Fletcher Building Limited
Annual Report 2019
contents
Contents
Where we are right now
The Results
This Annual Report is dated 21 August 2019
and is signed on behalf of the Board by:
Bruce Hassall
Chair
Robert McDonald
Director
When used in this annual report, references to the ‘Company’ are references to Fletcher
Building Limited. References to ‘Fletcher Building’ or the ‘Group’ are to Fletcher Building
Limited, together with its subsidiaries and its interests in associates and joint ventures.
All references to financial years (e.g. FY18 and FY19) in this annual report are to the
financial year ended 30 June. References to $ and NZ$ are to New Zealand dollars
unless otherwise stated.
In certain sections of this report the Group has chosen to present certain
financial information exclusive of the impact of Significant Items and/or the
results of the Building + Interiors (B+I) business unit, consistent with previous
market guidance. Where such information is presented, it is clearly described
and marked with an appropriate footnote. This allows the readers of this report
to better understand the underlying operations and performance of the Group.
Results at
a Glance
Revenue
$9,307m
2018 $9,471m (p) 2%
Net earnings/(loss)
$164m
2018 $(190)m
EBIT before significant items (1)
$631m
2018 $50m
Cash flows from
operating activities
$153m
2018 $396m (p) 61%
Earnings per share
19.2¢
2018 (25.5)¢
Return on funds
employed (ROFE) before
significant items (1)
11.8%
2018 0.9% (p) 10.9 ppts
Total dividend
23CPS
2018 nil
EBIT margin before
significant items (1)
6.8%
2018 0.5% (p) 6.3 ppts
Safety TRIFR (2)
5.0
2018 5.1 (p) 2%
Employee engagement
71%
2018 70% (p) 1 ppt
Carbon Emission Intensity (3)
139
2018 149 (p) 10 pts
Customer NPS (4)
41
2018 33 (p) 8 pts
(1) Measures before significant items are non-GAAP measures used by management to assess the performance of the Group and have been derived
from Fletcher Building Limited’s financial statements for the year ended 30 June 2019.
(2) Total recordable injury frequency rate. Measured by the total number of recordable injuries per million hours worked.
(3) CO2 tonnes for every $1 million of revenue.
(4) Net Promoter Score is a measure of how satisfied our customers are with our business.
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Fletcher Building Limited Annual Report 2019 Where we work
We employ over 16,000 people in New Zealand, Australia and the South Pacific.
Australia
$3b 300+
Revenue
Operating
sites
5,000
+
people across
Australia
2
Fletcher Building Limited Annual Report 2019 800
Approx.
people working on
construction in the
South Pacific
10,000
Approx.
people across almost every
region of New Zealand
Our people are committed to
working together to deliver for
our customers and to support
our communities.
New Zealand
$5b 400+
Revenue
Operating
sites
3
Fletcher Building Limited Annual Report 2019 Chair’s
Report
4
Dear Shareholders
DELIVERING ON STRATEGY AND RETURN TO PROFITS
Through the FY19 year, Fletcher Building delivered against all the key
areas of its plans, despite challenges in Australia, and returned the
Group to profitability with net earnings attributable to shareholders
of $164 million compared to a loss of $190 million in the prior year.
We also reinstated dividends and, through the $1.3 billion divestment
of the international businesses, ended the year with a strong balance
sheet with net debt of $325 million.
DIVIDEND AND SHAREHOLDER RETURNS
We are pleased that the Company’s significantly improved earnings
and strong cash flows have enabled the Board to approve a final
dividend for the year ended 30 June 2019 of 15 cents per share
(unimputed and unfranked) to be paid on 19 September 2019.
Combined with the 8 cents per share interim dividend, this brings
the total dividend to 23 cents per share for the FY19 year. The Board
is pleased that we have been able to resume payment of a dividend
and that we can now begin again to reward our many shareholders
who have remained loyal to the Company during a difficult period.
Given the strength of the balance sheet, our confidence in the B+I
provisions and our outlook generally we are also returning up to
$300 million to shareholders through an on-market share buyback.
The buyback will commence following release of the Company’s
full year results.
Bruce Hassall, Chair.
Fletcher Building Limited Annual Report 2019 HEALTH AND SAFETY
ANNUAL SHAREHOLDER MEETING
This year’s Annual Shareholder Meeting will be held in November
2019. We look forward to shareholders taking the opportunity to ask
questions, if they wish.
LOOKING AHEAD
This year, we implemented what was planned and outlined in June
2018 – we stabilised the Group, returned to profits, reinstated
dividends, and focused our activities back on New Zealand and
Australia. This sets us up well to drive strong performance across
all our businesses, in particular, our Australia businesses, in the
coming financial year and as we make further progress on executing
our strategy.
Bruce Hassall
Chair
We were very saddened at the tragic deaths of five of our people
during the year. These incidents continue to remind us of the
importance of taking a vigilant approach to safety. The Board has
placed intense scrutiny on health and safety and on improving
safety performance. We will continue to stay focused on this as
management implement a business-wide reset of safety across all of
Fletcher Building.
GOVERNANCE
In September, we welcomed five new independent directors, who
have added valuable expertise, bringing a range of complementary
commercial, operational and governance experience to the Board
skill set. During the year, Board members placed an added emphasis
on getting close to the operating businesses through a greater
number of site tours and meetings with management across the
Group. I am confident the Board has appropriate governance and
oversight of the operations of the Group.
On behalf of my Board colleagues, I would like to express our
appreciation for all the dedication of the Group’s employees during
FY19 and for the resilience and commitment they showed during
one of the most difficult periods in the Company’s history.
I am privileged to have become Fletcher Building’s Chair at a pivotal
point in its long history and I am pleased with the progress we
have made through this year. You can rest assured that I and my
fellow Board members are focused on delivering enhanced value to
all our shareholders and building strong relationships of trust with
our key stakeholders.
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Fletcher Building Limited Annual Report 2019
CEO’s
Report
6
At the beginning of the year we identified three stages to the
repositioning of Fletcher Building; firstly, to stabilise the business
through FY19, then to drive performance through FY20, and from
FY21 onwards drive growth. Through this year we achieved what we
needed to and we remain on track.
It was both pleasing and important to see the business deliver
against our financial goals, albeit Australia was tougher than
expected; and across our key actions through FY19. This
performance however, was somewhat overshadowed by the
fatalities we experienced in our Steel and Construction divisions
which I discuss in more detail later.
Our overarching theme through the year was to get focused and
this was achieved; we successfully sold our Northern Hemisphere
businesses, we stabilised Construction, we made a material
intervention in Australia to set it up for a turnaround, and through all
this stayed focused on our strong core New Zealand businesses.
HEALTH AND SAFETY
We have an unwavering commitment to the health and safety of
our people and those who work with us. We were therefore deeply
saddened that during the year we had five fatalities in our business.
Our focus immediately after these was to support the families, friends
and workmates who were impacted by these tragedies, and to ensure
these would not be repeated. We also engaged more broadly across
government and industry to change standard industry work practices
where appropriate. Beyond this we embarked on a multi-year reset
of our safety programs and approach across the entire business. The
leadership team and I are committed to making Fletcher Building a
consistently safe place where everyone who works with us, returns
home safely to their families each and every day.
Ross Taylor, CEO.
Fletcher Building Limited Annual Report 2019 PERFORMANCE
Fletcher Building’s performance in FY19 was solid and importantly
we finished the year within our earnings guidance range. Group EBIT
before significant items was $631 million, compared to $50 million
in the prior year. Significant items of $234 million were incurred
through the divestment of our International businesses and through
restructuring charges taken to reset our Australia division.
Group revenue was $9,307 million, which was slightly down on
FY18, but excluding B+I revenue was slightly higher than the prior
period. Our core New Zealand divisions, including residential,
delivered good results, and despite operating in a highly competitive
environment these businesses maintained strong market positions
and revenues.
The Construction division stabilised and returned to profitability
during FY19, and we continue to remain within the provisions set for
the legacy B+I projects in February 2018. Only six of these projects
remain to be completed, and of these projects only two will extend
into calendar 2020. We announced in June that we would resume
bidding for new vertical construction work and will do so in a very
measured and disciplined way.
A combination of a tough residential market, rising input costs
and poor operating disciplines in some areas saw the Australian
division deliver lower than expected results for the year. That said it
was always identified as a “turnaround” and the team successfully
implemented a decisive intervention through the year to set these
businesses up for profit growth in FY20.
A highlight of the year was the successful sale of the Formica and
Roof Tile Group businesses. These were both completed ahead of
schedule and the proceeds received were above expectations. The
exit of these businesses leaves the Group with a more focused
and manageable footprint and has materially strengthened the
Company’s balance sheet.
the company, as well as supporting people with appropriate training
and development.
These changes underpinned a continuing rise in employee
engagement through the year.
CUSTOMER SATISFACTION
Great customer service underpins our business, and in FY19 we
saw an increase in our customer satisfaction measure, reflecting
our focus in this area. We continue to look to have all businesses
performing at top quartile levels on customer satisfaction measures
over the coming few years.
SUSTAINABILITY AND INNOVATION
Our sustainability journey continued to develop in FY19 as we work
to increase the transparency of reporting in this space and move
towards an integrated reporting model.
We are committed to reducing our carbon footprint and are in
the process of setting a science-based target for carbon
emissions reduction.
We have a range of initiatives underway which include the diversion
of up to half of all New Zealand’s used tyres into fuel to be used in
the manufacture of cement, the recycling of plastic waste into the
manufacture of our plastic pipes, and the planned investment in a
new state-of-the-art Winstone Wallboards factory, which will enable
the recycling of used plasterboard and the reduction of carbon
emissions by 15%.
In addition, we are in the final stages of building a scale housing
panelisation factory in Auckland which will facilitate both higher
quality homes and a significant reduction in the average total time of
constructing a home.
OUTLOOK
CAPITAL MANAGEMENT
We made considerable gains with strengthening the company’s
balance sheet during FY19 and ended the year well below our target
leverage range following the successful sale of Formica for $1.2
billion. This has allowed us to commence a debt reduction program
which will total between $700 million and $800 million across FY19
and FY20.
In New Zealand we expect residential consents to ease slightly
off current peaks, non-residential construction to remain at similar
levels, and infrastructure spend to ease in major roading with a move
to road safety, water, and rail.
And in Australia we expect the contraction in residential to continue,
and the non-residential and East Coast infrastructure market to be
broadly flat.
The Company intends to maintain a prudent balance sheet while our
performance reset continues.
CONCLUSION
But having taken this into consideration we will return up to $300
million to shareholders by way of an on-market share buyback to
commence following full year results.
Dividend payments were reinstated during FY19 with a total dividend
for the year of 23 cents per share.
Through FY19 we achieved what we said we would, and this
positions us well to drive performance through FY20.
I thank our shareholders, people, customers and suppliers for
their continued support of Fletcher Building, and I look forward to
updating you on our progress during FY20 and beyond.
EMPLOYEE ENGAGEMENT
Through the year, the benefits of our leaner organisation, greater
communication, and the shift of key skills and overhead into the
operating businesses, started to emerge. We also made good
progress on evolving and improving leadership through all levels of
Ross Taylor
CEO
7
Fletcher Building Limited Annual Report 2019 Strategy
Our vision is to be the undisputed leader in
New Zealand and Australian building solutions
with products and distribution at our core.
1. REFOCUS ON THE NZ CORE
3. STRENGTHEN AUSTRALIA
The new divisional structure for FY19 established a single leadership
team for the Australian businesses that is based in-market. While the
division faced significant market headwinds mainly through a sharp
decline in residential markets during FY19, it also had poor operating
disciplines in some of our businesses. Decisive intervention during the
year has resulted in clear business unit priorities being established,
including a cost-out programme and targeted growth investment
to set the business up for performance improvement and growth.
The division has emerged from FY19 with much of this programme
underway. It is targeting $100 million of gross annual cost-out benefit
by FY21 with approximately $50 million of this to flow to net EBIT in
FY21. The Group continues to target the Australia division generating
7% EBIT margins in the medium term.
4. EXIT NON-CORE BUSINESSES
One of the key highlights of FY19 was completing the sale of
both the Formica and Roof Tile Group global businesses ahead of
schedule and for strong valuations. The sale proceeds from these
have resulted in a very strong Group balance sheet and enabled
a number of changes to the Group capital structure, as outlined
throughout this report. The completion of this key focus area leaves
the Group with a more focused and manageable footprint, operating
in the New Zealand and Australian markets.
We continue to defend and grow our NZ building materials and
distribution businesses and leverage our position in residential. Our
divisional and business unit leadership teams have evolved as our key
performance criteria are lifted. The NZ businesses continue to benefit
from the elevated market backdrop which has held revenues at high
levels. We have maintained our competitive positions and market
shares throughout the year, however, margins have either held flat
or seen some compression across most businesses. Having dealt
with our other priorities, such as the exit of non-core businesses, we
are well set up to focus on improving operational disciplines through
FY20 and setting ourselves up for margin improvements and growth
in FY21.
2. STABILISE CONSTRUCTION
The Construction division changed significantly during the year
with a strengthened management team and experienced project
teams that are fit for purpose. Meanwhile, governance and risk
management processes have been put in place that now underpin
the operations of each business and the disciplines that are
required for building a balanced portfolio. Pleasingly, the division
returned to profitability during the year. Meanwhile we are making
good progress on closing out the historical B+I projects with six
remaining to be completed and are within the provisions made in
February 2018. As part of our overall positioning of the division, we
intend to recommence focused bidding in the New Zealand vertical
construction market. As well as our own divisional improvement,
bid conditions and margins have become more appropriate, the
overall market outlook is strong and a select client base is keen for
us to re-engage in the sector. Importantly, this ensures we are able
to maintain the current momentum to complete the legacy B+I
projects and provide a future for our people as those projects come
to a close.
8
New Zealand International Convention Centre.
Fletcher Building Limited Annual Report 2019 To support our strategy we have made changes to how we work
and are very clear on the enablers of successful execution.
THERE ARE 6 KEY ENABLERS OF OUR STRATEGY:
1. Strong safety culture
2. Engaged and capable people,
with a lean operating model
4. Fit for purpose systems and
next-generation digital capabilities
3. High level of customer
intimacy built through owning
channels to key segments
5. Disciplined performance
improvement and capital allocation
6. Leading innovation and
local adaptation anchored
in environmental
consciousness
STRATEGY
TIMEFRAMES
FY2019
REFOCUS AND STABILISE
FY2020
PERFORMANCE
FY2021 – 23
GROWTH
1.
Refocus on
the NZ core
NZ Businesses strong and growing
2.
Stabilise
Construction
Complete B+I projects
Return division to profit
Construction turnaround complete
3.
Strengthen
Australia
Set-up for turnaround
Performance improvement
Profitable market share
4.
Exit non-core
businesses
Roof Tile Group and
Formica divested
9
Fletcher Building Limited Annual Report 2019 Sustainability
We want to be the New Zealand and
Australian leader in sustainable building
materials, construction and distribution,
and we’ve set ourselves some ambitious
goals to get there.
Our sustainability strategy focuses on what is most important to our business
and to others - our people, communities, customers, key stakeholders and
investors - and where our actions will lead to meaningful change.
The strategy extends what we have already put in place and deepens
our commitment to our people, sustainable products, carbon emission
reduction initiatives, and transparent reporting. We want our business to
thrive and we are committed to playing our part in a sustainable future.
OUR KEY AIMS
BE THE LEADER IN MAKING
SUSTAINABLE BUILDING PRODUCTS
TRANSPARENT ENVIRONMENTAL,
SOCIAL AND GOVERNANCE REPORTING
SUPPORT OUR PEOPLE
AND OUR COMMUNITIES
PARTNER WITH OUR SUPPLY CHAIN TO
DELIVER SUSTAINABLE OUTCOMES
BUILD HEALTHY HOMES AND DELIVER
SUSTAINABLE INFRASTRUCTURE
CAREFUL MANAGEMENT OF OUR
RESOURCES AND EMISSIONS
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Fletcher Building Limited Annual Report 2019 LONG TERM GOALS
– Best practice safety
SIGNIFICANT INITIATIVES IN FY20
– Protect safety reset
– Certified sustainable products and innovative new solutions
– Reduce the environmental footprint of our products
– Recognised as a diverse, inclusive and equitable place to work
– Gender pay parity plan in place
– Leading sustainability ratings for what we build
– Group science-based target for reducing our carbon emissions,
– Carbon emissions reduced – in line with limiting global warming
to below 2°C
– Supply chain risks reduced
– Achieving global benchmark performance
water and waste reduction plans in place
– Implement supply chain Code of Conduct
– Move to full Environment, Social and Governance reporting
OUR MATERIAL ISSUES
Our material issues are the areas where we have the biggest impact and the most influence.
Sustainability aims
Material issue
Divisions with most impact
Be the leader in making
sustainable building products
– The environmental footprint of our products
– Customer engagement
Building Products and Steel, Distribution,
Concrete, Australia
– The health, safety and wellbeing of our
Support our people and
our communities
people and supply chain
– Our people and culture
– Our role as a large employer
Corporate, Building Products and Steel,
Distribution, Concrete, Construction, Australia,
Residential and Development
Build healthy homes
and deliver sustainable
infrastructure
– The impact of our construction operations
– Customer engagement
Building Products and Steel, Distribution,
Concrete, Construction, Australia, Residential
and Development
Careful management of our
resources and emissions
– The resources we use as a large
manufacturer - energy, water and materials
- and our impact on those resources
Building Products and Steel, Distribution,
Concrete, Construction, Australia, Residential
and Development
Partner with our supply
chain to deliver
sustainable outcomes
– Our supply chain
– Marketing and communications
– How we work with government and with
industry partners
Corporate, Building Products and Steel,
Distribution, Concrete, Construction, Australia,
Residential and Development
Transparent environmental,
social and governance
reporting
– Our governance structures and risk
management, including supply chain
– Financial performance and return to
our shareholders
Corporate
SUSTAINABLE DEVELOPMENT GOALS
The Sustainable Development Goals are a global set of goals
adopted by New Zealand, Australia and all United Nations
member states that support strategies to improve health and
education, reduce inequality, and spur economic growth while
tackling climate change and working to preserve our oceans and
forests. Fletcher Building’s sustainability key aims support the
following eight United Nations Sustainable Development Goals.
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Fletcher Building Limited Annual Report 2019 Health
and Safety
We are committed to providing a healthy and
safe workplace for everyone who works with us
at Fletcher Building. We believe that everyone
deserves to be protected from harm. To help
us get there we are constantly looking at what
we’re doing that’s working, what’s not working
and where we can do better.
Tragically, in FY19 we had five fatalities within our business. Two
occurred in our Steel division and three in our Higgins business in a
single roading incident. Each of these tragedies had significant and
everlasting impacts on their whanau, friends, our people and the
communities in which we work.
Our priority during these times is firstly to the whanau and to our
colleagues who are so deeply affected by these losses. Our second
priority is to investigate and understand these events, so we learn
from them and prevent them from ever happening again.
Over the past two years, we have dedicated a lot of time, energy
and resource in building our health and safety framework, Protect,
and implementing our online software solution, Radar, to record
and monitor our health and safety performance. During this
period, we experienced a reduction in our Total Recordable Injury
Frequency Rate (TRIFR) from 6.9 (FY17) to 5.0 (FY19). We also
experienced a reduction in serious injuries from 33 (FY17) to
20 (FY19).
While our overall health and safety performance appeared to be
improving in the past few years, the loss of five of our colleagues
this year is clearly a call for action. As expressed by our leadership
team, we will learn from this, and we will use it to help us drive
safety improvements across all of Fletcher Building. Nothing in
Fletcher Building is more important than getting everyone home
safely each and every day.
We are partnering with a leading international organisation to
review Protect in FY20 with a goal to either accelerate, eliminate,
refine or supplement the programme in order to drive the required
culture, discipline and approach that will improve the safety of
our workplaces.
12
Our internal employee survey shows we have strong safety values
which can serve as a foundation to build from as part of the
Protect reset. In FY19, 88% of employees said that their managers
regularly reinforce safety behaviours, and 83% said their managers
care about their wellbeing.
In alignment with our Protect tohu, the Protect reset will honour
our past (nga wa- o mua), the stories of our people and the good
work done. It will also embrace the views of our present-day
operations and people (i tenei wa- ) through a Fletcher Building
wide survey and deep dive into the culture, system and risk
assessments in each of our divisions. The goal of the Protect reset
will be to create a sustainable framework and future aspiration (tu-
manako) where all our people are free from harm.
Tupuna (Ancestor)
Represents our founder
Sir James Fletcher I
Nga wā o mua (Our past)
Represents our past
operations and people
Tūkotahi (Unity)
Our newest value
"Better Together"
I tenei wā (Present day)
Represents our present
operations and people
Tūmanako (Aspiration)
Represents our future
operations and people
Protect is our safety framework that sets a
consistent environment, health and safety standard
across the business. In FY19, the Protect brand was
updated with a tohu, which was offered to Fletcher
Building by the Whakatupu leadership development
programme initiative. The tohu brings mana and
whakapapa to Protect in a uniquely Māori context.
Fletcher Building Limited Annual Report 2019 FY19
Total Recordable Injury
Frequency Rate (TRIFR)
5.0
FY18: 5.1
FY19
Serious Injury
Frequency Rate
0.34
FY18: 0.33
6.4
6.7
TRIFR (1)
6.9
5.1
5.0
FY15
FY16
FY17
FY18
FY19
CASE STUDY
Serious Injuries (2)
33
22
25
21
20
FY15
FY16
FY17
FY18
FY19
(1) Total recordable injury frequency rate. Measured by the total number of recordable injuries per
million hours worked.
(2) Serious Injury includes immediate treatment as an in-patient at hospital for more than 24 hours
or immediate treatment for a serious injury or illness as defined by Safe Work Australia.
WELLBEING
As part of our five year strategic plan, we are increasing our focus on the
personal health and wellbeing of our people, recognising the two-way
relationship between work and personal health.
In FY19, we appointed a Group Health and Wellbeing Manager to develop a
strategic and holistic approach to wellbeing, manage our health exposures
and to drive injury management good practices throughout our businesses.
In FY20, our focus will be on aligning our support and management
practices across all of our businesses for injury and illness management to
help ensure our people are supported and cared for in a consistent manner
following work and non-work related injuries or illnesses.
Our primary health exposures across our businesses are related to silica,
noise and asbestos. All of these risks have the potential to cause long term
damage to the health of those people exposed to them. In FY20, health
and exposure monitoring programmes will be used to drive continual
improvement across our businesses for both mitigation methods and
monitoring of the long-term health of our people and those affected by our
work and our products.
We also recognise that the mental and physical health of our people
can have a significant impact on the safety of our sites as well as the
environment in which we work. In FY20, we will be concentrating on the
health and fitness of our people who are in safety critical roles. In addition,
we plan on improving mental health awareness across our businesses.
Improving the safety of
temporary works
Fletcher Construction is proud to have
been instrumental in the establishment of
an industry forum for Temporary Works
(Temporary Works Forum NZ) and the
publication of New Zealand’s first ever
Temporary Works Good Practice Guide.
Temporary works are any structure on
site that allow or enable, but are not part
of, the permanent structure. They are
typically removed afterwards, but not
always. Scaffolding and trench supports
are all examples of temporary works.
In 2016, a Fletcher Construction worker
suffered a serious leg fracture when a
temporary block wall collapsed. This
prompted a review within the business
and an Enforceable Undertaking
agreement with WorkSafe.
The review included local industry
practices as well as international best
practice towards the procedural control
of temporary works. As a result, the
industry established a forum and
standardised guidelines were published.
Fletcher Construction worked with
Engineering NZ and Structural Engineering
Society New Zealand (SESOC) to support
the industry forum, to develop the
guidelines and train hundreds of staff and
industry professionals.
TWfNZ GPG01:19 Temporary Works:
Procedural Control GPG was published in
May 2019. Industry feedback has been
overwhelmingly positive.
13
Fletcher Building Limited Annual Report 2019 People and
Communities
The launch of our five year strategy just over a
year ago was an exciting time for our people,
but it was also a time of change. One of the
key enablers identified as critical to delivering
our strategy was continuing to increase the
engagement and capability of our people.
We remained focused on this, while
delivering for our customers and looking
after our communities.
EMPLOYEE ENGAGEMENT
This year’s employee engagement survey FBuSay results showed
steady high-levels of engagement across the company. We once
again achieved an exceptionally high participation rate – 91%
compared with 92% in FY18. Participation this high tells us our
people are invested in how we are doing as a company and they
want to contribute to this.
In fact, 78% of respondents feel their work gives them a
feeling of personal accomplishment and are proud to work for
Fletcher Building.
Our overall Group engagement score was 71% compared with 70%
last year, which is on par with our industry (a composite of retail,
manufacturing and construction).
DIVERSITY AND PEOPLE DEVELOPMENT
The effort we are putting into driving greater diversity in all parts of
our business continues.
We were extremely proud of our Fletcher Building Pride network's
influence both within the Company and externally. Fletcher Building
Pride won the Employee Network of the year at the New Zealand
LGBTI awards in November 2018. Allan Lennie our former Fletcher
Building Pride Chair bravely shared his experience of workplace
bullying to encourage others to speak up and get help. He is a
champion for change and passionate about ensuring the influence
of the network reaches the wider business. In March 2019, he
was recognised for his leadership when he won the Rainbow Tick
Ambassadorship Award at the inaugural Rainbow Excellence Awards.
14
In previous years, activities around Auckland have been the Group’s
focus. This year we spent more time in the regions. Fletcher Building
took part in the Wellington Pride parade, and the Concrete division
launched seven permanent rainbow trucks. The drivers of these trucks
are proud of the inclusive message the colourful trucks send as they
go about delivering to their customers throughout the country.
But it's not just about the big events and initiatives, small genuine
gestures are important too. Our focus on inclusion and diversity
begins when we first start talking to job candidates. We have been
a Rainbow Tick organisation since 2015, and we were the first
building materials and construction company to receive the Tick.
This Tick is an important symbol of what we have achieved, but also
a reminder to walk the talk each day. We held our first Rainbow Tick
breakfast in Christchurch this year in partnership with BNZ, with
over 70 people attending.
Winstone Aggregates new rainbow branded aggregate tippers.
Fletcher Building Limited Annual Report 2019 In FY19, approximately
employees undertook over
14,000
118,000
hours of learning through our
training courses.
We value our people and their families, and we
build a stronger team by spending time together.
This is just one way to live our Better Together
value and be one Fletcher Building Team.
Fletcher Building Connect programme graduation.
extremely positive, with managers saying that Connect graduates
show improved time management, proactivity and confidence.
Our Whakatupu Programme which aims to support Ma- ori into
leadership roles had 54 participants this year. The programme is well
respected and integrated within our business having been in place
since 2016.
To encourage the future generation of engineers, Easysteel Hawke’s
Bay and Patton Engineering joined forces with Hastings Boys High
School to establish a pre-apprenticeship programme. The programme
provides year 12 and 13 students a chance at a hands-on programme
of engineering skills development. Easysteel also worked with
supplier Weldwell to secure resources for the programme.
We continued our support with First Foundation providing work
experience and mentoring for high-potential students from low-decile
secondary schools.
LEADERSHIP, SKILLS AND TRAINING
In FY19, approximately 14,000 of our people undertook more than
118,000 hours of learning through our training courses. This included
more than 77,000 hours on Protect safety by over 11,000 employees,
and approximately 26,000 hours of leadership training by over 1,200
existing and potential leaders and managers. Feedback on training
was very positive with an overall 92% approval rating by participants.
We continue to focus on the identification and development of
talent, leveraging our world-class leadership programmes to grow
emerging leaders through to future general managers. In FY19, we
successfully piloted an online learning solution for senior leaders,
ExecOnline, which offers a suite of world-class short online learning
programmes, delivered in conjunction with leading international
universities including Stanford and Harvard.
15
Across our business around 20% of our employees are women. We
continue to provide targeted development opportunities for high
performing women, are a principal supporter of Global Women, and
are also working on practical ways to expose more of our women to
the opportunities and career progression in our exciting industries.
In 2018, Tradelink launched its Women in Plumbing initiative to
promote Tradelink as an employer of choice for women. It promotes
mentoring, career opportunities, and has created an increased
awareness in the market of its support of women in the workplace.
The initiative has received outstanding feedback from the Plumbing
Merchant Association of Australia and most recently, 25% of new
Tradelink recruits have been women, exceeding the target of 20%.
In another new initiative for our business, Fletcher Living teamed
up with ELE Group and Connexis to co-host a Girls with Hi Vis®
event at Fletcher Living’s South Auckland Waiata Shores residential
development. The event gave around 60 women a taste of what a
career in construction or infrastructure is like.
Another of our priorities is investing in youth. A development
programme which we are particularly proud of is Connect, an
innovative development and pastoral care programme designed
to support youth in the transition from high school, vocational
education or unemployment into the workforce. In FY19, we had
34 people graduate from the programme. Feedback has been
Fletcher Building Limited Annual Report 2019 Switch Up, our online recruitment platform has successfully placed
54 people into a range of our businesses. The no CV–required
approach shows how screening for attitude and work ethic is a
particularly effective recruitment method for young people coming
into our business from school or unemployment.
A unique programme PlaceMakers Auckland Frame and Truss is
involved in is at the training and production plant within the Auckland
South Corrections Facility in South Auckland. The plant provides
training for select inmates who are working towards release, in the
manufacture of timber framing. This project makes a real difference
by giving inmates a career path after release for employment within
the PlaceMakers plant, and providing an additional supply for the
Auckland housing market.
Winner of the Outstanding Emerging Leader Award, Olivia Kathan from PlaceMakers.
EXCELLENCE AWARDS
Fletcher Building’s Excellence Awards, which are a much-anticipated
celebration of success within our business, were held in March 2019.
An initial list of more than 230 entries was whittled down to eleven
winners, with Ross Taylor acknowledging the outstanding calibre of
entries from all parts of the company.
Fletcher Living’s Beachlands team took out the top award for truly
living by our purpose and values, having achieved outstanding
customer results with a Net Promoter Score of 93.
OUR EVENTS FOR EMPLOYEES AND FAMILIES
A special part of being an employee at Fletcher Building is the
company-wide events we hold, many of which extend to include
employees’ families.
In FY19, 13,000 of our people and their families took part in Fletcher
Building events, an increase of around 3,000 from FY18 reflecting a
concerted effort to make events more accessible to our people in the
regions. This is just one way we live our Better Together value.
16
Our people also have access to financial support through the
Employee Education and Employee Welfare Funds. Between
1 April 2018 and 31 March 2019, the Education Fund assisted 570
employees and dependants with further education and tuition and
a further 145 dependants with development initiatives, such as
Outward Bound.
The Welfare Fund funds the provision of Employee Assistance
Programme (EAP) Services as well as many health and wellbeing
initiatives across the New Zealand business, and supports New
Zealand employees and their families in the event of death, disability
or financial hardship resulting from unexpected medical events.
Between 1 April 2018 and 31 March 2019, the Welfare Fund provided
over $360,000 towards these initiatives.
We sincerely thank the Fletcher Trusts, the Welfare and Education
Funds, for their contribution to making our events possible, as well
as the significant additional opportunities and support they provide
our people.
OUR COMMUNITIES
We are driven to have a positive impact on the world around us and
be a good neighbour.
How we contribute to our communities and work with our
stakeholders takes different forms for each of our businesses and
projects. This can range from local working bees, to residential
development open days, to more formal Memorandums
of Understanding.
Fletcher Living believes that a diverse, connected community
makes a healthy community, and because of this works to provide
a range of housing in its developments. For example, the Ko- whai
Ridge development in Massey, Auckland is a joint venture with Nga- ti
Wha- tua Ora- kei. Ko- whai Ridge will add 197 much needed homes to
the Auckland housing market. When it is finished, 58 of these will
be bought by community housing providers Vision West, Accessible
Properties, and CORT. The development models the future of
housing on government land on a mixed tenure basis.
Another example of Fletcher Living making a positive impact
on communities is through its $1 million One Central activation
programme in Christchurch. Fletcher Living is bringing people back
into the central city with exciting community activities including
a hammock forest for the public to enjoy a quiet moment to
themselves or socialise with others in natural surroundings, and
most recently the Instagram-able #chchswing, a pair of giant swings.
Golden Bay Cement and Winstone Aggregates have built a strong
relationship with Te Pouwhenua o Tiakiriri Kukupa Trust, which
represents the hapu and iwi in the southern Whangarei region. This
has been strengthened with a formal relationship agreement, which
provides a pathway for the on-going operations of the businesses
while also supporting the long-term aspirations of Powhenua.
A standout project for Fletcher Construction South Pacific has been
the redevelopment of Gordons Market in Papua New Guinea’s
capital, Port Moresby. Part of the UN Women's Safe City for
Women and Girls programme, the basis for the PGK30 million
Fletcher Building Limited Annual Report 2019 design and build project, was to provide a safe and clean working
environment for women. The market, which is the Pacific’s largest,
was opened by New Zealand Prime Minister Jacinda Ardern in
December 2018.
Laminex Australia has recently partnered with Habitat for Humanity
Australia to help vulnerable families. The team ran a pilot project
in Yea, Victoria and there are plans to get involved throughout
Australia in the future.
In April 2019, PlaceMakers launched the PlaceMakers Foundation.
The foundation plans to make a lasting difference from offering a
helping hand to local community groups to bringing major projects to
fruition. The first recipient was a three-year old Dunedin boy raising
money for much-needed surgery which will allow him to walk. He
received the proceeds from the sale of two container homes built by
local tradesmen funded by a Working Bee Grant.
PlaceMakers was the principal partner of the prostate cancer
national awareness month Blue September for its eighth year in a
row bringing the total amount raised to $2.1 million for this worthy
cause. Mico continued its partnership with Make a Wish for a second
year delivering and contributing to seven wishes in FY19, and raising
over $35,000 as well as producing additional labour and materials.
As a Group we contribute a significant amount of money, time
and resources to a wide variety of causes and projects. The total
amount donated to various initiatives and organisations in FY19
was $2 million on top of the other discretionary donations made
by our businesses. Some of the charities we support include Give
a Kid a Blanket, Shine, Auckland City Mission, and following the
tragic events in Christchurch in March 2019, Fletcher Building
donated $100,000.
CASE STUDY
Women in Science, Tech,
Engineering and Mathematics
This year the Fletcher Building careers team ran a
first-of-its-kind Women in Science, Technology,
Engineering, and Maths evening as part of the
University’s STEM Careers Expo in May. Five
women from manager to new graduate level
spoke to around 100 soon-to-be graduates to
break down myths and showcase engineering,
construction, and IT as great career paths for
women. We are aiming to increase the number
of female applicants for our graduate and
intern programmes. Alongside this, when the
graduate recruitment website was redesigned,
we intentionally included more videos featuring
women. We were pleased to see the number of
female applicants for our Graduate Programme
increase this year particularly for engineering
and IT.
Ofa Halatanu from Brian Perry Civil says she
loves the friendly construction site environment
where everyone looks out for one another. She
believes more women would join the industry if
they were encouraged at school.
I discovered engineering late in
school, sometimes people just
assume girls aren’t interested in it.
We are once we're exposed to it!
#chchswing at Fletcher Living One Central, Christchurch.
17
Fletcher Building Limited Annual Report 2019 and hybrid machinery for earthworks, which has supported efforts
to reduce emissions.
Our innovation and sustainability teams continue to work alongside
our businesses to support the development of new or more efficient
products and services.
CARBON EMISSIONS
Addressing climate change is one of the biggest challenges we
face globally. We recognise that as an organisation we have a part
to play in preventing climate change, and for this reason we have
committed to achieving a 30% reduction in our Scope 1 (direct) and
Scope 2 (indirect) emissions by 2030. The target is in alignment
with the Paris Accord and based on maintaining the global
temperature rise to well below 2oC.
Our target is currently being verified by the Science Based Targets
initiative, a well-recognised international third-party verification body.
Environment
Fletcher Building recognises its opportunity
to make a significant and positive impact on
environmental sustainability within our industries.
To achieve sustainable building solutions, we are
looking at our whole operation as well as how we
work with our supply chain.
