Fletcher Building Limited
Annual Report 2020
Contents
Welcome to our FY20 Annual Report, which describes our business operations, approach to doing
business, performance for the year and focus for FY21. As with our previous reports, we include
commentary on our strategy, governance, environmental and social performance of our business as
well as our financial results. We welcome questions, comments or suggestions about this report to
investor.relations@fbu.com.
This report and our previous reports and presentations are available at fletcherbuilding.com.
Our Year
Governance
Financial Report
Performance
Other Disclosures
Divisional Review
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This Annual Report is dated 19 August 2020
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. FY19 and FY20) 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.
At a Glance
People in New Zealand,
Australia and the South Pacific
15,000+
Operating sites
650+
Revenue
$7,309m
2019 $8,308m
Net (loss)/earnings
– reported
($196m)
2019(2) $164m
EBIT before
significant items (1)
$160m
2019 $549m
Cash flows from
operating activities
$410m
2019 $153m(2)
Earnings per share
(23.5¢)
2019 28.8¢
Leverage ratio
(economic net debt/EBITDA)
0.9x
2019(2) 0.4x
Total dividend
nil
2019 23 cps
EBIT margin before
significant items (1)
2.2%
2019 6.6%
Safety TRIFR (3)
5.7
2019 5.0
Employee engagement
71%(4)
2019
Carbon Emission
1,132,416 tCO2e
2019 1,298,266 tCO2e
Customer NPS (5)
39
2019 39
(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 2020.
(2) The 2019 number includes discontinued operations which were divested during the year.
(3) Total recordable injury frequency rate. Measured by the number of recordable injuries per million hours worked. TRIFR does not include restricted work injuries.
(4) Note that the employee engagement survey did not take place as originally planned in March 2020 because of the COVID-19 crisis.
(5) Net Promoter Score is a measure of how satisfied our customers are with our business. Prior years have been restated to reflect inclusion of all business units in NPS programme.
1
Fletcher Building Limited Annual Report 2020 Chair’s Report
Dear Shareholders
Bruce Hassall, Chair.
Dear Shareholders
OVERVIEW OF FY20
This has been an extraordinary and challenging year for Fletcher
Building and for our shareholders. The unprecedented events of
COVID-19 required decisive action and strong governance to ensure
the Group was positioned for both the immediate impacts and the
ensuing economic downturn. Importantly, the Group balance sheet
has remained very strong.
Ahead of COVID-19, the Group was in a good position to deliver
on its goals and execute its strategy. However, the impact of
the stringent shutdown requirements in New Zealand as well
as the health and safety measures required in Australia due to
the COVID-19 pandemic, resulted in the Group delivering a loss
attributable to shareholders of $196 million in FY20 compared to a
profit of $164 million in FY19. We had to make some very difficult
decisions this year which unfortunately included cancelling our
interim dividend and not declaring a final dividend.
2
As the COVID-19 pandemic unfolded in March, the Board turned
very quickly to addressing the immediate challenges of the rapidly
evolving situation. We provided oversight and support to the
executive team as they focused on the health and operational
situation affecting our people, our customers and our suppliers. In
New Zealand, we shut down almost all of our operations for a five-
week period in an unprecedented country-wide lockdown.
We then shifted to preserving the strong balance sheet and
liquidity positions we had established, as well as sizing the
Group for the lower market outlook and we took decisive action
to reduce costs which affected almost all our stakeholders. This
included suspending our on-market share buyback programme,
reducing capital expenditure, effective management of creditors
and debtors and stopping all non-essential expenditure. We also
reduced remuneration across the Board, executive team and general
managers, placed employees on the 'Bridging Pay Programme',
removed STI bonuses and unfortunately, given the uncertainty of the
situation, cancelled our interim dividend. In addition, we negotiated
more favourable terms on our lending agreements allowing us to
rely on more favourable debt covenants. We are grateful to our
shareholders, customers, suppliers and other stakeholders for
their support. Because of these actions, our strong balance sheet
withstood the uncertainty of the crisis and ended the year with net
debt of $497 million and liquidity of $1.6 billion (adjusting for the
repayment of debt on 29 July 2020 the Group's liquidity at 30 June
2020 would have been $1.3 billion). We have not needed to
raise capital.
While we took decisive action, we were unable to prevent a material
earnings impact, and unfortunately, we decided to increase our
provisions across our Buildings and Infrastructure projects in our
Construction division by $150 million. The majority of the provisions
were as a result of impacts from COVID-19 shutdowns and
productivity losses which will affect FY20 and beyond. Importantly
we are now well through the legacy work left to complete across
buildings and infrastructure and at the same time we have
successfully bid and won new work that is of much higher quality
and importantly at a significantly lower risk than the legacy work we
have just about completed. The margins and contract terms have
been strictly controlled through the bid processes to ensure they
are more balanced and appropriate. While the additional provisioning
on historical projects is disappointing, Fletcher Construction is
increasingly well set-up to deliver sustainable earnings in the future.
Fletcher Building Limited Annual Report 2020 At the same time, we were also focused on ensuring Fletcher
Building is effectively set up for the inevitable lower market activity
that will play out in FY21. This has resulted in the recognition of
significant items in FY20 of $276 million, the majority of which relate
to the difficult but necessary decisions to permanently reduce our
cost base including property footprint reduction, rationalisation
across our supply chain, logistics and procurement activities, and
regrettably a reduction in our workforce by approximately 12%. We
are also recognising impairments and restructuring costs to the
Rocla business that is being divested and the early repayment of the
some of our most expensive debt resulted in a one-off payment of
$30 million, albeit saving $17 million in interest per annum.
BOARD DEVELOPMENTS AND GOVERNANCE
During the year, there were a number of changes to the Board.
Tony Carter retired from the Board at last year’s Annual Shareholders’
Meeting (ASM) while Steve Vamos resigned from the Board
in March. We thank both Tony and Steve for their considerable
knowledge, experience and contribution over their 10 and 5-year
respective tenures.
We welcomed Peter Crowley to the Board who was appointed as an
independent non-executive director in October. We continue to look
to renew and refresh the Board’s mix of skills and experience from a
broad stakeholder point of view.
OUR PEOPLE
ANNUAL SHAREHOLDER MEETING
We are very proud of our Fletcher Building people who worked with
commitment to meet the Government requirements of the various
lockdown levels in New Zealand, as well as meeting the rules in
Australia, with social distancing, personal protective equipment and
contact tracing.
We responded rapidly and effectively to the impact of COVID-19,
sadly losing some talented and hard-working people through the
resizing of the business. On behalf of my Board colleagues, I would
like to express our sincere appreciation for the continued dedication
and efforts of the Group’s workforce during FY20; especially for
their focus on rising to the new challenges and during a period of
significant uncertainty.
As part of the multi-year reset of the Protect safety programme, the
Board are resolutely behind the belief that all injuries are preventable,
and the work being done by the Group to embed this and the aim to
have zero injuries every day. Fletcher Building is heading in the right
direction, driven by strong and compassionate leadership, with no
deaths and fewer serious injuries this year. A slight increase in the
Total Recordable Injury Frequency Rate, while disappointing, means
that we will continue to drive improvement in this area and ensure
our workplaces are safer.
This year’s ASM will be held in November 2020. We look forward to
shareholders taking the opportunity to ask questions.
LOOKING AHEAD
The Board remains firmly focused on achieving the Fletcher Building
strategy, sustainability targets and continuing our focus on the Protect
safety programme. We are confident that Fletcher Building is well-
positioned for the new market reality.
We are dedicated to improving profitability in our businesses so
that we deliver shareholder value and we continue to deliver on our
aspirations in the building solutions sector in New Zealand
and Australia.
Bruce Hassall
Chair
3
Fletcher Building Limited Annual Report 2020
CEO’s Report
Ross Taylor, CEO.
Fletcher Building’s FY20 performance was characterised by the
impacts of COVID-19 and the actions we took to ensure we were
well positioned to successfully navigate the market uncertainty in
FY21 and beyond.
An unwavering commitment to health and safety was a hallmark for
the year overall. As the risk of COVID-19 emerged, we moved quickly
to adopt rigorous hygiene, distancing and contact tracing protocols.
We continued our focus on the multi-year reset of our safety
programmes across the entire business. We are driving positive
change in our safety culture through our company values and a
genuine belief that all workplace injuries are preventable. In FY20,
in our drive towards zero injuries we were pleased to see we had
no fatalities and total serious injuries reduced from 15 to 8. While
our Total Recordable Injury Frequency Rate (TRIFR) 5-year trend
continues to show progress, our FY20 rate was slightly up from last
year. This only moves to strengthen our commitment and focus on
preventing all injuries.
OPERATIONAL PERFORMANCE
When we updated shareholders at the half-year, we were trading to
expectations, making good progress with operating efficiencies, and
had solid investment plans to drive growth.
Then, as COVID-19 crossed New Zealand and Australian borders
through March 2020, the resulting reduction in trading levels and
productivity had a significant impact on revenue and profitability.
4
In New Zealand, we had a period of nearly five weeks in March-April
where a Government-imposed ‘Level 4’ lockdown required almost
all our business to be shut down with trading restricted to essential
services only. The exceptional response of our people meant we shut
down some 400+ sites, safely, and in just three days. Revenue from
our New Zealand operations during this period was almost nil.
In Australia, the country took similar protective measures to keep its
people safe, resulting in lower revenues and productivity levels, and
higher operating costs, in the context of uncertain trading conditions.
As this was unfolding, we moved quickly taking all measures we could
to reduce costs: Board and senior management pay cuts, $70 million
reduction in capital expenditure, reduced spending in areas such
as marketing and introduced a 12-week ‘Bridging Pay Programme’
for employees.
As a result of our pragmatic and decisive action we have preserved
our operating cash flow and strong balance sheet, despite materially
reduced earnings.
FLETCHER CONSTRUCTION
We have continued to make good progress in working through the
historical construction projects, with only $0.6 billion of the original
$2.2 billion from 2018 remaining. At the same time, we have also
progressively rebuilt the operations and skills of this business.
An important part of this was the reset of our bid margins and
disciplines, and the risks we would accept on projects. Since this
reset, we have successfully won new work comprising a forward
order book of approximately $2.4 billion with a materially better
margin outlook and lower risk profile.
Through the FY20 year-end process we decided to increase the
provisions to complete our historical construction projects by
$150 million. This addresses three main issues that emerged:
COVID-19 costs and productivity losses which we have not been
able to claim under our contracts with clients, issues arising from
a handful of historically completed projects and a prudent risk
allowance across the legacy work left to complete.
While the need for additional provisioning is disappointing, I believe
Fletcher Construction is now increasingly well positioned to focus on
its future, and a sustainable and profitable earnings outlook.
FY20 OPERATING PERFORMANCE
For FY20, Group revenue was $7,309 million, down from $8,308
million in FY19.
Operating earnings before significant items from continuing
operations was $310 million and accounting for the construction
provisions reduced to $160 million compared to $549 million in FY19.
Pleasingly, cash flows from operating activities were well managed
through the COVID-19 impacts and strong at $410 million.
Fletcher Building Limited Annual Report 2020 SETTING UP THE COMPANY FOR THE
NEW MARKET REALITY
As trading and movement restrictions eased in late April, while
uncertainty remained, expert forecasts pointed to a meaningful
market decline and reduced customer demand across all our
businesses. While no one can be certain exactly how our markets
will perform in FY21 it was important to adopt a base case scenario
to plan for.
In New Zealand our baseline planning is for residential consents to
decline by around 30% from peak levels in FY20 and non-residential
activity to be impacted by a reduced private sector project pipeline.
Infrastructure shows promise of a lesser decline owing to the
Government’s commitment to ‘shovel-ready’ projects. In Australia,
a similar trend is expected though with a lesser decline in the
residential sector, given the already low level of activity by
historical standards.
Accordingly, we have reset the cost base and cash burn of the
business. This meant reducing our annual capital expenditure,
retiring our most expensive debt lines, taking operational efficiencies
in our supply chains and property footprint, forfeiting Short-Term
Incentive (STI) payments and salary increases across the Group, and
regrettably, reducing our workforce by around 1,500 positions. While
these moves were necessary, there is no doubt that this has been a
challenging time for our people. Throughout, our people have done
an exceptional job of serving our customers, safely managing our
operations, and resetting the business. We recognise their hard work
and valuable contribution to the Group in FY20.
This reset will achieve permanent annual cost savings of
approximately $300 million per annum but incurred one-off
restructuring costs contributing to significant items of $276 million.
This translated to a net loss for the Group of $196 million, compared
to a profit of $164 million in FY19.
CAPITAL MANAGEMENT
Our balance sheet remains strong with a Group leverage ratio (net
debt/EBITDA) below the bottom end of our target range and we have
total available funding of $2.1 billion as at 30 June 2020. Of this,
$525 million was undrawn with $1.1 billion of cash on hand, meaning
total liquidity for the Group was $1.6 billion. In early June we pre-
emptively renegotiated our lending covenants which will enable the
Group to rely on more favourable terms for covenant testing through
to the end of 2021. Since balance date, we made an early repayment
of US$200 million and AU$99 million of USPP notes, our most
expensive form of debt, meaning the Group's liquidity at 30 June
2020 would have been $1.3 billion.
STEADFAST FOCUS ON STRATEGY
Notwithstanding the uncertainty and disruption in our markets
and the broader economy, we remain on track and committed to
executing our strategy and achieving our vision to be the undisputed
leader in New Zealand and Australian building solutions – with
products and distribution at our core.
FY20 saw continued progress on enabling our strategies through
investments and innovation across our business. We opened
Clever Core, New Zealand’s largest offsite home manufacturing
facility, which brings unprecedented pace to Fletcher Living’s ability
to deliver housing to its developments. We were the first building
materials and construction company in New Zealand and Australia
to commit to a Science-Based Target (SBT) for carbon emissions
and were included for the first time in the DJSI Australia index,
one of only five New Zealand business in either the Australia
or Asia-Pacific indices. We opened a new concrete plant in Mt
Maunganui, committed to developing our new Winstone Wallboards
facility in nearby Tauranga and completed the retail precinct at the
iconic Commercial Bay development, which will transform Auckland’s
CBD. Following a brief pause, the sale process for Rocla continues
in a market of improving investor sentiment and is targeted to be
completed in FY21.
Looking ahead, we will continue to focus on investing significantly
in our digital and innovation strategies, while also looking for
opportunities to grow our market share either in our existing product
lines or in logical adjacencies. With our strong balance sheet
position, we expect the coming tougher market environment will
afford us even better opportunities to achieve our aspirations and
overall strategies.
CONCLUSION
Recognising the unexpected events of FY20 and ongoing uncertainty
in our markets, we made some difficult but necessary decisions
under challenging circumstances. This has ensured a strong balance
sheet for short-term market conditions and a business positioned
to help rebuild the New Zealand and Australian economies in the
longer-term; just as we have done for more than 100 years.
I want to thank our shareholders, people, customers and suppliers
for their trust and support in our business and look forward to our
next update.
The share buyback continues to be suspended, having acquired
29.1 million shares for a total consideration of $147 million,
representing 3.4% of issued capital.
Ross Taylor
CEO
5
Fletcher Building Limited Annual Report 2020
Our Strategy
Vision: To be the undisputed leader in New Zealand and Australian
building solutions – with products and distribution at our core.
There are four key focus areas to our strategy:
1.
Strengthen
and grow the
New Zealand core
2.
Profitable growth
in Residential and
Development
3.
Stabilise
Construction
4.
Turnaround and
grow Australia
We are continuing our focus
on operational excellence
and driving profitability.
We will complete the fix of
underperforming businesses.
We will target market share
growth through customer
service performance, product
innovation and adding
logical adjacencies.
We will continue our strong
performance across the
residential business. We will
aim to progressively build
apartment capability and
volumes. Clever Core will
grow through adding external
customers and a broader
product range. Meanwhile
we have a solid pipeline of
industrial land development
which will support a
minimum of circa $25 million
p.a. ongoing profits.
There are six key enablers of our strategy:
We are focused on completing
the historical Construction
order book. Meanwhile we
continue to build out the "go
forward" lower risk/higher
margin order book across all
Construction business units.
We will continue to upskill the
business and improve overall
operating disciplines and
consistency.
We are rationalising our
portfolio and associated
business sales. We have
a strong focus on driving
top line growth, operational
performance and margin
improvements. We aim to grow
market share through customer
service performance, product
innovation and adding
logical adjacencies.
Strong safety culture
Customer intimacy
through channel ownership
Fit for purpose systems
and next-generation
digital capabilities
Disciplined
performance
improvement
and capital allocation
Engaged and capable
people, with a lean
operating model
Leading innovation
anchored in
environmental
consciousness
6
Fletcher Building Limited Annual Report 2020 Our Sustainability Aims
To support our strategy, we continue to focus on sustainability.
As a large business, we recognise our operations have an impact
on many people. Our sustainability strategy is based on what is
most important to our business, people, communities, customers,
investors and key stakeholders. Our strategy addresses the areas
where we have the most impact, and our aims and targets focus on
where our actions will lead to meaningful change – these are our
Material Issues.
The table below shows how the aims of our sustainability strategy
align to our Material Issues and the Sustainable Development
Goals most relevant to these aims. We have noted which divisions
have the most impact on achieving the aim, and we report on
performance against each aim in the following Sustainability
section of this report on pages 8-18. Page 49 of this report
summarises how we assessed our Material Issues.
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, 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, Distribution,
Concrete, Residential and Development,
Construction, Australia
Build healthy homes
and deliver sustainable
infrastructure
– Building design and construction
– Customer engagement
– Product innovation
Building Products, Distribution,
Concrete, Residential and Development,
Construction, Australia
Careful management of our
resources and emissions
– The resources we use as a large
manufacturer and our impact on those
resources (energy, water and materials)
Building Products, Distribution,
Concrete, Residential and Development,
Construction, Australia
– Our carbon, water and waste emissions
Partner with our supply
chain to deliver
sustainable outcomes
– Our supply chain practices and performance
– Marketing and communications
– How we work with government and with
Corporate, Building Products, Distribution,
Concrete, Residential and Development,
Construction, Australia
industry partners
Transparent environmental,
social and governance
reporting
– Our governance structures, ethics and risk
Corporate
management, including supply chain
– Financial performance and return to
our shareholders
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 aims support the
following eight United Nations Sustainable Development Goals.
7
Fletcher Building Limited Annual Report 2020 Sustainability
Sustainability
Performance
FIRST
to set a Science Based
Carbon Target in our
Sector, in New Zealand
and Australia
Our aspiration is to be the New Zealand and Australian leader
in sustainable building materials, construction and distribution.
We’ve been making meaningful and consistent changes so our
business thrives and we play our part in a sustainable future.
Our sustainability strategy deepens our
commitment to our people, sustainable products,
carbon emission reduction initiatives and
transparent reporting.
As part of this, we are focused on increasing the
level of transparency and disclosure within our
operations and supply chain. We have had a Code
of Conduct for our people for some years, and in
FY20 we published our supplier Code of Conduct.
This requires all our suppliers to demonstrate
transparency in the way they work, how they
treat their employees and suppliers, and their
environmental protection measures.
In FY20 we added to our governance policies by
publishing our Human Rights Policy. This includes
our commitment to put processes in place to
prevent unethical practices in our operations and
supply chains.
Fletcher Building has commenced the implementation
of a comprehensive Modern Slavery Compliance
Programme, which addresses our obligations.
We are initially adopting a risk-based approach to
implementation, focusing on specific industry and
geographical segments. We will comply with annual
modern slavery reporting obligations, which will
commence from 31 March 2021.
We also continue to proactively participate in the
Carbon Disclosure Project and the Dow Jones
Sustainability Index (DJSI). We use the insights from
these indices to inform and improve our governance
and sustainability performance. Our increased focus
on sustainability was recognised this year with the
inclusion of Fletcher Building in the DJSI Australia
index, one of only five New Zealand businesses in
either the DJSI Australia or DJSI Asia-Pacific indices.
In our FY19 report, we noted six significant initiatives for FY20. We provide an update on these
initiatives in this report.
Significant initiatives in FY20
Information in this report
Protect safety
Reduce the environmental impact of our products
Put a gender pay parity plan in place
Set group wide Science-Based Target for carbon reductions
Implement supplier Code of Conduct
p 11
p 17, 18
p 10, 11
p 16
p 8
Move to full Environmental, Social and Governance reporting
Coverage of this report
8
Fletcher Building Limited Annual Report 2020 To be part of a
sustainable future, we
are working on six aims:
BE THE LEADER IN MAKING
SUSTAINABLE BUILDING PRODUCTS
– Reduce the environmental impact of
our products
– Gain sustainability product certifications
TRANSPARENT
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE REPORTING
– Improve environmental, social
and governance reporting across
our business
SUPPORT OUR PEOPLE AND
OUR COMMUNITIES
– Protect our people from harm
– Improve diversity, equity and
inclusion in our workplace
– Provide world-class learning and
development opportunities
– Measure the impact and
opportunities we provide in the
communities where we build
CAREFUL MANAGEMENT
OF OUR RESOURCES AND
EMISSIONS
– Reduce carbon emissions in
line with a below 2oC future
PARTNER WITH OUR
SUPPLY CHAIN TO DELIVER
SUSTAINABLE OUTCOMES
– Improve environmental, social
and governance reporting within
our supply chain
9
BUILD HEALTHY HOMES AND DELIVER
SUSTAINABLE INFRASTRUCTURE
– Meet a consistent sustainability standard
for our construction projects
– Understand what matters to our customers
and lead in providing sustainable solutions
– Innovate to sustainably grow revenue,
margin and markets
Fletcher Building Limited Annual Report 2020 Sustainability
Supporting our people
and communities
FY20
Total Recordable Injury
Frequency Rate (TRIFR)
5.65
FY19: 5.00
FY20
Serious Injury
Frequency Rate
0.17
FY19: 0.34
10
Our first priority is always the health and safety of our people and
everyone we work with. This year we built upon our safety focus and
began a multi-year programme to improve safety in our workplaces
driven by the belief that all injuries are preventable.
Our senior leaders are engaging directly with
our people to establish the change we need.
We continue to set clear expectations on role
modelling safe behaviours and performance
against these expectations is linked to senior
leader remuneration. Across the business, our
people have been positive and open to their role
in how we can all make our workplaces safer.
Over the coming years, we will continue
to improve our practices in assessing and
managing critical risks within our operations.
We continue to use Radar, an enterprise-wide
risk management tool, to record and monitor
our health and safety performance. For FY20,
our overall Total Recordable Injury Frequency
Rate (TRIFR) increased slightly from last year.
We have also provided further transparency by
reporting separate employee and contractor
TRIFR rates. This year, serious and fatal
injuries were significantly lower. While any
injury is unacceptable, a drop from five
fatalities and 15 serious injuries (combined
total 20) in FY19 to zero fatalities and eight
serious injuries in FY20 indicates that we are
heading in the right direction.
Close to 10,000 of our people across
the Group took part in safety training
programmes this year. We also focused on
supporting and developing our people in
other areas. The wide range of learning and
development programmes we offer include
safety leadership and compliance training,
sales and customer service programmes,
Rainbow Tick training for leaders and core
management and leadership skills. As part
of providing great career opportunities for
our people we offer leadership development
programmes for all levels from emerging
leaders to executives. This year we have had
We are heading in the right
direction with safety.
a greater focus on female leader development
opportunities, improving how we induct
new employees into Fletcher Building, and
redesigning our core leadership programmes
to include a range of online and in-person
approaches to deliver programmes for a variety
of learning styles. We have increased the level of
feedback from participants and track outcomes
to understand the impact and effectiveness
of these programmes. We want our business
to be inclusive for everyone. We track the
diversity of our workforce at all levels and report
our diversity metrics. This includes reporting
progress on the diversity of people in leadership
roles to our Board. In FY20 we developed a
company-wide Inclusion and Diversity strategy
which will drive our progress in this area. We
have three areas of focus: fostering an inclusive
workplace culture, increasing the representation
of women across all parts of the business, and
increasing leadership opportunities for groups
that are currently under-represented: women,
Ma- ori, Pasifika and indigenous people.
In FY20, we undertook a detailed analysis
of pay and implemented gender pay parity
reporting processes across the Group. This has
enabled us to gain understanding, self-monitor
and report to the Board. Alongside this, we took
part in Global Women’s Champions for Change
pilot programme for gender pay gap reporting.
This pilot provided a broad cross-industry
review of male versus female pay and is being
used to develop a framework for comparable
Fletcher Building Limited Annual Report 2020 and meaningful reporting. Fletcher Building Chair Bruce
Hassall, director Barbara Chapman and CEO Ross Taylor are
three of the 55 chairs and CEOs involved in Champions for
Change, which aims to advance inclusion and diversity in
New Zealand, through identifying initiatives and actions in this
space such as closing the gender pay gap.
We recognise that women are under-represented in our
industry and are actively working to promote careers for
women. In 2020 we became corporate members of the
National Association of Women in Construction and teamed
up with GirlBoss NZ to run the first ‘speed internship’ week
for young women interested in careers in science, technology,
engineering and mathematics.
TRIFR (1)
6.7
6.9
5.1
5.0
5.65 5.76
5.26
FY16
FY17
FY18
FY19
FY20
Total
Employees
Contractors
Serious Injuries (2)
33
25
21
20
8
FY16
FY17
FY18
FY19
FY20
(1) Total recordable injury frequency rate. Measured by the total number of recordable
injuries per million hours worked. TRIFR does not include restricted work injuries.
(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.
Protect Reset
This year we reset our commitment to health and
safety and started on our multi-year safety culture
change programme.
Following the reflections of a deep assessment of
the culture and performance of our businesses, we
developed a roadmap to help us realise a future
where zero injuries everyday is possible. The
roadmap includes five focus areas:
1. Shifting mindsets
2. Developing our leaders
3. Enabling our frontline
4. Managing our critical risks
5. Driving accountability
The journey this year began with senior leaders
reflecting on our own leadership and challenging our
safety beliefs. As part of this, we agreed that safety
needed to be integral to everything we do. We reset
‘Protect’ as a Fletcher Building company value along
with refining behaviours which support the value and
establish the belief: all injuries are preventable. The
link between safety performance and senior leader
remuneration was also strengthened this year. All
senior leaders are required to complete a set number
of safety leadership walks for STI eligibility.
Each division now has plans to implement the
roadmap in a way that is line-led by operational chief
executives, general managers and management. This
is supported by EHS partners, and focused on critical
risks as well as driving our TRIFR down. Some of
the activities already underway include a safety
leadership programme (for all levels from frontline
supervisor to executive), the development and
launch of life saving rules and active risk containment
activities across all our sites.
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Fletcher Building Limited Annual Report 2020
Supporting our people and communities (Continued)
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Future workforce matched
with future-focused
manufacturing
Our latest startup Clever Core used Fletcher Building’s
own recruitment platform Switch Up to employ people
entering the workforce for the first time or people
wanting to retrain for a career in manufacturing and
construction. Our people at Clever Core have gained
skills in the growing field of offsite manufacturing and
have opportunities to move into management and
specialist roles.
It is really exciting to see our latest venture
come together, being expertly guided by
a team of highly motivated young people
keen to use new skills gained through
specialist training they wouldn’t get
anywhere else. We are proud to match
this future-focused manufacturing facility
with our future workforce.
– Ross Taylor.
Switch Up is an award-winning recruitment tool
developed by Fletcher Building to transform the way
we attract, select and develop first-time job seekers. It
is designed to engage young people and simplifies the
application process. Job descriptions are provided by
videos from current employees describing their lives
on the job. Instead of creating CVs, applicants create
job-seeker profiles and answer employer questions that
are designed to give applicants insight into employment
and the skills required for the job. All applicants
receive feedback, and Switch Up directs unsuccessful
applicants to resources that will help them to fill the
gaps in their profile and develop the necessary skills to
be successful.
The programme excited participants by what our business
and industry has to offer through site tours, networking and
a ‘Dragon’s Den’ style idea pitching event. We are a finalist
in the 2020 Diversity Awards NZ for this initiative and five
of the GirlBoss participants will take part in paid internships
with us in FY21.
Within Fletcher Building we have targeted recruitment,
training and retention policies for bringing young people
into our business, and for supporting our Ma- ori and
Pasifika workforce.
We work with the Ministry of Social Development, Work
and Income NZ, Te Puni Kokiri, The Southern Initiative, Kiwis
Can Do, The Solomon Group, South Pacific Indigenous
Engineering Students Network and TupuToa to support
career pathways for Ma- ori and Pasifika people.
Our Whakatupu programme has been running for more than
five years. This programme was developed with our people
and is specifically aimed at providing leadership pathways
for our Ma- ori employees and to bring initiatives from the
Whakatupu cohorts into our workforce. After completing
Whakatupu, 93% of participants we surveyed reported
higher engagement at work. Participants also reported
improved business skills and a stronger connection to their
role in the business.
We provide our people with the opportunity to be nominated
for Connect – an award-winning youth focused development
and mentoring programme targeted at those new to
working or with less than 18 months work experience. The
programme is founded on Ma- ori and Pasifika values. While
Connect is for all employees, it recognises that Ma- ori and
Pasifika people are under-represented in leadership positions
and aims to build a pipeline of talent for future promotion.
TupuToa is an innovative internship programme creating
pathways for Ma- ori and Pasifika university students into
careers in the corporate and professional sectors. We are
proud to be a principal sponsor of the programme and this
year we supported eight internships and five interns have
taken permanent roles in our business.
This year, Fletcher Building also provided 35 additional
construction internships and 40 graduate positions in
finance, technology, construction and sustainability roles
across the business.
We have been a principal sponsor of First Foundation for
20 years. The programme is designed to give young people
the opportunity to achieve their dreams, irrespective
of socio-economic status, through financial support for
education and work experience. Often the students are
the first in their family to attend university. We provide
scholarships to five students each year. Sponsored students
receive $22,000 over three years towards university costs
and take part in five weeks’ paid work experience per annum
to develop skills and people networks.
Fletcher Building Limited Annual Report 2020
We are proud to have maintained our Rainbow
Tick certification. This year we supported Pride
events in Auckland, Wellington and Queenstown
and expanded our Pride network to our Australian
businesses. We also adjusted our HR systems
to include a wider range of gender and
pronoun options.
