CEO Series: Lindsay Partridge AM – 45 Years Of Dividend Growth

HOSTS Alec Renehan & Bryce Leske|21 April, 2021

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

Today we have another episode in our CEO series, as Bryce and Alec speak to Brickworks’ (ASX:BKW) CEO & Managing Director, Lindsay Partridge.

Lindsay has a background as a ceramic engineer, and is currently one of Australia’s longest-serving public company CEOs. He was appointed CEO of Brickworks Ltd in 1999 and Managing Director in 2000. On the occasion of the Queen’s Diamond Jubilee 2012 Honours List Lindsay was appointed Member in the General Division of the Order of Australia, for service to the building and construction industry, particularly in areas of industry training and career development, and to the community, and he is an experienced company director with substantial expertise in governance, human resources, compliance reporting, media, investor relations and mergers and acquisitions. We talk to Lindsay about all of this, and more – including: how the pandemic has effected both the US and Australian businesses, his framework for approaching capital allocation decisions at Brickworks, his leadership philosophy and the greatest leadership challenges and successes he’s faced.

If you want to let Alec or Bryce know what you think of an episode, contact them here

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BRYCE LESKE: [00:00:41] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to the dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going? [00:00:55][14.2]

ALEC RENEHAN: [00:00:55] I'm very good, Bryce. I'm very excited about this interview. We've got a CEO of a company that's close to your heart. And I think also we can officially say our first member of the Order of Australia on the show is pretty special. [00:01:12][17.1]

BRYCE LESKE: [00:01:13] We are privileged to welcome Lindsay Partridge to the show. Lindsay, welcome. [00:01:17][3.6]

LINDSAY PARTRIDGE: [00:01:18] Thank you. I'm excited to be here, too. [00:01:19][1.2]

BRYCE LESKE: [00:01:19] So for those of you who haven't come across Lindsay, it's quiet, quite the resume. He was CEO and managing director of Brickworks ASX, Tica B.K.W we recently had Tom Milner on the show. You would have remembered through the Brickworks listed investment company. Lindsay Partridge is a ceramic engineer and one of Australia's longest-serving public company CEOs. He was appointed CEO of Brickworks in 1999 and managing director in 2000 on the occasion of the Queen's Diamond Jubilee in 2012 honors list. Lindsay was appointed member in the General Division of the Order of Australia for service to the building and construction industry, particularly in areas of industry training and career development and to the community. And for this episode, it is part of our CEO and executive series. He's an experienced company director with substantial expertise in all things from governance, human resources, compliance, reporting, media, investor relations, mergers and acquisitions, you name it. And we're going to discuss it all. So, Lindsay, welcome. [00:02:25][65.8]

ALEC RENEHAN: [00:02:26] Thank you. Very impressive resume. We would love to we'd love to start these interviews by hearing the CEOs talk about their company in their own words. So to kick us off today, how would you describe Brickworks? [00:02:39][13.4]

LINDSAY PARTRIDGE: [00:02:41] Well, because everybody thinks of it about being a big company and it's not really quite right. Seventy five per cent of our assets are investments that half our assets are invested in Washington Heights. So Paterson, about a quarter of our assets are invested in our property trusts, which is mainly with Goodman. And then the balance is the the the building products, which is Australia and the United States has a really good quarter of the business. So people don't think about that. But there's a lot of I'm sure we'll get into it. But there's a lot of advantages to having a structure like that, particularly when you've got a volatile business, your main business being a volatile business such as building products. [00:03:12][30.9]

ALEC RENEHAN: [00:03:13] So if you can just unpack those four divisions a bit more for people who aren't familiar with Brickworks, you said investments, property, trust, building products in Australia, building products in North America. Can you just add a bit of color to those? [00:03:26][13.1]

