INTERVIEW WITH MARK ROWSTHORN AND PETER MCGREGOR, CEO and CFO OF ASCIANO GROUP (AIO)

“Asciano to Raise Capital After Loss”

 

http://www.brr.com.au/event/49145

 

WEDNESDAY, AUGUST 6 2008, 11:00 AM.

 

            AIO      Well, good morning everyone and thank you for joining us. It’s a pleasure to

10                    see you all and welcome, a very warm welcome to our first set of annual results for Asciano. Well, it’s been quite a year now, very short history. All sorts of events happened and now we find ourselves in very choppy and volatile market. So it’s been interesting time for not just us but certainly our businesses being involved in all sorts of things.

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                        Before I start on the sort of more formal presentation, I just like to talk about a couple of things that surprisingly haven’t made the press or a knowledge to the market. The first part of that is the development of the management team and when I look back over the last 12 months, we’ve had several iterations

20                    and as you’re aware Asciano came out of talk and was very much the offspring. I think we were described as the wild child during the week. But certainly there was a lot to do in quite challenging terms of getting the right structure and the right people running the business. It’s probably taken 12 months to get that under control or in a position where I think that we’re very

25                    well advanced in terms of having a quality, intelligent, and incentivized management team.

 

                        The second important development is the work that we’ve done in our strategic planning process and each of the businesses has spent about

30                    probably six to eight months in developing those plans to the extent – and we’ve had them validated by that party and they are powerful tool for our business going forward in terms of the objectives, in terms of market shares, in terms of the direction we’re going to take for the business going forward.

 

35                    So there are two things that are very powerful that I think we’ve achieved going forward. And when you combine that with a unique – pardon me, a unique set of assets, which we believe are world-class, and some assets that we think that we can grow or will grow, we’ve got a very powerful combination going forward.

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                        Before I start on as I said the formal presentation, I’m sure you’re aware of the developments that happened on Monday, and I just like to read a script that’s been put together by the board and hopefully that will close down too many questions later on because what we want to do here today is to focus

45                    on the results, what we’ve achieved during the year, and our outlook going forward.

 

                        So just in terms of the TPG/GIP proposal, the directors met on Monday after receiving a material approach from these parties. It was considered a board meeting. It was a non-binding and highly conditional bid at $4.40 and the decision was made that it undervalues the business and have decided not to proceed with due diligence. To gain a recommendation from the board and the right to conduct due diligence, any proposal must recognize the value of

5                      our unique set of assets and must contain a sufficient control premium. And this proposal did not reach the mark.

 

                        As a board member and a large shareholder in Asciano, I did not support the proposal submitted to the board on Monday. The Asciano board will continue

10                    to ensure that all options remain open for enhancing the value to our security holders. The board will keep an open mind of course for an offer of the whole company that reflects fair value. However, our primary focus remains on delivering value to our shareholders through the execution of our plans and strategy. And with that, I’ll turn to the formal part of proceedings today. Thank

15                    you.

 

                        So the first slide demonstrates the year that we’ve had financially. Revenue has increased by 5% and EBITDA has come in on guidance at 11% increase year-on-year. Importantly, our margins have improved across the businesses

20                    at 23.2 and I confirm the distribution of 46 cents of which 23 will be payable at the end of the month. The last time we met, we talked about ticking some boxes after I guess a difficult first six months, but the management team sat down and put together a bunch of targets that we wanted to achieve. And I’m confident here in saying that we have achieved all of those targets. So we’ve

25                    ticked all the boxes.

 

                        First of all, we said we’d reduce or eliminate the shareholding in Brambles; that was done. We said we’d take a look at peripheral assets, non-core assets, and our sale process for the Tasmanian rail freight business is well

30                    underway. We talked about maximizing our returns from our existing businesses. That included taking a very high look at our grain business. We’re either going to close this or put contracts in place to mitigate the risks of the volume in that business. That’s been achieved.

 

35                    We also put together an efficiency review committee headed up by the very senior people in the company, looking at our cost lines, looking at our efficiency and duplications that’s well advanced in terms of identifying and also delivering some of those cost savings. We talked about operation – leveraging our operating capability in two significant areas, not just for

40                    existing businesses. One was the opportunity in the Middle East, which was being put in a position of preferred tenderer, and secondly our entry to the Queensland coal market.

 

                        Importantly, we’ve worked long and hard on our capital structure and Peter

45                    will illuminate you with – by that short-term decisions and also our plans for the medium term. It’s been a difficult time as I said for the management team with all the noise that seems to sit around the company so I’d like to congratulate our team for a job well done and I compliment their ability to keep their heads down and there’s quite a few of them here today despite all those challenges that are in the market.

 

                        So in summary, I think we’ve got – and I think I know we’ve got a very robust

45                    future ahead of us with the businesses and the tea that we’ve got going forward.

 

                        So in terms of content today, I’ll spend some time talking about the divisional performance. Peter will take a closer look at the financial information. Back to

10                    me on outlook and where we’re headed. And then Peter will spend some time talking about our capital plans with our structure. And then I’ll wrap up.

 

                        So in terms of the divisions in Asciano, there’s four key divisions as most of you are aware. In the Patrick side, we’ve got the Container Ports and the

15                    Auto, Bulk, and General Ports business. And in the rail, we’ve got Intermodal business and the Bulk Rail business.

 

                        So I’ll start with Container Ports. Overall, we’re just pleased to say that business has performed very well. Our volumes have remained buoyant on

20                    the back of strong import growth as businesses enjoyed 9% to 10% increases in volume over the last five years and this year completed was no different to that. All the terminals performed very well across the board. Efficiency gains have been introduced particularly in Brisbane and Sydney with the introduction of the AutoStrads, improving performance of that and also the

25                    Rail Mounted Gantries, which is a big investment here in Botany, Sydney.

 

                        Turning to the Auto, Bulk, and General business, three parts of that business, the Autocare business, our joint venture with MYK, has performed very well on the back of reasonably strong volumes in the car market, the auto market.

30                    That business in terms of key events we’re seeing a closure of the Sydney operations and the relocation to Port Kembla. Importantly, most of the contracts in that business have been extended during the course of the year and that holds them in very good stead over the next 5 to 10 years. While it was a minor reduction in cost handle during the year, there’s been a quite

35                    substantial increase in storage which is perhaps more profitable.

 

                        Another thing that we’ve done with this business is to re-structure both our grain and our industrial services rail businesses with this port business. And what we’ve done there is to put the business in a position where we can take

40                    advantage of port and rail opportunities under a single management structure and I think it’s an important move for us to capitalise on the opportunities that are ahead of us.