Employees in New Zealand, Australia and the
South Pacific Islands have access to financial
support through the Fletcher Building Employee
Educational Fund (EEF). Between 1 April 2019 and
31 March 2020, the EEF assisted 644 employees
and dependants with further education and tuition,
and a further 182 dependants with development
initiatives, such as Spirit of Adventure and Outward
Bound adventures. Support totalled over $5.8
million. Employees in New Zealand can also access
the Fletcher Building Employee Welfare Fund
(EWF) which supports our people in the event of
death, disability or financial hardship resulting from
unexpected medical events. This year, hardship
applications relating to COVID-19 were also
considered. In total, the fund supported our people
to a total of more than $352,000 between 1 April
2019 and 31 March 2020 and a further $152,000
in response to COVID-19 hardship situations. The
EWF also provided $446,500 to support Employee
Assistance Programme services and Health and
Wellbeing initiatives for employees. Both the EEF
and EWF are independent entities of Fletcher
Building. We sincerely thank both the EEF and
EWF for their generosity and support which make
a substantial difference to our people.
In FY20, over
of our people took part in around
10,250
75,800
7.4
hours of training per person
hours of learning
Supporting our
people’s health &
wellbeing during
COVID-19
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The past year brought us a new common challenge in health
and wellbeing: COVID-19. Our people responded quickly,
restricting travel and large gatherings by early March, and
implementing self-managed isolation protocols for returning
travellers and individuals potentially exposed to the virus.
A critical risk approach was taken, with all businesses
implementing mandatory controls and routinely evaluating their
implementation and effectiveness. We achieved 99% verification
that all businesses and sites had the required controls in place
which included contact tracing, provision for distancing, robust
cleaning and hygiene practices and educational systems. In
addition, we monitored and supported over 400 of our people
who had potential exposures and possible symptoms from
March through to June 2020 and continue to mitigate our risk in
line with Government recommendations.
We were also acutely aware
of the effects of the New
Zealand lockdown and
economic uncertainty in New
Zealand and Australia from
COVID-19 on mental health
and wellbeing.
In response, we launched
a mobile phone COVID-19
Support Hub app. The Hub
app was downloaded by
over 7,000 of our people.
It proved a valuable
communication tool providing
an easy place to find business
updates, payroll help,
financial help, and general
wellbeing advice, particularly
while New Zealand was in
lockdown and workplaces
were shut. The Hub app was
also used to connect people
to government help lines,
expert advice or simply a
volunteer to talk through what
they were experiencing. The
app is generously funded by the Employee Welfare Fund and
we plan to adapt it as a one-stop shop for company information
and real-time updates for our people.
Alongside this, we provided everyone at Fletcher Building
access to former All Black and mental health champion Sir John
Kirwan's mental wellbeing app 'Mentemia'.
13
Fletcher Building Limited Annual Report 2020
Sustainability
Careful management of our
resources and emissions
As a leading construction, building products manufacturing and
distribution business, a key aim of our sustainability strategy is careful
management of our resources and emissions.
39%Waste percent
diverted from landfill
We understand the urgent need to address carbon
emissions, and as part of that commitment we
are the first company in our sector in Australasia
to publish a Science-Based Target (SBT) for
carbon reduction for scope 1 (direct) and scope 2
(indirect) emissions. Our target was independently
verified by the SBT Initiative in December 2019.
We report our carbon emissions every year to the
Carbon Disclosure Project (CDP).
In FY20, scope 1 and scope 2 carbon emissions
were 847,643 tCO2e and 284,773 tCO2e,
respectively. The combined total of 1,132,416
tCO2e is a reduction of 1.3% from FY19. FY19
emissions were low due to a six-week mill
breakdown at Golden Bay Cement, which
represents around 50% of Fletcher Building’s
emissions. In FY20, emissions from our
New Zealand businesses were unsually low due
to the COVID-19 'Level 4' lockdown and operating
restrictions in April and May in other New Zealand
Combined scope 1 and 2 carbon emissions
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1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
FY16
FY17
FY18
FY19
FY20
Combined scope 1 & 2 emissions
Scope 2 emissions
Scope 1 emissions
*Figures exclude International Division.
14
operations. The Australia division, which largely
continued operating as normal, had an overall
reduction of 2.3% from FY19 largely through site
consolidation and energy efficiency.
We assess our Greenhouse Gas emissions
using the Greenhouse Gas Protocol Corporate
Accounting Standard, in accordance with
international best practice. Using this
methodology, we estimate that our scope 3
emissions were 848,025 tCO2e. These are the
emissions associated with the manufacture
of materials we have purchased, and services
supplied to us. Our FY20 emissions will be
externally verified in FY21.
Reducing waste to landfill remains an area of
focus, and in particular reducing waste from
construction and demolition activities, which is
a significant component of landfill waste in both
New Zealand and Australia. Reducing the waste
we generate and applying ‘circular economy’
principles to use waste from one industry as
a raw material input for another will be key to
overall waste reduction.
We put these principles into place in the
design of our new Winstone Wallboards plant
which is planned to reduce manufacturing
waste by 90%. We continue to have zero
waste to landfill from our Oliveri business and
we worked collaboratively with other New
Zealand businesses as part of the XLabs Circular
Economy Lab, organised by Auckland Tourism,
Events, and Economic Development (ATEED).
At XLabs we focused on taking waste out of the
life cycle of medium density fibreboard (MDF).
MDF is strong, inexpensive material made from
waste wood fibre and is commonly used in
making kitchen, bathroom and office furniture,
but it is not easily reprocessed. We are now
pursuing a number of options with our
Innovation team.
In FY20 our waste to landfill was 26,442t and
diversion from landfill was 16,787t. This equates
to 39% diversion from landfill which exceeds our
target of 30%. Further waste reduction is a goal
for FY21.
Fletcher Building Limited Annual Report 2020
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Our response to water and fire crises in Australia and New Zealand
We responded to the devastating impact of bushfires
in Australia with direct donations exceeding $280,000
to the Rural Fire Service (NSW), Country Fire Authority
(VIC), Red Cross (NSW Bushfire Appeal) and Salvation
Army (Disaster Appeal). We provided paid time off
work for our people to volunteer in rural firefighting
and other emergency crews to help their communities
in affected areas. In addition staff at our Rocla
Wodonga site worked over the Christmas break to
supply power poles to reconnect electricity to several
communities across New South Wales and Victoria.
In Auckland, we implemented water saving measures
in response to severe drought conditions in summer
2019-2020. Fletcher Construction’s Infrastructure
and Higgins teams have installed rainwater capture
and collection systems and the Pipeworks team
are now using UV light instead of hot water to cure
pipes, saving an estimated 160,000L of water for
one pipeline installed as part of a major transport
project. A number of our businesses including Tasman
Insulation and Winstone Wallboards already use bore
water, and we are exploring how we can supply any
excess non-potable water we have to others.
Fletcher Living and Winstone Aggregates
have been working with Auckland’s
Watercare to supply non-potable
groundwater from Three Kings quarry
to construction businesses, sites and
projects around Auckland.
Fletcher Living and Winstone Aggregates have been
working with Auckland’s Watercare to supply
non-potable groundwater from Three Kings quarry
to construction businesses, sites and projects
around Auckland.
Other steps are being taken to prepare for future
droughts and increase water conservation across
Fletcher Building including investigation of closed-loop
water systems in manufacturing plants and increased
rainwater storage across the Group.
Fletcher Building Limited Annual Report 2020
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Science-Based Targets
In December 2019, Fletcher Building became the first
building materials and construction company in
New Zealand and Australia to attain an independently
verified Science-Based Target (SBT) for carbon
emissions reduction. SBTs are important because they
are based on robust climate science, and the strict
verification process ensures that the decarbonisation
target set by a company is meaningful in a global
context. SBTs also drive innovation, increase
competitiveness and demonstrate climate leadership.
Fletcher Building’s SBT is a public commitment that
we will reduce direct and indirect carbon emissions
by 30% by 2030, from 2018 as a baseline year. Our
target is in line with the Paris Agreement to limit
global warming to well below 2°C and ensures
Fletcher Building takes responsible action towards its
contribution to climate change.
We have developed carbon reduction roadmaps that
identify key initiatives over the next 10 years for all
business units and are actively tracking progress of
each business unit. Some of the first carbon reduction
activities are to increase energy efficiency in new
facilities through use of renewable energy and by
transitioning our vehicle fleet to include more hybrid
and electric vehicles. In FY20, there were a number of
In December 2019, Fletcher Building
became the first building materials and
construction company in New Zealand
and Australia to attain an independently
verified Science-Based Target (SBT) for
carbon emissions reduction.
significant ongoing projects: alternative fuels and lower
carbon materials in cement manufacture at Golden Bay
Cement, the design of our new Winstone Wallboards
facility which is planned to significantly reduce carbon
emissions; and ongoing LED lighting replacement
for Tradelink stores which will reduce electricity
consumption and associated emissions by more than
40% over the next six years.
Fletcher Building Limited Annual Report 2020
Better products, houses
and infrastructure
Sustainability
Published EPDs
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EPDs in
development
05
AUSTRALASIA
Furniture, Fittings & Flooring
Licence No. 3208041
As part of our aim to be the New Zealand and Australian leader
in sustainable building materials, we are increasing the number
of products we manufacture that hold Environmental Product
Declarations (EPDs) and other sustainability certifications.
EPDs assess the environmental impact of
a product across the entire product lifecycle.
EPDs provide a verifiable and transparent product
assessment against an international standard and
empower our customers to make an informed
choice about the environmental impact of the
products they choose. We have nine EPDs
already published in Australia and New Zealand
and five more underway. You will find these green
products in our Fletcher Living homes.
A number of our products also hold other
sustainability certifications such as Declare labels
and Environmental Choice certifications that
are recognised within green building standards
including Green Star and Homestar. Our
environmental certifications are disclosed on our
businesses' websites.
We are active members of sustainable
construction organisations including the
Sustainable Business Council, the Sustainable
Business Network, the New Zealand Green
Building Council and the Infrastructure
Sustainability Council Australasia. We have been
working closely with these industry bodies and
Government to embed more sustainable methods
into construction as part of post COVID-19
recovery packages for the construction industry.
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Fletcher Building Limited Annual Report 2020 y
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With the EPD, we are able to
demonstrate that Golden Bay Cement
has significantly lower carbon
emissions than our competitors.
– Simon Harper.
Greener materials for homes and infrastructure
Golden Bay Cement's EversureTM and EverfastTM
cements and Winstone Wallboards' plasterboards
GIB® were three of our earliest products to have
their full environmental impact assessed.
All hold Declare labels, Environmental
Choice New Zealand, Good Environmental
Choice Australia (GECA) or Global GreenTag
certification, and an EPD.
Declare labels are part of one of the world’s
most stringent sustainable building certification
programmes, the Living Building Challenge.
A Declare label shows, in a simple and transparent
way, several product properties including where
the product is made, its end-of-life options, and
the list of ingredients used to make it. The label
also shows whether the product is “Red List
Free”, meaning that it does not contain chemical
substances known to be harmful to the environment
or to the people using them.
Environmental Choice New Zealand and Global
GreenTag are independently-run ecolabels identifying
the most environmentally friendly products, and
are recognised within both the New Zealand and
Australian Green Building Council’s rating system.
The latest addition to the certification for Golden Bay
Cement is the EPD. Simon Harper, National Sales
and Marketing Manager said: “With the EPD, we
are able to demonstrate that Golden Bay Cement
has significantly lower carbon emissions than our
competitors when measured against the same
criteria. This transparency now allows the industry
to be confident that cement from Golden Bay Cement
is utilised on their project that it results in the lowest
carbon concrete available”.
Winstone Wallboards has held an EPD for GIB®
plasterboard for several years and used its existing
EPD as a robust baseline to design improvements for
its new Tauranga production facility that will further
reduce the environmental impact of its products.
Fletcher Building Limited Annual Report 2020
Performance
Fletcher Living Waiata Shores
19
Fletcher Building Limited Annual Report 2020 Group Performance
Reported results
Total revenue
EBIT before significant items (1)
Significant items (2)
EBIT
Lease interest expense
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 (3)
Capital expenditure
Revenue
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Other
Continuing operations
Less: intercompany revenue
Group external revenue
Year ended
June 2020
NZ$M
7,309
160
(276)
(116)
(69)
(80)
(265)
81
(184)
(12)
(196)
(23.5)
0.4
-
410
232
Year ended
June 2019
NZ$M
8,308
549
(94)
455
-
(116)
339
(80)
259
(13)
246
28.8
36.7
23
153
285
Year ended
June 2020
Year ended
June 2019
NZ$M
1,173
1,471
740
466
1,318
2,802
10
7,980
(671)
7,309
NZ$M
1,314
1,596
802
639
1,702
3,024
11
9,088
(780)
8,308
Change %
(12%)
(71%)
(194%)
(125%)
NM
31%
(178%)
201%
(171%)
8%
(180%)
NM
NM
NM
168%
(19%)
Change %
(11%)
(8%)
(8%)
(27%)
(23%)
(7%)
(9%)
(12%)
(14%)
(12%)
(1) Measures before significant items 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 2020.
(2) Significant items relate principally to restructuring charges recognised. Further details of significant items can be found in note 2 of the financial statements.
(3) The 2019 number includes discontinued operations which were divested during the year.
20
Fletcher Building Limited Annual Report 2020
Building Products
EBIT* 2020
Distribution
EBIT* 2020
Concrete
EBIT* 2020
$87m $85m
EBIT 2019 $167m (p) (48%)
EBIT* 2019 $115m (p) (26%)
$74m
EBIT* 2019 $89m (p) (17%)
Residential and
Development
EBIT* 2020
Construction
EBIT* 2020
Australia
EBIT* 2020
$65m
EBIT* 2019 $137m (p) (53%)
($147m)
EBIT* 2019 $51m (p) (388%)
$33m
EBIT* 2019 $77m (p) (57%)
* Before significant items.
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Corporate
Continuing operations
Divested businesses
Total
Lease interest expense
Funding costs
Earnings before tax
Tax benefit/(expense)
Earnings after tax
Non-controlling interests
Net earnings
EBIT
EBIT before significant items(1)
Reported
Year ended
June 2020
Reported
Year ended
June 2019
NZ$M
NZ$M
Reported
Year ended
June 2020
Pro forma
Year ended
June 2019
Reported
Year ended
June 2019
NZ$M
NZ$M
NZ$M
20R vs
19P
Change
%
Change
%
68
67
61
64
(160)
(133)
(83)
(116)
-
(116)
(69)
(80)
(265)
81
(184)
(12)
(196)
150
104
84
137
47
(21)
(46)
455
(58)
397
-
(118)
279
(102)
177
(13)
164
(55%)
(36%)
(27%)
(53%)
NM
NM
(80%)
(125%)
(100%)
(129%)
NM
32%
(195%)
179%
(204%)
8%
(220%)
87
85
74
65
(147)
33
(37)
160
-
160
(69)
(80)
11
4
15
(12)
3
167
115
89
137
51
77
(38)
598
82
680
(64)
(118)
498
(133)
365
(13)
352
160
104
84
137
47
57
(40)
549
82
631
-
(118)
513
(133)
380
(13)
367
(48%)
(26%)
(17%)
(53%)
NM
(57%)
3%
(73%)
(100%)
(76%)
NM
32%
(98%)
103%
(96%)
8%
(99%)
(1) Measures before significant items 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 2020.
21
Fletcher Building Limited Annual Report 2020 Group Overview
The key feature of the Group’s FY20 result was the significant impact of the COVID-19
pandemic in the latter part of the financial year. Trading levels, operating productivities and
earnings were materially affected across the Group from March to June as governments put in
place measures to contain the spread of the virus. Positively, cash flows were well-managed
and strong through this period, and as a result the Group has maintained a strong balance sheet
and liquidity position at year-end.
In FY20 the Group reported external revenue from continuing
operations of $7,309 million, compared to $8,308 million in the
prior year. EBIT before significant items from continuing operations
was $160 million, compared to $549 million reported in the prior
year. Group net earnings from continuing operations were a loss of
$196 million, compared to a profit of $246 million reported in the
prior year. Cash flows from operating activities were $410 million,
compared to $153 million in the prior year.
Prior to March, the Group had traded largely in line with
expectations, with good performances in several businesses
(especially Concrete, core Building Products, Residential &
Development, and Laminex Australia) offset by weakness in Steel
and in the pipes businesses in both New Zealand and Australia.
In New Zealand, a ‘Level 4’ lockdown to control COVID-19 required
the Group to close almost all of its local operations from 25 March to
28 April. The Group moved rapidly to reduce costs and preserve cash
flow and balance sheet strength, with measures including: reducing
Board and executive remuneration; cutting non-essential spend in
areas such as travel and marketing; establishing a 3-month ‘Bridging
Pay Programme’ for employees, supported by the government
wage subsidy; daily monitoring of cash collections; reducing FY20
capital expenditure by approximately $70 million; and deferring
some residential land purchases. With almost no revenue, the
cost control measures enabled the Group to reduce its loss in
New Zealand in April from an ordinary monthly cost run-rate of
approximately $100 million to an unaudited EBIT loss before
significant items of $55 million.
As COVID-19 restrictions eased through May and June, the
New Zealand businesses experienced a gradual ramp-up of
operations and mixed levels of trading activity, with revenue
generally between 80% and 100% of pre-COVID-19 expectations.
Those core businesses exposed to the residential finishing trades
generally performed better in the ramp-up period than those focused
on earlier stage civil and infrastructure work. Residential house sales
were strong through May and June, though with settlement dates
generally scheduled for FY21. Productivity on construction projects
were adversely impacted, especially on commercial sites, due to
social distancing health measures.
In Australia, while there was no hard lockdown, activity levels were
also impacted by government-imposed measures to contain the
spread of the virus. This resulted in revenue at around 90% of
pre-COVID-19 expectations through 4Q20, which adversely impacted
productivity and together with additional costs impacted margins
across the division’s manufacturing and distribution operations.
Overall, the reduced trading levels and lower productivity
resulting from the pandemic restrictions had an adverse impact of
approximately $200 million on EBIT before significant items.
In addition to this, the FY20 result was impacted by a $150 million
increase in provisions on the historical construction projects.
Three factors led to the increased provisions. Around 50% was
due to reduced productivities on key legacy projects, which were
significantly disrupted by COVID-19 in FY20, and with ongoing
challenges expected in FY21 across supply chains and project
resourcing. Around 20% of the additional provisions was due
to issues which have arisen on a small number of historically
completed projects. The final 30% consists of a prudent risk
provision across the portfolio of legacy work.
While this additional provisioning is disappointing, the division
continues to make progress in its reset. The costs to complete
the legacy project work across the Buildings and Infrastructure
businesses has reduced from approximately $2.2 billion in February
2018 to approximately $600 million currently, and the division’s
forward order book has been rebuilt to comprised $2.4 billion of
new work with a materially better margin outlook and significantly
lower and more appropriate risk profile.
In response to an expected market downturn arising from the
COVID-19 pandemic, the Group moved to decisively reset its cost
base in FY20. This included a reduction in its operational footprint,
including the exit of some offices, warehouses, and manufacturing
sites, and ceasing some unprofitable product lines. Regrettably,
an expectation of lower market activity also resulted in a reduction
of Group headcount by around 1,500 roles. This, together with the
completion of the Australia ‘P100’ cost-out programme, significant
manufacturing site closures associated with the disposal of the
Rocla business, and make whole costs from the early repayment
of USPP notes has resulted in total restructuring costs for the
Group (recognised as significant items) in FY20 of $276 million.
22
Fletcher Building Limited Annual Report 2020 The Group’s funding costs for the year decreased by 32% to
$80 million, resulting principally from lower debt levels following
$650 million of debt repayments since June 2018. A tax benefit of
$81 million in FY20 compared to a tax expense of $102 million in
the prior year.
Basic earnings per share from continuing operations were (23.5)
cents in FY20, compared to 28.8 cents in the prior year. Adjusting
for the impact of significant items, earnings per share from
continuing operations were 0.4 cents, compared with 36.7 cents
in the prior year.
The Group’s leverage ratio (net debt / EBITDA) at 30 June 2020 was
0.9 times compared with 0.4 times at 30 June 2019.
The average maturity of the Group’s debt at 30 June 2020 is 4 years
(excluding the USPP notes prepaid on 29 July 2020) and the hedged
currency split is 36% Australian dollar; 63% New Zealand dollar; and
1% spread over various other currencies.
Approximately 46% of all borrowings have fixed interest rates
with an average duration of 2.2 years. Inclusive of floating rate
borrowings, the average interest rate on the debt (based on year-end
borrowings) is 3.7%.
GROUP CASH FLOWS
NZ IFRS 16
Cash flows from operating activities were $410 million, compared
to $153 million in the prior year. The cash flow result was achieved
despite a material reduction in earnings as a result of COVID-19. This
reflects the Group’s ongoing focus on working capital efficiency
as well as the specific cash preservation measures undertaken
through the final quarter of the year. Close management of
customer collections resulted in a $95 million inflow from
receivables for the year, partly offset by a $67 million reduction in
creditors positions.
In Construction, the ongoing cost of completing the legacy
Buildings projects resulted in trading cash outflows of $213 million
in FY20 compared to outflows of $257 million in the prior year.
Capital expediture cash flows from continuing operations were
$240 million in FY20, compared with $285 million in the prior
year. The lower level in FY20 reflects a decision to reduce capital
expenditure in the fourth quarter of the year by $70 million relative
to pre-COVID-19 expectations. The Group’s focus on cash and
balance sheet also resulted in a reduction of residential land
purchases relative to pre-COVID-19 expectations.
FUNDING
Total available funding as at 30 June 2020 was $2,126 million.
Of this, $525 million was undrawn and there was an additional
$1,104 million of cash on hand, meaning total liquidity for the
Group at 30 June 2020 was $1,629 million.
On 30 June 2020, the Group announced its intention to make an
early repayment of US$200 million and AU$99 million of USPP
notes. The repayment was on 29 July 2020 from the Group’s
cash reserves and reflected a decision to retire the Group’s most
expensive source of debt. Repayment of the notes will reduce the
Group’s funding costs by $17 million in FY21. After taking account
of foreign exchange and interest rate derivatives held in respect
of these notes, the repayment amount made was $350 million.
Adjusting for this prepayment, the Group’s liquidity at 30 June 2020
would have been $1.3 billion.
The Group’s gearing at 30 June 2020 was 12.3% compared with
7.2% at 30 June 2019.
For the year ended 30 June 2020, the Group’s financial statements
are prepared in accordance with the new lease accounting standard
NZ IFRS 16, adopted from 1 July 2019. In prior years, lease costs
were fully reported in EBIT. Under NZ IFRS 16, the two components
of lease costs are reported separately: (1) the depreciation of
right-of-use assets is reported in EBIT and (2) the deemed interest
portion of the lease liability is reported in lease interest expense. The
pro forma effect of NZ IFRS 16 in the prior year was a $49 million
favourable impact on EBIT and a $15 million adverse impact on net
earnings. Financial tables in this Annual Report (where indicated)
show both the reported result for the prior year, as well as a pro
forma restatement of the prior year to illustrate the impact of
NZ IFRS 16 had it been applied and to allow for a like-for-like
comparison. Commentary on the divisional operating performance
compares principally with the pro forma results for the prior year.
OUTLOOK
The Group has undertaken a thorough cost reset process to prepare
for an expected market downturn of c25% in New Zealand and
c20% in Australia. The first half of FY21 is expected to be stronger
than the second half of the year, as the economic impact of the
COVID-19 pandemic flows through to activity levels. However, the
outlook is uncertain, and the Group will remain vigilant to macro
factors and movements in forecasts. The Group has a strong balance
sheet and is well-positioned to implement its strategy with the ability
to react to market activity as needed.
23
Fletcher Building Limited Annual Report 2020 Building
Products
The Building Products division reported gross revenue of $1,173 million,
which was 11% lower than the prior year. EBIT before significant items was
$87 million, compared to $167 million in the prior year.
Prior to March, the businesses primarily selling into residential finishing trades (Winstone Wallboards,
Tasman Insulation, Laminex) were trading at or near record volumes, and delivering year-on-year margin
improvements. The Steel and Pipes businesses had experienced softer volumes, driven by subdued
infrastructure sector activity combined with aggressive competition in key product categories. Margins
in the Steel business were further impacted by significant inventory devaluations due to declining global
steel prices.
The Building Products businesses almost entirely ceased operations during the COVID-19 ‘Level 4’
lockdown, resulting in a $22 million loss in April. In May and June, volumes returned strongly in the
residential finishing trades, driven by pent up demand from work ceased during the lockdown, while
volumes in other segments settled at around 80% of pre-COVID-19 Levels.
The division recognised $19 million in significant items in the year, reflecting headcount reductions
and rationalisation of certain sites and product lines to prepare for an expected lower level of
market activity.
Trading cash flow for the division of $125 million was $32 million lower than the prior year.
Capital expenditure in the year was $53 million, in line with the prior year spend of $55 million.
$22 million of the FY20 spend related to the initial investment in the new Wallboards plant in Tauranga.
Future Focus
The division’s focus continues to be in four key areas: product innovation and adjacencies;
improvements in customer experience; operating efficiencies and enhanced pricing disciplines.
The division has continued to invest in ensuring its manufacturing facilities are the most
efficient in market, including material investments in the first phase of the new Wallboards
facility and the commissioning of a HDPE mobile extrusion pipe plant in Iplex. Expanded
product ranges were introduced in Pipes, Easysteel and Laminex, and Dimond launched an
innovative mobile roll-to-roof system. New products introduced in prior years continue to deliver
growth, with GIB Weatherline, GIB Barrierline, PVC-O, and Tasman Insulation’s building wraps
range all trending well.
Several digital initiatives have been launched to improve efficiency and customer experience,
notably in Winstone Wallboards and Laminex, while Tasman Insulation continues to introduce
new channels to market. The division’s pricing capability and discipline continues to improve,
with the Pipes and Steel businesses exiting FY20 with stronger margins as a result of initiatives
to address areas of price leakage.
Divisional Review
Winstone Wallboards
Laminex New Zealand
Tasman Insulation
Iplex New Zealand
Humes
Fletcher Steel
Altus JV
% of Revenue
15%
REVENUE
$1,173m
24
Fletcher Building Limited Annual Report 2020 Building Products
Financial Summary
Building Products
EBIT before significant items(2)
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019(1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019(1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Gross revenue
1,173
External revenue
EBIT before
significant items(2)
Significant items(3)
Funds
Trading cash flow
Capital expenditure
922
87
(19)
678
125
53
1,314
1,013
167
(10)
692
157
55
1,314
1,013
160
(10)
723
157
55
(11%)
(9%)
(48%)
(90%)
(2%)
(20%)
4%
Building Products
Steel
Total
101
(14)
87
132
35
167
127
33
160
(23%)
(140%)
(48%)
(1) The pro forma figures for the year ended 30 June 2019 have been restated for comparative
purposes to include the impact from NZ IFRS 16.
(2) EBIT before significant items is a non-GAAP measure used by management to assess the
performance of the business and has been derived from Fletcher Building Limited's financial
statements for the period ended 30 June 2020.
(3) Details of significant items can be found in note 2 of the financial statements.
25
Fletcher Building Limited Annual Report 2020 Divisional Review
PlaceMakers
Mico
Forman Building Systems
Distribution
% of Revenue
REVENUE
$1,471m
The Distribution division reported gross revenue of $1,471 million,
which was 8% lower than the prior year. EBIT before significant items
was $85 million, compared to $115 million in the prior year.
18%
Prior to March, the division was delivering revenue growth of 2% above the prior year. Gross margins
were steady despite continued competitive intensity especially in large commercial projects. PlaceMakers
was growing in all geographical segments, except for the Lower South Island. Mico experienced growth
across their three key customer segments; Commercial, Group Home Builders and SME.
Both the Mico and PlaceMakers businesses were deemed essential services during the COVID-19
‘Level 4’ lockdown with the businesses selecting branches in larger centres or those servicing essential
projects to remain open at significantly reduced capacity. Trading volumes were limited with April revenue
down 86% on the prior year, resulting in an $11 million loss in April. In May and June, the businesses
experienced mixed volumes, with declines in the Auckland and Christchurch regions while other regions
were steady on the prior year.
The division recognised $18 million in significant items relating to redundancies, the closure of the
PlaceMakers Antigua Street (Christchurch) and Helensville (Auckland) sites and associated fixed asset
impairments. Prior to March, the businesses had begun a workforce optimisation initiative that was
accelerated in May and June to ensure staffing levels in the branch network and support offices were both
efficient and sized for expected future market conditions.
Trading cash flows for the division was $117 million, $19 million up on the prior year. This was the result of
reduced working capital, with tight management of both inventory and debtors throughout the year.
Capital expenditure in the year was $21 million, compared to $23 million in the prior year, with investment
centred on property upgrades and digital innovation.
Future Focus
Ensuring competitive customer offerings, ease of doing business and market leading service
remain core to the division’s strategy.
PlaceMakers released its Trade App in April, allowing customers greater flexibility in how they
choose to interact with PlaceMakers, including the ability to order product on line, through click
and collect and select enhanced delivery options. Further development of our digital capability
remains a key priority with further e-commerce offerings, including the trade portal and
refreshed consumer e-commerce platform, to be launched in FY21.
PlaceMakers have also begun grouping branches into regional hubs, with these structures now
in place in mid Canterbury, Christchurch, Nelson-Marlborough and North Auckland. Hubs will
provide greater consistency for customers who transact with multiple branches and enable
efficient delivery via a combination of centralised distribution centres and branch deliveries.
26
Fletcher Building Limited Annual Report 2020 Distribution
Financial Summary
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019(1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Gross revenue
External revenue
EBIT before
significant items(2)
Significant items(3)
Funds
Trading cash flow
Capital expenditure
1,471
1,440
85
(18)
209
117
21
1,596
1,552
115
-
251
98
23
1,596
1,552
(8%)
(7%)
104
(26%)
-
300
98
23
NM
(17%)
19%
9%
(1) The pro forma figures for the year ended 30 June 2019 have been restated for
comparative purposes to include the impact from NZ IFRS 16.
(2) EBIT before significant items is a non-GAAP measure used by management to assess
the performance of the business and has been derived from Fletcher Building Limited's
financial statements for the period ended 30 June 2020.
(3) Details of significant items can be found in note 2 of the financial statements.
27
Fletcher Building Limited Annual Report 2020 Divisional Review
Winstone Aggregates
Golden Bay Cement
Firth Industries
Concrete
% of Revenue
REVENUE
$740m
The Concrete division reported gross revenue of $740 million, 8% lower
than the prior year. EBIT before significant items was $74 million, a
decrease of $15 million or 17% compared to the prior year.