LINDSAY PARTRIDGE: [00:03:26] I just give you a bit of history. They just say how we worked out. Brickworks was on the list on the ASX in 1961, but prior to that was on the New South Wales Exchange. Brickworks was formed by Sydney brick makers who wanted to buy out the state government from brickmaking, and it was formed in that 34 and they did that. They bought out the state government at brickmaking at the Homebush Bay, which of course became the site of the Olympics. And every time the government changed the next three or four years, it got swapped backwards and forwards. But then we left it with the government to lose money. And I think they ran through a loss until the late 60s. But Brickworks existed. And then the chairman of Brickworks was a gentleman by the name of William King Dawes, and he owned the company. The Australian company was formed in 1988. And so he folded that into Brickworks and he had two other companies. He folded them all in and they picked up some other company. So by nineteen sixty one, when we listed, we had 11 dry press backyard's around Sydney. So anyway, in Sydney where you see the remnants of a brickworks or a remnant of a base for you, you know, a landfill or something, it was usually one of our plants, the most famous one of course down here at St Peter's. Most people know the brickworks there. That was all ours. So that's that's where we got into it. We couldn't keep up after the war. And they started all these big factories out at Horsley Park and buying a lot of land. And in 1968, they worried that London was going to take them over. And they looked on the stock exchange and they sold us another company they called Washington Heights of Paterson. That was exactly the same size, about 26 or 27 million dollars. And so they swapped million shares each. The paper the next day said Directors' on drugs, shareholders get brickbat, which I've got that out of my computer. They have so know they bought shares in each other up until about 1990. When I said, that's enough, it's enough. At that point, salesperson Patterson owned forty nine point nine per cent of Brickworks, a little bit less. Today we own forty three per cent of them. So that twenty six million dollars today we had thirty nine per cent today. That twenty six dollars million is worth two point eight billion. Wow. So it's been a pretty good investment. So that's why, that's why sales came from it. And what we learned was that steady income and dividend stream from sales. Helped us get through the really tough downturns and remember, you know, we've been through the Depression, World War Two, actually World War One, you know, we've been through the Vietnam War. We went through the Whitlam years and we've been through the you know, the Bob Carr shut down housing in New South Wales. We've been you know, we've been through everything. We've been through the GFC. And now, of course, we've gone through the pandemic. And having that sort of income coming in for investments is one thing that makes us strong. The business didn't really grow much up until really when I took over. And as the new chairman came in, Jim, Jim Milner, who was the previous chairman, his nephew, Robert Milner, who's the chairman today. And we started looking at other assets. We started acquiring other companies. And the biggest of those we bought in Australia was Bristol Ltd in 2003, and we were Queensland and New South Wales, and that was the rest of the country. And that put us together and that made us the biggest bookmaker in Australia. We picked up roof tiles. We picked up one masonry plant. We went from there where we picked up by the brickworks along the way and some really great ones out of, like, barrel break is one of ours. And so now we then bought a whole lot of the basically plants went up about 10, 11 Masumi plants around Australia. So we became number two masonry business. We got involved in some other things that didn't work, timber that didn't really work. We were in sewer pipes. We got out of them. We got into floor tiles. That was good for a while, then went bad. So we got rid of that. But we've got quite a narrow, very tight sort of business at the moment. We realized that we couldn't grow anymore in Australia and we made the decision about three years ago that we need to expand, we need to expand offshore. And so we bought Glengarry in the north eastern United States with export to other companies. So you see brick and red and brick. And now we have we had about 16 plants, but a been underutilized. We have now about 10 plants in the US in the north east. So that's how that building products came together. We bought all this land in the early 60s, the surplus plants. But as time has gone on, we get a lot more clay comes in from excavations and tunnels and things. And so we've actually got more clay today than we started, particularly here in Sydney. But we had a lot of land that was really surplus to our needs. And we looked around and we picked a partner, which was good, but it turned out very good choice. And they've been wonderful partners ever since. And we realized that there was a future position in industrial space, but there wasn't a future position. You had residential and we had a lot of the old brickworks at Brookvale and at least what we'd sold off as residential land after we fix them up. But the industrial, we thought, well, how do you know? And some of the hardest things to get head around if an industrial development doesn't stack up, it means the raw land is too expensive. And the reason that's the case is that that's the only number the contract is fixed. So, okay, so if you sell it, I think you're going to sell to cheap. So by saying and putting it a fund and staying in a 50 50, as you get reevaluations and the rent goes up, if there's any, you know, unfairness in the original deal, they a squared up. And that's exactly how it has worked out for us. So that land now that trust is over two billion dollars is seven hundred seventy-seven million dollars. It's twenty-five per cent of our assets. So it's been a really good program for us. [00:08:42][315.3]

BRYCE LESKE: [00:08:42] Mm. So Lindsay, you're a ceramic engineer by trade, but you're now obviously CEO and then Dave Brickworks are able to take us through the path from engineering to say sweet. [00:08:57][14.8]

LINDSAY PARTRIDGE: [00:08:58] Well, I think the interesting thing is the fact that I was actually a ceramic engineer, but because most people haven't heard about it. But, you know, that was my dad was interested in pottery and there was an old lady a couple of doors down as a kid that used to have a wheel and have glasses and things. And after school, you know, muck around with them, make pots and things. And that was always interesting. I always enjoyed it. And I was looking for something. I knew if I went into something like civil engineering, there'd be a thousand engineers and you wouldn't necessarily stand out. And I had a friend that did it and at that time taught was a lot of exciting things happening. You know, silicon chips, the space shuttle, you know, they all were using ceramics, a lot of exciting things happening. So anyhow, I went into it and I was in a record year of six years. Wow. And as things turned out, you know, maybe only one or two of those people was really actually interested in going into industry. The others all want to do research and stuff like that. So I looked on staff. It was the Whitlam is was the 70s. Inflation was high, unemployment was twelve or percent. And about halfway through. I can't wait to get a job like I got the backside out of my pants. I did a job. And so I applied. I got a cadetship with a company which was BGH Industries, and they were they did a lot of things, but they were in bricks. And I still in the summer vacations, I go work for them and say get accepted by the staff and had a lot of knowledge through that before I even got to the point of graduating. But so when I graduated, they very quickly they had this program. I wanted to accelerate very quickly. They wanted you when you're thirty and head office because they were growing rapidly and they needed people up. And it's a bit like we are. So, you know, within six months I was running a factory and I worked at one of these. I think for young people I think about is you don't want to develop yourself straight up a single silo. Like if you're going up the sales and marketing or you're going up the production and then you get the top of it and then you want to become a general manager and head to go. Across our silo, whereas my career was, you know, I already had the technical background, like I worked in the lab for a month, and then they had me doing a marketing job. Then they had me running a kiln. Then they sent me to St. Croix because Amanda was away. And then they gave me a small business unit. And so very quickly, I had a very diverse range. And then I was like sales manager of a big division. And then they sent me to the United States and that was effectively general manager at the age of 25. So if someone's going to get to the top, you know, they want to be very young, the 30s in the general manager level, because what you need is you need at some point in your create 10 years as a GM, because it's only when you get to the general manager or the vice president level in the United States that you're really going to have to handle all the issues, you know, and there's nothing to hide behind you. You've got to handle the issue, you know, and that's when you really get your stripes, if you like that and lose your hair once. But it's always, you know, and that's how it went. And then and then I left that company. I joined Brickworks in eighty five and came in. I step back. I was an operations manager, had four factories. I took over this really bad factory, but I thought Brickworks had a better future than the company I was with. And that was the main thing. And I didn't mind what the salary was or anything else. I didn't care how hard the job was. I just want to start and now rebuilding and we pretty quickly rebuild it in the next four or five years. And then the privacy I want to retire and I took over in 1990, she said. And the rest is history. [00:12:05][187.6]