 

                        Turning to rail, the Intermodal business has performed extremely well.

45                    Despite volume not increasing all that much, there’s been a terrific result on the bottom line through improvement in efficiency cost line and asset utilisation. We’ve worked very hard and the team has worked very hard on improving that performance. There’s been significant growth in some of the specialised parts of that business, including our express operations and also the steeling work that we enjoy with BlueScope, which is our largest customer and those volumes have been running very, very well. So that business is in very good shape and we look forward to that improving going forward once again.

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                        Our Bulk Rail business predominantly operates in the Hunter Valley. This business has suffered to an extent from the constraints in the port and rail infrastructure. However, we’re seeing some movement in the camp there. We’ve introduced three more train sets recently and that’s having a marked

10                    improvement on our performance. It is a very important business to us moving forward in the medium term with a growth that’s anticipated in those markets. We’re very well placed to take advantage of the opportunity.

 

                        I touched on grain before but it’s important that we re-structure that business.

15                    We now have a very strong partnership with GrainCorp for the export tonnes and that’s a five-year arrangement. But we’ll see that business whether grains or not, whether we move any volume or not, whether it’s losses mitigated.

 

                        The second part of that is a deal that was announced at the stock exchange

20                    this morning with our friends from Manildra, which is a domestic task in grain. It’s about eight trains that we’re very pleased to say that we’ve joined up with Manildra and will provide those services. So we’ve turned our grain business from a loss making difficult part of the company to something now that’s got fundamentally contracted in long-term arrangements.

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                        The other part of that is our broad acre arrangements in New South Wales, which we work very closely with the New South Wales government and those issues are now overcome and contracted and once again the arrangement there is for five years. With any luck, the recent rains will continue to fall and

30                    there’ll be secondary grains and we’ll have so much grain we won’t know what to do with it.

 

                        So now on that note, I will pass across to Peter to spend some time on the financials.

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            AIO      Thanks, Mark. Good morning, everyone. Let me add my words of welcome. It’s very nice to see so many of you here. I’m going to move fairly quickly through the financial information, there will be plenty of time for questions at the end.

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                        Building on Mark’s comments, I think the best way to summarise the year is to say the three of our four core businesses enjoyed a very strong earnings performance during the year.

 

45                    Our Container Ports business generated 14.5% EBITDA growth, driven primarily by volumes. Pricing remains very competitive in that business. The Auto, Bulk, and General Ports business enjoyed strong revenue growth of 6%, driven primarily by Autocare and also benefited enormously from a very tight cost control regime. Operating cost in the business increased by 3% during the year, resulting in a very substantial increase in margins in that business.

 

                        The Intermodal business as Mark has mentioned benefited from increased

5                      pricing and particularly strong growth from our premium express business. Coupled with improved capacity utilisation that business generated 23% EBITDA growth for the year.

 

                        Turning to the Pacific National Bulk business, and coal in particular, we did

10                    generate very satisfactory revenue growth in this business of 10%. However, costs have been an issue for us and there have really been three factors. Firstly, our product mix has changed during the year with a high proportion of the coal we’ve been hauling sourced from the upper Hunter Valley. The upper Hunter Valley is the highest cost and least efficient part of the rail network in

15                    the Hunter Valley.

 

                        The second issue was the severe weather in July 2007 that resulted in production shutdown. As a result, we incurred a number of costs that we have been unable to recover.

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                        The third issue has been fuel costs. The issue for us with fuel cost is there is a lag. We fully recover all of the fuel costs; however, there is a lag between those costs being incurred and recovered. And the 2008 financial year we had incurred a number of increased fuel cost that will be recovered in the

25                    current financial year.

 

                        Turning to the overall results, as Mark’s already mentioned, our 52-week EBITDA performance was 653 million, an 11% increase and within the range of guidance we previously provided to the market.

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                        Let me make a number of brief comments on this slide. You will notice we’ve taken the Brambles dividends above the line, but it is in accordance with the previous guidance we’ve given and in accordance within accounting standards. It should be noted we’ve also targeted all of the EBITDA losses in

35                    the grain business above the line, notwithstanding that the bulk of that business has been or will be discontinued in due course. If we would (inaudible) (0:16:20) those two are up against each other, EBITDA would have remained within the guidance range.

 

40                    The second point to note is you will note the the absence of corporate expenses in 2007. That reflects the fact that during 2007, Asciano’s businesses were divisions of Toll and all the head office costs were effectively absorbed by Toll. If we were to effectively normalise the numbers and include the cost associated with our cost structure in the 2007 results, the EBITDA

45                    growth would have been 15%, which is a more accurate reflection of the performance of the underlying business.

 

                        You’ll note $255 million in depreciation and amortization. That includes $178 million of depreciation of property, plant and equipment, and $77 million of amortization of intangibles. The net financing cost figure of $385 million is a 54-weight figure. The 52-weight equivalent figure was $371 million.

 

                        Finally there have been some changes to the significant items since the

5                      interim results and three in particular. Firstly we have partially written back the write-down of our export grain business, following the signing of the grain * contracts. As I mentioned, that business generated some $20 million in EBITDA losses for the year. It was a profitable business in the June quarter and will remain a profitable business going forward.

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                        Secondly we’ve taken some additional provisions for redundancy and re-structure costs, following the efficiency review that Mark mentioned or following the commencement of the efficiency review that Mark mentioned.

 

15                    And finally you’ll note there the $103 million capital loss on the sale of the Brambles stake, which has been taken as a significant item.

 

                        Turning briefly to CAPEX, our total CAPEX spent during the year was $350 million and there were three key initiatives. The first was $80 million in

20                    investment in new rolling stock service, the Queensland coal contract. The total capital cost as Mark mentioned will be in the order of $580 million. The payments made so far are primarily in deposits for new rolling stock.

 

                        Secondly we have added a significant capacity to our Hunter Valley coal fleet

25                    that included six replacement locomotors that are included in maintenance CAPEX and nine new locomotors representing three new train sets included in growth CAPEX.

 

                        And finally we are continuing to develop Berth 10 at the Fisherman’s Islands,

30                    our terminal in Brisbane, and that is the bulk of the growth CAPEX in the Container Ports business.

 

                        Finally let me touch on our bank facilities and capital structure. Since the interim results, we have reduced debt by $270 million. The components of

35                    that were $400 million reduction due to the repayment of the Brambles facility, following the sale of that stake, partly offset by $130 million in additional drawings under our growth CAPEX facilities.

