1 00:00:00,200 --> 00:00:01,960 Speaker 1: Now it was a strong day for Fletcher building on 2 00:00:01,960 --> 00:00:04,680 Speaker 1: the ins and X company announced it's been fielding a 3 00:00:04,680 --> 00:00:06,800 Speaker 1: bit of interest for some of its businesses. Sand tris 4 00:00:06,840 --> 00:00:08,800 Speaker 1: that we have Milford Asset Managements with us to talk 5 00:00:08,840 --> 00:00:09,320 Speaker 1: us through today. 6 00:00:09,360 --> 00:00:11,400 Speaker 2: Sam, Good evening, Heather, So. 7 00:00:11,320 --> 00:00:12,400 Speaker 1: What do you make of the announcement? 8 00:00:13,560 --> 00:00:15,400 Speaker 2: I yuess. It certainly has been a big day for 9 00:00:15,480 --> 00:00:18,119 Speaker 2: the Fletcher share price today after the news that it 10 00:00:18,200 --> 00:00:22,680 Speaker 2: had received that ongoing and bound inquiry from interested parties 11 00:00:22,680 --> 00:00:25,119 Speaker 2: for some of its businesses, so the market took it 12 00:00:25,160 --> 00:00:28,200 Speaker 2: as a clear positive sign. The background to this is 13 00:00:28,200 --> 00:00:31,760 Speaker 2: that the new CEO, Andrew Reading, who started in September 14 00:00:31,840 --> 00:00:34,640 Speaker 2: last year and has been essentially tasked with turning the 15 00:00:34,680 --> 00:00:38,960 Speaker 2: business around, has been undertaking a review of Fletcher's division 16 00:00:38,960 --> 00:00:42,280 Speaker 2: since his appointment, reviewing what makes sense going forward and 17 00:00:42,360 --> 00:00:44,360 Speaker 2: what is non core and could be divested or sold off. 18 00:00:45,159 --> 00:00:47,440 Speaker 2: The first outcome of this last month was announced when 19 00:00:47,479 --> 00:00:49,600 Speaker 2: the company said, look, we're going to move some of 20 00:00:49,600 --> 00:00:53,800 Speaker 2: our problem at Australian divisions into integrate them into the 21 00:00:53,800 --> 00:00:58,040 Speaker 2: appropriate New Zealand businesses. But the strategic review, essentially for 22 00:00:58,160 --> 00:01:01,120 Speaker 2: many listed companies, is about putting up a for sale 23 00:01:01,160 --> 00:01:04,160 Speaker 2: sign for parts of his business. And Andrew has been 24 00:01:04,160 --> 00:01:08,240 Speaker 2: pretty cautious on his comments about what the outcomes could be. 25 00:01:08,360 --> 00:01:12,200 Speaker 2: But today to here, look they're receiving ongoing in particular inquiry, 26 00:01:12,720 --> 00:01:15,120 Speaker 2: implying just not one or two buyers, but a good 27 00:01:15,200 --> 00:01:17,160 Speaker 2: level of interest. I think it really was liked by 28 00:01:17,200 --> 00:01:20,480 Speaker 2: the market and there's a signal that there is more 29 00:01:20,520 --> 00:01:22,400 Speaker 2: to come. There's deals to be done here. 30 00:01:22,800 --> 00:01:25,039 Speaker 1: So what do you think the shareholders are expecting as 31 00:01:25,040 --> 00:01:27,640 Speaker 1: outcomes from both a review and also the potential sales. 32 00:01:28,600 --> 00:01:31,120 Speaker 2: So the shareholders are set to receive an update in 33 00:01:31,240 --> 00:01:33,280 Speaker 2: two weeks time, and I think at the high level 34 00:01:33,880 --> 00:01:36,559 Speaker 2: most want to see the business really refocus on its core, 35 00:01:36,680 --> 00:01:40,280 Speaker 2: so where the profit has been driven Australia historically in 36 00:01:40,360 --> 00:01:43,360 Speaker 2: New Zealand's building products and in distribution. And there's some 37 00:01:43,480 --> 00:01:46,880 Speaker 2: very strong, well positioned businesses within those division divisions off 38 00:01:46,880 --> 00:01:49,680 Speaker 2: which is so the likes of Winstone, world Wards, Pigbacks etc. 39 00:01:50,640 --> 00:01:52,920 Speaker 2: Then remove the distractions, so these are the businesses that 40 00:01:53,000 --> 00:01:56,320 Speaker 2: really are at for sale, the Australian divisions which have 41 00:01:56,560 --> 00:01:59,520 Speaker 2: little or no contribution to the group in terms of 42 00:01:59,520 --> 00:02:02,000 Speaker 2: synergy and or profitability, and then get rid of some 43 00:02:02,040 --> 00:02:04,920 Speaker 2: of the lower margin, risky divisions like that construction piece. 