SUSTAINABLE BUILDING MATERIALS AND CONSTRUCTION
We believe in making sustainable products and being transparent
with our customers about our products and their impact.
A number of our businesses have improved the sustainability of their
products and operations this year:
– Iplex New Zealand introduced recycled polyethylene into its land
drainage pipes, with the potential to reuse more than four million
plastic bottles per year.
– Oliveri significantly changed its packaging and have achieved zero
waste to landfill. They are rated as “beyond best practice” by the
Australian Packaging Covenant Organisation.
– The Construction division is working with its clients and
construction partners on sustainability rated projects, including
-
the Pu- hoi to Warkworth Expressway, Peka Peka to O
Expressway and Commercial Bay.
taki
Fletcher Living is committed to creating thriving communities and
building healthy homes for its customers. Homes are designed
and delivered with sustainable and energy saving features. It is
becoming more common for us to include sustainability rated
home certifications as part of our developments when partnering
with other organisations and agencies.
Within our construction projects and residential developments,
we are innovating and looking for opportunities to reduce our
environmental impact. This includes managing our impact on
natural resources, local habitats and biodiversity, reducing
emissions and waste, removing any hazardous materials and
managing water use and energy consumption. In the Construction
division recent innovations include increasing the use of biofuels
18
Golden Bay Cement.
Fletcher Building Limited Annual Report 2019 Pink®Batts® are made from recycled glass and
the packaging is also recyclable.
As part of setting this new carbon emissions standard we undertook
an external audit of our FY18 carbon emissions data. This included all
businesses in New Zealand and Australia.
The review highlighted that carbon emissions had been significantly
overestimated in our previous reporting. The errors were principally
due to double-counting of some major emission sources. Corrected
FY17 and FY18 emissions are included in this report. FY18 emissions
for the group were 1,418,093 t CO2e (1,238,380 t CO2e excluding the
International Division).
We are implementing the internationally recognised standard for
greenhouse gas accounting (ISO 14064-1) to report and audit our
carbon data.
Our increased emissions from FY17 to FY18 were primarily due
to the inclusion of Higgins acquired in FY17 in our reporting and
reduced availability of biomass for Golden Bay Cement which caused
higher consumption of coal as a fuel.
CASE STUDY
Combined scope 1 and 2 carbon emissions
Environmental transparency
Fletcher Building is making it easier for
designers, architects and their customers to
understand the environmental performance of
our products.
We have now voluntarily published nine
Environmental Product Declarations (EPDs),
and more than any other company in
New Zealand.
EPDs are leading practice in environmental
transparency – they are independently verified
documents that detail the environmental impact
of a product over its full life cycle.
This year we published EPD's for pre-
painted metal products by Pacific Coilcoaters,
Pink®Batts® by Tasman Insulation, and cement
products by Golden Bay Cement, which are the
first EPDs for cement in Australasia.
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1,400,000
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1,000,000
400,000
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FY14
FY15
FY16
FY17
FY18
FY19
Emissions excluding Formica and Roof Tile Group
200,000
200
0
Formica and Roof Tile Group Emissions
FY14
FY15
FY16
FY17
FY18
FY19
FY14
FY15
FY16
FY17
FY18
FY19
175
150
200
125
175
100
150
125
100
FY14
FY15
FY16
FY17
FY18
FY19
Emissions intensity
19
Fletcher Building Limited Annual Report 2019
FY19 emissions were 8% lower than FY18, with 1,298,266 t CO2e
being produced (1,146,788 t CO2e excluding the international
division). The decrease was largely due to a production outage at
Golden Bay Cement and reduced fuel and energy usage in our
Australian businesses.
We expect emissions from Golden Bay Cement to increase in the
short term as production returns to normal levels. However, we have
a number of emission reduction initiatives planned for FY20 and
beyond. Golden Bay Cement is progressing well with its alternative
fuels strategy. The project to introduce tyre-derived fuel is on track
with plant equipment planned to be installed and commissioned
during the first half of the 2020 calendar year.
The project will substitute 20% of Golden Bay Cement's coal use with
up to 3.1 million shredded tyres per annum, which is up to half of New
Zealand’s annual waste tyres, excluding stockpile. It will also reduce
Golden Bay Cement's use of iron sand by 5,000 tonnes or 40%.
We have a number of other carbon reduction initiatives planned,
including opportunities to use cogeneration energy at Laminex
Australia’s Gympie site. Tradelink is monitoring and reducing
electricity usage at their highest usage branches. Fletcher Steel and
our Humes business have developed carbon reduction road maps
and in FY20 all of our business units will be developing reduction
plans in line with our carbon targets.
WATER
Water is essential to our operations, and we recognise our
responsibility to sustainably manage what we use and discharge.
Many of our businesses incorporate water management systems
into their operations, including internal water recycling loops and
catchment equipment for harvesting rainwater. Firth, Winstone
Aggregates, PlaceMakers and Pacific Coilcoaters have all implemented
water management improvements this year. Meanwhile Laminex
Australia, has reduced water taken from bores at its Dardanup site
from 120,000 kilolitres to 48,000 kilolitres per year.
As part of our construction project planning, we work to preserve
natural waterways and make sure that we have extensive erosion
and sediment controls in place.
Over the next year we will improve the quantity and quality of data
that we collect on water consumption and discharge across the
Group. This will enable us to have oversight and focus on further
decreasing our water footprint.
Iplex NZ recycled plastic bottles.
20
Fletcher Building Limited Annual Report 2019 30/30
30% reduction of carbon
emissions by 2030
WASTE
Waste is an area of increased scrutiny across the business. In
FY19, we worked closely with our key waste service providers to
improve our data and performance. Through better understanding
of our waste footprint we can develop specific waste reduction
strategies. We are looking at circular economy principles to
find ways we can use waste from one process or business as
an input in to another. Some of our businesses have already
achieved a significant reduction in waste to landfill, for example,
Fletcher Living, which is currently on target to divert over 70% of
its waste. Oliveri and Iplex NZ stand out for having achieved zero
waste to landfill. Fletcher Building's target is to divert more than
30% of our waste from landfill by FY23.
LAND AND BIODIVERSITY
Maintaining and protecting local habitats and biodiversity
is important to us, our clients and our communities. From
protecting native bats, snails and birds to restoring wetlands and
tree planting, our teams continue to ensure conservation is at the
heart of what we do.
Oliveri.
Dotterel eggs
CASE STUDY
Protecting our endangered birds
When Fletcher Living’s Health and Safety Manager,
spotted a few small birds on their Hobsonville
Point development site during a pre-construction
walk, she set in flight a process that has led
Fletcher Living to help save New Zealand’s
endangered North Island dotterel population.
Dotterels nest in open sites, typically sand or
gravel banks and sandbars close to beaches and
lagoons. The Fletcher Living site ticked all the
boxes for a great nesting location.
Not wanting to take any chances with a protected
national taonga, Fletcher Living paired up with
ecologists and the Department of Conservation
to safeguard the birds while enabling work to
continue on adjacent areas of the site.
Together we carried out
comprehensive grid searches to
find and protect all the nests. Then
exclusion zones were established
around the nests, complete with
fencing and signage that made it
easy for workers to identify and
avoid the dotterels.
– Project Manager Ross Kendrick.
Deterrent measures were also put in place to
encourage the dotterels to take up residence in a
safer, more remote area of the site.
The dotterels have so far raised five chicks from a
cordoned off area of the site.
21
Fletcher Building Limited Annual Report 2019 Group Performance
Reported results
Total revenue
EBIT before significant items (1)
Significant items (2)
EBIT
Funding costs
Earnings/(loss) before tax
Tax (expense)/benefit
Earnings/(loss) after tax
Non-controlling interests
Net earnings/(loss)
Basic earnings per share (cents)
Basic earnings per share before significant items (cents)
Dividends declared per share (cents)
Cash flows from operating activities
Capital expenditure
Revenue
Building Products
Distribution
Steel
Concrete
Residential and Development
Construction
Australia
Other
Continuing operations
Discontinued operations
Less: intercompany revenue
Group external revenue
Year ended
June 2019
Year ended
June 2018
NZ$M
9,307
631
(234)
397
(118)
279
(102)
177
(13)
164
19.2
43.0
23.0
153
348
NZ$M
9,471
50
(168)
(118)
(157)
(275)
96
(179)
(11)
(190)
(25.5)
(8.1)
0.0
396
304
Year ended
June 2019
Year ended
June 2018
NZ$M
759
1,596
555
802
639
1,702
3,024
11
9,088
1,019
(800)
9,307
NZ$M
764
1,530
532
812
575
1,685
3,076
8
8,982
1,285
(796)
9,471
Change %
(2%)
NM
39%
NM
25%
NM
NM
NM
(18%)
NM
NM
NM
23.0
(61%)
14%
Change %
(1%)
4%
4%
(1%)
11%
1%
(2%)
38%
1%
(21%)
1%
(2%)
(1) Measures before significant items (and B+I) are non-GAAP measures used by management to assess the performance of the Group and has been derived from Fletcher Building Limited’s
financial statements for the year ended 30 June 2019.
(2) Significant items relate principally to losses recognised on disposal of businesses during the year and restructuring charges recognised. Further details of significant items can be found in
note 2 of the financial statements.
22
Fletcher Building Limited Annual Report 2019
Building Products
EBIT* 2019
$127m
EBIT 2018 $132m (p) 4%
Distribution
EBIT 2019
$104m
EBIT* 2018 $104m (p) 0%
Steel
EBIT 2019
$33m
EBIT* 2018 $49m (p) 33%
Concrete
EBIT 2019
$84m
EBIT* 2018 $90m (p) 7%
Residential and
Development
EBIT 2019
$137m
EBIT 2018 $136m (p) 1%
Construction
EBIT 2019
Australia
EBIT* 2019
$47m
EBIT+ 2018 $52m (p) 10%
$57m
EBIT* 2018 $114m (p) 50%
* Before significant items.
+ Before significant items and the impact of the B+I business unit.
Building Products
Distribution
Steel
Concrete
Residential and Development
Construction
Australia
Corporate
Continuing operations
Formica and Roof Tile Group
Divested businesses
Total
Funding costs
Earnings/(loss) before tax
Tax (expense)/benefit
Earnings/(loss) after tax
Non-controlling interests
Net earnings/(loss)
Reported operating earnings
Operating earnings before
significant items and B+I
Year ended
June 2019
Year ended
June 2018
NZ$M
NZ$M
Change
%
Year ended
June 2019
Year ended
June 2018
NZ$M
NZ$M
Change
%
117
104
33
84
137
47
(21)
(46)
455
(58)
397
(118)
279
(102)
177
(13)
164
132
101
41
73
136
(613)
65
(111)
(176)
8
50
(118)
(157)
(275)
96
(179)
(11)
(190)
(11%)
3%
(20%)
15%
1%
NM
(134%)
59%
NM
NM
(100%)
NM
25%
NM
NM
NM
(18%)
NM
127
104
33
84
137
47
57
(40)
549
82
631
(118)
513
(133)
380
(13)
367
132
104
49
90
136
52
114
(45)
632
65
13
710
(157)
553
(127)
426
(11)
415
(4%)
0%
(33%)
(7%)
1%
(10%)
(50%)
11%
(13%)
26%
(100%)
(11%)
25%
(7%)
(5%)
(11%)
(18%)
(12%)
23
Fletcher Building Limited Annual Report 2019 Group Overview
External revenue of $9,307 million was $164
million or 2% lower than the prior year, and
excluding B+I revenue was 1% higher than the
prior period. Operating earnings before significant
items were $631 million and were within the
Group’s guidance range of $620 - $650 million.
This compares to $710 million in the prior year which excluded the
Building + Interiors (B+I) business unit losses and included a full year
of trading for the Formica and Roof Tile Group (RTG) businesses. The
Group returned to profit in FY19 with net earnings of $164 million
compared to a loss of $190 million in the prior year.
In the New Zealand businesses, gross revenue (excluding B+I) grew
by 3%, while operating earnings (excluding B+I) before significant
items declined by $31 million or 6% compared to the prior year.
Market activity levels were generally steady compared to the
prior period, with businesses benefiting from the ongoing strong
residential consents, especially in Auckland. Notwithstanding the
strong activity levels, the New Zealand market remained highly
competitive across all sectors.
– The distribution and materials divisions (Building Products,
Distribution, Steel, and Concrete) recorded revenue in line with
the prior year, while operating earnings declined by 7% or $27
million. The reduction in EBIT was primarily due to challenging
trading conditions in the Steel business ($16 million impact),
a mill outage in Golden Bay Cement ($7 million impact), and
higher depreciation compared to the prior period ($5 million
impact). Outside of these factors, business unit earnings were
generally stable or slightly higher compared to the prior period.
The Building Products businesses maintained their strong market
positions, though continued to experience some pressure on
margins as sustained high input costs were not able to be fully
recovered. Distribution volumes benefited from the elevated
market backdrop and we continued to drive improvements to the
customer experience, rolling out our digital mobility tools to all
of our PlaceMakers branches. In Concrete, Winstone Aggregates
produced a very strong result (30% increase in EBIT) as large
infrastructure projects sustained the demand for aggregates and
quarry operating efficiency improved.
– The Residential and Development division delivered earnings
1% higher than the prior period. The housing business continued
its strong growth with house sales rising to 755 units. Margins
remained stable across most housing typologies, however a
higher proportion of units were sold in Christchurch resulting in a
lower overall margin and earnings in line with the prior year. Land
Development sales mainly from Wiri were completed faster than
expected, resulting in a strong EBIT of $56 million for the year.
by strong activity levels across the rest of the division. Operating
earnings for the division declined by $5 million or 10% (excluding
B+I) reflecting lower margin in the Major Projects and Brian Perry
businesses, while Higgins continued to perform well. There was no
change to the B+I provisions booked in February 2018.
In Australia, gross revenue declined by 2% and operating earnings
before significant items declined by $57 million or 50% compared
to the prior year. Performance was impacted by a combination of
a sharp decline in the residential market, which resulted in lower
volumes and heightened competitive intensity in businesses
exposed to that sector (especially Laminex and Stramit) and gross
margin compression in all businesses, as increased input costs (e.g.
resin, fuel, steel) were exacerbated further by a depreciating AUD/
USD currency ($23 million EBIT impact). The division made decisive
intervention to reset and strengthen the Australian business units.
By year end, over 60% of the identified initiatives aimed at overhead
cost savings and consolidating operations were implemented.
The Group completed the sale of the Formica business in June
2019 and the sale of the RTG business in November 2018. Net
proceeds from the transactions totalled $1.25 billion and were
delivered ahead of schedule, completing an important leg of the
Group’s strategy announced in June 2018.
Significant items of $234 million for the year included the loss
on sale for the International businesses of $140 million, and
other restructuring charges of $94 million primarily related to the
Australia reset.
Funding costs for the year decreased by 25% to $118 million,
resulting from lower debt levels and cessation of additional interest
charges in March 2019. The tax expense of $102 million compared
to a tax benefit of $96 million in the prior year, which reflected the
impact of the B+I loss provisions recognised in FY18.
Basic earnings per share were 19.2 cents compared with (25.5)
cents per share in the prior year. Adjusting for the impact of
significant items, earnings per share were 43.0 cents compared with
(8.1) cents per share in the prior year.
GROUP CASH FLOW
Cash flows from operating activities of $153 million were $243
million lower than the prior year.
Excluding B+I and the International businesses which were divested
during the year, trading cash flows from continuing operations were
$552 million, which was $251 million lower than the prior year. This
was due to the following factors:
– Reduced earnings, primarily in the Australia and Steel divisions;
– Increased creditor payments in the materials and distribution
– The Construction division grew revenue by 1% as a decrease from
the continued wind down of the B+I legacy projects was offset
businesses, which had been expected and reflects the unwind of
high creditor balances held as at June 2018;
24
Fletcher Building Limited Annual Report 2019 Cash flow (NZ$m) for the year ended
June 2019
June 2018
Change
EBIT from continuing operations before significant items
Depreciation and amortisation
Provisions, significant items and other
Trading cash flow before working capital movements
Residential and Development
Construction
Other divisions:
- Debtors
- Inventories
- Creditors
Working capital movements
Trading cash flow from continuing operations
Discontinued operations
B+I
Trading cash flow
Less: cash tax paid
Less: interest paid
Cash flows from operating activities
Free cash flow from continuing operations
549
174
(65)
658
(27)
(16)
28
(54)
(37)
(106)
552
14
(257)
309
(28)
(128)
153
254
631
170
(47)
754
(28)
35
(20)
(54)
116
49
803
121
(285)
639
(85)
(158)
396
494
(82)
4
(18)
(96)
1
(51)
48
(153)
(155)
(251)
(107)
28
(330)
57
30
(243)
(240)
– Lower cash flows in Construction (ex-B+I), due to timing of cash receipts
in Higgins and South Pacific, and advance project payments received in
the prior period in Major Projects.
The trading cash flow impacts above were offset to a degree by a
favourable movement in debtors: a cash inflow of $28 million in FY19
compared to a cash outflow of $20 million in the prior year.
The ongoing cost of completing the legacy B+I projects resulted in a
cash outflow of $257 million in FY19 compared to an outflow of $285
million in the prior year.
Cash generation improved materially in the second half of the financial
year, with trading cash flow from continuing operations of $516 million
compared to $36 million outflows in the first half. This was driven
particularly by improved performance in working capital in the materials
and distribution businesses, with a cash inflow of $140 million in the
second half compared to a cash outflow of $203 million in the first half.
Capital expenditure for the Group was $348 million, compared with $304
million in the prior year. Of this total, $285 million was for the Group’s
continuing operations and was at the lower end of the FY19 capex
guidance of $275 million to $325 million.
FUNDING
Total available funding as at 30 June 2019 was $2,257 million. Of this,
$667 million was undrawn and there was an additional $1,372 million of
cash on hand.
The Group’s gearing at 30 June 2019 was 7.2% compared with 23.5% at
30 June 2018.
The Group’s leverage ratio (net debt/EBITDA) at 30 June 2019 was 0.4
times compared with 4.8 times at 30 June 2018. Leverage at 30 June 2019
excluding B+I was 0.4 times compared with 1.4 times at 30 June 2018.
The average maturity of the Group’s debt at 30 June 2019 is 4 years and
the hedged currency split is 40% Australian dollar; 56% New Zealand
dollar; 3% US dollar; and 1% spread over various other currencies.
Approximately 56% of all borrowings have fixed interest rates
with an average duration of 2.9 years. Inclusive of floating rate
borrowings, the average interest rate on the debt (based on
period end borrowings) is 5.0%. Interest rates reflect the removal
of the additional interest charges arising from the debt covenant
breach in 2018.
DIVIDEND
The 2019 final dividend is 15 cents per share, bringing the total
dividend for 2019 to 23 cents per share. In line with the Group’s
tax crediting policy, the Group targets to impute and frank at
least the final dividend subject to available tax credits. The final
dividend will be unimputed and unfranked for tax purposes.
The final dividend will be paid on Thursday 19 September 2019 to
holders registered as at 5.00 pm (NZ time) on Thursday 29 August
2019. The shares will be quoted on an ex-dividend basis from
Wednesday 28 August 2019 on the NZX and ASX. The Dividend
Reinvestment Plan will not be operative for this dividend payment.
OUTLOOK
New Zealand – activity in the residential sector in FY20 is
expected to decrease slightly compared to the current year,
driven by an easing in the level of new residential consents
but continued strength in the Auckland region. Activity levels in
the commercial and infrastructure sectors are also expected to
remain broadly stable, though with a changing mix as previous
spend in major roading shifts to road safety, water, and rail.
Australia – residential activity is expected to continue to contract,
however, the market environment remains uncertain. Commercial
activity and East Cost infrastructure is expected to remain broadly
flat with an established project pipeline.
25
Fletcher Building Limited Annual Report 2019 Divisions
Building
Products
Concrete
26
Residential and
Development
Fletcher Building Limited Annual Report 2019 Distribution
Steel
Construction
Australia
27
Fletcher Building Limited Annual Report 2019 Building
Products
Winstone Wallboards | Laminex New Zealand | Tasman Insulation
Humes | Iplex New Zealand | CSP Pacific
DIVISIONAL PERFORMANCE OVERVIEW
The Building Products division reported gross revenue of $759
million, which was 1% lower than the prior year. Operating earnings
before significant items were $127 million, a decrease of $5 million
or 4% compared to the prior year, however, second half earnings
were up by 3%.
Capital expenditure in the year was $37 million compared to the prior
year spend of $19 million. Key initiatives included Iplex NZ’s purchase
of a mobile extrusion plant for polyethylene (PE) pipe manufacturing
in the South Island, and investments in digital customer platforms
that went live during the year.
FUTURE FOCUS
The Building Products division’s focus for the next 12 months will
be on four key areas. Firstly, organic growth through adjacencies
and product innovation, secondly, an efficient operating model,
thirdly, enhanced pricing disciplines and finally, improved customer
experience. Key drivers of growth for FY20 include Winstone
Wallboard’s new Weatherline® products, Iplex’s superior performance
PVC-O range and a further refreshed décor range in our laminated
products. We continue to invest in ensuring our manufacturing
facilities are the most efficient in the market. This includes the
construction of a new Winstone Wallboards facility, New Zealand’s
first mobile PE extrusion plant which can be relocated on site for
large pipeline projects and increased automation in our insulation
facility. Our customer experience will receive renewed focus over
the coming year to ensure that our customers continue to see the
benefits of improved DIFOT, enhanced digital systems and a more
seamless transaction process.
Revenue performance across the division reflected supportive
conditions in the residential sector, offset to a degree by lower
infrastructure and rural activity, which impacted the pipelines
businesses as one-off projects were not repeated. Winstone
Wallboards and Tasman Insulation delivered solid revenue growth of
7% and 5% respectively, supported by record production volumes.
All business units continue to focus on expanding their product
offerings. Highlights during the year included the launch of a new
rigid air barrier Weatherline® by Winstone Wallboards, product range
expansions and refreshes by Laminex NZ and double-digit growth in
the plumbing and electrical segments by Iplex NZ.
Operating earnings increased in Winstone Wallboards and Tasman
Insulation compared to the prior year, however this was more than
offset elsewhere in the division due to lower pipelines project
activity and input cost pressures. The cost pressures were seen in
higher energy costs – electricity, fuel and gas – and materials costs,
especially resin. While some of these were able to be passed on,
market competition restricted the full recovery of these costs.
In Humes, performance also reflected challenges identified
during the deployment of a new ERP system in the prior year. The
business has undergone a significant reorganisation to streamline
its processes and establish a good base moving forward. Significant
items of $10 million were recorded in the current period relating to
costs associated with this restructuring.
Trading cash flow of $142 million was consistent with the prior
year. This reflected an increase in inventory holdings by Winstone
Wallboards to meet current demand levels and in preparation for
transitioning to a new plant, while receivables continued to be well
controlled with a 1.6 day reduction in debtor days achieved through
the year.
28
Fletcher Building Limited Annual Report 2019 22%
EBIT
$127m
% of Group EBIT
Building Products
Financial Summary
Year ended 30 June
2019
NZ$M
2018
NZ$M
Change
NZ$M
Change
%
Gross revenue
External revenue
EBIT
Funds
Trading cash flow
* Before significant items.
759
587
127*
503
142
764
613
132
494
142
(5)
(26)
(5)
9
(1%)
(4%)
(4%)
2%
0%
29
Fletcher Building Limited Annual Report 2019 Distribution
PlaceMakers | Mico | Forman Building Systems | Snappy
DIVISIONAL PERFORMANCE OVERVIEW
The Distribution division reported gross revenue of $1,596
million, which was 4% higher than the prior year. Operating
earnings were $104 million, consistent with the prior year.
Solid revenue growth in both PlaceMakers and Mico
continued to be supported by the Auckland market, with
the Waikato and Bay of Plenty regions returning to growth
in the second half. However, the Christchurch market
remains soft. The division continued to expand its branch
network to establish a greater market presence, with a new
PlaceMakers branch in Rotorua following the purchase of a
local competitor, while Mico opened a new branch
in Motueka.
Operating earnings were in line with the prior year despite
the growth in revenue, reflecting the combination of a highly
competitive market and upward pressure on labour costs,
which increased ahead of inflation. The division continues
to defend margins and this will continue be a major focus
looking forward.
Trading cash flow of $98 million was $14 million lower than
the prior year. This was primarily due to lower than expected
customer receipts through the year-end. Working capital
remains well controlled. However, with inventory days in line
with the prior year and debtor days improving by 0.8 days.
Capital expenditure in the year was $23 million, compared
to $20 million in the prior period. The division continued its
program of upgrades to branches and showrooms, with
the PlaceMakers Waiheke, Oamaru and Kaiwharawhara
branches all undergoing significant upgrades. The division
also continues to invest in digital innovation to streamline
customer facing processes through use of technology
on handheld devices. In addition, a new transportation
management system is using technology to transform
delivery capability and enable efficiencies through optimised
delivery routing and load sizes. A new head office ERP
system in PlaceMakers was also successfully implemented
during the year.
30
FUTURE FOCUS
Looking ahead to FY20, the division is continuing to focus
on investment in e-commerce and digital capability to create
an enhanced customer experience. Following the successful
PlaceMakers implementation during FY19, Mico will complete a
similar head office ERP upgrade during FY20. The investment in
branch and showroom upgrades will continue, and the division will
also explore opportunities to further increase its network footprint
and category reach.
Fletcher Building Limited Annual Report 2019 EBIT
$104m
18%
% of Group EBIT
Distribution
Financial Summary
Year ended 30 June
2019
NZ$M
2018
NZ$M
Change
NZ$M
Change
%
Gross revenue
1,596
1,530
External revenue
1,552
1,490
EBIT
Funds
Trading cash flow
* Before significant items.
104
300
98
104*
264
112
66
62
36
(14)
4%
4%
0%
14%
(13%)
31
Fletcher Building Limited Annual Report 2019 Steel
Easysteel (including Dimond Structural and Dimond Roofing)
Pacific Coilcoaters | Fletcher Reinforcing
DIVISIONAL PERFORMANCE OVERVIEW
FUTURE FOCUS
The Steel division’s focus for the next 12 months will be on three
key areas: best in class customer service; launching innovative new
steel-based systems to market; and growing our share in special
steels and speciality cladding products. We continue to improve our
customer experience to stay ahead of the competition including
improvements in product availability (DIFOTIS and lead times), speed
of quote and traceability of our products. Our focus on innovation
and new product development over recent years is starting to
materialise with numerous new products being ready to come to
market in the early stages of FY20 including a post tensioned steel
solution for vertical construction.
The Steel division reported gross revenue of $555 million, 4%
higher than the prior year. Operating earnings were $33 million, a
decrease of $16 million or 33% compared to the prior year.
Increased revenue reflected continued strength in the residential
market, driving higher volumes in Easysteel roofing sales
and steady domestic growth of Colorcote products in Pacific
Coilcoaters. The division also continued to build market share on
strong customer service performance. Offsetting these gains
were subdued activity in the manufacturing and rural sectors and
lower project activity in Fletcher Reinforcing, where bids were not
submitted for some tenders due to higher risk profiles.
Lower operating earnings for the division reflected a combination
of an intensely competitive trading environment, rising global
steel prices and increases in a number of other input costs such
as energy, transport, and labour. Margins in EasySteel and Pacific
Coilcoaters were particularly impacted as higher costs could not be
recovered in the competitive market environment.
Trading cash flows for the year of $15 million were $40 million
lower than the prior year. The key contributors to this reduction
were the lower earnings of $16 million and increased investment
in inventory of $18 million. The higher inventory balance reflected
two factors: the division’s strategy to increase dual supply of raw
materials, with imported supply having longer lead times; and the
increase in steel input prices.
Capital expenditure in the year was $18 million, compared to $14
million in the prior period. Key investments included ‘ARMA+’
a new ERP system for Fletcher Reinforcing, upgraded roll-
forming capacity in Dimond, and safety improvements and crane
replacements across all business units.
32
Fletcher Building Limited Annual Report 2019 EBIT
$33m
6%
% of Group EBIT
Steel
Financial Summary
Year ended 30 June
2019
NZ$M
2018
NZ$M
Change
NZ$M
Change
%
Gross revenue
External revenue
EBIT
Funds
Trading cash flow
* Before significant items.
555
426
33
220
15
532
411
49*
184
55
23
15
(16)
36
(40)
4%
4%
(33%)
20%
(73%)
33
Fletcher Building Limited Annual Report 2019 Concrete
Winstone Aggregates | Golden Bay Cement | Firth Industries
DIVISIONAL PERFORMANCE OVERVIEW
The Concrete division reported gross revenue of $802 million, 1%
lower than the prior year. Operating earnings were $84 million, a
decrease of $6 million or 7% compared to the prior year. When
adjusted for the impact of the cement mill outage, operating
earnings improved by 1%.
Winstone Aggregates had a very strong year with quarry revenue
up 12%, driven by improved pricing and an 8% increase in
aggregate sales volumes as major roading projects lifted demand.
The acquisition of the Tamahere quarry in the Waikato region
was completed in March 2019, with quarry operations now
fully integrated into the division, and reflecting the continued
investment in future resource.
In Golden Bay Cement, revenue was consistent with the prior
year when adjusted for the cement mill outage at the Portland
manufacturing facility in September 2018. Revenue continued
to be underpinned by consistent domestic demand and positive
price achievements. The business continued to improve the
extent and robustness of the cement supply chain during the
year as coastal shipping deliveries extended to New Plymouth,
and additional barge capacity was introduced between Portland
and Auckland.
In Firth, ready-mix volumes were steady nationally, though there
was variation by region with continued growth in Auckland offset
by a decline in Canterbury as some significant infrastructure
projects were completed. Overall, a positive lift in sales price
was achieved across the year. The new Auckland Airport precinct
ready-mix plant has been fully commissioned lifting the capacity
of the Auckland network and provides a well-positioned location to
service the region.
Operating earnings for the division were impacted by the $7
million cost of the cement mill outage. The strong volume and
price performance in Winstone Aggregates lifted earnings for this
business by 30% over the prior year. Cement earnings (adjusted
for mill outage costs) were 2% higher than the prior year, with
increased coal costs of $3 million offset by supply chain savings
and improved pricing. Firth earnings from masonry grew by
34
14% as the Hunua block plant favourably impacted manufacturing
efficiencies and further benefits were accrued from the refined
manufacturing footprint. This was offset by a decrease in ready-mix
earnings of 12% on the prior year as higher energy, labour and
distribution costs were not able to be fully recovered by
price increases.
Trading cash flow for the division of $136 million increased from
$128 million in the prior year, with improvements in working capital
offsetting the reduced earnings.
Capital expenditure for the division of $65 million was broadly in
line with the prior year. Investment was particularly focused on
aggregates, as the division invested in developing quarry resource
to meet projected demand, and purchased replacement heavy
mobile equipment to maintain quarry efficiencies and capability.
Firth continued its program of ready-mix truck replacement, and
commissioned a new ready-mix plant at Auckland Airport. Golden
Bay Cement spend focused on silo capacity and cement mill
resilience at the Portland facility, as well as the implementation
of the new cement barge service to Auckland to drive supply
chain efficiency.
Fletcher Building Limited Annual Report 2019 EBIT
$84m
14%
% of Group EBIT
Concrete
Financial Summary
Year ended 30 June
2019
NZ$M
2018
NZ$M
Change
NZ$M
Change
%
Gross revenue
External revenue
EBIT
Funds
Trading cash flow
* Before significant items.
802
549
84
656
136
812
545
90*
628
128
(10)
4
(6)
28
8
(1%)
1%
(7%)
4%
6%
FUTURE FOCUS
The division’s focus for FY20 will be on projects to further bolster
long term capability, reduce carbon emissions, improve customer
service experience – especially through digital connectivity – and
ensure cost competitive manufacturing and supply chain positions.
Firth will continue to invest in new trucks, rejuvenation of current
plants, and growth through investment in new fixed and mobile plant
locations. New product development in masonry will include a more
environmentally-friendly honing plant for enhanced
surface finishes.
Golden Bay Cement will continue to work on cost reduction initiatives,
particularly in supply chain logistics. Tyre Derived Fuel, a project in
conjunction with Ministry for the Environment, will be completed in
the second half of FY20 enabling material cost improvements and
reduction in carbon emissions. The key product development initiative
is to develop a low carbon and sustainable cementitious material
which will reduce the carbon footprint for concrete.
Winstone Aggregates will continue to invest in quarry capacity to
ensure long term sustainable resource extraction and earnings, and
will focus on building out capabilities to meet the demands of large
project opportunities.
35
Fletcher Building Limited Annual Report 2019 Residential and
Development
Residential | Land Development | Panelisation
equipment, and recruited operating staff. The plant is targeting to
produce the first panels in the first half of FY20.
Trading cash flow for the division was $95 million compared to
$109 million in the prior year. Residential cash flow increased from
an outflow of $10 million in FY18 to an inflow of $55 million in the
current period, in line with a target of moving to 100% conversion
of earnings to cash. In Land Development, trading cash flow of $41
million was lower than the $120 million delivered last year, mainly
due to the deferred settlement of approximately $50 million for one
of the lots sold at Wiri.
Divisional funds employed increased to $651 million at 30 June
2019 from $604 million at 30 June 2018. This included $145 million
of lot purchases and $40 million of costs to develop residential land.
The current funds balance includes 3,687 residential lots for further
development or sale. In addition, the business has a further 1,735
units under unconditional agreements to be delivered over the next
five years.
DIVISIONAL PERFORMANCE OVERVIEW
The Residential and Development division reported revenue of $639
million, an increase of 11% compared to the prior year. Operating
earnings grew by 1% to $137 million an increase of $1 million
over the prior year. The Group adopted NZ IFRS 15 Revenue from
Contracts with Customers during the year, which affected the
recognition of revenue from sale of houses and the comparison of
results over the prior year. Adjusting the comparative period for the
new accounting policies, the current year EBIT was 6% higher than
the prior year.
The Residential business grew revenue by 13% to $526 million
in FY19. Total house sales volumes increased by 6% to 755 units,
compared to 714 in the prior year. When section sales are excluded,
735 dwellings were sold during the year compared to 613 in the prior
year (527 dwellings when adjusted for the impact of NZ IFRS 15).
Auckland house sales continued to be a strong driver of revenue
growth in FY19. Good demand remains in the $600,000 - $900,000
range, which is the focus for the business. Sales in higher price
points have been steady, though the time taken to settle these
houses has on average been longer due to purchasers usually having
to sell their current homes first. Christchurch had a good year with
strong sales at the Atlas Quarter and Awatea developments, and
made the first sales in One Central, which is the focus for future
development in this market.
Residential earnings of $84 million were 1% lower than last year.
Margins remained stable across most housing typologies, however
a higher proportion of units were sold in Christchurch resulting in a
lower overall margin mix.
Land Development had continued success in realising value
from assets surplus to Group requirements, especially at the
Wiri development in South Auckland, which proceeded ahead of
expectations. This was the key driver of Land Development revenue
of $113 million, which was 5% higher than the prior year, and a 10%
increase in operating earnings to $56 million.
The newly created Panelisation business reported an operating
loss of $3 million, as it established a new factory, installed new
36
Fletcher Building Limited Annual Report 2019 EBIT
$137m
23%
% of Group EBIT
Residential and Development
Financial Summary
Year ended 30 June
2019
NZ$M
2018
NZ$M
Change
NZ$M
Change
%
Gross revenue
External revenue
EBIT
Funds
Trading cash flow
639
639
137
651
95
575
575
136
604
109
64
64
1
47
11%
11%
1%
8%
(14)
(13%)
Residential and Development
EBIT
Year ended 30 June
2019
NZ$M
2018
NZ$M
Change
%
Residential
Land Development
Panelisation
Total
85
51
84
56
(3)
137
136
(1%)
10%
NM
1%
FUTURE FOCUS
Looking ahead, the division will continue to scale its housing
business, with a number of new developments across
Auckland including sites at Te Atatu, Tamaki and Karaka.
There is also work being undertaken to assess investment
in additional land to the north-west and south of Auckland.