ALEC RENEHAN: [00:12:06] Wow. Now you're both the CEO and the managing director of Brickworks. Just for people who are unfamiliar with that distinction, can you explain the difference between a managing director? And I say, yeah, [00:12:16][9.9]

LINDSAY PARTRIDGE: [00:12:17] yeah, yeah, absolutely. Well, see, I was chief executive officer. You know, you're the senior executive. Often they call you the executive director. Might make it clear to your executive directors. In other words, you actually work in the job full time. But of course, if you want to sign any documents, you need a director. And so if you actually are directly called your managing director, some people are both an architect. They could be both. But I actually just call myself managing director. Yes, I'm the executive director. I work there. The director means that I can sign the documents as director and the size of Brickworks, that is all you seem to do is sign, you know, these days. A lot of it is that on the computer, you know, whether is expenses or the holiday leave form or something. But, you know, the important documents to you and you've got, you know, lawyers that check all the documents for you get to sign it. But that can be part can be onerous at times. [00:13:04][46.8]

BRYCE LESKE: [00:13:07] So Lindsay from nineteen ninety nine, the share price has grown. When you took over. The share price has grown from about three points to where it's sitting today at about 20, which is a compound annual growth rate over twenty one years of about 10 percent, which is pretty amazing. What do you think has been some of the biggest drivers of growth and shareholder value from within the business over that period? [00:13:30][23.3]

LINDSAY PARTRIDGE: [00:13:30] Yeah, well, if you had the dividend, it's actually a bit over. Twelve is about twelve point six. Sorry. So if you want to go back, if you want to go back to the sixty eight, that's like 30 percent a year since 1960. Wow. Which is just amazing, you know. So well look at one of the things you look, if you're a young investor and you're looking at and I look at a company I want to buy, I always go back and have a look at the ten year tables and what's happened to the share price. But if you look at what is the net assets, did the net assets go up every year? Because what a company should be doing is making one hundred dollars. It should be giving fifty dollars to the shareholders as a dividend, investing fifty dollars back in the company. You know, that ratio might vary depending on what sort of company it is and how much capital needs, but a manufacturing company needs a lot of capital. It's very hard to grow your assets as a manufacturing company because you depreciating it out all the time and that sort of runs against you. Whereas when you look about a building assets and you look at like the property, the property is an appreciating asset. So it's something, you know, do you put your money in a car which is depreciating or do you put your money in the car yard, which is going up in value, you know, so you've got to increase the value. And then, of course, it helps if you increase the profit. Now, if the company's been, you know, because it's always been valuable company, if you're looking at it as a value of the income and the profits and the dividend stream, well, then you've got to increase it. But if you're doing that in a business where you've got highly depreciating assets, it's very hard to grow it quickly. But that's the first thing. The net tangible asset should go up every year. And there'd be very few years in that time, though it has gone up. And the other thing is that in that 20 years, I think I've only had one year or two years where the profits go backwards. So that's a good thing to get promoted to, you know, make lots of money, make your boss look good by making lots of money. Yeah. You know, and that's got to help your career a lot. [00:15:16][105.8]

ALEC RENEHAN: [00:15:20] So we want to touch on capital allocation because, you know, it's one of the most important roles. As a CEO, do you have a framework for approaching capital allocation decisions? [00:15:31][10.3]

LINDSAY PARTRIDGE: [00:15:31] Yeah, we do. And it may be a little bit unconventional. And, you know, it's obviously the obvious thing. Everyone says, well, you want to put the party business, which is getting the best for. Inspectors never starved of capital, you know, but what actually happens, in reality, is that you don't get many choices. Like I've got 40 plants out there and this one's got a broken, you know, whatever, you know, the kilns been flogged out, you know, and I've got a place to kill that sort of to the point it has to be done or the plant stops. And so by the time you do a health and safety always go through, the environment always goes through. So you deal with your health and safety. You do your environment. Got no choice on that. Then you fix all the things that are about to break down. And if you don't fix them. And then what does that leave you with? Not much. So you've got to be a bit creative. And, you know, and one of the things that we did, we started leasing plants where we knew that were baseload. And this was a really, really unusual thing for people like us to do. But, you know, we're building our 130 million dollar plant, 100 million dollars that is leased to baseload plant. Now, at least you've got to pay the lease where the patrons are not. So it's a baseload. It's going to go no matter what under all conditions. Right. So you can always pay the lease and we bury that in the production cost. And what that allows us to do, if we didn't do that, we couldn't afford the CapEx for a long time in the future. We can bring that forward. We can get the return immediately. And the saving is such on the modernization and the efficiency in the plant. We can absorb it in the production cost. And so it works good. And so that's how we find an extra angle which we can get get the finance to really grow those plants. But there's a few other things with capital allocation because it's not only just important equipment, it's like acquisitions. And how you funded the whole capital management of a large company is quite a complex issue and something that, you know, does keep me thinking from time to time at how best to optimize. [00:17:08][96.9]

ALEC RENEHAN: [00:17:09] Yeah, I mean, the reason that we I mean, capital allocation is always important. But the reason that we wanted to ask you in particular is because Brickworks has this history of either maintaining or increasing its dividend over the course of its life. I think forty five or forty six years since Brickworks last had to decrease in nineteen seventy six, and that was just a one off. So I mean, having that I guess obligation or expectation that you're going to at least maintain must add another element to how you think about capital allocation. [00:17:39][29.9]

