Building Momentum
Fletcher Building Limited
Annual Report 2021
Nicola O'Sullivan inspects a section of managed fill now replanted at a historic
Winstone Aggregates quarry site at Hunua. The site neighbours the quarry currently
being mined for Greywacke, primarily for infrastructure such as roading and concrete.
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 FY20 and FY21 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 legacy projects, 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.
Front cover image: Fletcher Steel's Marijune Cabiling scans steel coils for dispatch at Pacific Coil Coaters in Penrose, Auckland.
Contents
Welcome to our FY21 Annual Report, which describes our business operations, approach to doing business and
performance for the year. 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
02 We are Fletcher Building
03
04
05
At a Glance
Chair’s Report
CEO’s Report
06 Our Strategy
08
12
18
22
Zero Injuries Every Day
Embracing Innovation and
Disruption to Drive Future Growth
Leadership in Sustainability
Our People
Performance
26
Group Performance
28
30
32
34
36
38
40
Group Overview
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Governance
42
Board and Executive Team
45
56
Corporate Governance
Sustainability Materiality
and Methodology
57
Remuneration Report
Financial Report
68
Trend Statement
69
75
117
Financial Statements
Notes to the Financial Statements
Independent Auditor’s Report
Other Disclosures
121
Statutory Disclosures
128 Corporate Directory
This Annual Report is dated 18 August 2021
and is signed on behalf of the Board by:
Bruce Hassall
Chair
Robert McDonald
Director
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1
Fletcher Building Limited Annual Report 2021
We are Fletcher Building
Australia
New Zealand
South Pacific
Fletcher Building has operations in
Papua New Guinea, Fiji, Samoa and
American Samoa, Tonga, Vanuatu
and the Solomon Islands.
2
‘Improving the world around us through smart
thinking, simply delivered’ is our purpose.
We are driven through efforts
to create a better more
sustainable world. We want to
be smart and innovative in all
we do, making our customers'
lives easier in the process.
Fletcher Building builds homes,
buildings and infrastructure
that creates communities,
improves productivity, and
contributes to the quality of life
for people living and working
in cities and regions across
New Zealand, Australia and the
South Pacific.
Our impact spans the full
construction value chain.
We operate businesses
from resource extraction,
product manufacture and
distribution, through to
property development and
infrastructure construction.
Fletcher Building is dual
listed on the NZX and ASX
and operates through six
divisions – Building Products,
Distribution, Concrete,
Residential and Development,
Construction, and Australia.
Fletcher Building Limited Annual Report 2021 At a Glance
People in New Zealand,
Australia and the South Pacific
14,500+
Revenue
$8,120m
Net earnings /
(loss) – reported:
$305m
2020 $7,309m
2020 ($196m)
EBIT before
significant items (1)
$669m
2020 $160m
Cash flows from
operating activities
$889m
2020 $410m
Earnings per share
37.0¢
2020 (23.5¢)
EBIT margin before
significant items (1)
8.2%
2020 2.2%
Leverage ratio
(net debt/EBITDA)
0.2x
2020 0.9x
Total dividend
30.0¢
2020 nil
Safety TRIFR (2)
5.0
2020 5.7
Employee engagement
66%
2019(3) 71%
Carbon emissions
1,145,035
tCO2e
2020 1,146,851 tCO2e
Customer NPS (4)
41
2020 40
(1) Measures before significant items are non-GAAP measure used by management to assess the performance of the Group and have been derived from Fletcher Building's financial
statements for the year ended 30 June 2021.
(2) Total Recordable Injury Frequency Rate. Total number of recorded injuries per million hours worked. Does not include Restricted Work Injuries.
(3) Note that the employee engagement survey did not take place as originally planned in March 2020 because of the COVID-19 crisis.
(4) Net Promoter Score measures how satisfied our customers are with our business.
3
Fletcher Building Limited Annual Report 2021 Chair’s Report
Bruce Hassall, Chair
Dear Shareholders
Fletcher Building delivered a strong financial
performance and ongoing operational
improvements in FY21. The business
largely enjoyed a more normal trading
environment during the operating period
with only minimal impacts from COVID-19
disruptions.
The Group’s return to profit was pleasing,
with net earnings attributable to
shareholders of $305 million, compared to
a loss of $196 million in FY20 and strong
cash flows from operating activities of $889
million compared to $410 million in FY20.
These were material improvements on both
the FY20 and FY19 years.
Having delivered a strong earnings and
cash flow result, the Board has approved
a final dividend for the year ended 30 June
2021 of 18.0 cents per share (unimputed
and unfranked) to be paid on 17 September
2021. Combined with the 12 cents per
share interim dividend, this brings the total
dividend to 30.0 cents per share for the
FY21 year.
4
The Board continuously assesses Fletcher
Building’s balance sheet position and
investment opportunities in order to drive
shareholder returns. In June 2021, the
Company commenced an on-market share
buyback of up to $300 million to deliver
value to our shareholders. At 30 June 2021,
we had acquired 3.1 million shares valued
at $24 million.
Fletcher Building’s overall strategy takes
into account a wide range of factors
which include environmental, social and
governance. We consider where we have a
real impact and we align both our financial
and non-financial targets to those areas. We
also take into consideration the impact that
broader societal changes will have on us
and what we need to react to.
The Board continued its focus on driving the
Fletcher Building strategy this year, together
with financial and non-financial metric
performance. We continued to prioritise
our sustainability targets, for example our
plans to reduce carbon 30% by 2030, and
driving leadership and culture in the Protect
safety programme through our Safety,
Health, Environment and Sustainability
Committee. We provided strong oversight
on financials and risks via the Audit and Risk
Committee. We’ve continued to evolve our
remuneration structure, including reaching
out to shareholders to hear their feedback,
to ensure it is aligned with shareholder
interests. The current structure and the
changes we have made are outlined in the
Remuneration Report.
Ongoing investment has been critical to
future-proofing our businesses. The Board’s
time and emphasis with management
continues to focus on how to ensure we
continue to drive operational performance
and make value-enhancing growth
investments. This is both an exciting and
important transition for the Group to make.
In this regard, the Board recognises there
are considerable opportunities; completing
the turnarounds of our Australian and
Construction businesses, innovating on
disruption and adjacencies across all the
businesses, driving decarbonisation, and
accelerating e-commerce and digital activity.
We look forward to seeing tangible
progress against all these over the coming
year and into the future.
With a deeply experienced and capable
executive team in place, the Group is
well-positioned to deliver on its goals of
ongoing performance and growth. Our
people are central to achieving these goals
and the Board acknowledges the hard
work carried out by our skilled teams to
deliver for our stakeholders. Coming out
of a tough COVID-19 year in FY20, where
some difficult decisions were made, it was
pleasing to see the improvements being
made by the business. We are focused
on developing a culture of performance
and growth for our people which includes
providing training and development and
driving our inclusion and diversity strategy.
This year’s Annual Shareholders' Meeting
(ASM) will be held on 19 October 2021. I
look forward to updating our shareholders
personally and having the opportunity to
answer any questions they may have.
In closing, on behalf of the Board, I
want to convey my appreciation to the
entire Fletcher Building team. Through
their focus, commitment and hard work,
Fletcher Building is well-positioned for
ongoing performance and growth. We
are dedicated to continuing to enhance
shareholder value and we remain focused
on achieving our aspiration to be the leader
in New Zealand and Australian building
products and solutions.
Bruce Hassall
Chair
Fletcher Building Limited Annual Report 2021 CEO’s Report
Ross Taylor, CEO
Fletcher Building’s strong FY21 financial
result reflects the significant work carried
out over the past three years to reset and
simplify the business. Having delivered on
the first phase of our five-year strategy, we
are confident we now have a sustainable
base from which we can drive further
operational improvements and growth.
FY21 saw increases across all our key
financial metrics compared with both FY20
(heavily impacted by COVID-19) and FY19,
which was a more normal operating year.
Group revenue for the year was $8,120
million compared to $7,309 million in FY20,
while EBIT before significant items was
$669 million, compared to $160 million
in FY20. Group EBIT margins lifted
materially in FY21 to 8.2% and our
return on funds employed (ROFE)
increased to 18.6%.
The businesses generated strong cash
flows from operating activities of $889
million, compared to $410 million in FY20.
Our balance sheet remains strong with $1.6
billion liquidity and net debt of $173 million
at year end.
In addition to our financial performance, we
have also made good progress against our
non-financial metrics which we also drive
through our strategy.
Firstly, in relation to safety, we remain
resolutely focused on ensuring all our
people get home safely, every day. An
important step in achieving this goal is
reducing serious injuries to zero across all
our sites. With this goal in mind, in FY21
we delivered safety leadership training, risk
containment and life-saving rules across our
businesses. Pleasingly, 85% of our sites
were injury-free and our Total Recordable
Injury Frequency Rate (TRIFR) was 5.0,
12% lower than the prior year.
Secondly, a focus on carbon reduction
forms one important element of our
broader sustainability strategy. We have a
Science Based Target in place to reduce
our direct and indirect carbon emissions by
30% by 2030. In FY21 we made significant
progress towards this goal, having achieved
a reduction in emissions from our base
FY18 levels. Our business unit roadmaps
have been developed to plan in more detail
where carbon reduction is possible and how
we will achieve it. Through this planning,
we have a line of sight to our targeted
reduction of emissions by 2030 from
initiatives across all our businesses.
Thirdly, our customers remain front and
centre of what we do. We continually
collect feedback and understand how we
can constantly improve what we are doing
to strengthen our customer relationships.
Our goal is to build towards a ‘best in class’
net promoter score (NPS) of ≥ 55. Over
the course of the financial year, we were
pleased to see our NPS increase marginally
from 40 to 41, despite a range of service
disruptions due to COVID-19 along with
broader industry supply chain constraints.
Ongoing investments in technology, data,
e-commerce and service enhancements,
such as 'track and trace', will further amplify
our ability to meet our customers’ current
and future needs.
Finally, for our people, we know that strong
engagement translates into our teams and
people going above and beyond to deliver
for our customers. It was disappointing
to see engagement levels decline from
71% to 66% since FY19, however, this
was in the context of a tough period for
our people that included COVID-19 and
the completion of significant corporate
restructuring activities. Having navigated
these challenges, we are now positioned to
sharpen our focus on raising engagement
levels across the business.
Our growth aspirations continue to be
supported by strategic investments, with
net capital expenditure for FY21 of $212
million. This included $78 million towards
the new landmark Winstone Wallboards
plasterboard facility in Tauranga, which we
expect to complete in 2023.
Notwithstanding the ongoing uncertainty
around COVID-19, we believe that the
economic trends in our key markets remain
supportive for further growth. In New
Zealand, the activity pipeline continues to
look ‘stronger for longer’. With ongoing
supply chain and labour constraints having
the effect of smoothing the recent sharp
rises in building consents over a longer
period, this is likely to mean an extended
period of solid building activity through
FY22 and beyond.
Australia’s residential outlook also remains
resilient, particularly across detached
housing and renovations. This is likely to be
offset by the apartments, commercial and
key civil sectors stabilising at current levels.
More broadly, with the combination of a
strong balance sheet, a sound strategy
which we are delivering on and a favourable
market outlook, I am confident that Fletcher
Building is well-positioned to deliver future
performance and growth.
The past year has been characterised by
many challenges and disruptions associated
with the global pandemic. I would like to
acknowledge and thank our more than
14,500 people who have remained focused
on supporting our customers, and each
other, under difficult circumstances. Finally,
I would also like to thank our shareholders,
customers, and suppliers for their support. I
look forward to providing further updates on
our progress in FY22.
Ross Taylor
CEO
5
Fletcher Building Limited Annual Report 2021 Our Strategy
Maximising momentum
to drive growth
Over the past three years,
Fletcher Building has refocused,
stabilised and set-up the
business for performance.
Our vision is to be the 'leader in New
Zealand and Australian building products
and solutions'.
'Improving the world around us through smart
thinking, simply delivered', represents three
key themes which shape how we operate as
a group of businesses.
Firstly, our purpose recognises our
commitment to make sure what we do is
sustainable, and also makes things better
wherever possible. Secondly, it highlights our
desire to adopt smart thinking in all we do
- for example, by delivering our customers
the best global ideas, or through innovating
or disrupting how we have traditionally
operated. Lastly, at the heart of it all is a
real drive in our organisation to make our
customers' lives easier.
Today, we are resilient and have strong
momentum as we enter the next phase
of our strategy, to deliver ongoing
performance and growth.
We’re confident that we have the right
strategy to optimise our advantage and
harness the growth trends anticipated in
our key markets.
Ross Taylor, CEO
Fletcher Construction’s Waikato 50 Project Director
David Taylor, and Project Manager Kirsty McVicar
(winner of 2021 Women in Construction award).
6
Fletcher Building Limited Annual Report 2021 Our Strategy
Vision
Purpose
To be the leader in New Zealand and Australian building products and solutions
Improving the world around us through smart thinking, simply delivered
Strategic
Goals
Zero injuries every
day
Market leading
customer solutions
and services
Lowest delivered cost
Economic
performance of each
business in industry
top quartile
Leadership in
innovation,
sustainability, and
growth via disruption
Our
People
Focused on
operational excellence
Global expertise –
locally delivered
Obsession for
customers
Strive for growth
and innovation
Driven by purpose
and values
Group
Measures
Zero Serious Injuries
NPS ≥ 55
Engagement ≥ 80%
30% Carbon Reduction
Growing Market Share
EBIT Margin ≥ 10%
Cash Conversion > 60%
ROFE 15%
Our strategic goals are focused on achieving performance and growth
Zero injuries every day
Lowest delivered cost
Our commitment to safety is at the heart
of what we do. We believe all injuries are
preventable and are committed to our
responsibility to get our people home safely
every day. We will never stop aspiring
to create a safer workplace.
Market leading customer
solutions and services
Delivering long-term value for our customers
is how we will achieve our vision. We are
continuing to invest in strengthening our
customer-centric mindset, by actively
listening to what our customers (and potential
customers) are telling us, and anticipating their
needs through advanced data and analytics.
This will allow us to continue to meet our
customers' current and future needs, and
provide a seamless and positive experience.
We are always looking for ways to do
things better and more efficiently to drive
sustainable cost management. Our focus
will be investing in initiatives that create real
customer value and stopping those that don’t.