The new panelisation plant will commence manufacturing
panels for the Fletcher Living business in the first half of
FY20, supporting the increase in the volumes of homes
constructed during the coming year. The Land Development
business will continue to develop sites surplus to the
Group’s requirements, targeting approximately $25 million
per annum earnings in the medium term.
37
Fletcher Building Limited Annual Report 2019 FY18 as a result of the unwind of advance payments on several large
roading contracts.
The division invested $31 million in capital expenditure in FY19,
consistent with the prior year. The focus of investment continues to
be in the manufacture and supply of bituminous products in Higgins
and in plant for foundations in Brian Perry Civil.
FUTURE FOCUS
Looking ahead, the division will build off the stabilised base that has
been established in FY19. With a refreshed leadership team in place,
the priorities will be to: complete the remaining legacy B+I projects
within current provisions; leverage a strengthened set of project and
risk management capabilities in winning and delivering new work
effectively; and bring innovative solutions to bear for key customers.
The division is well-placed to benefit from a significant pipeline of
transport, water and commercial infrastructure that is planned in
New Zealand in the coming years.
Construction
Major Projects | Building + Interiors (B+I)
South Pacific | Brian Perry Civil | Higgins
DIVISIONAL PERFORMANCE OVERVIEW
The Construction division reported gross revenue of $1,702 million,
1% higher than the prior year. The division returned to profitability for
the year with operating earnings of $47 million compared to a loss of
$608 million in the prior year (a profit of $52 million when excluding
the B+I loss of $660 million in FY18).
Increased revenue for the division was reflected by strong revenue
growth in the Major Projects and Brian Perry Civil businesses, offset
by lower revenues from the ongoing completion of the B+I legacy
projects. The completion of the B+I legacy projects remains within the
project provisions announced in February 2018. Of the 16 key projects,
ten were completed by the date of this report, four are on track to be
completed by 31 December 2019, with the last two to be completed
in calendar 2020. In June 2019 the Group confirmed its intention to
recommence focused bidding in the vertical construction market.
At 30 June 2019 the backlog of work for the division (being the value
of contracted work awarded but not completed) was $1,445 million,
compared with $1,784 million in June 2018 and $1,600 million
in December 2018. B+I backlog decreased by $485 million. The
Major Projects business was successful in its bid for the Northern
Interceptor project for Watercare, while Higgins, South Pacific and
Brian Perry Civil continue to have good success with project wins in
New Zealand and Fiji and go into the FY20 year with good work in
hand volumes.
Operating earnings for the division were $47 million. The result was
underpinned by Higgins, which delivered earnings of $36 million.
While this was a $6 million decrease on the prior year, due to
the completion of several high-margin projects in Fiji and in New
Zealand, the outlook for the business remains strong. In aggregate,
the Major Projects, Brian Perry Civil and South Pacific businesses
reported earnings in line with the prior year.
Trading cash flow for the division for the year was an outflow of
$210 million compared to an outflow of $172 million in the prior year.
Cash outflows in the B+I business were $257 million in the current
year, compared to $285 million in the prior year. Excluding the B+I
business, trading cash flow for the division was an inflow of $47
million, which was lower than the inflow of $113 million recorded in
38
Fletcher Building Limited Annual Report 2019 8%
EBIT
$47m
% of Group EBIT
Construction
Financial Summary
Year ended 30 June
2019
NZ$M
2018
NZ$M
Change
NZ$M
Change
%
Gross revenue
1,702
1,685
External revenue
1,622
1,605
EBIT
Funds
47
48
Trading cash flow
(210)
(608)*
(238)
(172)
17
17
655
286
(38)
1%
1%
NM
NM
(22%)
Construction
EBIT*
Year ended 30 June
Higgins
Infrastructure, South Pacific,
Brian Perry Civil
B+I
Total
* Before significant items.
2019
NZ$M
2018
NZ$M
Change
%
36
11
42
10
(14%)
10%
47
52
(660)
(608)
47
10%
NM
NM
39
Fletcher Building Limited Annual Report 2019 Australia
Building Products Australia: Laminex Australia | Iplex Australia | Rocla | Fletcher Insulation
Distribution Australia: Tradelink | Oliveri Solutions
Steel Australia: Stramit
DIVISIONAL PERFORMANCE OVERVIEW
The Australia division reported gross revenue of $3,024 million
compared with $3,076 million in the prior year, a decrease of 2%.
Operating earnings before significant items were $57 million, a
decrease of $57 million or 50% compared to the prior year.
these revenue gains did not flow through to earnings. Iplex
announced market price increases in the second quarter that muted
the impact of these cost pressures. Fletcher Insulation made a small
loss in the period as it was impacted by a fire at its Rooty Hill facility.
Distribution Australia recorded revenue in line with the prior year
and operating earnings of $8 million, down from $13 million in the
prior period. In Tradelink, market share gains continued in the small
to medium network customer segment (SME) and the business
increased these segment earnings year on year for the third year in
a row. Tradelink opened 11 new stores in the year and invested $10
million into showroom and branch refurbishments. Oliveri Solutions
(formerly Tasman Sinkware) recorded reduced revenue and EBIT in
the year given its high exposure to the residential market and the
retail sales channel declined materially year on year.
Steel Australia gross revenue declined 3% compared to the prior
year and operating earnings before significant items declined from
$25 million to $11 million. This was driven by higher raw material
costs, including unfavourable foreign exchange rates, which could
not be fully recovered through price increases in a competitive
market environment.
Overall performance in the division was well below expectations,
impacted by the sharp decline in the residential market with
commencements down approximately 20% on the prior year. This
resulted in lower volumes and heightened competitive intensity
in the higher margin and more residential exposed businesses,
especially Laminex and Stramit. In addition, gross margin
compression was experienced in most businesses, as increased
input costs such as resin, fuel and steel could not be recovered
in price in this environment. The increased costs were further
exacerbated by a depreciating AUD/USD currency resulting in a $23
million earnings impact compared to the prior year.
As part of our plans to grow our Australian businesses and in light of
the sharp residential market decline, we carried out a comprehensive
review and decisive intervention to reset and strengthen the division
in FY19. As a result we are now executing: (1) clear business unit
priorities, (2) a cost-out programme, (3) targeted growth investment
and (4) talent refresh. The program targets $100 million of gross
EBIT benefits by FY21, with around $15 million of net EBIT benefit
in FY20 and $50 million in FY21. The programme delivered $15
million of gross benefits in FY19. During the year we took decisive
action, including closing a number of sites, consolidating properties,
restructuring sales and other teams, and the Iplex and Rocla
businesses were merged.
Building Products Australia gross revenue declined by 2% in FY19
and operating earnings before significant items decreased to $40
million compared to $76 million in the prior year. This reduction was
due mainly to the Laminex business, where revenue declined 6%
and Laminex earnings were impacted by a reduction in margins
associated with increased competition in a declining residential
market; increased raw material input costs; and one-off costs
associated with industrial action in September to October. Revenue
in the pipelines businesses increased as the civil infrastructure
market experienced continued growth, however, foreign exchange
rates and increased raw material costs, especially in Iplex, meant
40
Fletcher Building Limited Annual Report 2019 10%
EBIT
$57m
% of Group EBIT
Trading cash flows for the division were $57
million compared to $146 million in the prior
year, with the decline primarily due to lower
earnings. A strong performance in receivables
management, where debtor days improved
by 2.2 days, support a stable working
capital position.
The division recorded significant items of $78
million for the year as restructuring costs were
recognised as a result of the strategic reset of
the division.
The division invested $91 million of capital
expenditure during the year, compared to
$79 million in the prior year, with major
investments in Laminex’s e-commerce offering
and a significant product range refresh. The
division continued to invest in automation in its
manufacturing operations, which remains a key
priority moving forward.
FUTURE FOCUS
The Australia division will remain focused on
its cost out programme, which will leverage
divisional scale and drive cross business unit
operational efficiencies to reset our cost
base. There will be targeted investment for
growth focusing on network densification
in the distribution business, and innovation,
new product development, and automation –
primarily in the manufacturing businesses. The
division will continue to strengthen its focus
on customer value propositions and service
promises to ensure we continue to grow in
key customer, product and market segments.
These include the small to medium enterprise
customer in Tradelink, the decorative category
in Laminex, the civil market for Iplex and water
quality for Rocla.
Australia
Financial Summary
Year ended 30 June
2019
NZ$M
2018
NZ$M
Change
NZ$M
Change
%
Gross revenue
3,024
3,076
External revenue
2,933
2,972
EBIT*
EBIT* (A$m)
Funds
57
53
114
106
1,735
1,804
Trading cash flow
57
146
(52)
(39)
(57)
(53)
(69)
(89)
(2%)
(1%)
(50%)
(50%)
(4%)
(61%)
Australia
EBIT*
Year ended 30 June
Building Products Australia
Distribution Australia
Steel Australia
Divisional costs
Total
* Before significant items.
2019
NZ$M
2018
NZ$M
Change
%
40
8
11
(2)
76
13
25
(47%)
(38%)
(56%)
NM
57*
114
(50%)
41
Fletcher Building Limited Annual Report 2019 Our Board
(L–R): Steve Vamos, Doug McKay, Barbara Chapman, Bruce Hassall, Antony Carter, Rob McDonald, Cathy Quinn, Martin Brydon.
BRUCE HASSALL
BCom, FCA (CAANZ)
MARTIN BRYDON
MBA, FAICD, FAIM, Dip Elect Eng, Dip Elron Eng
Chair and Independent Non-Executive Director
Independent Non-Executive Director
Term of office: Appointed director 1 March 2017, last elected 2017
annual meeting.
Term of office: Appointed director 1 September 2018, last elected
2018 annual meeting.
Board committees: Chair of the Nominations Committee.
Bruce Hassall has had a distinguished career with broad and deep
commercial and strategic experience, and connections across the
New Zealand economy, including in the small medium enterprise
(SME), commercial, government and export sectors. As former
senior partner and chief executive officer of PwC New Zealand he
has extensive advisory background and knowledge of the corporate
environment. Bruce is the Chair of The Farmers' Trading Company
Limited and Prolife Foods Limited, and is a director of Bank of New
Zealand and Fonterra Co-operative Group Limited.
Board committees: Member of the Nominations Committee
and Member of the Safety, Health, Environment and
Sustainability Committee.
Martin has more than 40 years' experience in the Australian
building products sector, having started his career as an indentured
engineering cadet with BHP. He joined Cockburn Cement Limited
in 1981, where he then served as chief executive officer from
1998-1999. Following Cockburn Cement’s merger into Adelaide
Brighton in 1999, he held a number of senior management roles
before his appointment as chief executive officer and managing
director in 2014. Martin retired following a distinguished 30-year
career with Adelaide Brighton in January 2019.
42
Fletcher Building Limited Annual Report 2019 ANTONY CARTER
BE (Hons), ME, MPhil (Loughborough)
DOUG MCKAY
ONZM, BA, AMP (Harvard), CMInstD
Independent Non-Executive Director
Independent Non-Executive Director
Term of office: Appointed director 1 September 2010,
last re-elected 2016 annual meeting.
Board committees: Member of the Audit and Risk Committee,
Member of the Nominations Committee and Member of the
Remuneration Committee.
Tony Carter has extensive experience in retail management having
served as managing director of Foodstuffs (Auckland) and Foodstuffs
(New Zealand), New Zealand's largest retail organisation. Prior to
this he owned and operated several Mitre 10 hardware stores, later
serving as a director and Chair of Mitre 10 New Zealand Limited.
Tony is the Chair of Air New Zealand Limited and Fisher & Paykel
Healthcare Corporation Limited, a director of ANZ Bank New Zealand
Limited and Vector Limited, and a trustee of the Maurice Carter
Charitable Trust.
Term of office: Appointed director 1 September 2018, last elected
2018 annual meeting.
Board committees: Chair of the Safety, Health, Environment and
Sustainability Committee, Member of the Audit and Risk Committee
and Member of the Nominations Committee.
Doug brings considerable business leadership and commercial
experience, as the former chief executive of major manufacturing
and distribution businesses in New Zealand and Australia, such as
Lion Nathan, Carter Holt Harvey, Goodman Fielder, Sealord and
Independent Liquor. He was the inaugural chief executive of the
amalgamated Auckland Council until the end of 2013. In 2015 Doug
was made an Officer of the New Zealand Order of Merit for services
to business and local government. Doug is the Chair of Bank of New
Zealand and Eden Park Trust Board and is a director of Genesis Energy
Limited, IAG New Zealand Limited and National Australia Bank.
BARBARA CHAPMAN
CNZM, BCom, CMInstD
Independent Non-Executive Director
CATHY QUINN
ONZM, LLB
Term of office: Appointed director 1 September 2018, last elected
2018 annual meeting.
Independent Non-Executive Director
Board committees: Chair of the Remuneration Committee and
Member of the Nominations Committee.
Barbara brings extensive and diverse trans-Tasman executive experience
to the Board having served as chief executive and managing director of
ASB Bank for seven years and having held a number of senior executive
roles responsible for marketing, communications, human resources, life
insurance and retail banking in New Zealand and Australia. She has an
extensive list of professional achievements to her credit, including being
named New Zealand Herald's 2017 Business Leader of the Year. In 2019
Barbara was made a Companion of the New Zealand Order of Merit for
services to business. Barbara is the Chair of Genesis Energy Limited
and the 2021 APEC CEO Summit Committee, deputy Chair of The
New Zealand Initiative, a director of IAG New Zealand Limited and New
Zealand Media and Entertainment (NZME), and a member of the Prime
Minister's Business Advisory Council.
Term of office: Appointed director 1 September 2018, last elected
2018 annual meeting.
Board committees: Member of the Audit and Risk Committee,
Member of the Nominations Committee and Member of the Safety,
Health, Environment and Sustainability Committee.
Cathy Quinn is one of New Zealand's foremost commercial and
corporate lawyers with significant expertise in governance, equity
capital markets, mergers and acquisitions and private equity
services. Cathy was the chair of MinterEllisonRuddWatts for eight
years during a period of transformation and significant growth. In
2016 Cathy was made an Officer of the New Zealand Order of Merit
for services to law and women. Cathy is a director of Rangatira
Limited and Tourism Holdings Limited and a Board member of New
Zealand Treasury and the New Zealand China Council.
ROB MCDONALD
BCom, FCA
STEVE VAMOS
BEng (Hons)
Independent Non-Executive Director
Independent Non-Executive Director
Term of office: Appointed director 1 September 2018, last elected
2018 annual meeting.
Term of office: Appointed director 6 July 2015, last re-elected 2018
annual meeting.
Board committees: Chair of the Audit and Risk Committee and
Member of the Nominations Committee.
Board committees: Member of the Nominations Committee and
Member of the Remuneration Committee.
Rob McDonald's finance career spans over 30 years’ with a strong
track record in financial and risk management, developed over two
decades with Air New Zealand. As the airline's chief financial officer,
he received a number of accolades during his career, including
CFO of the Year in the Deloitte Top 200 in 2015 and the Fairfax
Media New Zealand CFO of the Year award in 2010. Rob is the
Chair of Contact Energy Limited and is a director of the Chartered
Accountants of Australia and New Zealand and Sovereign Assurance
Company Limited.
Steve Vamos has more than 30 years' experience in the information
technology, internet and online media industries. He is the chief
executive officer of Xero Limited, a global online platform providing
accounting software for businesses and their advisors. He has held
senior management roles at IBM, Apple, ninemsn in Australia and
Microsoft Corporation in Australia and the USA.
43
Fletcher Building Limited Annual Report 2019 Executive Team
(L–R): Dan Anthony, Claire Carroll, Dean Fradgley, Ian Jones, Peter Reidy, Ross Taylor, Bevan McKenzie, Wendi Croft, Charles Bolt, Hamish McBeath,
Bruce McEwen, Steve Evans.
ROSS TAYLOR
Chief Executive Officer
BEVAN MCKENZIE
Chief Financial Officer
STEVE EVANS
Chief Executive Residential and Development
DEAN FRADGLEY
Chief Executive Australia
CHARLES BOLT
Group General Counsel and Company Secretary
IAN JONES
Chief Executive Concrete
DAN ANTHONY
Chief Information Officer
HAMISH MCBEATH
Chief Executive Building Products
CLAIRE CARROLL
Chief People and Communications Officer
BRUCE MCEWEN
Chief Executive Distribution
WENDI CROFT
Chief Health and Safety Officer
PETER REIDY
Chief Executive Construction
For the full biographies of our Executive Team, please see our website.
44
Fletcher Building Limited Annual Report 2019 Financial performance - before significant items
Trend Statement
Notes
Financial performance
Operating revenue
Earnings before interest and taxation (EBIT)
Net earnings
Cash flow from operations
Earnings per share - basic (cents per share)
Dividends for the period (cents per share)
Return on average funds (%) (3)
Return on average equity (%) (4)
Earnings before interest and taxation (EBIT)
Net earnings
Earnings per share - basic (cents per share)
Return on average funds - before significant
items (%) (3)
Return on average equity - before significant
items (%) (4)
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Capital
Reserves
Minority equity
Total equity
2019
2018
2017
2016
2015
2014
2013
2012
(2)
2011
(1)
2010
NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M
9,307
9,471
9,399
9,004
8,661
8,401
8,517
8,839
7,416
6,799
397
164
153
19.2
23.0
7.4
4.0
631
367
43.0
(118)
(190)
396
(25.5)
0
(2.2)
(5.2)
50
(60)
(8.1)
273
94
243
13.5
39.0
4.9
2.5
719
462
660
67.0
39.0
13.4
12.4
503
270
575
39.2
37.0
9.6
7.7
592
339
489
49.3
36.0
11.7
9.9
525
321
682
418
653
399
624
362
46.3
60.6
58.0
52.7
569
326
559
47.6
34.0
10.8
9.4
569
326
47.6
403
185
448
27.2
34.0
7.4
5.2
556
317
46.5
492
283
402
45.0
33.0
10.6
8.2
596
359
57.1
521
272
522
44.9
29.0
12.7
9.1
521
301
49.7
11.8
0.9
9.4
12.7
12.5
12.3
10.8
10.2
12.8
12.7
8.8
(1.7)
8.7
11.6
11.3
10.5
9.4
9.0
10.4
10.0
4,121
3,944
3,419
3,222
3,272
2,958
2,868
3,112
3,104
2,317
3,589
4,601
4,254
4,045
4,229
3,983
4,257
4,367
4,388
3,397
7,710
8,545
7,673
7,267
7,501
6,941
7,125
7,479
7,492
5,714
2,330
2,356
1,996
1,997
1,947
1,596
1,557
1,936
1,700
1,384
1,207
2,047
2,097
1,557
1,844
1,891
2,014
2,091
2,092
1,307
3,537
4,403
4,093
3,554
3,791
3,487
3,571
4,027
3,792
2,691
3,427
3,425
2,678
2,650
2,633
2,624
2,606
2,582
2,553
1,912
714
32
693
24
878
1,041
1,050
24
22
27
795
35
913
35
838
32
1,113
1,077
34
34
4,173
4,142
3,580
3,713
3,710
3,454
3,554
3,452
3,700
3,023
Total liabilities and equity
7,710
8,545
7,673
7,267
7,501
6,941
7,125
7,479
7,492
5,714
Other financial data
Total shareholders return (%) (5)
Net tangible assets per share ($)
Gearing (%) (6)
Leverage (%) (7)
(29)
3.53
7.2
0.4
(6)
2.85
23.5
4.8
0
2.70
35.3
2.7
11
2.87
27.3
1.6
(3)
2.80
31.8
2.0
9
2.60
32.3
2.0
51
2.61
33.5
2.3
(27)
2.65
37.4
2.6
14
2.71
34.3
2.4
24
2.90
26.8
1.5
(1) The Crane group was acquired with an effective acquisition date of 28 March 2011.
(2) The June 2012 balance sheet has been restated following revisions to IAS 19 Employee Benefits adopted by the Group.
(3) EBIT to average funds (net debt and equity less deferred tax asset).
(4) Net earnings to average shareholders' funds.
(5) Share price movement in year and gross dividend received, to opening share price.
(6) Net debt (borrowings less cash and deposits) to net debt and equity.
(7) Net debt to EBITDA.
45
Fletcher Building Limited Annual Report 2019 Financial
Statements
46
Fletcher Building Limited Annual Report 2019 Consolidated Income Statement
FOR THE YEAR ENDED 30 JUNE 2019
Continuing operations
Revenue
Cost of goods sold
Gross margin
Selling, general and administration expenses
Share of profits of associates and joint ventures
Significant items
Earnings before interest and taxation (EBIT)
Funding costs
Earnings before taxation
Taxation expense
Earnings after taxation
Earnings attributable to non-controlling interests
Net earnings/(loss) from continuing operations
Net earnings/(loss) from discontinued operations net of tax
Net earnings/(loss) attributable to the shareholders
Net earnings per share (cents)
Basic
Diluted
Net earnings per share from continuing operations (cents)
Basic
Diluted
Weighted average number of shares outstanding (millions of shares)
Basic
Diluted
Dividends declared per share (cents)
Notes
28
28
2
15
25
2
4
4
17
The accompanying notes form part of and are to be read in conjunction with these financial statements.
On behalf of the Board, 21 August 2019
Bruce Hassall
Chair
Robert McDonald
Director
2019
NZ$M
8,308
(6,025)
2,283
(1,748)
14
(94)
455
(116)
339
(80)
259
(13)
246
(82)
164
19.2
19.0
28.8
27.7
853
951
23.0
2018
NZ$M
8,211
(6,571)
1,640
(1,691)
22
(149)
(178)
(155)
(333)
105
(228)
(11)
(239)
49
(190)
(25.5)
(25.5)
(32.1)
(32.1)
745
745
0.0
47
Fletcher Building Limited Annual Report 2019 Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2019
Net earnings/(loss) attributable to shareholders
Net earnings attributable to non-controlling interests
Net earnings/(loss)
Other comprehensive income
Items that do not subsequently get reclassified to income statement in the future:
Movement in pension reserve
Items that may be reclassified subsequently to income statement:
Movement in cash flow hedge reserve
Movement in currency translation reserve
Items that have been reclassified to income statement during the year:
Reclassification from currency translation reserve
Other comprehensive income
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year arises from:
Continuing operations
Discontinued operations
The accompanying notes form part of and are to be read in conjunction with these financial statements.
2019
NZ$M
164
13
177
2018
NZ$M
(190)
11
(179)
(25)
(25)
(6)
(34)
(40)
7
7
(58)
119
178
(59)
119
10
10
2
129
131
141
(38)
(119)
81
(38)
48
Fletcher Building Limited Annual Report 2019 Consolidated Statement of Movements in Equity
FOR THE YEAR ENDED 30 JUNE 2019
e
v
r
e
s
e
r
s
t
n
e
m
y
a
p
d
e
s
a
b
-
e
r
a
h
S
e
v
r
e
s
e
r
e
g
d
e
h
w
o
fl
h
s
a
C
l
n
o
i
t
a
s
n
a
r
t
y
c
n
e
r
r
u
C
e
v
r
e
s
e
r
g
n
i
l
l
o
r
t
n
o
c
-
n
o
N
t
s
e
r
e
t
n
i
y
t
i
u
q
E
l
a
t
o
T
i
n
o
s
n
e
P
e
v
r
e
s
e
r
l
a
t
o
T
s
e
t
o
N
e
r
a
h
S
l
a
t
i
p
a
c
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
NZ$M
Total equity at 30 June 2017
2,678
1,216
13
(2)
(286)
(63)
3,556
24
3,580
Total comprehensive income for the year
(190)
2
129
10
(49)
Movement in non-controlling interests
Issue of shares
Dividends paid to shareholders of the parent
Movement in share-based payment reserve
Movement in treasury stock
Total equity at 30 June 2018
Change in accounting policies
Adjusted equity at 30 June 2018
Total comprehensive income/(loss) for the year
Movement in non-controlling interests
Dividends paid to shareholders of the parent
Reclassification of pension reserve on disposal
of business
Movement in share-based payment reserve
19
18
17
18
28
19
17
(132)
736
11
3,425
894
3,425
(19)
875
164
(68)
(73)
Movement in treasury stock
18
2
(4)
9
9
2
11
(11)
(38)
(11)
736
(132)
(4)
11
736
(132)
(4)
11
(157)
(53)
4,118
24
4,142
(19)
(19)
(157)
(53)
4,099
24
4,123
(6)
(27)
(25)
106
13
(5)
73
(68)
2
2
119
(5)
(68)
2
2
Total equity at 30 June 2019
3,427
898
11
(6)
(184)
(5)
4,141
32
4,173
The accompanying notes form part of and are to be read in conjunction with these financial statements.
49
Fletcher Building Limited Annual Report 2019
Consolidated Balance Sheet
AS AT 30 JUNE 2019
Assets
Current assets:
Cash and cash equivalents
Current tax assets
Contract assets
Derivatives
Debtors
Inventories
Total current assets
Non-current assets:
Property, plant and equipment
Intangible assets
Investments in associates and joint ventures
Inventories
Retirement plan assets
Other investments
Derivatives
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities:
Creditors, accruals and other liabilities
Provisions
Current tax liabilities
Derivatives
Contract liabilities
Borrowings
Total current liabilities
Non-current liabilities:
Creditors, accruals and other liabilities
Provisions
Retirement plan liabilities
Deferred tax liabilities
Derivatives
Borrowings
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Shareholders' funds
Non-controlling interests
Total equity
Total liabilities and equity
Notes
2019
NZ$M
2018
NZ$M
6
25
11
16
7
8
12
13
20
8
26
16
25
9
10
25
16
11
14
9
10
26
25
16
14
18
19
1,372
66
40
5
1,298
1,340
4,121
1,754
1,129
152
264
61
108
121
3,589
7,710
1,254
346
5
4
119
602
2,330
84
18
2
8
1,095
1,207
3,537
3,427
714
4,141
32
4,173
7,710
665
72
13
6
1,629
1,559
3,944
2,231
1,696
149
189
88
1
86
161
4,601
8,545
1,547
449
26
7
142
185
2,356
38
162
38
37
19
1,753
2,047
4,403
3,425
693
4,118
24
4,142
8,545
The accompanying notes form part of and are to be read in conjunction with these financial statements.
50
Fletcher Building Limited Annual Report 2019 Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2019
Cash flow from operating activities
Receipts from customers
Dividends received
Payments to suppliers, employees and other
Interest paid
Income tax paid
Net cash from operating activities
Cash flow from investing activities
Sale of property, plant and equipment
Sale of subsidiaries/investments
Sale of cash in subsidiaries
Purchase of property, plant and equipment and intangible assets
Purchase of subsidiaries/businesses
Net cash from investing activities
Cash flow from financing activities
Issue of shares
Issue of capital notes
Net debt repayment
Repurchase of capital notes
Distribution to non-controlling interests
Dividends
Net cash from financing activities
Net movement in cash held
Add: opening cash and cash equivalents
Effect of exchange rate changes on net cash
Closing cash and cash equivalents
The accompanying notes form part of and are to be read in conjunction with these financial statements.
2019
NZ$M
9,139
6
(8,836)
(128)
(28)
153
5
1,320
(37)
(348)
(26)
914
100
(199)
(181)
(7)
(68)
(355)
712
665
(5)
1,372
2018
NZ$M
9,810
18
(9,189)
(158)
(85)
396
19
57
(304)
(228)
727
221
(483)
(55)
(15)
(123)
272
440
219
6
665
51
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019
1. Statement of accounting policies
General information
The financial statements presented are those of Fletcher Building Limited (the Company) and its subsidiaries (the Group). The Group is primarily
involved in the manufacturing and distribution of building materials and residential and commercial construction.
Fletcher Building Limited is domiciled in New Zealand. The registered office of the Company is 810 Great South Road, Penrose, Auckland.
The Company is registered under the Companies Act 1993 and is a Financial Markets Conduct Act 2013 reporting entity in terms of the Financial
Reporting Act 2013. The Group is a for-profit entity.
Basis of presentation
These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand, which is the New
Zealand equivalent to International Financial Reporting Standards (NZ IFRS). They also comply with International Financial Reporting Standards.
These financial statements are presented in New Zealand dollars ($), which is the Group’s presentation currency and rounded to the nearest
million unless otherwise stated.
The consolidated financial statements comprise the income statement, statement of comprehensive income, statement of movements in
equity, balance sheet, statement of cash flows, and statement of accounting policies, as well as the notes to these financial statements.
Accounting convention
The financial statements are based on the general principles of historical cost accounting, except that certain financial assets and liabilities, as
described below are stated at their fair value.
The accounting policies have been applied consistently by all Group entities throughout all periods presented, except as disclosed below,
"Changes in accounting policies."
Accounting policies are disclosed within each of the applicable notes to the financial statements and are marked with this icon.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with NZ IFRS requires the directors to make estimates and judgements that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of sales and expenses during the reporting period. Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results
could differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis.
The estimates and judgements that are critical to the determination of the amounts reported in the financial statements have been disclosed with
the relevant notes in the financial statements are marked with this icon, or where applied to the financial statements as a whole, are detailed below.
Basis of consolidation
The consolidated financial statements comprise the Company, it's controlled entities and it's interest in associates, partnerships and joint
arrangements. Intercompany transactions are eliminated in preparing the consolidated financial statements.
Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the
entity. Subsidiaries are included in the consolidated financial statements using the acquisition method of consolidation, from the date control
commences until the date control ceases.
Foreign currency
Translation of the financial statements of foreign operations
The assets and liabilities of the Group’s overseas operations are translated into New Zealand currency at the rates of exchange ruling at balance
date. The revenue and expenditure of these entities are translated using an average exchange rate reflecting an approximation of the appropriate
transaction rates. Exchange variations arising on the translation of these entities and other currency instruments designated as hedges of such
investments are recognised directly in the currency translation reserve. The cumulative exchange variations would be reclassified subsequently
to earnings if the overseas operation to which the reserve relates were to be sold or otherwise disposed of.
52
Fletcher Building Limited Annual Report 2019 Foreign currency transactions
Transactions in foreign currencies are translated at exchange rates at the date of the transactions.
Monetary assets and liabilities in foreign currencies at balance date are translated at the rates of exchange ruling at balance date.
Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in earnings, except where deferred in
other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.
Non-monetary assets and liabilities in foreign currencies are translated at the exchange rates in effect when the amounts of these assets and
liabilities were determined.
Note
Description
Financial Performance
Note 2
Note 3
Note 4
Note 5
Key estimates and judgements
Segmental information
Net earnings per share
Income statement disclosures
Working Capital Management
Note 6
Note 7
Note 8
Note 9
Cash and cash equivalents
Debtors
Inventories, including land and developments
Creditors, accruals and other liabilities
Note 10
Provisions
Note 11
Contract assets and liabilities
Long-term Investments
Note 12
Property, plant and equipment
Note 13
Intangible assets
Funding and Financial Risk Management
Note 14
Borrowings
Note 15
Funding costs/(income)
Note 16
Financial risk management
Group Structure and Related Parties
Note 17
Dividends and shareholder tax credits
Note 18
Capital
Note 19
Non-controlling interests
Note 20
Investments in associates and joint ventures
Note 21
Related party disclosures
Other Information
Note 22
Capital expenditure commitments
Note 23
Lease commitments
Note 24
Contingent liabilities
Note 25
Taxation
Note 26
Retirement plans
Note 27
Share-based payments
Note 28
Impact of NZ IFRS 15 and other reclassifications
Note 29
Subsequent events
53
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019 (Continued)
2. Key estimates and judgements
This section provides details of the key estimates and judgements undertaken when preparing these financial statements.
Changes in accounting policies
The following sets out the new accounting standards and amendments to standards that were applicable to the Group from
1 July 2018.
NZ IFRS 15 Revenue from Contracts with Customers
The Group adopted NZ IFRS 15 from 1 July 2018 using the modified retrospective approach. As a result, the Group has restated its opening
equity position as at 1 July 2018 by $19 million to reflect the impact of transitioning to NZ IFRS 15. This adjustment primarily reflects the change
in the timing of the recognition of revenue from house sales in the Residential division.
In line with the requirements of the standard with regards to the transition option adopted, the Group has not restated the comparative
information presented for the Income Statement, which continues to be reported under previous revenue standards, NZ IAS 11 and NZ IAS 18.
The Group has restated the comparative information to improve the comparability of the Balance Sheet, refer to note 28.
On adoption of NZ IFRS 15, the Group has revised its accounting policies for revenue recognition (where applicable) which are disclosed in note 28.
A number of new standards, amendments and interpretations have been issued by the International Accounting Standards Board and the
External Reporting Board in New Zealand that are not yet effective and have not been early adopted by the group. Those which are relevant to
the group are set out below:
Standards not yet effective or early adopted
The following sets out the new accounting standards and amendments to standards that are not yet applicable to the Group.
NZ IFRS 16 Leases
NZ IFRS 16 was issued in February 2016 and is effective for the Group for the period beginning 1 July 2019. NZ IFRS 16 sets out the principles for
the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. NZ IFRS 16 replaces NZ IAS 17 and the
related interpretations.
For lessees, NZ IFRS 16 removes the distinction between operating leases and finance leases and introduces a single lessee accounting model
which requires right-of-use assets and lease liabilities to be recognised in the consolidated balance sheet for most lease contracts.
Going forward, the lease expense previously recognised in the consolidated income statement for operating leases will be replaced by a straight-
line depreciation expense in relation to the right-of-use assets and an amortising interest charge in relation to the lease liabilities. The interest
charge will be front-loaded in the earlier periods of a lease and reduce in later periods as the interest element of the lease liability unwinds.
The Group will adopt the modified retrospective approach on transition. Under this approach, NZ IFRS 16 will be applied to leases
from either:
– lease commencement - where historic lease documentation is available; or
– transition date, 1 July 2019.
A cumulative catch-up adjustment to retained earnings as at 1 July 2019 is required for leases where NZ IFRS 16 has been applied from
lease commencement, however prior year comparatives will not be restated.
The Group will apply both the short-term and low value lease exemptions allowed under NZ IFRS 16 which recognises payments for leases of
12 months or less, or leases of a low value on a straight-line basis as an expense in the income statement.
The Group will also adopt transition reliefs to:
– exclude initial direct costs in the measurement of the right-of-use asset as at 1 July 2019; and
– use the benefit of hindsight to assist in the assumptions and judgements regarding renewals.
Financial Impact
NZ IFRS 16 will have a significant impact on the financial position of the Group on transition. The Group has a large number of leases, consisting of
property, mobile plant and heavy machinery, commercial and passenger vehicles and IT equipment.
Property leases, which include retail, manufacturing, distribution, storage and office sites, have the most significant impact on adoption of NZ IFRS
16 given their high value and long lease terms with renewal options.
On 1 July 2019, the Group will recognise lease liabilities of approximately $1.8 billion, and right-of-use assets of $1.5 billion in the consolidated
balance sheet. An adjustment of $0.3 billion will be made to retained earnings to recognise the front-loading of interest expense in the early years
of the leases.
54
Fletcher Building Limited Annual Report 2019
The Group expects this to result in a reduction to net earnings before tax of $15 million in FY20. Although there is no impact to net earnings from a
lease over its full life cycle, the current timing impact on net earnings before tax of $15 million results from the combined depreciation $185 million
and interest expense of $64 million (which is higher in earlier years of these leases) exceeding the current operating expense of $234 million.
Operating expenses will decrease by approximately $49 million as the FY20 depreciation charge for the right-of-use asset of $185 million replaces
the FY19 lease expense of $234 million.
There will be no impact to cash outflows, however the classification of cash flows will change. It is estimated the Group’s operating cash outflows
will decrease and financing cash outflows will increase by approximately $169 million as repayment of the principal portion of the lease liabilities
will be classified as cash flows from financing activities.
The Group’s activities as a lessor are not material and therefore the Group does not expect any significant impact on the financial statements.
However, as required by NZ IFRS 16, additional disclosures will be included within the notes to the financial statements for the year ending 30
June 2020.
Key judgements
The following key judgements were required in calculating the above financial impacts:
– determining the lease term (which can be complex where leases include rights of renewal or cancellation); and
– the discount rate applicable to each lease and the lease payments.
