WEBVTT - Quick bite: What makes a business investable? A CEO’s take

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<v Speaker 1>You're listening to a share these podcast. If you were

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<v Speaker 1>an investor thinking about channel infrastructure as an investment, what

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<v Speaker 1>would be the metrics that you would be looking at.

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<v Speaker 1>We talked about dividend, so divin yield is one, but

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<v Speaker 1>what are some of those other metrics that you would

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<v Speaker 1>think about tracking over time to assess whether channel of

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<v Speaker 1>structure is being well run and doing well.

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<v Speaker 2>So the measure that I would look at so this

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<v Speaker 2>dividend and free cash flow? Right, and the reason that

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<v Speaker 2>free cash flow is so important and actually you look

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<v Speaker 2>at it across any business you invest in, not just channel.

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<v Speaker 2>You know that is a true measure for the cash

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<v Speaker 2>that the business is producing. And so you know ebit

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<v Speaker 2>DA can have. You know, when people talk about revenue

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<v Speaker 2>and ebit DAR, there's pros and cons with those measures,

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<v Speaker 2>but free cash flow is the earnings less the sustainable capex,

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<v Speaker 2>less your interest costs. So you know, it's a true

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<v Speaker 2>measure of the cash that the business is producing. And

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<v Speaker 2>I think cheerholders should look at that. I wouldn't want

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<v Speaker 2>to give anybody any financial advice, but I certainly look

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<v Speaker 2>at it at any investment that I look at, not

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<v Speaker 2>just not just channel and that's a metric that we

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<v Speaker 2>are focused on as a company because you know, we

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<v Speaker 2>need to balance the long term nature of our business

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<v Speaker 2>and making sure that we make good, disciplined investments in

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<v Speaker 2>our assets to ensure that they're there for a very

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<v Speaker 2>long period of time. So that's covered in the capex

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<v Speaker 2>part of it, and then there's the earnings part of it,

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<v Speaker 2>or the cash that the business generates as well, which

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<v Speaker 2>is a reflection of the enterprise or the job that

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<v Speaker 2>we do.

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<v Speaker 1>Your background is that you've headed up M and A

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<v Speaker 1>for a large recent bank. Outside of maybe those terminal assets,

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<v Speaker 1>is there any other sorts of assets that could be

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<v Speaker 1>quite attractive, particularly because of maybe capabilities, expertise, other sort

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<v Speaker 1>of assets and experience that channel might have that they

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<v Speaker 1>could leverage.

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<v Speaker 2>Yeah. One of the lessons that I've learned from I'm

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<v Speaker 2>doing twenty years of M and A is you need

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<v Speaker 2>to look really long and hard at what your own

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<v Speaker 2>capabilities are as a business and ask yourself, you know,

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<v Speaker 2>can you actually manage what you're buying better than the

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<v Speaker 2>person that's selling it to you? And I think in

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<v Speaker 2>relation to terminals sets, you know, I think we've got

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<v Speaker 2>we managed New Zealand's largest terminal by a country mile.

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<v Speaker 2>We've made some really good operational improvements over the last

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<v Speaker 2>couple of years. Really proud of the way the team's

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<v Speaker 2>delivered that, and I think, you know, that's earned us

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<v Speaker 2>the right to say, well, we are really good owners

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<v Speaker 2>and managers of those assets. And so I think we're

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<v Speaker 2>pretty disciplined about the types of sets that we'll look at, actually,

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<v Speaker 2>and I think focused on those where we can add

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<v Speaker 2>value as a management team and as as an operator,

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<v Speaker 2>and sticking sticking to those now. It might be in

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<v Speaker 2>the future that we build additional capability and we say, hey,

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<v Speaker 2>we've got a capability that we can go and export,

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<v Speaker 2>or you know, there's an asset that comes with the

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<v Speaker 2>team that has a great cape ability. But I think

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<v Speaker 2>for the business as it stands today, that's really our focus.

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<v Speaker 1>So it's really asking the question, are we the highest

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<v Speaker 1>value owner of the sasset? It's right, I'm not just

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<v Speaker 1>trying to get a bargain for a sort of random

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<v Speaker 1>messet that might not be so strategically aligned.

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<v Speaker 2>You shouldn't and you can't do M and A for

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<v Speaker 2>M and a's sake. You do it because you see

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<v Speaker 2>it gives you a competitive advantages of business help solve

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<v Speaker 2>your customers problems in our case, and that most importantly,

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<v Speaker 2>we can add value to shareholders. And if it doesn't

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<v Speaker 2>tack those boxes, then you know we shouldn't be doing it.

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<v Speaker 2>Investing involves the risk you might lose the money you

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<v Speaker 2>start with. We recommend talking to a licensed financial advisor.

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<v Speaker 1>We also recommend reading product disclosure documents before deciding to invest.