Prior to March the division was tracking strongly with revenue growth of 2% and earnings in all
businesses tracking ahead of the prior year. Firth saw a strong lift in sales price, combined with a gain in
market share. In Golden Bay Cement, domestic cement volumes lifted following the exit of a competitor
from the imported cement market. Winstone Aggregates earnings were up year on year due to strong
price increases and a favourable shift in product mix. The Tamahere quarry purchased in March 2019
completed its first full year of operations under our ownership with a strong EBIT return.
The Concrete businesses ceased operations during COVID-19 ‘Level 4’ lockdown. This resulted in lower
earnings in March and a $13 million loss in April. The division experienced a strong recovery of activity in
May and June across all segments and products, with revenue up 2% on the prior year.
9%
The division recognised $13 million of significant items reflecting headcount and property rationalisation
decisions in line with our expectations of lower future business volumes. These initiatives include a
refinement of our quarry network and the right-sizing our ready-mix network.
Trading cash flow for the division was $100 million, compared with $136 million in the prior year,
reflective of lower earnings during the final part of the financial year, while working capital management
remained solid.
Capital expenditure for the division was $50 million. Investment in the year included further quarry
resource development to meet forecast demand, additional heavy mobile equipment for both
quarries and the cement operation, while Firth continued its programme of ready-mix truck and
plant replacement.
Future Focus
The division’s strategic focus continues to be on projects that support long-term capability,
reduce carbon emissions, improve customer service experience – especially through digital
connectivity – and ensure cost competitive manufacturing and supply chain positions.
Firth is now progressing with a digital channel to market and we expect initial implementation
in FY21. Masonry will further rationalise its manufacturing network to drive efficiencies in line
with plans already in progress. Product development continues in masonry with new sized
paving options and more environmentally friendly honed surface finishes.
Golden Bay Cement’s major cost reduction initiative - the Tyre Derived Fuel initiative - a project
in conjunction with Ministry for the Environment, enabling energy cost improvements and
reduction in carbon emissions will complete the construction phase in January 2021 with the
first tyre derived fuel to be generated in February 2021. The business continues to work on
the development of a low carbon and sustainable cementitious material which will reduce the
carbon footprint for Concrete.
28
Fletcher Building Limited Annual Report 2020 Concrete
Financial Summary
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019 (1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Gross revenue
External revenue
EBIT before
significant items(2)
Significant items(3)
Funds
Trading cash flow
Capital expenditure
740
503
74
(13)
607
100
50
802
549
89
-
646
136
65
802
549
84
-
656
136
65
(8%)
(8%)
(17%)
NM
(6%)
(26%)
23%
(1) The pro forma figures for the year ended 30 June 2019 have been restated for
comparative purposes to include the impact from NZ IFRS 16.
(2) EBIT before significant items is a non-GAAP measure used by management to assess
the performance of the business and has been derived from Fletcher Building Limited's
financial statements for the period ended 30 June 2020.
(3) Details of significant items can be found in note 2 of the financial statements.
29
Fletcher Building Limited Annual Report 2020 Divisional Review
Residential
Land Development
Clever Core
Residential and
Development
% of Revenue
REVENUE
$466m
The Residential and Development division reported revenue of $466 million,
which was 27% lower than the prior year. EBIT before significant items were
$65 million, compared to $137 million in the prior year. The decline in both
revenue and EBIT was largely due to a reduction in houses sold and less
properties taken to profit in the Development business.
The Residential business experienced a mixed market throughout FY20. Activity was slow during the first
quarter of the financial year, but from mid-October until mid-March there was a notable increase in sales
demand and firmer pricing in both the Auckland and Christchurch markets.
The Development business completed the first of two transactions on the former Crane Copper Tube site
in Sydney contributing EBIT of $12 million, with the second site transaction being delayed until 1H21.
6%
Clever Core, the division’s new panelisation business, officially opened in October 2019. The plant has
produced 40 panelised houses for Fletcher Living’s developments in Auckland. The production and
installation rate of panels achieved late in the year are trending well for the future success of
this business.
From March until early May, house sales were negatively impacted by the COVID-19 ‘Level 4’ lockdown.
The absence of sales during these important sales months, as well as delays in the completion of houses,
led to 666 units being taken to profit in FY20 compared to 755 units in the prior year.
May and June house sales activity was strong, although most of these sales will settle in the new
financial year. The demand for Auckland houses in the $600k – $900k price range remains especially
strong, reflecting interest from both first-time buyers and investors.
Trading cash flow for the division was $118 million compared to $95 million in the prior year. Cash flow
in the current year included a $50 million receipt related to the Wiri land development sale that was
completed in FY19, and which offset the lower FY20 earnings.
Funds employed reduced from $651 million at 30 June 2019 to $604 million, mainly due to the Wiri
settlement. Land stocks in the division has remained constant, with a total of 2,596 lots (either finished
sections or development land) held on balance sheet at the end of FY20. The business has a further
1,323 residential lots under unconditional purchase agreements to be delivered over the next four years.
Future Focus
We continue to focus on delivering houses at mid-market price points in Auckland across a
range of developments and have a commitment to continuing to broaden the types of homes
offered, including more apartments. In Christchurch the near-term focus is increasingly on the
One Central development and supplementing it with opportunities in growth corridors.
Clever Core will increase the volume of houses it supplies into Fletcher Living and look to
commence sales to external customers in FY21.
The Development business has a good pipeline of Fletcher Group land available for industrial
development that has arisen from recent restructuring decisions, including the divestment of
the Rocla business in Australia.
30
Fletcher Building Limited Annual Report 2020 Residential and
Development
Residential and Development
Financial Summary
Residential and Development
EBIT
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019 (1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019 (1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Gross revenue
External revenue
EBIT before
significant items(2)
Significant items(3)
Funds
Trading cash flow
Capital expenditure
466
460
65
(1)
604
118
3
639
639
137
-
651
95
7
639
639
137
-
651
95
7
(27%)
(28%)
(53%)
NM
(7%)
24%
57%
Residential
Land Development
Clever Core
Total
63
6
(4)
65
84
56
(3)
84
56
(3)
137
137
(25%)
(89%)
(33%)
(53%)
(1) The pro forma figures for the year ended 30 June 2019 have been restated for comparative
purposes to include the impact from NZ IFRS 16.
(2) EBIT before significant items is a non-GAAP measure used by management to assess the
performance of the business and has been derived from Fletcher Building Limited's financial
statements for the period ended 30 June 2020.
(3) Details of significant items can be found in note 2 of the financial statements.
31
Fletcher Building Limited Annual Report 2020 Divisional Review
South Pacific
Brian Perry Civil
Higgins
Buildings
Infrastructure
% of Revenue
REVENUE
$1,318m
17%
32
Construction
The Construction division reported gross revenue of $1,318 million, 23%
or $384 million lower than the prior year. EBIT before significant items of
$(147) million compared to $51 million in the prior year.
Prior to March, Higgins was trading well with expectations of a strong finish to the year. Brian Perry had a slow
start to the year but was benefiting from demand for urgent Watercare work with respect to the Auckland
drought and urgent runway work at Auckland Airport. Completion of the legacy Buildings and Infrastructure
projects was continuing to expectations and within the provisions set in February 2018. Rebuild work had
commenced on the New Zealand International Convention Centre, which was affected by a fire in October
2019, with insurance responding to loss and damage on this project.
The 'Level 4' lockdown significantly impacted all of the division’s businesses as paving, civil and building works
ceased. This included the Commercial Bay project in downtown Auckland, which was within days of meeting
agreed opening dates on the retail and office precincts. COVID-19 also resulted in the cancellation of Auckland
Airport’s Domestic Jet Facility project, where Fletcher Construction had been part of a successful joint venture
bid. Construction activities resumed under 'Level 3' in late April, however productivities were impacted by a
gradual ramp-up in site work as well as social distancing protocols, especially on commercial building sites.
Through the year-end review process, it was decided to increase provisions to complete the historical
construction projects by $150 million. Three factors led to the increased provisions. Around 50% was due
to reduced productivities on key legacy projects, which were significantly disrupted by COVID-19 in FY20,
and with ongoing challenges expected in FY21 across supply chains and project resourcing. Around 20% of
the additional provisions was due to issues which have arisen on a small number of historically completed
projects. The final 30% consists of a prudent risk provision across the portfolio of legacy work.
While this additional provisioning is disappointing, the division continues to make progress in its reset. In
February 2018, the division had work to complete of approximately $2.2 billion for major projects across the
Buildings and Infrastructure businesses, almost all of which comprised large, higher-risk, fixed price projects.
Currently, approximately $600 million of this work remains to be completed. Over this period, the division has
also rebuilt its forward order book to comprise $2.4 billion of new work with a materially better margin outlook
and lower and more appropriate risk profile. This order book includes primarily: smaller, self-perform work in
Higgins and Brian Perry; national and local maintenance contracts; a strong pipeline of road pavement work;
and the 10-year Watercare Enterprise Framework Agreement, providing an estimated $1.3 billion backlog of
work for Brian Perry and Infrastructure over 10 years.
In FY20, the division recognised $13 million of significant items, consisting mainly of redundancy and property
rationalisation costs.
Trading cash flow for the division was an outflow of $148 million in FY20, compared to an outflow of $210
million in the prior year. Cash outflows for the Buildings and Infrastructure legacy work were $186 million,
compared to $270 million in the prior year. Excluding the legacy work, trading cash for the division was an
inflow of $38 million, compared to an inflow of $60 million the prior year, with Higgins performing strongly.
The division invested $32 million in capital expenditure in FY20. Consistent with the prior year, the focus of
investment continues to be in the manufacture and supply of bituminous products in Higgins and in plant for
foundations in Brian Perry Civil.
Future Focus
The priorities will continue to be to complete the remaining legacy projects within provisions,
leverage a strengthened set of project and risk management capabilities in winning and
delivering new work effectively, and bring innovative solutions to bear for key customers, with a
strengthened leadership team in place.
The division remains well positioned to tender and deliver work in the significant pipeline of
Infrastructure work announced by the Government in the transport sector and in the growing
remedial and new works in the water sector.
Fletcher Building Limited Annual Report 2020 Construction
Financial Summary
Construction
EBIT
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019 (1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019 (1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Gross revenue
External revenue
EBIT before
significant items(2)
Significant items(3)
Funds
Trading cash flow
Capital expenditure
1,318
1,261
(147)
(13)
50
(148)
32
1,702
1,622
1,702
1,622
(23%)
(22%)
51
-
38
(210)
31
47
(388%)
-
48
(210)
31
NM
32%
30%
(3%)
Higgins
Infrastructure, South
Pacific, Brian Perry
Civil & FC Buildings
Total
B+I Legacy
Total
14
(94)
(80)
(67)
(147)
39
12
51
51
36
11
(64%)
(883%)
47
(257%)
NM
47
(388%)
(1) The pro forma figures for the year ended 30 June 2019 have been restated for comparative
purposes to include the impact from NZ IFRS 16.
(2) EBIT before significant items is a non-GAAP measure used by management to assess
the performance of the business and has been derived from Fletcher Building Limited's
financial statements for the period ended 30 June 2020.
(3) Details of significant items can be found in note 2 of the financial statements.
33
Fletcher Building Limited Annual Report 2020 Divisional Review
Building Products Australia:
Australia
Laminex Australia
Iplex Australia
Rocla
Fletcher Insulation
Distribution Australia:
Tradelink
Oliveri Solutions
Steel Australia:
Stramit
% of Revenue
35%
REVENUE
$2,802m
34
The Australian division reported gross revenue of $2,802 million
compared with $3,024 million in the prior year. EBIT before significant
items was $33 million, compared to $77 million in the prior year.
The performance in the division was mixed through the year, with most businesses impacted by the sharp
decline in the residential market, which saw commencements down approximately 20% on the prior year.
Building Products Australia saw continued strong turnaround momentum in the Laminex and Fletcher
Insulation businesses, both of which grew earnings despite subdued market activity. Laminex revenue
declined 7%, however EBIT increased by 5% due to market share gains driven by new product ranges,
growth in volumes transacted through the business’s ecommerce platform, and the benefit of cost-out
initiatives. In the Pipelines businesses (Iplex-Rocla), revenue declined due to delays in key infrastructure
projects and subdued residential subdivision activity, resulting in a loss of c$15 million in these businesses.
A decision was taken through the year to divest the Rocla business, with completion of this transaction
expected in FY21.
Distribution Australia revenue was down 4% while Steel Australia revenue increased 4% with share gains
in the distributor and commercial segments. However, both businesses reported reduced earnings, as
competitive intensity placed ongoing pressure on price and margin, and Stramit was impacted by lower
sales in the shed segment. Tradelink’s focus on the small to medium network customer segment (SME)
continues to provide increased stability in revenue, despite the residential downturn. Tradelink has largely
completed its store footprint expansion, and is now focused on the showroom and branch refurbishment
programme. Stable earnings in Oliveri continued in the year as a result of favourable margin mix changes to
the bathroom product range.
The division recognised a $166 million charge to significant items during the year, relating to costs
associated with the rationalisation of its property footprint and fixed cost base, along with the reduction
of headcount.
Capital expenditure in the year was $65 million, with key investments focused on automation and capability
improvements in the manufacturing businesses and system upgrades in the distribution business.
Trading cash flow of $49 million compared to $57 million in the prior year, reflecting the cash impact
of restructuring costs recognised in FY19. Excluding the cash impact of significant items, FY20 trading
cash flow was $92 million, compared to $71 million in the prior year, reflecting focused improvements in
inventory management and debtor collections.
Future Focus
With a healthy pipeline of product and service innovation, including through improved digital
capabilities. The cost-out programme is now largely complete with focus now on key growth
initiatives. Enablers of growth include: new digital offerings through expanded digital presence
and platforms, which will build off the success of the Laminex eCommerce platform that
has now delivered >$100 million of online sales in <12 months; acceleration of new product
adjacencies, including a focus on architectural offers in Stramit, Design by Tradelink, and
compact range enhancements in Laminex; as well as a continuation of customer focus with
refined value propositions.
Fletcher Building Limited Annual Report 2020 Australia
Financial Summary
Australia
EBIT
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019(1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Year ended 30 June Reported
2020
NZ$M
Pro forma
2019 (1)
NZ$M
Reported
2019
NZ$M
20R v 19P
Change
%
Gross revenue
External revenue
EBIT before
significant items
(NZ$m) (2)
EBIT before
significant items
(A$m) (2)
Significant items (3)
Funds
Trading cash flow
Capital expenditure
2,802
2,723
33
3,024
2,933
77
3,024
2,933
(7%)
(7%)
57
(57%)
31
72
53
(57%)
(166)
1,494
49
65
(78)
(78)
(113%)
1,602
1,735
57
91
57
91
(7%)
(14%)
28%
Building Products
Australia
Distribution Australia
Steel Australia
Divisional costs
Total
26
7
5
(5)
33
47
15
16
(1)
77
40
8
11
(2)
57
(45%)
(53%)
(69%)
NM
(57%)
(1) The pro forma figures for the year ended 30 June 2019 have been restated for comparative
purposes to include the impact from NZ IFRS 16.
(2) EBIT before significant items is a non-GAAP measure used by management to assess
the performance of the business and has been derived from Fletcher Building Limited's
financial statements for the period ended 30 June 2020.
(3) Details of significant items can be found in note 2 of the financial statements.
35
Fletcher Building Limited Annual Report 2020 Our Board
BRUCE HASSALL
BCom, FCA (CAANZ)
Chair and Independent Non-Executive Director
Term of office: Appointed director 1 March 2017, last elected 2017 annual meeting.
Board committees: Chair of the Nominations Committee and Member of the
Remuneration 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 CEO 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.
MARTIN BRYDON
MBA, FAICD, FAIM, Dip Elect Eng, Dip Elron Eng
BARBARA CHAPMAN
CNZM, BCom, CMInstD
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 1 September 2018, last elected
2018 annual meeting.
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 CEO 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 CEO and managing director in 2014. Martin retired following a
distinguished 30-year career with Adelaide Brighton in January 2019.
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 CEO 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 NZME (New Zealand Media and Entertainment) Limited,
and deputy Chair of The New Zealand Initiative. She is also Chair of the
APEC 2021 CEO Summit.
36
Fletcher Building Limited Annual Report 2020 PETER CROWLEY
BEcon, BA, FAICD
ROB MCDONALD
BCom, FCA
Independent Non-Executive Director
Independent Non-Executive Director
Term of office: Appointed director 1 October 2019, last elected 2019
annual meeting.
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.
Board committees: Chair of the Audit and Risk Committee,
Member of the Nominations Committee and Member of the
Remuneration Committee.
Peter Crowley has over 35 years of experience in the construction
materials and building products industries across Australia,
New Zealand, Asia, Europe and North America. From 2003-2015,
he served as managing director and CEO of GWA Group Limited,
a leading Australian supplier of building fixtures and fittings to
households and commercial premises. He also spent 18 years in
the cement industry, including various chief executive roles with the
Rugby Group plc and a variety of managerial roles with Queensland
Cement and its parent company Holcim. Peter is a director of
Barrambin Trading Company Pty Ltd, The Riverside Coal Transport
Company Pty Ltd and Wesley Medical Research Limited.
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 AIA New
Zealand Limited and the Chartered Accountants of Australia and
New Zealand.
DOUG MCKAY
ONZM, BA, AMP (Harvard), CMInstD
CATHY QUINN
ONZM, LLB
Independent Non-Executive Director
Independent Non-Executive Director
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 CEO 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 CEO 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.
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 practiced as one of New Zealand's foremost commercial
and corporate lawyers for over 30 years. 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 chairs Fertility Associates Holdings Limited.
37
Fletcher Building Limited Annual Report 2020 Executive Team
ROSS TAYLOR
Chief Executive Officer
BEVAN MCKENZIE
Chief Financial Officer
ANDREW CLARKE
Group General Counsel and
Company Secretary
DANIEL BEECHAM
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
For the full biographies of our Executive Team, please see our website.
38
Fletcher Building Limited Annual Report 2020 Corporate 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
Group’s operations.
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 Group. 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.
The Group’s approach to applying the principles and recommendations outlined in the NZX Corporate Governance Code (“the
Code”) is set out below (including where its practice materially differs from the Code). The Group’s constitution, the Board
and committee charters, code of conduct and policies referred to in this statement are available to view on our website at
fletcherbuilding.com/investor-centre/corporate-governance
This governance statement is current as at 30 June 2020 and was approved by the Board on 18 August 2020.
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 Group 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 Group’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 Group 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. The policy also sets out expectations around giving and receiving gifts, political
and charitable donations and dealings with business partners. All Fletcher Building personnel must adhere strictly to the requirements of this
policy.
Fletcher Building has a free phone and online service (“FBuCall”) that can be used by any Fletcher Building personnel 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.
Fletcher Building is also committed to upholding Human Rights across all its business operations. Human Rights are fundamental civil, political,
economic and social rights and freedoms that every human is entitled to without discrimination and include the right to be treated decently at
work, to express opinions and beliefs without fear of recrimination, to have privacy, and to be free from harassment, abuse or discrimination. In
December 2019, the Board adopted a Human Rights Policy, which describes how Fletcher Building will uphold and monitor human rights within
its business operations.
The Modern Slavery Act 2018 is an Australian Commonwealth Act which commenced on 1 January 2019. Our updated Human Rights Policy
includes the statement that Fletcher Building prohibits the use of all forms of forced labour, including indentured labour, bonded labour, prison
labour, modern forms of slavery and any form of human trafficking within our supply chain. The first of the annual statements are required to
be reported to the Australian Border Force by 31 March 2021. The statements will be published on an online portal controlled by the Australian
Border Force.
SECURITIES TRADING POLICY
The Group has a policy that applies to all directors, employees and contractors of Fletcher Building Limited and its subsidiaries
(“Fletcher Building Personnel”), as well as trusts, companies, persons and other entities controlled by Fletcher Building Personnel.
Persons also covered by the policy are any secondee, adviser or contractor who is in possession of material information that is not
available to the market and who intends 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 notify the Group Secretary of their intent to trade. In addition,
through our share registry, Computershare Investor Services Limited (Computershare), we actively monitor trading in Fletcher Building
shares by senior personnel.
39
Fletcher Building Limited Annual Report 2020
Corporate 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 Group. The Board has statutory responsibility for the affairs and activities of the
Group, which in practice is achieved through delegation to the CEO who is charged with the day-to-day leadership and management of
the Group.
The Board’s roles and responsibilities are formalised in a Board charter, which is available on the Group’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 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 Group’s constitution. The Nominations Committee makes
recommendations to the Board in respect of Board and committee composition and, when required, identifies individuals it considers 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 his or her appointment. That letter outlines the key terms and conditions of his or
her appointment, including Fletcher Building’s expectations of the role of director, and is required to be countersigned confirming agreement.
DIRECTOR INDEPENDENCE
The Group acknowledges the importance of having independent directors, ensuring it has the correct balance of skills to optimise the financial
performance of the Group and maximise returns to shareholders.
The Board currently comprises seven directors, with a wide range of skills and experience. The qualifications and experience of each of the
directors, including length of service, are set out in “Our Board” section on pages 36 and 37.
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
his or her independence can be re-assessed. If there is a change in the Board’s determination, it will be announced to the market. The Board
considers all the current directors as at 30 June 2020 to be independent.
The Chair is an independent director and is not the CEO. 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 Group’s website. The Remuneration Committee reviews progress against
diversity initiatives developed by the Group to deliver outcomes against the Policy. Further information on diversity initiatives can be found in
“Supporting our People and Communities” section on pages 10 to 13.
The Board is satisfied with the initiatives being implemented by the Group 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 developed a Diversity and Inclusion strategy during the 2019 calendar year. Implementation of this strategy will
include the establishment of targets, reporting and governance. We are currently updating our Diversity Policy as an output of this work and the
new policy will be implemented in the 2020 calendar year.
Additionally, as members of the Champions for Change network in New Zealand, Fletcher Building has provided diversity reporting as input
into the Champions for Change Annual Diversity Report 2020, providing benchmark against appropriate external comparators as per current
policy requirements.
40
Fletcher Building Limited Annual Report 2020 The numbers and proportion of male and female within Fletcher Building as at 30 June 2020 are set out in the table below.
Board of directors
Executive committee
Senior management (1)
All employees
2020
2019
Women
2 (29%)
2 (17%)
17 (25%)
21%
Men
5 (71%)
10 (83%)
51 (75%)
79%
Women
2 (25%)
2 (17%)
16 (25%)
20%
Men
6 (75%)
10 (83%)
48 (75%)
80%
(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 Group’s business interests and the nature of the Group’s
strategic focus. Skills and diversity that are relatively underweight are considered in making appointments to the Board. The matrix shows the
representation of expertise among the current directors.
Business context
Capability
Key elements
Director expertise
Product and market
knowledge
Industry
Construction and infrastructure / Manufacturing and
distribution / Land and property development
New Zealand / Australia building products sector
Functional Expertise
Financial expertise
Commercial depth
Prior CFO, ARC Chair experience,
Financial risk management
Business operations at scale
Commercialisation of research-based innovation
Technology and digital
innovation
Cybersecurity, data analytics, disruptive
technology, digital platforms
Sales and go-to-market
Marketing, retail, service delivery, customer
engagement, omnichannel
M&A, divestments,
corporate restructuring
M&A, divestments, corporate and balance
sheet structuring
Government, legal,
regulatory, governance
Engagement with government stakeholders, legal,
policy and regulatory environments, NZX/ASX
experience, ESG, Shareholder engagement
Health and safety
Safety standards and best practice
People, culture
transformation
Leading transformation / cultural turnaround,
talent management and remuneration
Key:
Very strong
Strong
Solid
Some gaps
This Key represents the assessment of the strength of the skills and experience of the Board as a whole.
DIRECTOR INDUCTION AND PROFESSIONAL DEVELOPMENT
The Board conducts induction and continuing professional development for directors, which includes visits to Group operations
and briefings from key executives and industry experts. Directors are provided with material health and safety information relevant
to the business.
The Safety, Health, Environment and Sustainability Committee maintained regular meetings throughout the year and conducted targeted
site visits (where COVID-19 travel restrictions permitted) to observe first-hand the business response to critical safety issues.
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 comprehensive review of its performance and of the committees during FY20, with the assistance of an independent
consultant Propero Consulting Limited. The collective results of the review were then reported to the Board by the Chair and discussed with
directors. The Board is focused on implementing the recommendations that came out of this review in FY21.
41
Fletcher Building Limited Annual Report 2020 Corporate 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 2020 the Board committees were:
– 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 (a copy of which is available on the Group’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.
Comittee
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 as at 30 June 2020
Rob McDonald (Chair)
Peter Crowley
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
The principal role of the committee is to oversee and regulate compensation
and organisation matters affecting the Group, including remuneration and
benefits, policies, performance and remuneration of the Group’s senior
executives, management development and succession planning of the CEO
and his direct reports.
Safety, Health,
Environment and
Sustainability Committee
(SHES)
The role of the committee is to assist the Board to provide leadership and
policy for SHES management within Fletcher Building. The committee
focuses on compliance with legislative and regulatory requirements and the
promotion of good SHES governance.
Bruce Hassall (Chair)
Barbara Chapman (Chair)
Bruce Hassall
(effective 1 July 2020)
Rob McDonald
Doug McKay (Chair)
Peter Crowley
Martin Brydon
Cathy Quinn
42
Fletcher Building Limited Annual Report 2020 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
The table below shows directors’ attendance at the Board and committee meetings during the year ended 30 June 2020.
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
Antony Carter (3)
Barbara Chapman
Peter Crowley (4) / (5)
Rob McDonald (6)
Doug McKay
Cathy Quinn
Steve Vamos (7)
17
17
17
5
17
15
17
16
16
8
4
3
2
2
4
4
4
3
3
3
1
3
2
3
3
3
2
6
5
2
6
4
3
4
1
4
2
4
4
(1) All non-executive directors are members of the Nominations Committee.
(2) Bruce Hassall attended all committee meetings in an ex officio capacity, excluding his attendance as Chair of the Nominations Committee.
(3) Antony Carter retired from the Board on 28 November 2019 following conclusion of the Annual Shareholders' Meeting.
(4) Peter Crowley was appointed to the Board on 1 October 2019.
(5) Peter Crowley was appointed member of the Audit and Risk Committee and Safety, Health, Environment and Sustainability Committee, each effective 20 December 2019.
(6) Rob McDonald was appointed member of the Remuneration Committee effective 20 December 2019.
(7) Steve Vamos resigned from the Board effective 30 March 2020.
TAKEOVER PROTOCOLS
The Board has established detailed protocols that set out the procedure to be followed if there is a takeover offer for the Group, including
any communication between Group 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 Group.
Our Continuous Disclosure Policy sets out the internal processes designed to ensure that the Group 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 of Fletcher Building
and its 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 Group’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 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 Group operates.
43
Fletcher Building Limited Annual Report 2020 Corporate 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 Group 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 Group 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 8 to 18 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.
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 Group’s website at fletcherbuilding.com/about-us/environment-and-sustainability/.
Principle 5 – Remuneration
“The remuneration of directors and executives should be transparent, fair and reasonable.”
Fletcher Building’s remuneration strategy is designed to attract, retain and motivate high calibre people at all levels of the organisation with
remuneration programmes that are market-competitive, flexible and affordable, provide incentive to drive for both annual and long-term
results, and maximise shareholder value.
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 Group's website.
The ‘Remuneration Report’ on pages 50 to 59 outlines in detail the remuneration framework of Fletcher Building, as well as the
remuneration of the directors, the CEO 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 of the Group is to ensure that the key risks faced are identified, assessed, controlled, monitored
and reported so that the Group can achieve its objectives and protect its people, customers, financial results 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 are 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.
Risks identified through other business wide processes, such as the materiality assessment described on page 49, are used to inform the risk
management framework and where material are included in risk management processes.
44
Fletcher Building Limited Annual Report 2020
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 and technology. The Group’s approach aligns with the international risk management framework as established
under the International Organisation for Standardisation (ISO) ISO31000:2018 Risk Management – Principles and Guidelines.
ACTIVITY IN FY20
In FY20 Fletcher Building reviewed and refreshed both its risk management policy and risk management framework. This review enabled
both the policy and framework to be refreshed to reflect the updated ISO31000:2018 Risk Management – Principles and Guidelines as well
as internal developments within the Group.
Both the updated risk management policy and risk management framework were reviewed by an external party to ensure that these
documents were pragmatic, clearly understood and representative of current good market practices.
Additionally, through the year there were risk workshops including individual business units’ managers and the Group Risk team reviewing the
specific business unit risk registers. This is an integral part of the risk management framework at Fletcher Building and helps form part of the
updates provided to the Audit and Risk Committee.
Fletcher Building also utilised external experts in the provision of the risk engineering programme. This programme covered 22 key sites in FY20
and the resulting risk engineering reports provide valuable insights to both management as well as our insurers.
COVID-19 RESPONSE
In FY20, like many businesses, Fletcher Building was materially impacted by COVID-19. The Group's response began in late January 2020
with a focus on monitoring our supply chain, particularly with respect to the potential disruption in China. This risk was well managed by the
Group through strong supplier relationships and proactive management of existing resilience stock levels. Regular reporting to both senior
management and the Board occurred during this period.
As COVID-19 developed into a global pandemic the response by the Group focused on keeping its people safe from the developing health
and safety risk and ensuring that our business units could continue to operate in a normal manner. The Group’s Crisis Management Team was
mobilised and through this period met 29 times between February and April 2020. Additionally, during this period the Board met on a regular
basis to be updated on the COVID-19 response by the business.
In Australia, this focus resulted in the majority of our businesses being able to operate with relatively few restrictions through this period.
In New Zealand, our operations were required to cease during COVID-19 Alert 'Level 4' as most operations were deemed to be non-essential
services. This resulted in the temporary closure of over 450 sites and the requirement for ~9,400 of our people to either work from home or
enter the Group’s 'Bridging Pay Programme'. This period saw a robust response by the Group, leveraging its business continuity and IT recovery
plans to manage the business through this event.
With the transition in New Zealand from COVID-19 Alert 'Level 4' to Alert 'Level 3' in late April, the Group was able to execute the ‘Return
to Work’ plans that the business unit managers and divisional lead teams had developed. Most of our operations were able to recommence
in Alert 'Level 3' to respond to the requirements of our customers and help the rebuilding of the New Zealand economy. The Group utilised
innovative solutions in this period such as the in-house development of a contact tracing system.
45
Fletcher Building Limited Annual Report 2020 Corporate Governance (Continued)
KEY RISKS
The Fletcher Building risk management framework is focused on the 10 key commercial (non-Health and Safety) risks that the
Group faces across its business. These risks are dynamic and during the course of FY21 new risks and uncertainties may materialise
owing to changes in economic conditions, regulatory environment and other factors.