Adoption project
The Group’s IFRS 16 project is governed by a Steering Group which oversees the relevant project work streams, approves key decisions and
provides regular updates to the Audit and Risk Committee. During the year to 30 June 2019, work has progressed to finalise the discount rate
methodology, accounting policies and internal controls, complete the data collection and validation of the Group’s portfolio of lease data and
fully implement the IT system solution which will record and calculate the NZ IFRS 16 impact.
2A. SIGNIFICANT ITEMS
Transactions are classified as significant items when they meet certain criteria approved by the Group’s Audit and Risk Committee. Significant
items are determined in accordance with the principles of consistency, relevance and clarity. Transactions considered for classification as
significant items include restructuring costs; acquisition and disposal costs; impairment or reversal of impairment of assets; business integration;
and transactions or events outside of the Group’s ongoing operations that have a significant impact on reported profit.
2019
Building Products
Australia
Formica and Roof Tile Group
Corporate
Total significant items before taxation
Tax benefit on above items
Total significant items after taxation
(1) Restructuring activity
Restructuring activity (1)
NZ$M
M&A Activity (2)
NZ$M
(10)
(78)
(6)
(94)
27
(67)
(140)
(140)
4
(136)
Total
NZ$M
(10)
(78)
(140)
(6)
(234)
31
(203)
The Group has recognised a charge of $94 million for restructuring costs, $78 million of which is in Australia, associated with the restructure
of various businesses across the Group as an extension of the strategic reset that began in FY18. The restructuring includes redundancies and
property exit costs, as well as associated advisory costs incurred.
(2) M&A activity
On 1 November 2018 the Group divested the Roof Tile Group business for total proceeds of $66 million. A net loss on sale of $18 million has been
recorded, comprising a transaction loss of $11 million and a loss on the reclassification of $7 million of the foreign currency translation reserve.
On 3 June 2019 the Group divested the global Formica business for proceeds of $1,191 million and a net loss on sale of $122 million has
been recorded.
55
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
2018
Distribution
Steel
Concrete
Construction
Australia
Formica and Roof Tile Group
Divested businesses
Corporate
Total significant items before taxation
Tax benefit/(charge) on above items
Total significant items after taxation
(1) Restructuring activity
Restructuring activity (1)
NZ$M
M&A Activity (2)
NZ$M
Impairments (3)
NZ$M
Total
NZ$M
(3)
(8)
(9)
(5)
(66)
(91)
23
(68)
(3)
(8)
(17)
(5)
(49)
(57)
37
(66)
(168)
38
(130)
(17)
(5)
(40)
(52)
(114)
15
(99)
37
37
37
The Group recognised a charge of $91 million for costs associated with the restructure of the Group’s operating model. The restructuring
includes redundancies and exit costs, as well as:
– $20 million relating to various Corporate and Business Unit IT systems and associated external advisory costs incurred.
– $7 million for costs associated with the integration of the Calder Stewart business into the Steel division.
– $3 million for costs associated with the termination of the Formica US Pension Plan.
(2) M&A activity
The Group divested its 50 per cent stake in the Sims Pacific Metals joint venture for $42 million with a resulting net gain on sale of $25 million,
and its 20 per cent stake in Dongwha New Zealand Limited for $17 million with a net gain on sale of $12 million.
(3) Impairments
During the year, the Group has recognised a $114 million impairment charge, relating to businesses where the carrying amount exceeded the
recoverable amount:
– $40 million relating to Rocla where goodwill of $11 million, brands of $21 million and inventories of $8 million were impaired. Offsetting the
impairment of brands is a $7 million reversal of the associated deferred tax liability through tax expense.
– $52 million relating to Roof Tile Group where goodwill of $15 million, brands of $4 million, property, plant and equipment of $29 million, and
working capital of $4 million have been impaired.
– $5 million relating to the Forman Contracting brand asset, reflecting a revision in expected medium-term revenues and earnings.
– $17 million relating to the impairment of assets of $12 million and $5 million for disposal costs of a quarry within Winstone Aggregates.
2B. DISCONTINUED OPERATIONS
The Group divested the Roof Tile Group and the Formica business during the current year and divested it's interest in Dongwha New Zealand
Limited and Sims Pacific Metals in the prior year. The relevant financial information for each business is set out below.
Roof Tile Group
Formica
Dongwha & Sims Pacific Metals
Net earnings/(loss) after taxation from discontinued operations per Income Statement
i
ii
2019
NZ$M
(19)
(63)
(82)
2018
NZ$M
(54)
52
51
49
56
Fletcher Building Limited Annual Report 2019
(i) Roof Tile Group
On 1 November 2018 the Group divested the Roof Tile Group for total proceeds of $66 million (including a working capital adjustment of $7
million). This resulted in the following loss on sale.
Consideration
Less: Transaction costs and provisions
Net sale proceeds
Carrying value
Less: reclassification of foreign currency translation reserve
Loss on sale
There was no tax benefit in any jurisdiction arising from the loss on sale recognised.
Financial Performance
The financial performance information presented is for the period ended 1 November 2018 and the year ended 30 June 2018.
2019
NZ$M
66
(7)
59
(70)
(11)
(7)
(18)
Revenue
Expenses
Earnings before taxation
Taxation expense
Loss on sale
Earnings/(loss) after taxation from discontinued operations
Period ended
1 Nov 2018
NZ$M
Year ended
June 2018
NZ$M
58
(55)
3
(4)
(1)
(18)
(19)
147
(201)
(54)
(54)
(54)
Cash Flow Performance
The cash flow information presented is for the period ended 1 November 2018 and the year ended 30 June 2018.
Period ended
1 Nov 2018
NZ$M
Year ended
June 2018
NZ$M
Movement in exchange differences on translation of discontinued operations
Other comprehensive income from discontinued operations
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net increase/(decrease) in cash generated by the discontinued operation
13
13
4
(1)
3
5
5
(7)
(3)
(10)
57
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Assets and Liabilities
The carrying amounts of assets and liabilities as at the date of sale were:
Cash and cash equivalents
Current tax assets
Debtors
Inventories
Property, plant and equipment
Intangibles
Deferred tax assets
Total assets
Creditors, accruals and other liabilities
Provisions
Total liabilities
(ii) Formica
1 Nov 2018
NZ$M
June 2018
NZ$M
2
1
30
25
19
11
(2)
86
12
4
16
4
2
29
25
27
11
(2)
96
10
3
13
On 3 June 2019 the Group divested the global Formica business for total net proceeds of $1,191 million, all of which had been received at 30
June 2019. Financial information relating to the Formica business for the period to the date of disposal and the details of the loss on sale are
outlined below.
Sale price
Less: Debt-like items, minority interest and working capital
Less: Transaction costs and provisions
Net sale proceeds
Carrying value
Loss on sale
There was no tax benefit in any jurisdiction arising from the loss on sale recognised.
Financial Performance
The financial performance information presented is for the period ended 3 June 2019 and the year ended 30 June 2018.
Period ended
3 June 2019
NZ$M
941
(864)
77
(18)
59
(122)
(63)
Revenue
Expenses
Earnings before taxation
Taxation expense
Loss on sale
Earnings/(loss) after taxation from discontinued operations
58
2019
NZ$M
1,259
(20)
(48)
1,191
(1,313)
(122)
Year ended
June 2018
NZ$M
1,006
(948)
58
(6)
52
52
Fletcher Building Limited Annual Report 2019 Cash Flow Performance
The cash flow information presented is for the period ended 3 June 2019 and the year ended 30 June 2018.
Movement in exchange differences on translation of discontinued operations
Movement in cash flow hedge reserve
Movement in pension reserve
Other comprehensive income from discontinued operations
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net increase/(decrease) in cash generated by the discontinued operation
Assets and Liabilities
The carrying amounts of assets and liabilities as at the date of sale were:
Cash and cash equivalents
Current tax assets
Debtors
Inventories
Property, plant and equipment
Intangible assets
Deferred tax assets
Total assets
Creditors, accruals and other liabilities
Provisions
Current tax liabilities
Borrowings
Retirement plan liabilities
Deferred tax liabilities
Total liabilities
Period ended
3 June 2019
NZ$M
Year ended
June 2018
NZ$M
13
(1)
(2)
10
24
(58)
(23)
(57)
82
(4)
78
102
(68)
(13)
21
3 June 2019
NZ$M
June 2018
NZ$M
37
158
252
537
571
32
13
148
231
454
592
14
1,555
1,484
152
21
7
23
39
242
187
7
19
22
35
48
318
2C. INTANGIBLE ASSET IMPAIRMENT TESTING
Goodwill and brands were tested for impairment in June 2019. Each cash generating unit (CGU) that carries goodwill is valued on a value-in-
use or fair value less costs of disposal basis using a discounted cash flow model. Management has used its past experience of sales growth,
operating costs and margin, and external sources of information where appropriate, to determine their expectations for the future. These cash
flow projections are principally based on the Group's five year strategic plan, which are risk adjusted where appropriate. Cash flows beyond
five years have been extrapolated using estimated terminal growth rates, which do not exceed the long-term average growth rate for the
industries and countries in which the business units operate. The terminal growth rate used was 2.5% (2018: 2.5%).
New Zealand and South Pacific CGU's
The goodwill and brands balances for the 15 New Zealand and South Pacific CGU's represent 46% of the total balance for the Group. The cash
flows are discounted using a nominal rate specific to each business. New Zealand businesses have employed rates between 8.0% and 9.0%
(2018: average 8.0%), and the South Pacific business has employed a rate of 18.5% (2018: 18%), reflecting the risk profile of each business
and for the regions in which the CGUs operate.
Sensitivity to reasonably possible changes in assumptions
The impairment assessment confirmed that, for these business units, the recoverable amounts exceed carrying values as at 30 June 2019.
Management considers that no reasonably possible change in assumptions would cause the carrying amount to exceed the recoverable amount.
59
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Australia CGU's
The goodwill and brands balances for the four Australia CGU's represent 54% of the total balance for the Group. The cash flows are discounted
using a nominal rate specific to each business. Australia rates range between 8.0% and 9.0% (2018: average 9.0%), reflecting the risk profile of
each business and for the regions in which the CGUs operate.
Sensitivity to reasonably possible changes in assumptions
Throughout the current financial year the Australia economy, particularly the residential market, has experienced a significant downturn. The
Laminex Australia and Tradelink business units have been particularly impacted by this downturn, which has impacted the forecast cash flows
used to assess the carrying value of each CGU.
Group and divisional management completed a comprehensive strategic review of the Australia division during the year and identified a number
of strategic initiatives for the near to medium term to set the business units up for long term margin growth. A number of these initiatives
have been implemented during the current financial year, however, the benefits of these will be achieved over the longer term and are, in part,
dependent on the recovery of the Australian economy and residential market.
The key assumptions used in the impairment tests for the significant business units of Laminex Australia and Tradelink are outlined below. No
impairment was recognised during the financial year, however, a change in any of the key assumptions would lead to the elimination of the
excess of recoverable amount over carrying amount.
Laminex Australia (representing 28% of Group goodwill and brands balances)
Key Assumption
Value attributed
Sensitivity (absolute movement)
Revenue growth (5-year Cumulative Average Growth Rate (CAGR))
EBIT margin (5-year average)
Terminal growth rate
Discount rate
4.00%
7.30%
2.50%
8.30%
Decrease by 0.8 ppts
Decrease by 1.2 ppts
Decrease by 1.2 ppts
Increase by 1.0 ppts
Tradelink (representing 11% of Group goodwill and brands balances)
Key Assumption
Value attributed
Sensitivity (absolute movement)
Revenue growth (5-year Cumulative Average Growth Rate (CAGR))
EBIT margin (5-year average)
Terminal growth rate
Discount rate
Other Australia CGU's
2.80%
2.80%
2.50%
8.30%
Decrease by 0.5 ppts
Decrease by 0.5 ppts
Decrease by 1.4 ppts
Increase by 1.2 ppts
The impairment assessment confirmed that, for all other business units, the recoverable amounts exceed carrying values as at 30 June 2019.
Management considers that no reasonably possible change in assumptions would cause the carrying amount to exceed the recoverable amount.
2D. SUPPLEMENTARY DISCLOSURES: EARNINGS PER SHARE
Earnings per share is disclosed in full in note 4. The below disclosure has been included to provide additional useful information by removing the
impact of one-off events in the current and prior year, and the resulting impact on the earnings per share measure.
The effect of significant items on earnings per share is as follows:
Net earnings/(loss) after taxation (as per income statement)
Add back: Significant items after taxation (note 2a)
Net earnings before significant items
Net earnings from continuing operations before significant items
Net earnings per share before significant items (cents)
Net earnings per share from continuing operations before significant items (cents)
Net earnings per share - as reported per income statement (cents)
2019
NZ$M
164
203
367
313
43.0
36.7
19.2
2018
NZ$M
(190)
130
(60)
(184)
(8.1)
(24.7)
(25.5)
2E. SUPPLEMENTARY DISCLOSURES: CONSTRUCTION ACCOUNTING
The Construction division is engaged by customers to construct and maintain buildings and infrastructure across New Zealand and the South
Pacific. During FY17 and FY18, the Group recognised significant provisions within the division as a number of these construction contracts
were loss making. These projects were determined to be onerous contracts and the related provisions are disclosed in note 10. Construction
60
Fletcher Building Limited Annual Report 2019
projects are inherently more uncertain earlier in their lifetime, which leads to a number of significant estimates and judgements being made at
these early stages. The Group's policies for accounting for such projects are outlined below, and demonstrate the significant judgements made.
Contract assets and liabilities arising from construction work in progress at year end are disclosed in note 11.
A summary of total contracted work under construction and details of the major construction projects and their approximate stage of
completion is disclosed to demonstrate the uncertainty that remains on these projects.
Construction accounting policies
Revenue recognition
Construction contract revenue
The Group derives revenue from the construction of building and infrastructure projects across New Zealand and the South Pacific. Contracts
entered into may be for the construction of one or several separate inter-linked pieces of large infrastructure. While it is uncommon, contracts
can be entered into for the building of several projects. Where this occurs, the Group will identify the single or multiple performance
obligations and allocate the total transaction price across each performance obligation based on stand-alone selling prices. The transaction
price is normally fixed at the start of the project.
The nature of construction projects leads to variations in the project size and scope. It is also normal practice for contracts to include bonus
and penalty elements based on timely construction or other performance criteria known as variable consideration, discussed below.
The performance obligation is fulfilled over time and as such revenue is recognised over time. As work is performed on the assets being
constructed they are controlled by the customer and have no alternative use to the Group, with the Group having a right to payment for
performance to date.
Generally, contracts identify various inter-linked activities required in the construction process. Revenue is recognised on the measured
output of each process based on appraisals that are agreed with the customer on a regular basis.
Maintenance contract revenue
Services revenue is primarily generated from maintenance services supplied to roading assets owned by local or central Government in
New Zealand and the South Pacific. This revenue also arises in respect of infrastructure assets previously constructed by the Group where
maintenance was included in the contract. The service contracts are typically determined to have one single performance obligation which are
significantly integrated and are fulfilled over time. There is no change to the revenue recognition methodology previously utilised.
Variable consideration
Revenue in relation to variations, such as a change in the scope of the contract, are only included in the transaction price when it is approved
by the parties to the contract, the variation is enforceable or in certain circumstances when approved by the Board of Directors, and the
amount becomes highly probable.
Construction work-in-progress - Contract assets, contract liabilities, and provisions for onerous contracts
Earnings on construction contracts (including sub-contracts) are determined using the percentage-of-completion method and represent the
value of work carried out during the year, including amounts not invoiced. Costs are recognised as incurred and revenue is recognised on the
basis of the proportion of total costs at the reporting date to the estimated total costs of the contract. Estimates of the final outcome of each
contract may include cost contingencies to take account of specific risks within each contract that have been identified. The cost contingencies
are reviewed on a regular basis throughout the contract life and are adjusted where appropriate. However, the nature of the risks on contracts
are such that they often cannot be resolved until the end of the project.
Margin on the contract is not recognised until the outcome of the contract can be reliably estimated. The Group uses its professional
judgement to assess both the physical completion and the forecast financial result of the contract. When a contract is identified as loss-
making, a provision is made for estimated future losses on the entire contract.
Construction work in progress is stated at cost plus profit recognised to date, less progress billings. Cost includes all expenditure directly
related to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal
operating capacity.
Estimates and judgements are made relating to a number of factors when assessing construction contracts. These primarily include the
programme of work throughout the contract period, assessment of future costs after considering changes in the scope of work, maintenance
and defect liabilities, expected inflation (for unlet sub-trades) and performance bonuses or penalties.
The significant judgements inherent in accounting for the Group’s most material construction projects are:
– The extent to which a project progresses in line with the complex project programme and timetable previously formed and the resulting
impact of any programme delays or gains on project costs, especially project overheads (preliminary and general costs) and any liquidated
or other damages;
– Sub-contractor cost, in particular cost that is yet to be agreed in scope or price (including inflationary pressures) or that relating to
programme prolongation;
– The outcome of ongoing commercial negotiations, including elements of variable consideration and changes in project scope; and
– Future weather and ground conditions.
61
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Status of construction projects (> $200 million original contract value) as at 30 June 2019:
Commercial Bay - Fixed price contract
NZICC - Guaranteed maximum price and fixed price contract
Business Unit
B+I
B+I
Puhoi to Warkworth - Fixed price contract (Public Private Partnership)
Major Projects
Hamilton City Edge Expressway - Alliance contract
Peka Peka to Otaki Expressway - Fixed price contract
Major Projects/Higgins
Major Projects/Higgins
Percentage of
completion (% cost)
Forecast
completion
76%
70%
58%
62%
47%
2020
2020
2021
2021
2021
Revenue Backlog by Business Unit as at 30 June 2019:
Building + Interiors
Major Projects
Brian Perry Civil
Higgins
South Pacific
Current Revenue Backlog
NZ$M
Top 5 projects as a % of
Revenue Backlog
256
445
172
494
78
1,445
97%
100%
50%
44%
64%
N/A
Revenue backlog refers to the level of construction work the Group is contracted to but is not yet complete at year end. This represents the
performance obligations that are yet to be completed for the construction contracts active at the end of the year. The long term nature of the
contracts held by the Major Projects and Higgins businesses will see these performance obligations be completed over a period generally
between one to five years, although some may extend longer. The Building + Interiors, Brian Perry Civil, and South Pacific businesses have
contracts that are either short term in nature or are nearing completion with those performance obligations likely to be settled within the next
12 months.
62
Fletcher Building Limited Annual Report 2019 Financial Review
This section explains the results and performance of the Group, including the segmental analysis, details of significant items, and
earnings per share.
3. SEGMENTAL INFORMATION
Segmental information is presented in respect of the Group’s industry and geographical segments. The use of industry segments as the
primary format is based on the Group’s management and internal reporting structure, which recognises groups of assets and operations with
similar risks and returns. Inter-segment pricing is determined on an arm’s length basis.
Industry segments
Building Products
Distribution
Steel
Concrete
Residential and Development
Construction
Australia
Other
Continuing operations
Discontinued operations
Group
Less: intercompany revenue
Group external revenue
Building Products
Distribution
Steel
Concrete
Residential and Development
Construction
Australia
Corporate
Continuing operations
Discontinued operations
Group total
2019
NZ$M
Gross revenue
2018
NZ$M
Gross revenue
2019
NZ$M
External revenue
2018
NZ$M
External revenue
759
1,596
555
802
639
1,702
3,024
11
9,088
1,019
10,107
(800)
9,307
764
1,530
532
812
575
1,685
3,076
8
8,982
1,285
10,267
(796)
9,471
587
1,552
426
549
639
1,622
2,933
8,308
999
9,307
613
1,490
411
545
575
1,605
2,972
8,211
1,260
9,471
9,307
9,471
EBIT before
significant items
EBIT before
significant items
Funds*
Funds*
127
104
33
84
137
47
57
(40)
549
82
631
132
104
49
90
136
(608)
114
(45)
(28)
78
50
503
300
220
656
651
48
1,735
60
4,173
4,173
494
264
184
628
604
(238)
1,804
(869)
2,871
1,271
4,142
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes. Group balances such as borrowings and taxation are allocated to Corporate as
these are managed at a Group level. Funds are managed at a divisional level, and as such, B+I funds are included in the Construction divisional balance.
63
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Industry segments (Continued)
Building Products
Distribution
Steel
Concrete
Residential and Development
Construction
Australia
Corporate
Continuing operations
Discontinued operations
Group
Geographic segments
New Zealand
Australia
Other jurisdictions
Continuing operations
North America
Asia
Europe
Other jurisdictions
Discontinued operations
Group
Significant items (Note 2a)
Earnings before interest and taxation (EBIT)
New Zealand
Australia
Other
Debt and taxation
Continuing operations
North America
Asia
Europe
Discontinued operations
Group
2019
NZ$M
Depreciation,
depletion and
amortisation
expense
2018
NZ$M
Depreciation,
depletion and
amortisation
expense
2019
NZ$M
Capital expenditure
2018
NZ$M
Capital expenditure
12
10
5
50
21
62
14
174
25
199
13
9
5
45
20
62
16
170
44
214
37
23
18
65
7
31
91
13
285
63
348
19
20
14
62
1
33
79
13
241
63
304
External revenue
External revenue
EBIT before
significant items
EBIT before
significant items
5,220
2,944
144
8,308
404
297
253
45
999
9,307
5,063
3,018
130
8,211
465
314
316
165
1,260
9,471
467
54
28
549
45
48
(10)
(1)
82
631
(234)
397
(180)
123
28
(29)
43
38
(6)
4
79
50
(168)
(118)
Non-current
assets+
Non-current
assets+
Funds*
Funds*
1,895
1,359
45
3,299
3,299
1,706
1,420
48
3,174
319
458
315
1,092
4,266
2,405
1,752
85
(69)
4,173
4,173
2,006
1,810
199
(985)
3,030
350
492
270
1,112
4,142
+ Excludes deferred tax assets, retirement plan surplus and financial instruments.
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes. Group balances such as borrowings and taxation are allocated to Corporate as
these are managed at a Group level. Funds are managed at a divisional level, and as such, B+I funds are included in the Construction divisional balance.
64
Fletcher Building Limited Annual Report 2019
Description of industry segments
Building Products
Distribution
Steel
Concrete
Residential and Development
Construction
Australia
Discontinued operations
The Building Products division is a manufacturer, distributor, and marketer of building products used both
commercially and in residential markets in New Zealand.
The Distribution division consists of building, plumbing, and pipeline distribution businesses in New Zealand.
The Steel division consists of steel manufacture and distribution businesses in New Zealand.
The Concrete division includes the Group's interests in the concrete value chain, including extraction of
aggregates, and the production of cement and concrete. The division operates in New Zealand.
The Residential and Development division operates in New Zealand and is both a residential home builder
and develops and sells mainly commercial sites within the Group's property portfolio which are surplus to
operating requirements.
The Construction division is a builder and maintainer of commercial buildings and infrastructure across
New Zealand and the South Pacific.
The Australia division manufactures and distributes building materials for a broad range of industries
across Australia.
Discontinued operations comprises the Formica and Roof Tile Group businesses both of which were
divested during the current year and the Group's 50% interest in Sims Pacific Metals and 20% interest in
Dongwha New Zealand Limited both of which were divested during the prior year.
4. NET EARNINGS PER SHARE
Earnings per share is the portion of a company's profit allocated to each outstanding ordinary share and is calculated by dividing the
earnings attributable to shareholders by the weighted average of ordinary shares on issue during the year excluding treasury stock. Capital
notes and options are convertible into the company's shares and may therefore result in dilutive securities for purposes of determining the
diluted net earnings per share. Fletcher Building may, at its option, purchase or redeem the capital notes for cash at the principal amount plus
any accrued but unpaid interest.
Net earnings per share (cents)
Basic
Diluted
Net earnings per share (cents) from continuing operations
Basic
Diluted
Numerator
Net earnings/(loss)
Numerator for basic earnings per share
Dilutive capital notes distribution
Numerator for diluted net earnings per share
Numerator (continuing operations)
Net earnings/(loss) from continuing operations
Numerator for basic earnings per share from continuing operations
Dilutive capital notes distribution
Numerator for diluted net earnings per share from continuing operations
Denominator (millions of shares)
Weighted average number of shares outstanding (refer to note 19)
Conversion of dilutive capital notes
Denominator for diluted net earnings per share
2019
19.2
19.0
28.8
27.7
NZ$M
164
164
17
181
246
246
17
263
853
98
951
2018
(25.5)
(25.5)
(32.1)
(32.1)
NZ$M
(190)
(190)
(190)
(239)
(239)
(239)
745
745
65
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
5. INCOME STATEMENT DISCLOSURES
The following items are specific disclosures required to be made and are included within
the income statement:
Net periodic pension cost
Employee related short-term costs (1)
Other long-term employee related benefits
Research and development expenditure
Amortisation of intangibles
Bad debts written off
Donations and sponsorships
Maintenance and repairs
Operating lease expense
(1) Short term employee benefits for the executive committee included in the above is disclosed in note 21.
Auditor's remuneration
Audit and review of the financial statements (1)
Audit services associated with Formica sale process
Assurance services associated with capital raise
Total audit and assurance services
Tax services
Other non-assurance services
Total non-assurance services
Total auditor remuneration
(1) The audit includes fees for both the annual audit of the financial statements and the review of the interim financial statements.
2019
NZ$M
2018
NZ$M
1
1,604
57
5
19
6
2
171
257
5
1,791
71
2
26
8
2
160
187
NZ$000's
NZ$000's
3,132
770
3,902
369
23
392
4,294
4,883
175
5,058
600
51
651
5,709
66
Fletcher Building Limited Annual Report 2019 Working Capital Management
This section provides details of the key elements of working capital which includes cash, receivables, inventories and short term liabilities.
6. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash and demand deposits with banks or other financial institutions and highly liquid investments that
are readily convertible to cash.
Cash and cash equivalents include the Group's share of amounts held by joint operations of $28 million (2018: $31 million).
At 30 June 2019, approximately $30 million (2018: $70 million) of total cash and deposits were held in subsidiaries that operate in countries
where exchange controls and other legal restrictions apply and are not immediately available for general use by the Group.
Cash and bank balances
Contract retention bank balances
Short-term deposits
Reconciliation of net earnings to net cash from operating activities
Net earnings
Earnings attributable to minority interest
Add/(Less) non-cash items:
Depreciation, depletions and amortisation
Other non-cash items
Taxation
Gain on disposal of businesses and property, plant and equipment
Net working capital movements
Residential and Development
Construction
Other divisions:
Debtors
Inventories
Creditors
Net cash from operating activities
2019
NZ$M
189
23
1,160
1,372
2019
NZ$M
164
13
177
199
108
74
(1)
380
(26)
(276)
26
(69)
(59)
(404)
153
2018
NZ$M
227
13
425
665
2018
NZ$M
(190)
11
(179)
214
148
(181)
(36)
145
(28)
407
(12)
(58)
121
430
396
67
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019 (Continued)
7. DEBTORS
Debtors are recognised initially at their fair value which is represented by their face value and subsequently valued at its estimated net
realisable value to adjust for expected credit losses. Estimates are used in determining the level of receivables that may not be collected,
refer to note 16c. Trade debtors normally have 30 to 90 day terms.
Trade debtors
Contract debtors
Contract retentions
Less provision for doubtful debts
Trade and contract debtors
Other receivables
Current
0 - 30 days over standard terms
31 - 60 days over standard terms
61+ days over standard terms
Provision
Trade and contract debtors
2019
NZ$M
834
209
42
(15)
1,070
228
1,298
919
121
14
31
(15)
1,070
2018
NZ$M
1,158
208
31
(21)
1,376
253
1,629
1,166
155
23
53
(21)
1,376
8. INVENTORIES, INCLUDING LAND AND DEVELOPMENTS
Inventories are valued at the lower of cost or net realisable value, determined principally on the first-in, first-out basis. Cost includes direct
manufacturing costs and manufacturing overheads at normal operating levels.
Raw materials
Work in progress
Finished goods
Consumable stores and spare parts
Inventories held at cost
Inventories held at net realisable value
Current portion
Non-current portion
2019
NZ$M
472
216
877
39
1,604
1,325
279
1,604
1,340
264
1,604
2018
NZ$M
562
247
884
55
1,748
1,609
139
1,748
1,559
189
1,748
The non-current portion of inventories relates to land and developments that is expected to be held for greater than 12 months (current portion
of $408 million, 2018: $374 million).
The Group also has conditional commitments for the purchase of land to be used for residential construction totalling $257 million (June 2018:
$275 million), of which $71 million is expected to be delivered in the year to 30 June 2020.
68
Fletcher Building Limited Annual Report 2019
9. CREDITORS, ACCRUALS AND OTHER LIABILITIES
Trade creditors and other liabilities are stated at cost or estimated liability where accrued.
Employee entitlements include annual leave which is recognised on an accrual basis and the liability for long service leave which is measured
as the present value of expected future payments to be made in respect of services provided by employees.
Assumptions in determining long service leave relate to the discount rate, estimates relating to the expected future long service leave
entitlements, future salary increases, attrition rates and mortality.
Trade creditors
Contract retentions
Accrued interest
Other liabilities
Employee entitlements
Workers' compensation schemes
Current portion
Non-current portion
Carrying amount at the end of the year
2019
NZ$M
761
37
29
319
184
8
1,338
1,254
84
1,338
2018
NZ$M
1,073
43
34
214
212
9
1,585
1,547
38
1,585
The non-current portion of creditors and accruals relates to long service employee entitlement obligations and unconditional deferred
land payments.
10. PROVISIONS
A provision is recognised when the Group has a current obligation and it is probable that an economic benefit will be required to settle it. The
following are the significant categories of provisions held by the Group:
Restructuring
Restructuring provisions are recognised when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal
detailed plan. Costs relating to ongoing activities are not provided for.
Warranty & Environmental
Warranty provisions represent an estimate of potential liability for future rectification work in respect of products sold and services provided.
Environmental provisions represent an estimate for future liabilities relating to environmental obligations.
Onerous contracts
The provision for onerous contracts has arisen as a result of the adoption of NZ IFRS 15 Revenue from Contracts with Customers during the
period. NZ IFRS 15 requires loss making contracts (previously recognised as part of construction contracts on the face of the Balance Sheet)
be recognised as a provision for onerous contracts. Refer to note 28 for disclosure of the reclassification.
Other
Other provisions relate to miscellaneous matters, across the Group, none of which are individually material.
69
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019 (Continued)
2019
Carrying amount at the beginning of the year
Currency translation
Charged to earnings
Settled or utilised
Released to earnings
Disposal of business
2018
Carrying amount at the beginning of the year
Currency translation
Charged to earnings
Settled or utilised
Released to earnings
Current portion
Non-current portion
Carrying amount at the end of the year
Restructuring
NZ$M
Warranty &
environmental
NZ$M
Onerous
contracts
NZ$M
Other
NZ$M
Total
NZ$M
30
(1)
22
(12)
(5)
(2)
32
8
28
(6)
30
39
(1)
12
(10)
(4)
(2)
34
34
1
21
(16)
(1)
39
497
(233)
264
154
566
(223)
497
45
15
(21)
(2)
(3)
34
53
1
27
(33)
(3)
45
2019
NZ$M
346
18
364
611
(2)
49
(276)
(11)
(7)
364
249
2
642
(278)
(4)
611
2018
NZ$M
449
162
611
During the year the Group utilised $12 million (30 June 2018: $6 million) in respect of restructuring obligations at certain businesses. The
remaining balance is expected to be utilised in the next year. Warranty and environmental provisions are expected to be utilised over the next
three years.
11. CONTRACT ASSETS AND LIABILITIES
The Group has adopted NZ IFRS 15 Revenue from Contracts with Customers during the period, which requires additional disclosures of material
contract assets and liabilities. The Group has previously disclosed this information as 'Construction Contracts', and has restated the prior year
balances for completeness (refer to note 28). There are no other material contract assets or liabilities than those disclosed below.
Construction contracts with cost and margin in advance of billings
Contract assets
Construction contracts with billings in advance of cost and margin
Contract liabilities
2019
NZ$M
40
40
119
119
2018
NZ$M
13
13
142
142
70
Fletcher Building Limited Annual Report 2019
Long-term Investments
This section details the long-term assets of the Group including Property, Plant and Equipment and Intangible Assets.
12. PROPERTY, PLANT AND EQUIPMENT
Land, buildings, plant and machinery, finance leased assets and fixtures and equipment are stated at cost, less accumulated depreciation and
accumulated impairment losses.
The cost of purchasing land, buildings, plant and machinery, fixtures and equipment is the value of the consideration given to acquire the
assets and the value of other directly attributable costs which have been incurred in bringing the assets to the location and the condition
necessary for their intended service, including subsequent expenditure. Assets are reviewed annually for impairment indicators.
Resource extraction assets are held at historic cost and depleted over the shorter of the life of the site or right to use period. Site development
costs incurred in order to commence extraction are capitalised as resource extraction assets.
Finance leases
Leases in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases and are measured at
the lower of their fair value or the present value of the minimum lease payments at the inception of the lease.
Finance leases are capitalised to reflect the borrowings incurred and the cost of the asset acquired. Such obligations are classified within
borrowings. The finance cost portion of lease payments is expensed to the income statement over the lease period. The leased asset is
depreciated on a straight line basis over the estimated useful life of the asset with regard to residual values.
Depreciation of property, plant and equipment and amortisation of definite life intangible assets are calculated on the straight line method.
Refer to note 13 for details of intangible assets. Expected useful lives, which are regularly reviewed, typically range between:
Buildings
30–50 years
Plant and machinery
5–15 years
Fixtures and equipment
2–10 years
3–30 years
Leased assets capitalised
Intangible assets, including software (note 13) 5–15 years
2019
Carrying value at 1 July 2018
Additions
Acquisitions
Disposals
Depreciation expense
Transfer of assets to inventory
Disposal of business
Currency translation
Carrying value at 30 June 2019
Represented by:
Cost
Accumulated depreciation and
impairment
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
255
8
(6)
(19)
(51)
(6)
181
182
(1)
181
320
11
(19)
(12)
(3)
(88)
(5)
204
1,368
238
4
(125)
(397)
(14)
1,074
330
2,280
(126)
(1,206)
204
1,074
171
33
(30)
(9)
(3)
162
422
(260)
162
Leased
Assets
NZ$M
40
77
15
14
(11)
(2)
95
132
(37)
95
38
43
(5)
38
Total
NZ$M
2,231
305
18
(25)
(180)
(22)
(545)
(28)
1,754
3,389
(1,635)
1,754
71
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
2018
Carrying value at 1 July 2017
Additions
Disposals
Depreciation expense
Impairment expense
Transfer of assets to inventory
Currency translation
Carrying value at 30 June 2018
Represented by:
Cost
Accumulated depreciation and
impairment
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
Leased
Assets
NZ$M
274
1
(8)
(1)
(21)
10
255
256
(1)
255
321
21
(5)
(16)
(8)
(7)
14
320
1,312
183
(16)
(130)
(19)
38
1,368
504
2,807
(184)
(1,439)
320
1,368
173
40
(13)
(30)
(1)
2
171
442
(271)
171
84
15
(10)
(12)
77
107
(30)
77
42
(2)
40
43
(3)
40
Total
NZ$M
2,206
260
(42)
(188)
(41)
(28)
64
2,231
4,159
(1,928)
2,231
As at 30 June 2019 property, plant and equipment includes $39 million of assets under construction that are not depreciated until they are
commissioned and brought into use (June 2018: $167 million).
13. INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangibles are carried at cost
less any accumulated amortisation and accumulated impairment losses.
Intangible assets with indefinite useful lives are not amortised but are tested for impairment annually, either individually or at the cash-
generating unit level. Intangible assets with a definite life are amortised on a straight-line basis.
Goodwill is stated at cost, less any impairment losses. Goodwill is allocated to cash-generating units (CGUs) and is not amortised but is
tested annually for impairment, and when an indication of impairment exists. Brands for which all relevant factors indicate that there is no
limit to the foreseeable net cash flows are considered to have an indefinite useful life and are held at cost and are not amortised but are
subject to an annual impairment test.