 

                        We have continued to comfortably comply with all of our covenants during the

40                    year and we finished 2008 with almost $600 million in available liquidity. Thanks, Mark.

 

            AIO      So turning to our outlook and forward thinking on each part of the business, the Container volumes and Patrick if I can stop with Patrick’s, Container

45                    volumes continue to be quite robust. We’re not seeing any real impact from economic slowdown at this point, and of course, most of the imports coming across the docks these days are not luxury items but basic consumer goods. So hopefully and we’re confident and have targeted that this growth will continue going forward.

 

                        There has been a minor shift in the occasional use of shipping consortiums and due to that happening there’s a re-shuffle of volumes across both ourselves and DP World that has led to a 2% reduction in our volume, market

5                      share loss that happened in May, so that’s obviously been put into our forecast going forward. These are the things we just can’t foresee and consortiums change from time to time, depending on volumes, et cetera. However, we think that that can be offset by continually improving our business and I touched on the AutoStrad project and a number of other

10                    capital initiatives and also the sort of the work we’re doing with duplication of office systems and so forth. So there’s a lot going on that business to offset any shortfall in volume going forward.

 

                        Although volumes continue to remain solid, the bulk volumes in our Auto,

15                    Bulk, and General business are showing some signs of recovery. The agricultural sector has recovered to an extent due to recent weather. And as I’ve said we’ve repositioned that grain and our industrial services business. With ports and rail combined I think that will add both cost line efficiencies and also some important revenues synergies going forward with the

20                    opportunities.

 

                        On the Pacific National side, continued demand is strong at the moment, both Intermodal and the coal business. We’ve continued to execute key contracts with our customers and that will underpin ongoing growth. We’ve lost no

25                    substantial customers in the business to our competitors at all. We’ll continue to expand the express offering, which is quite unique and no one else can do that on a national basis.

 

                        The increase in fuel will I think help the business more and more. The

30                    increase in energy cost seeing a shift. In fact the last few months more of a shift across to our rail business, not substantial but I think significant into the medium term as tracking costs become higher and higher.

 

                        The introduction of the carbon trading scheme is an important element of this

35                    business into the medium term. Transport has been included in the scheme as proposed by the Greiner report at the moment. There was an unfortunate incident there where rail was excluded from the (inaudible) (0:23:18) scheme and road was given a 12-month honeymoon period. We’re obviously banging down as many doors as we can to say how strange that is given that it will

40                    increase carbon emissions and not reduce them because rail is three times cleaner than road. It’s amazing what a bit of lobbying can do.

 

                        Hunter Valley demand is still quite strong and I think hopefully the Greiner report that is now sitting on the Minister’s desk the government will make a

45                    speedy decision and see that the proposed improvements and the essential coordination of all key parties in the culture and the supply chain there can get going. That’s with the government and we’re hopeful that decision will be released with its recommendations shortly. I talked about our grain profitability. We look forward to a better year and a reasonable crop is expected this stage according to the ABARE stats.

 

                        So we’re looking at now some of the key growth in our business and I’m very

5                      excited to say that we have finally executed contracts with * to commence our entry into the Queensland coal market. It’s an enormous opportunity for our business and we’re looking forward to working with our new partners in Queensland. It has been an excruciating and long, painful negotiation but all that’s behind us. Now the job is at hand. We want to build a significant

10                    business in Queensland and the contracts that we’ve signed say both XStrata and Rio supporting 14.2 tonnes per annum over a 10-year term and this gives us that enormous foundation to build a significant business in Queensland.

 

                        As you’re aware, Queensland coal is the largest coal market in the world and

15                    it will continue to grow. At the moment about 185 million tonnes per year. By the year 2020 it will be 380 million tonnes. So it’s a very exciting time for the business. My compliments to all involved in the negotiation. It’s been a fantastic thing and we look forward to working very closely with XStrata and Rio to very significant operators and we wish them all the success which we

20                    hope to ride on in Queensland.

 

                        So I’ll hand back to Peter now to talk about the funding and capital structure issues.

 

25        AIO      As Mark has already flagged, we are entering a very significant growth base for Asciano as a business. Our CAPEX requirement in 2009 will be doubled the 2008 level. As we invest in the new growth initiatives we’ve talked about particularly in Queensland and Saudi but also just continue to build additional capacity across our existing network. As a result, we do have a requirement

30                    for additional liquidity to fund growth in 2008-2009.

 

                        As we’ve previously announced and has been widely publicised we have over recent months undertaken a very detailed review of our capital needs and our capital structure. With a focus on three key short-term objectives being to

35                    create a sustainable business model, secure funding for our 2009 growth initiatives, and providing appropriate balance to our security holders between yield and capital growth potential.

 

                        We’ve also been mindful of three very important medium-term objectives.

40                    Being to enhance our long-term strategic positioning, to secure funding for additional growth options beyond 2009, and also to increase our flexibility and range of options as we approach our May 2010 refinancing requirement.

 

                        As a result of this review, we’ve today announced three new initiatives. The

45                    first is a revised distribution policy. Going forward, distributions paid by Asciano will be internally funded. The maximum distributions over any rolling two to three-year period will reflect free cash flow generated by the business after maintenance CAPEX. Our expectation is that for 2008-2009 this will result in distributions per security in the range of 24 to 30 cents with ongoing distribution growth of 10% to 15%.

 

                        This initiative will allow us to focus our external financing and new

5                      opportunities and to continue to grow the business and create value for our security holders. We also believe it will result in a more appropriate mix of yield and capital growth potential for security holders.

 

                        The second initiative we’ve announced today is that we have secured equity

10                    funding for our 2008-2009 growth capital requirements. We have executed underwriting agreements for $100 million security purchase claim and for our 2009 interim and final distribution reimbursement plans. The combination of the cash flows through the SPP, the cash retained through the underwritten DRP, and the available but undrawn growth CAPEX facilities provide

15                    sufficient capital to fund all of our growth initiatives for the next 12 months.

 

                        I think the key point is that will allow us to now focus on both executing the business plans, planning the business, and on the longer term funding requirements for the business.

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                        As of the 30th of June, our gearing was within our previously advised target range of 6.5 to 7 times trailing EBITDA. Going forward, we will look to reduce this level of gearing over the coming 24 months to an orderly and disciplined process. This will achieve two objectives for us. Firstly, it will provide scope to

25                    fund future growth initiatives in the business in 2010 and beyond. Secondly and importantly, it will increase our flexibility and range of options as we start to think quite actively about the May 2010 refinancing.