The 10 key risks, their potential impacts and how they are managed by the Group are:
Description
How this risk may impact
Fletcher Building
How we manage this risk at
Fletcher Building
Business Resilience
A disruption to business processes,
in particular the loss of key assets,
may lead to an inability to undertake
the activities of a business unit or
the Group.
The occurrence of a disruption
event at a key site could lead to
an extended operational interruption,
which may negatively impact the
financial performance of the business
unit and ultimately the Group.
• Business units have business continuity plans in place to address
the identified operational continuity risks as well as to enable
preventative measures to be undertaken.
• Regular monitoring of the risk environment occurs to ensure that
key risks are appropriately covered by insurance (where practical
and cost effective).
The failure by the Group to identify
early and respond to cyclical downturns
may impact financial results and
operational performance by business
units and the Group.
• An established independent risk engineering review programme is
in place for our key sites.
• We review long-term risks associated with climate change and
resource availability at Group level to assess our resilience and the
risk horizon.
• Senior Leadership teams of business units and divisions monitor
their key markets and are supported by the Corporate centre with
in-depth market analysis.
• Monthly operational reviews are undertaken by the CEO and
executives with business units and divisions, as well as the Board
undertaking business unit deep dives.
• Strong focus on working capital, capital expenditure and balance
sheet management.
Additionally, we recognise that failure
to adhere to, or monitor changes to
the various regulatory requirements
may lead to the imposition of penalties,
operational disruption or reputational
damage. Fletcher Building is committed
to complying with legal and regulatory
requirements across all our operations.
• The Group has developed a broad range of policies that address
the regulatory and legal risks that are faced by the business.
A number of these policies are located at fletcherbuilding.com/
investor-centre/corporate-governance/
• A key development in recent years is the establishment of
commercial Golden Rules, which provide a framework for all staff
on the type of contractual risks that the Group is prepared to
accept and/or how they should be managed commercially.
The structures constructed or
products manufactured, supplied
and/or purchased may not meet
relevant international or local standards
and regulations may lead to product
recalls, remediation costs and/or
financial penalties.
• Robust product quality control systems and processes exist within
our businesses to manage this risk.
• Supplier vetting and reviews are undertaken by both our
businesses and where appropriate by third parties.
• External experts provide independent audits on business units'
manufacturing and product quality control processes.
Disruption to business unit or
Group operations through the
ineffective coordination, and
control of the organisational supply
chain may result in operational
disruption, negatively impact financial
performance, imposition of penalties
and reputational damage.
• Business units have business continuity plans in place that address
the identified supply chain issues.
• Where possible business units look to establish contingent
supply agreements across material/product suppliers and
logistical providers.
Economic and
Construction Downturn
The building and construction
industries in which the Group
operates are fundamentally
cyclical and are impacted by the
macroeconomic conditions within
both the New Zealand and
Australian economies.
Regulatory and Legal
With the Group operating in a
number of different business
sectors as well as countries it is
subject to a wide range of regulatory
requirements and jurisdictions.
These regulations and jurisdictions
can be complex and subject to
change and may affect the
Group’s operations.
Product Quality
The Group constructs, manufactures
as well as sources from third
parties a range of structures and
building products that are required
to meet local and international
standards and regulations.
Supply Chain
Disruption to business unit operations
through the ineffective coordination,
and control of the organisational
supply chain. The Group’s supply
chain may face a variety of challenges
such as pandemics, logistical and
public infrastructure constraints or
disruption to key suppliers.
46
Fletcher Building Limited Annual Report 2020 Description
People
The failure of the Group to
attract, retain and support our
people (including engagement
with collective representation
groups) negatively impacting
business units or the Group.
Environment
Business unit operations may cause
environmental damage through the
failure to comply with the required
environmental laws, resource
consents and regulations.
Additionally, failure to execute the
strategic initiatives required for
the Group to achieve its objective
of being the New Zealand and
Australian leader in sustainable
building materials, construction and
distribution, in particular, achieving a
30% reduction of carbon emissions
by 2030.
Technology Resilience
Fletcher Building is dependent on
information technology systems to
maintain its operations.
Failure to provide reliable, resilient,
adaptable, and efficient technology
infrastructure may impact the
operations of the business units or
the Group.
Additionally, the Group is
also exposed to threats by third
parties that can create operational
disruption or result in the loss
of confidential data.
Contractual
The Group has a diverse portfolio
of business units and the execution
of onerous contract(s) by any one
of the business units may result
in the Group incurring liabilities or
performance under contracts that are
commercially adverse.
Corporate Reputation and Social
License to Operate
The Group appreciates the privileged
position it has in the communities it
operates in as a Company and the
social responsibility that it has to
a wide range of stakeholders. In a
diverse and ever-changing economic
and social environment, the Group
needs to consider its operations to
ensure that it continues to address
the interests of all its
key stakeholders.
How this risk may impact
Fletcher Building
How we manage this risk at
Fletcher Building
The failure of the current processes
to attract and retain talented staff
can have a negative impact on the
functioning of a business unit and
the Group.
Additionally, industrial action by
collective representation groups can
cause operational disruption.
Failure to comply with the
environmental laws, resource
consents and regulations may result
in imposition of penalties and
reputational damage.
Additionally, the inability to achieve
the Group’s sustainability objectives
may result in decreased demand
from customers for the Group’s
services and building materials.
• The People and Performance function within the Group supports
business units by providing advice, tools, processes and policies to
drive employee, team and business performance.
• With a core value of the Group being, Better Together, the Group is
committed to driving greater diversity in all parts of the business.
Please refer to pages 10 to 13 of this report for further details on
the Group’s focus on People and Communities.
• The Group continues to focus on identifying and developing talent,
leveraging its world-class leadership programmes to grow the
Group’s emerging and established leaders.
• FBuSay, the Group wide employee engagement survey provides
valuable insights on staff engagement.
• Business units that have potential environmental impacts have
Environmental Management Plans in place and have monitoring
processes in place for resource consents.
• At both Group and business unit level we engage with regulators
on proposed changes to standards and regulations.
• The Group has a stated sustainability strategy and accompanying
annual targets. Please refer to pages 8 and 9 of this report
for further details on the Group’s sustainability strategy
and performance.
Failure to provide reliable, resilient,
adaptable, and efficient technology
infrastructure may cause operational
disruption, reputational damage to
business units or the Group.
Failure to safe-guard confidential
information may also result imposition
of penalties and reputational damage.
• Continued capital expenditure investment in technology systems
across the Group to support our operations.
• Development of IT disaster recovery plans for each business unit.
• A dedicated team within Group Technology to address the
ever-evolving cyber security threats that the Group faces.
• Group-wide education and awareness training in relation to
cyber-threats.
The execution of onerous contracts
may have the potential to negatively
impact financial performance or
the reputation of a business unit
or the Group.
•
•
The Group has established delegated financial authorities
(‘DFA’s) that business units and the Group must adhere to.
The Group has developed commercial Golden Rules which
govern the way we contract with external parties.
• Engagement with the communities and how we work with
stakeholders takes different forms for each business unit
and project.
The failure to act in a way which
supports a strong corporate and
social reputation for the Group with
its key stakeholders (government,
investors, customers and communities)
may result in adverse commercial,
reputational or regulatory outcomes
leading to negatively impacting the
financial performance of a business
unit or the Group.
47
Fletcher Building Limited Annual Report 2020 Corporate Governance (Continued)
RISK CAPTURE AND REPORTING
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 page 11. Health and safety risks are captured within Radar.
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 Group’s auditor. Auditor’s fees and
expenses paid to EY are presented within note 6 of the Group financial statements included in this Annual Report. The other work performed
by the external auditor 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 or relate to strategic matters affecting the Group.
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 requirements on communicating with
shareholders are formalised in a Shareholder Communications Policy, which is available on the website.
The Group operates an investor relations programme, which includes scheduled interactions with institutional investors, analysts and other
market commentators. Presentations are also disclosed on the Group’s website and the NZX and ASX announcement platforms. The Chair
meets with major shareholders in New Zealand and Australia on an annual basis as well as on an ad-hoc basis. The CEO and chief financial
officer attend 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 annually obtains research on the perceptions that the New Zealand and Australian investment community has of the
Group, 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 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 Group’s Annual Shareholders' Meeting, either in person or by representative. Resolutions at
shareholders' 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 Group and provide management with a view of the concerns
of the Group’s shareholders. Our notice of meeting is sent to all of our shareholders and posted on our website at least 20 working dates prior
to the meeting.
The Group is closely monitoring the COVID-19 situation and the travel restrictions it has caused. As a result, the Group may elect to hold the
Annual Shareholders' Meeting in 2020 as a virtual meeting.
48
Fletcher Building Limited Annual Report 2020
Sustainability Materiality Assessment
As a large business, we recognise our operations have an impact on many people. Our sustainability strategy is based on what is most
important to our business, people, communities, customers, key stakeholders and investors. Our sustainability strategy addresses the areas
where we have the most impact, and our aims and targets focus on where our actions will lead to meaningful change.
In FY18 we commissioned independent experts to carry out a materiality assessment to inform the development of the sustainability strategy
for Fletcher Building. The materiality assessment identified the key issues stakeholders want Fletcher Building to address and was designed
and executed in line with the AA1000SES internationally recognised standard for stakeholder engagement.
The assessment identified 28 aspects of sustainability that are material for Fletcher Building. We ran a series of internal workshops to identify
which aspects were most material in the immediate future, and which aspects were most material for a ten-year horizon.
We then validated the assessment in FY19 through interviews with a number of our major institutional investors who have committed to the
UN Principles of Responsible Investment framework. We also reviewed our FY18 performance, regional and international trends and disruptors
for our market sector, the components of leading sustainability indexes, the performance of leading peers in our market sectors, surveys of
attitudes and concerns around sustainability from Colmar Brunton in New Zealand and the Lowy Institute in Australia, and the UN Sustainable
Development Goals (SDGs).
The information from these interviews and reviews was used to validate our materiality assessment. The material issues identified underpin
the six core aims of our sustainability strategy, which we first published in our FY19 Annual Report and can be referred to in this report on
page 9.
Two of our most significant material issues in both time horizons are safety and carbon emissions/climate change. In FY20, we kicked off
a multi-year cultural change safety reset with the inclusion of Protect as a core value and the establishment of Safety Leadership Walks as
a gateway to leadership incentive schemes in addition to the targets for all of our senior leaders to reduce recordable injuries (TRIFR). We
include targets for carbon reduction in plans for all our business units and in remuneration incentives for senior managers in areas of the
business with the most impact on our carbon emissions and climate change.
We recognise that because the issues that matter to our business and our stakeholders will change over time, the issues that are
material for our business will change. We will look to carry out a review of our material issues in FY21 and FY22 as part of our current plan to
move to integrated reporting.
49
Fletcher Building Limited Annual Report 2020 Remuneration
Report
Message from the Remuneration Committee Chair
Dear Shareholders
On behalf of the Board, I am pleased to present Fletcher Building’s Remuneration Report for the financial
year ended 30 June 2020.
Over the year we have seen some significant events impacting our business and people, starting with
the fire at the New Zealand International Convention Centre in October, the bushfires in Australia through
December / January, and ending with the global pandemic of COVID-19 from March of this year. Our people
have demonstrated great resilience and an ongoing dedication to their customers, team and the Group.
Through this, our focus has remained on our people, customers and shareholders as we have navigated
through these challenges and made the decisions needed for the longer-term health of the Group.
Details on some of the decisions we have made in response to these events are provided below, as well as
an overview of changes we have made relating to our safety approach in our short-term incentives, and our
new look remuneration report.
Strengthening our safety approach in our short-term incentives
As a company we have placed significant investment in strengthening our safety governance, practice
and culture. Although our overall Total Recordable Injury Frequency Rate (TRIFR) remained relatively
unchanged from FY19, serious injuries were significantly lower, and most importantly there were no
fatalities in FY20. While every injury is unacceptable, we are demonstrating solid progress in enhancing
our safety culture. This is evidenced through the genuine and committed approach our people are taking
in building on the positive progress we are making with our safety beliefs, values and behaviours.
To emphasise its importance, safety is a gateway into our short-term incentive (STI) plan. This requires
all senior leaders in the business to complete a set number of safety leadership walks before any STI
payment is made, irrespective of whether financial or individual performance has been achieved. Safety
leadership walks are an essential lead indicator that allows us to better understand where greater
safety focus is needed and sets the business up to be accountable for taking action where necessary.
The leadership walks play a vital part in further reinforcing a leadership safety culture through creating
important safety conversations, providing visibility of our senior leaders and the importance they place
on safety, as well as providing a fresh set of eyes across our critical risks.
New look remuneration report
We have made changes to our remuneration report this year, so our remuneration frameworks and
approach to rewarding for performance are more transparent and better understood. We have included
additional graphics to support that understanding, which enable us to more simply demonstrate the clear
link we require between performance and remuneration outcomes.
This remuneration report includes: a summary of our remuneration governance approach; the impact
business performance for FY20 has had on incentives; and our remuneration framework and how that
links to our strategy. We have also added a more detailed overview of the CEO’s remuneration outcomes
for FY20.
Our remuneration
strategy aims to
attract, retain
and motivate high
calibre people at
all levels of the
organisation, to
support our vision
and strategy.
BARBARA CHAPMAN
Remuneration Committee
Chair
50
Fletcher Building Limited Annual Report 2020 COVID-19 and the impact on our businesses and people
This financial year, COVID-19 provided a significant challenge to our organisation with almost all of our New Zealand businesses shut down
during 'Level 4' lockdown, excluding a small number of essential services. In addition Australia, while continuing to operate, was impacted
by reduced trading and COVID-19 safety protocols during H2. The revenue our businesses were able to generate during this period was
significantly reduced. As a result, we put in place a number of remuneration strategies as part of managing the Group’s immediate financial
position and to prepare for the longer-term impacts of COVID-19 on the economy.
As we thought through these strategies, we looked to balance the needs of our shareholders, customers and people during a time of
significant uncertainty.
At the end of March, we put in place a 'Bridging Pay Programme' for our people not working over the lockdown period in New Zealand. This
involved stepped down pay reductions over a period of 12 weeks. Our aim was to provide certainty around pay and working arrangements so
our people could plan their finances as best as possible. We also launched a mobile app which enabled us to answer questions around leave
and pay entitlements, and to provide financial and wellbeing support tools for our people while they were not at their workplaces. Additional
funding was also provided to the Fletcher Building Employee Welfare Fund (EWF). Those people facing genuine hardship during the lockdown
were able to apply for COVID-19 financial hardship grants through the EWF.
Owing to the impact of the COVID-19 lockdown on revenue, we were eligible for $68 million in wage subsidies from the New Zealand
Government, which was passed on in full to employees in accordance with the scheme. Our most senior people in New Zealand who
continued to work through the shut down which included the Board directors, CEO, chief executives and other senior leaders, also took
temporary pay cuts. The cuts were 30% for the directors, CEO and chief executives; these remain in place for the directors and CEO through
to end of Q1 FY21 (30 September 2020). Senior people who were not required to work through the shut down were placed on the 'Bridging
Pay Programme'.
With expectations that COVID-19 will lead to a downturn in FY21 and potentially beyond, it was imperative that the Group reposition its cost
base and operating model. This has meant making some very difficult decisions, including reviewing the number of people we employ. In
May we entered into a consultation process to reduce the number of people we employ in both New Zealand and Australia, by approximately
1,500 roles. We supported these people with career advice and wellbeing support, as well as ensuring every permanent employee leaving
Fletcher Building would receive a payment of no less than four weeks’ base salary to recognise the exceptional circumstances.
Short-term incentives and application of discretion
Further, even though some businesses performed sufficiently well to trigger eligibility for incentive payments, and in some cases performed
well above target (in the case of operating cash), the directors exercised their discretion to determine that no STI payments for performance
in FY20 would be made across the Group irrespective of performance levels. Total estimated STI payments that would have been paid
is circa $13 million. I am confident this was the right thing to do in light of the remuneration strategies in place across the Group, and
cancellation of the FY20 interim dividend.
This means for FY20, the CEO and executive will receive no STI payments. Last year the CEO and executives’ STI payments ranged from
4% to 146% of their STI target.
And finally, to further contain labour costs, we made the decision that no remuneration review would take place for FY21.
We appreciate the resilience of our people in supporting these decisions, which is a testament to the culture that Ross and his team
are building.
The decisions around jobs and pay, while necessary to manage our costs, in no way reflect the performance of our people in what has been
a unique and challenging environment; we value our people highly and are grateful for their efforts. In a year that has provided a number of
challenges, the response of our people has been exceptional, and I am very proud of the dedication shown by them.
I invite you to review the full remuneration report.
Barbara Chapman
Remuneration Committee Chair
51
Fletcher Building Limited Annual Report 2020 Remuneration Report (Continued)
The role of the Remuneration Committee
The principal role of the Remuneration Committee is broader than purely remuneration matters. Its role is to oversee and regulate remuneration
and organisation matters affecting the Group, including remuneration and benefits policies, performance and remuneration of the Group’s senior
executives, development and succession planning for the CEO and direct reports to the CEO, and major organisation changes.
The Remuneration Committee is kept apprised of relevant market information and best practice, obtaining advice from external advisors
when necessary.
Key decisions made by the Remuneration Committee during FY20 included: approval of FY19 STI payouts (which were made in September
following completion of the financial year), review and approval of base salaries for the CEO and chief executives and the STI framework for
senior leaders for FY20, pension plan governance matters, people and remuneration strategies put in place in response to COVID-19 - including
the decision to apply discretion to determine that no STI payments would be made for FY20, and a review of the Group’s remuneration
disclosures with resulting changes made to this remuneration report.
Performance and the impact on incentives
Short-term incentives (STI)
EBIT performance during FY20 was below target levels for the CEO, chief executives and the majority of senior management resulting in
most not meeting the performance thresholds required for eligibility for payment on EBIT or individual goals. Cash performance during FY20
was in some cases well above target performance levels, resulting in eligibility for payment for some executives and senior management.
However, the Board exercised its discretion to determine that no STI payments for performance in FY20 would be made across the Group
irrespective of performance levels. This decision was made having regard to the impacts of COVID-19, the impact of the Group performance
on shareholders – which included the cancellation of the FY20 interim dividend, and the critical management of cash.
Long-term incentives
The July 2016 long-term share scheme grant (specifically the remaining relative total shareholder return tranche, which was within the
12-month retest period up to 30 June 2020), was below the minimum threshold performance levels and therefore was forfeited. The
July 2017 long-term share scheme grant was below minimum threshold performance levels, and has therefore entered the 12-month
retest period.
Further details on each of these incentive schemes are provided on the following pages.
Executive and senior management remuneration strategy and framework
Fletcher Building’s remuneration strategy aims to attract, retain and motivate high calibre people at all levels of the organisation, to support
our vision and strategy.
Total remuneration is comprised of three elements - fixed remuneration, a short-term variable incentive, and a long-term share scheme.
Remuneration levels are reviewed and benchmarked annually for market competitiveness, and alignment with strategic and performance
priorities. A peer group comprised of New Zealand and Australian companies generally comparable in size, complexity and industry is used
to benchmark executives. The benchmarking peer group was reviewed and refreshed in 2019, to ensure it included companies that displayed
similar characteristics by way of industry/sector, market capitalisation, revenue, geographic scope and employee numbers, and so it reflected
where the Group wins and loses talent from. In light of no remuneration review taking place for FY21, this benchmarking exercise was not
undertaken in FY20.
Fixed remuneration
Fletcher Building’s policy is to set fixed remuneration based on capability, performance, size of role, 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 countries.
Short-term variable incentive (STI)
STIs are designed to incentivise the Group’s 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 Group. Target levels of STI opportunity range from 20% to 100% of base salary depending on the role. For the CEO the
target STI opportunity is set at 100% of base salary.
52
Fletcher Building Limited Annual Report 2020 Vision
To be the undisputed leader in New Zealand and Australian
building solutions – with products and distribution at our core
Governance
Our Board is responsible for the Group’s remuneration policy, with the Remuneration Committee
assisting in the conduct of its responsibilities. The principal role of the committee is to oversee and
regulate remuneration and organisation matters affecting the Group
Remuneration Principles
(a full set of our remuneration principles are available in our remuneration policy)
Shareholder
Focus on creation
of shareholder
value – short and
long-term
Our People
Attract and
retain high calibre
people, rewarding
high standards
of performance
and values
Strategy
Focus on key
company goals
and objectives –
short and
long-term
Risk
Encourage con-
duct that does not
expose the Group
to inappropriate risk
and promotes high
standards
Remuneration Framework and How it Supports the Strategy
Remuneration
Element
Element
Delivery
Performance
Measure
Relationship
to Strategy
Fixed
Remuneration
Executives are
benchmarked against
a peer group comprised
of New Zealand and
Australian companies
generally comparable
in size, complexity
and industry
Short-Term
Incentives
Recognises, on a
discretionary basis,
achievement of
the Group and individual
performance objectives
Includes base
salary and any
non-cash benefits and
superannuation/
KiwiSaver
Set based
on capability,
performance, job
size, and industry
benchmarks
Annual cash
payment following
final audited
financial year
results
Rewards for financial,
individual and safety
performance measured
using a balanced
scorecard
Long-Term
Incentives
Aims to drive
long- term,
sustainable
results and creation
of shareholder
value
Allocation of
Fletcher Building
shares, with vesting
after 3 years, based
on achievement of
shareholder return over
this period. Allocation
is made using face value
at the time of grant
Relative Total
Shareholder Return
referenced to an
industry comparator
peer group
Attract and
retain key talent
to drive the delivery
of the Group
strategy. Rewards
ongoing performance
in role
Retains and
motivates key talent,
and drives alignment
by rewarding for
achievement of
the Group goals
and creation of
shareholder value
Supporting the
alignment of our most
senior people with
shareholder interests
ensuring value is only
created for our people
where relative total
shareholder return is
realised. Encouraging
long-term sustainability
and achievement of
the Group strategy
o
t
t
c
e
j
b
u
S
d
n
a
k
s
i
R
t
A
s
e
m
o
c
t
u
O
e
c
n
a
m
r
o
f
r
e
P
53
Fletcher Building Limited Annual Report 2020
Remuneration Report (Continued)
Financial targets
For the CEO and senior management roles in Corporate, the financial target is based on the Group EBIT and operating cash. For those
senior management roles operating in specific divisions or business units, the financial target is based on their own division/business
unit EBIT and operating cash or working capital depending on the business’ priorities. Each of these financial measures are assessed
separately at the time of determining STI payments. To ensure an appropriate balance between focusing on individual division/business
unit financials and that of the Group or respective division that the business unit operates in, a multiplier (either up or down) is applied
based on achievement of Group EBIT, or division EBIT targets.
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 FY20, the financial threshold level was set at 90% of target. The maximum financial level is generally
set at 110% or 120% of target.
The CEO, chief financial officer, and operating roles have 70% of their STI opportunity based on financial measures, with the remaining 30%
on individual goals. As functional roles have a greater ability to directly influence company performance through their individual goals, 50% of
their STI opportunity is based on individual goals with the remaining 50% on financial measures.
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 above plan growth, gross profit margin expansion, talent, diversity and innovation, and other
strategic goals that drive performance beyond the current financial year. The executives' objectives were reviewed by the Board, and in the
case of the CEO were approved directly by the Chair.
The performance range for individual goals is between 0% and 100%, with no opportunity for stretch performance. If the threshold EBIT
target is not met, no individual component of the STI is payable.
Achievement against each executives’ individual goals is reviewed by the Board at the time of reviewing and approving STI payouts.
Safety performance
To reinforce a line led safety culture, and to place emphasis on the importance of active and authentic leadership for safety on site, safety
leadership walks are a gateway for any STI payment to be made. The number of safety walks required to be completed differs by role with
operating roles and EHS roles completing no less than 12 per year.
In addition, a multiplier of between 0.9 and 1.1 is applied to the overall STI outcome based on achievement against TRIFR targets. Injury
reduction targets (i.e., reduction in TRIFR) are set for each business and tracking of this important measure provides us with year on year
comparisons of actual safety performance. TRIFR is used as a common measure for injury performance globally and, as such, enables
external benchmarking which we use to understand how our safety performance compares to other companies.
In the event of a fatality or serious injury, the Board has the discretion to adjust any or all of the STI payment and in doing so will consider
the leader’s length of time in role (and therefore ability to influence), their demonstrated leadership prior to the incident as well as the quality
of the leader’s response post-incident. The Board recognises the importance of this discretion and has and will continue to adjust outcomes
where it considers appropriate.
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 Group’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
A long-term performance incentive scheme designed to align employee remuneration with sustainable financial outcomes for shareholders
over the longer term is in place. The Group has a share based 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. This non share-based scheme will
no longer operate from FY21, as no employees remain on this scheme. Participation in any year is by annual invitation at the discretion of
the Group.
Under the ELSS, participants purchase shares in the Group 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 comprises 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.
54
Fletcher Building Limited Annual Report 2020 Provided the nominated share performance criteria are met and participants remain employed with the Group 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 Group, 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 for 2019 ELSS grant
The sole performance criteria for the 2019 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 2019 offer comprises Adelaide Brighton, BlueScope, Boral, Brickworks, CSR, GWA Group, James Hardie, Metro Performance
Glass, Reece and Steel & Tube.
The relative TSR performance and resulting vesting entitlements are set out below:
Relative TSR percentile
Percentage vesting entitlement
Below 51st
At 51st
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 restructure.
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 2019
July 2018
July 2017
July 2016
October 2015
1,386,100
1,041,605
890,075 (1)
905,211
3,208,083
In-Flight
0%
0%
100% (2)
100%
N/A
N/A
N/A
70.1 – 76.3
67.1 – 73.1
(1) FB’s TSR did not meet the minimum vesting threshold for the three years ended 30 June 2020 for the 2017 issue. Therefore, the restrictive period has been extended to 30 June 2021.
(2) The 2016 EPS tranche was forfeited in August 2019 and the restrictive period for the TSR tranche was extended for 12 months until 30 June 2020. FB’s TSR did not meet the minimum
vesting threshold for the period ended 30 June 2020. Therefore, the remaining 50% shares in the 2016 issue will be forfeited in August 2020.
In addition, in 2019 the Board granted a special retention in the form of a one-off share-based arrangement to the value of $1,000,000 to the
CEO as disclosed in the 2019 Annual Report. This arrangement will vest 30 June 2022, subject to him remaining employed with the Group.
Minimum shareholding requirement
Over time, executives and senior managers must acquire and maintain a holding in the Group’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 Group 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 Group performance.
In addition, for the CEO 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 Group on or before 31 March of the following financial year. This requirement applies
for the first two years of employment as an executive.
As at 30 June 2020, the CEO had a holding in the Group’s ordinary shares equal to 57% of his base remuneration. This has been calculated
in accordance with the minimum shareholding requirement methodology, which uses the greater of the sum invested or the market value of
the shares.
FBuShare
FBuShare is Fletcher Building’s employee share plan available to all permanent employees. The plan aims to connect our people with our
performance, and to promote employee engagement and retention. Employees acquire shares in the Group and, if they continue to be employed
after a three year qualification period, they become entitled to receive one bonus award share for every two shares purchased in the first year of
each qualification period and still owned at the end of that period. FBuShare does not require any performance criteria to be met. FBuShare has
a minimum contribution rate of NZ$500 per annum and 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.
55
Fletcher Building Limited Annual Report 2020 Remuneration Report (Continued)
CEO’S REMUNERATION
Ross Taylor’s annual base salary as at 30 June 2020 was $2,050,000 (1), with an on-target STI of 100% of base salary and LTI of
100% of base salary.
The current mix of remuneration components for the CEO is set out below, and clearly shows the significant weighting of variable pay
(at risk), which is subject to achievement of short-term and long-term strategic goals.
33%
LTI*
33%
BR*
CEO on
Target
Performance
Pay Mix
28%
LTI*
28%
BR*
CEO
Maximum
Performance
Pay Mix
33%
STI*
1%
Other
Benefits
42%
STI*
1%
Other
Benefits
Variable Pay
(at risk)
LTI*: Long-term incentive
STI*: Short-term incentive
BR*: Base Remuneration
The remuneration received for FY20 is significantly lower due to the 30% pay reduction due to COVID-19, and no FY20 STI payment made.
The remuneration Ross Taylor received for FY20 and FY19 comprised of the following:
Base remuneration
Other benefits (2)
Short-term incentive accrued in the financial year, payable in September of the following
financial year
FY20
$1,903,302
$61,802
$0
FY19
$2,050,248
$106,503
$1,095,819
Received (3)
$1,965,104
$3,252,570
Long-term incentive - number of shares granted
Long-term incentive - face value of grant
Refer above for details of the STI and ELSS.
(1) A 30% pay reduction due to COVID-19 on this value is in place from Q4 FY20 through to end of Q1 FY21.
(2)
Includes KiwiSaver and medical insurance premium.
Shares granted
263,628 (4)
196,495 (5)
$2,050,000
$2,050,000
(3) This table sets out remuneration awarded for the relevant financial year. The table on page 58 shows remuneration received during the year, which includes amounts relating to prior years
but paid in the year due to timing differences.
(4) Based on a share price of NZ$5.21, being the volume weighted average price for the five business days prior to 1 July 2019.
(5) 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.
56
Fletcher Building Limited Annual Report 2020 CEO’S REMUNERATION
For FY20, the following financial and non-financial measures were considered by the Board to be key to incentivise earnings and operating
cash, and to drive sustainable business performance. The table below summarises performance against targets for each of these measures
under the CEO’s FY20 STI.
In addition to the measures set out below, considerable focus during the last half of FY20 has been on responding to and leading through
the COVID-19 global pandemic and preparing the Group for an economic downturn. Although the shut down and COVID-19 had a material
impact on achievement of EBIT, positive gains were made controlling cash at a time when the Group’s ability to generate revenue was
significantly impacted.
Actual
Outcome Comment
Provided active and authentic leadership for safety on site through safety
leadership walks.
Scorecard
Weighting
‘Target’
(payout
range)
Gate for any
payment
Measure
Safety Gateway
Financial Targets
FB Group EBIT (gateway
to individual goals)
50%
(0%-76%)
FB Group Cash
Individual Goals
20%
(0%-30%)
Australian division has momentum
for the turnaround and is set up to
achieve growth in FY21
10%
(0%-10%)
Gross profit margin uplift for NZ
Core, and deploy strategies and
operating disciplines to ensure set
up to achieve FY21 gross profit
margin uplift beyond current plan
Growth and innovation initiatives
identified, and plan being
implemented that credibly point
to EBIT uplift between FY20 and
FY23 Forecast
5%
(0%-5%)
5%
(0%-5%)
Construction division strategy and
organisation set up with a credible
and robust plan to implement
through FY21
5%
(0%-5%)
Senior leadership fit for purpose.