For the purposes of considering whether there has been an impairment, assets are grouped at the lowest level for which there are identifiable
cash flows that are largely independent of the cash flows of other groups of assets. When the book value of a group of assets exceeds the
recoverable amount, an impairment loss arises and is recognised in earnings immediately. Refer to note 2c for impairment considerations.
Assessing the carrying value of goodwill and indefinite life brands requires management to estimate future cash flows to be generated by
the related cash-generating unit. The key assumptions used in the value in use models include the expected rate of growth of revenues and
earnings, the terminal growth rate and the appropriate discount rate to apply.
2019
Carrying value at the beginning of the year
Acquired during the year
Impairments in the income statement
Amortisation expense
Disposal of business
Currency translation
Represented by:
Cost
Accumulated impairment/amortisation
Accumulated currency translation
Carrying value at the end of the year
72
Goodwill
NZ$M
1,085
7
Brands
NZ$M
451
(369)
(12)
711
1,165
(451)
(3)
711
(165)
(8)
278
357
(79)
278
Other
Intangibles
NZ$M
160
43
(3)
(19)
(37)
(4)
140
297
(153)
(4)
140
Total
NZ$M
1,696
50
(3)
(19)
(571)
(24)
1,129
1,819
(683)
(7)
1,129
Fletcher Building Limited Annual Report 2019 2018
Carrying value at the beginning of the year
Acquired during the year
Disposed of during the year
Impairments in the income statement (Note 2)
Amortisation expense
Currency translation
Represented by:
Cost
Accumulated impairment/amortisation
Accumulated currency translation
Carrying value at the end of the year
Goodwill
NZ$M
1,069
1
(26)
41
1,085
1,527
(451)
9
1,085
Brands
NZ$M
461
(30)
20
451
530
(79)
451
Other
Intangibles
NZ$M
156
44
(20)
(26)
6
160
308
(146)
(2)
160
Total
NZ$M
1,686
45
(20)
(56)
(26)
67
1,696
2,365
(676)
7
1,696
As at 30 June 2019 other intangible assets includes $39 million of assets being developed (June 2018: $23 million).
Significant intangible balances within cash generating units (CGUs)
Laminex Australia
Higgins New Zealand
Iplex New Zealand
Stramit
Tradelink
Other
Formica businesses (divested in 2019)
2019
2018
Goodwill
NZ$M
Brands
NZ$M
Goodwill
NZ$M
Brands
NZ$M
154
114
105
66
60
212
711
119
19
7
41
50
42
278
160
114
105
68
62
215
361
1,085
124
19
7
43
52
61
145
451
The goodwill allocated to significant CGUs accounts for 70% (2018: 80%) of the total carrying value of goodwill. The remaining 'other' CGUs,
which comprise 14 (2018: 22) in total, are each less than 7% of total carrying value. The significant brand assets account for 85% (2018: 86%) of
the total carrying value of brands. The remaining 'other' brand assets are each less than 5% of total carrying value (2018: 9%).
73
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019 (Continued)
Funding and Financial Risk Management
This section includes details on the Group's funding and outlines the market, credit and liquidity risks that the Group is exposed to and how
these risks are managed, including the use of derivative financial instruments.
Capital risk management
The Group's objectives when managing capital are to provide returns to shareholders and benefits for other stakeholders and to maintain an
optimal capital structure that safeguards the Group's ability to continue as a going concern. In order to maintain or adjust the capital structure,
the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce
net debt.
The Group monitors its capital requirements using various measures that consider debt facility covenants. A key measure is; a through-the-cycle
net debt to EBITDA ratio (leverage). Net debt represents the value of the Group's drawn borrowings adjusted for debt hedging activities and
available cash funding. The target leverage ratio range is 1.5 to 2.5 times. It is intended that the Group will not be materially outside the target
gearing and leverage ratio ranges on a long-term basis.
The Group was in compliance with all debt facility financial covenants.
The Group has not sought and does not hold a credit rating from an accredited rating agency.
14. BORROWINGS
The Group borrows in the form of private placements, bank loans, capital notes and other financial instruments. Funding costs associated with
the Group borrowings is shown in note 15.
Borrowings are initially recognised at fair value net of attributable transaction costs, and are subsequently measured at amortised cost
using the effective interest rate method. Any borrowings that have been designated as hedged items (USD and any other foreign currency
borrowings) are carried at amortised cost plus a fair value adjustment under hedge accounting requirements. Borrowings denominated in
foreign currencies are retranslated to the functional currency at each reporting date.
Economic debt represents the face value of drawn borrowings adjusted for foreign currency movements hedged with derivative instruments.
The Group uses cross currency interest rate swaps, interest rate swaps and foreign forward exchange contracts to manage its exposure to
interest rates and borrowings sourced in currencies different from that of the borrowing entity's reporting currency. Details of debt hedging
activities and instruments used are included in note 16.
Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s net debt arising from financing activities, including both cash and non-cash changes.
Cash Flows
Currency
translation
Other non-cash
movements
(including
hedge
accounting)
(334)
165
(81)
(30)
(280)
12
(268)
(712)
(980)
6
(4)
3
5
(25)
(20)
5
(15)
2019
NZ$M
886
258
485
68
1,697
33
1
34
(33)
(107)
1
1
1,590
(1,372)
218
Private placements
Bank loans
Capital notes
Other loans
Carrying value of borrowings
(as per balance sheet)
Less: value of derivatives used to manage changes
in hedged risks on debt instruments
Economic debt
Less: Cash and cash equivalents
Net debt
2018
NZ$M
1,181
97
566
94
1,938
(61)
1,877
(665)
1,212
74
Fletcher Building Limited Annual Report 2019 Cash Flows
Currency
translation
Other non-cash
movements
(including hedge
accounting)
97
(31)
Private placements
Bank loans
Capital notes
Other loans
Carrying value of borrowings
(as per balance sheet)
Less: value of derivatives used to manage changes
in hedged risks on debt instruments
Economic debt
Less: Cash and cash equivalents
Net debt
2017
NZ$M
1,262
389
400
121
2,172
(42)
2,130
(219)
1,911
(147)
(292)
166
(44)
(317)
2
(315)
(440)
(755)
17
114
(49)
65
(6)
59
Carrying value of borrowings included within the balance sheet as follows:
Current borrowings
Non-current borrowings
Total borrowings
Less: Cash and cash equivalents
Net debt (as per balance sheet)
At reporting date, the Group had the following funding facilities:
Utilised facilities
Unutilised syndicate bank loan facilities
Total facilities
Private placements
2018
NZ$M
1,181
97
566
94
(31)
1,938
28
(3)
(3)
2019
NZ$M
602
1,095
1,697
(1,372)
325
1,590
667
2,257
(61)
1,877
(665)
1,212
2018
NZ$M
185
1,753
1,938
(665)
1,273
1,877
828
2,705
Private placements comprise loans of AUD99 million, USD451 million, CAD15 million, EUR41 million and GBP10 million with maturities
between 2022 and 2028. During the year the Group pre-paid JPY10,000 million and USD131.5 million of private placements with original
maturities in 2027 and September 2019 respectively.
As a consequence of the Formica divestment, the Group was required to make a mandatory disposition pre-payment offer on a rateable portion
(33%) on all senior debt including to private placement noteholders.
As a result, $292 million of private placements are classified as current at 30 June 2019. Subsequent to year-end only $8 million of private
placement noteholders accepted the offer and were pre-paid in July 2019.
Capital notes
At 30 June 2019 the Group had issued $385 million capital notes to retail investors (June 2018: $416 million) and $100 million capital notes to
institutional investors (June 2018: $150 million). The capital notes do not carry voting rights and do not participate in any change in value of the
issued shares of Fletcher Building Limited.
Listed capital notes
Listed capital notes are long-term fixed rate unsecured subordinated debt instruments that are traded on the NZDX. On election date, holders
may choose either to keep their capital notes on new terms or convert the principal amount and any interest into shares of Fletcher Building
Limited, at approximately 98 per cent of the current market price. If the principal amount of these notes held at 30 June 2019 were to be
converted to shares, 81 million (June 2018: 60 million) Fletcher Building Limited shares would be issued at the share price as at 30 June 2019,
of $4.85 (June 2018: $6.95).
Instead of issuing shares to holders who choose to convert, Fletcher Building may, at its option, purchase or redeem the capital notes for cash
at the principal amount plus any accrued interest.
As at 30 June 2019, the Group held $115 million (30 June 2018: $84 million) of its own capital notes.
75
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019 (Continued)
Unlisted Capital Notes
Unlisted capital notes are not listed on the NZDX. Fletcher Building can redeem the unlisted capital notes for cash at par within the next 12
months depending on the tranche and otherwise in certain defined circumstances. If the notes are not repaid in this time, the holder has the
right to request conversion of the capital notes into ordinary shares of Fletcher Building Limited at 95% of volume weighted average share price
calculated over a period before the time of conversion.
If the unlisted capital notes are not redeemed or converted within the next 12 months, these rights of redemption and conversion arise on each
subsequent quarterly interest payment date.
If the principal amount of the unlisted capital notes held at 30 June 2019 were to be converted to shares, 22 million Fletcher Building Limited
shares would be issued. (June 2018: 23 million).
Bank Loans
At 30 June 2019, the Group had a $925 million syndicated revolving credit facility on an unsecured, negative pledge and borrowing covenant
basis that comprises $200 million maturing in November 2019, $350 million maturing in November 2020 and $375 million maturing in November
2022. The funds under this facility can be borrowed in United States, Australian and New Zealand dollars.
As a consequence of the Formica divestment, the Group was required to make a mandatory disposition pre-payment offer on a rateable portion
(33%) on all senior debt including to Syndicate banks at par. As a result, $85 million of bank loans are classified as current at 30 June 2019.
On the 22 July 2019, the Group refinanced its $925 million syndicated revolving credit facility which resulted in two tranches, $525 million
maturing in July 2022 (Tranche 1), $400 million maturing in July 2024 (Tranche 2). The refinanced syndicated revolving facility is with ANZ Bank
New Zealand Limited, MUFG Bank Limited, Bank of New Zealand, Citibank N.A., The Hongkong and Shanghai Banking Corporation Limited,
Bank of China (New Zealand) Limited, China Construction Bank (New Zealand) Limited and Westpac New Zealand Limited.
Other Loans
At 30 June 2019, the Group had $44 million (June 2018: $44 million) of loans that are secured against specific subsidiaries' own balance sheets
or against specific assets and had unsecured loans at 30 June 2019 of $24 million (June 2018: $50 million) some of which were subject to the
negative pledge. Other loans include bank overdrafts, short-term loans, working capital facilities, financial leases and amortising loans.
Negative pledge
The Group borrows certain funds based on a negative pledge arrangement. The negative pledge includes a cross guarantee between a number
of wholly owned subsidiaries and ensures that external senior indebtedness ranks equally in all respects and includes the covenant that security
can be given only in very limited circumstances. At 30 June 2019 the Group had debt subject to the negative pledge of $1,062 million (June
2018: $1,253 million).
The impact of debt hedging activities on borrowings is represented in the table below:
Currency of Borrowings
Fixed rate
Floating rate
Impact of
hedging
Fixed rate
Floating rate
% Fixed
Underlying borrowing exposure
Economic debt exposure
2019
NZ$M
385
104
20
18
70
717
1,314
269
100
14
383
237
437
(20)
(18)
(70)
(673)
(107)
535
310
44
889
356
331
14
701
60%
48%
0%
0%
0%
100%
0%
56%
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
76
Fletcher Building Limited Annual Report 2019
Currency of Borrowings
Fixed rate
Floating rate
Impact of
hedging
Fixed rate
Floating rate
% Fixed
Underlying borrowing exposure
Economic debt exposure
2018
NZ$M
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
Japanese Yen
United States Dollar
Other
Total
Liquidity risk
416
108
20
16
72
134
875
4
1,645
159
103
14
1
16
293
224
457
8
5
16
(134)
(637)
(61)
566
249
20
16
72
120
4
1,047
233
419
22
5
17
118
16
830
71%
37%
48%
76%
81%
0%
50%
0%
56%
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial commitments as they fall due. The Group manages its
liquidity risk by maintaining a target level of undrawn committed credit facilities and a spread of the maturity dates of the Group's debt facilities
that it reviews on an ongoing basis.
The following maturity analysis table sets out the remaining contractual undiscounted cash flows, including estimated interest payments for
non-derivative financial liabilities and derivative financial instruments. Creditors and accruals are excluded from this analysis as they are not part
of the Group's assessment of liquidity risk because these are offset by debtors with similar payment terms.
Bank loans
Capital notes
Private placements
Other loans
Borrowings - Principal cash flows
Gross settled derivatives - to pay
Gross settled derivatives - to receive
Debt derivatives financial instruments - Principal
cash flows
Total principal cash flows
2019
Contractual
cash flows
NZ$M
Up to 1 Year
NZ$M
1–2 Years
NZ$M
2–5 Years
NZ$M
Over 5 Years
NZ$M
258
485
884
68
1,695
907
(1,012)
(105)
1,590
85
200
292
25
602
337
(338)
(1)
601
173
100
1
274
274
185
269
1
455
208
323
41
364
362
(299)
(375)
(91)
364
(13)
351
Contractual interest cash flows
323
72
59
111
81
Total contractual cash flows
1,913
673
333
475
432
Bank loans of $85 million and private placements of $292 million are classified as current as the Group was required to make a mandatory
disposition pre-payment offer on a rateable portion (33%) on all senior debt as a consequence of the Formica divestment. Subsequent to year-
end only $8 million of private placement noteholders accepted the offer and were pre-paid in July 2019, and therefore the remaining balance will
revert to non-current in the interim financial statements for the period ending 31 December 2019.
77
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019 (Continued)
2018
Contractual
cash flows
NZ$M
Up to 1 Year
NZ$M
1–2 Years
NZ$M
2–5 Years
NZ$M
Over 5 Years
NZ$M
Bank loans
Capital notes
Private placements
Other loans
Borrowings - Principal cash flows
Gross settled derivatives - to pay
Gross settled derivatives - to receive
Debt derivatives financial instruments - Principal
cash flows
Total principal cash flows
Contractual interest cash flows
97
566
1,212
94
1,969
710
(802)
(92)
1,877
558
150
35
185
136
(136)
-
185
113
200
195
15
410
410
97
216
193
2
508
62
(85)
(23)
485
824
42
866
648
(717)
(69)
797
91
191
163
Total contractual cash flows
2,435
298
501
676
960
15. FUNDING COSTS/(INCOME)
Interest expense and income is recognised on an accrual basis in profit or loss using the effective interest method.
Fundings costs also include the changes in fair value relating to derivatives used to manage interest rate risk, and the associated changes in
fair value of the borrowings designated in a hedge relationship attributable to the hedged risk.
Interest income
Interest on borrowings and derivatives
Net Interest expense
Changes in fair value relating to:
Borrowings designated in a hedging relationship
Derivatives designated in a hedging relationship
Total changes in fair value
Bank fees, registry and other expenses
Other (gains)/losses
Funding costs from continuing operations
Discontinued operations
Funding costs
2019
NZ$M
2018
NZ$M
(4)
110
106
33
(33)
14
(4)
116
2
118
(3)
126
123
(31)
31
32
155
2
157
Included in interest on borrowings is the net settlement of the Group's interest derivatives. This consists of $44 million of interest income and
$43 million of interest expense (2018: $48 million interest income; $47 million interest expense) and cash flow hedge effectiveness reclassified
to profit or loss. The comparative bank fees, registry and other expenses amount includes one-off costs in relation to the breach of bank
covenants that occurred in the prior year. Other (gains)/losses include costs associated with pre-payment of borrowings and the settlement of
related derivatives.
Interest rate risk
At 30 June 2019, 56% of the Group's debt was subject to a fixed interest rate (June 2018: 56% fixed).
(i) Interest rate repricing
The following tables set out the interest rate repricing profile of interest bearing financial liabilities assuming floating rate facilities are utilised to
maintain debt levels.
78
Fletcher Building Limited Annual Report 2019
Fixed financial liabilties
Floating financial liabilities
Economic debt
% Fixed
2019
NZ$M
889
701
1,590
56%
2020
NZ$M
689
901
1,590
43%
2021
NZ$M
589
1,001
1,590
37%
2022
NZ$M
275
1,315
1,590
17%
2023
NZ$M
259
1,331
1,590
16%
2024
NZ$M
44
1,546
1,590
3%
The Group's overall weighted average interest rate (based on year end borrowings) excluding fees is 5.03% (June 2018: 6.23%).
(ii) Interest rate risk
It is estimated a 100 basis point increase in interest rates would result in an increase in the Group's interest costs by approximately $7.0 million
pre-tax on the Group's debt portfolio exposed to floating rates at balance date (June 2018: $8.3 million) assuming that all other variables
remain constant.
16. FINANCIAL RISK MANAGEMENT
Exposures to credit, liquidity, currency, interest rate and commodity price risks arise in the normal course of the Group’s business. The
principles under which these risks are managed are set out in policy documents approved by the Board. The policy documents identify the
risks and set out the Group’s objectives, policies and processes to measure, manage and report the risks. The policies are reviewed periodically
to reflect changes in financial markets and the Group’s businesses. Risk management is carried out in conjunction with the Group's central
treasury function, which ensures compliance with the risk management policies and procedures.
Derivative financial instruments, including foreign forward exchange contracts, interest rate swaps, foreign currency swaps, cross currency
interest rate swaps, options, forward rate agreements and commodity price swaps are utilised to reduce exposure to market risks. All the
Group’s derivative financial instruments are held to hedge risk on underlying assets, liabilities and forecast and committed trading and funding
transactions. The Group policy specifically prohibits the use of derivative financial instruments for trading or speculative purposes.
The table below summarises the key financial market risks to the Group and how these risk are managed:
Financial risk
Description
Management of risk
Foreign currency trade
transaction risk
(Note 16(a)(i))
Arises on the conversion of a business unit’s
foreign currency revenue and expenditure to
its functional currency, such that a material
loss or a gain may be incurred. This covers
imports, exports, capital expenditure, and
foreign currency bank accounts balances that
are not in a business unit’s functional currency.
It is Group policy that no currency exchange risk may be
entered into or allowed to remain outstanding should it arise on
committed transactions.The Group uses foreign currency forward
contracts and foreign currency options to manage the risk on firm
commitments and recognised material trade related exposures.
Majority of these transactions have maturities of less than one
year from the reporting date.
Foreign currency balance
sheet translation risk
(Note 16(a)(ii))
Arises due to the translation of the Group’s
foreign denominated assets and liabilities,
overseas operations and subsidiaries to the
company’s functional currency of NZD, such
that the Group’s reporting of financial ratios
would be materially affected.
Interest rate risk
(Note 14 & Note 16(b))
The risk that the value of borrowings or cash
flows associated with the borrowings will
change due to changes in market rates.
It is the Group's policy to hedge this foreign currency translation
risk by borrowing in the currency of the asset in proportion to the
Group's long-term debt to debt plus equity ratio as approved by
the Board.
Where the underlying debt in any currency does not equate to
the required proportion of total debt, debt derivatives, such as
foreign exchange forwards, swaps and cross currency interest
rate swaps are entered into.These are designated as net
investment hedges where the borrowings or contracts are in a
different currency to that of the business in which they
are recognised.
To manage the net exposure to foreign currency borrowings, the
Group enters into cross currency interest rate swaps (CCIRS).
CCIRS are used to manage the combined foreign exchange risk
and interest rate risk as they swap fixed rate foreign currency
borrowings and interest payments into equivalent New Zealand
dollar-denominated or Australian dollar-denominated amounts of
principal with floating interest rates.
The Group manages the fixed interest rate component of its
borrowings by entering into CCIRS, interest rate swaps, forward
rate agreements and options. It aims to maintain fixed interest rate
borrowings between certain ranges over specefic time periods.
79
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Financial risk
Description
Management of risk
Commodity price risk
Arises from committed or highly probable
trade and capital expenditure transactions
that are linked to traded commodities. In the
current year this was primarily movements in
electricity prices.
The Group manages its commodity price risks through
negotiated supply contracts and, for certain commodities, by
using commodity price swaps and options. The Group manages
its commodity price risk depending on the underlying exposures,
economic conditions and access to active derivatives markets.
Cash flow hedge accounting is applied to commodity derivative
contracts. In the current year this was primarily related to
electricity prices.The average hedged electricity price for 2019
was NZ$/MWh 78 (June 2018: NZ$/MWh 75).
A 10% increase in the New Zealand electricity spot price at
balance date would not materially impact the Group's earnings or
equity position.
Disclosure about the credit risk associated with financial instruments and fair value measurement of financial instruments is included in note
16c and 16d.
Derivative financial instruments and hedge accounting
Derivatives are initially recorded at fair value and are then revalued to fair value at balance date with the resulting gain or loss on re-
measurement recognised in the income statement unless the derivative is designated into an effective hedge relationship as a hedging
instrument, in which case the timing of recognition in the income statement depends on the nature of the designated hedge relationship.
For a derivative instrument to be classified and accounted for as a hedge, it must be highly correlated with, and effective as a hedge of the
underlying risk being managed. This relationship is documented from inception of the hedge. The fair values of derivative financial instruments
are determined by applying quoted market prices, where available, or by using inputs that are observable for the asset or liability.
The Group may designate derivatives as:
– Fair value hedges (where the derivative is used to manage the variability in the fair value of recognised assets and liabilities);
– Cash flow hedges (where the derivative is used to manage the variability in cash flows relating to recognised liabilities or forecast
transactions); or
– Net investment hedges (where borrowings or derivatives are used to manage the risk of fluctuation in the translated value of its
foreign operations).
The Group holds derivative instruments until expiry except where the underlying rationale from a risk management point of view changes, such
as when the underlying asset or liability that the instrument hedges no longer exists, in which case early termination occurs.
Fair value hedges
Where a derivative financial instrument is designated as a hedge of a recognised asset or liability, or of a firm commitment, any gain or loss on
the derivative (hedging instrument) is recognised directly in the income statement, together with any changes in the fair value of the hedged risk
(hedged item).
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of assets or liabilities, or of a highly probable
forecasted transaction, the effective part of any gain or loss is recognised directly in the cash flow hedge reserve within equity and the
ineffective part is recognised immediately in the income statement. The effective portion is reclassified to the income statement when the
underlying cash flows affect the income statement.
If the hedge no longer meets the criteria for hedge accounting, hedge accounting is discontinued. The cumulative gain or loss previously
recognised in the cash flow hedge reserve remains there until the forecast transaction occurs, or is immediately recognised in the income
statement if the transaction is no longer expected to occur.
Net investment hedges
Where the derivative financial instruments are designated as a hedge of a net investment in a foreign operation, the derivative financial
instruments are accounted for on the same basis as cash flow hedges through the foreign currency translation reserve (FCTR) within equity.
Cost of hedging
The forward elements of foreign exchange forwards and swaps are excluded from designation as the hedging instrument and the foreign
currency basis spreads of CCIRS are separately accounted for and recognised in other comprehensive income as cost of hedging.
80
Fletcher Building Limited Annual Report 2019
Derivatives that do not qualify for hedge accounting
Where a derivative financial instrument does not qualify for hedge accounting, or where hedge accounting has not been elected, any gain or
loss is recognised directly in the income statement.
(a) Foreign currency risk
(i) Currency transaction risk
Cash flow hedge accounting is applied to forecast transactions and short term intra-group cash funding. The Group designates the spot element
of foreign exchange forwards and swaps to hedge its currency risk and applies a hedge ratio of 1:1. The Group's policy is for the critical terms
of the foreign exchange forwards and swaps to align with the hedged item. The main currencies hedged are the Australian dollar, the United
States dollar, the Japanese yen, the Euro and the British pound. The gross value of these foreign exchange derivatives at 30 June 2019 was
$448 million (June 2018: $379 million).
(ii) Currency translation risk
The effect of the Group’s hedge accounting policy in managing foreign exchange risk related to the Group’s net investments in foreign
operations is presented in the table below:
Hedged investments
and hedging instruments used
Australia Dollar-denominated
Maturity of forward contracts: 0-4 months
Hedged investments
and hedging instruments used
United States Dollar-denominated
Maturity of borrowings: 15-120 months
Australia Dollar-denominated
Maturity of forward contracts: 0-4 months
Euro-denominated
Maturity of borrowings: 96 months
Maturity of forward contracts: 0-1 months
Great British Pound-denominated
Maturity of borrowings: 121 months
Maturity of forward contracts: 0-1 months
Canadian Dollar-denominated
Maturity of borrowings: 121 months
Maturity of forward contracts: 0-1 months
2019
NZ$M
Carrying amount
Notional Amount
Hedge effectiveness
Amount of
investment
hedged
Foreign
currency
borrowings
Foreign currency
forwards
Net investment
gain/(loss)
recognised
in other
comprehensive
Income
Net investment
gain/(loss)
recognised
in other
comprehensive
Income
230
230
(230)
(230)
(2)
(2)
2
2
Carrying amount
Notional Amount
Hedge effectiveness
2018
NZ$M
Amount of
investment
hedged
NZ$M
Foreign
currency
borrowings
NZ$M
Foreign currency
forwards
NZ$M
238
109
72
15
20
7
16
5
482
(238)
(72)
(20)
(16)
(346)
Net investment
gain/(loss)
recognised
in other
comprehensive
Income
NZ$M
Net investment
gain/(loss)
recognised
in other
comprehensive
Income
NZ$M
18
(18)
(109)
(15)
(7)
(5)
(136)
6
2
1
27
(6)
(2)
(1)
(27)
81
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
It is estimated a 10% weakening of the New Zealand dollar against the major foreign currencies the Group is exposed to on the net assets of its
foreign operations would result in an increase to equity of approximately $135 million (June 2018: $219 million) and no material impact on earnings.
The Group applies hedge accounting to foreign currency denominated borrowings that are managed by CCIRS. The hedge ratio applied is 1:1.
The hedge relationship may be designated into separate cash flow hedges and fair value hedges to manage the different components of foreign
currency and interest rate risk:
– fair value hedge relationship where CCIRS are used to manage the interest rate and foreign currency risk in relation to foreign currency
denominated borrowings with fixed interest rates.
– cash flow hedge relationship where CCIRS are used to manage the variability in cash flows arising from interest rate movements on floating
interest rate payments and foreign exchange movements on payments of principal and interest.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency,
reference interest rates, tenors, repricing dates and maturities and the notional amounts. The Group assesses whether the derivative
designated in each hedging relationship is expected to be effective in offsetting changes in the fair value of the hedged item using the
hypothetical derivative method.
In these hedging relationships, the main sources of ineffectiveness are:
– changes in counterparty credit risk and cross currency basis spreads which are not reflected in the change in the fair value of the hedged
item; and
– differences in repricing dates between the cross currency interest rate swaps and the borrowings.
The effect of the Group’s hedge accounting policies in managing both its foreign exchange risk and interest rate risk related to borrowings
denominated in foreign currency is presented in the table below.
2019
NZ$M
Nominal
amount of
the hedging
instrument
NZ$M
Carrying
amount
NZ$M
Accumulated
cost of
hedging
NZ$M
Change in
value used for
calculating
hedge
ineffectiveness
NZ$M
Hedging (gain) or
loss recognised
in other
comprehensive
income
NZ$M
Fair value
hedge (income
statement)
(gain)/loss
NZ$M
Hedge type
Cash flow hedging and fair value
hedging
Cross currency interest rate swaps
USD denominated borrowings
374
6
(9)
35
1
39
Maturity: 97-121 months
Weighted average interest rate:
floating
Weighted average NZD/USD
exchange rate: 0.7055
USD denominated borrowings
299
102
(2)
26
15
673
108
(11)
61
1
54
Maturity: 42-66 months
Weighted average interest rate:
floating
Weighted average AUD/USD
exchange rate: 1.0082
82
Fletcher Building Limited Annual Report 2019 2018
NZ$M
Nominal
amount of
the hedging
instrument
NZ$M
Carrying
amount
NZ$M
Accumulated
cost of
hedging
NZ$M
Change in
value used for
calculating
hedge
ineffectiveness
NZ$M
Hedging (gain) or
loss recognised
in other
comprehensive
income
NZ$M
Fair value
hedge (income
statement)
(gain)/loss
NZ$M
Hedge type
Cash flow hedging and fair value
hedging
Cross currency interest rate swaps
5
(17)
2
(10)
USD denominated borrowings
371
(18)
(12)
Maturity: 97-121 months
Weighted average interest rate:
floating
Weighted average NZD/USD
exchange rate: 0.7055
USD denominated borrowings
296
76
(3)
Maturity: 42-66 months
Weighted average interest rate:
floating
Weighted average AUD/USD
exchange rate: 1.0082
JPY denominated borrowings
134
6
(9)
5
3
7
Maturity: 104 months
Weighted average interest rate:
floating
Weighted average AUD/JPY
exchange rate: 82.1950
801
64
(24)
15
7
(27)
There was no hedge ineffectiveness recognised in profit or loss during the year.
(b) Interest rate swaps
The Group applies hedge accounting to the borrowings and the associated interest rate swaps, for movements in benchmark market
interest rates. Hedge accounting is applied on these instruments for floating-to-fixed instruments as cash flow hedges or for fixed-to-floating
instruments as fair value hedges. The Group applies a hedge ratio of 1:1.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the reference
interest rates, tenors, repricing dates and maturities and the notional amounts.
The Group assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in the fair
value of the hedged item using the hypothetical derivative method.
In these hedging relationships, the main sources of ineffectiveness are:
– the effect of the counterparty and the Group's own credit risk on the fair value of the interest rate swaps which is not reflected in the change
in the fair value of the hedged item; and
– differences in repricing dates between the interest rate swaps and the borrowings.
83
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
2019
NZ$M
Nominal
amount of
the hedging
instrument
NZ$M
Carrying
amount -
derivative
assets/
(liabilities)
NZ$M
Change in
value used for
calculating
hedge
ineffectiveness
NZ$M
Hedging
(gain) or loss
recognised
in other
comprehensive
income
NZ$M
Hedging
(gain) or loss
recognised
in income
statement
NZ$M
150
206
356
(2)
(6)
(8)
(1)
(6)
(7)
2018
NZ$M
1
6
7
Nominal
amount of
the hedging
instrument
NZ$M
Carrying
amount -
derivative
assets/
(liabilities)
NZ$M
Change in
value used for
calculating
hedge
ineffectiveness
NZ$M
Hedging
(gain) or loss
recognised
in other
comprehensive
income
NZ$M
Hedging
(gain) or loss
recognised
in income
statement
NZ$M
150
141
118
409
(1)
(2)
4
1
(1)
3
(5)
(3)
1
2
3
5
5
Hedge type
Cash flow hedging
Interest rate swaps - NZD borrowings
Maturity: 5-33 months
Weighted average interest rate: 2.48%
Interest rate swaps - AUD borrowings
Maturity: 32-56 months
Weighted average interest rate: 1.87%
Hedge type
Cash flow hedging
Interest rate swaps - NZD borrowings
Maturity: 17-45 months
Weighted average interest rate: 5.98%
Interest rate swaps - AUD borrowings
Maturity: 10-12 months
Weighted average interest rate: 4.13%
Fair value hedging
Interest rate swaps - USD borrowings
Maturity: 15 months
Weighted average interest rate: Floating
There was no hedge ineffectiveness recognised in profit or loss during the year.
(c) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
To the extent the Group has a receivable from another party, there is a credit risk in the event of non-performance by that counterparty and
arises principally from receivables from customers, derivative financial instruments and the investment of cash.
(i) Trade receivables
The Group has a credit policy in place under which customers are individually analysed for credit worthiness and assigned a purchase limit. If
no external ratings are available, the Group reviews the customer's financial statements, trade references, bankers' references and/or credit
agencies' reports to assess credit worthiness. These limits are reviewed on a regular basis. Owing to the Group’s industry and geographical
spread at balance date, there were no significant concentrations of credit risks in respect of trade receivables. Refer to note 7 for debtor
balances and ageing analysis.
Most goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. Credit risks
may be further mitigated by registering an interest in the goods sold and the proceeds arising from that supply. The Group does not otherwise
require collateral in respect of trade receivables.
84
Fletcher Building Limited Annual Report 2019
In assessing credit losses for trade receivables, the Group applies the simplified approach and records lifetime expected credit losses (“ECLs”)
on trade receivables. Lifetime ECLs result from all possible default events over the expected life of a trade receivable. The Group considers the
probability of default upon initial recognition of the trade receivable, based on reasonable and available information on the customers.
In assessing ECLs on trade receivables the Group considers both quantitative and qualitative inputs. Quantitative data includes past collection
rates, industry statistics, ageing of receivables, and trading outlook. Qualitative inputs include past trading history with the Group.
(ii) Derivative financial instruments and the investment of cash
The Group enters into derivative financial instruments and invests cash with various counterparties in accordance with established Board
approved credit limits as to credit rating and dollar value but does not require collateral or other security except in limited circumstances.
In accordance with the established counterparty limits, there are no significant concentrations of credit risk in respect of these financial
instruments and no loss is expected.
The Group has not renegotiated the terms of any financial assets that would otherwise be overdue or impaired. The carrying amount of non-
derivative financial assets represents the maximum credit exposure. The carrying amount of derivative financial assets are at their current fair value.
(d) Fair Values
The estimated fair value measurements for financial assets and liabilities compared to their carrying values in the balance sheet, are as follows:
Financial assets
Cash and liquid deposits
Debtors
2019
2018
Carrying
Value
NZ$M
Fair
Value
NZ$M
Carrying
Value
NZ$M
Fair
Value
NZ$M
Classification
Amortised cost
Amortised cost
1,372
1,372
665
665
1,085
1,085
1,453
1,453
Forward exchange contracts - fair value through profit or loss Fair value
Forward exchange contracts - cash flow hedge
Fair value - hedging instruments
Forward exchange contracts - net investment hedge
Fair value - hedging instruments
1
1
2
1
1
2
Cross currency interest rate swaps - split designation
Fair value - hedging instruments
108
108
Interest rate swaps - fair value hedge
Fair value - hedging instruments
Interest rate swaps - fair value through profit or loss
Fair value
1
1
3
3
82
4
3
3
82
4
Total financial assets
Financial liabilities
Creditors and accruals
Bank loans
Private placements
Other loans
Capital notes
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Forward exchange contracts - fair value through profit or loss Fair value
Forward exchange contracts - cash flow hedge
Fair value - hedging instruments
Cross currency interest rate swaps - split designation
Fair value - hedging instruments
Interest rate swaps - cash flow hedge
Fair value - hedging instruments
Total financial liabilities
Total financial instruments
2,570
2,570
2,210
2,210
799
258
886
68
485
3
1
8
799
258
956
68
497
3
1
8
1,114
1,114
97
97
1,181
1,238
94
566
4
18
4
94
584
4
18
4
2,508
2,590
3,078
3,153
62
(20)
(868)
(943)
85
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019 (Continued)
Fair value measurement
All of the Group's derivatives are in designated hedge relationships and are measured and recognised at fair value.
All derivatives are level 2 valuations based on accepted valuation methodologies. Forward exchange fair value is calculated using quoted
forward exchange rates and discounted using yield curves derived from quoted interest rates matching maturity of the contract. The fair value
of electricity price swaps is measured using a derived forward curve and discounted using yield curves derived from quoted interest rates
matching the maturity of the contract.
Interest rate derivatives are calculated by discounting the future principal and interest cash flows at current market interest rates that are
available for similar financial instruments.
Level 1
Level 2
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Inputs that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) other than
quoted prices included within level 1.
Level 3
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fair value disclosures
The fair values of borrowings used for disclosure are measured under level 2, by discounting future principal and interest cash flows at the
current market interest rate plus an estimated credit margin that is available for similar financial instruments with a similar credit profile to
the Group.
The interest rates across all currencies used to discount future principal and interest cash flows are between 1.1% and 5.3% (June 2018: 1.7%
and 7%) including margins, for both accounting and disclosure purposes.
86
Fletcher Building Limited Annual Report 2019
Group Structure and Related Parties
This section details the Group's capital, non-controlling interest of subsidiaries, investments in associates and joint ventures and information
relating to transactions with other Group entities.