LINDSAY PARTRIDGE: [00:17:40] And that's why a little bit unusual or maybe I didn't fully explain it then. But, you know, we're in a volatile business. So, you know, the mistake that young brick makers make is that they wait till there's a boom on and then they run down the board and say, I want to build this new plant. Well, the boom only lasts a few years. And then the commission, we call it, you know, make the decision to build in boom and then commission in doom, because by the time the plant's ready to start, the market's gone and then it's like an albatross around people's neck. So what we do is that we invest in the boom, we invest in the bottom, have the plant ready, and we don't get caught out, like who knew it was going to become a pandemic? You know, the government put incentive at the moment, the markets about the boom. And, you know, we're just bringing this brand new plant out of the ground, but we've got enough reserve capacity that we can we can carry it. So that's countercyclical. Now, you only can do that if you've got a good asset backing and that's what we can do. And so therefore, that means we've got the plant available. We've got we've got flexibility. We've always got a spare plant. So if the market picks up quickly, I can get it on. But to come back to your point on the dividend so we can pay a dividend out of the dividend we received from Salz, plus what we receive from the property trust that covers the dividend because it's seventy five per cent of assets for investment. So we pay interest that out basically. And sales have increased for twenty years. So it's a good start. And the property trusts earnings have gone up every year for 12 years or fourteen years now and I am going to continue more so when I can sit here today and I can absolutely guarantee that our dividend will most probably be going up the next two years because I know what's coming through. Yeah, and it's a good chance to be much, much longer. So that underwrites it. So the building process can be volatile and we can still cover the cover, the dividend. [00:19:17][97.6]

ALEC RENEHAN: [00:19:18] That's a pretty great business structure that you've created. Yeah. [00:19:21][2.9]

LINDSAY PARTRIDGE: [00:19:21] And that's been other examples on the market. Different times in the people come along with it all, you know, and they break it up and then the original core business goes broke. Yeah. Because what happens in a really bad bust up then the company can't survive, it just hasn't got resources. [00:19:36][15.0]

BRYCE LESKE: [00:19:37] Would there be uproar if you had to decrease the dividend? [00:19:39][2.0]

LINDSAY PARTRIDGE: [00:19:40] Oh yeah. I'd be good, I'd good time for me to retire. [00:19:42][1.8]

ALEC RENEHAN: [00:19:46] So we were looking at your January investor update and the value of the Souls investment and the fifty percent share of the property trust is worth about three point six billion. Trust me, if those numbers are wrong and brickworks market cap is about three billion. So in theory, investors are getting the building products business for free. How do you think about this gap between net asset value and market cap? [00:20:08][22.7]

LINDSAY PARTRIDGE: [00:20:09] Yeah, it gives me a lot to think about, that's for sure. There's a few other twists and turns in there. I mean, if we did sell us all shares, we're going to pay a fair bit of capital gains tax. So that pulls it back. And, you know, it's really a mental exercise. We're trying to decide, you know, is there a climate discount on the sale shares or is it that they think thinking looking beyond the current boom and building products? I think it's got to slow down a year's time because the stock market looks at 18 months or so. You know what it is that they think there's gonna be inflation and interest rates are going to go up and therefore there'll be cap rate expansion on the industrial. They are very you don't know what goes through people mind, but it's a bit of a mental exercise where you put it a normal sort of company. Remember, we're the only company on the stock market that's across shareholding. It is legal today. You couldn't do it again, but it is legal today. It was grandfathered, would buy back its shares, but we can't really do that. So we're sort of limited, has hands behind our back. But it is a concern. And we're always thinking of creative ways in which we may be able to help close that. And one of the things that are trying to focus more on the retail shareholders who want the dividend stream and let's face it, the three percent fully franked dividend is much better than anything you get in the bank. And with our history of paying it, you know, good. But if you put money in the bank that they don't pay you more interest every year where you put, you know, invest in a brickworks, you get a high dividend every year. [00:21:26][77.5]

ALEC RENEHAN: [00:21:27] Yeah, it is an interesting choice. When you think about do you just let the market figure out that you undervalued compared to your net assets and let time take its course? I do take active steps to really try and close that gap. So, I mean, how do you think about that? That, yeah, [00:21:44][16.6]

LINDSAY PARTRIDGE: [00:21:44] we just spent a lot of time thinking about it. Well, I come and see people are equity mates because, you know, we really, really focus on retail shareholders that can say that three per cent frank dividend is much better than putting your money in the bank, particularly when you got a long history of paying it. You know, I get paid to increase value for my shareholders. The last thing I want to do is actually, you know, issue equity. So that sort of limits in that area, you know, so it makes it quite hard. And, you know, recently one of the areas where we thought we might been undervalued, that people weren't valuing, you know, the sole person's holding at the right level. And they were doing that because I thinking that it wasn't real cash. And there's all sorts of things that have been floating around about ghost equity and stuff like this. So so we sold something. The price was very high. And we're worried about a liquidity event on their side of it. They're going into the Miski index. So we sold something. That's when we dropped back to thirty nine point four per cent. And that was to prove to the market that we could sell the shares and we would get real cash. And then, of course, but down the track, we had to pay real tax. And that's what sort of limits us. But of course, you can't go buy back. But I think it got them a 60 per cent free float. It got them into the ASX 100, you know, robustly. The share price then recovered. I think we did that about twenty eight dollars. The share price recovered and that was like 32, 33. So it worked exactly what we thought. You know, we've got less shares but actually worth more and approved to the market that that was real. It was it wasn't phony. [00:23:09][85.4]

BRYCE LESKE: [00:23:16] So, Lindsay, no doubt that last year was a pretty disruptive year for all businesses, given the covid, what was the impact of covid on Brickworks, on, you know, the men into different divisions that you've got? Did you have to make any drastic changes? [00:23:28][11.9]

