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1 DuluxGroup Limited ABN ASX Announcement Monday 25 March 2013 ALESCO UPDATE DuluxGroup today provided an update in relation to the acquisition of Alesco, ahead of the release of DuluxGroup s 2013 half year results on 13 May. DuluxGroup took control of the Alesco businesses in December Managing Director Patrick Houlihan advised that the trading results for the Alesco businesses prior to acquisition were in line with expectations. The trading performance of the businesses before acquisition is as we anticipated, with modest softening of revenue reflecting weaker market conditions, said Mr Houlihan. Mr Houlihan said that after three months of ownership DuluxGroup was well advanced with identifying cost synergies and had undertaken strategic reviews of each of the acquired businesses. To date we ve identified cost synergies of $9 million, ahead of the original estimate of $5 million, he said. We have largely completed detailed reviews of the Parchem construction products & equipment business and the Garage Doors & Openers business, and have identified a wide range of growth opportunities. We have also completed our strategic review of the Lincoln Sentry cabinet and window products business. We have concluded that we intend to retain Lincoln Sentry, as we believe it also has compelling growth potential under DuluxGroup ownership. Taking account of the base business performance, cost synergies, potential revenue synergies and strategic upside, we are confident that the acquisition will generate strong returns, even before any cyclical recovery, said Mr Houlihan. DuluxGroup also stated that its heritage (i.e. pre-alesco) DuluxGroup businesses were trading in line with expectations and that all four business segments had shown positive revenue growth to February, in generally subdued markets. DuluxGroup reiterated its previous outlook statement: that is, for net profit after tax for the 2013 full year to be ahead of last year on a like for like basis, subject to economic conditions, and excluding Alesco related impacts. DuluxGroup also indicated that for the Alesco businesses, 2013 pro forma performance (i.e. for 12 months from October 2012 to September 2013) is expected to be broadly in line with the prior year, subject to market conditions. Media contact: Lisa Walters, DuluxGroup Corporate Affairs Manager or

2 Alesco Update 25 March 2013

3 Alesco update Trading conditions and results for the Alesco businesses have been in line with expectations Cost synergy realisation is progressing well, with approximately $9m of cost synergies identified to date, predominantly associated with head office costs We have undertaken detailed reviews of the Parchem and Garage Doors & Openers businesses and have identified a wide range of growth opportunities We have also completed our strategic review of Lincoln Sentry. We intend to retain this business, as we believe it also offers compelling growth opportunity The final enterprise value of Alesco on acquisition was $258m. Inclusive of transaction costs and the expected costs of integration, the total cost is expected to be ~$280m Taking account of the base business performance, cost synergies, potential revenue synergies and strategic upside, we are confident that the acquisition will generate strong returns, even before any cyclical recovery 1

4 Business performance pre-acquisition in line with expectations $m 12 mths to 12 mths to May-12 Sep-12 vs May-12 Sales GDO % Parchem % Lincoln Sentry % Other % Total % EBIT GDO % Parchem % Lincoln Sentry % Corporate / Other (3.3) (2.6) Total % Trading performance to September 2012 largely reflects market conditions 2

5 Cost synergies ahead of original $5m estimate Cost synergies of $9m have been identified to date Of these, we estimate $3m will be achieved in FY13, a further $5m in FY14 and the final $1m in FY15 The cost synergies primarily relate to corporate functions and procurement Please note that the baseline Alesco corporate costs are ~$7m Given this, and net of the $3m of synergies, the proforma corporate costs for FY13 will be ~$4m For FY14 and beyond the synergies will exceed this corporate cost baseline Further detail is included within the appendix 3

6 Total enterprise value of $258m and total cost of ~$280m Enterprise value of acquisition of $258m (refer appendix for detail) Transaction costs of $9-10m Primarily relate to adviser fees, legal fees, due diligence costs, share registry costs, shareholder communication costs and acquisition accounting and tax advice Of these costs, $3.6m ($3.3m post tax) were recognised in The remainder (largely non-deductible for tax) will be recognised in 2013 Integration costs expected to be $12-15m These predominantly relate to redundancies, IT remediation, systems migration, strategic reviews, integration advice and integration management We expect the majority of these costs to be incurred in FY13 Overall transaction cost of ~$280m is well below the book value of assets acquired (~$465m) 4

