The cost to finish the plagued NZ International Convention Centre has hit $1 billion. Here’s what Fletcher Building’s CEO Ross Taylor really thinks about it.
Video / NZ Herald
Fletcher Building has made a $120 million net loss after tax in its interim result and its chief executive has resigned, giving six months’ notice.
Chairman Bruce Hassall is also stepping down at the shareholder meeting later this year.
When trading on the NZX resumed, shares in Fletcher Building dropped by 65c or 15.6 per cent to $3.51.
The result is a 230 per cent drop in profit.
In the half-year to December 31, 2023, the company made $4.2 billion in revenue, down 1 per cent on 1H23 and ebit before significant items of $264m, down 27 per cent on the $360m previously.
Shareholders also received news their interim dividend has been canned.
“Given the current market conditions, the expected legacy cash outflows and in line with the company’s dividend policy, the board has made the prudent decision to not declare and pay an interim dividend in order to maintain our balance sheet settings.”
Fletcher Building CEO Ross Taylor. Photo / Michael Craig
Fletcher said in a statement that Taylor, who was paid more than $5.4m last financial year, would serve out his six-month notice period in full “if required to facilitate an orderly handover to his successor”.
“I remain committed to the business and facilitating a smooth and orderly transition to my successor who will be able to focus on leading the organisation through the next strategy cycle and beyond.”
Taylor gave a full-year outlook today too.
“As we look ahead to the remainder of the year, we expect FY24 Group ebit before significant items to be in a range of $540m to $640m with the mid-point assuming a continuation of current market conditions for the balance of FY24,” he said.
He cited a backdrop of weaker trading conditions, particularly in the New Zealand residential building sector, where volumes fell 20 per cent.
The $120m net loss after tax is a turnaround on the $92m profit previously.
“Disappointingly, the result was heavily impacted by the $165m significant items provision on the New Zealand International Convention Centre announced on February 5 and a $122, non-cash impairment and write-down on the Tradelink Australia business,” today’s announcement said.
“We have concluded that whilst we believe there is a compelling opportunity for Tradelink, further ownership of the business is not in line with the strategic objectives of Fletcher Building,” Taylor said, adding that Fletcher intended to commence a divestment process for the asset shortly.
The company plans a media conference at 10am, then an investor call at 11am, which is expected to conclude by midday.
Yesterday, Sam Stubbs, the managing director of KiwiSaver provider Simplicity NZ, said that more than one million investors in KiwiSaver own shares in Fletcher indirectly via their funds.
So the company’s fortunes affect many New Zealanders and its performance hasn’t been good enough so he wants boardroom changes.
Sam Stubbs wants a boardroom shakeup at Fletcher Building. Photo / Doug Sherring
Forsyth Barr analysts had last week forecast $299m ebit before significant items from today’s result, down 17 per cent on 1H23. Craigs’ analysts estimated $327m ebit before significant items, down 9 per cent on 1H23.
On Monday, the company went into a trading halt before today’s result.
Stubbs and Oliver Mander, Shareholders Association chief executive, reiterated previous statements that new directors were needed at the board chaired by Bruce Hassall.
Mander said the crucial factor was risk and what steps the board had taken to mitigate that “because issues keep arising”.
Stubbs complained about Fletcher’s continually declining share price, said the board was entrusted with shareholders’ and more than one million KiwiSaver investors’ money yet, every two to three years, something went wrong, with the company saying it would change but suffering disasters continually.
Fletcher is chaired by Bruce Hassall, whose fellow directors are Martin Brydon, Barbara Chapman, Peter Crowley, Sandra Dodds, Rob McDonald, Doug McKay and Cathy Quinn.
Last Monday, the company made provision for $180m losses for the New Zealand International Convention Centre [NZICC] to cost a further $165m and a Wellington car park to cost an extra $15m.
Craigs’ analysts Cameron Parker and Ryan Li have raised many problems with the business including:
Ongoing uncertainty with the NZICC with around 10 months to run until it is finished.
No agreed solutions for problems with Wellington International Airports’ car parks dispute.
Claims on the Puhoi to Warkworth motorway project of around $200m of which Fletcher’s share could be half.
No visible way forward on its Iplex pipe issues in Western Australia, including any decision from the regulator.
These difficulties had all created a drag on the share price, the Craigs’ analysts said.
Shares on the NZX were trading around $4.19 before the halt, down 23 per cent annually, giving a market cap of $3.2b.
Anne Gibson has been the Herald’s property editor for 24 years, has won many awards, written books and covered property extensively here and overseas.
