Friday, 29 March 2024

Announcement

FLLYR: FBU: Fletcher Building announces 2017 annual results

16 Aug 2017 08:30NZX
Auckland, August 16 2017: Fletcher Building today announced underlying
operating earnings of $525 million for the 12 months ended 30 June 2017, down
23 per cent from FY16.

Revenue for the year was $9.4 billion, up four per cent year-on-year. Net
earnings before significant items were $321 million, down 23 per cent from
FY16.

Performance was impacted by the Building + Interiors (B+I) business unit
within the Construction division, which reported a $292 million loss during
the year. The loss resulted from a combination of complex design issues,
inadequate project management and stretched resourcing in a capacity
constrained New Zealand construction market - which negatively impacted two
major projects in Christchurch and Auckland and a number of smaller projects
across the B+I portfolio.

The challenges in B+I masked a robust performance across the remaining
portfolio, with Building Products (+6%) , International (+27%), Distribution
(+10%) and Residential and Land Development (+55%) all posting strong
earnings growth.

Interim CEO Francisco Irazusta said while the result was disappointing, he
was confident the B+I business will improve with new leadership and
governance now embedded.

"Despite the B+I result being disappointing our teams are working hard to
complete our projects to the highest quality. Following a complete review of
the B+I portfolio a significant amount of change has already been implemented
- including improved project governance and processes for current and future
projects and enhanced bidding rigour.

"We now have new management in place and highly capable leaders in
Construction Chief Executive Michele Kernahan and B+I General Manager David
Kennedy, who brings with him over 30 years'' construction experience. Under
their leadership B+I will be a more focussed business, targeting key sectors
and clients and incorporating appropriate risk premiums into margins.

"It is encouraging to see the broader business performing so well during the
year and continuing to benefit from supportive economic conditions in key
markets. Stripping out the impact of B+I the Group''s earnings increased by
around 20 per cent and our New Zealand portfolio grew earnings by around 30
per cent in FY17."

Fletcher Building also confirmed an impairment charge of $222 million for its
Tradelink and Iplex Australia businesses, representing approximately 3% of
the group''s total assets as at 30 June 2017. The impairment will be reported
below the EBIT line and have no impact on cash earnings.

"In taking these impairments we are addressing the gap between the balance
sheet carrying values of Tradelink and Iplex Australia and their near to
medium term profitability in a tightening Australian economy.

"Despite these charges both businesses are progressing well against their
turnaround strategies. Tradelink has opened 20 new stores in FY17, improved
its customer proposition and taken market share, while Iplex Australia has
returned to profitability for the first time since 2014."
Commenting on the outlook for FY18 Mr Irazusta said Fletcher Building will
continue to benefit from strong macro-economic drivers.

"In Auckland we need over 13,000 new houses built a year to meet population
demand, however in the last year only around 10,000 were consented, which we
believe translates to around 8,000 being built.  This means there is a
shortfall of 5,000 houses in the last year alone - so we expect elevated
levels of activity to continue, despite some cooling in the Auckland market
in the near term. Infrastructure investment will also remain robust, to serve
growing communities and improve productivity.

"In Australia we believe the declines in Western Australia are stabilising
and there is a major focus on infrastructure investment across the Eastern
seaboard.

"I am privileged to be leading the business during this interim phase. We are
now in our second month of FY18 and I am firmly focused on supporting the
business to deliver a strong first half result."

A final dividend of 19 cents per share will be paid on 11 October 2017, with
full New Zealand tax credits attached, bringing the total dividend for the
year to 39 cents per share. The dividend reinvestment plan will be operative
for this dividend payment.

#Ends

For further information please contact:

Leela Gantman
Head of Communications
+64 27 541 6338
Leela.gantman@fbu.com

Rodney Deacon
Head of Investor Relations
+64 21 631 074
Rodney.deacon@fbu.com

Teleconference details

Fletcher Building Chairman Sir Ralph Norris, Interim CEO Francisco Irazusta
and CFO Bevan McKenzie will host a teleconference call for investors and
analysts at 11.00am NZ time today (9.00am Australian Eastern time) to provide
more detail on this announcement. Dial in details are set out below.

Passcode: 886148

Australia Toll Free: 1 800 558 698 Hong Kong: 800 966 806
Australia Local: +61 2 9007 3187 Japan: 0053 116 1281
New Zealand Toll Free: 0800 453 055 Singapore: 800 101 2785
NZ Local (Auckland): +64 9 929 1687 UAE: 8000 3570 2705
NZ Local (Wellington): +64 4 974 7738 United Kingdom: 0800 051 8245
NZ Local (Christchurch): +64 3 974 2632 United States: (855) 881
1339

Please see attached FY2017 full year results documents:

Media release
Management commentary
Annual report
Results investor presentation
Appendix 1
Appendix 7
End CA:00305558 For:FBU    Type:FLLYR      Time:2017-08-16 08:30:18
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