Ann: REH - ASX Announcement Equity Raise, page-10

I agree Vic. I think it makes sense what you have stated. It’s just good commonsense. When everyone is talking about the market being frothy after a long bull run it’s time to be prudent with your debt levels and very careful with purchases of other businesses. If history has taught us anything major corrections happen roughly every 9-10 years. I certainly wouldn’t be taking on a lot of debt at the tail end of that time. I find towards the end of bull runs there are some CEOs who use large amounts of debt to purchase overpriced businesses. I use to like Reece and was thinking about purchasing some shares during this downturn but their debt has ballooned greatly in last few years (1.6 billion if memory serves me well - although they may have reduced it slightly). Compared with NPAT it’s way too high in my book. I personally like Debt/NPAT to be under 4 and ideally under 2. That’s just my preference and I understand others will have their criteria but it has served me well over the years (although I’ve been caught out this time with webjet and their Debt/NPAT was 2). I understand that Reece will be hoping to dramatically increase their profit the next few years but when an event like the GFC or coronavirus hits and your NPAT or cashflow is cut in half or like webjet destroyed it’s prudent to have lower levels of debt as servicing that debt becomes much more difficult. It puts you at a disadvantage especially if you have to raise capital at a severely reduced rate. With NPAT at roughly 200m last year for Reece it creates a problem during market downturns especially if the businesses you acquire aren’t perform compared with the amount of debt you took on to purchase said business. I’m hoping this is going to be a good time for CEOs to learn about debt and consider whether purchasing businesses for higher multiples after a long period of a market run up is actually a good idea for their business.