Fulton Hogan makes $222m profit, pays dividend, takes wage subsidy

Wednesday, 4 November 2020

Infrastructure company Fulton Hogan, which received $34.3 million in wage subsidy payments, made a $222 million profit last year, and announced a $79.5 million dividend. It has only partially repaid the subsidy.

Infrastructure company Fulton Hogan made a $222 million profit last year and rewarded its shareholders with $79.5m in dividends, bolstered by taxpayer wage subsidy payments.

The company’s annual report shows its after-tax profit rose 28 per cent in the year to June 30. It paid shareholders a 24 cent a share interim dividend in March, totalling $33.5m, and set aside $46m for a 33c final dividend.

The company noted the final dividend was lower than last year’s 36c payment in light of the uncertain outlook brought about by Covid-19.

The annual report showed the firm was paid $34.3m in wage subsidies, although Fulton Hogan said in a statement on Wednesday that at the end of September, following a full reconciliation, it made a partial reimbursement.

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Ministry of Social Development figures last updated on Tuesday this week showed the firm received $33.3m for 4883 employees.

Companies have faced criticism for taking advantage of the wage subsidy scheme when they were profitable and paying dividends. Last month, retailer Briscoe paid back its $11.5m subsidy after trading improved and honey company Comvita told shareholders it intended to pay back $104,000 of wage subsidies once it returned to profitability.

Others, such as retailer The Warehouse Group, faced public criticism from Prime Minister Jacinda Ardern for claiming $67.8m through the wage subsidy scheme while continuing with staff restructuring and redundancies.

In its statement on Wednesday, Fulton Hogan said: “Our intention is to retain the remaining wage subsidy in line with the objective and criteria of the scheme.”

To access the wage subsidy, employers had to have experienced a 30 per cent revenue drop over a month between January and June 9, compared with the same month in 2019 and that decline had to be related to Covid-19.

“Covid-19 had a significant impact on Fulton Hogan’s New Zealand operations,” managing director Cos Bruyn said in the statement.

“The abrupt and severe curtailment of works during the six-week, Covid-19 alert level 4 lockdown saw over 70 per cent of the company’s 4500 New Zealand-based employees unable to work.”

Directors, New Zealand-based executives and other employees took a 20 per cent cut in remuneration, and special leave provisions were put in place for employees, he said.

With the support of the wage subsidy scheme, and “significant financial commitment” from Fulton Hogan, all New Zealand-based employees, working or not, were paid at least 80 per cent of their salary, despite the company incurring a significant loss in New Zealand in April, he said.

Bruyn said the result reflected a strong turnaround for the company in the Australian market.

Over the past year, Fulton Hogan generated cash from operations of $495.7m, up from $86.8m last year. Its net debt reduced to $400.7m from $659.4m.

Despite the strong result for the year, the outlook remains uncertain on both sides of the Tasman as local governments face lower incomes and the private sector defers capital expenditure to strength balance sheets, Bruyn and chairman Dean Hamilton said in the annual report.

A number of commercial contracts had already been cancelled or deferred, they said.

A Fulton Hogan spokesman said the company would not make any further comment.