LINDSAY PARTRIDGE: [00:23:29] Yeah. Look, a year ago, I guess we wouldn't be sitting here laughing and joking. I was about to be locked up somewhere. So, yeah, it wasn't looking weird. It was a different year. It was for everybody. And it was. And I thought, break that down into three parts, just like I say, like the industrial shades. Just found another gear and took off, you know, that also. And people realized that, well, you know, this click and collect and, you know, online delivery and all this sort of stuff is here for real. And I know that you guys, but I got a couple of parcels arrive every day and, you know, they come in from all over the world, you know, so it's it's really now part of a way of our life and will continue. And the reason why these big ships are getting bigger and what they're getting stuck in the Suez Canal because, you know, they've been shipping so cheap. So, you know, that's here to stay. And that's been great. And that's really given that business a shot in the arm. And that was all well underway. And because of it, the government gave us some very rapid approvals, you know, Amazon and a few other things. The new plants we're building ourselves got through in Australia. We were lucky that we were considered essential service. So we never got shut down. We were able to deliver the product, you know, builders that are building houses. There are a couple of trades on site. They drive to work. They're on their own. I mean, there was no risk at all of getting over to fly. And that was the same all the way through, except this last lockdown in Victoria where they wouldn't let us deliver for four or five days there. So when we sat down and said, okay, what are we going to do? What's the new world going to be like? What are we going to do to come out of this other side stronger than we are now? You know, what have we got to do? We said, okay, well, first of all, we look after our staff and they're going to be working from home. And so we're going have lots of training. We have lots of meetings. They're going to be communicating. We're going to be making sure that their wellness is there, that they're good mental state, and we pursue that aggressively. MESSIAS out of all the normal things and we were very well equipped because we had a lot of biomedical kits throughout the company which set up for the Ebola. People thought I was mad and Ebola, that I think I'm mad now because we just opened the kits, pulled out the thermometer. We had all the hazmat gear, everything. Right. So that all just happened instantly very early in February, you know, and I was getting myself a little bit of trouble from the government because I said they should have closed the borders. But so that all went so well for our staff, too, that we could see what sort of products that people wanted was changing. They wanted maybe more homely type products. And there were more models and we'd been monochromatic and we didn't have many models in that range. And so we set a very religious, very disciplined product development, and that was also to keep people occupied. I was stunned at how quickly we produced some of the most amazing products and that resulted in what we call the B Twenty launch, which is in October. We launched over 100 new products. It was the biggest thing we ever did, all done online. And that was an amazing success. And those products are selling strongly today. We realized it was important that we needed to keep our CapEx up because once again, we were at the bottom of the cycle. We wanted to invest in the countercyclical. We're going to need those plants going forward. We want to be competitive. And we've got very quick. We got the approval in six or 12 weeks. It was just amazing what it could take it, you know, two or three years. Yeah. So that was a brand new brickworks. One hundred and thirty million was an original 100 million increase, 130 million capacity, 130 million dollars. And your makes me work. Seventy million dollars and a lot of other things so that you know, that that sort of, you know, really coming through. And the other thing we realized is that the way we going to relate and communicate to our customers and our engineers and architects was going to change. And so we started doing what we're doing here, broadcasting, and we went from out of fifty people in our design studios to getting to four hundred, you know, to get into two or three thousand online. And that was just incredible. And then there were all over the world, they come from 10 and 15, 20 countries. So that worked well. So it's worth it since they actually built to broadcast. But I asked up office, have a proper broadcast booth, a little one, and then we have a big one, a seat for people that has launched, you know, here in Sydney, we're building another one in New York and a New York design studio where the same thing. So we'll be out around events from New York and then stream it here into Sydney. And that's just the way of the future. [00:27:21][232.3]

ALEC RENEHAN: [00:27:22] Yeah, that's whole. Every business is now investing in that kind of broadcasting capacity. [00:27:27][5.0]

LINDSAY PARTRIDGE: [00:27:28] Yeah. I mean, it takes a bit to set up the money it cost us, you know, the best part of a million dollars. And but, you know, you've got that many lights on. You got to have massive air conditioning. And this anywhere but in America was really quite a different story. You know, we were impacted by covid. You know, there's no way you're going to get Americans to sit at home and mean they tried different things. But I mean and some of the areas of the Midwest where we had like one in Iowa, we had a meatworks down the road, two thousand employees, and went through there like smoke. And, you know, everyone's away. So the statistics are horrifying. We had single days with ten per cent of our workforce away so we couldn't get the plants up here. We've had over ten per cent of our staff. We've got about 800 staff there. So know really about one hundred have had it. But the most horrifying statistic is that we lost we didn't lose any staff members. We lost two of their family members. All right. Which was very tragic and very difficult on my staff over there that was trying to look after those people. But look, you know, having said that, they were out of it now and this is something that people don't realize. And we're out of winter, but we're out of cover. We were lucky to have single digits away today. And my view is, by the end of April, you know, it will be a thing of the past in the United States. I mean, they are currently vaccinating the population of Australia every week. Yeah. So they're getting out of this at a million miles an hour. And as you know, we're not so quick on these things. So. [00:28:46][78.1]

ALEC RENEHAN: [00:28:47] So would love to understand what you think the outlook for Brickworks is. And I guess in particular, the buildings products business. I imagine a lot of people listening and I don't want to speak for Bryce, but definitely may. It's not a business that I have thought a lot about. So what are some of the key drivers of the industry and of the brickworks business that investors should be aware of? [00:29:11][24.1]