7 Trading update For the heritage DuluxGroup businesses, we reiterate our AGM commentary and guidance The overall operating environment is consistent with that outlined at the AGM All four business segments have shown positive revenue growth (to February) in relatively subdued markets overall The full year outlook remains unchanged For the Alesco businesses, we expect the full year result (on a pro forma basis) to be broadly in line with prior year, subject to market conditions 5

8 Appendix 6

9 Total enterprise value of $258m and total cost of ~$280m $m Equity value 183 $2.00 per share (initial 19.9%) $1.90 per share (remainder) $2.05 per share (employee rights) Net debt acquired 75 Balance at November 30, 2012 Enterprise value 258 Transaction costs (expense) 9-10 Adviser fees, legal fees, due diligence costs, share registry costs, shareholder communication costs and acquisition accounting and tax advice Integration costs (expense) Redundancies, IT remediation, systems migration, strategic reviews, integration advice and integration management Total cost ~280 Total cost excludes pre-existing liabilities or contingent liabilities (eg. NZ OCN tax) and also excludes additional liabilities that crystallised on change of control (eg. FBT on employee loan forgiveness) These will be outlined as part of the acquisition balance sheet disclosure in our March half year accounts 7

10 Accounting considerations Consolidation of Alesco from December 2012 FY13 will include ~10 months of operating performance (Dec-12 to Sep-13) Due to seasonality (Oct and Nov are typically strong months), these 10 months have historically represented approximately 80% of annual revenue and 75% of annual EBIT We will also provide pro forma figures to reflect operating performance from the start of October 2012 On a pro forma basis, the first half proportion of revenue and EBIT (based on a September year end) has been ~48% and ~42% respectively (on average over the last two years) Operating segments to be finalised, but expectation is that GDO, Parchem and Lincoln Sentry will be separately disclosed for now Allocations of corporate costs may change as we bring the Alesco businesses in line with our accounting policies Balance sheet to be re-stated to reflect fair value In simple terms, the total book value of net assets (~$391m) will be reduced to reflect the price paid for the equity by DuluxGroup ($183m) Expectation is that the majority of this $200m+ reduction will relate to intangibles, though the fair value of all assets will be assessed Preliminary acquired balance sheet will be included with March half year results 8

11 Cost synergies and corporate costs further detail Cost synergies of $9m have been identified to date. They relate primarily to Executive and board costs (realised in FY13) Progressive realisation of other savings as integration progresses (eg. other corporate functions and overheads) Procurement and other savings within businesses Please note the baseline Alesco corporate costs (net of business recoveries) are ~$7m Of the $15.4m of Alesco corporate costs (per the Independent Expert Report), approximately $8.5m has historically been absorbed by the remaining Alesco businesses The remaining ~$7m figure differs from the reported figure of $3.1m (May-12) due to favourable non-recurring items in the May-12 year (~$2m) and stranded corporate cost recoveries following the divestiture by Alesco of Parbury and Dekorform (~$2m) in March 2012 Given this, and given ~$3m of synergies, the remaining Alesco corporate costs for FY13 will be ~$4m on a pro forma basis (~$3m on a 10-month basis) Cost Synergies and reported Alesco Corporate Costs $m FY13 FY14 FY15 Baseline corporate costs (pro forma)* Estimated cumulative synergies * net of recoveries from the Alesco businesses 9

12 Alesco NZ Tax Litigation On 5 March 2013, the NZ Court of Appeal handed down its judgment against Alesco NZ, dismissing its appeal on the tax deductibility of interest deductions on Optional Convertible Notes ( OCN ) The appeal and judgement covers the years However, the assessments to be issued by the NZ Commissioner of Tax will be for covering the OCN period Alesco estimated the cost to be approximately NZ$14.9m (including core tax, penalties, interest and costs) which is partially offset by carry forward losses of NZ$3.5m We are reviewing this estimate and do not expect it to be materially different We are considering our options around a further appeal to the NZ Supreme Court 10