17. DIVIDENDS AND SHAREHOLDER TAX CREDITS
Dividends
There was no final dividend paid to shareholders in October 2018 (October 2017: 19 cents per share)
Dividend of 8 cents per share paid to shareholders in April 2019 (April 2018: nil)
2019
NZ$M
68
68
2018
NZ$M
132
132
In line with the Company's dividend policy, the Board determined that it would declare a final dividend of 15.0 cents per share for the 2019
financial year.
Shareholder tax credits
Imputation and franking credits allow the Company to transfer the benefit from the tax it has paid in New Zealand and Australia respectively
to its shareholders when it pays dividends.
Imputation credit account
Imputation credits at the beginning of the year
Taxation paid
Imputation credits attached to dividends paid
Franking credit account
Franking credits at the beginning of the year
Taxation paid
Franking credits received
18. CAPITAL
2019
NZ$M
2018
NZ$M
4
33
(37)
3
3
2019
A$M
2018
A$M
32
(1)
1
32
27
5
32
Ordinary shares are classified as shareholders’ funds. Costs directly attributable to the issue of new shares or options are shown in
shareholders’ funds as a reduction from the proceeds. Acquired shares are classified as treasury stock and presented as a deduction from
share capital under the treasury stock method, as if the shares are cancelled, until they are reissued or otherwise disposed of.
Reported capital at the beginning of the year including treasury stock
Issue of shares
Reported capital at the end of the year including treasury stock
Treasury stock
2019
NZ$M
3,447
3,447
(20)
3,427
2018
NZ$M
2,711
736
3,447
(22)
3,425
All ordinary shares are issued and fully paid and carry equal rights in respect of voting, dividend payments and distribution upon winding up.
87
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Number of ordinary shares:
Number of shares on issue at the beginning of the year
853,347,141
695,921,174
2019
2018
Shares issued under the accelerated entitlement offer during the year
Shares issued under the dividend reinvestment plan
Total number of shares on issue
Less shares accounted for as treasury stock
156,306,701
1,119,266
853,347,141
853,347,141
(2,574,158)
(2,820,341)
850,772,983
850,526,800
The Group completed an entitlement offer to shareholders of new shares in May 2018 resulting in the issue of approximately 156 million
ordinary shares. The offer raised $750 million of additional equity which was offset by $23 million of transaction fees.
19. NON-CONTROLLING INTERESTS
Non-controlling interests are allocated their share of profit for the year in the income statement and are presented separately within equity in
the balance sheet. The effect of all transactions with non-controlling interests that change the Group’s ownership interest but do not result in
a change in control are recorded in equity.
Share capital
Reserves
2019
NZ$M
2018
NZ$M
22
10
32
13
11
24
20. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Investments in associates are measured using the equity method. The equity method has been used for associate entities over which the Group
has significant influence but not control.
A joint arrangement is an arrangement where two or more parties have joint control. The Group classifies its joint arrangements as either joint
operations or joint ventures depending on the legal, contractual and other rights and obligations.
2019
NZ$M
2018
NZ$M
49
21
63
19
152
48
20
62
19
149
375
509
38
19
(5)
14
82
33
(7)
26
Investment by associate/joint venture:
Wespine Industries Pty Limited
Hexion Australia Pty Ltd
Altus NZ Limited
Other
Equity accounted earnings comprise:
Sales - 100%
Earnings before taxation - 100%
Earnings before taxation - Fletcher Building share
Taxation expense
Earnings after taxation - Fletcher Building share
88
Fletcher Building Limited Annual Report 2019
21. RELATED PARTY DISCLOSURES
The disclosures below sets out transactions and outstanding balances that Group companies and other related parties have with each other.
Transactions with related parties are conducted on normal business terms.
Key management personnel are defined as the Executive Committee and Board of Directors.
Trading activities with related parties
2019
Wespine Industries Pty Limited and Hexion Australia Pty Ltd
Altus NZ Limited
2018
Wespine Industries Pty Limited and Hexion Australia Pty Ltd
Altus NZ Limited
Dongwha Pattina NZ Limited
Key management personnel compensation
Directors' fees
Executive committee remuneration paid, payable or provided for:
Short-term employee benefits
Termination benefits
Fletcher Building Retirement Plan
Purchases from
related parties
NZ$M
Amounts owing
to related parties
(within creditors)
NZ$M
39
5
78
6
6
5
14
2019
NZ$M
2018
NZ$M
2
19
2
2
15
3
As at 30 June 2019, Fletcher Building Nominees Limited (the New Zealand retirement plan) held $2.1 million of shares and $5.0 million of
capital notes in Fletcher Building (June 2018: $2.8 million of shares; $7.5 million of capital notes).
89
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Other information
This section provides additional required disclosures that are not covered in the previous sections.
22. CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure commitments are those where future expenditure has either been committed or has received Board approval at year-end,
but not provided for in the financial statements.
Committed at year end
Approved by the directors but uncommitted at year end
23. LEASE COMMITMENTS
2019
NZ$M
52
62
114
2018
NZ$M
68
47
115
Leases under which a significant proportion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives received) are recognised as an expense in the Income Statement on a
straight-line basis over the term of the lease. Expenditure arising from operating leasing commitments is written off to earnings in the period
in which it is incurred.
Expected future minimum lease payments on non-cancellable leases:
Within one year
Within two years
Within three years
Within four years
Within five years
After five years
2019
NZ$M
226
211
191
177
162
1,326
2,293
2018
NZ$M
200
175
149
119
98
316
1,057
Operating lease commitments relate mainly to occupancy leases of buildings and motor vehicles.
As part of the Group’s NZ IFRS 16 implementation project a number of policy decisions have been finalised, including the treatment of
optional renewal periods when determining lease term. From the NZ IFRS 16 adoption date for the Group of 1 July 2019, optional renewal
periods have been included in the lease term where it is reasonably certain the option to renew will be exercised. The lease commitments
disclosure as at 30 June 2019 has been prepared on a consistent basis with the finalised accounting policy. The comparative balances remain
as reported previously.
24. CONTINGENT LIABILITIES
Contingent liabilities are subject to uncertainty or cannot be reliably measured and are not provided for, including legal disputes and
litigation arising in the normal course of business. Disclosures as to the nature of any contingent liabilities are set out below. Judgements
and estimates are applied to determine the probability that an outflow of resources will be required to settle an obligation. These are made
based on a review of the facts and circumstances surrounding the event and advice from both internal and external parties.
Provision has been made in the ordinary course of business for all known and probable future claims. Contingent liabilities arise in respect of
the following categories:
Contingent liabilities with respect to guarantees extended on trading transactions,
performance bonds and other transactions
2019
NZ$M
333
2018
NZ$M
402
90
Fletcher Building Limited Annual Report 2019
25. TAXATION
Taxation expense
The provision for current tax is the estimated amount due for payment during the next 12 months by the Group. The provision for deferred
tax has been calculated using the balance sheet liability method.
Deferred tax is recognised on tax losses, tax credits and on the temporary difference between the carrying amount of assets and liabilities
and their taxable value where recovery is considered probable. Deferred tax is not recognised on the following temporary differences:
– The initial recognition of goodwill
– The initial recognition of asset and liabilities in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss
There are no significant deferred tax liabilities in respect of the undistributed profits of subsidiaries and associates.
Judgements are required about the application of income tax legislation. These judgements and assumptions are subject to risk and
uncertainty as there is a possibility of future changes in the interpretation and/or application of tax legislation. This may impact the amount
of current and deferred tax assets and liabilities recognised in the balance sheet and the amount of other tax losses and temporary
differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised tax assets and liabilities may require
adjustment, resulting in a corresponding credit or charge to the income statement.
Below is the reconciliation of earnings before taxation to taxation expense:
Earnings/(loss) before taxation
Taxation at 28 cents per dollar
Adjusted for:
Difference in tax rates
Non-assessable income
Non-deductible expenses
Tax losses for which no deferred tax asset was recognised
Utilisation of previous unrecognised tax losses
Tax in respect of prior years
Effects of changes in US tax legislation
Other permanent differences
Tax expense/(benefit) on earnings from continuing operations
Tax expense on earnings from discontinued operations
Tax on earnings before significant items
Tax benefit on significant items
Total current taxation expense/(benefit)
Total deferred taxation benefit
Current tax assets/(liabilities)
Included within the balance sheet as follows:
Current tax assets
Current tax liabilities
2019
NZ$M
280
2018
NZ$M
(275)
78
(8)
(5)
38
9
(2)
3
(11)
102
80
22
102
133
(31)
102
117
(15)
102
66
(5)
61
(77)
3
(27)
22
5
(4)
2
(5)
(15)
(96)
(105)
9
(96)
(58)
(38)
(96)
(87)
(9)
(96)
72
(26)
46
91
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Movement during the year:
Opening provision for current tax assets/(liabilities)
Taxation expense
Transfer from/(to) deferred taxation
Non-controlling interest share of taxation expense
Tax recognised directly in reserves
Sale of business
Net tax payments
Provision for deferred tax assets/(liabilities)
Included within the balance sheet as follows:
Deferred tax assets
Deferred tax liabilities
Movement during the year:
Opening provision for deferred tax assets
Taxation expense
Transfer (from)/to current tax
Sale of business
Tax recognised directly in reserves
Composed of:
Provisions
Inventories
Debtors
Property, plant and equipment
Brands
Tax losses
Pensions
Other
2019
NZ$M
2018
NZ$M
46
(117)
71
4
10
19
28
61
(15)
87
(120)
4
5
85
46
2019
NZ$M
2018
NZ$M
121
(2)
119
124
15
(71)
41
10
119
169
21
4
(44)
(77)
63
(5)
(12)
119
161
(37)
124
5
9
120
(10)
124
232
21
5
(74)
(120)
62
(2)
124
The Group has recognised certain tax losses available in New Zealand and Australia on the basis that the respective companies will have future
assessable income. The tax losses have been recognised on the basis of the forecast earnings set out in the companies' strategic plans. The
Group reviews future loss utilisations at each reporting period.
92
Fletcher Building Limited Annual Report 2019 26. RETIREMENT PLANS
Fletcher Building Limited is the principal sponsoring company of a plan that provides retirement and other benefits to employees of the Group
in New Zealand. Participation in this plan has been closed for a number of years, although defined contribution savings plans have been made
available. Various defined benefit and defined contribution plans exist in Australia following the acquisition of the Crane, Amatek, Tasman
Building Products, and Laminex businesses which Group business units contribute to on behalf of their employees. Where the plans have a
deficit in their funded status, the companies are making additional contributions, as recommended by the trustees of the plans, to improve the
funded status.
The Formica group of companies also maintained various defined benefit plans and medical plans in other countries. The defined benefit plan in
USA was closed during FY18 and the Group sold the Formica business during FY19 with no ongoing obligations in relation to the remaining plans.
The Group’s plan assets and liabilities in respect of individual retirement plans are calculated separately for each plan by an independent actuary,
as being the fair value of the plan’s assets less the present value of the future obligations to the members. The value of the asset recognised
cannot exceed the present value of any future refunds from the plans or reductions in future contributions to the plans, unless a constructive
right to a refund of the surplus exists, in which case the amount to be refunded is recognised as an asset. In the Group’s balance sheet, plans
that are in a surplus position are not offset with plans that are in a liability position.
Obligations for contributions to defined contribution plans are recognised in earnings as incurred. The actuarial cost of providing benefits under
defined benefit plans is expensed as it accrues over the service life of the employees, after taking account of the income expected to be earned
by the assets owned by the plans.
All retirement plan related actuarial gains or losses are recognised in other comprehensive income in the pension reserve in the year in which
they arise.
Principal assumptions made in the actuarial calculation of the defined benefit obligation relate to the discount rate, rate of salary inflation and
life expectancy.
The calculation of the defined benefit obligations are based on years of service and the employees' compensation during their years of
employment. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned
in the future. These obligations are accounted for in accordance with NZ IAS 19 Employee Benefits, which has the effect of recognising the
volatility in the returns earned by the plans in the pension reserve.
The following table provides the weighted average assumptions used to develop the net periodic pension cost and the actuarial present
value of projected benefit obligations for the Group's plans:
Assumed discount rate on benefit obligations
Annual rate of increase in future compensation levels
2019
%
2.14
2.61
2018
%
2.53
2.69
Expected returns on plan assets have been determined by the independent actuaries as the weighted average of the expected return after tax
and investment fees for each asset class by the target allocation of assets to each class.
During the year the Group contributed less than $1 million (2018: less than $1 million) in respect of its Australian defined benefit plans and $3
million (2018: $10 million) in respect of its Formica defined benefit and medical plans. It contributed $59 million (2018: $71 million) in respect of
its defined contribution plans worldwide, including Kiwisaver and Australia superannuation.
Fletcher Building Limited has an obligation to ensure that the funding ratio of the New Zealand plan's assets is at least 115% of the plan's
actuarial liability. This is based upon any two consecutive annual actuarial valuations as calculated by the plan's actuary. This calculation is done
on the plan's funding basis, which is completed in accordance with NZ IAS 26 Retirement Benefit Plans. At 31 March 2019, the value of the plan
assets was 159% of the actuarial liability and the funded surplus was $103 million (31 March 2018: 155%, $101 million).
The Group expects to contribute less than $1 million to its Australia defined benefit plans during the year to 30 June 2020. The Group is
currently not contributing to the New Zealand plan.
93
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Net periodic pension cost
Service cost
Net interest cost
Net periodic pension cost - recognised in earnings before interest and taxation
Recognised net asset/(liability)
Assets of plans
Projected benefit obligation
Funded surplus/(obligation)
Asset ceiling effect
Recognised net asset
Recognised net asset/(liability) by jurisdiction:
New Zealand plan
Australian plans
Retirement plan assets - recognised within non-current assets
Other overseas plans
Retirement plan liabilities - recognised within non-current liabilities
Recognised net asset
2019
NZ$M
2018
NZ$M
3
(2)
1
400
(339)
61
61
47
14
61
61
7
(2)
5
756
(694)
62
(12)
50
66
22
88
(38)
(38)
50
94
Fletcher Building Limited Annual Report 2019
Movement in recognised net asset
Recognised net asset at the beginning of the year
Currency translation
Actuarial movements for the year
Net periodic pension cost
Sale of business - liability
Employer contributions
Recognised net asset
Assets of the plans
Assets of plans at the beginning of the year
Actual return on assets
Total contributions
Settlement of USA plan
Benefit payments
Sale of business
Currency translation
Assets of the plans consist of:
Australasian equities
International equities
Property
Bonds
Cash and short-term deposits
Other assets
Projected benefit obligation
Projected benefit obligation as at the beginning of the year
Service cost
Interest cost
Member contributions
Actuarial loss arising on changes in demographic assumptions
Actuarial loss arising on changes in financial assumptions
Actuarial gain arising on other assumptions - experience adjustments
Benefit payments
Sale of business
Settlement of USA plan
Currency translation
2019
NZ$M
2018
NZ$M
50
1
(25)
(1)
36
61
756
15
1
(38)
(334)
400
45
109
27
134
57
28
400
(694)
(3)
(9)
(1)
(1)
(24)
(2)
37
361
(3)
(339)
33
2
10
(5)
10
50
827
45
13
(117)
(48)
36
756
59
310
24
262
63
38
756
(793)
(5)
(19)
(2)
4
(5)
48
117
(39)
(694)
95
Fletcher Building Limited Annual Report 2019 Notes to the Financial Statements 2019 (Continued)
27. SHARE-BASED PAYMENTS
The Group has a long-term share-based performance incentive scheme targeted at selected employees (invited to participate at the discretion
of the Company) most able to influence the results of the Group.
The long-term share scheme allows scheme participants to acquire shares in the Company at market price, funded by an interest-free loan from
the Group. The scheme participants are entitled to vote on the shares and to receive cash dividends, the proceeds of which are used to reduce
the loan. The shares are held in trust for the scheme participants by the Trustee, Fletcher Building Share Schemes Limited.
For shares granted in and prior to 2016 vesting of half of any entitlement under the executive long-term share scheme is dependent upon the
Group achieving a total shareholder return (TSR) that is equal to the TSR of the comparator group of companies at the point that the cumulative
market capitalisation of that comparator group exceeds 50% of the total market capitalisation of the comparator group TSR index over a
three year restricted period. Vesting of the other half of any entitlement is dependent upon the Group achieving an earnings per share target.
However, for shares granted in and after 2017 all of the entitlement under the scheme is dependent upon the Group's TSR exceeding the 51st
percentile of the TSR of the comparator group over a three year restricted period. Additionally, in respect of the entitlement which is dependent
on the Group's TSR, the three year restrictive period is automatically extended for an additional year if the minimum vesting threshold is not
met. Scheme participants can elect to extend the restrictive period for an additional year if the Group's TSR means that the vesting level is
between the 51st and 75th percentile of the comparator group. No extension is permitted for the entitlement that is dependent upon achieving
an earnings per share target.
At the end of the restrictive period or any extension, the Group will pay a bonus to the executives to the extent that performance hurdles have
been met, the after-tax amount of which will be generally sufficient for the scheme participants to repay the balance of the loan in respect of
the shares which are to be transferred. Owing to the integrated nature of the scheme, for accounting purposes the Group accounts for the
incentive scheme as being equity-settled. If the performance hurdles are not met or are only partially met, the trustee will acquire the beneficial
interest in some or all of the relevant shares. The loan provided in respect of those shares which do not transfer to the scheme participants (the
forfeited shares) will be novated to the trustee and will be fully repaid by the transfer of the forfeited shares.
The Group will recognise an expense in earnings, with a corresponding increase in the share-based payments reserve, over the restrictive
period. If the performance hurdles based on TSR are not met and the shares do not transfer to the scheme participants, the amount in the
share-based payments reserve will remain in equity and will not be released to earnings. If the performance targets based on earnings per
share are not met and the shares do not transfer, the amount in the share-based payments reserve will be released to earnings.
The Group accounts for the share schemes under the treasury stock method. The receivable owing from the scheme participants, representing
the shares held in the Company, is deducted from the Group’s paid up capital. The shares are deducted from equity until the end of the
restrictive period, at which point they transfer to scheme participants or beneficial ownership of the shares transfers to the trustee.
The following are details with regard to the scheme:
2018
Award
1 July 2018
1,041,605
$6.99
2017
Award
1 July 2017
890,075 (1)
$7.85
2016
Award
2015
Award
1 July 2016
1 October 2015
905,211
$10.61
3,208,083
$6.89
$7,280,819
$6,985,959
$9,604,289
$22,103,692
30 June 2021
30 June 2020
30 June 2019
30 September 2018
1,041,605
(80,069)
890,075
(181,723)
905,211
(497,159)
(906)
407,146
3,208,083
(2,690,458)
(20,501)
497,124
Number of shares held at 30 June 2019
961,536
708,352
(1) This is an average share price which includes 182,561 shares granted at $7.34 to Ross Taylor as Chief Executive Officer and the remainder issued to other participants at $7.98.
Total fair value expense in year for executive performance share scheme
Amount recognised at year end for related bonus payable
Fair value has been determined using Monte Carlo valuation methodology.
96
2019
NZ$M
2
9
2018
NZ$M
8
14
Grant date
Number of shares granted
Market price per share at grant date
Total value at grant date
Vesting date
Number of shares:
Number of shares originally granted
Less forfeited over life of scheme
Less vested over life of scheme
Fletcher Building Limited Annual Report 2019
Employee share purchase scheme - FBuShare
The global employee share purchase scheme, FBuShare, allows eligible group employees to regularly save up to NZ$5,000 per annum of their
after-tax pay and purchase shares in the company (purchased shares) at market prices. At the end of rolling three year qualification periods,
and provided they remain employed by a Group company, employees will be awarded one free award share for every two purchased shares
acquired in the first year of each three year qualification period and still held at the end of those periods.
Dividends payable will be re-invested in additional shares. Employees will receive award shares on any additional shares, subject to the same
conditions set out above. The employees are responsible for any income tax liability payable on dividends and on the value of any award shares.
At the end of each three year qualification period, employees may continue to hold any purchased, additional and award shares or they may sell
some or all of the shares.
The Group accrues the liability to pay for award shares over the three year qualification periods.
28. IMPACT OF NZ IFRS 15 AND OTHER RECLASSIFICATIONS
This note outlines changes to the comparative information in the Income Statement due to a change in classification treatment and explains the
impact of the adoption of NZ IFRS 15 Revenue from Contracts with Customers on the Group's financial statements. It also discloses the new
accounting policies that have been applied from 1 July 2018, where they are different to those applied in prior periods.
NZ IFRS 15 - Revenue from Contracts with Customers
Revenue was previously recognised when it was probable that work performed will result in revenue whereas under the new standard, revenue
is recognised when it is highly probable that a significant reversal of revenue will not occur. The following are the accounting policies applicable
to the recognition of revenue for the Group from 1 July 2018.
Construction division
Construction contract revenue
The Group derives revenue from the construction of building and infrastructure projects across New Zealand and the South Pacific. Contracts
entered into may be for the construction of one or several separate inter-linked pieces of large infrastructure. While it is uncommon, contracts
can be entered into for the building of several projects. Where this occurs, the Group will identify the single or multiple performance obligations
and allocate the total transaction price across each performance obligation based on stand-alone selling prices. The transaction price is normally
fixed at the start of the project.
The nature of construction projects leads to variations in the project size and scope. It is also normal practice for contracts to include bonus and
penalty elements based on timely construction or other performance criteria known as variable consideration, discussed below.
The performance obligation is fulfilled over time and as such revenue is recognised over time. As work is performed on the assets being
constructed they are controlled by the customer and have no alternative use to the Group, with the Group having a right to payment for
performance to date.
Generally, contracts identify various inter-linked activities required in the construction process. Revenue is recognised on the measured output
of each process based on appraisals that are agreed with the customer on a regular basis.
Maintenance contract revenue
Services revenue is primarily generated from maintenance services supplied to roading assets owned by local or central Government in
New Zealand and the South Pacific. This revenue also arises in respect of infrastructure assets previously constructed by the Group where
maintenance was included in the contract. The service contracts are typically determined to have one single performance obligation which are
significantly integrated and are fulfilled over time. There is no change to the revenue recognition methodology previously utilised.
Variable consideration
Revenue in relation to variations, such as a change in the scope of the contract, are only included in the transaction price when it is approved
by the parties to the contract, the variation is enforceable or in certain circumstances when approved by the Board of Directors and the amount
becomes highly probable.
Residential and Development division
Through the Residential division the Group derives income from the sale of completed houses, construction type projects for enabling or
utilities works for large developments, and the sale of development sites surplus to Group requirements. Revenue is recognised when control
passes to the customer for each type of transaction. House sales are commonly recognised at the time of settlement, when title passes to
the customer and payment is received. Enabling or utilities works are recognised over time using a percentage of completion method. Land
development sales are recognised in line with the requirements of the specific sale and purchase agreement.
Performance obligations vary between the types of transactions. The sale of a completed house from Group inventory to a customer is a
single performance obligation, as houses are not constructed under contract from a customer. For works contracts and development sales, the
division reviews the terms of the sale to determine whether the performance obligations are distinct and separately identifiable.
97
Fletcher Building Limited Annual Report 2019
Notes to the Financial Statements 2019 (Continued)
Other divisions
Sale of goods
The materials and distribution businesses within the Group recognise revenue when control of the goods has passed to the customer, the
associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods,
and there is a high probability that a significant reversal in the revenue recognised will not occur. Revenue is measured net of returns, trade
discounts and volume rebates. The timing of the transfer of control varies depending on the individual terms of the sales agreement, for most
sales when the product is delivered to the customer.
Impact on the financial statements
The Group has adopted NZ IFRS 15 Revenue from Contracts with Customers from 1 July 2018 which resulted in changes in accounting
policies and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in NZ IFRS 15,
the Group has adopted the new rules retrospectively using the modified approach and taken advantage of the applicable practical expendients
possible, primarily regarding contract modifications. Under this approach, the comparative periods presented in the Income Statement have not
been restated, rather the cumulative effect of applying this standard has been applied to the opening balance of retained earnings. The main
components of this cumulative effect are shown below.
Retained earnings
Retained earnings - as reported at 30 June 2018
Write-off of pre-contract costs previously capitalised
Restatement of variable consideration previously recognised
Restatement of timing of residential sales
Opening reserves - restated
NZ$M
894
(1)
(1)
(17)
875
NZ IFRS 15 requires changes to the disclosure of certain Balance Sheet items. While restatement of these items is not required under the
modified approach for adoption, the Group has opted to restate the following Balance Sheet items for simplicity.
Balance Sheet
As at 30 June 2018
Contract assets
Construction contracts
Contract liabilities
Provisions (current)
Provisions (non-current)
Reported
NZ$M
NZ IFRS 15
(626)
(89)
(25)
13
626
(142)
(360)
(137)
Restated
NZ$M
13
(142)
(449)
(162)
Other Income Statement classifications
Selling, general and administration expenses
During the period the Group has elected to change the classification of warehousing and freight costs for finished goods inventory. These costs
are now disclosed in selling, general and administration expenses which provides a more useful perspective on the underlying nature of these
transactions. The comparative periods have also been restated below to improve comparability of these lines in the Income Statement.
Other gains and losses
The Group has historically reported smaller items of an exceptional nature in a separate line on the Income Statement, described as 'other
gains and losses'. This was in contrast to the presentation of expenses in the Income Statement by function and in addition to the disclosure of
'significant items' (refer to note 2). To provide clarity, the Group will continue to classify significant one-off events as significant items, with the
remainder recognised according to their function in the Income Statement. The comparative information has been restated below to improve
the comparability of the financial statements.
98
Fletcher Building Limited Annual Report 2019
For the year ended 30 June 2018
Cost of goods sold
Gross margin
Selling, general and administration expenses
Other gains and losses
29. SUBSEQUENT EVENTS
Reported
NZ$M
Selling and
Marketing
Other gains
and losses
(6,923)
(1,992)
(1,311)
(28)
380
380
(380)
(28)
(28)
28
Restated
NZ$M
(6,571)
(1,640)
(1,691)
On 20 August 2019, the Directors declared a final dividend of 15.0 cents per share, payable on 19 September 2019, and approved the on-market
share buyback of up to NZ$300 million.
99
Fletcher Building Limited Annual Report 2019
s Report
To the Shareholder of
Fletc
Independent Auditor's Report
Chartered Accountants
Chartered Accountants
Independent Auditor's Report
Independent Auditor's Report
Independent Auditor's Report
To the Shareholder of Fletcher Building Industries Limited
To the Shareholder of Fletcher Building Industries Limited
To the Shareholders of Fletcher Building Limited
Report on the Financial Statements
Report on the Financial Statements
Opinion
Opinion
OPINION
We have audited the financial statements of Fletcher Building Industries Limited (“FBIL” or “the Company”), on pages 2 to 11,
We have audited the financial statements of Fletcher Building Industries Limited (“FBIL” or “the Company”), on pages 2 to 11,
which comprise the balance sheet as at 30 June 2019, and the income statement, statement of comprehensive income, statement of
which comprise the balance sheet as at 30 June 2019, and the income statement, statement of comprehensive income, statement of
We have audited the consolidated financial statements of Fletcher Building Limited (“the Company”) and its subsidiaries (together
movements in equity and statement of cash flows for the year then ended, and notes to the financial statements including a
movements in equity and statement of cash flows for the year then ended, and notes to the financial statements including a
“the Group”), on pages 47 to 99, which comprise the balance sheet of the Group as at 30 June 2019, and the Income Statement,
summary of significant accounting policies.
summary of significant accounting policies.
Statement of Comprehensive Income, Statement of Movements in Equity and Statement of Cash Flows for the year then ended of
the Group, and notes to the financial statements including a summary of significant accounting policies.
In our opinion, the financial statements on pages 2 to 11 present fairly, in all material respects, the financial position of FBIL as at
In our opinion, the financial statements on pages 2 to 11 present fairly, in all material respects, the financial position of FBIL as at
30 June 2019 and its financial performance and its cash flows for the year then ended in accordance with New Zealand
30 June 2019 and its financial performance and its cash flows for the year then ended in accordance with New Zealand
In our opinion, the consolidated financial statements on pages 47 to 99 present fairly, in all material respects, the financial position
equivalents to International Financial Reporting Standards and International Financial Reporting Standards.
equivalents to International Financial Reporting Standards and International Financial Reporting Standards.
of the Group as at 30 June 2019 and its financial performance and its cash flows for the year then ended in accordance with New
Zealand equivalents to International Financial Reporting Standards and International Financial Reporting Standards.
This report is made solely to the Company's shareholder. Our audit has been undertaken so that we might state to the Company's
This report is made solely to the Company's shareholder. Our audit has been undertaken so that we might state to the Company's
shareholder those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent
shareholder those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent
This report is made solely to the Company's shareholders, as a body. Our audit has been undertaken so that we might state to
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholder for
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholder for
the company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose. To the
our audit work, for this report, or for the opinions we have formed.
our audit work, for this report, or for the opinions we have formed.
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's
shareholders, as a body, for our audit work, for this report, or for the opinions we have formed.
Basis for Opinion
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those
BASIS FOR OPINION
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those
We are independent of the Company in accordance with Professional and Ethical Standard 1 (revised) Code of Ethics for
We are independent of the Company in accordance with Professional and Ethical Standard 1 (revised) Code of Ethics for
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other
Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
ethical responsibilities in accordance with these requirements.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (revised) Code of Ethics for Assurance
Practitioners issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other ethical
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other than in our capacity as auditor we have no relationship with, or interest in FBIL. Ernst & Young has provided tax advisory
Other than in our capacity as auditor we have no relationship with, or interest in FBIL. Ernst & Young has provided tax advisory
and other assurance services to various companies within the Fletcher Building Limited Group (“the Group”). Partners and
and other assurance services to various companies within the Fletcher Building Limited Group (“the Group”). Partners and
Ernst & Young has provided tax advisory and other assurance services to the Group. Partners and employees of our firm may deal
employees of our firm may deal with the Group on normal terms within the ordinary course of trading activities of the business of
employees of our firm may deal with the Group on normal terms within the ordinary course of trading activities of the business of
with the Group on normal terms within the ordinary course of trading activities of the business of the Group. We have no other
the Group.
the Group.
relationship with, or interest in, the Group.
Key Audit Matters
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
KEY AUDIT MATTERS
statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and
statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
in forming our opinion thereon, but we do not provide a separate opinion on these matters. For the matter below, our description
in forming our opinion thereon, but we do not provide a separate opinion on these matters. For the matter below, our description
statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole,
of how our audit addressed the matter is provided in that context.
of how our audit addressed the matter is provided in that context.
and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the audit of the financial statements section of
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the audit of the financial statements section of
description of how our audit addressed the matter is provided in that context.
the audit report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
the audit report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the audit of the financial statements section of
respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures,
respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures,
the audit report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying
including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying
respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures,
financial statements.
financial statements.
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial statements.
100
Accounting for investment in associate
Accounting for investment in associate
Why significant
Why significant
How our audit addressed the key audit matter
How our audit addressed the key audit matter
The Company owns 20 per cent of the shares in Fletcher
The Company owns 20 per cent of the shares in Fletcher
Building Holdings New Zealand Limited (“FBHNZ”)
Building Holdings New Zealand Limited (“FBHNZ”)
which currently holds all of the shares in Fletcher Building
which currently holds all of the shares in Fletcher Building
►
►
►
►
In obtaining sufficient appropriate audit evidence, we:
In obtaining sufficient appropriate audit evidence, we:
evaluated the basis of accounting and its appropriateness;
evaluated the basis of accounting and its appropriateness;
recalculated the share of the equity accounted profits
recalculated the share of the equity accounted profits
including dividend receipts;
including dividend receipts;
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Fletcher Building Limited Annual Report 2019
Construction revenue and associated provision for onerous contracts
Why significant
How our audit addressed the key audit matter
A substantial amount of the Group’s revenue relates
to revenue from construction contracts. Where
these contracts have a long-term duration, revenue
and margin are recognised based on the stage of
completion of individual contracts. This is calculated
based on the proportion of total costs incurred at the
reporting date compared to the Group’s estimation
of total costs of the contract. Where a contract is
identified as loss-making a provision is immediately
recorded for estimated future losses on the entire
contract. We focused on these types of contracts
due to the high level of estimation involved, in
particular relating to:
– forecasting total cost to complete, including
the estimation of cost contingencies for
contracting risks;
– revisions to total forecast costs for certain events
or conditions that occur during the performance
of the contract, or are expected to occur to
complete the contract; and
In obtaining sufficient appropriate audit evidence, we:
– evaluated the Group’s process regarding accounting for contract
revenues. We tested controls such as:
›
›
the preparation, review and authorisation of monthly project reports,
which involves management assessing key contract KPIs; and
the project reviews undertaken by the Group’s Project
Management Office and management governance committee;
– used a risk rating process to select a sample of contracts for testing
based on a number of quantitative and qualitative factors. These
factors included contracts with significant deterioration of margin and/
or completion dates, significant variations and claims, and factors
which might indicate a greater level of judgement was required by the
Group. For the contracts selected, where relevant, we:
›
read the contract terms and conditions to evaluate whether the
individual characteristics of each contract were reflected in the
Group’s estimation of total costs of the contract;
› undertook site visits (to both contract sites and commercial
offices) to understand the nature of risk elements of the contracts;
– the recognition of variable consideration, based
on an assessment by the Group as to whether it
is probable that the amount will be approved by
the customer and therefore recovered.
›
›
Disclosures regarding the Group’s construction
contracts are included in notes 2 (e), 10 and 11 of the
financial statements.
tested a sample of costs incurred to date through agreement to
supporting documentation;
tested the estimated costs to complete by agreeing key forecast
cost assumptions to underlying evidence such as subcontractor
quotes, tender information, historical invoicing, employment
records or agreements with subcontractors;
› considered the Group’s ability to forecast margins on contracts by
analysing the accuracy of previous margin forecasts to
actual outcomes;
›
›
tested variable consideration, both within contract revenue and
contract costs, to supporting documentation and by reference to
underlying contracts; and
for the most significant contracts by size and complexity we used
our construction and real estate specialists to evaluate the overall
appropriateness of forecast project outturn. Our construction and
real estate specialists have significant international experience and
credentials to advise on such projects.
– evaluated the Group’s legal and external experts’ reports received
on contentious matters to identify conditions that may indicate the
inappropriate recognition of variable consideration or liquidated or other
damages. We considered the consistency of this to the inclusion or not
of amounts in the estimates used for revenue recognition;
– evaluated contract performance in the period since year end to the
date of this report to assess the Group’s year end judgements in
respect of revenue recognition and forecast costs to complete; and
– considered the adequacy of the associated disclosures in the
financial statements.
101
Fletcher Building Limited Annual Report 2019 Independent Auditor's Report (Continued)
Goodwill and other intangible assets’ impairment assessments
Why significant
The Group holds goodwill and other intangible assets which
are carried at $1.1 billion at 30 June 2019.
The recoverable amount of goodwill and other intangible
assets is determined each reporting period by reference to
valuations prepared using discounted cash flow models
(‘DCF models’).
DCF models contain significant judgement and estimation
in respect of future cash flow forecast, discount rate and
terminal growth rate assumptions. Changes in certain
assumptions can lead to significant changes in the
assessment of the recoverable amount.
Disclosures regarding the Group’s key assumptions adopted
and the sensitivity to reasonably possible changes in key
assumptions which could result in impairment and/or create
additional impairments at certain cash generating units
(‘CGUs’) are included in note 2 (c) of the financial statements.
Treasury – Derivative valuation and hedge accounting
Why significant
The Group manages its economic risks through the use of
derivative financial instruments (‘derivatives’) which primarily
consist of interest rate swaps, foreign exchange contracts
and cross currency interest rate swaps.
Fair value movements in the derivatives are driven by
movements in the financial markets. Changes in fair value due
to these movements can be significant.
Disclosures regarding the fair value of the Group’s derivative
assets and liabilities outstanding at balance date are included
in note 16 of the financial statements.