LINDSAY PARTRIDGE: [00:29:12] Well, our biggest business is bricks or and the second businesses, masonry and roof tiles. And they go majority into housing. Yes, we do a lot of basements and things in commercial buildings and we're doing a lot of the railway and metro stations at the moment and concrete blocks. But the interesting stuff is, is the bricks. And so the drive is as good as the amount of detached houses. And of course, what's come out of covid, we're seeing this big shift back to houses from apartments, which we think is fabulous, moving from, you know, not only from apartments or houses, but also from the city to the regional areas. And this is worldwide. This is not just here. This is happening worldwide. So that that I think that's a trend that even if it comes back a little bit when it's over, I don't think it'll revert it. People a lot of people had a real deep think while they've been sitting at home for six or 12 months and said, well, I don't really like my life and this is what I'd really like. And a lot of companies are saying, well, we only want you here two or three days a week. So some companies have even saying you've got to stay home Monday and Friday. So, so. Well, I don't to live in Sydney, I can work anywhere. I'll I'll work in the country somewhere and then just commute. What they haven't worked out, of course, is that if somebody's job can be done from somewhere in the country, what can also be done from the Philippines? [00:30:20][68.6]

ALEC RENEHAN: [00:30:22] I'll be a bit like that. [00:30:23][1.3]

LINDSAY PARTRIDGE: [00:30:23] I go to the office every day. [00:30:25][1.3]

ALEC RENEHAN: [00:30:27] So this recent run-up in house prices, especially in regional areas, is a great forward-looking indicator for you guys. [00:30:33][5.5]

LINDSAY PARTRIDGE: [00:30:33] I like to think so. And what it does, it makes medium density development stack up. That's something a project was a bit marginal. It's now not marginal. It's very doable. And I think that always gives it a bit longer legs. The only negative in the horizon, of course, is the lack of immigration. Although we were at a cyclical low, you could say that the vacancy rate was very low, the rental vacancy rate was low. And if you thought a lot of students went home and a lot of backpackers and things, but, you know, the vacancy rates low across the country. So, you know, usually that indicate that people need houses and particularly if they can get the ownership level up. You know, I don't hold me to this, but say the ownership level, 60 per cent, you know, you can get at the sixty one or sixty two. And that's a good thing for our country. But there's a lot of people in one percent of the population going from Araneta owner. That's that's a good thing. And young people, because there was so good for them, you know, they could get 25000 from the government. Some states gave twenty five thousand, a lot of couples took twenty five thousand each out of their super 100000. I mean, when could you ever get one hundred thousand dollars deposit. Yeah. So that was obviously driving. The investors are coming back and upgraders, they're so, [00:31:36][63.2]

BRYCE LESKE: [00:31:38] so Brickworks is leading brickmaking here in Australia and over in the US. Are there any plans to expand into other markets, Europe, Asia. [00:31:46][8.3]

LINDSAY PARTRIDGE: [00:31:47] At the moment I just really want to get a really good base, you know, beachhead in the US and get that up to where we think it can go. I think over time there's going to be more acquisition opportunities there. To give you some idea, pre to the GFC, America was making about ten billion bricks per annum. Nobody about two million houses after JSA really got knocked around and it's only got back to about one and a half million houses and about four billion bryk. So I would think there's a fair bit of a lot of surplus capacity which we're doing our best to soak up and sort out, particularly in our area. But I think if there's a good, solid boom over the next three to five years and everyone's talking about, you know, low interest rates for long term, I'd be a bit worried about inflation coming back. But I want to really solid full employment and good inflation before they take their foot off the gas. [00:32:35][47.5]

BRYCE LESKE: [00:32:35] For comparison, how many bricks are we doing in Australia? [00:32:37][1.9]

LINDSAY PARTRIDGE: [00:32:38] Australia is about one and a half billion. Yeah, yeah, yeah, yeah, yeah. Bricks are bigger than Australian bricks. About a third bigger than an American brick. Really. One and a half billion is more like the two and a bit. You know, this one's there you go. Here we get hot water. That's what you call that a brick. Look at this. [00:32:56][17.9]

ALEC RENEHAN: [00:32:56] Well, I just sort of assuming that bricks would have been standard around the world. [00:33:02][5.9]

LINDSAY PARTRIDGE: [00:33:02] Yeah, well, you could see that we sort of came from England. You think so? Well, no, but no, we make we only make one or two sizes in Australia, but in the US would be people we could make a ten or a dozen in every plant right [00:33:14][11.8]

ALEC RENEHAN: [00:33:15] now they go. [00:33:15][0.5]

BRYCE LESKE: [00:33:16] Reduce the size, charge the same price. That's what they're doing right out of the box. [00:33:24][7.5]

LINDSAY PARTRIDGE: [00:33:24] The best thing you buy, we go to 100 years. I mean, what could you buy a better value than a brick? [00:33:28][4.2]

ALEC RENEHAN: [00:33:31] So we do love to ask some questions around, I guess, like people and culture and leadership. A lot of the fund managers we spoke to talk about the importance of that, of who the leader is and the culture that they're trying to build. So we'd love to get some of your thoughts on it, I guess, starting here as a CEO. Do you have a leadership philosophy? [00:33:52][21.0]