Economic performance of each
business in industry top quartile
We plan to extend the advantage of our
powerful heritage brands by arming all our
businesses to perform to their full potential.
Having the fundamental elements of our
business right will enable our efforts
and resources to focus on growth,
with the capability to make more
strategic investments.
Leadership in innovation,
sustainability and growth
via disruption
We want to be the leader in
bringing new ideas and trends
from around the world to our
people, our partners, and our
customers. To do this we must not
be afraid to disrupt the markets,
the competition and, where
necessary, ourselves. Our focus
on sustainability will help drive our
innovation by shaping how key
resources are used in products
and processes.
Anchored by our Values
Four values define how we work at
Fletcher Building. Across the organisation,
our people strive to constantly
demonstrate these characteristics
each day.
To believe that all injuries
are preventable and
genuinely care about
getting our people
home safely, each
and every day.
To innovate and grow
by creating a workplace
where everyone shares
ideas and has a go.
To listen and understand
our customers, know our
competitors and provide
our customers with
products and services
they value.
To use our diverse
backgrounds and
experience to create
better results than
ever expected.
7
Fletcher Building Limited Annual Report 2021
Zero Injuries Every Day
Our safety commitment
Our plan is to ensure every person who works for us or with us
goes home safely each and every day. Fundamental to achieving
this is to make Fletcher Building a place where all our people
believe that all injuries can be prevented.
The Protect safety programme is focused
on ensuring this belief is made real and
built into all our rituals and practices which
provide our people with the skills and the
tools to proactively manage safety.
We have a strategic vision for our future and
a realistic plan to get us there. We know
that good safety is critical for our people and
performance. It is simply good business.
Getting to ‘zero’
Our current injury performance is improving,
and when analysed over a five-year period
we are recording a downward trend on
serious injuries, dropping from an average of
25 per year down to 8 in FY21. That means,
on average, 17 more people went home
safely to their families in the past year, free
from serious or life altering injuries. We
think this is the strong start we are looking
for, but our work on protecting our people
and each other, is never done.
Our Total Recordable Injury Frequency Rate
(TRIFR) was 5.0, a slight improvement
from last year. At this rate, we are ahead
of most of our peers in Australia and New
Zealand. However, we know that the best
companies in the world get below 3. We
will continue to drive TRIFR down as we
continue on our path toward preventing
all injuries.
When it comes to keeping
our people safe, our work
is never done. However,
we are pleased to see a
marked improvement in
safety performance and
our people’s commitment
to making ‘zero’ a reality.
Wendi Croft, Chief Health and Safety Officer
Our Protect strategy
To understand how safety performance
can be improved, we turned to global
experiences to draw on how the best in the
world have optimised their safety culture to
deliver zero injuries.
The five fundamental
pillars to our strategy
Shift
Mindsets
Develop
Leaders
85%
of our sites were
injury free
37,000
leader-led site safety
walks took place
Firstly, we knew we had to shift mindsets.
To achieve zero, our people needed to
personally connect with Protect and
to believe that preventing all injuries -
getting to ’zero’ - is possible. Along with
the values, the executive and business
leaders came together and identified four
things that all our people can do every day
to make a difference:
> Believe all injuries are preventable
> Never walk past – speak up and
take action
> Celebrate the good stuff
> Care for each other.
Safety needed to be line-led, not policed
by the safety team.
Leader site safety walks have been a
foundation in resetting that attitude.
In the past year, leaders have completed
over 37,000 leader walks, talking with
our teams about the work that they do
and supporting safety improvements.
Our leaders have monthly scorecards
and KPIs regularly reviewed, but it’s only
when our leaders are out on site and
engaged that we can truly foster a safety
leadership culture.
8
Fletcher Building Limited Annual Report 2021
Our people are leading the way in developing personalised
augmented reality experiences for site safety inductions. These
easy step-by-step immersive tools provide a paper-free alternative
to enhance contractors' risk awareness onsite.
Enable the
Frontline
Manage
Critical Risks
Drive
Accountability
Our frontline workers and teams are
the foundation of our business. They are
both the most vulnerable and the most
experienced in the risks we are exposed
to every day.
Together with our frontline teams, we
agreed and established new Life Saving
Rules – simple rules everyone can follow
at work, that we all know can protect
each other and save a mate's life. In the
coming year, our Frontline Development
Programme will be focused on enabling
our people to speak up, challenge their
risk perception and shift the way that they
think about safety at work.
Managing our critical risks well - the areas of our
operation that when mishandled can result in
serious injury or death - is essential to get right.
Getting in place the right organisational
structures, systems, processes and plans will
support our vision long term.
Our leaders are now supported by capable
Environmental Health and Safety (EHS) teams
which collaborate with them as trusted safety
partners. We have committed to simplifying
and decluttering our safety systems, including
gathering our big data together and using
business intelligence tools to gain insights
into our performance.
We have included supporting our Protect
safety programme as a key priority in our
Remuneration Framework review for FY22,
as outlined on pages 58 and 61.
We know that we need to be disciplined
around our critical risks and that we need to
sharpen our risk perception. Through our risk
containment activities, teams physically seek
out and contain exposed risks that could cause
serious or fatal injuries. 2,242 risk containment
sweeps have systematically identified and
contained critical risks in FY21, and we have
continued a downward trend in the number
and severity of the injury related claims lodged
across our businesses.
In the coming year and beyond, we will be
implementing a full risk analysis and assurance
process for our critical risks based on global
best practice. This approach will enable us to
focus in on a few critical controls, verify that
they are in place and assess their effectiveness.
This will give us confidence and visibility over
the things that really matter to save a life.
9
Fletcher Building Limited Annual Report 2021 Zero Injuries Every Day:
Our safety commitment
Continued
Total Recordable Injury
Frequency Rate (1)
6.9
5.1
5.2
5.7
5.0 (3)
FY17
FY18 FY19 FY20 FY21
Serious Injuries (2)
33
21
21
8
8
FY17
FY18 FY19 FY20 FY21
(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.
(3) Subcontractor TRIFR for FY21 was 4.9.
Watch Video
Further insights into
our Protect safety
programme
10
Learning from our near misses and from our people is essential. 6’4” Fletcher Living subcontractor
‘Jonny’ was the inspiration for the addition of another rail on all our scaffolding – putting our sites
well above safety standards and ensuring everyone is safe.
Establishing an aspirational safety culture
Seeing leaders thinking differently about
safety and our injury rates decrease gives
us confidence we are heading in the right
direction. We are achieving material change
in how we run our businesses – from
our fleet management to our inductions,
from integrated risk solutions to simple
innovation investments such as the 'Jonny
Rail’ heightened scaffolding standard or tip
alarms on heavy vehicles. We believe that our
leadership focus and our strategy will help
us deliver on our safety commitment of zero
injuries every day.
Two years ago, when we embarked on this
journey, only 42% of our people believed all
injuries were preventable. That meant that
most of our people expected to continue
to experience harm at the same rate – that
the injuries were just inevitable. This is
unacceptable to us. We are seeing early signs
that this belief is changing and more of our
people are going home safely every day. It’s a
good sign that our strategic focus is making
a difference.
Fletcher Building Limited Annual Report 2021 Protect Our Mental Health:
Skills to cope with a disrupted work and home life
y
d
u
t
S
e
s
a
C
Mental health pressure on the workforce
is a reality across many industries, and the
awareness of those impacts in the construction
sector are well documented. Making Fletcher
Building a place where our people thrive at
work and know they are cared for by their
teams, is a force our leadership is determined
to get behind.
For several years we have provided programmes to equip our
people to manage their mental health more proactively. With
the arrival of COVID-19 and, unprecedented stress to all areas
of our lives during this last year, the need to dial-up those
efforts was evident.
Many of our operational sites continued in a highly sanitised,
socially-distanced state and had added production pressure
without the same comradery that drives site culture. At home,
our people were often thrust into a reality of work life and
personal life squeezed into close quarters.
Our Fletcher Building executive quickly initiated frank and open
virtual conversations about the impact as we all adjusted to
a ‘lockdown’ or altered operational environment. From there,
our leaders began tailored efforts to bring people together
regularly. Arming our workforce with mental health tools to
cope was essential. In addition to the support provided by
our long-standing Employee Assistance Programme (EAP) we
increased a wellness focus through our dedicated employee
hub app and a series of virtual resilience trainings, including a
special session with TV psychologist Nigel Latta to put it all into
perspective as a community.
We led the Protect Our Mental
Health initiative from the front –
launching the programme to 250 of
our people with a series of change
stories from our leaders. Soon after
we kicked off a series of workshops
and webinars available to help our
people through difficult times,
supplemented by access to the
handy Mentemia app.
Dean Fradgley, CE Australia
Residents in the Australian state of Victoria in particular – where
many of our Australian operations are based – found themselves
in the grip of a highly disruptive 111 day lockdown during the
winter months of 2020. Fletcher Building Australia accessed
a programme of tailored support from our partnership with
NZ-based Mentemia, specialists in digitally-delivered mental
wellbeing to create the Protect Our Mental Health programme.
This was led from the front, with the senior leadership team
sharing their own, personal stories of mental health. More than
200 Protect Ambassadors were mobilised to help reach into the
business and better connect our frontline workforce to tools
and support. Mentemia’s purpose-developed app connecting
with virtual workshops and a regular programme of podcasts
and webinars led by a psychologist, generated impressive
attendance. Informal online ‘coffee and chat’ catch ups drew a
gathering, the largest of these attracted 70 people.
With more than 4,500 people spread across 250 sites, never
before has our Australian national business been able to connect
together so seamlessly. Leaders report back more conversations
around mental health has increased the cohesiveness of teams,
and the business was able to achieve better performance as
a result.
In FY21 Fletcher Building established a partnership with MATES
in Construction, in their mission to combat the enormous toll
of death by suicide in the building and construction industry, a
programme which will expand in FY22. Thanks to a grant from
the PlaceMakers Foundation, PlaceMakers is now working with
MATES in Construction to offer in-person support, information
and training for staff across 70 stores and sites nationwide.
Fletcher Construction and PlaceMakers have expanded partnerships with
MATES in Construction activating initiatives to help improve mental health
and prevent suicide across the industry. From left Lance Van Niekerk, Victoria
McArthur (CEO MATES in Construction), Bruce McEwen and Slade McFarland.
11
Fletcher Building Limited Annual Report 2021
Embracing Innovation and Disruption
to Drive Future Growth
20
innovation pilots
underway
264
people involved in
innovation challenges
to date
12
Environmental Advisor,
Cameron Russell using
drone technology at
Winstone Aggregates
Hunua Quarry.
Driving business growth requires both discipline in our existing
businesses and a willingness to embrace innovation and disruption to
fuel future performance and growth.
Innovation at Fletcher Building involves the whole organisation and ranges from day-to-day
performance improvements to disruptive change. It involves us applying agile process and
experimentation techniques and partnering with leading global innovators and disruptors to
bring new ideas to our businesses.
Driving growth through data and digital innovation
Our business is increasingly shaped by the need to build for a sustainable future by embracing
new products, technologies and processes which will meet the shifting expectations of
our customers, and transforming our current ways of working to ensure that our operation
delivers efficiently and safely, always.
As we respond to these opportunities, we are not ‘re-inventing the wheel’, rather we
deliberately look to great innovators to determine what is relevant for our customers in
Australia and New Zealand and develop these ideas for our local markets. We then use our
scale to commercialise these new ideas quickly.
Core to all of our innovation ambitions is understanding our customer needs and behaviours.
By leveraging our significant data assets, we are able to understand threats and opportunities
in our markets and respond more quickly to address them.
Specifically, we are using data analytics and digital capabilities to simplify our customers’
experience and to scale our distribution model. One example of this is the digital tools we are
developing for our customers allowing them to plan their work and manage their accounts to
help them improve their business.
These tools improve our customers’ experience and also provide us with greater insight into
our customers’ behaviours.
Fletcher Building Limited Annual Report 2021 y
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Digital enablement for PlaceMakers trade customers
While digital capabilities are commonplace
in many aspects of our lives, the trades industries
have traditionally continued to rely on paper-
based account management. However overseas
trends show this is changing rapidly.
Our PlaceMakers team wanted to get ahead of the curve,
be bold and disrupt the way we’ve always done things by
enabling customers to connect anytime, anywhere. The
ambition being, to put a PlaceMakers store ‘in the pocket’ of
every New Zealand builder.
By adopting an agile delivery model and partnering with both
onshore and offshore development capability, we are able to
bring products to market. This helped us speed up the launch
of the ‘Trade App’ in 2020, allowing customers to receive
contactless service following the initial COVID-19 disruption in
New Zealand. For the first time, trade customers could place,
track and update their orders in a seamless mobile experience.
A desktop and tablet friendly ‘Trade Portal’ quickly followed
with additional features, along with a fully integrated,
mobile-optimised consumer online store to complete the
e-commerce capability.
Customer centric, digital solutions are now in-store with the
launch of ‘Skip the Counter’ experience, reducing queues at
the trade counter and allowing customers to drive in, scan
and drive out.
No need to leave the worksite
PlaceMakers e-tools (Trade App and Trade Portal) allow
customers to view their specific product pricing, check
stock availability and place orders for click-and-collect or for
delivery to site. The ability to get the materials they need
to complete their jobs is no longer constrained by opening
hours, location or stock unavailability, they can manage all of
this from wherever they are.
Customer uptake of PlaceMakers e-tools has been strong
with 31% of trade customers now registered on the digital
platform and digital sales growing to over 8% of total
sales. It’s an encouraging result given that our international
benchmarking for similar trades businesses indicates 5% total
digital sales over five years is the standard.
Over the next 12-18-months PlaceMakers will continue to
drive awareness of the benefits of a mobile-managed account,
working with customers to understand their business' pain
points and what’s possible with these new tools.
With the digital platform fundamentals now in place,
customer experience improvements and new features are
continuing to be developed and rolled out.
PlaceMakers has a roadmap of ongoing developments to
deliver a personalised customer centric experience and new
features which make builders’ lives even easier. From basic
customer prompts such as, “Do you need screws with that?”
to more customer-centric features such as the ability to ‘create
a quote’ for their own customers. PlaceMakers is driven to
become an integral part of our customers' world and make it
even easier for them to do business.