Capabilities assessed with agreed
actions delivered
5%
(0%-5%)
Safety
Safety Performance
Multiplier
of between
0.9-1.1
The EBIT loss of $(116) million did not meet the threshold target level set
as it was impacted by both the COVID-19 market impacts (which included
an almost complete shut down of the NZ businesses), and increase in the
provision envelope to complete the remaining legacy construction projects.
This resulted in no payment for this measure. As EBIT is also the gate to
eligibility for payment against individual goals, no payment for individual goals
was made irrespective of achievement against some of these goals.
Cash flow performance for the FY20 year was materially above budget. This
was achieved from strong cash disciplines across the business which were well
maintained through the COVID-19 shut down, and enhanced by decisions to
restrict both capital expenditure and residential land purchases through the year.
The Australian business did not meet its budget targets as a result of the
market slowdowns from the COVID-19 impacts. While the business was reset
through the year to ensure it was set up on a go forward basis to deal with
this – goal was not achieved.
The NZ businesses did not achieve the targeted profit levels for FY21 as a
result of the shut down and market contraction resulting from the impacts of
COVID-19. While the business was reset through the year to ensure it was set
up on a go forward basis to deal with this – this goal was not achieved.
A suite of potential growth initiatives are identified with plans in place, that
align with the overall Group strategy. These will be progressively implemented
over the coming years.
FCC reset continuing to plan across; order book, team and skills rebuild, robust
and consistent bid and delivery disciplines, appropriate project risk profiles
and the continuing completion of legacy and historical projects. Unfortunately,
we decided to increase our provisions across our Buildings and Infrastructure
projects in our Construction division by $150 million, the majority of which
were as a result of impacts from COVID-19 shutdowns and productivity which
impacted both in FY20 and beyond.
Senior Leadership team in place, working effectively, and appropriate
development plans in place.
Group Total Recordable Injury Frequency Rate (TRIFR) for FY20 was 5.7
(a slight increase from FY19’s TRIFR of 5.0). As such the targeted improvement
was not achieved. Of note however was the significant decrease in serious
injuries (down from 20 in FY19 to 8 in FY20). Critical risks and reducing
serious/fatal harm were the primary safety focus of the business.
Even though performance against the FB Group cash measure would have
triggered eligibility for an incentive payment for this component, the directors
exercised their discretion to determine that no STI payment would be made
for performance in FY20.
FY20 STI Outcome
100%
(0%-150%)
0%
Key:
Above Target Achievement
Full achievement against target
Partial achievement against target
No achievement against target
57
Fletcher Building Limited Annual Report 2020 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 Group 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$
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
New Zealand
business
activities
International
business
activities
Total
From NZ$ to NZ$
New Zealand
business
activities
International
business
activities
Total
507
373
300
214
140
118
102
77
66
56
42
28
43
21
17
19
20
18
15
8
14
6
4
9
4
1
5
0
2
2
7
3
411
322
257
181
144
101
88
68
45
38
24
28
28
14
16
8
8
12
7
4
7
2
3
8
6
2
3
2
2
0
3
1
918
695
557
395
284
219
190
145
111
94
66
56
71
35
33
27
28
30
22
12
21
8
7
17
10
3
8
2
4
2
10
4
420,000 - 430,000
430,000 - 440,000
440,000 - 450,000
450,000 - 460,000
470,000 - 480,000
480,000 - 490,000
490,000 - 500,000
500,000 - 510,000
510,000 - 520,000
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
600,000 - 610,000
610,000 - 620,000
630,000 - 640,000
640,000 - 650,000
700,000 - 710,000
730,000 - 740,000
750,000 - 760,000
790,000 - 800,000
800,000 - 810,000
830,000 - 840,000
1,140,000 - 1,150,000
1,400,000 - 1,410,000
1,520,000 - 1,530,000
1,730,000 - 1,740,000
3,060,000 - 3,070,000
2
3
1
1
1
7
2
0
3
1
3
2
1
0
1
0
1
2
1
2
1
1
0
1
1
1
2
1
1
0
1
1
1
0
2
0
0
1
2
0
0
0
0
0
1
0
1
1
1
0
0
0
0
2
0
0
0
0
0
0
1
0
3
4
1
3
1
7
3
2
3
1
3
2
1
1
1
1
2
3
1
2
1
1
2
1
1
1
2
1
1
1
1
2,285
1,857
4,142
This table is required by law and sets out remuneration that has been received during this year, and so includes amounts that relate to prior periods (due to timing of payments).
58
Fletcher Building Limited Annual Report 2020 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 117.
As a result of COVID-19, effective 1 April 2020 the Board agreed to a reduction of 30% to the Chair and non-executive directors fees to remain
in place through to the end of September 2020. Subsequently in June 2020, the Nominations Committee considered the appropriateness of
current fee levels in light of COVID-19 and its impact on the Group's future performance and recommended to the Board no increase to the
directors' fees for FY21, which remain at the current fee levels of FY20.
The remuneration scale for directors is outlined below:
Remuneration scale (1)
Board of directors
Audit and Risk Committee
Remuneration Committee
Nominations Committee
Safety, Health, Environment and
Sustainability Committee
Non-vouchable expense allowance
Overseas based directors travelling allowance
Position
Chair (2)
Non-Executive director
Chair
Member
Chair
Member
Chair
Member
Chair
Member
FY20
$367,200
$142,800
$37,000
$19,000
$28,000
$14,000
-
$8,000
$28,000
$14,000
$5,000
$18,000
FY21
$367,200
$142,800
$37,000
$19,000
$28,000
$14,000
-
$8,000
$28,000
$14,000
$5,000
$9,000
(1)
This table shows fees before the application of 30% reduction in Board fees referred to above.
(2) No additional fees are paid to the Board Chair for committee roles.
Fees to directors for unscheduled, additional work required for the Group is time based, payable at $1,200 per half day. No payments for this
work were made in FY20 and none are budgeted for FY21. 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.
Details of the total remuneration received by each Fletcher Building director for FY20 (i.e. after including the 30% reduction in Board fees
from 1 April 2020) are as follows:
Audit
and Risk
Committee
Nominations
Committee (1)
Remuneration
Committee
Safety, Health,
Environment and
Sustainability
Committee
Overseas
based
directors
travelling
allowance
Non-vouchable
expense
allowance
$5,000.00
Total
Remuneration
$344,660.00
Directors
Bruce Hassall
(Chair)
Board Fees
$339,660.00
Martin Brydon
$132,090.00
$ -
(Chair)
$8,000.00
Antony Carter (2)
$58,594.57
$7,796.20
$3,282.61
$5,744.57
Barbara Chapman
$132,090.00
$8,000.00
$28,000.00
(Chair)
$14,000.00
$5,000.00
$18,000.00
$177,090.00
$2,051.63
$5,000.00
$77,469.58
$173,090.00
Peter Crowley (3) / (4)
$96,390.00
$10,119.57
$6,000.00
$7,456.52
$3,750.00
$13,500.00
$137,216.09
Rob McDonald (5)
$132,090.00
$37,000.00
(Chair)
$8,000.00
$7,456.52
$5,000.00
$189,546.52
Doug McKay
$132,090.00
$19,000.00
$8,000.00
$28,000.00
(Chair)
$5,000.00
$192,090.00
Cathy Quinn
$132,090.00
$19,000.00
$8,000.00
$14,000.00
$5,000.00
Steve Vamos (6)
$107,100.00
$6,000.00
$10,500.00
$3,750.00
$178,090.00
$127,350.00
Total
$1,262,194.57
$92,915.77
$55,282.61
$51,701.09
$63,456.52
$39,551.63
$31,500.00
$1,596,602.19
(1) All non-executive directors are members of the Nominations Committee.
(2) Antony Carter retired from the Board on 28 November 2019 following conclusion of the Annual Shareholders' Meeting.
(3) Peter Crowley was appointed to the Board on 1 October 2019.
(4) Peter Crowley was appointed member of the Audit and Risk Committee and Safety, Health, Environment and Sustainability Committee effective 20 December 2019.
(5) Rob McDonald was appointed member of the Remuneration Committee effective 20 December 2019.
(6) Steve Vamos resigned from the Board effective 30 March 2020.
59
Fletcher Building Limited Annual Report 2020
Financial
Report
60
Fletcher Building Limited Annual Report 2020 Trend Statement
Notes
Financial performance
Operating revenue
Earnings before interest and taxation (EBIT)
Net earnings
Cash flow from operations
Earnings per share - basic (cents per share)
Dividends for the period (cents per share)
Return on average funds (%) (3)
Return on average equity (%) (4)
Financial performance - before significant items
Earnings before interest and taxation (EBIT)
Net earnings
Earnings per share - basic (cents per share)
Return on average funds (%) (3)
Return on average equity (%) (4)
160
3
0.4
3.7
0.1
June
2020*
June
2019
June
2018
June
2017
June
2016
June
2015
June
2014
June
2013
June
2012
(2)
June
2011
(1)
NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M NZ$M
7,309
9,307
9,471
9,399
9,004
8,661
8,401
8,517
8,839
7,416
(116)
(196)
410
(23.5)
0.0
(2.7)
(5.1)
397
164
153
19.2
23.0
7.4
4.0
631
367
43.0
11.8
8.8
(118)
(190)
396
(25.5)
0.0
(2.2)
(5.2)
50
(60)
(8.1)
0.9
(1.7)
273
94
243
13.5
39.0
4.9
2.5
525
321
46.3
9.4
8.7
719
462
660
67.0
39.0
13.4
12.4
682
418
60.6
12.7
11.6
503
270
575
39.2
37.0
9.6
7.7
653
399
58.0
12.5
11.3
592
339
489
49.3
36.0
11.7
9.9
624
362
52.7
12.3
10.5
569
326
559
47.6
34.0
10.8
9.4
569
326
47.6
10.8
9.4
403
185
448
27.2
34.0
7.4
5.2
556
317
46.5
10.2
9.0
492
283
402
45.0
33.0
10.6
8.2
596
359
57.1
12.8
10.4
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Capital
Reserves
Minority equity
Total equity
Total liabilities and equity
Other financial data
Total shareholders return (%) (5)
Net tangible assets per share ($)
Gearing (%) (6)
Leverage (%) (7)
3,824
4,121
3,944
3,419
3,222
3,272
2,958
2,868
3,112
3,104
4,954
3,589
4,601
4,254
4,045
4,229
3,983
4,257
4,367
4,388
8,778
7,710
8,545
7,673
7,267
7,501
6,941
7,125
7,479
7,492
2,385
2,330
2,356
1,996
1,997
1,947
1,596
1,557
1,936
1,700
2,858
1,207
2,047
2,097
1,557
1,844
1,891
2,014
2,091
2,092
5,243
3,537
4,403
4,093
3,554
3,791
3,487
3,571
4,027
3,792
3,280
3,427
3,425
2,678
2,650
2,633
2,624
2,606
2,582
2,553
220
35
3,535
8,778
(21)
2.87
12.3
0.9
714
32
693
24
878
1,041
1,050
24
22
27
795
35
913
35
838
1,113
32
34
4,173
4,142
3,580
3,713
3,710
3,454
3,554
3,452
3,700
7,710
8,545
7,673
7,267
7,501
6,941
7,125
7,479
7,492
(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
* June 2020 includes the impact of NZ IFRS 16 - Leases and incorporates right-of-use asset, right-of-use liability, right-of-use asset depreciation and lease liability interest expense.
(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 to net debt and equity.
(7) Net debt to EBITDA.
61
Fletcher Building Limited Annual Report 2020 Consolidated Income Statement
FOR THE YEAR ENDED 30 JUNE 2020
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)
Lease interest expense
Funding costs
Earnings before taxation
Taxation benefit/(expense)
Earnings after taxation
Earnings attributable to non-controlling interests
Net earnings/(loss) from continuing operations
Net 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
3
2.1
27
15
24
5
5
17
The accompanying notes form part of and are to be read in conjunction with these financial statements.
On behalf of the Board, 19 August 2020
Bruce Hassall
Chair
Robert McDonald
Director
2020
NZ$M
7,309
(5,496)
1,813
(1,660)
7
(276)
(116)
(69)
(80)
(265)
81
(184)
(12)
(196)
(196)
(23.5)
(23.5)
(23.5)
(23.5)
835
835
2019
NZ$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
62
Fletcher Building Limited Annual Report 2020
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2020
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:
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.
2020
NZ$M
(196)
12
(184)
(17)
(17)
(6)
35
29
12
(172)
(172)
(172)
2019
NZ$M
164
13
177
(25)
(25)
(6)
(34)
(40)
7
7
(58)
119
178
(59)
119
63
Fletcher Building Limited Annual Report 2020
Consolidated Statement of Movements in Equity
FOR THE YEAR ENDED 30 JUNE 2020
NZ$M
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
Total equity at 30 June 2018
3,425
875
e
v
r
e
s
e
r
s
t
n
e
m
y
a
p
9
d
e
s
a
b
-
e
r
a
h
S
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
e
v
r
e
s
e
r
e
g
d
e
h
w
o
fl
h
s
a
C
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
(157)
(53)
4,099
24
4,123
Total comprehensive income for the year
Movement in non-controlling interests
Dividends paid to shareholders of the parent
Reclassification of pension reserve on disposal
of business
19
18
164
(68)
(73)
Movement in share-based payment reserve
2
Movement in treasury stock
18
2
(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
Change in accounting policies
27
(183)
(183)
(183)
Adjusted equity at 30 June 2019
3,427
715
11
(6)
(184)
(5)
3,958
32
3,990
Total comprehensive income/(loss) for the year
Movement in non-controlling interests
Dividends paid to shareholders of the parent
Movement in share-based payment reserve
Repurchase of shares
Movement in treasury stock
Total equity at 30 June 2020
19
17
18
18
(196)
(128)
(147)
1
(6)
35
(17)
(184)
(128)
1
(147)
12
(9)
(172)
(9)
(128)
1
(147)
3,280
391
12
(12)
(149)
(22)
3,500
35
3,535
The accompanying notes form part of and are to be read in conjunction with these financial statements.
64
Fletcher Building Limited Annual Report 2020
Consolidated Balance Sheet
AS AT 30 JUNE 2020
Assets
Current assets:
Cash and cash equivalents
Current tax assets
Contract assets
Derivatives
Debtors
Inventories
Assets classified as held for sale
Total current assets
Non-current assets:
Property, plant and equipment
Intangible assets
Right-of-use assets
Investments in associates and joint ventures
Inventories
Retirement plan assets
Derivatives
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities:
Creditors, accruals and other liabilities
Provisions
Lease liabilities
Current tax liabilities
Derivatives
Contract liabilities
Borrowings
Liabilities directly associated with assets held for sale
Total current liabilities
Non-current liabilities:
Creditors, accruals and other liabilities
Provisions
Lease 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
2020
NZ$M
2019
NZ$M
7
24
3
16
8
9
2.5
12
13
27
20
9
25
16
24
10
11
27
24
16
3
14
2.5
10
11
27
24
16
14
18
19
1,104
66
69
125
1,041
1,215
3,620
204
3,824
1,555
1,133
1,413
158
301
42
67
285
4,954
8,778
1,098
251
172
5
7
223
581
2,337
48
2,385
60
26
1,549
13
1,210
2,858
5,243
3,280
220
3,500
35
3,535
8,778
1,372
66
40
5
1,298
1,340
4,121
4,121
1,754
1,129
152
264
61
108
121
3,589
7,710
1,254
346
5
4
119
602
2,330
84
18
2
8
1,095
1,207
3,537
3,427
714
4,141
32
4,173
7,710
65
The accompanying notes form part of and are to be read in conjunction with these financial statements.
Fletcher Building Limited Annual Report 2020 Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2020
Cash flow from operating activities
Receipts from customers
Dividends received
Payments to suppliers, employees and other
Interest paid
Income tax paid
Net cash from operating activities
Cash flow from investing activities
Sale of property, plant and equipment
Sale of subsidiaries/investments
Sale of cash in subsidiaries
Purchase of property, plant and equipment and intangible assets
Purchase of subsidiaries/businesses
Net cash from investing activities
Cash flow from financing activities
Issue of capital notes
Drawdown of borrowings
Repayment of borrowings
Principal elements of lease payments
Repurchase of shares
Repurchase of capital notes
Distribution to non-controlling interests
Dividends
Net cash from financing activities
Net movement in cash held
Add: opening cash and cash equivalents
Effect of exchange rate changes on net cash
Closing cash and cash equivalents
The accompanying notes form part of and are to be read in conjunction with these financial statements.
2020
NZ$M
7,512
1
(6,957)
(146)
410
5
1
(240)
(234)
100
401
(269)
(171)
(147)
(220)
(9)
(128)
(443)
(267)
1,372
(1)
1,104
2019
NZ$M
9,139
6
(8,836)
(128)
(28)
153
5
1,320
(37)
(348)
(26)
914
100
(199)
(181)
(7)
(68)
(355)
712
665
(5)
1,372
66
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020
1. Statement of accounting policies
General information
The financial statements presented are those of Fletcher Building Limited (the Company) and its subsidiaries (the Group). The Group is primarily
involved in the manufacturing and distribution of building materials and residential, commercial and infrastructure construction. Fletcher Building
Limited is domiciled in New Zealand. The registered office of the Company is 810 Great South Road, Penrose, Auckland.
The Company is registered under the Companies Act 1993 and is a Financial Markets Conduct Act 2013 reporting entity in terms of the Financial
Reporting Act 2013. The Group is a for-profit entity.
Basis of presentation
These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand, which is the
New Zealand equivalent to International Financial Reporting Standards (NZ IFRS). They also comply with International Financial Reporting Standards.
These financial statements are presented in New Zealand dollars ($), 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.
Changes in presentation
The Group has restated the comparative information included in the disclosure notes for significant items (note 2.1), earnings per share (note
2.4) and segmental information (note 4) to exclude the results of Formica and the Roof Tile Group discontinued operations. The comparative
financial information for each business, including financial performance, cash flow performance, and assets and liabilities is disclosed as part of
discontinued operations in the Group's consolidated financial statements for the year ended 30 June 2019.
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.
COVID-19
On 11 March 2020, the World Health Organisation officially declared COVID-19, the disease caused by novel coronavirus, a global pandemic.
COVID-19, as well as the measures introduced to slow the spread of the virus, have since had a significant impact on the global economy
and the markets the Group operates in. The Group has considered the impact of COVID-19 and associated market volatility in preparing its
financial statements.
New Zealand
In March 2020, the New Zealand Government announced the COVID-19 alert system (Levels 1-4) which specified the level of risk and restrictions
that were to be followed. New Zealand entered alert 'Level 4' lockdown on 25 March 2020, which required mandatory nationwide suspension of
all non-essential services. In full compliance with the 'Level 4' restrictions, the Group suspended almost the entirety of its business activities.
On 27 April 2020, New Zealand moved to alert 'Level 3', permitting the Group to resume general operations with the requirement to comply with
the Government's social distancing directions and guidelines still in place. The Government subsequently announced the move to alert 'Level 2' on
13 May 2020 and then alert 'Level 1' on 18 June 2020 with all restrictions on business activities removed.
Australia
On 22 March 2020, the Australian Government introduced social distancing measures aimed at stopping the transmission of COVID-19. Under
the regime introduced, construction and construction related activities were permitted to operate subject to compliance with physical distancing
requirements. As such, the Group continued its operations in Australia while complying with the Australian Government's social distancing and
safety requirements.
67
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Impact of COVID-19 on the macroeconomic outlook
Forward-looking information, including an explanation of the scenarios considered in determining the Group’s forward-looking assumptions for
the purposes of its impairment and expected credit loss assessments, ('ECL') have been provided in notes 2.2 and 16.3 respectively. Noting
the wide range of possible scenarios and macroeconomic outcomes, and the relative uncertainty of how COVID-19 and its social and economic
consequences will flow, the Group considers that these scenarios represent reasonable and supportable forward-looking views as at the
reporting date.
Key statements of balance sheet items and related disclosures that have been impacted by COVID-19 are as follows:
Category
Assessment
Debtors
The Group undertook a review of its trade debtor portfolio and applicable ECL provisions. The review
considered the macroeconomic outlook, customer credit quality and the effect of payment deferral options
as at the reporting date.
Notes
2.1, 16.3
Goodwill and brand
impairment
The Group has considered the impact of COVID-19 on New Zealand and Australian macroeconomic outlook.
Relative uncertainty around the short and long-term impact of the pandemic has been incorporated in the
Group's forward looking assumptions.
2.1, 2.2
Finite life non-
financial assets
Inventories
Debt covenants
Finite life assets, including property, plant and equipment, intangible assets and right-of-use assets,
have been assessed for indicators of impairment. This assessment incorporated a consideration of
COVID-19 as an indicator.
The Group has performed a review of its inventory ranges and categories and how adverse
macroeconomic outlook impacts realisability of inventory and its net realisable value.
The Group has assessed the impact on its current and forecast performance against its debt covenant
metrics. No covenant breaches have been identified as at 30 June 2020 nor at the time at which these
financial statements were authorised for issue.
Long-term
construction
contracts
The Group has considered the impact of COVID-19 on the status of its long-term construction contracts,
including the impact of restrictions introduced by the New Zealand Government in the period of March
to June 2020 on the projects' progress and contract position as at the balance date.
Rent abatements
The Group has elected to adopt the COVID-19-Related Rent Concession practical expedient issued
by New Zealand External Reporting Board in June 2020.
Government grants
The Group received the funds from the New Zealand Government's wage subsidy scheme, income from
the wage subsidy has been accounted for under NZ IAS 20 - Accounting for Government Grants and
Disclosure of Government Assistance.
2.1
2.1
14
2.6
2, 2.1
2.3
Basis of consolidation
The consolidated financial statements comprise the Company, it's controlled entities and its 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 prevailing 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.
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 prevailing 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.
68
Fletcher Building Limited Annual Report 2020 Note
Description
Note
Description
Financial Performance
Funding and Financial Risk Management
Note 2
Note 3
Note 4
Note 5
Note 6
Key estimates and judgements
Note 14
Borrowings
Revenue from contracts with customers
Note 15
Funding costs/(income)
Segmental information
Net earnings per share
Income statement disclosures
Note 16
Financial risk management
Group Structure and Related Parties
Note 17
Dividends and shareholder tax credits
Working Capital Management
Note 18
Capital
Note 7
Note 8
Note 9
Cash and cash equivalents
Note 19
Non-controlling interests
Debtors
Note 20
Investments in associates and joint ventures
Inventories, including land and developments
Note 21
Related party disclosures
Note 10
Creditors, accruals and other liabilities
Note 11
Provisions
Other Information
Note 22
Capital expenditure commitments
Long-term Investments
Note 23
Contingent liabilities
Note 12
Property, plant and equipment
Note 24
Taxation
Note 13
Intangible assets
Note 25
Retirement plans
Note 26
Share-based payments
Note 27
Impact of NZ IFRS 16 and other reclassifications
Note 28
Subsequent events
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 2019.
NZ IFRS 16 Leases
NZ IFRS 16 is effective for the Group from 1 July 2019 and 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.
The Group adopted the modified retrospective approach on transition which resulted in a cumulative catch-up adjustment to equity as at
1 July 2019. The comparative information presented for the year ended 30 June 2019 has not been restated and therefore continues to be
shown under NZ IAS 17. The Group's activities as a lessor are not material and therefore the Group has not recognised any changes to lessor
accounting as a result of the transition to NZ IFRS 16.
Under NZ IFRS 16, a single lessee accounting model requires right-of-use assets and lease liabilities to be recognised in the balance sheet for
most lease contracts at the lease commencement date. The lease liabilities are initially measured at the present value of the lease payments
that are not yet paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. Generally the Group uses the incremental borrowing rate as the discount rate and this
rate is determined on a portfolio basis, in relation to asset type, location and duration of obligation.
Lease liabilities are subsequently measured at amortised cost and are increased by the interest charged and decreased by the lease payments
made. Lease liabilities are remeasured when there is a change in future lease payments arising from a change in an index or rate, a change
in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of
whether a renewal or purchase option is reasonably certain to be exercised or a termination clause is reasonably certain not to be exercised.
The Group has applied judgement to determine the discount rate applicable to each lease and the lease term for those lease contracts that
include a renewal or termination option. The assessment of whether the Group is reasonably certain to either exercise a renewal option or not
exercise a termination option significantly impacts the value of lease liabilities and right-of use assets recognised on the balance sheet.
Right-of-use assets are initially measured at cost, which is an amount equal to the corresponding lease liabilities adjusted for any lease
payments made at or before commencement date, less any lease incentives received. Right-of-use assets are subsequently measured at
cost less any accumulated depreciation and impairment losses, adjusted for certain remeasurements to the lease liabilities. Depreciation is
calculated on a straight-line basis over the expected useful economic life of a lease which is taken as the lease term.
The Group applies 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 also adopted the
following transition reliefs to:
69
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
- exclude the initial direct costs in the measurement of the right-of-use asset as at the date of initial application;
- use the benefit of hindsight to assist in the assumptions and judgements regarding renewals; and
- rely on previous assessments on whether leases are onerous.
Refer to note 27 for further information on the adoption and impact of NZ IFRS 16.
COVID-19-Related Rent Concessions
In June 2020, the New Zealand Accounting Standards Board provided a practical expedient to NZ IFRS 16. The expedient permits Tier-1 and
Tier-2 reporting entities not to assess whether rent concessions that occur as a direct consequence of the COVID-19 pandemic and meet
specified conditions as lease modifications and, instead, to account for those rent concessions as reassessments. The Group has elected
to adopt the expedient.
NZ IFRIC 23
NZ IFRIC 23 is effective for the Group from 1 July 2019. NZ IFRIC Interpretation 23 “Uncertainty over income tax treatments” clarifies the
recognition and valuation principles applicable to income tax risks. These risks arise when there is uncertainty related to a tax position
adopted by the Group that could be challenged by the tax authorities. The Group has not identified any material impact to the financial
statements at 1 July 2019 following the implementation of NZ IFRIC 23.
There are no other new standards, updates and interpretations published and effective whose impact could be significant for the Group.
2.1 SIGNIFICANT ITEMS
In reporting financial information, the Group presents non-GAAP performance measures, which are not defined or specified under the
requirements of NZ IFRS.
The Group believes that these non-GAAP measures, which are not considered to be a substitute for or superior to NZ IFRS measures, provide
stakeholders with additional helpful information on the performance of the business. The non-GAAP measures are consistent with how the
business performance is planned and reported within the internal management reporting to the Board and Audit and Risk Committee.
The Group makes certain significant item adjustments to the statutory profit measures in order to derive many of these non-GAAP measures.
The Group’s policy is to exclude items that are considered to be significant in both nature and/or quantum and where treatment as an
adjusted item provides stakeholders with additional useful information to assess the year-on-year trading performance of the Group. On this
basis, the following items were included within significant items for the year ended 30 June 2020:
- Restructuring and other associated costs arising from significant strategy changes that are not considered by the Group to be part
of the normal operating costs of the business.
- Impacts of significant one-off adverse events that have material effect on the Group's financial performance and financial position.
- Impairment charges and provisions that are considered to be significant in nature and/or value to the trading performance of
the business.
- Net gains and losses on the disposal of properties where a commitment to close has been demonstrated.
As a direct consequence of COVID-19 and its impact on the New Zealand and Australian business activities, the Group has undertaken a
number of initiatives to prepare for an expected downturn in market conditions in FY21 and potentially beyond. An announcement was
made to the market on 20 May 2020 outlining restructuring plans. Implementation of the programme in May and June 2020 resulted in the
Group incurring restructuring and property rationalisation costs and asset impairment charges, these have been classified by the Group as
significant items, as outlined below:
Restructuring
activity (1)
NZ$M
Property
rationalisation (2)
NZ$M
Impairment of
assets (3)
NZ$M
(6)
(9)
(5)
(1)
(8)
(32)
(32)
(93)
24
(69)
(3)
(3)
(5)
(3)
(33)
(1)
(48)
15
(33)
(10)
(6)
(3)
(2)
(101)
(13)
(135)
38
(97)
Total
NZ$M
(19)
(18)
(13)
(1)
(13)
(166)
(46)
(276)
77
(199)
2020
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Other
Total significant items before taxation
Tax benefit on above items
Total significant items after taxation
70
Fletcher Building Limited Annual Report 2020
(1) Restructuring activity
Business restructure ($63m)
The Group announced its restructuring strategy in New Zealand and Australia on 20 May 2020, implementation of the restructure plan has
resulted in the Group recognising a $63 million provision in relation to redundancy and other associated costs.
Funding restructure ($30m)
On 29 June 2020, the Group provided notice to the US private placement noteholders ('USPP') of the intention to prepay A$99 million and
US$200 million of notes on issue with original maturities of 2022 and 2024. The prepayment of the private placement borrowings is part of a
revised funding strategy reflecting the requirement to reduce funding costs as the Group enters a period of uncertainty. The Group recognised
a significant item cost of $30 million in the income statement related to the make whole component of the prepayment as governed by the
private placement borrowing agreement. This cost is partially offset by the impact of related debt hedging activities. The USPP make whole (net
of hedging benefits) has been included as a significant item on the basis that it is a transaction resulting from a change to the Group's funding
strategy which has had significant impact on the Group's profit.
(2) Property rationalisation
As part of its organisational reset process, the Group has reviewed its operational property footprint, with an intention to identify and exit
office, warehouse and depot leases in order to rationalise property requirements. Property rationalisation costs primarily relate to recognition
of impairment on right-of-use assets, make good costs and losses incurred on early termination of leases. Property rationalisation costs were
partially offset by gains recognised on COVID-19 related rent concessions.
(3) Impairment of assets
The Group has recognised a number of charges in the year associated with reductions to the carrying values of the following asset categories:
Property, plant and equipment and intangible assets ($97m)
Uncertainty in the market conditions has been determined as an indicator of impairment for the Group's property, plant and equipment and
finite life intangible assets. For such assets, testing has been performed to assess the recoverability of the asset values. Impairment charges
were recognised where the recoverable value of the assets did not support their carrying value. Details of impairment charges recognised in
the year are disclosed in notes 12 and 13.
Inventory ($32m)
The Group has recognised charges in the year associated with the write down of inventory. These write downs relate to the discontinuation
of certain product ranges and disposal of inventory held at closed sites, distribution centres and warehouses.