LINDSAY PARTRIDGE: [00:33:53] Well, I do, but it's sort of like evolved over a lifetime. Like leadership is not something you're born with. I think leadership, something that you learn as you go along and you make a few mistakes and you try and improve it. And also what's required of you is changing. I mean, you've had to look at the discussions around, you know, in the US. The big thing is there is a racial discussion. And here we've got the discussion about, you know, women not being treated properly, you know, in some of those things. I mean, stuns me a bit because I thought to know most companies got over this, you know, 10 or 15 years ago. But there's some basis if you don't do some basic things, like looking after your staff, no one's going to look up to you as a leader. They're going to look down to you. So it's really, really important that, you know, you're honest, you do what you say, you treat people with dignity. You lookout for people that might be outside the company rules. But if someone's got a problem, you step in and give them all the assistance you can. If you don't do those basic sorts of things, you won't get any respect at all. I think that's where leaders sometimes go wrong and they can't understand that, you know, that that happens. And then it goes back to if you got an employee, you know, we have like a no asshole rule. And if you got you to know, you've got somebody who's a bit of a bastard to work with, then it disrupts everybody around them and they can't do their job and all. And they've got this conflict. And so you've got to go find them and get rid of them, you know, and that's important. You do that. I think I've got a pretty good team at the moment and they're all happy because there's no one, you know, they come to work, do the job and, you know, they go home and, you know, so those sorts of things are important. But there's a whole lot of basic things you need to have a plan around, you know, how are you trying to develop people? You're going to give them promotions. I mean, people become very loving towards the company if they get promotion, you know, and if they end up at a level they never thought they would achieve. And there doesn't have to be in a high level. So we had a guy who was a grazer and we wanted to fit us instead of going outside. We said don't do an adult apprenticeship. I worked his way. Just his wages never went down. Then he went up. And four years later, five years later, I mean, I never, ever thought of a tradesman, you know, in some of these guys that went on, did a second try it. That's double certified. So it's wonderfully skilled employees that have come up, you know, but that was forever. Yeah, I never thought I mean, huge money, but that's. Yeah, but yeah. So that they work for and that's what we want. We want people to stay with us. So we'll go out of our way to make sure that we look after our staff and keep them, you know. Yeah. [00:36:12][138.6]

BRYCE LESKE: [00:36:13] For those in our community who are aspiring C Suite or James, when you're hiring leaders within your business, are there any sort of key characteristics that you don't compromise on? [00:36:24][11.3]

LINDSAY PARTRIDGE: [00:36:25] Well, if you're hiring for the most senior levels, we do a pretty, pretty tough analysis. And one of the analyses would do, which you might not hear about, is we do sort of a graph. And on one side, it's like on the vertical verticals, like maturity's decisions and on the other axis, it's your agility now and then we graph everybody I don't like. And I think, you know, you've got a mostly just after in the middle of you got a few on the left that is so agile and a few on the right that that, you know, very agile, make very good decisions. And they are your top leaders. And now you might say why? And the answer is is that the problems that the chief executive gets are problems that no one else in the business could solve and usually you haven't seen before. And you've got to come up with a creative decision to get out of it. And if you don't solve it, you've got a problem. So creative. And you need to make, as I said, you know, responsible decisions. You can't, you know, make flippant decisions, might make them quick, but they've got to be considered so that that's what we look. And that's worked out pretty well for us. Yeah. [00:37:29][64.3]

BRYCE LESKE: [00:37:29] No, it's interesting. [00:37:30][0.5]

ALEC RENEHAN: [00:37:31] So people often love talking about the best times as a leader or as an investor. We want to maybe ask you about one. Not so good time. Was is there a particular mistake as a leader that stands out for you in your time at Brickworks? And what were some of the lessons that you learned from it? [00:37:48][16.1]

LINDSAY PARTRIDGE: [00:37:48] Yeah, because when you sort of said that the got to the worst day for any chief executive is when one of your staff or a member of the public gets killed, you know, and you know, that put a bit of a bummer. But you'll never forget those days. You know, one gets paid enough to to tell a family that you've just killed their son or daughter or something, you know, like that. Just they just they just terrible, terrible days. And, you know, yes, there's a lot of soul searching goes on. What could we have done different to avoid it and that. Sometimes just out of control or your staff member was just innocent bystander, you know, and things happen, but as far as making mistakes, you know, good question. I could think of a few things. But, look, we don't always get things right. Sometimes make mistakes on people. And you wish you hadn't have because we went too long. You know, one of the things that I always look out for is the people not being a self starter on people problems, you know. Right. People on the bus, wrong, people off the bus. And it's very easy to wait too long. You know, I like to give people a decent chance to prove themselves, but inevitably, when you let them go, the everyone else comes along as at all. I thank God for that. And why we just can't work out here. He didn't know he was doing this and doing that and something like. So you're getting your people right is very important and you'll always feel disappointed in yourself if you wait too long. Yeah, we've done a lot of acquisitions and because you're not always going to get them right. I thought the timber industry would be a good one for us because we were using and repairing hardwoods and it was a fashion item looking at high prices for it. But it was just, you know, supply line. It was always back to the government. And, you know, you could never invest because you could never get a log license long enough to warrant the investment. So you ended up with all these worn out old mills, which were dangerous and people were getting hurt. And, you know, and then the other thing was the timber industry is that, you know, you saw a log and you're lucky to get sort of 30, 35 percent out of it the first time. A lot of waste. Then you draw it, the tricks, 50 percent or so. You think about 20 or 25 percent of what you started with to try to make a profit out of it. So it's very hard. And though there may be a little bit quicker, other things, you know, like the top business was a great business. I loved it. I had a lot of experience in it. But, you know, worked well. When that was it was seventy five cents, you know, 85, 90 cents. You know, it was in trouble. And we always thought we were saddlers money. And then we decide to get out. But like we did because the dollar went to dollar A, you remember a dollar ten were smashed up. So it's not your fault. It's just the world changes and it no longer works. You just got to move on. Yeah. [00:40:17][149.5]

BRYCE LESKE: [00:40:18] And then on the flip side, is there a moment that you look back on and you're particularly proud of from a leadership point of view? [00:40:25][6.9]