 

                        To achieve these objectives, we will commence a process to monetise one or

30                    more of their underlying business units. We will look at options involving both the direct sale of our significant stake in one or more of the businesses. We’ll also look at other monetisation options, particularly around the issuance of asset-linked securities directly by one or more of the business units.

 

35                    This process will take a number of months. The final outcome will be subject to funds and pricing that are acceptable to us. As a result and given the current state of markets, we are retaining a full line of options at this stage; however, this is very much our preferred approach. Given the strategic value and quality of our underlying businesses, we are very confident that an

40                    acceptable outcome that will enhance shareholder value can be achieved through this process. As a result we anticipate a reduction in our cost of capital, an enhancement of security holder value, whilst at the same time maintaining management control of all of our operating businesses.

 

45                    In summary, this combination of initiatives will tick every box. It will place Asciano in a very, very strong position to continue focusing on running the business and on creating shareholder value in the longer term. Thanks, Mark.

 

            AIO      Thanks, Peter. So just to wrap up, I just want to reinforce a couple of points through the presentation. Number one, we’ve delivered a strong performance year-on-year with our operating divisions on a normalised basis. I think we’ve got very sound – a sound operating outlook going forward. We’ll continue to

5                      grow our returns from our existing businesses. We got a terrific growth opportunity to build not four businesses but two more very large businesses, one in Queensland and one in the Middle East. We’ve taken some steps both in the short term and the medium term to review our capital structure and get ourselves over a period of time in a more robust position. So when we

10                    combine our now very capable management team, well-advanced set of business plans where we’ve got key objectives which will catch to our managers’ remuneration, and a unique set of assets, we look forward to our shareholders being enhanced with their value and hopefully we’ll look forward to their patience through these rocky times and see the delivery of a much

15                    better and valuable outcome for them.

 

                        So I’m happy to open the forum up for questions and I think we’re dealing with questions here in the room first of all. I might sit down.

 

20        Q         EBITDA for Container business, looks like it’s down about 16% second half versus first half. Now you walked us through some of the market changes but what’s the other drivers behind that? And at the same time Intermodal looks like it’s gone some 93 million in the first half to 85 million in the second half, so I just want to know what’s driving that.

25        AIO      Most of the changes are seasonal, particularly Intermodal business you’ll see a seasonal drop-off because of your January period (inaudible) (0:33:55). That’s a typical trend. The Container area, you’ve got to include if you look at these businesses, you’ve got (inaudible) (0:34:05) business, the logistics business, and the port-linked business, and you’re seeing particularly the

30                    port-linked business down on volumes because that’s the catch basically to agriculture exports. So that business has been down to an extent.

 

            Q         New South Wales (inaudible) (0:34:31) about 100 million tonnes per annum and EBITDA is about 140. So if you’re holding 14 million tonnes in

35                    Queensland per annum and you’ve just – well, you’re going to outlay 390 million, it looks like the EBITDA from that would be about 20 million, so you’re getting sort of 5% EBITDA return?

 

            AIO      Well, they’re quite different operations and it’s the impact of having an older

40                    fleet across, so you have an enormous swing on that. The proposal on some of it is obviously confidential, but the proposal with our customers, our partnering agreement going forward is a very different financial arrangement and while we cannot talk about these sorts of returns that are coming there higher than what you are talking about.

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            Q         Okay, and just to follow up from that, in December, you said you are going to aim for 30 million tonnes per annum out of Queensland and it has come out at 14. What has happened there?

            AIO      Okay, there are two parts to our entry into the market. Clearly, we wanted to grab a sort of fundamental portion of the business going forward with contracts with two major customers that is being done. The second part of the CAPEX, the balance of it, the 200 million is for growth in that market. That

5                      equipment will arrive slightly later but be introduced into a number of parts for the market. At the moment, there is a shortage of rail equipments in the Queensland coal industry (inaudible) (0:36:19) industry and we can step into that market and fully utilize the assets straight away. So I think that is up, up to 20 train sets for the short of the moment. There’s going to be no change to

10                    that shortage as the coal volume is increased so we are confident we can step in wider by extending the arrangements in the (inaudible) (0:36:42) from XStrata and Rio. We’ve got quite a few very interested parties wanting to talk to us about that equipment and the last part of it is just the sit in the stock market and take a higher rate at any rate. So we are very confident about that

15                    and with that package of equipment, we got a very formidable real business that we can leverage up.

 

            Q         Yes, good morning, my name is Sanjay from Citigroup. I would like to introduce myself. Mark, my question is on the financing side, why have you

20                    kept your capital raising to just $100 million? I would have expected that with a bit on the table, a total of 40, you could have actually raised a lot more without actually needing to perhaps even consider selling an asset. So why just $100 million?

            AIO      Okay, yeah, well that only happened on Monday. We will obviously sit down

25                    and work through the options, but what we have put together here today is first of all the amount that is being raised is sufficient to deal with the capital that we have ahead of us in conjunction with the DRP. The second part of your question is really, are we keeping all the options open? You know, are we going ahead with the asset sale. Yes, that is we will commence the

30                    process if our share price is in the right position. We will obviously look at all options and they are open, but it is important at this point to say that we got a plan to go ahead with the partial divestment over an exchangeable. Things can change of course, Sanjay, but we are committed to the prices at the moment.

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            Q         One just related question is can you just describe a little bit about, give perhaps a little bit more flavor to what is asset-linked securities are, the dual track process that you are planning to run?

            AIO      Sure, I will ask Peter to answer that.

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                        Yeah, we have put a raise over the amount of work as you would have imagined, Sanjay, in the last couple of months into looking at the various options and we believe there is potential to develop our viable option that involves an issue of securities, convertible or exchangeable into equity in one

45                    or more of the underlying businesses. We have obviously got a substantial amount, more work to do, but we think it is an option that potentially enhances flexibility force rather than going to the path of a direct outright sale today, which is a path once you have gone down, it cannot be reversed. There is potential to look at more flexible options that may leave open further options down the track in terms of the ultimate ownership  structure.

 

            Q         Good morning Mark and Peter, it’s Cassandra Meagher from CommSec

5                      Equities Research, just a couple of questions, the board considered 10-year capital plans over the last couple of months. You’ve outlined the FY09 capital requirement, can you elaborate on capital requirement beyond FY09?

            AIO      For the 10 years?