Our digital focus has centred
around harnessing technologies
that drive convenience and value
for our customers. We are creating
solutions that enable a seamless
integration into their world, making
it easier for them to do business
with us.
Bruce McEwen, CE Distribution
The new PlaceMakers.co.nz Trade App and
portal and refreshed online store deliver a
more convenient digital experience, connecting
customers to shop and manage their trade
business whenever they choose.
13
Fletcher Building Limited Annual Report 2021
Embracing Innovation and Disruption to Drive Future Growth
Continued
Through our innovation programme, all Fletcher Building
people are being encouraged to become ‘innovators’.
Bringing the outside in
Our dedicated Innovation
and Sustainability team is
constantly looking to identify
and evaluate global trends
and new opportunities that
can complement our existing
businesses or disrupt the
industry. In the past 12 months
we’ve made significant
progress in forging ahead on
key areas where we can apply
a disruptive lens to drive new
product development, process
efficiencies, sustainability and
better customer outcomes.
14
product representation software; Partium,
a digital object recognition technology, and
Ligate, a 100% bio-based adhesive.
To drive an entrepreneurial mindset at
all levels of the organisation, we have
established our Innovation Capability
Building Programme, with several hundred
people participating in different types
of innovation training, workshops, or
collaborative programmes working on real
innovation opportunities.
Our team has a systematic process to
identify and quickly evaluate new product
opportunities, process innovations,
technologies, business models, and
partnerships. Starting with broad but
targeted global market eco-system
scans, we identify a pipeline of potential
innovations to address specific market
opportunities.
The ideas that come out of the eco-system
scans are prioritised and assessed against a
set of criteria. With input from our business
unit experts, we then select a number of
key opportunities to pursue in more depth.
We have completed six eco-scans and have
generated exciting developments with 20
pilots and partnerships now in place such as
Carbon Cure, a technology that lowers the
carbon content of concrete; Marxiant, a 3D
Fletcher Building Limited Annual Report 2021 Building a base for smart expansion of
Fletcher Living housing in New Zealand
In our Fletcher Living developments our
competitive advantage is that we control the
master-planning, which also allows us to create
the parks, play areas and other amenities that
are the foundations of a vibrant community.
These valuable community resources also
mean we can optimise the number of houses
to be built, without residents missing out
on that valuable outdoor living they love. We
are also able to continue to deliver homes at
all price points (generally in the $600,000 to
$900,000 range) in desirable locations. Fletcher
Living homeowners endorse this approach,
and consistently report back favourably on the
experience, with our net promoter score (NPS)
in the excellent range (NPS +68 in FY21).
In the last year, we have continued to evolve
our home offerings, commenced some work on
understanding the future of sustainable housing,
including a focus on a future of low-carbon
houses, and incorporating trends in technology
including electric vehicles and automation in
the home. We responded quickly to the shift to
work-from-home by adding facilities, such as
study nooks to our design plans.
Over the last five years our land development
strategy has grown to support a sophisticated
approach to selecting the right land in the right
location, then rezoning to share and create the
ideal conditions for our Fletcher Living
residential developments.
Our Clever Core offsite manufacturing is
continuing to evolve. In its first calendar year
of formal operation, we have expanded our
range of design typologies to over 20 and we
have successfully installed 97 new homes for
Fletcher Living in the last year.
With the recent acquisition of world leading
DfMA (Design for Manufacture & Assembly)
software, Clever Core has increased the speed
they are able to adapt their operation to new
design typologies, translating concept designs
to assembly-ready products faster and at a
lower cost. In FY22, one in five new Fletcher
Living homes will be delivered by Clever Core.
The evolution of our apartment offering
continues, typically at a mid-market price
range which holds growing appeal as Auckland
becomes increasingly densified. Our focus on
driving innovation in this type of housing grows
and we are developing sites in suburbs such as
Three Kings, Northcote and Panmure to deliver
our distinctive community approach. Some of
these apartments will include commitments
to deliver KiwiBuild or other government
programmes such as shared equity housing.
68
Fletcher Living NPS
20+
house typologies
built by Clever Core
Fletcher Living’s One Central
development in Christchurch,
winner of 2021 Te Ka-hui
Whaihanga New Zealand
Institute of Architects
Canterbury Awards
(Multi-Unit development).
15
Fletcher Building Limited Annual Report 2021 Embracing Innovation and Disruption to Drive Future Growth
Continued
GIB’s new Weatherline® Rigid Air Barrier product is being installed
at Fletcher Living’s Waiata Shores development in South Auckland.
Focusing our core New Zealand
businesses for growth
In our NZ Core divisions, our programme
of investments in modern manufacturing
and supply chains is taking effect. These
initiatives aim to deliver growth through
increasing process efficiency, reducing
cost of production and reducing our
carbon impact of production. A variety of
innovation initiatives are underway in our
Building Products division. These include
a wider range of cost-effective automation
solutions, such as at Tasman Insulation
which has resulted in 7% productivity
improvement; and the acceleration of our
new product innovation pipeline across our
Products, Pipes and Steel businesses. Iplex
has seen solid market share growth driven
by investment such as the mobile extrusion
plant and upgrading of manufacturing
capability. These improvements have led
to the development of new products
and solutions enabling entry to new
market segments.
In the past 18 months, Winstone Wallboards
has seen strong growth in its Weatherline®
Rigid Air Barrier product. With its distinctive
purple colour it is noticeable across both
commercial and residential sites. The
system benefits are wide-ranging including
moisture protection, early close-in providing
temporary weather protection during
construction, enhanced thermal efficiency
and structural bracing elements.
16
Improving our capacity to innovate for
growth is also important. Winstone
Wallboards is a world-class business
and our current Auckland plant is nearing
end-of-life. The new plant at Tauriko, Bay
of Plenty is set to open in 2023 and will
bring significant economic benefit to the
Tauranga region and around 100 new
permanent jobs. It will enable exciting
innovation opportunities, becoming a
hub for new product development while
improving energy, manufacturing and
logistical efficiency. Importantly, it will
provide the capacity to support long-
term demand for and surety of supply of
plasterboard in New Zealand. It will also be
more environmentally friendly, allowing us
to recycle used plasterboard and reduce
carbon emissions by 10%.
Fletcher Building Limited Annual Report 2021 Case Study
Innovation delivering insights into customer trends
Scanning for, trialling and testing innovation
is one thing, but making smart decisions to
ensure longer-term effectiveness of innovative
practices, products and services in our business
requires a combination of data-led disciplines.
evaluation process, they can better understand where they
are at and where action is needed. This has led to dedicated
focus on delivery of new product development projects
and initiatives that respond to market needs, drive product
leadership within the industry and deliver fresh new sources
of business and revenue growth.
With market leading joinery and surfaces business Laminex
Australia, we have sought to accelerate our growth in
decorative sales over the past two years, by employing
innovative strategies to capture customers’ attention. To
lead the market, our product selection of roughly 9,000
individual products needs to always ‘hit the mark’ with
bold options, popular ranges and great customer choice.
To clearly assess product performance Laminex is using a
range of analytics tools.
In the past year, Laminex has added the Product Vitality
Index to their reporting KPIs to provide a view to help
ensure their customers always have access to the newest,
most durable, and desirable products.
The Product Vitality Index is a measure that describes
'new' product revenues as a percent of total revenues.
By including the index into their monthly operational
Consistent market and customer feedback indicates that
over the last three to four years, Laminex has increased
its level of innovation and product leadership. This has
translated into a record number of product launches,
particularly those targeted at new product categories and
applications, which has led to increased consideration and
use of our products. In the past six months alone, Laminex
has launched three new brands, Haven Kitchens by Formica,
Surround by Laminex and Fusion, with a total addressable
market of over A$3 billion.
Following this process, Laminex are currently maintaining
a Product Vitality of over 12%. The end result is a clearer
forecast of future product pipeline that will land with our
customer base. It’s a welcome part of the kit enabling Laminex
to perform very well in market with margins in historic top
quartile levels and sustainably low overhead costs.
By applying innovation practices, including embracing
Product Vitality measures, Australia have demonstrated
they can continue to bring to market the latest and most
desirable products customers want, sooner.
17
Fletcher Building Limited Annual Report 2021 Leadership in Sustainability
Our aspiration is to lead our
markets with sustainable building
materials, construction and
distribution. We have been making
steady progress to improve the
sustainability of our products, and
to innovate so that as our business
thrives we also play our part in a
sustainable future.
Our sustainability strategy deepens our
commitment to our people and customers.
We focus on the issues that are significant
for our business and our stakeholders to
form the core aims of our strategy, and
we look for areas where we can make
a meaningful difference. These are our
material sustainability issues. In this annual
report we outline our performance on the
most significant of these issues, which
are improving our safety performance,
reducing our greenhouse gas emissions
and supporting our people.
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
18
Careful
management of
our resources and
emissions
Reduce carbon
emissions in line
with limiting climate
change below 2oC
Partner with our
supply chain to deliver
sustainable outcomes
Improve environmental,
social and governance
reporting within our
supply chain
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 2021 The essential Waikato-50 water
initiative will increase Auckland water
supplies by an additional 50 mega
litres per day. The project was delivered
in a little over a year instead of the
three to four years it would normally
take for a project of this size.
Leading in sustainability
As a leading building products, construction,
and distribution business we take our
environmental responsibility seriously. We
understand the need to address carbon
emissions and mitigate the impacts of climate
change. As part of that commitment we are
the first construction materials company in
Australasia to set a Science-Based Target
(SBT) for carbon reduction – our ’30 by 30’
target to reduce our emissions by 30% by
2030. We were pleased to be recognised
by the Carbon Disclosure Project (CDP) this
year as the most improved business in New
Zealand for our carbon reporting.
We are an active member of the Sustainable
Business Council, the Sustainable Business
Network, the New Zealand Green Building
Council and the Infrastructure Sustainability
Council of Australia.
Reducing our greenhouse gas
(GHG) emissions
The main sources of our GHG emissions
are the fuels used to produce our products,
known as process heat, emissions from the
cement-making process, our electricity use
and our emissions from transport.
We have taken steps to reduce our impact
in all these areas – each of our business
units has a Carbon Reduction Roadmap that
identifies specific initiatives to meet our ’30
by 30’ target.
Process heat and cement
We made substantial investment in reducing
coal use for our cement operations at Golden
Bay Cement this year and we are actively
investigating solutions to minimise emissions
from the cement-making process.
Our forward plans for further reductions
across the business include the new
Winstone Wallboards plant we plan to open
in 2023, which will reduce emissions by
10% as well as increase recycled content in
the product and be significantly more
water efficient.
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 these eight
United Nations Sustainable Development Goals.
FY21 waste diverted
from landfill
46%
FY20: 39%
FY21 Environmental Product
Declarations (EPDs)
10
FY20: 9
Products with EPDs
19
Fletcher Building Limited Annual Report 2021 Leadership in Sustainability
Continued
Our businesses are proud to provide civil works for the Waipipi
Wind Farm on 980ha of coastal land between Patea and Waverley.
The site is expected to deliver about 455 gigawatt hours of
electricity each year—that’s enough to power about 65,000 homes.
Green electricity
This year we continued to reduce electricity usage in our Australian
businesses through energy efficiency programmes and site
consolidation. We installed one of New Zealand’s largest rooftop
solar energy systems at our Laminex manufacturing facility in
Hamilton and it is providing 19% of the energy for the site on
average and reducing greenhouse gas emissions for the site by
around 3%. We also completed an initial assessment of solar
options for our larger Australian sites.
Low carbon transport
From the small to the large we are moving away from fossil fuel
to power our vehicles. This includes a move to electric forklifts and
tipper trucks in some of our operations, transitioning 20% of our
construction fleet to hybrid by the end of next year, and investigating
hydrogen and electric options for heavy vehicles across our
business.
We are the first building
materials company in Australasia
to publish a Science-Based
Target (SBT) for carbon
reduction – our ’30 by 30’ target.
Our FY21 GHG emissions
Sustainable products
Combined Scope 1 and 2 carbon emissions in FY21 were 1,145,035
tCO2e compared to 1,238,380 tCO2e, our FY18 baseline. Our
emissions intensity - the tonnes emitted per million dollars of
revenue - reduced by 6%.
Approximately half of the overall reduction was due to our project
to reduce coal use at Golden Bay Cement by using end-of-life tyres
and work in our Australian businesses on energy efficiency, including
consolidation of some sites. The remainder was due to lower
production volumes at Golden Bay Cement while we installed the
end-of-life tyres facility.
Combined Scope 1 and 2 carbon emissions*
)
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2
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t
(
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o
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s
s
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m
E
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
FY18
FY19
FY20
FY21
Combined Scope 1 & 2 emissions
Scope 1 emissions
Scope 2 emissions
*Figures exclude International division.
Scope 3 emissions for FY21 were 813,725 tCO2e.
20
We continue to increase the number of our products 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.
They empower our customers to make an informed choice about
the environmental impact of the products they choose. We have
published 10 EPDs in Australia and New Zealand and will complete a
similar number over the next three years, which will meet our aim of
holding sustainability certifications for all our major products.
A number of our products also hold other sustainability certifications
such as Declare labels and Environmental Choice certifications
which are recognised within green building standards such as Green
Star and Homestar.
Reducing waste to landfill remains an area of focus for our business,
and in particular reducing waste from construction and demolition
activities, which is a significant component of landfilled waste in
both New Zealand and Australia. In FY21 our waste to Class 1
landfills was 23,456 tonnes and diversion from landfill was 19,604
tonnes. This equates to 46% diversion from landfill and is a 7%
improvement on last year.
We see reducing waste generation and applying ‘circular economy’
principles to use waste from one industry as a raw material input for
another industry as key to overall waste reduction.
Fletcher Building Limited Annual Report 2021
Case Study
At New Zealand’s only end-to-end cement plant Golden Bay Cement, we are now
using end-of-life tyres in cement manufacturing which helps to solve a significant
waste problem and improve the sustainability of this key building material.
Sustainability as a springboard for growth
Leading our markets in innovative practices to reduce carbon emissions, is not just
making good on our commitment to a reduction of 30% emissions by 2030, it can be
really good business. As we explore the opportunity to bring the best of global thinking
to this part of the world, seeking opportunities to reduce business costs and increase
process efficiencies, customer enhancements and product improvement are central.