LINDSAY PARTRIDGE: [00:40:26] Yeah, look, I think I think putting the property trust together was was was a stroke of genius. And I guess the risk was. But but yeah, it wasn't easy like people think. I think so. I think, you know, so we get this approval to build a new plan or something. That was easy that I realized is that that, you know, we've had to do a lot of work to convince the board. I mean, it's easy these days. They're very, very supportive. But the Bristol acquisition, I went to the board four times to get it. We end up paying a bit more than we otherwise would have. But we did get it through and was vital to the company in the future. Years with Western Australia boomed and New South Wales was a disaster, and without Western Australia it would have been a mess. And so it was really worked out a great decision. But the property has absolutely exceeded everybody's any any idea that we ever thought we would do as well or be as big. And it just was no way. I mean, clearly, we're going to very close and very soon we'll clear a billion dollars in assets in there. And it's growing topsy turvy. And, you know, yes, I did have to argue with the board a few years to get them to realize that we need to hang onto this land and not just sell it because you sell it, you pay a special dividend and then what you've got to show for it. Yeah, it's taken a bit slower to invest it and then down the track and it's grown at eighteen percent a year, gets a better return than souls. You know, it's twelve, thirteen percent return annually, you know. So it's a brilliant business and anything, you know, we shouldn't be pouring more and more money into it. Yeah. [00:41:46][80.5]

ALEC RENEHAN: [00:41:47] It's got to it's got a few blue-chip clients as well. It doesn't like Coles has a warehouse. [00:41:51][3.9]

LINDSAY PARTRIDGE: [00:41:51] The Amazon, Amazon were building Amazon at the moment. Well, you know. Yes. Twenty year lease with a one point seven trillion dollar company. That's not to me. So I think I can tell you it was when that building is finished, it will be the last kept right in Australia. And it has to be. And I was out there yesterday actually having a look at it. It's just a massive building. I don't know how to explain to people. It's got twice the steel as the Eiffel Tower. It's bigger than, you know, it's like a 190 thousand square meters. So it's like forty something football fields. Wow. They had five teams laying concrete. Each team was starting about four thirty in the morning. Each team laid a football field concrete every day. They were there for five months. Once it's got five months, five teams. Right. And then they then the car parks, two thousand car spots. At the moment they've got to have they're working around the clock. Amazon, as if you said you can deliver it, you know, in three months time. I wanted to and if it's I'll get back to to another one in six weeks, it's just relentless pressure. [00:42:55][63.3]

BRYCE LESKE: [00:42:55] Where's the facility. [00:42:55][0.4]

LINDSAY PARTRIDGE: [00:42:56] It's we contract out west. But you'd call it Eastern Creek, I guess. Yeah, right. Yeah. Just out. The state is a very big state. It is enormous. And, you know, it's ten stories high and it goes out of the curvature of the earth, you know. So I say that. But you get anywhere near it, you'll see it because. Just. What was that building over there and then the calls going in next? It is actually a bigger building, with different systems. The Amazon uses a still John on a flat robot that runs around a million miles an hour and then brings the product to the Packer who takes it out, puts in it, gets wrapped up. Whereas in the calls you've got like a rack system where you got a robot that runs up and down the racks and pulls out a couple of boxes of this or a couple of boxes of that to send out to the store. So, yeah, [00:43:47][50.8]

ALEC RENEHAN: [00:43:48] it's a fascinating world, all that supply chain stuff. So, Lindsay, we like to finish with the same final question, but before we do, we just want to say a massive thank you for taking the time to speak to us today. It's been a great interview. I think we've both got a lot out of it. I'm sure our audience will as well. But we will finish with this final question. If you think about Brickworks in 10 or 20 years, what does success look like for you? [00:44:14][26.0]

LINDSAY PARTRIDGE: [00:44:15] Look, success would be, you know, we continue growing at the rate we are and won't be maybe off to someone else. But they have to be, you know, make some hard decisions about how they're going to grow the company. You know, I would expect that we might be, you know, across three or four continents as far as the manufacturing side is concerned, that the property trust will be right down the east coast of Australia because of all the land in Victoria as well. And we might have acquired more land to develop. You know, I think a brickworks has, you know, might have been paying the dividend for twenty-five years and we considered a dividend aristocrat. That would be good because I did hold a few shares myself in retirement, [00:44:50][34.7]

BRYCE LESKE: [00:44:52] you know, going to be at the helm in 20 years. No, Lindsy very much. Appreciate you taking the time to come to the show today. As I like said, our audience would have got a lot out of that and we would certainly enjoy speaking to CEOs in them days to get a bit of an insight into the companies that are listed on the stock exchange and the community can go and invest in themselves. So thank you very much. [00:45:14][21.6]

LINDSAY PARTRIDGE: [00:45:14] My pleasure. Thank you. [00:45:15][0.7]

DISCLAIMER: [00:45:16] Equity means investing podcast is a product of equity, makes media pull information in this podcast is for education and entertainment purposes only. [00:45:24][7.3]

ALEC RENEHAN: [00:46:16] Bryce, with three policies here at equity markets, what's number one we face we hate fees and we love brands that are finding ways to reduce fees for everyday customers. And that's why we're here today to talk about afterpay, who in 2020 saved Australian customers one hundred and ten million dollars in consumer fees and interests by using afterpay rather than traditional credit cards. [00:46:42][25.3]

BRYCE LESKE: [00:46:42] That is right, Ren. It's been a great investment for me. And afterpay is changing the way we pay for the better by helping us all manage our money and to take back control, [00:46:51][8.7]

ALEC RENEHAN: [00:46:52] you just had to slip the investment thing in. [00:46:54][2.1]

BRYCE LESKE: [00:46:55] Everyone knows I love afterpay. [00:46:56][1.0]

ALEC RENEHAN: [00:46:57] Yeah, well, look, you may not be able to live off to pay as much as price, but you may love to pay because you can use it online or in-store. And it's really easy to get started. Just head to afterpay.com to sign up or download the after app from your app store. Pay better choose afterpay. [00:47:16][19.3]

BRYCE LESKE: [00:47:17] late fees, transaction limits, and eligibility criteria apply. Visit afterpay.com for more details. [00:47:17][0.0]

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