Expected credit losses ($6m)
The Group estimated its ECL as at 30 June 2020 based on a range of forecast economic conditions. COVID-19 has had a significant impact on
economic scenarios used by the Group to determine the ECL, with the probability of an adverse economic scenario in the near term estimated
as high. As such the Group recognised a significant item charge of $6 million that reflects expected deterioration of its customers' portfolio
credit quality.
For more details on key assumptions and estimates used in the ECL assessment, please refer to note 16.3.
2019
Building Products
Australia
Corporate
Total significant items before taxation
Tax benefit on above items
Total significant items after taxation
Restructuring activity
Restructuring
activity
NZ$M
(10)
(78)
(6)
(94)
27
(67)
Total
NZ$M
(10)
(78)
(6)
(94)
27
(67)
The Group had 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.
71
Fletcher Building Limited Annual Report 2020 Notes to the Financial Statements 2020 (Continued)
2.2 INTANGIBLE ASSET IMPAIRMENT TESTING
Goodwill and brands were tested for impairment in June 2020. Each cash generating unit (CGU) that carries goodwill or brands 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 business units' forecast five year 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 1.75% (2019: 2.5%).
COVID-19
In response to COVID-19 the Group undertook a review of key assumptions in estimating carrying values of relevant CGUs. The review
considered the impact of the COVID-19 pandemic on overall macroeconomic outlook, the Group's market segments and projected discount
and growth rates as at the reporting date. While these model inputs, including forward-looking information, were revised overall, valuation
methodology remained consistent with prior periods.
New Zealand and South Pacific CGU's
The goodwill and brand 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 and jurisdiction. New Zealand businesses have employed discount rates
between 8.0% and 10.0% (2019: between 8.0% and 9.0%), and the South Pacific business has employed a discount rate of 18.5% (2019:
18.5%), 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 2020.
Based on current economic conditions and performances of New Zealand and South Pacific CGUs, no reasonably possible change in a key
assumption used in the determination of the recoverable value of CGUs would result in a material impairment to the Group.
Australia CGU's
The goodwill and brand 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. Australian business units employed a discount rate of 8.1% (2019: between 8.0% and 9.0%),
reflecting the risk profile of each business and for the region in which the CGUs operate.
Sensitivity to reasonably possible changes in assumptions
Throughout the current financial year the Australian 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
5.0%
7.0%
1.75%
8.1%
Decrease by 1.2 ppts
Decrease by 0.3 ppts
Decrease by 1.0 ppts
Increase by 0.8 ppts
72
Fletcher Building Limited Annual Report 2020
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 CGU's
4.70%
2.40%
1.75%
8.10%
Decrease by 4.6 ppts
Decrease by 0.4 ppts
Decrease by 1.2 ppts
Increase by 1.3 ppts
Based on current economic conditions and CGU performances, no reasonably possible change in a key assumption used in the determination
of the recoverable value of Australian CGUs would result in a material impairment to the Group.
2.3 SUPPLEMENTARY DISCLOSURES: GOVERNMENT GRANTS
On 17 March 2020, the New Zealand government announced the implementation of a wage subsidy scheme. The Group met the eligibility
criteria requirements of the scheme and $68 million was received by the Group for the period from March to June. The funds received by the
Group were used to mitigate employee-related costs during the eligibility period through the Group’s 'Bridging Pay Programme'. Over 8,600
employees participated in the 'Bridging Pay Programme' which is more than 90% of the Group’s New Zealand-based employees.
Funds received as part of the wage subsidy scheme have been accounted for in line with NZ IAS 20 – Government Grants and Disclosure of
Government Assistance. The Group has elected to present income received from the wage subsidy as an offsetting deduction to its employee
costs. Funds received as part of the scheme have no unfulfilled conditions or other attached contingencies as at 30 June 2020. The Group had
not materially benefitted from any other forms of government assistance during the reporting period.
2.4 SUPPLEMENTARY DISCLOSURES: EARNINGS PER SHARE
Earnings per share is disclosed in full in note 5. The below disclosure has been included to provide additional useful information by removing
the impact of significant items in the current and prior year, and the resulting impact on the earnings per share measure.
The effect of significant items on earnings per share from continuing operations is as follows:
Net earnings/(loss) after taxation from continuing operations
(as per income statement)
Add back: Significant items after taxation (note 2.1)
Net earnings before significant items
Net earnings per share before significant items from continuing operations (cents)
Net earnings per share - as per income statement (cents)
2020
NZ$M
(196)
199
3
0.4
(23.5)
2019
NZ$M
246
67
313
36.7
28.8
2.5 ASSETS HELD FOR SALE
Rocla Pty Limited
On 19 February 2020, the Group publicly announced the decision of its Board of directors to sell the Rocla pipes and precast business, a
wholly owned subsidiary reported under the Australia segment. The divestment process was suspended on 25 March 2020 as a response to
COVID-19, and was recommenced on 1 June 2020. The sale of the Rocla business is expected to be completed within a year from the reporting
date. At 30 June 2020, the Rocla business was classified as a disposal group held for sale, therefore depreciation of the assets held for sale
ceased from 1 June 2020. The summary of the Rocla business assets included as held for sale and liabilities included as associated with held
for sale as at 30 June 2020 are presented below:
Assets
Property, plant and equipment
Right-of-use assets
Inventories
Debtors
Assets held for sale
2020
NZ$M
118
6
50
30
204
73
Fletcher Building Limited Annual Report 2020 Notes to the Financial Statements 2020 (Continued)
Liabilities
Creditors, accruals and other liabilities
Provisions
Lease liabilities
Liabilities directly associated with assets held for sale
Net assets directly associated with disposal group
2020
NZ$M
28
13
7
48
156
2.6 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. 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 11.
Construction 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 below.
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 contract price across each performance obligation based on stand-alone selling
prices. The contract 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
significantly integrated and is fulfilled over time.
Variable consideration
Revenue in relation to variations, such as a change in the scope of the contract, is only included in the contract price when it is approved
by the parties to the contract, the variation is enforceable, or in certain circumstances when the amount becomes highly probable and is
approved by the Board of directors.
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.
74
Fletcher Building Limited Annual Report 2020
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.
Status of construction projects (> $200 million original contract value) as at 30 June 2020:
Commercial Bay - Fixed price contract
NZICC - Guaranteed maximum price and fixed price contract
Business unit
Buildings
Buildings
Puhoi to Warkworth - Fixed price contract (Public Private Partnership)
Infrastructure
Hamilton City Edge Expressway - Alliance contract
Peka Peka to Otaki Expressway - Fixed price contract
Infrastructure/Higgins
Infrastructure/Higgins
Percentage of
completion (% cost)
Forecast
completion
96%
82%
63%
76%
55%
2020
2023
TBC
TBC
TBC
Revenue Backlog by Business unit as at 30 June 2020:
Buildings
Infrastructure
Brian Perry Civil
Higgins
South Pacific
Current Revenue Backlog
NZ$M
Top 5 projects as a % of
Revenue Backlog
352
1,156
762
545
114
2,929
100%
46%
8%
33%
83%
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 Buildings, Infrastructure 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 Buildings, Infrastructure, 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.
75
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
New Zealand International Convention Centre (NZICC)
On 22 October 2019 there was a significant fire at the NZICC project construction site causing damage to both the International Convention
Centre and Hobson Street Hotel.
Contract Works and Third-Party Liability insurances are in place on the project, and the Fletcher Construction Company Limited is an insured
party under these policies.
The Third-Party Liability insurance policy is responding where legal liability exists and cases are being reviewed and approved for payment
on a claim-by-claim basis. There are no legal proceedings in respect of this matter that require additional provision in these financial
statements.
The NZICC project continues to be accounted for under NZ IFRS 15: Revenue from Contracts with Customers and NZ IAS 37: Provisions,
Contingent Liabilities and Contingent Assets.
The Group has assessed all relevant known facts and circumstances related to the estimation of cost to complete and insurance recoveries
and concluded based on current information that there is no impact to the NZICC forecast project loss as a result of the fire. The assessment
required key judgments and estimates (including an assessment of the cost to complete remediation, the likelihood of receipt of insurance
recoveries and quantification of any claims and costs that it is probable insurance will not cover) and as such is subject to change as the
project progresses.
76
Fletcher Building Limited Annual Report 2020
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. REVENUE FROM CONTRACTS WITH CUSTOMERS
- The Group revenue is derived from the following streams:
- Sale of building products and materials
- Development and sale of residential property
- Construction of building and infrastructure projects (refer to note 2.6)
- Maintenance service contracts (refer to note 2.6)
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount
that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally
concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to
the customer.
Building products and distribution divisions
Sale of building products and materials
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, this occurs when the product is delivered to the customer.
Residential and Development division
Development and sale of residential projects
Through the Residential and Development 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.
2020
Goods and services transferred
at a point in time
Goods and services transferred
over time
Total revenue from contracts
with customers
Sale of
Building
Products and
Materials
Development
and Sale of
Residential
Properties
5,588
460
Construction
Contract
Revenue
Maintenance
Contract
Revenue
5,588
460
760
760
501
501
Total
6,048
1,261
7,309
77
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Sale of
Building
Products and
Materials
Development
and Sale of
Residential
Properties
6,047
639
Construction
Contract
Revenue
Maintenance
Contract
Revenue
1,095
6,047
639
1,095
527
527
Total
6,686
1,622
8,308
2019
Goods and services transferred
at a point in time
Goods and services transferred
over time
Total revenue from contracts
with customers
Contract assets
The gross amount of Construction and Maintenance work in progress consists of costs attributable to work performed and emerging
profit after providing for any foreseeable losses. In applying the accounting policies on providing for these losses, accounting judgement
is required.
Construction contracts with cost and margin in advance of billings are presented as part of Contract Assets for all contracts in which costs
incurred plus recognised profits exceed progress billings. If progress billings and recognised losses exceed costs incurred plus recognised
profits, then the difference is presented as Contract Liabilities.
Contract liabilities
Construction contracts where the total progress billings issued to clients (together with foreseeable losses if applicable) on a project exceed
the costs incurred to date plus recognised profit on the contract are recognised as a liability
Construction contracts with cost and margin in advance of billings
Contract assets
Construction contracts with billings in advance of cost and margin
Contract liabilities
2020
NZ$M
69
69
223
223
2019
NZ$M
40
40
119
119
4. 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. The results of the previous Steel division have
been consolidated into Building Products division as announced during the year ended 30 June 2019.
2020
NZ$M
Gross revenue
2019
NZ$M
Gross revenue
2020
NZ$M
External revenue
2019
NZ$M
External revenue
1,173
1,471
740
466
1,318
2,802
10
7,980
(671)
7,309
1,314
1,596
802
639
1,702
3,024
11
9,088
(780)
8,308
922
1,440
503
460
1,261
2,723
7,309
7,309
1,013
1,552
549
639
1,622
2,933
8,308
8,308
Industry segments
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Other
Group
Less: intercompany revenue
Group external revenue
78
Fletcher Building Limited Annual Report 2020
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Corporate
Group
2020
NZ$M
EBIT before
significant items
2019
NZ$M
EBIT before
significant items
87
85
74
65
(147)
33
(37)
160
160
104
84
137
47
57
(40)
549
2020
NZ$M
Funds*
678
209
607
604
50
1,494
(107)
3,535
2019
NZ$M
Funds*
723
300
656
651
48
1,735
60
4,173
* 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.
Depreciation,
depletion and
amortisation
expense
Depreciation,
depletion and
amortisation
expense
Capital
expenditure
Capital
expenditure
53
47
74
3
40
135
18
370
17
10
50
21
62
14
174
53
21
50
3
32
65
8
232
55
23
65
7
31
91
13
285
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Corporate
Group
Geographic segments
External revenue
External revenue
EBIT before
significant items
EBIT before
significant items
New Zealand
Australia
Other jurisdictions
Group
Significant items (note 2.1)
Earnings before interest and taxation (EBIT)
4,466
2,740
103
7,309
5,220
2,944
144
8,308
New Zealand
Australia
Other
Debt and taxation
Group
Non-current
assets+
Non-current
assets+
2,836
1,670
53
1,895
1,359
45
4,559
3,299
110
42
8
160
(276)
(116)
467
54
28
549
(94)
455
Funds*
Funds*
2,221
1,495
83
(264)
3,535
2,405
1,752
85
(69)
4,173
+ 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.
79
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Description of industry segments
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
5. NET EARNINGS PER SHARE
The Building Products division is a manufacturer, distributor, and marketer of building products used in
the residential and commercial markets in New Zealand.
The Distribution division consists of building, plumbing, and pipeline 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 both in New Zealand and Australia and involves
building and sale of residential homes in New Zealand and development and sale of commercial and
residential land in Australia and New Zealand. Development activity includes sale of land property
portfolio which are surplus to the Group's 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.
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 from continuing operations (cents)
Basic
Diluted
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
Denominator (millions of shares)
Weighted average number of shares outstanding (refer to note 18)
Conversion of dilutive capital notes
Denominator for diluted net earnings per share
6. 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) (2)
Other long-term employee related benefits
Research and development expenditure
Amortisation of intangibles
Bad debts written off
Donations and sponsorships
Maintenance and repairs
(1) Short-term employee benefits for the executive committee included in the above is disclosed in note 21.
(2) Employee related short-term costs include offsetting income from government grants, as disclosed in note 2.3.
80
2020
(23.5)
(23.5)
NZ$M
(196)
(196)
(196)
835
835
2019
28.8
27.7
NZ$M
246
246
17
263
853
98
951
2020
NZ$M
2019
NZ$M
2
1,332
58
1
24
5
1
143
1
1,604
57
5
19
6
2
171
Fletcher Building Limited Annual Report 2020
Auditor's remuneration
Audit and review of the financial statements (1)
Audit services associated with Formica sale process
Total audit and assurance services
Tax services
Other non-assurance services
Total non-assurance services
Total auditor remuneration
NZ$000's
NZ$000's
2,858
2,858
14
14
2,872
3,132
770
3,902
369
23
392
4,294
(1) The audit includes fees for both the annual audit of the financial statements and the review of the interim financial statements.
Working Capital Management
This section provides details of the key elements of working capital which includes cash, receivables, inventories and short-term liabilities.
7. 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 $102 million (2019: $28 million).
At 30 June 2020, approximately $19 million (2019: $30 million) of total cash and deposits were held in subsidiaries that operate in countries
where exchange controls and other legal restrictions apply and are not immediately available for general use by the Group.
Cash and bank balances
Contract retention bank balances
Short-term deposits
Reconciliation of net earnings to net cash from operating activities
Net earnings
Earnings attributable to minority interest
Add/(Less) non-cash items:
Depreciation, depletions and amortisation
Other non-cash items
Taxation
Loss/(gain) on disposal of businesses and property, plant and equipment
Net working capital movements
Residential and Development
Construction
Other divisions:
Debtors
Inventories
Creditors
Net cash from operating activities
2020
NZ$M
503
24
577
1,104
2020
NZ$M
(196)
12
(184)
370
240
(81)
7
536
50
(19)
95
(1)
(67)
58
410
2019
NZ$M
189
23
1,160
1,372
2019
NZ$M
164
13
177
199
108
74
(1)
380
(26)
(276)
26
(69)
(59)
(404)
153
81
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
8. DEBTORS
Debtors are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due
for settlement within 30 to 90 days and are therefore all classified as current. Debtors are recognised initially at the amount of consideration
that is unconditional, unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade
receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the
effective interest method. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in note 16.3.
Trade debtors
Contract debtors
Contract retentions
Less provision for doubtful debts
Trade and contract debtors
Other receivables
Current
0 - 30 days over standard terms
31 - 60 days over standard terms
61+ days over standard terms
Provision
Trade and contract debtors
Fair values of debtors
2020
NZ$M
746
69
35
(25)
825
216
1,041
739
75
6
30
(25)
825
2019
NZ$M
834
209
42
(15)
1,070
228
1,298
919
121
14
31
(15)
1,070
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
Impairment and risk exposure
Information about the impairment of trade receivables and the group’s exposure to credit risk and foreign currency risk can be found in
note 16.3.
9. INVENTORIES, INCLUDING LAND AND DEVELOPMENTS
Raw materials, work in progress and finished goods
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct
materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of
normal operating capacity. Cost includes the reclassification from equity of any gains or losses on qualifying cash flow hedges relating to
purchases of raw material but excludes borrowing costs. Costs are assigned to individual items of inventory on the first-in, first-out basis.
Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
Land held for resale
Land held for resale is stated at the lower of cost and net realisable value. Cost is assigned by specific identification and includes the cost
of acquisition and development costs during development.
82
Fletcher Building Limited Annual Report 2020
Raw materials
Work in progress
Finished goods
Consumable stores and spare parts
Inventories held at cost
Inventories held at net realisable value
Current portion
Non-current portion
Inventory classified as non-current
2020
NZ$M
364
377
736
39
1,516
1,192
324
1,516
1,215
301
1,516
2019
NZ$M
472
216
877
39
1,604
1,325
279
1,604
1,340
264
1,604
The non-current portion of inventories relates to land and developments that are expected to be held for greater than 12 months (current portion
of $367 million, 2019: $408 million).
The Group also has unconditional commitments for the purchase of land to be used for residential construction totalling $257 million (2019:
$257 million), of which $77 million is expected to be delivered in the year to 30 June 2021 (June 2019: $71 million).
10. CREDITORS, ACCRUALS AND OTHER LIABILITIES
Trade creditors and other liabilities are stated at cost or estimated liability where accrued. Employee entitlements include annual leave which
is recognised on an accrual basis and the liability for long service leave which is measured as the present value of expected future payments
to be made in respect of services provided by employees.
Assumptions in determining long service leave relate to the discount rate, estimates relating to the expected future long service leave
entitlements, future salary increases, attrition rates and mortality.
Trade creditors
Contract retentions
Accrued interest
Other liabilities
Employee entitlements
Workers' compensation schemes
Current portion
Non-current portion
Carrying amount at the end of the year
2020
NZ$M
609
30
30
326
154
9
1,158
1,098
60
1,158
The non-current portion of creditors and accruals relates to long service employee entitlement obligations and unconditional deferred
land payments.
2019
NZ$M
761
37
29
319
184
8
1,338
1,254
84
1,338
83
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
11. PROVISIONS
Provisions for restructuring, service and environmental warranties, and other provisions are recognised when the Group has a present legal
or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering
the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the
same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation
at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is
recognised as an interest expense.
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
An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Group cannot avoid because it has the contract)
of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a
contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties
arising from failure to fulfil it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental
costs and an allocation of costs directly related to contract activities).
Other
Other provisions relate to miscellaneous matters, across the Group, none of which are individually material.
Restructuring
NZ$M
Warranty &
environmental
NZ$M
Onerous
contracts
NZ$M
Other
NZ$M
Total
NZ$M
2020
Carrying amount at the beginning of the year
Currency translation
Charged to earnings
Settled or utilised
Released to earnings
Classified as held for sale
2019
Carrying amount at the beginning of the year
Currency translation
Charged to earnings
Settled or utilised
Released to earnings
Disposal of business
Current portion
Non-current portion
Carrying amount at the end of the year
32
75
(45)
(1)
(13)
48
30
(1)
22
(12)
(5)
(2)
32
34
2
(10)
(4)
22
39
(1)
12
(10)
(4)
(2)
34
264
34
364
150
(252)
162
497
(233)
264
33
(20)
(2)
45
45
15
(21)
(2)
(3)
34
2020
NZ$M
251
26
277
260
(327)
(7)
(13)
277
611
(2)
49
(276)
(11)
(7)
364
2019
NZ$M
346
18
364
During the year the Group utilised $45 million (2019: $12 million) in respect of restructuring obligations at certain businesses. The remaining
balance is expected to be utilised within the next 12 months. Warranty and environmental provisions are expected to be utilised over the next
three years.
84
Fletcher Building Limited Annual Report 2020
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 and fixtures and fittings are stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. 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.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged
to profit or loss during the reporting period in which they are incurred.
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
5–15 years
Plant and machinery
Fixtures and equipment
2–10 years
Intangible assets, including software (note 13) 5–15 years
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.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
2020
Carrying value at 1 July 2019
Additions
Disposals
Depreciation expense
Impairment
Transfer of assets to inventory
Transfer of assets to right of use
Assets held for sale
Currency translation
Carrying value at 30 June 2020
Represented by:
Cost
Accumulated depreciation and impairment
Leased
Assets
NZ$M
38
(38)
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
181
8
(1)
(5)
(50)
3
136
137
(1)
136
204
10
(10)
(12)
(37)
3
158
1,074
131
(11)
(111)
(57)
(25)
8
1,009
283
(125)
158
2,214
(1,205)
1,009
162
33
(28)
(6)
(6)
2
157
412
(255)
157
95
12
(12)
95
125
(30)
95
Total
NZ$M
1,754
194
(12)
(161)
(75)
(5)
(38)
(118)
16
1,555
3,171
(1,616)
1,555
85
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
2019
Carrying value at 1 July 2018
Additions
Acquisitions
Disposals
Depreciation expense
Transfer of assets to inventory
Disposal of business
Currency translation
Carrying value at 30 June 2019
Represented by:
Cost
Accumulated depreciation and impairment
255
8
(6)
(19)
(51)
(6)
181
182
(1)
181
320
11
(19)
(12)
(3)
(88)
(5)
204
330
(126)
204
1,368
238
4
(125)
(397)
(14)
1,074
2,280
(1,206)
1,074
171
33
(30)
(9)
(3)
162
422
(260)
162
Leased
Assets
NZ$M
40
77
15
14
(11)
(2)
Total
NZ$M
2,231
305
18
(25)
(180)
(22)
(545)
(28)
95
38
1,754
132
(37)
95
43
(5)
38
3,389
(1,635)
1,754
As at 30 June 2020 property, plant and equipment includes $133 million of assets under construction that are not depreciated until they are
commissioned and brought into use (2019: $145 million).
13. INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangibles are carried at cost
less any accumulated amortisation and accumulated impairment losses.
The Group's Intangible assets with indefinite useful lives are not amortised but are tested for impairment annually, either individually or at
the cash-generating unit level. Intangible assets with a definite life are amortised on a straight-line basis.
Goodwill is stated at cost, less any impairment losses. Goodwill is allocated to cash-generating units (CGUs) and is not amortised but is
tested annually for impairment, and when an indication of impairment exists. Brands for which all relevant factors indicate that there is no
limit to the foreseeable net cash flows are considered to have an indefinite useful life and are held at cost and are not amortised but are
subject to an annual impairment test.
For the purposes of considering whether there has been an impairment, assets are grouped at the lowest level for which there are identifiable
cash flows that are largely independent of the cash flows of other groups of assets. When the book value of a group of assets exceeds the
recoverable amount, an impairment loss arises and is recognised in earnings immediately.
Assessing the carrying value of goodwill and indefinite life brands requires management to estimate future cash flows to be generated by
the related cash-generating unit. The key assumptions used in the value in use models include the expected rate of growth of revenues and
earnings, the terminal growth rate and the appropriate discount rate to apply.
Goodwill
NZ$M
Brands
NZ$M
Other
Intangibles
NZ$M
711
(10)
7
708
708
708
278
(1)
4
281
360
(79)
281
140
39
(11)
(24)
144
333
(189)
144
Total
NZ$M
1,129
39
(22)
(24)
11
1,133
1,401
(268)
1,133
2020
Carrying value at the beginning of the year
Acquired during the year
Impairments in the income statement (Note 2.1)
Amortisation expense
Currency translation
Represented by:
Cost
Accumulated impairment / amortisation
Carrying value at the end of the year
86
Fletcher Building Limited Annual Report 2020 2019
Carrying value at the beginning of the year
Acquired during the year
Disposed of during the year
Impairments in the income statement (Note 2.1)
Amortisation expense
Disposal of business
Currency translation
Represented by:
Cost
Accumulated impairment/amortisation
Carrying value at the end of the year
Goodwill
NZ$M
1,085
7
Brands
NZ$M
451
(369)
(12)
711
711
711
(165)
(8)
278
357
(79)
278
Other
Intangibles
NZ$M
160
43
(3)
(19)
(37)
(4)
140
294
(154)
140
Total
NZ$M
1,696
50
(3)
(19)
(571)
(24)
1,129
1,362
(233)
1,129
As at 30 June 2020 other intangible assets include $26 million of assets being developed (2019: $39 million).
Significant intangible balances within cash generating units (CGUs)
Laminex Australia
Higgins New Zealand
Iplex New Zealand
Stramit
Tradelink
Other
2020
2019
Goodwill
NZ$M
Brands
NZ$M
Goodwill
NZ$M
Brands
NZ$M
154
114
105
61
61
213
708
122
19
7
41
51
41
281
154
114
105
66
60
212
711
119
19
7
41
50
42
278
The goodwill allocated to significant CGUs accounts for 70% (2019: 70%) of the total carrying value of goodwill. The remaining 'other' CGUs,
which comprise 14 (2019: 14) in total, are each less than 7% of total carrying value. The significant brand assets account for 85% (2019: 85%)
of the total carrying value of brands. The remaining 'other' brand assets are each less than 5% of total carrying value (2019: 5%).
87
Fletcher Building Limited Annual Report 2020 Notes to the Financial Statements 2020 (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. During the year, the target leverage ratio range was adjusted to reflect the impacts associated with the inclusion of
debt hedging activities and the adoption of NZ IFRS 16. The adjusted target leverage ratio range is 1.0 to 2.0 times (2019: 1.5 to 2.5 times). It is
intended that the Group will not be materially outside the target leverage ratio range on a long-term basis.
On the 10 June 2020, the Group agreed amendments to its syndicate and private placement borrowing arrangements which will enable the
Group to rely on more favourable terms for covenant testing for the period June 2020 to December 2021 (inclusive). Under the agreement, the
Group may elect to rely on a level of Total Interest Cover ratio of 1.5 times (normally 2.0 times) and a level of Senior Interest Cover ratio of 2.25
times (normally 3.0 times). The Group has agreed that, should it need to rely on the more favourable covenant levels, it will not pay a dividend
until it returns to compliance with, and agrees to be tested by, normal covenant levels.
The Group was in compliance with all debt facility financial covenants as at the balance date.
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's borrowings are 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.
2019
NZ$M
886
258
485
68
1,697
(107)
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
88
Cash Flows
Currency
translation
Reclassified
to lease
liabilities
Other non-cash
movements
(including
hedge
accounting)
(8)
142
(120)
2
16
(4)
12
267
279
35
(2)
33
(22)
11
1
12
(44)
(44)
(44)
(44)
2020
NZ$M
1,001
400
365
25
1,791
88
1
89
(57)
(190)
32
32
1,601
(1,104)
497
Fletcher Building Limited Annual Report 2020
Cash Flows
Currency
translation
Reclassified
to lease
liabilities
Other non-cash
movements
(including
hedge
accounting)
Private placements
Bank loans
Capital notes
Other loans
Carrying value of borrowings
(as per balance sheet)
Less: value of derivatives used to
manage changes in hedged risks on
debt instruments
Economic debt
Less: Cash and cash equivalents
Net debt
2018
NZ$M
1,181
97
566
94
1,938
(61)
1,877
(665)
1,212
(334)
165
(81)
(30)
(280)
12
(268)
(712)
(980)
6
(4)
3
5
(25)
(20)
5
(15)
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
2019
NZ$M
886
258
485
68
1,697
33
1
34
(33)
(107)
1
1
2020
NZ$M
581
1,210
1,791
(1,104)
687
1,601
525
2,126
1,590
(1,372)
218
2019
NZ$M
602
1,095
1,697
(1,372)
325
1,590
667
2,257
Private placements comprise loans of AUD99 million, USD446 million, CAD15 million, EUR41 million and GBP10 million with original
maturities between 2022 and 2028.
On 29 June 2020, the Group provided notice to private placement noteholders to prepay AUD99 million and USD200 million of notes on issue
with original maturities of 2022 and 2024. As a result, $470 million of private placement notes are classified as current at 30 June 2020. The
Group recognised a significant item in the income statement related to the USPP make whole component of the prepayment (including the
impact of debt hedging activities) as governed by the private placement borrowing agreement.
At 30 June 2019, as a consequence of the Formica divestment in the prior year, the Group was required to make a mandatory prepayment
offer on a rateable portion (33%) on all senior debt including private placement noteholders. As a result, $292 million of private placements
were classified as current at 30 June 2019. In July 2019, $8 million of private placement notes with original maturities between 2026 and 2028
were prepaid.
Capital notes
At 30 June 2020 the Group had issued $365 million capital notes to retail investors (2019: $385 million) and had fully repaid unlisted capital
notes issued to institutional investors. 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 2020 were to be
converted to shares, 101 million (2019: 81 million) Fletcher Building Limited shares would be issued at the share price as at 30 June 2020, of
$3.70 (2019: $4.85).
89
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
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 2020, the Group held $135 million (2019: $115 million) of its own capital notes.
Bank Loans
At 30 June 2020 the Group had a $925 million syndicated revolving credit facility on an unsecured, negative pledge and borrowing covenant
basis. The funds under this facility can be borrowed in United States, Australian and New Zealand dollars.
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, Bank of China (New Zealand) Limited, Bank of New Zealand, China Construction Bank (New Zealand) Limited, Citibank
N.A., MUFG Bank Limited, The Hongkong and Shanghai Banking Corporation Limited and Westpac New Zealand Limited.
Other Loans
At 30 June 2020 the Group had unsecured loans of $25 million (2019: $24 million) some of which were subject to the negative pledge. Other
loans include bank overdrafts, short-term loans, working capital facilities and amortising loans. As part of the adoption of NZ IFRS 16,
the Group reclassified $44 million of other loans to lease liabilities, refer to note 27.
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 2020, the Group had debt subject to the negative pledge of $1,230
million (2019: $1,062 million).
The impact of debt hedging activities on borrowings is represented in the table below:
Currency of borrowings
Fixed rate
Floating rate
Impact of
hedging
Fixed rate
Floating rate
% Fixed
Underlying borrowing exposure
Economic debt exposure
2020
NZ$M
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
365
118
20
17
73
773
1,366
405
6
14
425
246
447
(20)
(17)
(73)
(773)
(190)
2019
NZ$M
415
317
732
601
254
14
869
41%
56%
0%
0%
0%
0%
0%
46%
Currency of borrowings
Fixed rate
Floating rate
Impact of
hedging
Fixed rate
Floating rate
% Fixed
Underlying borrowing exposure
Economic debt exposure
385
104
20
18
70
717
1,314
269
100
14
383
237
437
(20)
(18)
(70)
(673)
(107)
535
310
44
889
356
331
14
701
60%
48%
0%
0%
0%
100%
0%
56%
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
90
Fletcher Building Limited Annual Report 2020
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial commitments as they fall due. The Group manages its
liquidity risk by maintaining a target level of undrawn committed credit facilities and a spread of the maturity dates of the Group's debt facilities
that it reviews on an ongoing basis.
