The new DC in Hamilton will have some impact on cash flow and I...

The new DC in Hamilton will have some impact on cash flow and I agree we should see improved free cash flow. The facility must be close to completion as job positions are being advertised. Incidentally I visited Hamilton recently and couldn't get over how much the area is thriving. I shared the roads with a lot of trucks! I was wondering why the DC was built so close to Auckland but can see now that Hamilton is a real hub for the central north island. There is a lot of wealth in the Hamilton/Cambridge area and I expect solid returns from this investment.

Company boards have many roles but one of the best ways we can assess culture and competence is in capital management. For the good performers it can take a full business cycle to gauge this but for the poor performers the time frame is often much shorter. Its baffling when you see a company which has the smarts to navigate the minefield of business development well enough to put themselves into a cash generating position, then become so muddled when determining the best use of that excess (think BHP on so many occasions).

Much is written by investing theorists about how companies should reinvest earnings when ROE's are high, at the expense of dividends. It's become a mantra in the value investing field. The assumption is that the incremental cash CAN be employed at an acceptable return. This is often not the case. There are only really three things to do with excess cash (in low gearing scenarios), invest it, return it to shareholders or undertake share buy-backs. The first option, referred to by Buffet as the "institutional imperative" is the great wealth destroyer in the hands of an inept board.

To this point at least there is everything to suggest that these decisions have been made with the greatest competence at SNL.