Golden Bay Cement (GBC) is New
Zealand’s only manufacturer of
cement and is uniquely positioned to
take advantage of innovations in the
cement process to reduce the impact
of manufacture. For 17 years GBC has
used waste wood to help displace coal
and reduce its emissions. This is one
reason why cement from GBC already
takes 20% less carbon to manufacture,
per tonne, than imported cement. This
performance is set to improve because in
FY21 GBC implemented a process to help
minimise waste across New Zealand as
well as reducing carbon emissions from
the plant, in partnership with the Waste
Minimisation Fund. GBC now uses waste
tyres at the end of their life as a fuel,
replacing coal.
Tyres that would otherwise go to landfill
are combusted as part of the cement
making process. The process can
consume up to 3.1 million waste tyres
per year, half of New Zealand’s output, as
fuel to substitute 15% or more of the coal
used to achieve the high temperatures
that cement making requires. The tyres
are transported to GBC by another
Fletcher Building business, Winstone
Aggregates, who backload shredded
tyres from the processing plant
in Auckland.
Because the tyres contain a proportion of
natural rubber, this fuel source has lower
carbon emissions than coal by around
13,000 tCO2e per annum. The steel in
the tyres saves 5,000 tonnes of ironsand
from being mined for use in cement. The
high temperatures in the cement kiln
mean that the tyres burn cleanly, with all
the ash and steel content becoming part
of the finished cement. At the same time
it helps solve a major waste problem
for New Zealand.
We are looking across all our concrete
products to create new, sustainable
products. We work with our customers
to refine the concrete they need using
our Firth carbon calculator, and these
customers can take advantage of Firth’s
low carbon cement offer. We are also
looking at the other raw materials used in
concrete, and this year we started trials
of recycled aggregate production at our
Hunua Winstone Aggregates site.
9,000
tonnes of carbon reduced so far
3.1m
tyres diverted from
landfill per year
21
Fletcher Building Limited Annual Report 2021 Our People
Developing a culture of performance
and growth for our people
From project managers to cement truck drivers to environmental specialists, our business operates at its
best when we embrace the scale, experience, and diversity of our people. Every day we are privileged to
have more than 14,500 talented people band together and turn our purpose and vision into reality.
In return, Fletcher Building aims to offer our
people an exceptional employee experience
with a commitment to help them succeed
personally and professionally. Our goal is
to provide an inclusive, safe and healthy
workplace, where teamwork is celebrated
and where people are challenged to be bold
and channel their inner innovator to help our
business grow.
Providing our people with career growth is a
priority. We are pleased that in FY21, nearly
half of all open positions were filled by
internal candidates, creating, in turn,
new opportunities for people to join
Fletcher Building.
Just as importantly, we have worked hard
to ensure that our people, whatever their
skillset and background, have access to
the necessary development opportunities
and experiences to build rewarding careers
with Fletcher Building. This has seen us
offer more than 166,000 hours of training,
learning and development options for our
people. We continue to be grateful for the
ongoing support of the Fletcher Building
Employee Educational Fund who in FY21,
invested more than $4.2 million in the
development of our people.
Our most recent employee engagement
score was 66%, down from 71% in FY19.
Whilst this drop is disappointing, it is a huge
motivator to make improvements across
the Group to help our people feel more
connected to Fletcher Building in the future.
Our key people traits
To succeed, we need a range of talented
people from diverse backgrounds with
different perspectives and experiences.
As part of our strategy, we have identified
a handful of fundamental people traits
and values that will be critical if we are to
achieve our true potential.
Operational excellence
Operational excellence is about making
sure we are delivering the basics well, all
the time. This key trait ensures we are
operating our businesses effectively
and efficiently while building solid
foundations to grow from.
This starts with a culture where safety is
always put first, no matter where in the
business our people work and strengthening
our belief that all injuries are preventable.
As part of our Protect programme, we
launched The Safety Leadership Programme
(SLP) which we highlight in the case
study opposite.
Another particular focus of operational
excellence in FY21 has been around pricing.
We recognise that to achieve the margin
expansion we want to deliver, we need to
enhance our pricing discipline. To do this
we have been building the capability of
our people in this area. An applied learning
framework encouraged teams to link their
learning to their own market, including
understanding pricing from a customer point
of view and what creates value for them.
Feedback has been positive with our
Stramit Australia teams commenting that
having a common framework to talk about
customer value is already positively changing
conversations about pricing across teams.
The Fletcher Construction team working on the Ara
Tu-hono – Pu-hoi to Warkworth project will extend
the four-lane Northern Motorway (SH1) 18.5km to
just north of Warkworth. The project is a partnership
between Waka Kotahi NZ Transport Agency (NZTA)
and the Northern Express Group (NX2).
22
22
Fletcher Building Limited Annual Report 2021
Fletcher Building Limited Annual Report 2021 Boldly driving a customer mindset
Three of our people traits are intrinsically linked;
obsession for customers; global expertise, locally
delivered; and striving for innovation and growth.
Instilling these traits in our teams and growing
them further is how we will stay ahead of
our competitors.
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We are orientating our business more towards
our customers to meet their shifting needs,
which requires using more data and analytics
to understand them better and anticipate their needs.
It also means encouraging our people to deliberately
look outside of their own businesses and industries for
innovations that improve the customer experience by
embracing disruptive global trends.
Building an innovation mindset and culture is central to
Fletcher Building achieving our goals. Over the past year,
our people have had the opportunity to be involved in a
range of different innovation activities.
One such example is the Fletcher Steel Innovation
Challenge which engaged with more than 180 of our
people and generated 400 new ideas and concepts.
These ideas were narrowed down to 11 and are
now included in Steel’s Innovation Roadmap
for commercialisation.
Focusing on these traits is getting results. We have lifted
our Net Promoter Score (NPS) by eight points to 41 over
the last three years and we are determined to keep this
trend moving upwards.
Driven by purpose and values
How we do what we do is as important as what we
achieve, and our values remain central to how we do
business. We actively foster an inclusive workplace which
encourages diversity of thought which we believe is the
foundation for greater innovation.
Our Inclusion and Diversity strategy concentrates on
three dimensions: fostering an inclusive culture; greater
women representation; and more ethnicity in leadership.
People-led action groups have been amplified this
year with two new groups being set up to promote
and champion inclusion and diversity initiatives. Ta-tai,
Fletcher Building’s Ma-ori Network Group and the Equality
Network Group join our well-established Fletcher Building
Pride Action Group, each sponsored by an executive
team member and empowered to develop initiatives and
events to raise awareness and ignite action.
While women hold more than 50% of our functional
roles, we recognise that our industry is traditionally
regarded as male dominated and that we have more work
to do to ensure a more balanced gender mix across our
operational roles. This is based on the belief that diverse
backgrounds, perspectives and thinking contribute to
building innovation, creativity and performance. With this
in mind, we set a target in FY21 to increase the number
of women in operational roles by 23 year-on-year, while
also retaining or replacing the number of women we
already employ. While not all our divisions achieved their
targets, notably, our Concrete division increased the
number of women in operational roles on their sites over
the past year, and one in four leaders in our Residential
and Development division is a woman. However, more
broadly, we continue to build our understanding of how
we can drive sustainable and meaningful change in this
important area.
Line managers, site supervisors and plant managers
are re-emerging as confident safety leaders through our
Safety Leadership Programme. At its heart is a shared
vision of achieving 'zero injuries every day'.
Developing as safety leaders
In FY21 we created our own Safety Leadership Programme (SLP) to
provide a purpose-built framework for leadership development to enhance
safety across the organisation. SLP is our primary tool to upskill and
empower our line leaders who are responsible for leading safety within
their division, business unit and teams.
What makes this a truly unique programme is that SLP is facilitated by
line managers, bringing credibility to the delivery as they are encouraged
to tell their own stories to connect with their teams. The programme
encourages people to talk openly about how they can personally
contribute to a safer workplace, rather than putting the emphasis on
compliance and legal obligations. In a practical sense, this means that
our people will focus on their own safety and that of their colleagues,
regardless of whether a supervisor is present or not.
SLP has become the gold standard for a truly authentic ‘by us, for us’
approach to developing a leadership vision, and a practical toolkit for our
leaders to engage the hearts and minds of their people. The cascaded
approach means no one is asked to lead differently until they have felt
a difference in their own leader. The programme is supplemented by
significant and ongoing coaching, which extends over a six-month period,
providing participants with the chance to hone their skills in their own
work sites.
The roll-out of the programme started with CEO, Ross Taylor leading
the executive team through the programme, who in turn took their own
leadership teams through it. We anticipate nearly 1,500 leaders will be
engaged in the programme by January 2022.
Our people have told us that it has made a difference to have their own
leaders facilitating workshops and genuinely leading these discussions.
Participants say they were particularly impacted by the open, honest
story telling which created an environment where they feel they have an
important and relevant part to play.
As one of our senior managers commented: 'this isn’t a safety course
that happens to be about leadership; it’s a leadership programme that
happens to be about safety.'
95%
agree or strongly agree they
will be a better safety leader
after attending the SLP
783
safety leaders initiated their
training through the SLP
Watch Video
More about our Safety
Leadership Programme
23
Fletcher Building Limited Annual Report 2021
Our People: Developing a culture of performance and growth for our people
Continued
Addressing the issue of gender pay parity
remains another key priority. While our
average female salary across the business
is 96% of the average male salary, we now
have action plans in place within all our
divisions to close this gap.
Our people-led Equality Network, which
aims to inspire, support and develop
women in our business has also delivered
valuable steps forward. In FY21 the
network expanded to over 160 members
and provided 93 women with professional
development and networking opportunities
through membership of the National
Association of Women in Construction
(NAWIC) and the NZ Women’s Infrastructure
Network. In addition, the first cohort of
15 women went through an in-house
mentoring programme designed and piloted
by the Equality Network, which adds to
development opportunities already available
to our women through Global Women and
our leadership development programmes.
This year 26 future leaders participated in
our flagship Whakatupu Ma-ori Leadership
wa- nanga ('to grow’) programme. This
programme continues to connect
participants with their culture and allow
them to grow personally and professionally
through new-found confidence and skills.
Whakatupu plays a key role in helping
us to create work environments where
our indigenous people can bring their
whole selves to work. Whakatupu is also
about creating a legacy community within
Fletcher Building so that alumni from the
programme can call on the team for support
throughout their Fletcher Building careers.
We also remain a principal sponsor of both
the First Foundation and Tupu Toa. These
organisations focus on development and
work opportunities for indigenous youth and
those from challenging backgrounds. Our
support gives a ‘hand-up’ to those that may
not have the same opportunities as others
in our community. We continue to provide
five First Foundation scholarships for tertiary
education annually and expect to secure
placements for the coming year's students
across Fletcher Living, Construction and
Concrete. We intend to offer 10 internships
from Tupu Toa in FY22.
Our suppliers
We also have a responsibility to those who
work with us. We are committed to the
highest standards of ethical behaviour in
the conduct of our business and activities.
We support and respect the protection of
human rights and endeavour to make sure
that Fletcher Building is not complicit in
human rights abuses. In FY20 we published
our Human Rights Policy and our Supplier
Code of Conduct, outlining how we and
our suppliers will ensure ethical treatment
of people who work with us. This year, we
focused on identifying areas with potential
risk for forms of modern slavery in our
supply chain, completed risk assessments
to identify where to focus, and published
our Modern Slavery Statement in
March 2021.
Watch Video
View Fletcher Steel's Kylie
Henderson Whakatupu
experience here.
C
a
s
e
S
t
u
d
y
More than 60 Fletcher Building employees
took time to mentor the girls and
demonstrate first-hand how rewarding a
career in the industry can be.
The results of the programme were
significant. As well as feeling more
confident in themselves, the percentage
of girls who stated that they were
interested in a career in Science,
Technology, Engineering, Mathematics
(STEM) increased from 16 at the start of
the programme to all 28 by the end.
Watch Video
View the Fletcher Building case
study video, and learn more
about the GirlBoss partnership.
GirlBoss New Zealand:
Creating possibilities for
tomorrow's workforce
Equally important as supporting women
already in the industry is creating and
sustaining a pipeline of young high
school-aged women, keen to enter the
building and construction industry.
In 2021, Fletcher Building teamed up
with GirlBoss New Zealand to run two
five-day programmes which introduced
28 female high school students to the
possibilities of a career in the sector.
Participants went on site visits to see the
latest Fletcher Building projects, learned
about personal branding and networking,
and took part in a Dragon’s Den-style
challenge. They were mentored by
senior leaders and then they presented
back to a panel of executive ‘dragons’
at the end of the week.
24
Fletcher Building Limited Annual Report 2021
Performance
25
Fletcher Building Limited Annual Report 2021 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)
Net earnings before significant items
Basic earnings per share (cents)
Basic earnings per share before significant items (cents)
Dividends declared per share (cents)
Cash flows from operating activities
Capital expenditure
Revenue
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Other
Gross revenue
Less: intercompany sales
External revenue
Year ended
June 2020
NZ$M
Change %
Year ended
June 2021
NZ$M
8,120
669
(128)
541
(64)
(44)
433
(116)
317
(12)
305
413
37.0
50.1
30.0
889
232
7,309
160
(276)
(116)
(69)
(80)
(265)
81
(184)
(12)
(196)
3
(23.5)
0.4
-
410
232
Year ended
June 2021
Year ended
June 2020
NZ$M
1,401
1,714
849
734
1,456
2,758
10
8,922
(802)
8,120
NZ$M
1,173
1,471
740
466
1,318
2,802
10
7,980
(671)
7,309
11%
NM
54%
NM
7%
45%
NM
NM
NM
-
NM
NM
60.5
49.7
NM
117%
-
Change %
19%
17%
15%
58%
10%
(2%)
-
12%
20%
11%
(1) EBIT before significant items is a non-GAAP measure 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.
(2) Significant items relate principally to restructuring charges recognised. Further details of significant items can be found in note 2.1 of the financial statements.
26
Fletcher Building Limited Annual Report 2021 Building Products
EBIT* 2021
Distribution
EBIT* 2021
$197m $127m
EBIT* 2020 $87m (p) 126%
EBIT* 2020 $85m (p) 49%
Concrete
EBIT* 2021
$113m
EBIT* 2020 $74m (p) 53%
Residential and Development
EBIT 2021
$154m
EBIT* 2020 $65m (p) 137%
Construction
EBIT* 2021
$31m
EBIT* 2020 $(147)m (p) NM
Australia
EBIT* 2021
$103m
EBIT* 2020 $33m (p) 212%
* Before significant items.