 

10        Q         Well, as far as you can go, yes.

            AIO      I might asphyxiate running through that. Well, let me make a couple of comments. I think once you get beyond 2010, it is a little more difficult because there is a real swing factor in terms of just how much the Queensland growth opportunity materializes over what period of time. If we

15                    were to capture, for example, 50% of the additional growth in the Queensland market, put aside the market share today, just 50% of the expected growth in the next 10 years, that would require at a minimum a couple of billion dollars of capital to go in. What I can tell you about 2009-2010 is that in 2010 we expect to have a higher level of maintenance CAPEX than will apply in 2008

20                    and 2009 because we will be undertaking one of our periodic major overhaul programmes for our intermodal fleet. Maintenance CAPEX tends, on a year-to-year basis, to range somewhere in the mid 100s. We would expect in 2010 to be somewhere in the mid 200s as a result of that programme.

 

25                    Growth CAPEX. Again, underlying growth CAPEX just building new capacity across the existing network tends similarly to be in the $100- and $150-million region annually. At this stage, it is likely that growth CAPEX in 2010 will be slightly lower than 2009. The reason for that is that 2009 includes the investment in Saudi and the completion of the Berth 10 expansion at

30                    Fisherman Islands. We will have between 250 and 300 million still to spend on Queensland in the 2010 financial year, but beyond that, there are no major new projects factored into the growth CAPEX expectations in 2010.

 

            Q         Just a second question on the efficiency review. Are you able to comment on

35                    any of the (inaudible) (0:42:25) cost savings and what that might mean to the margin?

            AIO      Sure. The first estimate that we put together, Cassandra, was cost savings in the order of 50 to 55 million that will be delivered over about 30 months, some of which has already been executed.

40

            Q         Are you able to comment on what extent that 30 has been executed out of that 50 to 55?

            AIO      Twenty-five percent of it. Just on those 10-year plans, but just the first two or three years obviously with capital plans going out 10 years. It is far more

45                    simple to identify the sorts of projects and the growth CAPEX that is needed to expand the business with the growth rates that they enjoy. Assumptions were made about market share about winning certain projects in years, sort of 3 to 10, so it becomes more academic, but the flavor that Peter painted was the coal business has got extraordinary growth and I think it was something like across the Hunter and Queensland up to 4 billion dollars worth of CAPEX required to maintain shares and growth a reasonable business in Queensland, and that is the lion’s share of the CAPEX going forward.

5

            Q         So just on the CAPEX plan with respect to your container port volume share, is that now 54%?

            AIO      It has come back from there. It is probably more around 52, Cassandra.

 

            Q         In terms of your CAPEX plan for rollout of (inaudible) (0:44:16), are you going

10                    to expand that, because you did not mention that in the CAPEX plan? Is that not factored in or…?

            AIO      Sydney is the most relevant there and that equipment, as you are aware, has not been commissioned for a lot long. So I do not anticipate any increase to that in the next three to four or five years really. It is a first-grade equipment

15                    that has just been installed. Less relevant in Melbourne and not relevant in the other ports.

 

            Q         Okay. Thank you.

            AIO      Thank you.

20

            Q         Good morning. Anthony Moulder, Credit Suisse. Just a second pickup on some of the comments regarding replacement CAPEX. You have started to replace some of the locos in the Hunter Valley. You have talked about a starter or replacement of the NR Class, the Intermodal fleet. Through to 2010,

25                    120 million, couple of hundred million will be the start of that, but there would be perceivably other or a longer (inaudible) (0:45:12) for the replacement of those NR Class, the wider Hunter Valley fleet, etc.

            AIO      Yes. We will continue to enhance the, how will I call it, the aging of the fleet in the Hunter, Anthony. That will continue and I think it is reflected in the capital

30                    plans. The point on the intermodal business is the 120 or so NR locos. They are still performing well and Peter referred to that overhaul that we have got next year and that is a progressive thing that is undertaken that extends the life of the locomotives, and they are still doing a very good job, and they fit the purpose, etc., etc., so I am very happy with those.

35

                        I think one of the things that we need to think about going forward is the increase in capacity that is scheduled with the IRTC improvements in the track infrastructure. If you look at those going forward, I was looking at the other day, Melbourne to Brisbane increases by 35% per annum, commencing

40                    I think year 2011 going forward. That will be a remarkable difference to the number of services that are available. We are sort of joining on those spots, the terminals, the pass, and customer contracts to enjoy that. To an extent, they reflect in our capital plans but that will be the challenge I think going forward to undertake and retain market share beyond what we have got today

45                    because there is quite significant growth going forward with what Dave Merchant has got planned for the IRTC.

 

            Q         Growth CAPEX will be it. If I turn to the fuel price lag, what is that lag between the fuel increases and when that is recovered?

            AIO      It is a bit different for each part of the business. In the ports, we do not recover it as quickly as we can. The fuel cost in the ports business is doubled and that is something that we are working on right now. In the rail business, the Hunter, the coal business is quite different to the intermodal business. In

5                      the intermodal business, where you have got freight forwarders, they tend to have very quick recovery from their customers and hence we have got an ability to recover from there. In the steel business, the lag was dreadful, I will not even describe it to you, but that contract has been fixed going forward. In the coal, it is generally about three months, the lag, which has hurt us on the

10                    way through and I think Peter touched on some of the impact of that in the financial results. Once again, we are working very hard to resolve that with our customers. It is not so good when the fuel is going up, of course, but when it is coming down, which it has done the last few months, it is kind of tricky.

15

            Q         A couple of more, if I can. What took so long as far as the signing of the Queensland coal contract? Is that related to the dropdown, as was pointed out, from 30 million tonnes to the 14.2?

            AIO      No, it was not related to that. The genesis of these arrangements really

20                    started three or four years ago. The step away from the current provider in Queensland is enormous funds for the parties and PN has never had a business in the colony before. No one has tried. It is sort of like you have got to be Merlin the Magician to get into the Queensland rail market. All sorts of barriers and blocks are made and I think part of the reason for the extent of

25                    the negotiations is really to try to come to terms with the customer’s necessity to make sure that there was absolutely no risk in a changeover. That has fundamentally been the difficulty all the way along, making sure that their risks were mitigated, we were very sympathetic to that; making sure that the equipment was on time, and it is; making sure that the access arrangements

30                    were in place. While those coal companies are enjoying terrific margins and volume growth, putting their business at risk is a fundamental step for them. So I think that had enormous impact on the negotiations. It is really about risk mitigation, but we are there and I think all the teams are very happy now to go forward and just make it happen.

