
that market. We have also incurred
some additional costs with a move
to more environmentally friendly low
VOC tinters.
Wattyl Annual Report 2007 7
Our new product programme was
highlighted by the successful launch
of (Taubmans) Ecoproof low VOC
Interior Broadwall product into the
retail market which followed a
successful launch into the trade
market in the prior year.
Our People
Much has been achieved over the last
few years and I would like to sincerely
thank the management team and our
staff for their relentless efforts in
improving the company’s underlying
performance. We have made great
progress in establishing a ‘one’
business culture and I am looking
forward to continuing to work with the
Wattyl team as we are now positioned
to drive growth in the business in
each of our markets.
Outlook
Our internal focus of the last two
years has established a solid base,
a strengthened management team
and a clearly articulated strategy for
our brands, customers and channels
to market.
While the outlook for the housing
market (HIA forecast) only indicates
a moderate improvement in housing
levels, our business is now well
positioned to take advantage of
opportunities while we continue to
improve the underlying performance
and growth of the business.
I am very pleased with the progress
the company has made over the last
2 years and I am confident that with
a value framework that aligns the
key activities across the business
we will continue to improve
shareholder returns.
John Nolan,
Managing Director
0333.90230.00118.70431.4057.611.7066.614.20725.63.22.75.05.06.3AGAAPAIFRSEBIT
(A$m)
continuing operations before
non-recurring items
Australia
Jun 07 HIA Forecast (housing starts)
New Zealand
Jun 07 BERL Forecast (housing starts)
Australia
New Zealand
Sales (A$m)
continuing operations
Our new product programme was
highlighted by the successful launch
of (Taubmans) Ecoproof low VOC
Interior Broadwall product into the
retail market which followed a
successful launch into the trade
market in the prior year.
Our People
Much has been achieved over the last
few years and I would like to sincerely
thank the management team and our
staff for their relentless efforts in
improving the company’s underlying
performance. We have made great
progress in establishing a ‘one’
business culture and I am looking
forward to continuing to work with the
Wattyl team as we are now positioned
to drive growth in the business in
each of our markets.
Outlook
Our internal focus of the last two
years has established a solid base,
a strengthened management team
and a clearly articulated strategy for
our brands, customers and channels
to market.
While the outlook for the housing
market (HIA forecast) only indicates
a moderate improvement in housing
levels, our business is now well
positioned to take advantage of
opportunities while we continue to
improve the underlying performance
and growth of the business.
I am very pleased with the progress
the company has made over the last
2 years and I am confident that with
a value framework that aligns the
key activities across the business
we will continue to improve
shareholder returns.
John Nolan,
Managing Director
0333.90230.00118.70431.4057.611.7066.614.20725.63.22.75.05.06.3AGAAPAIFRSEBIT
(A$m)
continuing operations before
non-recurring items
Australia
Jun 07 HIA Forecast (housing starts)
New Zealand
Jun 07 BERL Forecast (housing starts)
Australia
New Zealand
Sales (A$m)
continuing operations
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