44 00:02:05,000 --> 00:02:08,360 Speaker 2: So it was interesting today to actually see buyer interests 45 00:02:08,440 --> 00:02:12,000 Speaker 2: called out for that construction division specifically within the release. 46 00:02:12,040 --> 00:02:14,720 Speaker 2: So it does have it that that division does have 47 00:02:14,760 --> 00:02:17,760 Speaker 2: a reasonable pipeline of roading and infrastructure work ahead. And 48 00:02:17,800 --> 00:02:19,680 Speaker 2: I know how much you like a road cone, Heather, 49 00:02:19,800 --> 00:02:22,720 Speaker 2: but it has been a clear source of clear loss 50 00:02:22,800 --> 00:02:26,400 Speaker 2: of losses and as in the courts with SkyCity, at 51 00:02:26,400 --> 00:02:29,120 Speaker 2: the moment for that lawsuit read the convention seem to fire. 52 00:02:29,200 --> 00:02:31,440 Speaker 2: So wait for that update in two weeks that what's 53 00:02:31,480 --> 00:02:34,120 Speaker 2: the market, that is what the market's looking for, and 54 00:02:34,160 --> 00:02:36,880 Speaker 2: anything along those lines I think will be well received. 55 00:02:37,480 --> 00:02:40,440 Speaker 1: Now, I mean, obviously it's been, it's been a business 56 00:02:40,480 --> 00:02:43,200 Speaker 1: that I think we could say has been is fairly beleagued. 57 00:02:43,280 --> 00:02:44,840 Speaker 1: How do you how hard do you think this task 58 00:02:44,919 --> 00:02:46,720 Speaker 1: is going to be to execute this turnaround? 59 00:02:47,840 --> 00:02:50,640 Speaker 2: Not straightforward and short, and I think it will take time. 60 00:02:50,760 --> 00:02:54,040 Speaker 2: So the challenge for Andrew Man as management team really 61 00:02:54,240 --> 00:02:58,520 Speaker 2: is to manage that that conflict they have around the 62 00:02:58,520 --> 00:03:00,560 Speaker 2: desire to exit and sell off the bus and divisions 63 00:03:00,560 --> 00:03:06,120 Speaker 2: and get get on with life essentially versus keeping the 64 00:03:06,440 --> 00:03:09,600 Speaker 2: buyers honest and make them pay a fair and reasonable price, 65 00:03:09,840 --> 00:03:11,440 Speaker 2: you know, when you do put that for sale, sign 66 00:03:11,520 --> 00:03:16,040 Speaker 2: up through a strategic review, I think often by pricing 67 00:03:16,040 --> 00:03:19,840 Speaker 2: expectations and naturally fall, so they'll be out there having 68 00:03:19,600 --> 00:03:23,720 Speaker 2: trying to have those conversations convinced buyers that you know 69 00:03:24,080 --> 00:03:26,520 Speaker 2: that they are not desperate saloes, that they're more opportunistic 70 00:03:26,560 --> 00:03:28,840 Speaker 2: at times. And on top of that, really I think 71 00:03:28,880 --> 00:03:32,040 Speaker 2: the economic conditions which we've all been dealing with make 72 00:03:32,120 --> 00:03:35,560 Speaker 2: the conversation not as easy in terms of the profitability 73 00:03:35,720 --> 00:03:39,760 Speaker 2: being just depressed for many of these divisions that will 74 00:03:39,800 --> 00:03:43,160 Speaker 2: be up up for grabs. So look, the opportunity is there. 75 00:03:43,560 --> 00:03:45,600 Speaker 2: The trade off which the management team are really facing 76 00:03:45,680 --> 00:03:49,080 Speaker 2: is do we do something now and potentially cheaper We'll 77 00:03:49,120 --> 00:03:50,520 Speaker 2: hold on for a couple of years and wait for 78 00:03:50,560 --> 00:03:52,920 Speaker 2: those economic conditions to improve and try and get that 79 00:03:52,960 --> 00:03:53,520 Speaker 2: better price. 80 00:03:53,920 --> 00:03:56,080 Speaker 1: Sam, good to talk to you as always. Thank you, mate, 81 00:03:56,080 --> 00:03:57,840 Speaker 1: Sam Trau. We have Milfited Asset Management. 82 00:03:58,320 --> 00:04:01,520 Speaker 2: For more from Hither Duples and Drive, listen live to 83 00:04:01,600 --> 00:04:04,640 Speaker 2: News Talks it B from four pm weekdays, or follow 84 00:04:04,680 --> 00:04:06,440 Speaker 2: the podcast on iHeartRadio.