Fletcher Building chief executive Ross Taylor and chairman Bruce Hassall have told why they are leaving the unpopular multi-billion dollar Australasian business.
It comes down to one thing.
Little was said in the company’s statement to the NZX today about why either of them are leaving: Taylor insix months’ time around August and Hassall after the October annual meeting.
But the two fronted the media call this morning and explained their reasons.
Taylor blamed one single project: SkyCity Entertainment Group’s disastrous New Zealand International Convention Centre (NZICC) where Fletcher Construction has lost hundreds of millions of dollars - $165 million announced last Monday, alone.
The fire at the NZICC in October 2019. Photo / Dean Purcell
“It goes back to firstly starting with the convention centre - a very complex project. The provisions we’ve been having to make have been very disappointing. You accept accountability in the role of CEO. The buck does stop with myself and Bruce. It’s important to set the tone. When these things happen, accountability is taken from the top,” Taylor said.
Asked if the NZICC was why he was going, Taylor said: “It comes back to the convention centre since the fire. I’ve never seen anything like it my 40 years in this industry. All that complexity - it’s been progressive understanding. We’ve finished the remediation and we’re into the home stretch of the fit-out and that’s much more definable. But the provision is $165m more. I think in my position when that happened - I’ve got to take accountability. It’s not about is it fair or just? So the answer is yes, it’s because of that.”
Fletcher Building made a $120m net loss after tax in its interim result, announced this morning.
When trading on the NZX resumed, shares in Fletcher Building dropped by 65c or 15.6 per cent to $3.51.
Taylor explained why the resignations were not taking place for many months.
“We want to leave Fletcher Building really well-positioned to allow the board to get the right successor in place. We’ve got the business in good operational shape,” Taylor explained.
Hassall referred to “incredibly challenging times. We both realise the buck stops with us. It’s in the best interests for us to hand over to a new group CEO and a new group chair”.
Taylor would remain longer than required if that was needed to enable an orderly transition.
Bruce Hassall is Fletcher's chairman.
“It comes back to what Ross says. We’re the two leaders. Some of the stuff hasn’t gone that well in relation to provisioning and it hasn’t been a great outcome for shareholders. It’s a good thing to transition to a new leadership and resolving with the convention centre and Western Australia plumbing issues,” Hassall said.
Taylor said the majority of legacy construction projects had been “cleared”. The complexity of dealing with the NZICC was unprecedented in his career, he said.
Construction was Fletcher’s lowest-margin division.
Taylor reiterated the Perth pipe problems were workmanship and installation. There was no change to Fletcher’s provisions.
On the outlook, he expects an improving situation with the New Zealand housing market.
“We’ll keep the convention centre on track for completion in 2024,” he said.
Accounts were hit with far higher losses than those signalled last Monday: instead of being $180m worse off, the company had significant item write-downs and provisions of $308m, mainly due to an extra $122m hit from its Australian Tradelink business which it intends to sell.
No dividend will be paid for 1H24 but an interim dividend of 18c was paid in 1H23.
Asked about Tradelink and why it wasn’t performing, Taylor said it wasn’t sudden. Some Fletcher businesses had margins of 1 per cent five to six years ago but the company had set targets to push those up to 5 to 7 per cent. That hadn’t happened with Tradelink, Taylor said.
“As the market tightened, the business had not performed and we’ve got to step back and have a good look at Tradelink and consider if we can get it to 5 per cent or not. Tradelink’s struggling in the present market. It still has a future but in the scheme of the portfolio of FB and 25 businesses, is it the right business for us to keep persevering with? After seven years, it’s time. It is consistent with what I said six months ago.”
Taylor was asked about events leading up to his decision to retire and the confused disclosures to ASX and NZX on Monday.
“These are conversations ... Bruce and I have a very good, mature relationship and have authentic conversations.”
Asked if this was a recent issue, Taylor said: “I’ll just say the same response again”.
Grant Swanepoel of Jardens.
Grant Swanepoel and Luan Nguyen of Jardens released their first impressions of the result, saying the outlook for the full year to June 30, 2024 was a 13 per cent material downgrade to analysts’ consensus estimate of $675m.
“A worse-than-anticipated downgrade as it isn’t just a poor start to 2H but 1H24 had deteriorated materially worse than what Fletcher had been indicating. The company making positive moves to shore up the balance sheet, also exiting Tradelink, as the company faces softer earnings outlook and potential further write-downs,” they wrote.
On the Iplex problems, they said the company remains of the view that the resin and pipe was not at fault and that it is an installation issue.
“However, it has moved toward a view that it will be part of an industry solution and they will be part of delivering that solution. It is management’s view that not all of the 15,000 impacted homes (revised down from 17,500 homes) will leak as homes will likely only leak if there has been a burst within the first three years of installation and that industry burst rates should now start to slow,” the Craigs’ analysts said.
Fletcher was expecting a recall-or-not decision to be made next month.
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.