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Corporate
Total
Lease interest expense
Funding costs
Earnings/(loss) before tax
Tax (expense)/benefit
Earnings/(loss) after tax
Non-controlling interests
Net earnings/(loss)
EBIT
EBIT before significant items(1)
Year ended
2021
Year ended
2020
NZ$M
NZ$M
Change
%
Year ended
2021
Year ended
2020
NZ$M
NZ$M
Change
%
188
128
117
154
28
(17)
(57)
541
(64)
(44)
433
(116)
317
(12)
305
68
67
61
64
(160)
(133)
(83)
(116)
(69)
(80)
(265)
81
(184)
(12)
(196)
176%
91%
92%
141%
NM
NM
31%
NM
7%
45%
NM
NM
NM
-
NM
197
127
113
154
31
103
(56)
669
(64)
(44)
561
(136)
425
(12)
413
87
85
74
65
(147)
33
(37)
160
(69)
(80)
11
4
15
(12)
3
126%
49%
53%
137%
NM
212%
(51%)
NM
7%
45%
NM
NM
NM
-
NM
(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.
27
Fletcher Building Limited Annual Report 2021 Group Overview
External revenue of $8,120 million was $811 million or 11% higher than the prior year’s $7,309 million.
EBIT before significant items was $669 million, compared to $160 million in the prior year.
Group net earnings were $305 million, compared to a loss of $196 million reported in the prior year.
Cash flows from operating activities were $889 million, compared to $410 million in the prior year.
Whilst the uplift in the Group’s performance was partly due to
the adverse impact of COVID-19 in the prior year, the result also
reflected the Group’s progress in its strategy to drive performance
and growth. In particular, programmes implemented over the past
three years to improve operational performance and investments
in targeted growth opportunities resulted in materially improved
profitability. FY21 EBIT margin before significant items increased
materially to 8.2%, with the Group continuing to target an earnings
margin of around 10% in FY23.
In New Zealand, market activity levels for the core materials and
distribution divisions (Building Products, Distribution and Concrete)
remained robust throughout the year. Demand in the residential
sector was strong, driven by both new housing and renovation
activity, while the commercial and infrastructure sectors were
broadly in line with the prior year. Markets were also characterised
by global and local supply chain constraints, creating pressures
on logistics channels and freight costs, and there were material
increases in input costs in other areas – notably energy, steel and
resin. In this environment, the New Zealand core divisions delivered
strong performances. Gross revenue was 17% higher than the prior
period, ahead of market activity as businesses achieved share gains
in target segments. EBIT before significant items was $437 million,
significantly ahead of revenue growth through a combination of
operating leverage, efficiency benefits, and improved operational
disciplines across the businesses. EBIT margins before significant
items in these New Zealand core divisions lifted to 11% overall.
The Residential and Development division delivered EBIT before
significant items of $154 million, compared to $65 million in the
prior year. The Residential business continued to grow with house
sales volumes of 836 units in FY21. Combined with year-on-year
price growth of 8% in a supportive market environment, this
resulted in Residential EBIT of $101 million. Clever Core continued
to ramp up volumes to 97 units compared to 50 in the prior year.
Land Development EBIT was $57 million, predominantly from the
sale of two surplus Australian sites.
The Construction division reported gross revenue of $1,456 million
and EBIT before significant items of $31 million. Earnings were
underpinned by Brian Perry Civil and Higgins, which delivered a
combined EBIT margin of 5.4%. The division continues to make good
progress in reshaping its forward order book to deliver an improved
risk profile and margins.
In Australia, market conditions were mixed. The residential sector
proved resilient for detached housing and renovations, supported
by low interest rates and the Government’s HomeBuilder grant.
The commercial sector trended lower, and project activity in key
civil sectors also slowed. In this environment the division delivered
materially improved performance, driven by significant cost
reductions and operational investments undertaken over the past
three years. Gross revenue of $2,758 million was 2% lower than the
prior year due to the lower activity in commercial and civil sectors,
28
partially offset by market share gains in target segments. Divisional
EBIT before significant items increased to $103 million from $33
million in the prior year, and the EBIT margin increased to 3.7% from
1.2% in FY20. Growth in earnings and profitability was driven mainly
by the Laminex, Tradelink and Stramit businesses, while Rocla’s EBIT
included a $6 million benefit from reduced depreciation as it was
held for sale as at 30 June 2021.
Significant items charges for the Group were $128 million. $78
million was in respect of an impairment to the Rocla business,
based on a reassessment of likely divestment proceeds. The balance
of the significant items related to the final phase of the Group’s
restructuring programme, principally in the Australia division.
Net interest expense for the Group was $108 million in the year, of
which $64 million related to lease interest. The Group’s funding costs
for the period decreased by 45% to $44 million, resulting principally
from lower debt levels following the repayment of $764 million of
debt since June 2020. A tax expense of $116 million in the period
compared to a tax benefit of $81 million in the prior year.
Basic earnings per share were 37.0 cents in FY21, compared to
(23.5) cents in the prior year. Excluding the impact of significant
items, earnings per share were 50.1 cents, compared with 0.4 cents
in the prior year.
Group cash flows
Cash flows from operating activities for the Group were very strong
at $889 million, compared to $410 million in the prior year. In addition
to the substantial uplift in earnings, the key driver of this cash flow
performance was effective management of working capital. At the
same time, the Group has made targeted investments in inventories
to manage supply chain constraints and has also ensured prompt
payment to suppliers to support overall industry liquidity.
The working capital cycle in the core manufacturing and distribution
divisions improved by 5.3 days compared to the prior period, driven
by improvements in debtors and inventories. Payables days were
unchanged. A small level of inventory growth is expected in FY22 as
resilience stocks are rebuilt in some businesses.
In Residential and Development, strong house sales led to a
substantial reduction in housing inventories and a $105 million
working capital inflow. At 30 June 2021, the division held one
finished house in stock, compared to 107 at the end of the prior year.
Divisional funds decreased by 12% to $534 million and are expected
to rebuild in FY22 as the division invests in ongoing volume growth.
In Construction, overall trading cash flows (excluding significant
items) were an outflow of $118 million which comprised an outflow
of $104 million against legacy project provisions booked in prior
periods; an outflow of $69 million from an unwind of advanced
working capital positions; and an inflow of $55 million from the
balance of the business.
Capital expenditure for the Group in FY21 was $232 million,
including $78 million for the new Winstone Wallboards plant.
Fletcher Building Limited Annual Report 2021 At Pacific Coil Coaters, Steel GM
Adrian Blake and Group Operations
Manager Paul Murphy have led the
team to increased productivity of
>15% through smarter operations,
improved process and teamwork. All
this with a reduction in the number
of manufacturing shifts and an
improvement in safety performance.
Additional investments were focused on key strategic priorities in
manufacturing automation, digitisation, and carbon reduction.
Strong performance on all dimensions of cash management
resulted in Group free cash flow in the period (excluding legacy
projects) of $652 million, compared to $269 million in the
prior period.
Funding
The Group’s balance sheet and funding profile remain strong.
As advised in June 2020, the Group made an early repayment of
US$200 and A$99 million of USPP notes on 29 July 2020 from
the Group’s cash reserves, retiring the Group’s most expensive
source of debt and reducing annual funding costs by $17 million.
Total funding available to the Group as at 30 June 2021 was
$1,764 million of which $925 million was undrawn and there was
an additional $666 million of cash on hand. The Group’s liquidity
was therefore strong at $1.6 billion.
The Group’s gearing at 30 June 2021 was 4.4% compared with
12.3% at 30 June 2020.
The Group’s leverage ratio (net debt / EBITDA) at 30 June 2021
was 0.2 times, compared with 0.9 times at 30 June 2020 and
compared to a target ratio of 1.0 – 2.0 times.
Given the strength of this position, on 26 May the Group
announced its intention to undertake an on-market share buyback
of up to $300 million over the 12 months to May 2022.
The average maturity of the Group’s debt at 30 June 2021 is 3.1
years and the hedged currency split is 38% Australian dollar; 60%
New Zealand dollar; and 2% spread over various other currencies.
The Group currently has 70% of all borrowings with 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
period-end borrowings) is 4.0%.
Dividend
The 2021 final dividend is 18.0 cents per share, bringing the total
dividend for 2021 to 30.0 cents per share. In line with the Group’s
tax crediting policy, the Group targets to impute and frank at least
the final dividend subject to available tax credits. The final dividend
will be unimputed and unfranked for tax purposes.
The final dividend will be paid on Friday 17 September 2021 to
holders registered as at 5:00 pm (NZ time) on Friday 27 August 2021.
The shares will be quoted on an ex-dividend basis from Thursday 26
August 2021 on the NZX and ASX. The Dividend Reinvestment Plan
will not be operative for this dividend payment.
Outlook
The macro backdrop and activity pipeline remain supportive for
growth in both New Zealand and Australia. This is driven in particular
by strong demand in the Residential sector, while activity in the
Commercial and Infrastructure sectors remains stable. Supply chain
and labour constraints mean the New Zealand Residential sector
is currently at or near capacity, and is likely to mean an extended
period of building activity in FY22 and beyond. Input cost inflation
and supply chain disruption remain key features of the operating
environment in both geographies, with businesses focused on
managing continuity of supply for customers and ensuring cost
recovery through price. COVID-19 outbreaks and lockdowns remain a
risk to market activity and business performance. Overall, the Group
has a strong balance sheet, a favourable market outlook, and remain
well-positioned to drive performance and growth. An update on FY22
trading and outlook will be provided at Annual Shareholders' Meeting
in October 2021.
29
Fletcher Building Limited Annual Report 2021 Building Products
Divisional Review
Winstone Wallboards
Laminex New Zealand
Tasman Insulation
Iplex New Zealand
Humes
Fletcher Steel
Altus JV
% of Group revenue
16%
Revenue
$1,401m
The Building Products division
reported gross revenue of $1,401
million, 19% higher than the prior
year. EBIT before significant items
was $197 million, compared to $87
million in the prior year.
The strong trading momentum in the first
half continued in the second half of the year
with all Building Products businesses recording
robust results. Higher revenues were reflective
of a supportive market environment, notably
in the residential sector; market share gains,
including as a result of customers’ increasing
preference for local manufacturing; and
improved pricing disciplines as businesses
worked to offset input cost pressures in
resin, steel, paper, freight and energy.
The EBIT margin before significant items
for the division increased strongly to
14.1%, driven by manufacturing efficiency
programmes, reduced overheads and higher
production volumes. Pleasingly, the Humes
and Steel businesses delivered significant
earnings improvements on the back of a
successful execution of their turnaround plans.
During the year, the division made good
progress on initiatives to improve its customer
offering and operational efficiency. Winstone
Wallboards launched the Customer Specific
Quote (CSQ) application, which together
with the MyGIB app launched last year has
materially improved customer quote and
order processing. Humes continued the
rationalisation of its sales and manufacturing
operations, with the investment in upgrading its
pipe manufacturing facility in Papakura on track
for commissioning in mid-FY22. Tasman Insulation
completed the automation of its bagger and bag
placer processes, while Fletcher Steel rationalised
its South Island sites and finalised the relocation
of Easysteel and Dimond in Wellington to an
improved facility. Iplex launched new products in
the rainwater segment and started production of
160mm drum coils and free-standing coils and
Polyethylene25 length pipe, in line with its market
expansion initiative into the rural and electrical
segments. Laminex launched new product ranges
in line with its growth strategy and introduced
its new website, e-commerce and digital
marketing platforms.
Trading cash flow for the division was $244 million,
or $251 million excluding significant items. This is
reflective of the strong operating earnings and
good working capital management, as well as
lower-than-usual inventory levels resulting from
the strong sales demand.
Capital expenditure for the division was
$112 million, of which $78 million related to the
construction of the new Winstone Wallboards plant.
Watch Video
Investor Day 2021 -
Building Products
Future Focus
The division will continue to focus on delivering improved customer services,
innovative new products, and organic entry into targeted adjacencies. It will
also continue to drive cost efficiencies through modernisation and automation
of manufacturing facilities. At the forefront of these are the investments in the
new Winstone Wallboards plant, the modernisation of the Humes Papakura
pipe manufacturing plant, and the switch to advanced curing oven technology
at Pacific Coilcoaters. These initiatives will also support the division’s objective
to reduce its carbon footprint by at least 30% by 2030, as compared to the
2018 baseline. The division is targeting to maintain EBIT margins at around
14% at current market activity levels.
30
Fletcher Building Limited Annual Report 2021 Building Products
Financial Summary
Building Products
EBIT before significant items (1)
Change
%
Year ended 30 June
2021
NZ$M
2020
NZ$M
Change
%
2021
NZ$M
1,401
1,101
197
14.1%
(9)
726
2020
NZ$M
1,173
922
87
7.4%
(19)
678
19%
19%
126%
6.7%
53%
7%
27.1%
12.8%
14.3%
244
112
125
53
95%
(111%)
Year ended 30 June
Gross revenue
External revenue
EBIT before significant items (1)
EBIT margin before significant
items
Significant items (2)
Funds
ROFE (3)
Trading cash flow
Capital expenditure
Our Building Products businesses
Building Products
Steel
Total
157
40
197
101
(14)
87
55%
NM
126%
(1) 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 2021.
(2) Details of significant items can be found in note 2.1 of the financial statements.
(3) EBIT before significant items / closing funds.
GIB® is New Zealand’s
favourite plasterboard
owing to our high quality
commitment to innovation
and excellent customer
service. Our new Tauriko
facility will ensure we
can continue to support
customers now and into
the future.
Hamish McBeath,
CE Building Products
31
Fletcher Building Limited Annual Report 2021 Distribution
Divisional Review
PlaceMakers
Mico
Forman Building Systems
% of Group revenue
19%
Revenue
$1,714m
32
The Distribution division reported
gross revenue of $1,714 million,
17% higher than the prior year.
EBIT before significant items was
$127 million, an increase of $42
million on the prior year.
