Fletcher rewards shareholders as it continues building wind down

Wednesday, 26 June 2019

Ross Taylor held a briefing for investors.

Fletcher Building will return $300 million to shareholders with some of the money it received with the sale of the Formica division.

The Formica sale returned $1.2 billion, with most of it to be used to reduce $600 million in debt over the next 12 months.

Chief executive Ross Taylor announced details at a special briefing for investors where he said the business had been stabilised as the building and interiors division wound down its construction activity.

The buy back would take place after the company announced its annual result in August and will be in addition to the normal dividend.

* Fletcher Building back in the black but feeling the heat in Australia

* Fletcher Building posts $190m loss as costs rise**

The forecast for earnings before interest and tax in the current financial year was in the range $620m to $650m.

Many building projects had been completed, with seven still under way, and the two remaining ones continuing into 2020 being the Commercial Bay development in Auckland and national convention centre, he said.

The value of construction work under way had reduced from $1.4b in early 2018 to about $400m.

Taylor gave updates on the various Fletcher businesses - civil contracting, plumbing and electrical, insulation, building supplies, mining, and irrigation especially in Australia.

The residential property market had seen a sharp dowturn, particularly in Australia, but the decline was expected to slow over the next 18 months given population growth and forecasts.

Strong sales at Fletcher's Wiri development would see a higher than expected returns.

Fletcher Building has been restructuring after posting losses of about $1billion over the past two years, mostly from the building and interiors division.

Taylor outlined how the New Zealand business was strong and growing but the Australian activities had been hit harder.

The Australian economy had been worse than expected, putting pressure on margins. Improvements were under way in pricing disciplines and digital developments.

The company had a five year plan with growth from all divisions expected after 2021.

Construction disciplines had been improved under new teams and training regimes.

When bidding for new work the company look at more medium sized projects rather than big ones.

Taylor reported good progress in organic growth, small acquisitions such as a PlaceMakers branch in Rotorua, product innovations, and staff engagement.

But the death of two New Zealand workers had prompted a 'reset' in health and safety.

There were five injuries in the latest financial year which was lower than previous years and below the industry average.