The following maturity analysis table sets out the remaining contractual undiscounted cash flows, including estimated interest payments for
non-derivative financial liabilities and derivative financial instruments. Creditors and accruals are excluded from this analysis as they are not part
of the Group's assessment of liquidity risk because these are offset by debtors with similar payment terms.
2020
Contractual
cash flows
NZ$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(1)
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
Lease liability
Total lease cash flow
Total contractual cash flows
400
365
1,001
25
1,791
906
(1,096)
(190)
1,601
175
2,317
2,317
4,093
100
100
100
470
11
581
447
(566)
(119)
462
100
49
244
244
755
37
226
226
363
400
165
14
579
105
(109)
(4)
575
60
564
564
1,199
531
531
354
(421)
(67)
464
29
1,283
1,283
1,776
(1) On 29 June 2020, the Group provided notice to private placement noteholders to prepay AUD99 million and USD200 million of notes on
issue. As a result, $470 million of private placement notes are classified as current.
Bank loans
Capital notes
Private placements
Other loans
Borrowings - Principal cash flows
Gross settled derivatives - to pay
Gross settled derivatives - to receive
Debt derivatives financial instruments - Principal
cash flows
Total principal cash flows
2019
Contractual
cash flows
NZ$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
(1) At 30 June 2019, bank loans of $85 million and private placements of $292 million were classified as current as the Group was required to
make a mandatory disposition prepayment offer on a rateable portion (33%) on all senior debt as a consequence of the Formica divestment.
91
Fletcher Building Limited Annual Report 2020 Notes to the Financial Statements 2020 (Continued)
15. FUNDING COSTS/(INCOME)
Interest expense and income is recognised on an accrual basis in the profit or loss using the effective interest method.
Funding costs also include the changes in fair value relating to derivatives used to manage interest rate risk, and the associated changes in
fair value of the borrowings designated in a hedge relationship attributable to the hedged risk.
Interest income
Interest on borrowings and derivatives
Interest expense other
Net Interest expense
Changes in fair value relating to:
Borrowings designated in a hedging relationship
Derivatives designated in a hedging relationship
Total changes in fair value
Bank fees, registry and other expenses
Line fees
Other (gains)/losses
Funding costs
2020
NZ$M
2019
NZ$M
(9)
65
5
61
(50)
(50)
10
7
2
80
(4)
106
4
106
33
(33)
5
9
(4)
116
Included in interest on borrowings is the net settlement of the Group's interest derivatives. This consists of $39 million of interest
income and $35 million of interest expense (2019: $44 million interest income; $43 million interest expense). Bank fees, registry and
other expenses include one-off costs in relation to the amendment waiver fees paid during the year. Other (gains)/losses includes
credit valuation adjustment (CVA) / debit value adjustment (DVA) on derivatives.
Interest rate risk
At 30 June 2020, 46% of the Group's debt was subject to a fixed interest rate (2019: 56% fixed).
(i) Interest rate repricing
The following tables set out the interest rate repricing profile of interest bearing financial liabilities assuming floating rate facilities are utilised to
maintain debt levels.
Fixed financial liabilties
Floating financial liabilities
Economic debt
% Fixed
2020
NZ$M
732
869
1,601
46%
2021
NZ$M
526
1,075
1,601
33%
2022
NZ$M
315
1,286
1,601
20%
2023
NZ$M
299
1,302
1,601
19%
2024
NZ$M
80
1,521
1,601
5%
2025
NZ$M
1,601
1,601
0%
The Group's overall weighted average interest rate (based on year end borrowings) excluding fees is 3.67% (June 2019: 5.03%). The Group's
overall weighted average interest rate (based on year end borrowings) excluding private placement borrowings to be prepaid and fees is 3.30%.
(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
$8.7 million pre-tax on the Group's debt portfolio exposed to floating rates at balance date (2019: $7.0 million) assuming that all
other variables remain constant.
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Fletcher Building Limited Annual Report 2020
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 16.1(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 16.1(i))
Arises due to the translation of the Group’s
foreign denominated assets and liabilities,
overseas operations and subsidiaries to the
Group’s functional currency of NZD, such that
the Group’s reporting of financial ratios would
be materially affected.
Interest rate risk
(note 14 & note 16.2)
The risk that the value of borrowings or cash
flows associated with the borrowings will
change due to changes in market rates.
Commodity price risk
Arises from committed or highly probable
trade and capital expenditure transactions
that are linked to traded commodities.
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 specific time periods.
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, the Group used commodity price
swaps to hedge electricity prices and diesel prices. The average
hedged electricity price for 2020 was NZ$/MWh 118 (2019: NZ$/
MWh 78). The average hedged diesel price for 2020 was NZ$/
litre 0.73 (2019: N/A).
A 10% increase in the New Zealand electricity spot price or
the New Zealand diesel spot price at balance sheet date would
not have a material impact on the Group's earnings or
equity position.
93
Fletcher Building Limited Annual Report 2020 Notes to the Financial Statements 2020 (Continued)
Disclosure about the credit risk associated with financial instruments and fair value measurement of financial instruments is included in note
16.3 and 16.4.
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
remeasurement 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.
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.
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.
16.1 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 2020
was $570 million (2019: $448 million).
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Fletcher Building Limited Annual Report 2020
(ii) Currency translation risk
The effect of the Group’s hedge accounting policy in managing foreign exchange risk related to the Group’s net investments in foreign
operations is presented in the table below:
Carrying amount
Notional Amount
Hedge effectiveness
2020
NZ$M
Amount of
investment
hedged
Foreign
currency
borrowings
Foreign currency
forwards
Change in
value used for
calculating
hedge
ineffectiveness
Net investment
hedge
gain/(loss)
recognised
in other
comprehensive
Income
235
235
(235)
(235)
2
2
(2)
(2)
Carrying amount
Notional Amount
Hedge effectiveness
2019
NZ$M
Amount of
investment
hedged
Foreign
currency
borrowings
Foreign currency
forwards
Change in
value used for
calculating
hedge
ineffectiveness
Net investment
hedge
gain/(loss)
recognised
in other
comprehensive
Income
230
230
(230)
(230)
(2)
(2)
2
2
Hedged investments
and hedging instruments used
Australia Dollar-denominated
Maturity of forward contracts: 0-4 months
Hedged investments
and hedging instruments used
Australia Dollar-denominated
Maturity of forward contracts: 0-4 months
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 $138 million (2019: $135 million) and no material impact on earnings.
The Group applies hedge accounting to foreign currency denominated borrowings that are managed by CCIRS. The hedge ratio applied is 1:1.
The hedge relationship may be designated into separate cash flow hedges and fair value hedges to manage the different components of foreign
currency and interest rate risk:
– fair value hedge relationship where CCIRS are used to manage the interest rate and foreign.
– currency risk in relation to foreign currency denominated borrowings with fixed interest rates.
– cash flow hedge relationship where CCIRS are used to manage the variability in cash flows arising from interest rate movements on
floating interest rate payments and foreign exchange movements on payments of principal and interest.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency,
reference interest rates, tenors, repricing dates and maturities and the notional amounts. The Group assesses whether the derivative
designated in each hedging relationship is expected to be effective in offsetting changes in the fair value of the hedged item using the
hypothetical derivative method.
In these hedging relationships, the main sources of ineffectiveness are:
– changes in counterparty credit risk and cross currency basis spreads which are not reflected in the change in the fair value of the hedged
item; and
– differences in repricing dates between the cross currency interest rate swaps and the borrowings.
95
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
The effect of the Group’s hedge accounting policies in managing both its foreign exchange risk and interest rate risk related to borrowings
denominated in foreign currency is presented in the table below.
2020
NZ$M
Nominal
amount of
the hedging
instrument
Carrying
amount
Accumulated
cost of
hedging
Change in
value used for
calculating
hedge
ineffectiveness
Hedging
(gain) or loss
recognised
in other
comprehensive
income
Hedging
(gain)
or loss
reclassified
to income
statement
Fair value
hedge
(income
statement)
(gain)/loss
383
63
(8)
43
(4)
(39)
312
121
(1)
10
(7)*
(11)
17
73
3
(1)
(1)
20
1
Hedge type
Cash flow hedging and
fair value hedging
Cross currency interest
rate swaps
USD denominated
borrowings
Maturity: 73-97 months
Weighted average
interest rate: floating
Weighted average NZD/
USD exchange rate:
0.7055
USD denominated
borrowings
Maturity: 18-42 months
Weighted average
interest rate: floating
Weighted average AUD/
USD exchange rate:
1.0082
CAD denominated
borrowings
Maturity: 25 months
Weighted average
interest rate: floating
Weighted average NZD/
CAD exchange rate:
0.8795
EUR denominated
borrowings
Maturity: 25 months
Weighted average
interest rate: floating
Weighted average NZD/
EUR exchange rate:
0.5994
GBP denominated
borrowings
Maturity: 25 months
Weighted average
interest rate: floating
Weighted average NZD/
GBP exchange rate:
0.5419
805
188
(10)
52
(4)
(7)
(50)
*As a consequence of the prepayment notices issued to private placement noteholders on 29 June 2020, a portion of the related cross currency interest swap designated in a cash flow hedge
relationship was ineffective and subsequently reclassified to the income statement and recognised net of the make whole significant item.
96
Fletcher Building Limited Annual Report 2020
2019
NZ$M
Nominal
amount of
the hedging
instrument
Carrying
amount
Accumulated
cost of
hedging
Change in
value used for
calculating
hedge
ineffectiveness
Hedging (gain) or
loss recognised
in other
comprehensive
income
Hedging (gain)
or loss
reclassified
to income
statement
Fair value
hedge (income
statement)
(gain)/loss
374
6
(9)
35
1
299
102
(2)
26
39
15
Hedge type
Cash flow hedging
and fair value
hedging
Cross currency
interest rate swaps
USD denominated
borrowings
Maturity: 85-109
months
Weighted average
interest rate: floating
Weighted average
NZD/USD exchange
rate: 0.7055
USD denominated
borrowings
Maturity: 30-54
months
Weighted average
interest rate: floating
Weighted average
AUD/USD exchange
rate: 1.0082
673
108
(11)
61
1
54
16.2 Interest rate swaps
The Group applies hedge accounting to the borrowings and the associated interest rate swaps, for movements in benchmark market
interest rates. Hedge accounting is applied on these instruments for floating-to-fixed instruments as cash flow hedges or for fixed-to-floating
instruments as fair value hedges. The Group applies a hedge ratio of 1:1.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the reference
interest rates, tenors, repricing dates and maturities and the notional amounts.
The Group assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in the fair
value of the hedged item using the hypothetical derivative method.
In these hedging relationships, the main sources of ineffectiveness are:
– the effect of the counterparty and the Group's own credit risk on the fair value of the interest rate swaps which is not reflected in the change
in the fair value of the hedged item; and
– differences in repricing dates between the interest rate swaps and the borrowings.
97
Fletcher Building Limited Annual Report 2020 Notes to the Financial Statements 2020 (Continued)
2020
NZ$M
Nominal
amount of
the hedging
instrument
Carrying
amount -
derivative
assets/
(liabilities)
Change in
value used for
calculating
hedge
ineffectiveness
Hedging
(gain) or loss
recognised
in other
comprehensive
income
Hedging
(gain) or loss
recognised
in income
statement
Hedge type
Cash flow hedging
Interest rate swaps - NZD borrowings
50
(2)
Maturity: 21 months
Weighted average interest rate: 3.10%
Interest rate swaps - AUD borrowings
211
(10)
Maturity: 18-42 months
Weighted average interest rate: 1.87%
261
(12)
4
4
(4)
(4)
2019
NZ$M
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%
Nominal
amount of
the hedging
instrument
Carrying
amount -
derivative
assets/
(liabilities)
Change in
value used for
calculating
hedge
ineffectiveness
Hedging
(gain) or loss
recognised
in other
comprehensive
income
Hedging
(gain) or loss
recognised
in income
statement
150
206
356
(2)
(6)
(8)
(1)
(6)
(7)
1
6
7
There was no hedge ineffectiveness recognised in profit or loss during the year.
16.3 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) Impairment of financial assets
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 spread at
balance date, there were no significant concentrations of credit risks in respect of trade receivables. Refer to note 8 for debtor balances
and ageing analysis.
The Group has two types of financial assets that are subject to the expected credit loss model:
– Debtors (including trade debtors, contract debtors and contract retentions) (note 8)
– Construction contract assets (note 3)
While cash and cash equivalents are also subject to the impairment requirements of NZ IFRS 9, the identified impairment loss
was immaterial.
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Fletcher Building Limited Annual Report 2020
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.
Debtors and construction contract assets
The Group applies the NZ IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all
trade receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been Grouped based on shared credit risk characteristics
and the days past due. The construction contract assets relate to unbilled work in progress and have substantially the same risk characteristics
as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables
are a reasonable approximation of the loss rates for the contract assets.
The expected loss rates are based on the payment profiles of historical sales the corresponding historical credit losses experienced within this
period. The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of
the customers to settle the receivables. The group has identified the GDP and the unemployment rate of the countries in which it sells its goods
and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.
In response to COVID-19 the Group undertook a review of its customer credit portfolio and its exposure to ECL. The review considered the
macroeconomic outlook, client and customer credit quality, the type of collateral held, exposure at default and the effect of payment deferral
options as at the reporting date. The increase in ECL provisions of $6 million in general reflects increased loss expectations across the
portfolio as a result of a deterioation in the New Zealand and Australian macroeconomic environment.
The table below provides movement in the Group's ECL provision:
Opening provision for doubtful debts as at 1 July 2019
Increase in provision for doubtful debts recognised in profit or loss
Receivables written off during the year as uncollectible
Unused amount reversed
Closing loss allowance as at 30 June 2020
2020
NZ$M
(15)
(15)
5
(25)
2019
NZ$M
(14)
(8)
6
1
(15)
Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.
Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit. Subsequent
recoveries of amounts previously written off are credited against the same line item.
(ii) Derivative financial instruments and the investment of cash
The Group enters into derivative financial instruments and invests cash with various counterparties in accordance with established Board
approved credit limits as to credit rating and dollar value but does not require collateral or other security except in limited circumstances.
In accordance with the established counterparty limits, there are no significant concentrations of credit risk in respect of these financial
instruments and no loss is expected.
The Group has not renegotiated the terms of any financial assets that would otherwise be overdue or impaired. The carrying amount of non-
derivative financial assets represents the maximum credit exposure. The carrying amount of derivative financial assets are at their current fair value.
99
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
16.4 Fair Values
The estimated fair value measurements for financial assets and liabilities compared to their carrying values in the balance sheet, are as follows:
Financial assets
Cash and liquid deposits
Debtors
2020
2019
Carrying
Value
NZ$M
Fair
Value
NZ$M
Carrying
Value
NZ$M
Fair
Value
NZ$M
Classification
Amortised cost
Amortised cost
1,104
1,104
1,372
1,372
991
991
1,085
1,085
Forward exchange contracts - fair value through profit or loss Fair value
Forward exchange contracts - cash flow hedge
Forward exchange contracts - net investment hedge
Cross currency interest rate swaps - split designation
Interest rate swaps - fair value hedge
Interest rate swaps - fair value through profit or loss
Fair value
Fair value
Fair value
Fair value
Fair value
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
Forward exchange contracts - net investment hedge
Interest rate swaps - cash flow hedge
Total financial liabilities
Fair value
Fair value
Fair value
Total financial instruments
Fair value measurement
1
2
1
2
1
1
2
1
1
2
188
188
108
108
1
1
1
1
2,287
2,287
2,570
2,570
931
400
931
400
1,001
1,007
25
365
2
4
2
12
25
372
2
4
2
12
799
258
886
68
485
3
1
8
799
258
956
68
497
3
1
8
2,742
2,755
2,508
2,590
(455)
(468)
62
(20)
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 commodity 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 Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 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 (0.5%) and 4.0%
(2019: 1.1% and 5.3%) including margins, for both accounting and disclosure purposes.
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Fletcher Building Limited Annual Report 2020
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
Dividend of 15 cents per share paid to shareholders in October 2019 (October 2018: nil)
There was no interim dividend paid to shareholders in April 2020 (April 2019: 8 cents per share)
2020
NZ$M
128
128
2019
NZ$M
68
68
In line with the Group's dividend policy, the Board determined that it would not declare a final dividend for the 2020 financial year. The Group
had previously declared an interim dividend in February 2020, however this was cancelled in March 2020 when the impacts of COVID-19 on
the business became apparent.
Shareholder tax credits
Imputation and franking credits allow the Group to transfer the benefit from the tax it has paid in New Zealand and Australia respectively to
its shareholders when it pays dividends.
Imputation credit account
Imputation credits at the beginning of the year
Taxation paid
Franking credit account
Franking credits at the beginning of the year
Taxation paid
Franking credits received
18. CAPITAL
2020
NZ$M
2019
NZ$M
3
1
4
3
3
2020
A$M
2019
A$M
32
(1)
1
32
32
(1)
1
32
Ordinary shares are classified as shareholders’ funds. Costs directly attributable to the issue of new shares or options are shown in
shareholders’ funds as a reduction from the proceeds. Acquired shares are classified as treasury stock and presented as a deduction from
share capital under the treasury stock method, as if the shares are cancelled, until they are reissued or otherwise disposed of.
Reported capital at the beginning of the year including treasury stock
Repurchase of shares
Reported capital at the end of the year including treasury stock
Treasury stock
2020
NZ$M
3,447
(147)
3,300
(20)
3,280
2019
NZ$M
3,447
3,447
(20)
3,427
All ordinary shares are issued and fully paid and carry equal rights in respect of voting, dividend payments and distribution upon winding up.
101
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Number of ordinary shares issued and fully paid
Number of shares on issue at the beginning of the year
Repurchase of shares
Total number of shares on issue
Less shares accounted for as treasury stock
2020
2019
853,347,141
853,347,141
(29,090,725)
824,256,416
853,347,141
(3,031,034)
(2,574,158)
821,225,382
850,772,983
The Group commenced an on-market share buyback in September 2019. For the year ended 30 June 2020, the Group had repurchased
29,090,725 shares for the total consideration of $147 million. The purchased shares were subsequently cancelled, leaving the total number
of shares on issue at 30 June 2020 of 824,256,416 shares. In line with NZ IFRS, $0.1 million of transaction costs relating to the buyback were
offset against equity. On 25 March 2020, in response to COVID-19 and its impact on the Group's operating cash flow, the Group announced
the cancellation of the interim dividend and suspension of the on-market share buyback programme.
19. NON-CONTROLLING INTERESTS
Non-controlling interests are allocated their share of profit for the year in the income statement and are presented separately within equity in
the balance sheet. The effect of all transactions with non-controlling interests that change the Group’s ownership interest but do not result in
a change in control are recorded in equity.
Share capital
Reserves
2020
NZ$M
2019
NZ$M
21
14
35
22
10
32
20. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Investments in associates are measured using the equity method. The equity method has been used for associate entities over which the Group
has significant influence but not control.
A joint arrangement is an arrangement where two or more parties have joint control. The Group classifies its joint arrangements as either joint
operations or joint ventures depending on the legal, contractual and other rights and obligations.
Investment by associate/joint venture:
Wespine Industries Pty Limited
Hexion Australia Pty Ltd
Altus NZ Limited
Other
Equity accounted earnings comprise:
Sales - 100%
Earnings before taxation - 100%
Earnings before taxation - Fletcher Building share
Taxation expense
Earnings after taxation - Fletcher Building share
102
2020
NZ$M
2019
NZ$M
53
21
64
20
158
49
21
63
19
152
359
375
18
9
(2)
7
38
19
(5)
14
Fletcher Building Limited Annual Report 2020
21. RELATED PARTY DISCLOSURES
The disclosures below set out transactions and outstanding balances that Group companies and other related parties have with each other.
Transactions with related parties are conducted on normal business terms.
Key management personnel are defined as the Executive Committee and Board of directors.
Trading activities with related parties
2020
Wespine Industries Pty Limited and Hexion Australia Pty Ltd
Interpipe Holdings Limited
Altus NZ Limited
2019
Wespine Industries Pty Limited and Hexion Australia Pty Ltd
Interpipe Holdings Limited
Altus NZ Limited
Key management personnel compensation
Directors' fees
Executive committee remuneration paid, payable or
provided for:
Short-term employee benefits
Termination benefits
Fletcher Building Retirement Plan
Sales to
related parties
NZ$M
Purchases from
related parties
NZ$M
Amounts owing
from related
parties (within
debtors)
NZ$M
Amounts owing
to related
parties (within
creditors)
NZ$M
38
4
11
39
10
5
3
5
2020
NZ$M
2019
NZ$M
2
10
1
2
19
2
As at 30 June 2020, Fletcher Building Nominees Limited (the New Zealand retirement plan) held $1.8 million of shares in Fletcher Building
(2019: $2.1 million of shares and $5.0 million of capital notes).
103
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Other information
This section provides additional required disclosures that are not covered in the previous sections.
22. CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure commitments are those where future expenditure has either been committed or has received Board approval at year-end,
but not recognised as liabilities is as follows:
Committed at year end
Property, plant and equipment and other long-term assets
Equity accounted investments
Approved by the directors but uncommitted at year end
23. CONTINGENT LIABILITIES
Claims
2020
NZ$M
2019
NZ$M
411
12
22
445
52
12
62
126
There are a number of legal claims and exposures that arise from the normal course of the Group's business in respect of which no provision
has been made. Where it is more likely than not that such a litigation will result in an outflow of resources that is already reasonably
estimated, a claims provision is recorded in the amount of the present value of the expected cash outflows. Such provisions cover the
estimated payments to the claimants, legal costs and the cost of potential settlements.
It is frequently impossible to reliably determine the existence of a present obligation or reasonably estimate the probability that a potential
outflow of resources will result from a pending or future litigation. Also, the amount of liability, if any, that may arise, cannot be measured
reliably at this time.
Guarantees
In certain circumstances, the Group guarantees the performance of particular business units in respect of their obligations. This includes
bonding and bank guarantee facilities used primarily by the construction business as well as performance guarantees for certain of the
Group’s subsidiaries.
Silicosis
Laminex Australia (together with other engineered stone manufacturers and fabricators) is the subject of 20 silica related personal injury
claims based in Queensland. No claims have yet been lodged in other states as at 30 June 2020. Additionally, Victoria based Slater & Gordon,
in April 2020, advised of their intent to join Laminex Australia to a class action. No further correspondence has been received.
The Group has concluded it is too early to make a reliable estimate of both the future and potential claims and the extent of liability (if any)
manufacturers and distributors may have. Accordingly, the Group has not recognised any provisions with respect to the outstanding or future
silicosis claims as at 30 June 2020.
Holiday Pay
The Group assesses on an ongoing basis its compliance with the Holidays Act in respect of annual and public holiday payments. Pending the
interpretation by the Court of Appeal of legislation defining "discretionary payments" under the Holidays Act, potential implications may arise
requiring the Group to remediate past holiday pay payments in respect of staff who have participated in certain incentive schemes.
NZICC
On 22 October 2019 there was a significant fire at the NZICC project construction site causing damage to both the International Convention
Centre and Hobson Street Hotel. Contract Works and Third-Party Liability insurances are in place on the project, and the Fletcher Construction
Company Limited is an insured party under these policies. Certain costs resulting from the fire may fall outside the scope of the Contract
Works and Third-Party Liability policies, with the possibility that recovery may be sought from the Group. As outlined in note 2.6, such
costs that are known or considered probable as at balance date have been included in the assessment of the onerous contract provision. It
is possible that as the project progresses additional costs will be identified that will need to be included in the onerous contract provision
or as a separate provision. Due to the uncertainty regarding whether additional costs will be identified and incurred post balance date, no
additional amounts have been recognised or disclosed as at 30 June 2020.
Contingent liabilities with respect to guarantees extended on trading transactions, performance
bonds and other transactions
Contingent liabilities with respect to claims
2020
NZ$M
394
2019
NZ$M
333
394
333
104
Fletcher Building Limited Annual Report 2020
24. 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.
COVID-19
On 17 March 2020, the New Zealand Government announced a business continuity package which included a number of tax relief initiatives.
The Group has assessed the facts and circumstances included in the COVID-19 Response (Taxation and Social Assistance Urgent Measures)
Act 2020 and concluded that the introduction of the new legislation does not have a material effect on the Group's current and deferred
tax position.
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
Other permanent differences
Tax expense/(benefit) on earnings from continuing operations
Tax expense on earnings from discontinued operations
Tax on (loss)/earnings before significant items
Tax benefit on significant items
Total current taxation expense/(benefit)
Total deferred taxation benefit
2020
NZ$M
(265)
2019
NZ$M
280
(74)
(4)
(3)
4
2
(3)
(3)
(81)
(81)
(81)
(4)
(77)
(81)
(78)
(3)
(81)
78
(8)
(5)
38
9
(2)
3
11
102
80
22
102
133
(31)
102
117
(15)
102
105
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Current tax assets/(liabilities)
Included within the balance sheet as follows:
Current tax assets
Current tax liabilities
Movement during the year:
Opening provision for current tax assets/(liabilities)
Taxation expense
Transfer from/(to) deferred taxation
Non-controlling interest share of taxation expense
Tax recognised directly in reserves
Sale of business
Net tax payments
Provision for deferred tax assets/(liabilities)
Included within the balance sheet as follows:
Deferred tax assets
Deferred tax liabilities
Movement during the year:
Opening provision for deferred tax assets
Taxation expense
Transfer (from)/to current tax
Sale of business
Tax recognised directly in reserves
Composed of:
Provisions
Inventories
Debtors
Property, plant and equipment
Brands
Tax losses
Pensions
Leases
Other
2020
NZ$M
2019
NZ$M
66
(5)
61
61
78
(85)
3
3
1
61
66
(5)
61
46
(117)
71
4
10
19
28
61
2020
NZ$M
2019
NZ$M
285
285
119
3
85
78
285
162
17
8
(26)
(83)
128
(3)
84
(2)
285
121
(2)
119
124
15
(71)
41
10
119
169
21
4
(44)
(77)
63
(5)
(12)
119
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. This assessment has been made based on forecast earnings set out in the companies' strategic plans. The Group reviews
future loss utilisations at each reporting period.
106
Fletcher Building Limited Annual Report 2020 25. 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 Group’s plan assets and liabilities in respect of individual defined benefit 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
2020
%
1.02
2.18
2019
%
2.14
2.61
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 (2019: less than $1 million) in respect of its Australian defined benefit plans.
It contributed $58 million (2019: $59 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 2020, the value of the
plan assets was 142% of the actuarial liability and the funded surplus was $73 million (31 March 2019: 159%, $103 million).
The Group expects to contribute less than $1 million to its New Zealand and Australian defined benefit plans during the year to 30 June 2021.
The Group is currently not contributing to the New Zealand plan.
Net periodic pension cost
Service cost
Net interest cost
Net periodic pension cost - recognised in earnings before interest and taxation
Recognised net asset/(liability)
Assets of plans
Projected benefit obligation
Funded surplus
Recognised net asset
2020
NZ$M
2019
NZ$M
3
(1)
2
369
(327)
42
42
3
(2)
1
400
(339)
61
61
107
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Recognised net asset/(liability) by jurisdiction:
New Zealand plan
Australian plans
Retirement plan assets - recognised within non-current assets
Recognised net asset
Movement in recognised net asset
Recognised net asset at the beginning of the year
Currency translation
Actuarial movements for the year
Net periodic pension cost
Sale of business - liability
Recognised net asset
Assets of the plans
Assets of plans at the beginning of the year
Actual return on assets
Total contributions
Benefit payments
Sale of business
Assets of the plans consist of:
Australasian equities
International equities
Property
Bonds
Cash and short-term deposits
Other assets
Projected benefit obligation
2020
NZ$M
2019
NZ$M
31
11
42
42
61
(17)
(2)
42
400
8
1
(40)
369
45
110
30
104
29
51
369
47
14
61
61
50
1
(25)
(1)
36
61
756
15
1
(38)
(334)
400
45
109
27
134
57
28
400
Projected benefit obligation as at the beginning of the year
(339)
(694)
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
Currency translation
(3)
(6)
(1)
(21)
3
40
(3)
(9)
(1)
(1)
(24)
(2)
37
361
(3)
(327)
(339)
108
Fletcher Building Limited Annual Report 2020
26. 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 that 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:
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
2019
Award
1 July 2019
1,386,100
$5.21
2018
Award
1 July 2018
1,041,605
$6.99
2017
Award
1 July 2017
890,075(1)
$7.85
2016
Award
1 July 2016
905,211
$10.61
$7,221,581
$7,280,819
$6,985,959
$9,604,289
30 June 2022
30 June 2021
30 June 2020
30 June 2019
1,386,100
(32,358)
1,041,605
(150,848)
890,075
(240,037)
Number of shares held at 30 June 2019
1,353,742
890,757
650,038
(1) This is an average share price which includes 182,561 shares granted at $7.34 to Ross Taylor as CEO and the remainder issued to other participants at $7.98.
Total fair value expense in year for executive performance share scheme
Amount recognised at year end for related bonus payable
Fair value has been determined using Monte Carlo valuation methodology.
2020
NZ$M
5
10
905,211
(767,808)
(906)
136,497
2019
NZ$M
2
9
109
Fletcher Building Limited Annual Report 2020
Notes to the Financial Statements 2020 (Continued)
Employee share purchase scheme - FBuShare
The employee share purchase scheme, FBuShare, allows eligible Group employees to regularly save up to NZ$5,000 per annum of their
after-tax pay and purchase shares in the Group (purchased shares) at market prices. At the end of rolling three year qualification periods,
and provided they remain employed by a Group company, employees will be awarded one free award share for every two purchased shares
acquired in the first year of each three year qualification period and still held at the end of those periods.
Dividends payable will be re-invested in additional shares. Employees will receive award shares on any additional shares, subject to the same
conditions set out above. The employees are responsible for any income tax liability payable on dividends and on the value of any award shares.
At the end of each three year qualification period, employees may continue to hold any purchased, additional and award shares or they may sell
some or all of the shares.
The Group accrues the liability to pay for award shares over the three year qualification periods.
27. IMPACT OF NZ IFRS 16
The Group has a large number of leases, consisting of property, mobile plant and heavy machinery, commercial and passenger vehicles and IT
equipment and photocopiers. Property leases which include retail, manufacturing, distribution, storage and office sites have the most significant
impact on adoption of NZ IFRS 16 given their high value and long lease terms with renewal options. See note 2 for details of the Group's NZ
IFRS 16 accounting policies.