How our audit addressed the key audit matter
In obtaining sufficient appropriate audit evidence, we:
– understood the Group’s goodwill impairment assessment
process and identified controls;
– assessed the Group’s determination of CGUs based on our
understanding of the nature of the Group’s business units;
– obtained the Group’s DCF models and agreed forecasts to a
combination of the board approved FY20 budget, the FY21-
FY24 strategic plan or other management papers;
– assessed key inputs to the DCF models including future cash
flow forecasts (by reference to forecast earnings), discount
rates and terminal growth rates;
– considered the accuracy of previous Group forecasting to
inform our evaluation of forecasts included in the DCF models;
– involved our valuation specialists, for those CGUs with a higher
risk of impairment, to assess the Group’s discount rates.
Valuation specialists were also involved in assessing the DCF
models for valuation methodology, including the treatment of
assumptions for capital expenditure, working capital, terminal
value and the net present value calculation;
– performed sensitivity analysis on higher risk CGUs in relation to
the discount rate and forecast earnings to consider the potential
impact of changes in assumptions; and
– considered the adequacy of the associated disclosures in the
financial statements particularly focusing on the disclosure of
the CGUs where the impairment assessment is sensitive to
reasonably possible changes in assumptions.
How our audit addressed the key audit matter
In obtaining sufficient appropriate audit evidence, we:
– understood the Group’s treasury processes and
identified controls;
– involved our treasury specialists to evaluate the accuracy with
which the Group revalues derivatives;
– confirmed the existence of derivatives directly with
counterparties at balance date;
– assessed fair value movements on derivatives during the year
to identify whether these movements were appropriately
recognised in the Income Statement or the Statement of
Comprehensive Income in accordance with NZ IFRS 9
Financial Instruments;
– assessed hedge effectiveness across a sample of the hedged
portfolio; and
– considered the adequacy of the associated disclosures in the
financial statements.
102
Fletcher Building Limited Annual Report 2019 INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR’S REPORT
The directors of the company are responsible for the Annual Report, which includes information other than the financial statements
and auditor’s report.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the financial statements in
accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial Reporting
Standards, and for such internal control as the directors determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing
(New Zealand) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
A further description of the auditor’s responsibilities for the audit of the financial statements is located at External Reporting
Board’s website: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/.
This description forms part of our auditor’s report.
The engagement partner on the audit resulting in this independent auditor’s report is Simon O’Connor.
Chartered Accountants
Auckland
21 August 2019
103
Fletcher Building Limited Annual Report 2019 Remuneration Report
Fletcher Building seeks to ensure that it remunerates directors and management fairly and responsibly.
DIRECTORS' REMUNERATION
The current total directors' remuneration pool approved by shareholders in 2011 is $2 million per annum. Directors receive remuneration
determined by the Board on the recommendation of the Nominations Committee. Remuneration must be within the aggregate amount per
annum approved by shareholders. There are no schemes for retirement benefits for non-executive directors. Information of directors’ holding of
securities is set out on page 118.
Directors' fees for FY20 were reviewed and approved by the Board in June 2019. From 1 July 2019 the directors fees (excluding committee
fees) increased by 2% (rounded to the nearest $100), to be paid out of the current shareholder approved annual remuneration limit of $2 million.
The remuneration scale for directors is outlined below:
Board of Directors
Audit and Risk Committee
Remuneration Committee
Nominations Committee
Safety, Health, Environment and
Sustainability Committee
Non-vouchable expense reimbursement allowance
Overseas based directors travelling allowance
(1) No additional fees are paid to the Board Chair for committee roles.
Position
Chair (1)
Non-Executive Director
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Remuneration scale for the period
25 October 2017
to 24 October 2018
25 October 2018 to
30 June 2019
1 July 2019 to
30 June 2020
$352,000
$132,800
$36,800
$18,400
$28,000
$14,000
-
$8,000
$28,000
$14,000
$5,000
$18,000
$360,000
$140,000
$37,000
$19,000
$28,000
$14,000
-
$8,000
$28,000
$14,000
$5,000
$18,000
$367,200
$142,800
$37,000
$19,000
$28,000
$14,000
-
$8,000
$28,000
$14,000
$5,000
$18,000
Where an ad hoc committee is convened, such as for due diligence, additional remuneration may be payable at $1,200 per half day. However,
no payments for ad hoc committees were made in FY19. Directors do not receive any further remuneration for also being directors of Fletcher
Building Industries Limited, the NZX listed issuer of the group's capital notes. Directors' fees exclude GST, where appropriate. In addition, Board
members are entitled to be reimbursed for costs directly associated with carrying out their duties, including travel costs.
104
Fletcher Building Limited Annual Report 2019 Details of the total remuneration received by each Fletcher Building director for FY19 are as follows:
Directors
Board Fees
Audit
and Risk
Committee
Nominations
Committee (1)
Remuneration
Committee
Bruce Hassall
(Chair) (2)
$320,950.54
$6,133.33
Martin Brydon (3) (4)
$115,602.15
$1,333.33
(Chair)
$6,666.67
Safety, Health,
Environment
and
Sustainability
Committee
Overseas
based
directors
travelling
allowance
Non-vouchable
expense
reimbursement
allowance
$5,000.00
Total
Remuneration
$333,417.20
$11,666.67
$4,166.67
$15,000.00
$153,102.16
$183,546.77
$146,657.71
$73,568.81
$157,239.26
Antony Carter
$137,735.48
$18,811.29
$8,000.00
$14,000.00
Barbara Chapman (3) (5)
$115,602.15
$6,666.67
$20,222.22
(Chair)
$5,000.00
$4,166.67
Alan Jackson (6)
$52,179.93
$3,111.11
$10,888.89
$5,444.44
$1,944.44
Rob McDonald (3) (7)
$115,602.15
$30,803.77
(Chair)
$6,666.67
Doug McKay (3) (8)
$115,602.15
$15,744.62
$6,666.67
$4,166.67
$23,333.33
(Chair)
$4,166.67
$165,513.44
Sir Ralph Norris (9)
$58,666.67
$833.33
Cathy Quinn (3) (10)
$115,602.15
$15,744.62
$6,666.67
$11,666.67
$4,166.67
Cecilia Tarrant (11)
$22,133.33
$3,066.67
$1,333.33
$4,666.67
$833.33
$59,500.00
$153,846.78
$32,033.33
Steve Vamos (12)
$137,735.48
$3,066.67
$8,000.00
$14,000.00
$5,000.00
$13,500.00
$181,302.15
Total
$1,307,412.18
$93,370.97
$55,111.12
$59,111.11
$56,777.78
$39,444.45
$28,500.00
$1,639,727.61
(1) All non-executive directors are members of the Nominations Committee.
(2) Bruce Hassall succeeded Sir Ralph Norris as Board Chair effective 1 September 2018 and at the same time ceased to be Chair of the Audit and Risk Committee. No additional fees were
paid to him subsequently as Chair for committee roles.
(3) Martin Brydon, Barbara Chapman, Rob McDonald, Doug McKay and Cathy Quinn were appointed to the Board on 1 September 2018.
(4) Appointed member of the Safety, Health, Environment and Sustainability Committee effective 1 September 2018.
(5) Appointed member of the Remuneration Committee effective 1 September 2018 and succeeded as Chair of the Remuneration Committee effective 21 November 2018.
(6) Retired from the Board on 20 November 2018 following conclusion of the annual shareholders' meeting.
(7) Appointed Chair of the Audit and Risk Committee effective 1 September 2018.
(8) Appointed member of the Audit and Risk Committee and Chair of the Safety, Health, Environment and Sustainability Committee effective 1 September 2018.
(9) Ceased to be director effective 1 September 2018.
(10) Appointed member of the Audit and Risk Committee and the Safety, Health, Environment and Sustainability Committee effective 1 September 2018.
(11) Ceased to be director effective 1 September 2018.
(12) Ceased to be member of the Audit and Risk Committee effective 1 September 2018.
EXECUTIVE AND SENIOR MANAGEMENT REMUNERATION
The Company’s remuneration strategy aims to attract, retain and motivate high calibre people at all levels of the organisation, to support our
vision of being the undisputed leader in New Zealand and Australian building solutions – with products and distribution at our core.
Total remuneration is comprised of three elements - fixed remuneration, a short-term variable incentive, and a long-term share scheme. Our
remuneration strategy and frameworks are supported by a Remuneration Committee that oversees remuneration policies, and the performance,
remuneration, development and succession planning of executives and senior management. The Company’s remuneration committee is kept
appraised of relevant market information and best practice, obtaining advice from external advisors when necessary.
Remuneration levels are reviewed and benchmarked annually for market competitiveness, and alignment with strategic and performance
priorities. PwC was engaged to provide remuneration benchmark data for the chief executive officer and other executive committee roles during
the year. A peer group comprised of New Zealand and Australian companies generally comparable in size, complexity and industry is used to
benchmark executives.
Fixed remuneration
Fletcher Building’s policy is to set fixed remuneration based on capability, performance and industry benchmarks in the country in which
the employee is located. Participation in retirement savings plans is made available to employees as required by remuneration practices in
relevant jurisdictions.
Short-term variable incentive (STI)
STI’s are designed to incentivise earnings, operating cash and those measures that drive sustainable business performance by rewarding
employees' performance against both financial and individual goals. Participation in the STI plan is by annual invitation at the discretion of
the Company. Target levels of STI opportunity range from 25% to 100% of base salary depending on the role. For the chief executive officer the
target STI opportunity is set at 100% of base salary.
105
Fletcher Building Limited Annual Report 2019 Remuneration Report (Continued)
Financial targets
For the chief executive officer, corporate executives and senior management, the financial target is based on the Group EBIT and operating
cash. For operating executives and senior management, the financial target is based on their own division/business unit EBIT, and operating
cash or working capital depending on the business’ priorities. To ensure alignment across the Group, executive division operating roles also have
a multiplier based on Group EBIT, and senior management business unit operating roles have a multiplier based on their division EBIT.
Financial targets are set at three levels: a threshold level, which must be met before any STI is paid, a target level, and a maximum level that
reflects stretch performance. For FY19, the financial threshold level was set at 90% of target. The maximum financial level is generally set at
110% or 120% of target. The chief executive officer, chief financial officer, operating chief executives and senior management have 70% of their
STI opportunity based on financial measures. Functional chief executives and senior management have 50% of their STI opportunity based on
financial measures recognising the reduced line of sight to financial performance.
Individual goals
Individual goals for the executives and senior management are aligned to the different priorities and development phases in which their
businesses are operating. This may include people engagement, customer net promotor score, and other strategic measures. The executives'
objectives were reviewed by the Board, and in the case of the chief executive officer were approved directly by the Chair.
The maximum opportunity on the individual goals is 100% of target. There is no opportunity for stretch performance on the individual goals. If
the threshold financial (EBIT) target is not met, no individual component of the STI is payable.
Safety performance
A multiplier is applied to the overall STI outcome based on achievement against safety measures. These measures are safety site walks and / or
TRIFR targets. In the event of a fatality or serious injury, the Board has the discretion to adjust any or all of the STI payment, and the Board has
exercised this discretion in relation to the fatalities which occurred in FY19.
Clawback
The Board also has the discretion to require repayment of an employee’s STI for a period of up to three years where the Company’s financial
statements were incorrectly reported, there is misconduct that causes a financial trading loss that has not been taken into account in the STI
calculations or an error or misstatement has resulted in a material overpayment.
Long-Term Share Scheme
Long-term performance incentives are designed to align employee remuneration with financial outcomes for shareholders over the longer term.
The Company has an executive long-term share scheme (ELSS), which is offered to certain senior employees, including the Executives and
Senior Management. The scheme is a share-based scheme except in circumstances where, due to regulatory requirements, employees cannot
participate fully or at all by way of shares. In such circumstances, the employee receives an equivalent economic entitlement which is paid
partially or fully by way of a cash bonus entitlement. Participation in any year is by annual invitation at the discretion of the Company.
Under the ELSS, participants purchase shares in the Company at the offer price with an interest-free loan. The offer price is established at
market value at the commencement of the three year restrictive period. The shares are held by a trustee on behalf of participants until the
end of that three year restrictive period. The performance criteria includes a relative total shareholder return (TSR) measure, and the restrictive
period is extended by up to twelve months if the TSR criteria is not met at the end of the initial three year restrictive period.
Provided certain share performance criteria are met and participants remain employed with the Company throughout the restrictive period, a
cash bonus is paid to meet the repayment of the interest-free loan and legal title in the shares is then transferred to the participants. To the
extent that the share performance criteria are not met or the participant ceases to be employed by the Company, the shares are forfeited
and the proceeds used to repay the interest-free loan. Exceptions to this are considered in the case of redundancy, retirement or being an
executive with five or more years of service.
Performance criteria
The sole performance criteria for the 2018 ELSS grant is relative TSR. TSR performance is determined by benchmarking, by way of percentile
ranking, the TSR performance of the Group against the TSR performance for the same period of a comparator group. The comparator group
used for the 2018 offer comprises Adelaide Brighton, BlueScope, Boral, Brickworks, CSR, Dulux Group, GWA Group, James Hardie, Metro
Performance Glass, Reece and Steel & Tube.
The TSR performance and resulting vesting entitlements are set out below:
TSR percentile
Below 51st
At 51st
Percentage vesting entitlement
Nil
50%
Above 51st to below 75th
51% – 99% linear pro-rata
At 75th or above
100%
The Board has the discretion to determine the extent to which any shares held in the ELSS should be transferred in any takeover, merger or
corporate reconstruction.
106
Fletcher Building Limited Annual Report 2019 Vesting and forfeiture history
Prior to 2017, the ELSS performance criteria consisted of both relative TSR and an earnings per share (EPS) target. The vesting and forfeiture of
shares (due to failure to meet performance criteria) over the last five years is set out in the following table:
Date of grant
Shares granted
% vested
% forfeited
EPS Target
July 2018
July 2017
July 2016
October 2015
October 2014
1,041,605
890,075
905,221
3,208,083
815,164
0%
50% (1)
50% (2)
100%
N/A
N/A
70.1 – 76.3
67.1 – 73.1
61.0 – 66.4
(1) The 2016 EPS tranche was forfeited in July 2019 and the TSR tranche has been extended to 30 June 2020.
(2) The 2015 EPS tranche was forfeited in October 2018 and the TSR tranche was extended to 30 September 2019.
Minimum shareholding requirement
Over time, executives and senior managers must acquire and maintain a holding in the Company’s ordinary shares until such time as the
greater of the sum invested or the market value of their shareholding exceeds 50% of their base remuneration. The Company believes this
shareholding requirement strengthens the alignment of executives and senior management with the interests of shareholders and puts their
own remuneration at risk to long-term Company performance.
In addition, for the chief executive officer and his direct reports, if at the time of appointment to an executive role, the greater of the market
value or cost of the individual’s shareholding is less than the value of 10% of their base remuneration, the executive is required to apply no less
than 25% of the after-tax value of any STI payment to acquire shares in the Company on or before 31 March of the following financial year. This
requirement applies for the first two years of employment as an executive.
FBuShare
FBuShare is a broad-based employee share plan that aims to promote employee engagement and retention. Employees acquire shares in the
Company and, if they continue to be employed after a three year qualification period, they become entitled to receive one award share for
every two shares purchased in the first year of the qualification period and still owned at the end of that period. FBuShare does not require
any performance criteria to be met. FBuShare has a maximum contribution rate of NZ$5,000 per annum (or the equivalent currency in other
countries). Directors are not eligible to participate in FBuShare.
CHIEF EXECUTIVE OFFICER’S REMUNERATION
Ross Taylor’s annual base salary as at 30 June 2019 was $2,050,000. The remuneration he received for FY19 comprised:
Base remuneration
Other benefits*
* Includes Kiwisaver and medical insurance premium.
The following short-term variable incentive was accrued in the current year:
Short term variable incentive (STI) FY19
– accrued and payable in September 2019
The following long-term variable incentive was granted during the year:
$2,050,248
$106,503
$1,095,819
Executive long-term share scheme (ELSS) 2018
Refer above under ‘Executive and Senior Management Remuneration’ for details of the STI and ELSS.
Shares granted
196,495 (1)
$2,050,000
In addition to the long-term incentive, a special retention arrangement in the form of a one-off share-based arrangement to the value of
$1,000,000 has been put in place for the chief executive officer. The Board recognises the transition the Company is going through and the
important part the chief executive officer plays in the successful delivery of the strategy he set in 2018. This share arrangement will vest
30 June 2022 subject to him remaining employed with the Company.
(1) Based on a share price of NZ$6.99, being the volume weighted average price for the five business days prior to 1 July 2018.
107
Fletcher Building Limited Annual Report 2019 Remuneration Report (Continued)
EMPLOYEE REMUNERATION
Section 211(1)(g) of the Companies Act 1993 requires disclosure of the number of employees or former employees of the Company whose
remuneration and any other benefits received by them during the year in their capacity as employees, was equal to or exceeded $100,000 per
annum and to state the number of such employees or former employees in brackets of $10,000. These amounts are included below and include
all applicable employees or former employees of Fletcher Building worldwide. The remuneration amounts include all monetary amounts and
benefits actually paid during the year, including redundancies and the face value of long-term incentives vested.
From NZ$ to NZ$
International
business
activities
New Zealand
business
activities
499
398
283
193
170
120
101
80
73
64
43
48
27
29
12
14
22
13
9
16
6
7
8
6
8
3
4
4
3
2
2
1
3
2
7
2
501
368
294
200
152
128
91
77
64
50
52
34
41
21
26
21
21
13
15
6
5
5
5
8
5
5
0
3
1
0
3
2
2
3
1
1
100,000 - 110,000
110,000 - 120,000
120,000 - 130,000
130,000 - 140,000
140,000 - 150,000
150,000 - 160,000
160,000 - 170,000
170,000 - 180,000
180,000 - 190,000
190,000 - 200,000
200,000 - 210,000
210,000 - 220,000
220,000 - 230,000
230,000 - 240,000
240,000 - 250,000
250,000 - 260,000
260,000 - 270,000
270,000 - 280,000
280,000 - 290,000
290,000 - 300,000
300,000 - 310,000
310,000 - 320,000
320,000 - 330,000
330,000 - 340,000
340,000 - 350,000
350,000 - 360,000
360,000 - 370,000
370,000 - 380,000
380,000 - 390,000
390,000 - 400,000
400,000 - 410,000
410,000 - 420,000
420,000 - 430,000
430,000 - 440,000
440,000 - 450,000
450,000 - 460,000
108
Total
1,000
766
577
393
322
248
192
157
137
114
95
82
68
50
38
35
43
26
24
22
11
12
13
14
13
8
4
7
4
2
5
3
5
5
8
3
From NZ$ to NZ$
460,000 - 470,000
470,000 - 480,000
480,000 - 490,000
490,000 - 500,000
500,000 - 510,000
510,000 - 520,000
520,000 - 530,000
530,000 - 540,000
540,000 - 550,000
550,000 - 560,000
560,000 - 570,000
570,000 - 580,000
580,000 - 590,000
590,000 - 600,000
620,000 - 630,000
640,000 - 650,000
660,000 - 670,000
670,000 - 680,000
680,000 - 690,000
690,000 - 700,000
730,000 - 740,000
740,000 - 750,000
790,000 - 800,000
830,000 - 840,000
870,000 - 880,000
890,000 - 900,000
1,000,000 - 1,010,000
1,020,000 - 1,030,000
1,100,000 - 1,110,000
1,280,000 - 1,290,000
1,290,000 - 1,300,000
1,310,000 - 1,320,000
1,340,000 - 1,350,000
1,970,000 - 1,980,000
3,620,000 - 3,630,000
5,070,000 - 5,080,000
International
business
activities
New Zealand
business
activities
Total
3
1
2
2
0
2
3
1
0
0
1
2
1
1
0
1
1
0
0
0
1
1
0
0
0
1
1
1
0
0
0
0
0
1
0
1
0
1
2
3
3
4
3
2
1
2
0
1
2
1
1
0
1
1
1
1
0
0
1
1
1
0
0
0
1
1
1
1
1
0
1
0
3
2
4
5
3
6
6
3
1
2
1
3
3
2
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2,310
2,263
4,573
Fletcher Building Limited Annual Report 2019 Governance
The Board is committed to ensuring that Fletcher Building has appropriate corporate governance
arrangements in place that are consistent with the size and nature of the Company’s operations.
Those arrangements should be disclosed in a meaningful way to maximise transparency and
investor confidence.
At Fletcher Building, governance is about creating a strong and principled ethics-based culture, where accountability and transparency improve
the quality and clarity of decision-making within the Company. The primary objective is to create and adhere to a corporate culture that is open and
transparent, develops capabilities, and identifies opportunities to create value for our stakeholders.
Key corporate governance highlights this year include:
– Strengthened governance, including revitalised delegated financial authorities, the implementation of commercial golden rules and a
policy refresh.
– The comprehensive induction of the new Board, and the re-organisation and composition of Board committees.
– Adoption of the new NZX Listing Rules on 1 July 2019 and roll-out of Board and management training on the new regime.
– Systemic review of the Company’s approach to health and safety.
The Company is required to disclose the extent to which its corporate governance practices materially differ from the principles and
recommendations set out in the NZX Corporate Governance Code ("the Code"). The Company’s approach to applying the principles and
recommendations outlined in the NZX Corporate Governance Code is set out below (including where practice materially differs from the Code).
The Company’s constitution, the Board and committee charters, code and policies referred to in this statement are available to view on our
website at www.fletcherbuilding.com/investor-centre/corporate-governance.
This governance statement is current as at 30 June 2019 and was approved by the Board on 20 August 2019.
Principle 1 – Code of Ethical Behaviour
“Directors should set high standards of ethical behaviour, model this behaviour and hold management accountable for these standards
being followed throughout the organisation.”
CODE OF CONDUCT
The Company has a written Code of Conduct with which all directors, senior executives and employees are required to comply. The Code
of Conduct documents minimum standards of ethical behaviour and the Company’s expectations on loyalty and conflicts of interest, insider
trading, holding of offices in another Company or public office, intellectual property and misconduct.
In addition, the Company has a written Anti-bribery and Corruption Policy, which provides for a zero-tolerance approach to bribery and
corruption, whether in the private or public sector anywhere in the world. All Fletcher Building personnel must adhere strictly to the
requirements of this policy. The policy also sets out expectations around giving and receiving gifts, political and charitable donations and
dealings with business partners.
Fletcher Building has a free phone and online service (“FBuCall”) that can be used by any Fletcher Building staff member to report suspected
unacceptable, unethical or illegal behaviour in the workplace. This service is operated by external providers, who act as an independent third
party to ensure calls are kept anonymous.
SECURITIES TRADING POLICY
The Company has a policy that applies to all directors and employees (including any secondee, consultant, adviser or contractor) who are
in possession of material information that is not available to the market and who intend to trade, or advise or encourage others to trade, in
listed securities of Fletcher Building or any of its subsidiaries.
The policy employs the use of blackout periods to restrict persons covered by the securities trading policy who are likely to have knowledge
of, or access to, inside information from trading. This group of personnel must also obtain the written consent of the Group General Counsel
and Company Secretary prior to any transactions involving Fletcher Building securities. In addition, through our share registry, Computershare
Investor Services Limited (Computershare), we actively monitor trading in Fletcher Building shares by our personnel.
109
Fletcher Building Limited Annual Report 2019 Governance (Continued)
Principle 2 – Board Composition and Performance
“To ensure an effective Board, there should be a balance of independence, skills, knowledge, experience and perspectives.”
BOARD’S ROLES AND RESPONSIBILITIES
The role of the Board is to provide overall strategic guidance and effective oversight of management for the purposes of protecting and enhancing
the value of Fletcher Building assets in the best interests of the Company. The Board has statutory responsibility for the affairs and activities of
the Company, which in practice is achieved through delegation to the chief executive officer who is charged with the day-to-day leadership and
management of the Company.
The Board’s roles and responsibilities are formalised in a Board charter, which is available on the Company’s website. The Board charter sets out
those functions that are delegated to management and those that are reserved for the Board. Under the Board charter, the Group General Counsel
and Company Secretary is secretary to the Board and accountable directly to the Board, through the Chair, on all matters to do with the proper
functioning of the Board.
NOMINATION AND APPOINTMENT OF DIRECTORS
Procedures for the appointment and removal of directors are governed by the Company’s constitution. The Nominations Committee makes
recommendations to the Board in respect of Board and committee composition and, when required, identifies individuals believed to be
qualified to become Board members.
Before a person is appointed to the Board, checks as to the person’s character, experience, education, criminal record and bankruptcy
history are conducted. Each director receives a letter formalising their appointment. That letter outlines the key terms and conditions of their
appointment, including Fletcher Building’s expectations for the role of director, and is required to be countersigned confirming agreement.
DIRECTOR INDEPENDENCE
The Company acknowledges the importance of having independent directors, ensuring it has the correct balance of skills to optimise
the financial performance of the Company and maximise returns to shareholders.
The Board currently comprises of eight directors, with a wide range of skills and experience. The qualifications and experience of each of the
directors, including length of service, is set out in “Our Board” section on pages 42 and 43.
The factors that the Board will consider in whether a director is 'independent' are set out in Appendix A of the Board charter. Any director who
has a change in relevant circumstance to any of the factors listed in Appendix A must immediately notify the Chair of that change so that their
independence can be re-assessed. If there is a change in the Board’s determination, it will be announced promptly and without delay to the
market. The Board considers all the current directors as at 30 June 2019 to be independent.
The Chair is an independent director and is not the chief executive officer. A majority of the Board are independent directors. In addition,
the Chair of the Audit and Risk Committee is not the Chair of the Board, and pursuant to its charter all members of this committee are non-
executive and independent directors.
DIVERSITY POLICY
Fletcher Building has a Diversity Policy, which is available on the Company’s website. The Remuneration Committee reviews progress against
diversity initiatives developed by the Company to deliver outcomes against the Policy. Further information on diversity initiatives can be found in
“People and Communities” section on pages 14 to 17.
The Board is satisfied with the initiatives being implemented by the Company and its performance with respect to the Diversity Policy. The
policy does not currently include a requirement for the Board (or a committee) to set measurable objectives for achieving diversity (as is
recommended by the NZX Corporate Governance Code), as the Board has considered diversity outcomes can be achieved without measurable
objectives. Fletcher Building is currently developing a comprehensive Diversity and Inclusion strategy which will be introduced during the 2019
calendar year. This will include the establishment of targets, reporting and governance. The Diversity Policy will be reviewed and updated as an
output of this work.
Additionally, as members of the Champions for Change network in New Zealand, Fletcher Building have provided diversity reporting as input
into the Champions for Change Annual Diversity Report 2019, providing benchmark against appropriate external comparators as per current
policy requirements.
110
Fletcher Building Limited Annual Report 2019 The numbers and proportion of women and men within Fletcher Building as at 30 June 2019 are set out in the table below.
Board of directors
Executive committee
Senior management (1)
All employees
2019
2018
Women
2 (25%)
2 (17%)
16 (25%)
20%
Men
6 (75%)
10 (83%)
48 (75%)
80%
Women
1 (17%)
3 (27%)
15 (25%)
22%
Men
5 (83%)
8 (73%)
46 (75%)
78%
(1) Senior management for these purposes includes any person who reports to a member of the executive committee.
BOARD SKILLS MATRIX
The Board has adopted a skills matrix which takes account of the breadth of the Company’s business interests and the nature of the Company’s
strategic focus. Skills and diversity that are relatively underweight are considered in making appointments to the Board.
– Gender
– Strategy
– Management
– Finance/Accounting
– Legal/Governance
– Marketing
– Information technology
– Supply chain
– Building Products
– Construction
– Distribution
DIVERSITY
INDUSTRY
EXPERTISE
GEOGRAPHY
– Australia business experience
– International business experience
DIRECTOR INDUCTION AND PROFESSIONAL DEVELOPMENT
The Board conducts induction and continuing professional development for directors, which includes visits to Company operations and briefings
from key executives and industry experts. Directors are provided with material health and safety information relevant to the business.
During the year, the Board concentrated additional efforts on inspecting and further understanding the operations of Fletcher Building.
The Board carried out 11 site visits across a range of the New Zealand and Australia businesses. The Safety, Health, Environment and
Sustainability Committee conducted a further 15 site visits. In addition, operational general managers provided ‘deep dive’ presentations into
their businesses.
BOARD PERFORMANCE
Reviews of the performance of the Board and individual directors are carried out regularly to ensure the Board as a whole and individual
directors are performing to a high standard.
The Board carried out a review of its performance and of the committees in mid-2016, with the assistance of an independent consultant
Propero Consulting Limited. The review process included an online survey, a range of director and management team interviews, an
observation of a Board meeting, a review of Board packs and a Board discussion and feedback session.
Propero has been retained by the Board again and is currently undertaking a performance review which will be completed by the end of the
calendar year 2019. The process will be similar to that which was followed in 2016.
111
Fletcher Building Limited Annual Report 2019 Governance (Continued)
Principle 3 – Board Committees
“The Board should use committees where this will enhance its effectiveness in key areas, while still retaining Board responsibility.”
In accordance with the Board charter, various committees have been set up to enhance the Board’s effectiveness in key areas, while still
retaining overall responsibility. As at 30 June 2019 the Board committees are:
– Audit and Risk Committee
– Nominations Committee
– Remuneration Committee
– Safety, Health, Environment and Sustainability Committee
Each committee is governed by a charter setting out its roles and responsibilities. The charter for each committee is available on the Company’s
website. Committees do not take action or make decisions on behalf of the Board unless specifically mandated by prior Board authority to do so.
Employees only attend meetings of the Audit and Risk Committee and Remuneration Committee at the invitation of the particular committee. From
time to time, the Board may create ad hoc committees to examine specific issues on its behalf.
Committee
Role
Audit and Risk Committee (ARC)
The role of the ARC is to advise and assist the Board in discharging
the responsibilities with respect to external financial reporting,
internal control environment, internal audit and external audit
functions, and risk management practices.
Members
Rob McDonald (Chair)
Antony Carter
Doug McKay
Cathy Quinn
Nominations Committee
The committee’s role is to identify and recommend individuals
to the Board for nomination as members of the Board and its
committees and the terms, if any, of such membership.
All non-executive directors are
members of the Nominations
Committee
Remuneration Committee
Safety, Health, Environment and
Sustainability Committee (SHES)
The principal role of the committee is to oversee and regulate
compensation and organisation matters affecting the Company,
including remuneration and benefits, policies, performance and
remuneration of the Company’s senior executives, management
development and succession planning of the chief executive
officer and his direct reports.
The role of the committee is to assist the Board to provide
leadership and policy for SHES management within Fletcher
Building. The committee will focus on compliance with legislative
and regulatory requirements and the promotion of good
SHES governance.
Bruce Hassall (Chair)
Barbara Chapman (Chair)
Antony Carter
Steve Vamos
Doug McKay (Chair)
Martin Brydon
Cathy Quinn
112
Fletcher Building Limited Annual Report 2019 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
The table below shows directors’ attendance at the Board and committee meetings during the year ended 30 June 2019.
Board
Audit and Risk
Committee
Nominations
Committee (1)
Remuneration
Committee
Safety, Health,
Environment and
Sustainability
Committee
Number of meetings held
Bruce Hassall (Chair) (2)
Martin Brydon (3) (4)
Antony Carter
Barbara Chapman (3) (5)
Alan Jackson (6)
Rob McDonald (3) (7)
Doug McKay (3) (8)
Sir Ralph Norris (9)
Cathy Quinn (3) (10)
Cecilia Tarrant (11)
Steve Vamos (12)
15
15
14
15
13
6
14
14
1
14
1
14
4
4
4
3
3
3
1
3
1
1
2
2
1
2
1
1
1
1
1
1
1
2
3
2
3
2
2
1
2
1
2
3
5
4
4
1
1
1
1
4
1
4
1
1
(1) All non-executive directors are members of the Nominations Committee.
(2) Bruce Hassall succeeded Sir Ralph Norris as Board Chair effective 1 September 2018 and at the same time ceased to be Chair of the Audit and Risk Committee. Bruce attended all
committee meetings in an ex officio capacity, excluding his attendance as Chair of the Nominations Committee.
(3) Martin Brydon, Barbara Chapman, Rob McDonald, Doug McKay and Cathy Quinn were appointed to the Board on 1 September 2018.
(4) Appointed member of the Safety, Health, Environment and Sustainability Committee effective 1 September 2018.
(5) Appointed member of the Remuneration Committee effective 1 September 2018 and succeeded as Chair of the Remuneration Committee effective 21 November 2018.
(6) Retired from the Board on 20 November 2018 following conclusion of the annual shareholders' meeting.
(7) Appointed Chair of the Audit and Risk Committee effective 1 September 2018.
(8) Appointed member of the Audit and Risk Committee and Chair of the Safety, Health, Environment and Sustainability Committee effective 1 September 2018.
(9) Ceased to be director effective 1 September 2018.
(10) Appointed member of the Audit and Risk Committee and the Safety, Health, Environment and Sustainability Committee effective 1 September 2018.
(11) Ceased to be director effective 1 September 2018.
(12) Ceased to be member of the Audit and Risk Committee effective 1 September 2018.
TAKEOVER PROTOCOLS
The Board has established detailed protocols that set out the procedure to be followed if there is a takeover offer for the Company, including
any communication between Company insiders and the bidder.
Principle 4 – Reporting and Disclosure
“The Board should demand integrity in financial and non-financial reporting, and in the timeliness and balance of corporate disclosures.”
CONTINUOUS DISCLOSURE
Fletcher Building is committed to ensuring that all of our investors have timely access to full and accurate material information about the
Company. Our Continuous Disclosure Policy sets out the internal processes designed to ensure that the Company complies with the disclosure
obligations of the NZX and ASX. The Board has adopted this policy, which applies to all members of the Board and executive, all employees
in the Fletcher Building and affiliated entities, as well as consultants, contractors and other service providers where they have a relevant
contractual obligation to Fletcher Building or one of our businesses. The Continuous Disclosure Policy is available on the Company’s website.
Directors formally consider at each Board meeting whether there is relevant material information which should be disclosed to the market.
DISCLOSURE OF CODES AND CHARTERS
All of our key governance documents (including the Code of Conduct, key corporate policies and Board and committee charters) are available on
our website at www.fletcherbuilding.com/investor-centre/corporate-governance.
SAFEGUARDING INTEGRITY IN FINANCIAL REPORTING
The Audit and Risk Committee oversees the accounting and internal control systems, policies and procedures to ensure compliance with the legal
requirements, in respect of accounting policies, financial reporting, internal control, external audit and environmental regulation in all jurisdictions
in which the Fletcher Building Group operates.
113
Fletcher Building Limited Annual Report 2019
Governance (Continued)
In addition, prior to approving the full year financial statements, the Board received from the chief financial officer a declaration that, in his
opinion, the financial records of the Company have been properly maintained and that the financial statements comply with the appropriate
accounting standards and give a true and fair view of the financial position and performance of the Company and that the opinion has been
formed on the basis of a sound system of risk management and internal control that is operating effectively.
SUSTAINABILITY
The Sustainability section on pages 10 and 11 discusses non-financial focus areas for our business, including environmental, economic and
social matters. The Board and executives recognise that sustainability is critical to Fletcher Building's success. In FY19, we appointed a Head of
Sustainability to lead the development and execution of sustainability strategy for Fletcher Building.
Fletcher Building is committed to building strong relationships with our stakeholders. At the local level, our businesses thrive on regular
engagement with customers, suppliers, neighbours and local communities. At a Group level, we engage with Government and regulatory
authorities. We are members of the following environment and sustainability organisations:
– Infrastructure Sustainability Council of Australia
– Sustainable Business Council
– Lifecycle Association of New Zealand
– Sustainable Business Network
– NZ Green Building Council
Further sustainability information can be found on the Company’s website at www.fletcherbuilding.com/about-us/environment-and-sustainability/.
Principle 5 – Remuneration
“The remuneration of directors and executives should be transparent, fair and reasonable.”
Fletcher Building remuneration structure is designed to attract, reward and retain high performing directors, executives and employees who are
able to enhance the Company’s performance.