35

            Q         On that point, you are happy with the risk reward level, and if there are any perceived reasons you miss a million tonnes’ worth of export coal and that is quite (inaudible) (0:50:23), you are telling me that you have accepted liability for that?

40        AIO      No, no, we are not doing that. If we accepted that, we would probably accept that on the upside you get a proportion of their profits for the coal being hauled out. We cannot take that risk. We cannot put the Company at risk. Yes, that was negotiated, but all that has been put aside. A balance of arrangements has been reached that reflects risks for both parties going

45                    forward. So we are very satisfied where we got to. It took some time and it was pretty tough but we are there.

 

            Q         Lastly, if I could, the monetisation of one of the business units. You mentioned that you have got very strategic assets. How important is it if you had to monetarise or pucker up someone that provides equally a strong strategic benefit to Asciano?

            AIO      That is a good question. When I look at the quality of the assets we have got and the management that is running it, we do not need any assistance from

5                      another port company to demonstrate how we can run a port. The businesses that we have got in Australia are best practiced for terminals of those size globally. The sorts of efficiency and ship turnarounds that we have in our business are very, very good. There is no ship skewing anywhere, so I do not know now what would be taught. In fact, when you look at some of our

10                    technology in the AutoStrads we have got those big, big container operations globally looking at what we are doing. So a long line of answer to your question, without any help from port operators, rail operators tend to be the North Americans and basically sort of government businesses in Europe. So the answer, the Americans have never shown much interest in Australia apart

15                    from Genesee & Wyoming with their business that got here. So the answer is probably not.

 

            Q         It need not be management expertise or operational expertise, but it could be a network benefit that some players on other parts of the world would provide.

20                    Obviously, DP World has that (inaudible) (0:52:44) unlimited to a more limited group, but obviously, Asciano is somewhat limited down here as far as four ports in the key Australian markets.

            AIO      It is more about the service you provide, the prices you charge, and your general operational standards. We would not have 52% or 53% of the market

25                    if our global customers starve for network, (inaudible) (0:53:09) relevant. DP World would have taken more of the business off us. I am not sure that that is relevant here. It might be overseas to an extent, but it is not relevant here. It is all about the quality of service we have got and we have got better properties, better people, better equipment, newer equipment, better work

30                    practices, better business, better solution for the customers. Well, that is good enough speech, is it not?

            Q         Absolutely. Thank you very much.

 

            Q         A couple of quick questions. Just on the quantum of fuel surcharge, based on

35                    the lag, how much are you actually lagging? You said you are going to recover it. What sort of quantum (inaudible) (0:53:50) to make that to be?

            AIO      Look, in a very ballpark sense, our costs for the year were about $4 million, higher than otherwise would have been as a result of the lag in recovery of fuel costs.

40

            Q         Okay. Just on PN, 2% growth when you have got a booming WA economy, good Queensland economy, and now you made your hole on the intermodal. It looks a little bit lacklustre against that sort of environment. Is there something else happening in that market which is sort of causing those

45                    growths not to sort of run up? Name what you think the state gross product is.

            AIO      There are a couple of factors there. There is sort of an increase in shipping across to the west that has impacted some volume. QR started up services. I think they are running one train a week, which has an impact on us. I think it is one service away. Road from time to time. Road particularly in the north-south corridor. There has been no significant loss of business. Then you have got the sort of issues of capacity and service on the network. So if there is, and there has been, a lot of derailments or capacity issue, there has been some frustration with the operations of (inaudible) (0:55:20) which is now in

5                      another party’s hands and not ours. That has all had an impact across the board, but we have not lost customers. There has been just some slippage, I think, during the year but it is starting to come back now that fuel has increased. The management team has really been focused on improving that business of the coastlines and they  are very certainly out there trying to

10                    increase the businesses, and when I talk about those express services, that is a premium service, premium pricing. So you are seeing a bit of a switch in terms of the way they attack the market. Instead of sort of being a vanilla operation. It has been more specific about they can achieve.

 

15        Q         The final question, AutoStrads, you are having some issues with them at the half year or in your update the half year, you are putting a lot of work in them. How are they actually performing now and are they getting to the point where you can fully start rolling in terms of the other ports?

            AIO      Thanks for that. The AutoStrads project has improved month-on-month. It has

20                    just continued to improve, and the team involved there are very focused on continuing that level of improvement. In terms of rollout, that is a function of capital, it is a function of culture, depending on which term of the lease. It is certainly planned in that 10-year plan to roll them out in other locations, but I cannot recall exactly what it is. It is like three or four years out. It is the first

25                    one that is probably heading west. Melbourne will use a different technology because there comes a point where because of the volume in Melbourne it is more likely to go to a crane-stacking type which is more about the function of the number of containers going through the operation.

 

30  Operator    I think we got new questions on the phone now. Is that right, Jen?

 

      Operator    Please be advised you will need to ask your question from the handset and not the speaker phone. Your first question comes from David Cooke of ABN AMRO. Please ask your question.

35

            Q         Good morning, gentlemen. A couple of quick questions, if I may. Previously, you have talked about medium-term EBITDA guidance, you talked about 10% to 15%. Are you still expecting that to be your medium-term outlook, and associated with that, if I would look at FY09, if you lost 2 percentage points of

40                    market share in containers, that is about a 4% to 5% volume loss in containers in FY09, how easy is it going to be to recover that and therefore still be able to get in within a 10% to 15% guidance range?

            AIO      I am not sure that we had a 10% to 15% guidance range in the presentation. Certainly that has been the expectation. Certainly, that has been the history

45                    of the business over the last five years. The budget process that we have obviously completed reflects some of the changes that you have talked about, David. The reduction of container volumes at Patrick has been factored into our plans going forward.

 

            Q         So the recovery of that loss, in effect, is that still going to be using ports or is it rail that is really going to pick up the slack in 2009?

            AIO      Let me perhaps answer the question in a slightly different way. If we look over the course of 2009-2010, we are extremely confident that over that two-year

5                      period, the annualised EBITDA growth will be within that range and most likely towards the upper end of that range. I think one of the issues we are continuing to monitor and we will grapple with through 2009 is just some of the timing issues. There is clearly substantial upside in efficiency in the Hunter Valley coal network. The question is most of those efficiency gains are

10                    outside of our control. We cannot control that timing. Over a two-year period, that will certainly, certainly benefit our business. How much of that we can capture in 2009 remains an open question.