The following table shows the carrying amounts of the recognised right-of-use assets and the changes during the reporting period.
Year ended 30 June 2020
Opening net book value - retrospective application since lease
commencement
Opening net book value - retrospective application since transition date
Reclassification of finance lease asset at 30 June 2019*
Opening net book value 1 July 2019
Additions and renewals
Depreciation
Impairment
Disposals
Transferred held for sale
Currency translation
Closing Balance 30 June 2020
Land
NZ$M
17
1
18
2
(2)
2
20
Buildings
NZ$M
1,226
85
1,311
70
(122)
(23)
(65)
(2)
3
1,172
Plant &
machinery
NZ$M
168
3
38
209
73
(61)
(3)
(4)
7
221
* Finance lease asset has been reclassified to right-of-use asset, previously reported as property, plant and equipment.
The following table shows the carrying amounts of the recognised right-of-use liabilities and the changes during the reporting period.
Impact on the consolidated balance sheet: Lease liabilities
Year ended 30 June 2020
Opening net book value - retrospective application of standard since lease commencement
Opening net book value - application of standard since transition date
Reclassification of finance lease liability at 30 June 2019*
Opening net book value 1 July 2019
Additions
Repayments
Disposals
Transferred to held for sale
Currency translation
Closing Balance 30 June 2020
* Finance lease liability has been reclassified to lease liabilities, previously reported as other loans in Borrowings (note 14).
110
Total
NZ$M
1,411
89
38
1,538
145
(185)
(23)
(68)
(6)
12
1,413
Total
NZ$M
1,669
90
44
1,803
146
(171)
(67)
(7)
17
1,721
Fletcher Building Limited Annual Report 2020
Lease expenses recognised in consolidated income statement
For the period ended 30 June 2020
Right-of-use asset depreciation
Right-of-use asset impairment
Lease interest expense
Extension options
Total
NZ$M
185
23
69
277
Some leases contain extension options exercisable by the Group up to one year before the end of the non-cancellable contract period.
The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses
whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control.
Transition disclosures:
(a) Weighted average incremental borrowing rate (IBR) on transition:
These lease liabilities at 1 July 2019 were measured at the present value of the remaining lease payments, discounted using the Group's IBR as
of 1 July 2019. The weighted average lessee's IBR applied to the lease liabilities on 1 July 2019 was 3.72%.
(b) Operating lease commitments reconciliation:
Operating lease commitments disclosed as at 30 June 2019
Add: Reclassification of finance lease liability at 30 June 2019*
Less: Short-term and low-value leases recognised on a straight-line basis as expense
Less: Impact of discounting at the initial date of application
Lease liability recognised as at 1 July 2019 (discounted using the Group's incremental borrowing rate at the
date of initial application)
* Finance lease liability has been reclassified to lease liabilities, previously reported as other loans in Borrowings (note 14)
NZ$M
2,293
44
(6)
(528)
1,803
Impact on retained earnings
NZ IFRS 16 was applied using the modified retrospective approach without adjusting the figures for prior periods. The transition resulted in
recognition of right-of-use assets, right-of-use lease liabilities and deferred tax assets on 1 July 2019, with a net impact of $183 million being
recognised in retained earnings, summarised as follows:
Retained earnings - as reported 30 June 2019
Recognition of right-of-use assets
Recognition of right-of-use liability
Deferred tax consequences of above adjustments
Retained earnings as at 1 July 2019 (restated)
NZ$M
898
1,500
(1,759)
76
715
The transition to NZ IFRS 16 resulted in an impact on basic and diluted earnings per share. The basic and diluted earnings per share decreased by
1.4 cents per share.
28. SUBSEQUENT EVENTS
Victoria lockdown
On 3 August 2020, in response to the COVID-19 pandemic, Victorian State Government announced stage 4 restrictions for metropolitan
Melbourne area and stage 3 restrictions for regional Victoria, both effective from 11.59 pm 5 August 2020. Under stage 4 restrictions all
workplaces in metropolitan Melbourne are required to be closed unless the workplace was deemed part of a permitted industry as set out by
the Victorian Government. Introduction of these restrictions have not had material effect on the Group's Consolidated Financial Statements as
at 30 June 2020.
Other than events noted above no further matters have arisen between 30 June 2020 and the date of this report that had a material effect on the
Group's consolidated financial statements as at 30 June 2019.
111
Fletcher Building Limited Annual Report 2020
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 financial statements of Fletcher Building Limited (“the company”) and its subsidiaries (together “the Group”)
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
on pages 62 to 111, which comprise the consolidated balance sheet of the group as at 30 June 2020, and the consolidated income
summary of significant accounting policies.
summary of significant accounting policies.
statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended of the group, and the notes to the consolidated financial statements including a
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
summary of significant accounting policies.
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
equivalents to International Financial Reporting Standards and International Financial Reporting Standards.
equivalents to International Financial Reporting Standards and International Financial Reporting Standards.
In our opinion, the consolidated financial statements on pages 62 to 111 present fairly, in all material respects, the consolidated
financial position of the group as at 30 June 2020 and its consolidated financial performance and cash flows for the year then
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
ended in accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial
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
Reporting Standards.
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
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.
This report is made solely to the company's shareholders, as a body. Our audit has been undertaken so that we might state to 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
Basis for Opinion
Basis for Opinion
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's
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
shareholders, as a body, for our audit work, for this report, or for the opinions we have formed.
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.
BASIS FOR OPINION
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
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
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those
ethical responsibilities in accordance with these requirements.
ethical responsibilities in accordance with these requirements.
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
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.
We are independent of the group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance
Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance
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
Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
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
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
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
the Group.
the Group.
Ernst & Young provides other assurance related services to the group. Partners and employees of our firm may deal with the group
on normal terms within the ordinary course of trading activities of the business of the group. We have no other relationship with, or
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
interest in, the group.
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
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
KEY AUDIT MATTERS
of how our audit addressed the matter is provided in that context.
of how our audit addressed the matter is provided in that context.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
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
financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial
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
statements as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each
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,
matter below, our description of how our audit addressed the matter is provided in that context.
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
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of
financial statements.
financial statements.
the audit report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
consolidated financial statements.
112
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 2020
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 and the total expected
revenue from the relevant contract. Where a
contract is expected to be loss-making, a provision is
immediately recorded for estimated future losses on
the entire contract.
There is a high level of estimation involved in
accounting for the Group’s construction contracts, in
particular relating to:
– Initial forecasting of total cost to complete,
including the estimation of cost contingencies for
contracting risks, and revisions to these forecast
costs as a result of events or conditions that
occur during the performance of the contract, or
are expected to occur to complete the contract;
and
– 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 2.6 and 3 of the
financial statements.
In obtaining sufficient appropriate audit evidence, we:
– evaluated the Group’s process regarding accounting for contract
revenues and costs. We tested controls including:
›
the preparation, review and authorisation of monthly project reports,
which involves management assessing key aspects of contract
performance; 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
qualitative 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;
for selected contracts, undertook site visits (to either contract
sites and/or commercial offices) to understand the nature of risk
elements of the contracts;
›
tested a sample of costs incurred to date to supporting
documentation;
› sample 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;
› evaluated the Group’s ability to forecast total cost to complete by
analysing the accuracy of previous forecasts to actual outcomes;
› assessed variable consideration, where material, to supporting
documentation and by reference to underlying contracts, and
› assessed the probability of insurance recoveries in relation to the
New Zealand International Convention Centre project (“NZICC”)
by reference to confirmation from the insurer, forecast costs
to complete the remediation works to ensure these are within
indemnity limits, the level of cover available under the contract
works policy and receipt of progress payments to date.
– evaluated the Group’s legal and external experts’ reports received
on contentious matters to identify conditions that may relate to the
recognition of variable consideration or liquidated or other damages;
– 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.
113
Fletcher Building Limited Annual Report 2020 Independent Auditor's Report (Continued)
Goodwill and other intangible assets’ impairment assessments
Why significant
The Group holds goodwill and other intangible assets of $1.1
billion at 30 June 2020.
The recoverable amount of the Group’s Cash Generating
Units (“CGUs”) 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 forecasts, 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 for certain
CGUs are included in note 2.2 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 relevant 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, for
those CGUs with a higher risk of impairment, to a combination
of the Board approved FY21 budget and as applicable the FY22 -
FY25 strategic plan or other management papers;
– assessed key inputs to the DCF models including future cash
flow forecasts, discount rates, terminal growth rates as well as
the Group’s consideration of any impacts of COVID19 on these
estimates;
– considered the accuracy of previous Group cash flow
forecasting to inform our evaluation of forecasts included in the
DCF models of those higher risk CGUs;
– for those CGUs with a higher risk of impairment, involved our
valuation specialists 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 in relation to the discount rate
and forecast cash flows 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.
Transition to NZ IFRS 16: Leases (“NZ IFRS 16”)
Why significant
The Group adopted NZ IFRS 16 on 1 July 2019. Under
NZ IFRS 16, the Group must recognise right of use assets and
lease liabilities arising from leases (with some exceptions) in
the consolidated balance sheet. As disclosed in Note 27, the
Group recognised right of use assets of $1.5 billion and lease
liabilities of $1.8 billion on transition.
The Group has applied the modified retrospective approach
to adoption. Under this approach, the Group recognised right
of use assets and lease liabilities in the balance sheet on 1
July 2019 and an adjustment to opening retained earnings for
those leases where the standard was applied from the lease
commencement date. Comparative financial periods were
not restated.
Judgement is required relating to the assumptions and
estimates made in order to determine the quantum of right
of use assets and lease liabilities. Key assumptions include
estimating the lease term, by considering the likelihood
of exercise of any rights of renewal, and the rates used to
discount the lease liability at transition date and, where
applicable, the right of use asset at the inception of the lease.
How our audit addressed the key audit matter
In obtaining sufficient appropriate audit evidence, we:
– evaluated the Group’s process for adopting NZ IFRS 16 and
identified controls;
– assessed the Group’s application of practical expedients
available on transition against the requirements of NZ IFRS 16;
– involved our valuation specialists to evaluate the methodology
used to determine the Group’s incremental borrowing rates
(“IBR”) applied to the lease portfolio;
– reviewed a sample of leases to assess the Group’s
quantification of the right of use asset and lease liability as at 1
July 2019, including:
› examining key contractual inputs to the calculations
including lease end dates and lease payments;
›
recalculating the lease liability and right of use asset for a
sample of individual leases; and
› evaluating the treatment of contract modifications and key
judgements made in relation to rights of renewal used to
determine the lease term.
114
Fletcher Building Limited Annual Report 2020 Transition to NZ IFRS 16: Leases (“NZ IFRS 16”) (cont.)
Why significant
How our audit addressed the key audit matter
Disclosures regarding the impact of the transition to NZ IFRS
16 and subsequent movements in lease related balances in
the year are included in note 27 of the financial statements.
– evaluated the completeness of leases included in the
determination of the right of use asset and lease liability;
– assessed movements in right of use assets and lease liabilities
during the year including on a sample basis, lease additions,
lease modifications, rent abatements and expired and
terminated leases;
– assessed the appropriateness of the classification of lease
liabilities between current and non-current; and
– assessed the disclosures in the consolidated financial
statements against the requirements of NZ IFRS 16 and NZ
IAS 8 Accounting policies, Changes in Accounting Estimates
and Errors.
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 consolidated financial
statements and auditor’s report.
Our opinion on the consolidated 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 consolidated financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained during the audit, or otherwise appears to be materially misstated.
If, based upon the work we have performed, 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 consolidated 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 consolidated financial statements, the directors are responsible for assessing on behalf of the entity 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 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 consolidated 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 consolidated financial statements.
A further description of the auditor’s responsibilities for the audit of the financial statements is located at the 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 Brent Penrose.
Chartered Accountants
Auckland
19 August 2020
115
Fletcher Building Limited Annual Report 2020 Statutory Disclosures
DISCLOSURE OF INTERESTS BY DIRECTORS
The following are particulars of general disclosures of interest by directors holding office as at 30 June 2020, 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 2020 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
Martin Brydon
Brydon Investment Holdings Pty Limited
Fletcher Building Industries Limited
Rytysh Pty Ltd
Barbara Chapman
APEC 2021 CEO Summit Committee
Genesis Energy Limited
NZME Limited
The New Zealand Initiative Limited
Fletcher Building Industries Limited
IAG New Zealand Limited (resigned 30 June 2020)
Two Tin Pigs Limited
Prime Minister's Business Advisory Council (ceased effective 15 May 2020)
Reserve Bank Independent Expert Advisory Panel
Peter Crowley
Barrambin Trading Company Pty Ltd
Fletcher Building Industries Limited
Interlaken Estates Pty Ltd
The Riverside Coal Transport Company Pty Ltd
Wesley Medical Research Limited
Rob McDonald
Contact Energy Limited
The University of Auckland Business School Advisory Board
AIA New Zealand Limited
Chartered Accountants Australia and New Zealand
Fletcher Building Industries Limited
RSMcDonald Services Limited
McDonald Family Trust
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 (resigned 27 September 2019)
Wymac Consulting Limited
Chair
Chair
Chair
Director
Director
Director
Director
Director
Chair
Chair
Chair
Deputy Chair
Director
Director
Director
Member
Member
Director
Director
Director
Director
Director
Chair
Chair
Director
Director
Director
Director
Trustee
Chair
Chair
Director
Director
Director
Director
Director
Director
116
Fletcher Building Limited Annual Report 2020 Cathy Quinn
Fertility Associates Holdings Limited (appointed 1 July 2019)
MinterEllisonRuddWatts (effective 1 January 2020)
Fletcher Building Industries Limited
New Zealand Experience Limited (appointed 1 February 2020)
On Being Bold Limited
Rainbow's End Theme Park (appointed 1 February 2020)
Rangatira Limited
Tourism Holdings Limited
Council of the University of Auckland (appointed 26 February 2020)
New Zealand Treasury Advisory Board
Chair
Consultant
Director
Director
Director
Director
Director
Director
Member
Member
Council Executive Board of the New Zealand China Council (resigned 13 December 2019) Member
St. Jude's Trust
Trustee
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 2020.
Director
Bruce Hassall (Chair)
Martin Brydon
Barbara Chapman
Peter Crowley
Rob McDonald
Doug McKay
Cathy Quinn
Ownership
Ordinary Shares
Capital Notes
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
22,242
20,000
20,000
20,000
50,000
20,000
30,000
(1) Cathy Quinn also held a non-beneficial interest in securities as a Trustee of the St. Jude's Trust.
Non-Beneficial (1)
121,197
28,014,500
117
Fletcher Building Limited Annual Report 2020
Statutory Disclosures (Continued)
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 2020:
Director
Rob McDonald
Cathy Quinn
Date of acquisition
Nature of transaction
Consideration
23 August 2019
On-market purchase of shares
23 August 2019
On-market purchase of shares
NZ$93,950
NZ$46,975
Number of ordinary
shares acquired
20,000
10,000
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) programme 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 2020. 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 2020.
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS AS AT 30 JUNE 2020
The total number of voting securities of Fletcher Building at 30 June 2020 was 824,256,416 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
16,060
13,563
3,154
2,336
152
35,265
45.54
38.46
8.95
6.62
0.43
100.00
6,867,334
32,796,261
22,617,097
53,682,821
708,292,903
824,256,416
0.83
3.98
2.75
6.51
85.93
100.00
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 2020. The total number of voting securities of Fletcher Building Limited at 30 June 2020 was 824,256,416 fully paid
ordinary shares.
Substantial product holder
Allan Gray Group
Perpetual Limited and subsidiaries
Schroder Investment Management (Australia) Limited
The Vanguard Group, Inc.
Commonwealth Bank of Australia (1)
Number of ordinary shares in which
relevant interest is held
41,759,869
73,249,760
Date of notice
22 May 2020
31 March 2020
53,315,281
10 February 2020
47,403,706
18 December 2018
41,967,254
19 March 2018
(1) From 2000-2019 Colonial First State Global Asset Management (CFSGAM) was part of the Commonwealth Bank of Australia group’s wealth management division. In August 2019 Mitsubishi
UFJ Trust and Banking Corporation acquired the business. CFSGAM rebranded itself as First Sentier Investors. Since that time, there have been no updates to the former CBA SPH notices,
nor has there been a new SPH notice issued by First Sentier.
118
Fletcher Building Limited Annual Report 2020 20 LARGEST SHAREHOLDERS AS AT 30 JUNE 2020
Holder Name
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HSBC Nominees (New Zealand) Limited - NZCSD
Citibank 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
National Nominees Limited
Accident Compensation Corporation - NZCSD
National Nominees Limited - NZCSD
BNP Paribas Nominees Pty Ltd
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited - NZCSD
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees (NZ) Limited - NZCSD
New Zealand Depository Nominee Limited
BNP Paribas Nominees (NZ) Limited - NZCSD
ANZ Wholesale Australasian Share Fund - NZCSD
JBWere (NZ) Nominees Limited
ANZ Custodial Services New Zealand Limited - NZCSD
FNZ Custodians Limited
Total
Number of
ordinary shares
% of issued capital
95,112,117
80,981,758
64,771,537
58,705,623
47,477,492
42,013,712
40,073,744
37,051,710
29,755,424
21,877,012
14,314,937
13,965,299
13,921,062
12,553,924
10,817,812
10,091,584
9,365,644
8,015,842
6,766,210
6,341,074
11.54
9.82
7.86
7.12
5.76
5.10
4.86
4.50
3.61
2.65
1.74
1.69
1.69
1.52
1.31
1.22
1.14
0.97
0.82
0.77
623,973,517
75.69
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 2020, total holding in NZCSD were 313,045,536
or 37.98% of shares on issue.
AUDITOR FEES
EY has continued to act as auditors of the Group. Please refer to note 6 of the financial statements for audit fees paid to EY in the financial year
to 30 June 2020.
CREDIT RATING
The Group has not sought and does not hold a credit rating from an accredited rating agency.
DONATIONS
Please refer to note 6 of the financial statements for donations made in FY20. All political donations must be approved by the Board.
119
Fletcher Building Limited Annual Report 2020
Statutory Disclosures (Continued)
SUBSIDIARY COMPANY INFORMATION
The persons listed below respectively held office as directors of Fletcher Building Limited and its subsidiary companies as at 30 June 2020, or
in the case of those persons with the letter (R) after their name ceased to hold office during the year. Alternate directors are indicated with an
(A). Except where shown below, Fletcher Building's indirect ownership interest as at 30 June 2020 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 58. 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
Amatek Investments Pty Limited
Directors
M Brodie, B McKenzie
M Brodie, B McKenzie
M Brodie, B McKenzie
Approach Signs Limited
C Bolt (R), B McKenzie, P Reidy
Austral Bronze Crane Copper Pty Limited
M Brodie, B McKenzie
Australian Construction Products Pty Limited
C Bolt (R), B McKenzie, N Sumich, F Hopkins (A) (R)
Bandelle Pty Limited
Baron Insulation Pty Ltd
M Brodie, D Le Quesne (R), N Sekul
P Lavelle, B McKenzie, D Frost (A) (R)
Boden Building Supplies Limited (70%)
Building Choices Limited (75%)
P Boden, B McEwen
G Close, B McEwen
Building Prefabrication Solutions Limited
B McEwen, B McKenzie
Cleaver Building Supplies Limited (75%)
M Cleaver, B McEwen
Crane Enfield Metals Pty Limited
M Brodie, B McKenzie, D Clark (A) (R)
Crane Group Pty Limited
Crane Share Plan Pty Ltd
Crevet Pipelines Pty Ltd
Crevet Pty Ltd
CTCI Pty Limited
M Brodie, B McKenzie
M Brodie, B McKenzie
B McKenzie, N Sumich, F Hopkins (A) (R)
M Brodie, B McKenzie
J Burgess, B McKenzie, J Nicolazzo (A) (R)
Davis & Casey Building Supplies Limited (70%)
T Davis (R), B McEwen
Delcon Holdings (No. 11) Limited
C Bolt (R), D Fradgley, B McKenzie
ee-Fit Pty Limited
P Lavelle, B McKenzie, D Frost (A) (R)
Efa Technologies Pty Limited
C Bolt (R), M Brodie, B McKenzie
Fairbairn Building Supplies Limited (75%)
C Fairbairn (R), B McEwen
FBHS (Aust) Pty Limited
B McKenzie, A Wilson (R), T Broxham, J Chan (A) (R)
FBII (Puhoi) Limited
FBSOL Pty Limited
Fletcher Building (Australia) Pty Limited
C Bolt (R), B McKenzie, P Reidy
B McKenzie, A Wilson (R), T Broxham, J Chan (A) (R)
C Bolt (R), M Brodie, D Le Quesne (R), A Clarke, B McKenzie, N Sekul,
M Paterson (A) (R), D Clark (A) (R)
Fletcher Building (Fiji) Pte Limited
H Clarke, A Kumar, B Leach, C White
Fletcher Building Educational Fund Limited
C Carroll, J McDonald, P Muir
Fletcher Building Holdings Limited
C Bolt (R), A Clarke, B McKenzie
Fletcher Building Holdings New Zealand Limited
C Bolt (R), A Clarke, B McKenzie
Fletcher Building Industries Limited
M Brydon, A Carter (R), B Chapman, P Crowley, B Hassall, R McDonald, D McKay,
C Quinn, S Vamos (R)
Fletcher Building Infrastructure Investments Limited
C Bolt (R), M Kernahan (R), B McKenzie, P Reidy
Fletcher Building Limited
M Brydon, A Carter (R), B Chapman, P Crowley, B Hassall, R McDonald, D McKay,
C Quinn, S Vamos (R)
Fletcher Building Nominees Limited
J Chapman, M Farrell, J McDonald, H McKenzie, C Munkowits, G Niccol
Fletcher Building Products Australia Pty Limited
M Brodie, B McKenzie
Fletcher Building Products Limited
C Bolt (R), H McBeath, B McKenzie
120
Fletcher Building Limited Annual Report 2020 Company
Directors
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, B McKenzie
Fletcher Challenge Finance Investments Limited
C Bolt (R), A Clarke, B McKenzie
Fletcher Challenge Forest Industries Limited
S Evans, B McKenzie
Fletcher Challenge Industries S.A.
M Binns, K Cowie, H Ritchie
Fletcher Concrete (Fiji) Pte Limited
C Bolt (R), A Kumar, B Leach, C White
Fletcher Concrete and Infrastructure Limited
C Bolt (R), I Jones, H McBeath, B McKenzie
Fletcher Construction (Solomon Islands) Limited
B Leach, C White
Fletcher Construction Buildings Limited
B McKenzie, P Reidy
Fletcher Construction Company (Fiji) Pte Limited
B Leach, J Matthews
Fletcher Construction Infrastructure Limited
B McKenzie, P Reidy
Fletcher Development Limited
Fletcher Distribution Limited
Fletcher Insulation Pty Limited
S Evans, B McKenzie
C Bolt (R), B McEwen, B McKenzie
P Lavelle, B McKenzie, D Frost (A) (R)
Fletcher Morobe Construction Limited
B Leach, L Mathias (R), R Simpson
Fletcher Property Developments UK Limited
S Evans, B McKenzie
Fletcher Property Investments UK Limited
S Evans, B McKenzie
Fletcher Property Limited
Fletcher Residential Limited
Fletcher Steel Limited
C Bolt (R), A Clarke, B McKenzie
C Bolt (R), B McKenzie, S Evans
C Bolt (R), H McBeath, B McKenzie
Forman Building Systems Limited
C Bolt (R), B McEwen, B McKenzie
Gatic Pty Limited
B McKenzie, N Sumich
Geoff Brown Building Supplies Limited (75%)
G Brown (R), B McEwen
Geraldton Independant Building Supplies Pty Limited
J Burgess, B McKenzie
Graeme Joy Building Supplies Limited
B McEwen
Higgins Contractors Limited
C Bolt (R), B McKenzie, P Reidy
Higgins Group Holdings Limited
C Bolt (R), B McKenzie, P Reidy
Iplex Pipelines Australia Pty Limited
B McKenzie, N Sumich, F Hopkins (A) (R)
Iplex Pipelines NZ Limited
Iplex Properties Pty. Limited
Jeffcoats Building Supplies Ltd (68%)
Kemsley Fields Limited (56.8%)
C Bolt (R), H McBeath, B McKenzie
B McKenzie, N Sumich
R Jeffcoat, B McEwen
S Evans, R Peachey
Kenna Building Supplies Limited
B McEwen
Key Plastics Pty. Ltd.
B McKenzie, N Sumich, F Hopkins (A) (R)
Kimura Building Supplies (2016) Limited
J Kimura (R), B McEwen
Kingston Bridge Engineering Pty Ltd
B McKenzie, N Sumich, F Hopkins (A) (R)
Kinsey Kydd Building Supplies Limited (75%)
S Kinsey, B McEwen
Koning Building Supplies Limited
B McEwen
Koyana Rocla Pipes Limited
M Kotnis, G Sharma, C Shiralkar, A Mahesh
Kusabs Building Supplies Limited (75%)
G Kusabs, B McEwen
Laminates Holdings Pty Limited
J Burgess, B McKenzie
Laminex Group Pty Limited
J Burgess, B McKenzie, J Nicolazzo (A) (R)
Laminex Overseas Holdings Pty Limited
M Brodie, D Le Quesne (R), N Sekul
Laminex US Holdings Pty Limited
M Brodie, D Le Quesne (R), N Sekul
121
Fletcher Building Limited Annual Report 2020 Statutory Disclosures (Continued)
Company
Directors
Leary Building Supplies Limited (75%)
B Leary, B McEwen
Macready Building Supplies Limited (75%)
J Macready, B McEwen
Matt Orr Building Supplies Limited (75%)
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 (R), B McEwen, B McKenzie
M Brodie, B McKenzie
Moire Road General Partner Limited (51%)
A Crocker, S Evans, S Rapson, D Schwartfeger (R)
Morinda Australia Pty Limited
B McKenzie, A Wilson (R), T Broxham, J Chan (A) (R)
New Zealand Ceiling & Drywall Supplies Limited (90%) C Bolt (R), D Thomas
Northern Iron and Brass Foundry Pty. Ltd.
B McKenzie, N Sumich, F Hopkins (A) (R)
Oliveri Solutions Pty Limited
T Broxham (R), B McKenzie, SL Naish, P Dudney (A) (R)
Paul Robinson Building Supplies Limited (75%)
B McEwen, P Robinson
Pavement Technology Limited
Penny Engineering Limited
C Bolt (R), B McKenzie, P Reidy
C Bolt (R), B McKenzie, P Reidy
Penrose Retirement Nominees Limited
J Chapman, M Farrell, J McDonald, H McKenzie, C Munkowits, G Niccol
PlaceMakers Limited
C Bolt (R), B McEwen, B McKenzie
PlaceMakers Supply, Fix & Install Limited (75%)
G Close, B McEwen
Polymer Fusion Education Pty Ltd
B McKenzie, N Sumich
Raylight Aluminium Limited (87.5%)
Reece Building Supplies Limited (75%)
G Close, B McEwen
B McEwen, J Reece
Rocla Australia Pty Limited
C Bolt (R), M Brodie, B McKenzie
Rocla Concrete Pipes Pty Limited
C Bolt (R), M Brodie, B McKenzie
Rocla Industries Pty Limited
M Brodie, D Le Quesne (R), N Sekul
Rocla Pty Limited
Rocla Vic Pty Limited
S Cubed Pty Limited
Selwyn Quarries Limited
Shed Boss NZ Limited
C Bolt (R), B McKenzie, N Sumich, F Hopkins (A) (R)
M Brodie, D Le Quesne (R), N Sekul
B McKenzie, A Wilson (R), T Broxham, J Chan (A) (R)
C Bolt (R), I Jones, B McKenzie
C Bolt (R), D Fradgley, B McKenzie
Southbound Building Supplies Limited (75%)
B McEwen, A Rance
Stanley Building Supplies Limited (75%)
B McEwen, B Stanley-Joblin
Steven Marshall Building Supplies Limited (65%)
S Marshall (R), B McEwen
Stickland Building Supplies Limited
B McEwen
Stramit Corporation Pty Limited
B McKenzie, A Wilson (R), T Broxham, J Chan (A) (R)
Sullivan & Armstrong Building Supplies Limited
B McEwen
Tasman Australia Pty Limited
M Brodie, D Le Quesne (R), N Sekul
Tasman Building Products Pty Limited
M Brodie, D Le Quesne (R), N Sekul
Tasman Insulation New Zealand Limited
C Bolt (R), H McBeath, B McKenzie
Tasman Sinkware North America, Inc.
C Bolt (R), M Brodie
TBP Group Pty Limited
M Brodie, D Le Quesne (R), N Sekul
Terrace Insurances (PCC) Limited
C Bolt (R), K Carten, M Eades, B McKenzie, T Williams
The Fletcher Construction Company
(Fanshawe Street) Limited
The Fletcher Construction Company
Cook Islands Limited
C Bolt (R), B McKenzie, P Reidy
B Leach, B McKenzie, P Reidy
The Fletcher Construction Company Limited - NZ
C Bolt (R), B McKenzie, P Reidy
The Fletcher Construction Company Limited
(Samoa Branch)
C Bolt (R), B McKenzie, P Reidy
122
Fletcher Building Limited Annual Report 2020 Company
Directors
The Fletcher Organisation (Vanuatu) Limited
B Leach, Diract Ltd, Lotim Ltd
The Fletcher Trust and Investment Company Limited
C Bolt (R), B McKenzie, P Reidy
Thomas Street Pty Limited
C Bolt (R), M Brodie, B McKenzie
Tradelink Pty Ltd
T Broxham (R), B McKenzie. SL Naish, P Dudney (A) (R)
Winstone Wallboards Limited
C Bolt (R), H McBeath, B McKenzie, D Thomas
Young Building Supplies Limited (75%)
B McEwen, C Young (R)
As at 30 June 2020, 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%
123
Fletcher Building Limited Annual Report 2020 Corporate Directory
BOARD OF DIRECTORS
REGISTERED OFFICE
REGISTRY
Bruce Hassall (Chair)
Martin Brydon
Barbara Chapman
Peter Crowley
Rob McDonald
Doug McKay
Cathy Quinn
EXECUTIVE TEAM
Ross Taylor
Chief Executive Officer
Bevan McKenzie
Chief Financial Officer
Andrew Clarke
Group General Counsel and Company
Secretary
Daniel Beecham
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 21 155 8837
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
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)
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.
124
Fletcher Building Limited Annual Report 2020 125
Fletcher Building Limited Annual Report 2020