Revenue growth was delivered across all
customer segments and was particularly
strong in the Auckland region (+29% versus
prior year) and the lower North Island (+20%).
EBIT margin before significant items increased
to 7.4% for the year, the result of scale
benefits from top line growth and tightly
managed operating costs. This includes the
ongoing workforce optimisation programme,
which is focused on branch efficiencies
through improved ways-of-working.
Further to this, the PlaceMakers business
continued to bring delivery services in house,
with 93% of all ex-branch deliveries now
managed by the centralised delivery team.
The PlaceMakers Regional Hub programme
of work was completed during the year, with
27 of the 65 branches now in 8 regional hubs.
This structure is providing greater consistency
for customers who transact with multiple
branches, as well as simplified and aligned
regional leadership and sales teams.
The PlaceMakers e-commerce tools were
released during the period, creating a best-
in-class platform allowing customers greater
flexibility in their interactions with the business.
Key features include order and delivery tracking,
real-time visibility of stock availability and
personalised pricing. Encouraging adoption
has been a significant focus during the year,
with over 30% of trade customers now
registered and usage growing strongly.
The division continued to grow points of
presence, with the opening of new branches
in Hastings, Upper Hutt and Matamata.
Trading cash flow for the division was $122
million, or $129 million excluding significant
items. The division has continued to retain
tight management of working capital, while
balancing this with maintaining inventory levels
in a period of strong customer demand and
supply chain challenges.
Capital expenditure in the year was $12 million,
with investment centred on digital innovation
and property improvements.
Watch Video
Investor Day 2021 -
Distribution Division
Future Focus
Ensuring competitive customer offerings, ease of doing business and
market leading service remain core to the division’s strategy. Driving
adoption of e-commerce tools will continue to be a focus, with integration
into customer ecosystems a priority. Increased use of data and analytics
will enable personalisation and marketing automation, while also providing
insights from which to drive customer solutions. With the Hub structures in
place, the focus here is on driving outcomes from greater scale, including
the improved purchasing power, the ability to reconfigure the property
footprint and enabling closest site delivery. The division is targeting
ongoing EBIT margin expansion of 0.5%-1.0% by FY23.
2020 X.XFletcher Building Limited Annual Report 2021 Distribution
Financial Summary
Year ended 30 June
Gross revenue
External revenue
EBIT before significant items (1)
EBIT margin before significant items
Significant items (2)
Funds
ROFE (3)
Trading cash flow
Capital expenditure
2021
NZ$M
1,714
1,684
127
7.4%
1
215
2020
NZ$M
1,471
1,440
85
5.8%
(18)
209
Change
%
17%
17%
49%
1.6%
NM
3%
59.1%
40.7%
18.4%
122
12
117
21
4%
43%
(1) 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 2021.
(2) Details of significant items can be found in
note 2.1 of the financial statements.
(3) EBIT before significant items / closing funds.
Our Distribution businesses
Key strategic initiatives are
well underway to strongly
position the business
for the future. Initiatives
all centred on driving
convenience and value for
our customers, to deepen
loyalty and engagement,
and grow margins and
market share.
Bruce McEwen,
CE Distribution
33
Fletcher Building Limited Annual Report 2021 Concrete
Divisional Review
Firth Industries
Golden Bay Cement
Winstone Aggregates
% of Group revenue
10%
Revenue
$849m
34
The Concrete division reported
gross revenue of $849 million,
15% higher than the prior year.
EBIT excluding significant items
was $113 million, compared to
$74 million in the prior year.
Revenue was underpinned by strong demand
across all key product segments, owing to
differentiated offering, asset renewal and
debottlenecking of key operations and pricing
discipline. EBIT grew well ahead of revenue,
resulting in EBIT margins before significant
items lifting to 13.3%. These results reflect
a sustained programme over the past three
years of manufacturing and supply chain
efficiency initiatives, network optimisation
and development of a lean and agile support
organisation. This was partially offset by higher
electricity costs and product purchases to
maintain cement inventories through the
commissioning of the Golden Bay Cement
waste tyre facility.
The division has made good progress with
its decarbonisation plan and a sustained
reduction in carbon intensity remains a key
focus. Entering FY21, Golden Bay Cement
was already materially lower in carbon than
imported cement alternatives, due to its higher
use of renewable and recycled fuels, and
lower freight profile. By the end of FY21, this
advantage was reinforced by commissioning
of the waste tyre project at Portland, which
lifted the rate of coal substitution in the
manufacturing process from around 15% to
35%. Firth achieved 95% of ready-mix products
with Environmental Product Declaration. The
division continues to extend its offering of
sustainable enhanced solutions and services
such as supplementary cementitious materials,
and concrete recycling and re-use.
Other key initiatives in the division included
Firth’s launch of its ready-mix online sales portal
and rollout of digital dockets, and continued
extension of masonry and differentiated
concrete products.
Trading cash flow for the division was $164
million, or $168 million excluding significant
items. Working capital remains tightly controlled,
with strong market demand also holding
inventory at slightly below normal levels.
Capital expenditure in the year of $36 million
focused on the waste tyre project at Portland,
quarry stripping to access resource and
digital initiatives.
The division recognised a $4 million EBIT
gain in significant items in the year, mainly
relating to the disposal of lower North Island
quarries as part of the division's ongoing
footprint optimisation programme.
Watch Video
Investor Day 2021 -
Concrete Division
Future Focus
The strategy flows through into FY22 with a continued focus on
driving top and bottom- line improvements from market leading
services and solutions, leadership in carbon reduction, asset renewal,
and lowest delivered costs. The division expects to accelerate growth
by commercialising further innovative product solutions, digitalising
the business and customer experience, and moving towards more
recyclable products. Efficiency initiatives will focus on footprint
optimisation, debottlenecking and alternative fuels.
Fletcher Building Limited Annual Report 2021 Concrete
Financial Summary
Year ended 30 June
Gross revenue
External revenue
EBIT before significant items (1)
2021
NZ$M
2020
NZ$M
Change
%
849
583
113
740
503
74
15%
16%
53%
EBIT margin before significant items
13.3%
10.0%
3.3%
Significant items (2)
Funds
ROFE (3)
Trading cash flow
Capital expenditure
4
573
(13)
607
19.7%
12.2%
164
36
100
50
NM
(6%)
7.5%
64%
28%
(1) 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 2021.
(2) Details of significant items can be found in note 2.1 of the
financial statements.
(3) EBIT before significant items / closing funds.
Our Concrete businesses
Our New Zealand concrete
business provides a strong
platform for sustainable
growth thanks to our
leading position along
the value chain and
strong brands, capabilities
and footprint.
Nick Traber,
CE Concrete
35
Fletcher Building Limited Annual Report 2021 Residential and Development
The Residential and Development
division reported gross revenue
of $734 million, which was $268
million higher than the prior year.
EBIT was $154 million, compared
to $65 million before significant
items in the prior year.
For the Residential business, a strong housing
market was underpinned by historically low
mortgage rates and a constrained supply of
houses. Sales volumes increased to 836 units,
compared to 666 last year. The $600,000
to $900,000 range that has typically been
the focus for the business was particularly
popular with both first home buyers and
investors, with legislation changes on interest
deductibility further encouraging investment
in new houses. The average price of units
sold was 8% higher than the prior year, even
though the mix of houses sold was weighted
to lower price points. In houses that were
comparable to those sold the previous year
in the same location, prices were as much as
20% higher – in line with the broader market.
The business also continued to optimise house
typologies to meet customer preferences and
target price points. EBIT for the Residential
housing business of $101 million reflected the
strong growth in both volumes and prices.
Land Development EBIT of $57 million was
the result of two large land transactions in the
second half of the year. These were the
Rocla Gailes site in Brisbane and the former Crane
Copper Tube site in Sydney. There were also
sales of smaller sites as the Development team
continues to optimise the portfolio of properties
occupied by other Group businesses.
Clever Core, the division’s panelisation business,
produced and installed 97 house units for Fletcher
Living. During the year significant improvements
were made to the design and installation
processes, both of which will benefit future years.
Clever Core made an EBIT loss of $4 million, in line
with the result in the prior year, as it continues to
scale and optimise its operation.
Trading cashflow for the division was $261 million,
reflecting strong earnings and a reduction in
housing stock levels. At 30 June 2021, the division
held one finished house in stock, compared to
107 a year before. Divisional funds decreased as
a result by 12% to $534 million, despite ongoing
purchases of land. This funds balance includes
2,453 residential lots and one rural property for
further development or sale, and the division has a
further 1,552 units of both zoned and future urban
zoned land under unconditional contract including a
further rural property.
Watch Video
Investor Day 2021 -
Residential Division
Future Focus
The division will continue to grow the base Residential business and is
targeting to deliver over 1,000 homes per annum across the Auckland and
Canterbury markets. Clever Core will continue to scale its manufacturing
volumes, targeting approximately 200 units in FY22, which will include the
first sales of panelised homes to third parties. The Apartments business will
also continue to scale, targeting delivery of approximately 300 units annually,
by FY24 focused on the Auckland market. The Residential business will also
launch a complementary retirement offer within its residential communities,
targeting around 100 new units per year by FY25. The division continues to
target circa $25 million EBIT per annum through the sale of legacy Fletcher
Building properties plus development of acquired industrial sites.
Divisional Review
Residential (Fletcher Living)
Land Development
Clever Core
% of Group revenue
8%
Revenue
$734m
36
Fletcher Building Limited Annual Report 2021 Residential and Development
Financial Summary
Residential and Development
EBIT before significant items (1)
2021
NZ$M
2020
NZ$M
Change
%
Year ended 30 June
2021
NZ$M
2020
NZ$M
Change
%
734
721
154
466
460
65
58%
57%
Residential
Land Development
137%
Clever Core
Total
101
57
(4)
154
63
6
(4)
65
60%
NM
-
137%
Year ended 30 June
Gross revenue
External revenue
EBIT before significant items (1)
EBIT margin
Significant items (2)
Funds
ROFE (3)
Trading cash flow
Capital expenditure
21.0%
13.9%
-
534
29%
261
1
(1)
604
11%
118
3
7.1%
NM
(12%)
18%
121%
67%
(1) 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 2021.
(2) Details of significant items can be found in note 2.1 of the financial statements.
(3) EBIT before significant items / closing funds.
We have seen step-change
improvements across
each part of the Design
for Manufacturing and
Assembly (DfMA) process
this year. The result is that
we are confident of its
long term success.
Steve Evans,
CE Residential and Development
37
Our Residential and Development businesses
Fletcher Building Limited Annual Report 2021 Construction
Divisional Review
South Pacific
Brian Perry Civil
Higgins
Buildings
Infrastructure
% of Group revenue
16%
Revenue
$1,456m
38
The Construction division reported
gross revenue of $1,456 million,
which was $138 million or 10%
higher than the prior year. EBIT
before significant items was $31
million, compared to a loss of $147
million in the prior year.
Revenue was underpinned by solid
construction activity levels across New
Zealand, particularly in the transport and
water sectors. Divisional earnings were driven
mainly by the Brian Perry Civil and Higgins
businesses, which delivered EBIT margins of
5.7% and 5.3% respectively. The division’s
overhead costs were also reduced through
a cost-out programme and improved
operating leverage.
The Construction division has reshaped its
order book to achieve a more balanced risk
profile. The forward order book at 30 June
2021 is $3.0 billion, with a further $0.3 billion
in preferred works under design-development
with Auckland Transport for the AMETI busway
alliance project. Approximately two thirds of
the order book comprises lower risk smaller
self-perform work in Higgins and Brian Perry
Civil, national and local maintenance contracts,
and multi-year framework and alliance
agreements with Watercare and Ka- inga Ora.
The division has also embedded the ‘Fletcher
One’ standardised governance framework, and
invested in digital systems to improve controls
and operating efficiencies.
The division’s legacy project portfolio now
consists of $0.3 billion of work to complete,
down from $0.6 billion at 30 June 2020.
Key projects delivered in FY21 include
Commercial Bay in Auckland and Te Ni-kau,
Grey Hospital & Health Centre. Progress on
the major roading projects continues in line
with the revised completion dates set post
COVID-19, Pu- hoi to Warkworth, Peka Peka to
-
O
scheduled to complete in calendar 2022, with
work continuing to plan on the New Zealand
International Convention Centre.
taki, and Hamilton City Edge expressways are
Trading cash flow for the division in FY21 was
an outflow of $123 million, or an outflow of $118
million when excluding significant items.
This was comprised of: an outflow of $104
million against legacy project provisions booked
in prior periods; an outflow of $69 million
from an unwind of advanced working capital
positions; and an inflow of $55 million from
the balance of the business.
Capital expenditure in the year of $25 million
was mainly focused on mobile and static asphalt
plants for Higgins to service both New Zealand
and the Pacific.
Watch Video
Investor Day 2021 -
Construction Division
Future Focus
The ongoing focus for Construction is: growing
integrated asset lifecycle services to support key
infrastructure customers; maintaining a balanced risk
profile in its order book, alongside ongoing completion
of remaining legacy projects; executing consistently
through disciplined operations and specialised self-
perform resources; and as a result lifting divisional
EBIT margins to a range of 3%-5% by FY22.
2020 X.XFletcher Building Limited Annual Report 2021 Construction
Financial Summary
Construction
EBIT before significant items (1)
Year ended 30 June
Gross revenue
External revenue
EBIT before significant items (1)
2021
NZ$M
1,456
1,347
31
2020
NZ$M
Change
%
Year ended 30 June
2021
NZ$M
2020
NZ$M
Change
%
1,318
1,261
(147)
10%
Higgins
7%
NM
Other
Total
31
-
31
14
121%
(161)
(147)
NM
121%
EBIT margin before significant items
2.1% (11.2%)
13.3%
Significant items (2)
Funds
ROFE (3)
Trading cash flow
Capital expenditure
(3)
219
(13)
50
14.2% (294.0%)
(123)
(148)
25
32
77%
NM
NM
17%
22%
(1) 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 2021.
(2) Details of significant items can be found in note 2.1 of the financial statements.
(3) EBIT before significant items / closing funds.
Our Construction businesses
Our reshaped and
de-risked forward order
book plus investments in
specialised assets, digital
transformation, safety
leadership and in our people
are creating a sustainable
Fletcher Construction for
generations to come.