 

                        The second point I would make is in our container ports business. Container

15                    ports are quite a different business to rail. Rail is in many ways a fixed cost business requiring maintenance, fuel, and access. Container ports are much more variable cost business with about two-thirds of the whole cost being labour and labour related. As a consequence, in the event that we do see any form of sustained slowdown on the ports business, we can manage our

20                    prospect, but again there is a lag.

 

                        So, I think, there are uncertainties around 2009. We see them as being timing issues. The business is absolutely on track to deliver and we are above that long-term growth profile over the next two years. We just need to keep

25                    monitoring on a regular basis 2009 because there are a few variables out there at the moment that we do not have absolute control over.

 

            Q         Okay. But let me try and get comfort this way then. You lost the volume in May, have you reduced your labour force since then?

30        AIO      Just to be clear on the loss of volume in May, that was a loss of market share that we feel increasing. The loss of market share is less than the underlying growth in volume across the system. So it is not a case of (inaudible) (1:01:35). We have lost part of our volumes by virtue of (inaudible) (1:01:42) therefore we can reduce 4% of cost. It is a lot more complicated. It comes

35                    back to the point that we need to see the trend line and we need to see a sustained pattern. We do not go and chop and change the business on the basis of one or two months’ worth of numbers, particularly in a very volatile environment we see at the moment. It will be managed in a very quarterly way over time.

40        AIO      Typically, there are two or three consortium shuffles during the course of the year and it goes to capacity as well. So DP World will fund the increased market share, very difficult to service in Melbourne in particular. They have got insufficient geographic footprint there. For there to be any fundamental shifts away from us, it will be quite difficult for them.

45

            Q         Good point, thank you. My second question, if you did look to sell a strategic stake in one of your operations, what impact does that have on your debt covenants for FY2010 but also the 2012 transfers?

            AIO      At the end of the day, that depends entirely on the structure that we adopt. I think the starting point needs to be whether it requires for more approval of our banking syndicate or not. We will obviously engage very actively. We enjoy a very good and mutually productive relationship with all of our lenders

5                      and we would envisage as the firms by not engaging with them to ensure that they remain comfortable with what we are proposing. I do not see that as being an issue or an impediment in any way.

 

            Q         Is there a risk that if you did sell a meaningful stake, in effect, you would have

10                    to renegotiate the whole line so it could actually trigger a repayment event?

            AIO      Well, that is something we just went through. At the end of the day, our syndicate has security over our assets. If we sell assets, we are reducing our security, and yes, that would need to be addressed in the structure. Again, it is all manageable. It is a question of working out, in the first instance, what

15                    makes more sense for our business and then we are very confident of our ability to engage with our banks and enjoy their support through the process.

 

      Operator    Your next question comes from Cameron McDonald of Deutsche Bank. Please ask your question.

20

            Q         Hi, guys, just a couple of questions. Just following on from a previous question regarding assets. Have you received any other approaches to date about taking stakes in your assets?

            AIO      The answer to that is yes. I think it is sort of a non-stop thing. The assets are

25                    very attractive to all sorts of parties, whether they are strategic, financial, or sovereign bonds, and there has been a lot interest showed in those assets.

 

            Q         Okay, and that is what is giving you the comfort to say that the current bid materially undervalues the value of those assets because you have had other

30                    approaches.

            AIO      I do not remember saying that.

 

            Q         Well, you have said that you will not allow them to come in and do due diligence because it materially undervalues the business. Is that because of

35                    the other approaches that you have received?

            AIO      That was not taken into account.

 

            Q         Okay. Another question just on the Queensland expansion. Now $380 million dollars that is being invested to support the initial expansion, what sort of

40                    level of capacity will that 14 million tonnes be on the initial investment? So how scaleable is that $380 million?

            AIO      Well, it is just the function of train sets really, I think initially six train sets which will increase with the growth capital. Very scalable is the answer. It is really about getting confidence about the growth aspirations of our two new

45                    customers and also vigorously marketing ourselves across the other customers in the coal chain in Queensland.

 

            Q         Well, yes. I suppose my question is, of the six train sets, are they fully utilized with 14 million tonnes or could they do more?

            AIO      They can do more. The nature of these contracts is that we have got dedicated train sets on the mining activities in Queensland of Rio and Xstrata which is quite different to the QR approach and the approach that we have in the Hunter and that is a whole fleet that runs sort of, I would say, at random,

5                      but it is not dedicated to any particular customer. So, it is quite a different business model than what has ever been seen in the coal fields, so they will have dedicated operations. As they increase their volume, we will increase the train sets and we have obviously got a plan for that. The other part of that is the sort of surge capacity that we will have with that other stable of train

10                    sets in our growth area of capital.

 

            Q         Okay. My final question is around the entry of a third operator into Sydney and Brisbane. Can you make some comments about that and what you are factoring in in terms of loss of market share or the impact that that will have

15                    on your business in those two locations?

            AIO      Okay. In the 10-year plans that we have talked about we have factored in a third operator. I will just make a couple of points though. One is that we are allowed to bid in New South Wales and we will bid for the operation. Two is that we have the first part of the expansion in Port Botany and that is

20                    affectionately known as "The Knuckle" and that is another 18 hectares of expansion capability that we have got. So we are the first recipient of any enhanced capacity in Sydney.

 

                        The Brisbane operation is, as I said, factored in and it is only a small loss of

25                    volume because each of the shipping companies that comes to Australia has to be serviced in the four ports. There is the odd vessel or service that runs out of Brisbane and I guess that volume would be the most vulnerable where it is specific to Brisbane, but that is very much a turning part of the business. The rest of it is that the shipping companies need a national service. The

30                    entry of a third operator is extremely difficult. We have worked through the costing of it as a third operator in our planning process and it is an enormous cost at the capital line and in trading losses for another entrance, develop a national service and it will take 10 to 15 years to do to build a business. So without sounding arrogant about it or complacent about it, we are not. It is all

35                    about providing a good quality service in the end, but it is a very high bar to jump over to get a credible offering and it is a very expensive opportunity.

 

                        Global port operators, I guess, will be the most interested in this opportunity, say, in Sydney. They are all rationed for capital. There is a port opening or a

40                    dock opening in China every week and why anyone would invest in a trade-off of capital, why you would go from looking at an opportunity in China or India where you have got almost a surety of your return on day 1 because of the volume and a shortage of infrastructure to a very, very difficult environment in Sydney and Brisbane. I could be wrong, but I just (inaudible)

45                    (1:11:15) to be -- unless the government is prepared to subsidize an operator in and I will sit here as the only Australian. Steve Irwin said, "Well, that's pretty bloody rude because we do a good job,” and we have got a lot of Australians that work here and put the national hat on, and say, “Well, fair is fair,” and any new operator should be subject to the same rentals and any subsidies that are suggested, would just go nuts over. So, I guess the point I am making is that it is very difficult to do, very expensive to do, and good luck to anyone who is successful here in Sydney. But we will have a crack too and make sure to keep everyone on their toes.

