Latest / Early Edition with Ryan Bridge / John Tookey: Professor of Construction Management at AUT on Fletcher Building's sale of its construction arm

Transcript

John Tookey: Professor of Construction Management at AUT on Fletcher Building's sale of its construction arm · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Just like that.
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  Speaker 2: Fetch a building sold it's a construction arm for at
• 0:02
  Speaker 2: least three hundred and fifteen million dollars to a French
• 0:05
  Speaker 2: multi national by the name of Vancy Vanci Construction. The
• 0:09
  Speaker 2: Overseas Investment Office and Commerce Commission will have to approve
• 0:12
  Speaker 2: the deal. But what does this mean for the company.
• 0:14
  Speaker 2: One of our oldest John Tukey, is a professor of
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  Speaker 2: construction management at aut enjoins me. Now, good morning to you. John,
• 0:20
  Speaker 2: Good morning, sad day for an old company. But was
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  Speaker 2: it the right move?
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  Speaker 1: Well logical sell off the most profit or one of
• 0:29
  Speaker 1: the big high ticket items of your family silver to
• 0:34
  Speaker 1: raise the revenue, which is fine. The question is going
• 0:37
  Speaker 1: to be whether or not the removal of the construction
• 0:40
  Speaker 1: arm is going to significantly negatively affect the profitability and
• 0:46
  Speaker 1: indeed the sales of the building product side of things,
• 0:49
  Speaker 1: because obviously, when you're not reliant on one side of
• 0:52
  Speaker 1: the business generating business and the other side of the business,
• 0:54
  Speaker 1: it becomes harder.
• 0:56
  Speaker 2: Wascher building badly run or was it just unlucky.
• 1:00
  Speaker 1: Combination of circumstances. There were some very questionable decisions that
• 1:04
  Speaker 1: were made. If anybody thinks of that. Back to the
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  Speaker 1: point where Fletcher's CEO announced that he was getting rid
• 1:11
  Speaker 1: of the quote old farts back in the day was
• 1:15
  Speaker 1: a great thing you can look of online. You know,
• 1:18
  Speaker 1: these were the risk managers of the business at the
• 1:21
  Speaker 1: same time as he was taking on board more risk
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  Speaker 1: by expanding the book. So you know, yeah, you have
• 1:25
  Speaker 1: to ask whether or not that was a particularly transible move,
• 1:29
  Speaker 1: but it's a yeah. It's been a combination of circumstances. Obviously,
• 1:33
  Speaker 1: you had a big fire at the convention center, and
• 1:35
  Speaker 1: you had COVID and all the other things, which yeah,
• 1:39
  Speaker 1: generated a basically the perfect storm of circumstances.
• 1:44
  Speaker 2: Is this going to significantly shrink the company and its
• 1:46
  Speaker 2: influence on the inside X and the economy.
• 1:50
  Speaker 1: It will significantly shrink the company. It will make the
• 1:54
  Speaker 1: company much more profitable because construction operations are not particularly profitable.
• 1:59
  Speaker 1: Part they generate a lot of cash flow, but they
• 2:02
  Speaker 1: don't generate massive amounts of profitability per se. That having
• 2:07
  Speaker 1: been said, there is a there is a you know,
• 2:09
  Speaker 1: some of the long term infrastructural type of stuff that
• 2:13
  Speaker 1: flesh construction we're dealing with, generates a lot of business,
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  Speaker 1: generate a lot of positive revenue. When they were when
• 2:20
  Speaker 1: they were run optimally, they most certainly generated a lot
• 2:23
  Speaker 1: of profits over the year. It's just a great shame
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  Speaker 1: to see iconic brand for New Zealand as a whole
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  Speaker 1: lose one of its principal issues, you know, every and.
• 2:34
  Speaker 2: I guess, I guess it. Let me make money if
• 2:36
  Speaker 2: they can sell the materials to the new constructor, which
• 2:39
  Speaker 2: is now called Vancy. And so what do we know
• 2:41
  Speaker 2: about Vancy from France.
• 2:43
  Speaker 1: A big successful organization. It is tempting to say that
• 2:47
  Speaker 1: they're likely to want to molt the asset more than
• 2:50
  Speaker 1: anything else. And you know, on the upside, they could
• 2:53
  Speaker 1: be potentially bringing some technologies, techniques, personnel capabilities that have
• 2:58
  Speaker 1: been lacking historically. I tend not to think that there's
• 3:02
  Speaker 1: going to be a major increase in profitability capability, let's
• 3:08
  Speaker 1: put it that way. But the downside, as I say,
• 3:12
  Speaker 1: you know, just from national prestige point of view and
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  Speaker 1: the fact that you know, the government's always had a
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  Speaker 1: contractor of first resort to go to to be able
• 3:22
  Speaker 1: to generate stuff and keep the money in house to
• 3:26
  Speaker 1: a certain degree. So yeah, it's just not a happy space. No.
• 3:31
  Speaker 2: John Ticky from the a U T and I thank
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  Speaker 2: you for your time. For more from Earlily Edition with
• 3:35
  Speaker 2: Ryan Bridge, listen live to news talks it'd be from
• 3:39
  Speaker 2: five am weekdays, or follow the podcast on iHeartRadio