Peter Reidy,
CE Construction
39
Fletcher Building Limited Annual Report 2021 Australia
Divisional Review
Building Products Australia:
Laminex Australia
Iplex Australia
Rocla
Fletcher Insulation
Distribution Australia:
Tradelink
Oliveri Solutions
Steel Australia:
Stramit
% of Group revenue
31%
Revenue
$2,758m
40
The Australia division reported gross
revenue of $2,758 million which was
2% lower than the prior year. EBIT
before significant items was $103
million, compared with $33 million in
the prior year.
Overall, the division continues to benefit from
significant interventions over the past three years
to reduce its cost base and from investments in
automation and focused growth initiatives. Market
share has grown in most businesses through
customer service improvements and new product
development, leading to improved product vitality
across the division.
Building Products Australia revenue declined by
6% in the year, however EBIT before significant
items of $70 million was $44 million higher
than the prior year. This was driven in particular
by Laminex, which increased earnings by
38% through market share gains in decorative
categories, the introduction of new ranges,
and supply chain efficiencies. Laminex’s digital
sales also increased to over 25% of revenue.
Fletcher Insulation grew revenues by 9% and
earnings by 61% following the restructuring of its
manufacturing and distribution footprints over the
past two years. In the pipes business (Iplex, Rocla)
revenue declined by 18%, primarily due to low
levels of activity in key civil sectors and the exit
of the Rocla pipe operations in New South Wales
and Queensland. Nonetheless, the combined
business made a small profit this year as a result
of manufacturing site restructures and operational
efficiency improvements.
Distribution Australia reported reduced revenues of
2%, while EBIT before significant items increased
by $11 million. Tradelink continued to grow share in
the key small to medium (SME) plumber segment,
which now represents 46% of its total revenue
– up from 34% previously. Tradelink own brand also
continued to grow, now representing 35% of front-
of-wall sales – well above the previous 25% target.
The Tradelink consumer transactional website was
launched during the year and is delivering well ahead
of plan. Earnings in Oliveri grew through strong
uptake in the new bathroom range, share growth
in the traditional kitchen sink and tap market, and
successful cost-out initiatives.
Steel Australia sales grew by 12% and EBIT grew
to $21m, compared to $5 million in the prior year.
Strong momentum in the margin accretive sheds
and doors segments coupled with increased new
product development were key to the improvement,
alongside manufacturing efficiencies from
investments in increased automation.
Significant item charges in the division were $120
million for the year. These comprised a $78 million
impairment of Rocla, based on a reassessment of
likely divestment proceeds, while the remaining
$42 million related to the final phase of the
division’s restructuring activity.
Trading cash flows were $136 million, or $170
million excluding significant items. The strong
cash flow result reflected tight debtor controls and
focused improvements in inventory management,
balanced with targeted investments to overcome
supply chain constraints.
Capital expenditure in the year was $42 million,
with key investments in the areas of digital
migration, new product development and automation
in the manufacturing businesses.
Watch Video
Investor Day 2021 -
Australia Division
Future Focus
The Australia division’s focus remains on maximising efficiencies in the
operating model, maintaining governance on the cost positions taken,
embedding price effectiveness in all businesses, the continuation of product
and service innovation, and investment in improved digital offers. The division
continues to target ongoing expansion of EBIT margins to a range of 5%-7% in
FY23. A sale agreement for the Rocla business was signed in July 2021 and the
divestment is expected to complete at the end of August 2021.
Fletcher Building Limited Annual Report 2021 Australia
Financial Summary
Year ended 30 June
Gross revenue
External revenue
EBIT before significant items (NZ$m)(1)
EBIT before significant items (A$m)(1)
Australia
EBIT before significant items (1)
2021
NZ$M
2020
NZ$M
Change
%
Year ended 30 June
2021
NZ$M
2020
NZ$M
Change
%
2,758
2,802
2,684
2,723
103
96
33
31
(2%)
(1%)
NM
NM
Building Products Australia
Distribution Australia
Steel Australia
Divisional costs
70
18
21
(6)
103
26
7
5
(5)
33
169%
157%
NM
(20%)
212%
EBIT margin before significant items
3.7%
1.2%
2.5%
Total
Significant items (2)
Funds
ROFE (3)
Trading cash flow
Capital expenditure
(120)
(166)
28%
1,327
1,494
(11%)
7.8% 2.2%
5.6%
136
42
49
65
178%
35%
(1) 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 2021.
(2) Details of significant items can be found in note 2.1 of the financial statements.
(3) EBIT before significant items / closing funds.
Our Australia businesses
We have enthusiastically
embedded growth levers
of innovation, new product
development and made
logical strategic choices
about where we play
for value. Our digital
programmes are being
built out, with learning and
synergies being shared
across the division as we
digitise at pace.
Dean Fradgley,
CE Australia
41
Fletcher Building Limited Annual Report 2021 Our Board
Bruce Hassall
BCom, FCA (CAANZ)
Chair and Independent
Non-Executive Director
Term of office: Appointed
director 1 March 2017, last
elected 2020 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.
42
Martin Brydon
MBA, FAICD, FAIM, Dip Elect
Eng, Dip Elron Eng
Independent
Non-Executive Director
Term of office: Appointed
director 1 September 2018, last
elected 2020 annual meeting.
Board committees:
Member of the Nominations
Committee, Member of the
Remuneration 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.
He is Chair of ASX listed
company Duratec Limited.
Barbara Chapman
CNZM, BCom, CMInstD
Independent
Non-Executive Director
Peter Crowley
BEcon, BA, FAICD
Independent
Non-Executive Director
Term of office: Appointed
director 1 September 2018, last
elected 2020 annual meeting.
Term of office: Appointed
director 1 October 2019, last
elected 2019 annual meeting.
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 CEO
Summit 2021.
Board committees:
Member of the Audit and Risk
Committee, Member of the
Nominations Committee and
Member of the Safety, Health,
Environment and
Sustainability Committee.
Peter Crowley has over 40
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.
Fletcher Building Limited Annual Report 2021 Rob McDonald
BCom, FCA
Independent
Non-Executive Director
Term of office: Appointed
director 1 September 2018, last
elected 2018 annual meeting.
Board committees:
Chair of the Audit and Risk
Committee, Member of the
Nominations Committee and
Member of the
Remuneration Committee.
Rob McDonald’s finance
career spans over 30 years
with a strong track record in
financial and risk management,
developed over two decades
with Air New Zealand. As the
airline’s chief financial officer,
he received a number of
accolades during his career,
including CFO of the Year in the
Deloitte Top 200 in 2015 and
the Fairfax Media New Zealand
CFO of the Year award in 2010.
Rob is the Chair of Contact
Energy Limited, a director of
AIA New Zealand Limited and
the Chartered Accountants of
Australia and New Zealand, and
a member of the University of
Auckland Council.
Cathy Quinn
ONZM, LLB
Independent
Non-Executive Director
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 Fonterra
Co-operative Group Limited,
Tourism Holdings Limited and
Rangatira Limited. She is Pro-
Chancellor of the University
of Auckland Council and
chairs Fertility Associates
Holdings Limited.
Doug McKay
ONZM, BA, AMP (Harvard),
CMInstD
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.
43
Fletcher Building Limited Annual Report 2021 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
Nick Traber
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.
44
Fletcher Building Limited Annual Report 2021 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 2021 and was approved by the Board on 17 August 2021.
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 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 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, charitable
donations and dealings with business partners. The policy notes that political donations are not permitted without approval of the Board.
No requests for such approval were made in FY21. All Fletcher Building personnel must adhere strictly to the requirements of this policy.
There were no reported breaches of this policy in FY21.
Fletcher Building has a free phone and online service (“FBuCall”) which 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.
Our Human Rights Policy 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 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. Modern Slavery Statements are reported to the Australian
Border Force and published on an online modern slavery register controlled by the Australian Border Force.
SECURITIES TRADING POLICY
The Group has a Security Trading 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 black out periods to restrict persons covered by the Security Trading Policy who are likely to have
knowledge of, or access to, inside information from trading. This group of personnel must notify the Company 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.
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Fletcher Building Limited Annual Report 2021
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 Company Secretary
is secretary to the Board and accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board.
NOMINATION AND APPOINTMENT OF DIRECTORS
Procedures for the appointment and removal of directors are governed by the 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 42 and 43.
The factors that the Board will consider in whether a director is ‘independent’ are set out in Appendix A of the Board Charter. Any director
who has a change in relevant circumstance to any of the factors listed in Appendix A must immediately notify the Chair of that change so that
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 2021 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.
INCLUSION AND DIVERSITY
Fletcher Building’s Inclusion and Diversity Policy, is available on the Group’s website. The Remuneration Committee annually reviews progress
against inclusion and diversity initiatives developed by the Group to deliver outcomes against the policy.
The Board is satisfied with the initiatives being implemented by the Group and its performance with respect to the Inclusion and Diversity
Policy. Our inclusion and diversity strategy, set in 2019, concentrates on three dimensions: creation of an inclusive culture, greater female
representation across all roles and more diverse ethnicity in leadership. 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).
However, significant focus has been placed on setting targets and action plans this year to increase the number of women in operational
roles by 1% annually, including setting gender targets for divisional chief executives, as part of their FY21 short term incentives plans.
Fletcher Building is currently resetting gender representation targets, and has placed a spotlight on the various stages of the recruitment
processes to pinpoint where current practices may be hindering or helping the recruitment of women. Action plans are being developed
to address any changes needed, to ensure the retention of the women we have, and provide more opportunities for the internal movement
of women into operational leadership roles. These business unit plans will be supported by group initiatives designed to increase the
awareness of our Inclusion and Diversity strategy and build momentum for change.
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 2021, providing a benchmark against appropriate external comparators
as per current policy requirements.
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Fletcher Building Limited Annual Report 2021
The numbers and proportion of women and men within Fletcher Building as at 30 June 2021 are set out in the table below.
Board of directors
Executive committee
Senior management (1)
All employees
2021
2020
Women
2 (29%)
2 (17%)
17 (25%)
21%
Men
5 (71%)
10 (83%)
51 (75%)
79%
Women
2 (29%)
2 (17%)
17 (25%)
21%
Men
5 (71%)
10 (83%)
51 (75%)
79%
(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 when making appointments to the Board. The table below
shows the representation of expertise among the current directors for the Board as a whole.
Business context
Capability
Key elements
Director expertise
Product and market
knowledge
Industry
Manufacturing and distribution / land and property
development / construction and infrastructure
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
This key represents the assessment of the strength of the skills and experience of the Board as a whole.
Key:
Very strong
Strong
Solid
Some gaps
DIRECTOR INDUCTION AND DEVELOPMENT
The Board conducts induction and continuing development for directors, which includes visits to Group operations and briefings from key
executives and industry experts. Directors conducted site visits (where COVID-19 travel restrictions permitted) to observe first-hand the safety
and other management practices and business responses to issues.
BOARD PERFORMANCE
Reviews of the performance of the Board and individual directors are carried out to ensure the Board as a whole and individual directors are
performing to a high standard.
The Board completed a comprehensive review of its performance and processes in late 2019 and will do so again later in 2021. Both reviews
are conducted with the assistance of an independent consultant, Propero Consulting Limited. The results of the next review will be reported to
the Board by the Chair and consultant.
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Fletcher Building Limited Annual Report 2021
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 2021 the Board committees were:
– Audit and Risk Committee (ARC)
– Nominations Committee
– Remuneration Committee
– Safety, Health, Environment and Sustainability Committee (SHES)
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.
Committee
Role
Members as at 30 June 2021
Audit and Risk Committee
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.
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.
Bruce Hassall (Chair)
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 and management development and succession planning of the
CEO and his direct reports.
Barbara Chapman (Chair)
Martin Brydon
Bruce Hassall
Rob McDonald
Safety, Health,
Environment and
Sustainability Committee
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.
Doug McKay (Chair)
Martin Brydon
Peter Crowley
Cathy Quinn
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Fletcher Building Limited Annual Report 2021
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
The table below shows directors’ attendance at the Board and committee meetings during the year ended 30 June 2021.
Board
Audit and Risk
Committee
Nominations
Committee (1)
Remuneration
Committee
Safety, Health,
Environment and
Sustainability
Committee
Number of meetings held
Bruce Hassall (Chair)(2)
Martin Brydon(3)
Barbara Chapman
Peter Crowley
Rob McDonald
Doug McKay
Cathy Quinn
16
16
16
15
16
15
16
16
4
4
4
4
4
4
2
2
2
2
2
2
2
2
4
3
2
4
4
4
1
4
4
4
4
(1) All non-executive directors are members of the Nominations Committee.
(2) Bruce Hassall attended ARC and SHES committee meetings in an ex officio capacity.
(3) Martin Brydon was appointed as a member of the Remuneration Committee effective 1 January 2021.
The directors' meetings referred to in the table above do not include additional ad hoc or transactional committee meetings held through the year.
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.
INTEGRITY IN NON-FINANCIAL REPORTING
The Board has approved an overarching Sustainability Policy and a sustainability strategy for the business which is summarised on page 18.
The business sustainability strategy was developed by evaluating non-financial environmental, social and governance issues that are material to
the business. Performance against the strategy is reported to the SHES Committee of the Board.
Annual progress against the sustainability strategy aims and targets is reviewed by the SHES Committee and included in the Annual Report.
The SHES Committee also receives third party assurance on reported greenhouse gas emissions, and regular updates on actions that are in
place or planned to reduce the Group’s greenhouse gas emissions in line with our reduction target.
Significant transitional risks resulting from climate change are reported to the SHES Committee, and significant physical risks are included in the
risk management process for the business and reported to the Audit and Risk Committee.
As part of identifying material sustainability issues for the business that reflect wider stakeholder interest, the business is also an active
member of the following sustainability organisations:
– Infrastructure Sustainability Council of Australia
– Sustainable Business Council
– Sustainable Business Network
– New Zealand Green Building Council
– Green Building Council Australia
49
Fletcher Building Limited Annual Report 2021
Corporate Governance (continued)
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 57 to 66 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.”
Fletcher Building's risk management framework is aligned with ISO31000: 2018 Risk Management – Principles and Guidelines standard. The
purpose of the risk management framework is to ensure that the key risks we face are identified, assessed, controlled, monitored and reported
so that the Group can achieve its objectives and protect its staff, customers and reputation. The framework provides a consistent structure for:
risk management, business processes, corporate knowledge and technology, and alignment with Group strategy.