5

      Operator    Your next question comes from (inaudible) (1:12:03) from Victorian Funds Management. Please ask your question.

 

            Q         Hi, good afternoon, gentlemen. Can you hear me?

10        AIO      Yes.

 

            Q         Just one quick question. Just looking at the CAPEX plan during the next one or two financial years, that $550 million, could you give us some clarity as to what your level of certainty is around CAPEX cost blowouts, if any, and I

15                    suppose, I mean, given a lot of it is to sort of buy locomotives or rolling stock, how much of the pricing is actually locked in and where you might anticipate there might be CAPEX blowouts?

            AIO      Sure. I think over the next two years we have a very high degree of certainty. The focus on the CAPEX is really in three areas. The expansion at Fisherman

20                    Islands, the development of Berth 10, is well advanced. We are approaching sort of being halfway through that project and that CAPEX spend, and consequently, we have a very high degree of confidence in the cost to complete from here.

 

25                    In terms of the investment in Saudi, the arrangement with our product consortium members is that our investment will be kept, so there is no risk of a blowout there.

 

                        In terms of the rolling stock for Queensland, again, the contracts have been

30                    signed, the acquisition of that rolling stock, at fixed costs. Some of that rolling stock, some of the locomotives are being manufactured in Germany by Siemens, and we have actually put in place currency hedges and removed the currency risk under those contracts.

 

35                    So the risk of CAPEX blowouts are solely around new projects that may arise that we may decide to pursue. In terms of what we are currently pursuing, we have a very, very high degree of confidence in delivering on the numbers that we have talked about.

 

40        Q         Right. Just one other question as well. On the other growth CAPEX, the $140 million there, what items are in that number?

            AIO      It is things like new straddles at the container ports. It is new wagons in the rail fleet. Our business by and large is a volume-driven business. When you look, for example, at our container ports business where we are seeing 10%

45                    volume growth each year for the last five years, it brings with it a need to effectively add 10% to our capacity every year. So it is around, as I say, straddles, occasionally new key cranes, new rolling stock wagons. It is basically just the nuts and bolts CAPEX to keep building our capacity every year or just extending our current footprints for our other terminals. So there, cranes, straddles, work equipment and some property.

 

      Operator    Your next question comes from Paul Ryan of Evans and Partners. Please ask

5                      your question.

 

            Q         Good afternoon guys. A couple of questions if I may, just on the assets sale option, do you anticipate their being any capital gains tax issues. On that issue you've allocated the debt back to the group and out of the port and rail

10                    divisions. I'm certain it might be the first one.

            AIO      Again, it will depend ultimately on the structure. That is a possibility and one of the issues that will be factored in as we assess the option.

 

            Q         Just on your cash flow, in the second half, you cash conversion, EBITDA

15                    versus gross opening cash flow was under 70%, well below what, you know, the business had done historically, can you just explain that differential?

            AIO      There are a couple of things. You need to make sure you're comparing apples with apples. There are, for example, some cash cost taken through the cash flow that are significant items from an EBITDA perspective. The

20        second point to make is that as we have, as there's been additional certainty in the business through things like the restructure of grain, the resolution of Broad Acre, it has meant that some, there are some previous provision which were then able to release during the year. There are about $15 million in noncash items in EBITDA that obviously don't appear in the cash flow.

25

      Operator    Your next question comes from Phillip Wensly of Morgan Stanley. Please ask your question.

           

            Q         Thanks guys. Just looking at the future funding on a sustainable basis for the

30                    growth CAPEX profile, I just note that that growth CAPEX is sort of missed out there. You've talked about the maintenance CAPEX being funded out of operating cash flow. You've obviously put in place funding mechanisms for growth initiative in the short term. I mean although, now of course we have got capital initiative program to take place in the meantime, but at this stage,

35                    what are you thinking will be your method by which you fund growth CAPEX on a sustainable long-term basis?

            AIO      Well, again, I think one of the keys that we talked about in looking to de-gear the business going into 2010 is to increase our range of options and flexibility as we look forward. I think at the end of the day, the business we're in will

40                    continue to require a significant capital going forward. We are in a growth business and consequently we need to think about how the end price longer term additional growth CAPEX facilities with our debt structure bearing in mind that today our debt cost is a lot less than our equity does. Secondly, one of the key issues we’ll consider as we look at the business unit

45                    monetarisation. You know, it will partly be about cost of capital. Clearly the intention is to source capital in the first instance as a more competitive cost than our own internally generated capital. But one of the factors we will consider is, you know, an ability for our strategic partner or partners to continue to invest in the growth of the business going forward. We don’t see this as a one-off. I would also say that if there's one thing we've learned in the last 12 months, is it's that the world can change and access to capital and the cost of capital can change very quickly and the most important thing we can have is flexibility to commit to particular path at this point in the cycle I would

5                      suggest is very dangerous thing to do.

 

                        I think we up to the lucky last question, there's a few people are starting to look agitated, hungry, etc.

 

10  Operator    Your final question comes from Raffy Lamb of L1 Capital. Please ask your question.

 

            Q         Good day guys.

            AIO      Hello.

15

            Q         Sorry to keep everyone waiting. The consortium offer seems to represent a price just under 11 times ’09 EBITDA. Is it fair to assume that looking in 10-year asset sell downs, the (inaudible) (1:19:47) of this would be required and expected?

20        AIO      Well, I think there are a couple points to make. One is, in part that will depend on which asset or assets or business or businesses. We deicide to monetise. So that's issue one. Clearly, you know, the different multiples globally and historically has applied to, you know, comparables for the different business units within our portfolio. The second come of the market would be to hark

25                    back to the comment I made in response to the last questions, which is ti say clearly price and cost of capital will be an important element, but equally it will be one of a number of element including an ability to source competitive funding going forward that we'll consider. I think what conclusion you can draw is the board has made it quite clear that it doesn’t believe we can justify

30                    selling the entire business at that sort of multiple.

 

                        Thanks Raffy, think that's the end. Thank you everyone for coming along today. And you're continues support and we're got to rushed off to media, you know, so thanks very much.

 

INTERVIEW CONCLUDED

 

 

 

 

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