Our practices for setting remuneration are detailed in our Remuneration Policy. The policy is governed by the Remuneration Committee in line
with its charter, which is available on the Company’s website.
The ‘Remuneration Report’ on pages 104 to 108 outlines in detail the remuneration framework of Fletcher Building, as well as the
remuneration of the directors, the chief executive officer and other executives, and senior management. This includes a discussion on
share-based remuneration.
Principle 6 – Risk Management
“Directors should have a sound understanding of the material risks faced by the issuer and how to manage them. The Board should
regularly verify that the issuer has appropriate processes that identify and manage potential and material risks.”
RISK FRAMEWORK
The purpose of the risk management framework in the Fletcher Building Group is to ensure that the key risks faced are identified, assessed,
controlled, monitored and reported so that the Company can achieve its objectives and protect its people, customers and reputation.
The Fletcher Building risk management framework is based on a three lines of defence model as set out below. This starts – and operational
accountability ultimately rests – with the managers in the individual business units and the divisional chief executives. Our risk management and
assurance processes support this through our Group functions and is overseen by the Board and executive team, with a dedicated internal audit
team which takes a risk-based approach to auditing key business activities and reports directly to the Audit and Risk Committee.
114
Fletcher Building Limited Annual Report 2019 Internal Audit
3rd Line of Defence:
Board, Executive and
Internal Assurance
2nd Line of Defence:
Group Functions
FBU Board
ARC
Executive Committee
Legal
People
Finance
Group
Risk
EHS
Property
IT
1st Line of Defence:
Operating Units
Division
Division
BU
BU
BU
BU
As part of its risk management responsibility, the Audit and Risk Committee receives regular reports of the material, emerging and existing key
risks, the current and target risk ratings, and the measures in place to mitigate the risks.
The Fletcher Building risk management framework provides a consistent framework for the management of risk, ensuring the alignment
with strategy, business processes, corporate knowledge and technology. The Company’s approach aligns with the international risk
management framework as established under the International Organisation for Standardisation (ISO) ISO31000:2009 Risk Management
– Principles and Guidelines.
KEY RISKS
The Fletcher Building risk management framework is focused on the nine key commercial (non-Health and Safety) risks that the Company faces
across its business. The nine key risks are:
– Business Resilience
– Supply Chain
– Economic Downturn
– Workplace Relations
– Regulatory and Legal
– Product Quality
– Contractual
– Environment
– Technology
Through bottom-up business-led risk workshops, the nine key risk and uncertainties for each business are identified, assessed and risk controls/
mitigation plans established with on-going assessment of their effectiveness of the risk controls.
The risk and uncertainties that are faced by the individual business units are captured in the enterprise-wide risk management tool, RADAR. The
information captured in RADAR enables risk management information captured at the business unit level to be disseminated at higher levels of
the organisation.
The Group has also increased the cadence of operational risk reporting through business unit operations reviews. This allows the Group to see
where decisions are regularly being made when assessing risk in implementing the business strategy and to understand how different risks
affect different parts of the business.
HEALTH AND SAFETY
Fletcher Building has a health and safety management framework called Protect. Management of health and safety risks is discussed in more
detail on pages 12 and 13.
115
Fletcher Building Limited Annual Report 2019 Governance (Continued)
Principle 7 – Auditors
“The Board should ensure the quality and independence of the external audit process.”
The Audit and Risk Committee performs an annual performance assessment of the external auditor to ensure ongoing quality and
effectiveness. EY is our external auditor.
The Auditor Independence Policy includes requirements for the rotation of external audit engagement partners. The Auditor Independence
Policy is available on our website. In addition, the policy covers the provision of non-audit services by the Company’s auditor. Auditor’s fees and
expenses paid to EY are presented within Note 5 of the Group financial statements included in this annual report. The other work performed
by the external auditors beyond the statutory audit was pre-approved in accordance with the policy and is not considered to compromise
independence as the services did not constitute material sums of money.
Representatives from EY attend Fletcher Building’s annual shareholders’ meeting each year, where they are available to answer questions from
shareholders relevant to the audit.
INTERNAL AUDIT
Fletcher Building has an internal audit function, which evaluates and improves the effectiveness of key risk management, control and
governance processes. Internal audit develops an annual internal audit plan for approval by the Audit and Risk Committee and is accountable
for its implementation. To provide for the independence of the internal audit function, internal audit reports functionally to the Audit and Risk
Committee and administratively to the chief financial officer.
Principle 8 – Shareholder Rights and Relations
“The Board should respect the rights of shareholders and foster constructive relationships with shareholders that encourage them to engage
with the issuer.”
COMMUNICATING WITH SHAREHOLDERS
Fletcher Building maintains a website, which includes information about Fletcher Building’s financial performance, operational activities,
corporate governance and other information of specific relevance to investors and stakeholders. Core policies on communicating with
shareholders are formalised in a Shareholder Communication Policy, which is available on the website.
The Company operates an investor relations programme, which includes scheduled interactions with institutional investors, analysts and other
market commentators. Presentations are also disclosed on the Company’s website and the NZX and ASX announcement platforms. The Chair
meets with major shareholders of the Company in New Zealand and Australia on an annual basis. The chief executive officer and chief financial
officer attends an analysts’ and investors’ call after release of the interim and full year results and answer questions raised by analysts and
investors. The Board also obtains annually research on the perceptions that the New Zealand and Australian investment community have of the
Company, management and performance.
ELECTRONIC COMMUNICATIONS
Shareholders have the option to receive communications from, and send communications to, Fletcher Building in electronic form. Shareholders
are actively encouraged to take up this option.
SHAREHOLDER VOTING
Major decisions that may change the nature of Fletcher Building business are presented as resolutions at the annual shareholders’ meeting and
voted on by shareholders. There have been no major decisions made during the year which would change the nature of Fletcher Building and
which would require shareholder approval.
ANNUAL SHAREHOLDERS’ MEETING
All shareholders are entitled to attend the Company’s annual shareholders’ meeting, either in person or by representative. Resolutions at
shareholder meeting are by way of a poll, where each shareholder has one vote per share. Fletcher Building encourages shareholders to
ask questions in advance of the meeting, to encourage further engagement with the Company and provide management with a view of
the concerns of the Company’s shareholders. Our notice of meeting is sent to all of our shareholders and posted on our website at least 20
working days prior to the meeting.
116
Fletcher Building Limited Annual Report 2019 Statutory Disclosures
DISCLOSURE OF INTERESTS BY DIRECTORS
The following are particulars of general disclosures of interest by directors holding office as at 30 June 2019, pursuant to section 140(2) of the
Companies Act 1993. The director will be regarded as interested in all transactions between Fletcher Building and the disclosed entity. Changes
to entries disclosed during the year to 30 June 2019 are noted in brackets, for the purposes of section 211(1)(e) of the Companies Act 1993.
Bruce Hassall
Fletcher Building Industries Limited
Prolife Foods Limited
The Farmers' Trading Company Limited
Bank of New Zealand
Fonterra Co-operative Group Limited
Chair
Chair
Chair
Director
Director
Martin Brydon
Adelaide Brighton Limited (resigned 30 January 2019)
CEO/Managing Director
The University of Auckland Business School Advisory Board (resigned 31 January 2019)
Member
Brydon Investment Holdings Pty Limited
CCL Executive Superannuation Pty. Ltd. (resigned 9 January 2019)
CCL Staff Superannuation Pty. Ltd. (resigned 9 January 2019)
Fletcher Building Industries Limited
Rytysh Pty Ltd
Sunstate Cement Limited (resigned 7 February 2019)
The Cement Industry Federation Limited (resigned 20 March 2019)
Director
Director
Director
Director
Director
Director
Director
Cement, Concrete & Aggregates Australia (resigned 18 September 2018)
Alternate Director
Antony Carter
Air New Zealand Limited
Fisher & Paykel Healthcare Corporation Limited
Blues LLP (resigned 1 February 2019)
ANZ Bank New Zealand Limited
Avonhead Mall Limited
Fletcher Building Industries Limited
Vector Limited (appointed 1 May 2019)
Independent Selection Panel for Fonterra
Maurice Carter Charitable Trust
Barbara Chapman
Genesis Energy Limited
The CEO Summit Committee for APEC 2021 (appointed 20 June 2019)
The New Zealand Initiative Limited
Fletcher Building Industries Limited
IAG New Zealand Limited (appointed 1 November 2018)
NZME Limited
Two Tin Pigs Limited
Prime Minister's Business Advisory Council (appointed 18 October 2018)
Reserve Bank Independent Expert Advisory Panel (appointed 7 September 2018)
Rob McDonald
Contact Energy Limited
The University of Auckland Business School Advisory Board (appointed 12 March 2019)
Chartered Accountants Australia and New Zealand
Fletcher Building Industries Limited
RSMcDonald Services Limited
Sovereign Assurance Company Limited
McDonald Family Trust
Chair
Chair
Chair
Director
Director
Director
Director
Member
Trustee
Chair
Chair
Deputy Chair
Director
Director
Director
Director
Member
Member
Chair
Chair
Director
Director
Director
Director
Trustee
117
Fletcher Building Limited Annual Report 2019
Statutory Disclosures (Continued)
Doug McKay
Bank of New Zealand
Eden Park Trust Board
Fletcher Building Industries Limited
Genesis Energy Limited
IAG New Zealand Limited
National Australia Bank
Tourism Transport Limited
Wymac Consulting Limited
Cathy Quinn
Fletcher Building Industries Limited
On Being Bold Limited
Rangatira Limited (appointed 13 February 2019)
Tourism Holdings Limited
New Zealand Treasury Advisory Board
Council Executive Board of the New Zealand China Council
Steve Vamos
St Jude's Trust
Xero Limited
eGeneration Investments Pty Limited
Fletcher Building Industries Limited
Telstra Corporation Limited (resigned 16 October 2018)
The University of Technology Sydney Business School Advisory Board
(resigned 24 May 2019)
Chair
Chair
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Member
Member
Trustee
Chief Executive Officer
Director
Director
Director
Member
There were no specific disclosures made during the year of any interests in transaction entered by Fletcher Building or any of its subsidiaries.
INFORMATION USED BY DIRECTORS
There were no notices from directors of the Company requesting to disclose or use Company information received in their capacity
as directors.
INDEMNITY AND INSURANCE
In accordance with section 162 of the Companies Act 1993 and the constitution of the Company, Fletcher Building has continued to indemnify
and insure its directors, executives and employees acting on behalf of the Company, against potential liability or costs incurred in any
proceeding, except to the extent prohibited by law. The insurance does not cover liabilities arising from criminal actions.
DIRECTORS HOLDING OF SECURITIES
The Board charter requires non-executive directors (or their associates) to hold at least 20,000 shares in the Company to demonstrate their
commitment and alignment with the Company. This shareholding can be acquired at any time prior to the annual shareholders' meeting at
which they are first subject to re-election. Non-executive directors do not participate in any Company share or option plan.
Disclosure of Directors' interests in securities
Securities of the Company in which each director has a relevant interest at 30 June 2019:
Director
Bruce Hassall (Chair)
Martin Brydon
Antony Carter
Barbara Chapman
Rob McDonald
Doug McKay
Cathy Quinn (1)
Steve Vamos
(1) Non-Beneficial interest in 30,512,000 capital notes as a Trustee of the St. Jude's Trust.
118
Ordinary Shares
Capital Notes
22,242
20,000
67,019
20,000
30,000
20,000
20,000
20,000
150,000
30,512,000
Fletcher Building Limited Annual Report 2019
Disclosure of Directors' interests in share transactions
Directors disclosed, pursuant to section 148(2) of the Companies Act 1993, the following acquisitions of relevant interests in Fletcher Building
shares during the year ended 30 June 2019:
Director
Bruce Hassall
Martin Brydon
Barbara Chapman
Rob McDonald
Cathy Quinn
Steve Vamos
Date of acquisition
Nature of transaction
Consideration
Number of ordinary
shares acquired
4 October 2018
4-5 October 2018
4 October 2018
4 October 2018
4 October 2018
20 December 2018
On-market purchase
On-market purchase
On-market purchase
On-market purchase
On-market purchase
On-market purchase
NZ$64,870
A$118,362
NZ$130,660
NZ$194,826
NZ$130,000
A$18,505
10,000
20,000
20,000
30,000
20,000
4,085
STOCK EXCHANGE LISTINGS
Fletcher Building's ordinary shares are listed and quoted on the Main Board of NZX Limited and the Australian Securities Exchange (ASX) under
the company code 'FBU'. Fletcher Building's listing on the ASX is as a Foreign Exempt Listing. Fletcher Building must comply with the NZX
Listing Rules, but is exempt from almost all of the ASX Listing Rules. For the purposes of ASX Listing Rule 1.15.3, Fletcher Building confirms
that it continues to comply with the NZX Listing Rules.
In addition, Fletcher Building Limited maintains a sponsored Level 1 American Depositary Receipt (ADR) program with Deutsche Bank Trust
Company Americas (Deutsche Bank). The ADRs trade over the counter in the United States of America (US) under the ticker code 'FCREY', with
each ADR representing two ordinary Fletcher Building shares. US investors may prefer to purchase ADRs rather than ordinary shares in Fletcher
Building's home market because ADRs trade, clear and settle according to US market conventions.
EXERCISE OF NZX DISCIPLINARY POWERS
Neither NZX or ASX has taken any disciplinary action against Fletcher Building during the financial year ended 30 June 2019. In particular there
was no exercise of powers by NZX under NZX Listing Rule 9.9.3 (relating to powers to cancel, suspend or censure an issuer) with respect to
Fletcher Building during the reporting period.
NZX WAIVERS
There were no waivers granted by NZX or relied on by Fletcher Building Limited in the 12 months preceding 30 June 2019.
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS AS AT 30 JUNE 2019
The total number of voting securities of Fletcher Building at 30 June 2019 was 853,347,141 fully paid ordinary shares, each conferring on the
registered holder the right to one vote on a poll at a meeting of shareholders.
Size of holding
Number of shareholders
% of shareholders
Number of ordinary shares
% of ordinary shares
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
15,692
13,591
3,143
2,184
144
34,754
45.15
39.11
9.04
6.29
0.41
100.00
6,762,124
32,583,676
22,316,687
48,276,204
743,408,450
853,347,141
0.79
3.82
2.61
5.66
87.12
100.00
119
Fletcher Building Limited Annual Report 2019
Statutory Disclosures (Continued)
SUBSTANTIAL PRODUCT HOLDERS
According to notices given under the Financial Markets Conduct Act 2013, the following persons were substantial product holders of the
Company as at 30 June 2019. The total number of voting securities of Fletcher Building Limited at 30 June 2019 was 853,347,141 fully paid
ordinary shares.
Number of ordinary shares in which
relevant interest is held
Date of notice
95,202,683
27 May 2019
47,403,706
18 December 2018
50,303,744
30 November 2018
35,786,943
41,967,254
13 April 2018
19 March 2018
Substantial product holder
Perpetual Limited and subsidiaries
The Vanguard Group, Inc.
Schroder Investment Management (Australia) Limited
Ellerston Capital Limited (1)
Commonwealth Bank of Australia
(1) Ellerston Capital Limited ceased to be a substantial product holder effective 18 July 2019.
20 LARGEST SHAREHOLDERS AS AT 30 JUNE 2019
Holder Name
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
HSBC Nominees (New Zealand) Limited - NZCSD
JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct - NZCSD
HSBC Nominees (New Zealand) Limited A/C State Street - NZCSD
Citibank Nominees (New Zealand) Limited - NZCSD
Citicorp Nominees Pty Limited
National Nominees Limited
Accident Compensation Corporation - NZCSD
BNP Paribas Nominees (NZ) Limited - NZCSD
FNZ Custodians Limited
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited - NZCSD
BNP Paribas Noms Pty Limited
BNP Paribas Nominees Pty Limited
ANZ Wholesale Australasian Share Fund - NZCSD
Tea Custodians Limited Client Property Trust Account - NZCSD
National Nominees New Zealand Limited - NZCSD
BNP Paribas Nominees (NZ) Limited - NZCSD
JBWere (NZ) Nominees Limited
Citicorp Nominees Pty Limited
Total
Number of
ordinary shares
112,206,760
87,285,403
66,121,621
55,820,745
49,252,884
48,740,479
48,553,388
33,141,448
26,916,104
17,084,420
17,035,503
16,110,279
12,844,519
11,494,556
9,879,208
9,129,409
8,907,385
7,707,576
7,580,466
7,044,509
% of issued capital
13.15
10.23
7.75
6.54
5.77
5.71
5.69
3.88
3.15
2.00
2.00
1.89
1.51
1.35
1.16
1.07
1.04
0.90
0.89
0.83
652,856,662
76.51
New Zealand Central Securities Depository Limited (NZCSD) provides a custodial depository service which allows electronic trading of
securities to members. It does not have a beneficial interest in these securities. As at 30 June 2019, total holding in NZCSD were 334,363,562
or 39.18% of shares on issue.
AUDITOR FEES
EY has continued to act as auditors of the Company. Please refer to Note 5 of the financial statements for audit fees paid to EY in the financial
year to 30 June 2019.
CREDIT RATING
The Company has not sought and does not hold a credit rating from an accredited rating agency.
DONATIONS
Please refer to Note 5 of the financial statements for donations made in FY19. All political donations must be approved by the Board.
120
Fletcher Building Limited Annual Report 2019
SUBSIDIARY COMPANY INFORMATION
The persons listed below respectively held office as directors of Fletcher Building Limited and its subsidiary companies as at 30 June 2019,
or in the case of those persons with the letter (R) after their name ceased to hold office during the year. Except where shown below, Fletcher
Building's indirect ownership interest as at 30 June 2019 was 100%.
No employee of Fletcher Building appointed as a director of Fletcher Building Limited or its subsidiaries receives or retains any remuneration
or other benefits, as a director. The remuneration and other benefits of such employees, received as employees, are included in the relevant
bandings for remuneration disclosed under Employee Remuneration on page 108. Except where shown below, no other director of any
subsidiary company within the Group receives director’s fees or other benefits as a director.
Company
Amatek Holdings Pty Limited
Amatek Industries Pty Limited
Directors
M Brodie, B McKenzie, S Lo Ricco (R)
M Brodie, B McKenzie, S Lo Ricco (R)
Amatek Investments Pty Limited
M Brodie, B McKenzie, S Lo Ricco (R)
Approach Signs Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
Austral Bronze Crane Copper Pty Limited
M Brodie, B McKenzie, S Lo Ricco (R)
Australian Construction Products Pty Limited
C Bolt, B Nicholson (R), N Sumich
Australian Fibre Glass Pty Limited
M Brodie, D Le Quesne, S Lo Ricco (R)
Bandelle Pty Limited
Baron Insulation Pty Ltd
M Brodie, D Le Quesne, S Lo Ricco (R)
D Frost (R), P Lavelle, B McKenzie
Boden Building Supplies Limited (65%)
P Boden, D Fradgley (R), B McEwen
Building Choices Limited (75%)
G Close, D Fradgley (R), B McEwen
Building Prefabrication Solutions Limited
D Fradgley (R), B McEwen, B McKenzie
Cameron Building Supplies Limited (75%)
D Fradgley (R), B McEwen
Caravan Components Pty Limited
M Brodie, D Le Quesne, S Lo Ricco (R)
Cleaver Building Supplies Limited (65%)
M Cleaver, D Fradgley (R), B McEwen
Crane Enfield Metals Pty Limited
M Brodie, B McKenzie, S Lo Ricco (R)
Crane Group Pty Limited
Crane Share Plan Pty Ltd
Crevet Pipelines Pty Ltd
Crevet Pty Ltd
CTCI Pty Limited
M Brodie, B McKenzie, S Lo Ricco (R)
M Brodie, B McKenzie, S Lo Ricco (R)
B McKenzie, N Sumich
M Brodie, B McKenzie, S Lo Ricco (R)
G Andrew (R), J Burgess, B McKenzie, A Webster (R), E Woldhuis (R)
Davis & Casey Building Supplies Limited (65%)
T Davis, D Fradgley (R), B McEwen
Delcon Holdings (No. 11) Limited
C Bolt, D Fradgley, B McKenzie
Delcon Holdings (No. 8) Limited
C Bolt, M Kernahan (R), H McBeath, B McKenzie, D Thomas (R)
ee-Fit Pty Limited
D Frost (R), P Lavelle, B McKenzie
Efa Technologies Pty Limited
C Bolt, M Brodie, S Lo Ricco (R)
Evans Building Supplies Limited
D Fradgley (R), B McEwen
FBHS (Aust) Pty Limited
B McKenzie, P Tudor (R), A Wilson
FBII (Puhoi) Limited
FBSOL Pty Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
B McKenzie, P Tudor (R), A Wilson
Fletcher Building (Australia) Pty Limited
C Bolt, M Brodie, D Le Quesne, S Lo Ricco (R), B McKenzie
Fletcher Building (Fiji) Pte Limited
A Kumar, B Leach, K Lotu-Iiga (R), C White
Fletcher Building Educational Fund Limited
C Carroll, J McDonald, P Muir
Fletcher Building Holdings Limited
C Bolt, B McKenzie
Fletcher Building Holdings New Zealand Limited
C Bolt, B McKenzie
Fletcher Building Industries Limited
M Brydon, A Carter, B Chapman, B Hassall, A Jackson (R), R McDonald, D McKay,
R Norris (R), C Quinn, C Tarrant (R), S Vamos
Fletcher Building Infrastructure Investments Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
121
Fletcher Building Limited Annual Report 2019 Statutory Disclosures (Continued)
Company
Fletcher Building Limited
Directors
M Brydon, A Carter, B Chapman, B Hassall, A Jackson (R), R McDonald, D McKay,
R Norris (R), C Quinn, C Tarrant (R), S Vamos
Fletcher Building Nominees Limited
J Chapman, M Farrell, J McDonald, H McKenzie, C Munkowits, G Niccol
Fletcher Building Products Australia Pty Limited
M Brodie, S Lo Ricco (R), B McKenzie
Fletcher Building Products Limited
C Bolt, M Kernahan (R), B McKenzie, H McBeath
Fletcher Building Share Schemes Limited
J McDonald, G Niccol
Fletcher Building Welfare Fund Nominees Limited
R Linton, D Lucas, S Schulz, D Sixton
Fletcher Challenge Building Bolivia S.A.
M Binns, K Cowie, H Ritchie
Fletcher Challenge Building UK Limited
S Evans, P Foreman (R), B McKenzie, N Mason (R)
Fletcher Challenge Finance Investments Limited
C Bolt, B McKenzie
Fletcher Challenge Forest Industries Limited
S Evans, P Foreman (R), B McKenzie, N Mason (R)
Fletcher Challenge Industries S.A.
M Binns, K Cowie, H Ritchie
Fletcher Concrete (Fiji) Pte Limited
C Bolt, A Kumar, B Leach, C White
Fletcher Concrete and Infrastructure Limited
C Bolt, I Jones, M Kernahan (R), H McBeath, B McKenzie, D Thomas (R)
Fletcher Construction (Solomon Islands) Limited
B Leach, C White
Fletcher Construction Company (Fiji) Pte Limited
B Leach, J Matthews
Fletcher Distribution Limited
C Bolt, B McEwen, D Fradgley (R), B McKenzie
Fletcher Insulation Pty Limited
D Frost (R), P Lavelle, B McKenzie
Fletcher Morobe Construction Limited
K Fletcher (R), B Leach, L Mathias, P Moore (R)
Fletcher Property Developments UK Limited
S Evans, P Foreman (R), B McKenzie, N Mason (R)
Fletcher Property Investments UK Limited
S Evans, P Foreman (R), B McKenzie, N Mason (R)
Fletcher Property Limited
Fletcher Residential Limited
Fletcher Steel Limited
C Bolt, B McKenzie
C Bolt, S Evans, B McKenzie
C Bolt, D Fradgley (R), H McBeath, B McKenzie
Forman Building Systems Limited
C Bolt, D Fradgley (R), B McEwen, B McKenzie
Gatic Pty Limited
B McKenzie, N Sumich
Geoff Brown Building Supplies Limited (75%)
G Brown, D Fradgley (R), B MCEwen
Geraldton Independant Building Supplies Pty Limited
J Burgess, B McKenzie
Graeme Joy Building Supplies Limited
D Fradgley (R), G Joy (R), B McEwen
Higgins Contractors Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
Higgins Group Holdings Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
Home&Dry Limited
C Bolt, M Kernahan (R), H McBeath, B McKenzie
Iplex Pipelines Australia Pty Limited
F Hopkins (R), B McKenzie, N Sumich
Iplex Pipelines NZ Limited
Iplex Properties Pty. Limited
C Bolt, M Kernahan (R), H McBeath, B McKenzie, D Thomas (R)
B McKenzie, N Sumich
Jeffcoats Building Supplies Ltd (68%)
D Fradgley (R), R Jeffcoat, B McEwen
John Cockburn Building Supplies Limited
D Fradgley (R), B McEwen
Kemsley Fields Limited (56.8%)
S Evans, N Mason (R), R Peachey
Ken Jones Building Supplies Limited
D Fradgley (R), B McEwen
Kenna Building Supplies Limited
D Fradgley (R), B McEwen
Key Plastics Pty. Ltd.
B McKenzie, N Sumich
Kimura Building Supplies (2016) Limited (75%)
D Fradgley (R), J Kimura, B McEwen
Kingston Bridge Engineering Pty Ltd
B McKenzie, N Sumich
Kinsey Kydd Building Supplies Limited (75%)
D Fradgley (R), S Kinsey, B McEwen
Koning Building Supplies Limited (75%)
D Fradgley (R), J Koning (R), B McEwen
Koyana Rocla Pipes Limited
M Kotnis, G Sharma, C Shiralkar, A Mahesh
122
Fletcher Building Limited Annual Report 2019 Company
Directors
Kusabs Building Supplies Limited (75%)
D Fradgley (R), G Kusabs, B McEwen
Laminates Holdings Pty Limited
J Burgess, B McKenzie
Laminex Finance Pty Limited
Laminex Group (N.Z.) Limited
Laminex Group Pty Limited
D Le Quesne, S Lo Ricco (R), N Sekul
C Bolt, F Irazusta (R), H McBeath, B McKenzie
J Burgess, B McKenzie
Laminex Overseas Holdings Pty Limited
M Brodie, D Le Quesne, S Lo Ricco (R)
Laminex US Holdings Pty Limited
M Brodie, D Le Quesne, S Lo Ricco (R)
Leary Building Supplies Limited (75%)
D Fradgley (R), B Leary, B McEwen
Macready Building Supplies Limited (65%)
D Fradgley (R), J Macready, B McEwen
Matt Orr Building Supplies Limited (75%)
D Fradgley (R), B McEwen, M Orr
McGill Building Supplies Limited (75%)
B McEwen, J McGill
McInnes Building Supplies Limited (75%)
B McEwen, G McInnes
Mico New Zealand Limited
Milnes Holdings Limited
C Bolt, D Fradgley (R), B McEwen, B McKenzie
M Brodie, S Lo Ricco (R), B McKenzie
Moire Road General Partner Limited (51%)
A Crocker, S Evans, S Rapson, D Schwartfeger
Morinda Australia Pty Limited
B McKenzie, P Tudor (R), A Wilson
New Zealand Ceiling & Drywall Supplies Limited (90%) C Bolt, D Thomas
Ngapo-Kimura Building Supplies Limited
D Fradgley (R), B McEwen
Northern Iron and Brass Foundry Pty. Ltd.
B McKenzie, N Sumich
Oliveri Solutions Pty Limited
T Broxham, B McKenzie
Paul Robinson Building Supplies Limited (75%)
D Fradgley (R), B McEwen, P Robinson
Pavement Technology Limited
Penny Engineering Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
C Bolt, M Kernahan (R), B McKenzie, P Reidy
Penrose Retirement Nominees Limited
J Chapman, M Farrell, J McDonald, H McKenzie, C Munkowits, G Niccol
PinkFit Limited
PlaceMakers Limited
C Bolt, M Kernahan (R), H McBeath, B McKenzie
C Bolt, D Fradgley (R), B McEwen, B McKenzie,
PlaceMakers Supply, Fix & Install Limited (75%)
G Close, D Fradgley (R), B McEwen
Polymer Fusion Education Pty Ltd
B McKenzie, N Sumich
Raylight Aluminium Limited (87.5%)
G Close, M Ellis (R), D Fradgley (R), B McEwen
Reece Building Supplies Limited (75%)
D Fradgley (R), B McEwen, J Reece
Rocla Australia Pty Limited
C Bolt, M Brodie, S Lo Ricco (R)
Rocla Concrete Pipes Pty Limited
C Bolt, M Brodie, S Lo Ricco (R)
Rocla Drilling Pty Limited
Rocla Industries Pty Limited
Rocla Masonry Pty Limited
Rocla NSW Pty Limited
Rocla Pty Limited
Rocla SA Pty Limited
Rocla Vic Pty Limited
S Cubed Pty Limited
C Bolt, M Brodie, S Lo Ricco (R)
M Brodie, D Le Quesne, S Lo Ricco (R)
C Bolt, S Lo Ricco (R)
C Bolt, M Brodie, S Lo Ricco (R)
C Bolt, B Nicholson (R), N Sumich
C Bolt, M Brodie, S Lo Ricco (R)
M Brodie, D Le Quesne, S Lo Ricco (R)
B McKenzie, P Tudor (R), A Wilson
Seabar Holdings (No 16) Limited
C Bolt, D Fradgley (R), B McEwen, B McKenzie,
Selwyn Quarries Limited
Shed Boss NZ Limited
C Bolt, I Jones, B McKenzie, D Thomas (R)
C Bolt, D Fradgley, B McKenzie
Southbound Building Supplies Limited (75%)
D Fradgley (R), B McEwen, A Rance
Stanley Building Supplies Limited (75%)
D Fradgley (R), B McEwen, B Stanley-Joblin
Steven Marshall Building Supplies Limited (65%)
D Fradgley (R), S Marshall, B McEwen
123
Fletcher Building Limited Annual Report 2019 Statutory Disclosures (Continued)
Company
Directors
Stickland Building Supplies Limited (75%)
D Fradgley (R), B McEwen
Stramit Corporation Pty Limited
B McKenzie, P Tudor (R), A Wilson
Sullivan & Armstrong Building Supplies Limited
D Fradgley (R), B McEwen
Tasman Australia Pty Limited
M Brodie, D Le Quesne, S Lo Ricco (R)
Tasman Building Products Pty Limited
M Brodie, D Le Quesne, S Lo Ricco (R)
Tasman Insulation New Zealand Limited
C Bolt, M Kernahan (R), H McBeath, B McKenzie
Tasman Sinkware North America, Inc.
C Bolt
TBP Group Pty Limited
M Brodie, D Le Quesne, S Lo Ricco (R)
Terrace Insurances (PCC) Limited
C Bolt, K Carten, M Eades, B McKenzie
The Fletcher Construction Company
(Fanshawe Street) Limited
The Fletcher Construction Company
Cook Islands Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
B Leach, M Kernahan (R), B McKenzie, P Reidy
The Fletcher Construction Company Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
The Fletcher Construction Company Limited
(Samoa Branch)
C Bolt, M Kernahan (R), B McKenzie, P Reidy
The Fletcher Organisation (Vanuatu) Limited
B Leach, Diract Ltd, Lotim Ltd
The Fletcher Trust and Investment Company Limited
C Bolt, M Kernahan (R), B McKenzie, P Reidy
Thomas Street Pty Limited
C Bolt, M Brodie, S Lo Ricco (R)
Trade Mart Limited
Tradelink Pty Ltd
C Bolt, D Fradgley (R), B McEwen, B McKenzie
T Broxham, B McKenzie
Winstone Wallboards Limited
C Bolt, M Kernahan (R), H McBeath, B McKenzie, D Thomas
Young Building Supplies Limited (75%)
D Fradgley (R), B McEwen, C Young
As at 30 June 2019, Fletcher Building held an indirect ownership interest in the following associates and joint ventures.
Company
Ownership
Company
Ownership
Altera Apartments General Partner Limited
Altus NZ Limited
Bellus Apartments General Partner Limited
Byfords Readi-Mix Limited
Cromwell Certified Concrete Limited
Greenraft Limited
Hexion Australia Pty Limited
Illico Apartments General Partner Limited
Interpipe Holdings Limited
JFC Pumps Limited
50%
50%
50%
50%
50%
Kaipara Water Transport Limited
NX2 Hold GP Limited
Oamaru Shingle Supplies Limited
P2W Services Limited
Rangitikei Aggregates Supplies Limited
33.33%
Rodney Aggregates Supplies Limited
50%
50%
50%
50%
Saltus Apartments General Partner Limited
South Pacific Cement Limited
Verto Apartments General Partner Limited
Wespine Industries Pty Limited
25%
13.40%
33.33%
50%
50%
50%
50%
14.85%
50%
50%
124
Fletcher Building Limited Annual Report 2019 Corporate Directory
BOARD OF DIRECTORS
REGISTERED OFFICE
REGISTRY
Bruce Hassall (Chair)
Martin Brydon
Tony Carter
Barbara Chapman
Rob McDonald
Doug McKay
Cathy Quinn
Steve Vamos
EXECUTIVE TEAM
Ross Taylor
Chief Executive Officer
Bevan McKenzie
Chief Financial Officer
Charles Bolt
Group General Counsel and Company
Secretary
Dan Anthony
Chief Information Officer
Claire Carroll
Chief People and Communications Officer
Wendi Croft
Chief Health and Safety Officer
Steve Evans
Chief Executive Residential
and Development
Dean Fradgley
Chief Executive Australia
Ian Jones
Chief Executive Concrete
Hamish McBeath
Chief Executive Building Products
Bruce McEwen
Chief Executive Distribution
Peter Reidy
Chief Executive Construction
New Zealand
Fletcher Building Limited
810 Great South Road, Penrose
Auckland 1061, New Zealand
Private Bag 92114
Auckland 1142, New Zealand
Phone: +64 9 525 9000
Email: fbcomms@fbu.com
Web: www.fletcherbuilding.com
Australia
Level 4, 68 Waterloo Road
Macquarie Park, NSW 2113, Australia
Locked Bag 3501
North Ryde BC, NSW 1670, Australia
Phone: +61 2 8986 0900
AUDITOR
EY
PO Box 2146
Auckland 1140, New Zealand
SOLICITOR
Bell Gully
PO Box 4199
Auckland 1140, New Zealand
INVESTOR RELATIONS ENQUIRIES
Aleida White
Head of Investor Relations
Email: investor.relations@fbu.com
Phone: +64 9 525 9043
COMPANY NUMBERS
NZ Incorporation 1104175
NZBN 9429037065836
ARBN 096 046 936
Computershare Investor Services Limited
(Computershare) looks after our share
register and is your first point of contact
for any queries regarding your investment
in Fletcher Building. You can view your
investment portfolio, elect to enrol in our
Dividend Reinvestment Plan, indicate your
preference for electronic communications,
supply your email address, change your
details or update your payment instructions
relating to Fletcher Building at any time by
visiting the Computershare Investor Centre
at www.investorcentre.com/nz.
New Zealand
Computershare Investor Services Limited
Private Bag 92119
Auckland 1142, New Zealand
Level 2, 159 Hurstmere Road,
Takapuna, Auckland 0622, New Zealand
Phone: +64 9 488 8777
Fax: +64 9 488 8787
Email: enquiry@computershare.co.nz
Web: www.computershare.com/nz
Australia
Computershare Investor Services Pty Limited
GPO Box 3329
Melbourne, VIC 3001, Australia
Yarra Falls, 452 Johnston Street
Abbotsford, VIC 3067, Australia
Phone: 1800 501 366 (within Australia)
Phone: +61 3 9415 4083 (outside Australia)
Fax: +61 3 9473 2500
Receiving your communications
electronically
We encourage shareholders to receive
investor communications electronically
as it keeps costs down, delivery of our
communications to you is faster and it is
better for the environment. All you need to
do is log in to www.investorcentre.com/nz
and update your ‘Communication Preference’
to enable us to send all your investor
correspondence electronically where possible.
125
Fletcher Building Limited Annual Report 2019