Fletcher to address NZSA's performance concerns

Interim chief executive Francisco Irazusta. Photo / Michael Craig

Fletcher Building has taken on board criticism from the NZ Shareholders' Association about the company's performance and communication with investors and plans to address issues including directors' fees at this month's annual meeting, says chair Sir Ralph Norris.

"Since the FY17 results, the chairman, interim chief executive (Francisco Irazusta) and CFO (Bevan McKenzie) have met with both institutional and retail investors across a number of markets to listen and engage with shareholder representatives," a statement from Norris says. Concerns raised by NZSA members "are understandable in the context of the 2017 results, but do not reflect the considerable change implemented at the company during the year by its board and executive to address issues of concern to association members."

The NZSA surveyed its members for their views on Fletcher last month ahead of the AGM on October 25 and the results show almost 90 per cent of the 250 members who participated wanted changes at board level including 8 percent who wanted the entire board dumped.

It also showed 64 per cent thought directors' fees were too high, and that they weren't willing to accept responsibility for Fletcher's performance. Those that deemed the directors' performance below average had risen to 75 per cent since the company downgraded its earnings because of problems with two major construction contracts, from 60 per cent before. Most of those surveyed were long-term shareholders of Fletcher with 85 per cent having held the stock for more than four years. Almost half of them had been investors for a decade or more.

NZSA chief executive Michael Midgley said his organisation has had "multiple exchanges with the company at the highest levels including more than one meeting with the chairman and members of the board." In July, when Fletcher sacked former CEO Mark Adamson and cut its guidance, the NZSA had called for all of the board members to renew their mandate at this month's AGM but had subsequently rescinded that call.

"We do think they are making good endeavours," Midgley said. Seeking a new mandate "was a voluntary option they could've adopted. The board chose not to do that."

There is "still water to go under the bridge" between now and the annual meeting and at the annual meeting itself and the NZSA would be "looking forward to hearing from the board that they've made progress with all of these things," he said. "People are not happy but they've said their piece and Fletcher has to be given the opportunity to deliver on that." It was "heartening" that the company was listening to the criticism, he said.

Last month, Fletcher said director John Judge, who is chair of the board's audit & risk committee, would depart at the AGM, ending a nine-year tenure, while Kate Spargo, who joined the board in 2012, retired immediately. That leaves six directors on the board, which had started a process "to extend its skills and experience, particularly in the area of construction and contracting," the company said.

Operating earnings dropped 23 per cent in the year ended June 30 although much of its other operations performed well and it said cash flow would improve in 2018. The company plans to give 2018 guidance at its annual meeting.

Norris said today that the board "has engaged constructively with the association to explain how we are further strengthening our construction division and how we are extending the skills and experience of the board by seeking to appoint a new director with construction and contracting experience."

He said that at the AGM, "we will address a number of matters raised in the survey, including directors' fees, and developments in our shareholder communications."

Fletcher shares rose 0.4 per cent to $7.74 and have dropped 27 per cent this year, the third-worst performance on the S&P/NZX 50 Index, which has gained 17 per cent in the same period. It sank as low as 7.35 in July, a 19-month low.