The Group’s risk management framework is based on the three lines of defence model, as shown in Figure 1 below. Responsibility for
operational risk management sits 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 ultimately overseen by the Board and the executive leadership
team. A dedicated internal audit team takes a risk-based approach to auditing key business activities and reports directly to the Audit and
Risk Committee.
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:
Business Units
Division
Division
BU
BU
BU
BU
Figure 1
As part of its risk management responsibility, the Audit and Risk Committee receives regular reports of the existing and emerging key risks,
progress on the closure of recommendations that are generated through the risk engineering programme, current and target risk ratings as well
as controls to mitigate or manage risks.
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Fletcher Building Limited Annual Report 2021
ACTIVITIES IN FY21
In FY21, the Group continued its focus on risk management in four key areas: governance and reporting, response and recovery advice, risk
management expertise and guidance, and business resilience.
A total of 22 risk workshops were held with the individual business unit leadership teams in FY21. These workshops are a key component of the
Group’s risk management framework and assist in developing a bottom-up reporting process. Additionally, the risk workshops process supports
the individual business units’ leadership teams to ensure appropriate risk management strategies are being pursued.
Fletcher Building utilises a number of external experts to improve business resilience and help manage some of its key risks, such as business
resilience and product quality. As part of our risk engineering programme, external engineers conducted 23 site surveys. The reports and
recommendations produced from these site surveys provide valuable risk and resilience insights to Group management as well as our insurers.
Similarly, as part of our product quality assurance programme, external product quality auditors surveyed a number of manufacturing
facilities. These audits assess the effectiveness of existing controls and processes to assist the continued evolution of the Group’s product
quality systems.
COVID-19 RESPONSE:
In FY21, Fletcher Building has managed and continues to actively manage the risks arising from the COVID-19 pandemic. Through the year, the
Group's crisis management framework has supported relevant business units and divisions to respond to the dynamic operational environment
created by COVID-19. The Group's Crisis Management Team was activated as and when required during the year to address group-wide
COVID-19 responses.
All Fletcher Building business units have business continuity plans, which are specific to their business activities. All business units review their
business continuity plans regularly to ensure they remain fit for purpose and help respond to a range of crises.
51
Fletcher Building Limited Annual Report 2021 Corporate Governance (continued)
KEY RISKS:
The Fletcher Building risk management framework is focused on ten key commercial (non-health and safety) risks that the Group faces across
its business. However, these risks are dynamic and new risks and uncertainties may materialise during FY22 due to changes in economic
conditions, regulatory environment, and other factors. The ten key risks are:
Description
How this risk may impact Fletcher Building
How we manage this risk at Fletcher Building
Business resilience
A disruption to business processes,
particularly the loss of key assets, may lead
to an inability to undertake the activities of
a business unit or the Group.
A disruption event at a key site could lead to an
extended operational interruption, which may
negatively impact the financial performance of a
business unit and, ultimately, the Group.
– Business units have business continuity plans in
place that look to address the identified operational
continuity risks.
– Regular monitoring of the risk environment occurs
to ensure that key risks are appropriately covered by
insurance, where practical and cost-effective.
– An established independent risk engineering review
program is in place for our key sites.
– The business has carried out scenario analysis
for physical climate change risk and we review
short, medium and long-term risks associated
with climate change and resource availability at
divisional and Group level to assess our resilience
and the risk horizon.
Economic and construction downturn
The building and construction industry in
which the Group operates is fundamentally
cyclical and is impacted by the
macroeconomic conditions within both the
New Zealand and Australian economies.
The failure by the Group to identify early and
respond to cyclical downturns may impact
financial results and sub-optimal business
performance by business units and the Group.
– Senior leadership teams of business units and
divisions monitor their key markets and are
supported by the Corporate centre with in-depth
market analysis.
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, subject to change and may affect
the Group’s operations.
Failure to adhere to or monitor changes to the
various regulatory requirements may lead to the
imposition of penalties, operational disruption
and/or reputational damage.
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.
Products and structures manufactured, supplied
and/or purchased that may not meet relevant
international or local standards and regulations
may lead to product recalls, remediation costs
and/or financial penalties.
– Regular operational reviews are undertaken with
business units and divisions as well as the Board
undertaking divisional deep dives.
– Strong focus on working capital, CAPEX and balance
sheet management.
– 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: https://www.fletcherbuilding.com/
investor-centre/corporate-governance/
– The Group’s commercial Golden Rules provide a
framework for all staff on the type of contractual
risks that the Group is prepared to accept.
– 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.
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.
52
Disruption to business unit or group operations
through ineffective coordination and control
of the organisational supply chain may result
in operational disruption, penalties and
reputational damage.
– Business units have business continuity plans in
place that look to address the identified supply
chain issues.
– Where possible, business units look to establish
contingent supply agreements across material/
product suppliers and logistical providers.
Fletcher Building Limited Annual Report 2021 Description
People
The failure by the Group to attract,
retain and engage our people (including
engagement with collective representation
groups) negatively impacting business
units or the Group.
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.
– The People and Performance function within the
Group supports the business by providing advice,
tools, processes and policies to drive employee,
team and business performance.
Additionally, industrial action by collective
representation groups can cause operational
disruption.
– Business units and the Group benefit from the
development and learning activities provided by the
central Organisational Development team.
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
Like many businesses, 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
being liable for liabilities or performance
under contracts that are commercially
adverse.
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 building
materials.
– FBuSay, the Group wide employee engagement
survey, provides valuable insights about 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 the Group and business unit levels, we
engage with regulators on proposed changes to
standards and regulations.
– The Group has a stated sustainability strategy and
accompanying annual targets.
Failure to provide reliable, resilient, adaptable,
and efficient technology infrastructure may
cause operational disruption and/or reputational
damage to business units or the Group.
Failure to safeguard confidential information may
also result in the imposition of penalties and
reputational damage.
– Continued CAPEX investment in technology systems
across the Group to support our operations.
– A dedicated team within Group Technology to
address the ever-evolving cybersecurity 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’) 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.
Corporate reputation and social license to operate
The Group appreciates the privileged
position it has in the communities it
operates in 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.
The failure to act in a way that 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.
– Engagement with the communities and how we
work with stakeholders takes different forms for
each business unit and project.
53
Fletcher Building Limited Annual Report 2021 Corporate Governance (continued)
RISK CAPTURE AND REPORTING
The risk and uncertainties that are faced by the individual business units are captured in the Group-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 undertakes operational risk reporting through business unit operational reviews. This allows the Group to see how business units are
making decisions in assessing risks and implementing their business strategies. It also assists the group in understanding how different risks
affect different parts of the business.
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.
54
Fletcher Building Limited Annual Report 2021 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 investors, analysts and other market
commentators. Presentations are disclosed on the Group’s website and the NZX and ASX announcement platforms. Shareholder meetings
with the Chair and other directors are facilitated throughout the year. The CEO and chief financial officer present via an analysts’ and investors’
conference call after the 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 our shareholders and is posted on our website at least 20 working dates prior
to the meeting.
The Group continues to closely monitor the COVID-19 situation. As a result, the Group may elect to hold the Annual Shareholders’ Meeting in
2021 as a virtual meeting.
55
Fletcher Building Limited Annual Report 2021
Sustainability Materiality
and Methodology
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; where we have the most impact; and where
our actions can lead to meaningful change. These are our material sustainability issues, and they form the basis of the aims within our
sustainability strategy.
We identified these material issues by commissioning independent experts to carry out a materiality assessment in FY18 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 also interviewed a number of our major institutional investors who have committed to the UN Principles of Responsible Investment
framework and reviewed 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 are summarised on page 18 of this report. We intend to carry out a further materiality
assessment in FY22.
Two of the most significant material issues for our business are safety and greenhouse gas emissions. In the front section of this report
we note the activities we are undertaking to address these issues within our business, and progress against our targets.
METHODOLOGY
Greenhouse Gas Emissions
FY21 Greenhouse Gas (GHG) emissions included in this report were calculated for the period from 1 July 2020 to 30 June 2021
in accordance with the ISO14064-1:2006 International Standard for GHG Emissions Inventories and Verification. Emissions from
our businesses were calculated on the equity share basis. This means that emissions from our businesses and from joint ventures
we are part of have been included. For joint ventures, the percentage of emissions included is based on our percentage ownership
of the joint venture.
Enviro-Mark Solutions Limited have provided third-party verification of our Scope 1, Scope 2 and Scope 3 emissions in accordance with
ISO 14064-3:2006. Assurance and verification has been carried out for FY20 and FY21 GHG emissions as included in this report. The verification
statements are available on our website.
Environmental Product Declarations
Environmental Product Declarations (EPDs) referred to in this report were developed in accordance with the ISO 14025 standard for
Environmental labels and Declarations (Type III) and the EN 15804 EPD standard for the sustainability of construction works and services.
This standard harmonizes the scope and indicators for EPDs in the construction sector, making the information transparent and comparable.
56
Fletcher Building Limited Annual Report 2021 Remuneration
Report
We are well
positioned to
deliver on the
‘performance and
growth’ phase
of our strategy
with an aligned
remuneration
framework in place
to support this
Barbara Chapman
Remuneration Committee Chair
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 2021.
FY21 performance and remuneration outcomes
The 2021 financial year started with an enormous amount of uncertainty as a result of the ongoing
effects of COVID-19 being felt across the world. Through this disruption, we remained focused on
achieving our financial outcomes and strategic goals based around the key themes of: safety, customer,
our people, sustainability, and growth through innovation. Our incentive targets for our senior leaders
in FY21 were closely aligned with these goals, firmly orientating our remuneration outcomes with the
delivery of both in-year and long-term value.
I am pleased to report that the business’s performance against strategic goals through FY21 has been
strong. The fact that Fletcher Building achieved so much in a uniquely challenging year is a credit to
everyone in the company. This performance is also reflected in the short-term incentive (STI) outcomes for
the CEO and executive team ranging from 120% to 150% of target. More detail on performance against
STI goals is included in the STI section of this remuneration report.
The CEO and executive’s performance against their STI goals was reviewed and approved by the Board.
Consideration was given to both the formulaic outcomes against the targets set at the beginning of the
year, as well as an assessment of these outcomes in the context of a market environment which proved
to be more favourable than was anticipated. The Board considers that the business outcomes have been
strong, notwithstanding the improved environment. Therefore, no discretion was exercised by the Board
to adjust payments up or down, ensuring STI outcomes delivered to the CEO and senior leaders reflected
their contribution to this strong business performance.
Set up for the future
Looking ahead, the business is well positioned to deliver on the ‘performance and growth’ phase of our
long-term strategy. Key to this is ensuring that our people strategy and remuneration framework provide
the right environment and capability to drive this growth and deliver the right outcomes. Insight into our
culture and people capability focus areas is covered in the Our People section of this report.
With this in mind, through FY21 we conducted a thorough review of our executive remuneration
framework to ensure it remained fit for purpose for this next phase of our strategy.
Through this process we sought input from multiple stakeholders. Thank you to those who provided
valuable input. Two material changes to increase shareholder alignment and to support a stronger link
between sustainable performance and remuneration outcomes were identified. These are the introduction
of an equity deferral in our STI scheme and increasing our mandatory shareholding levels for the CEO and
the executive team. Other changes include the introduction of a safety key performance indicator (KPI) to
replace the safety multiplier and enhancing our disclosures.
The remainder of the remuneration section of the annual report provides an overview of the remuneration
framework that applied for FY21. The changes set out above will be incorporated into the FY22 annual
report with further detail provided following this letter.
I would like to recognise and thank our people for their commitment to serving our customers and
supporting one another through this past year.
I invite you to review the full remuneration report.
Barbara Chapman
Remuneration Committee Chair
57
Fletcher Building Limited Annual Report 2021
Remuneration Report (Continued)
FY22 REMUNERATION FRAMEWORK CHANGES
As set out in the Remuneration Committee Chair’s letter, a review of our executive remuneration framework was undertaken in FY21.
The following table summarises changes to this framework for FY22 and beyond, and provides the rationale and outcomes of these
changes. These changes apply to the CEO and his direct reports.
Change
Detail
Rationale and outcome
Increase minimum
shareholding
requirement
Increase in minimum shareholding requirement for
the CEO from 50% of base salary to 100% of base
salary, and increase other executives from 50% of
base salary to 75% of base salary.
This increased level of minimum shareholding
supports further alignment of our most senior
executives with our shareholders and is more
consistent with market practice.
Introduce STI deferral
Introduction of a two-year equity deferral into our STI
scheme at 50% for the CEO and 40% for executives.
A transition year will apply with half this deferral
(25% for the CEO and 20% for executives).
In addition, 20% of long-term incentives (LTI)
transfers to STI (at a discount of 40%).
Introduce safety KPI
Introduction of safety KPI to replace the
safety multiplier. The KPI comprises a lead
and lag indicator and will not be contingent on
financial performance to ensure a separation
of profit from safety.
Safety interactions will remain a gateway for any
STI payment to be made. Interactions could include
safety leadership walks, or facilitation of a safety
leadership programme.
Introducing an equity deferral into our STI scheme
increases the weighting of equity in our executive
remuneration packages, building further alignment with
our shareholders.
To ensure the overall cost of an individual's
remuneration package was not increased, whilst
managing the in-year cash impacts for individuals,
we discounted the transferred portion of LTI to STI.
This discount recognises the different probabilities
of LTI and STI paying out.
To further strengthen our focus on safety and
getting everyone home safely every day, we simplified
our approach to safety in our incentives.
Enhance disclosures
Enhancing our disclosures where we are
applying discretion (or not) with supporting
rationale through the remuneration section
of the annual report and through engagement
with shareholders and proxy advisors.
Building on our new look remuneration report
from FY20, this further supports providing greater
transparency and understanding of our remuneration
frameworks and therefore how they drive performance
and link to shareholder outcomes.
Other than in relation to the portion of LTI, transferred at a discount to STI, our LTI scheme remains unchanged for FY22, ensuring the
CEO and executive’s remuneration outcomes are aligned with sustainable financial outcomes for our shareholders through the relative
total shareholder return performance hurdle. Further details on this plan are provided in the Long-Term Share Scheme section of this
remuneration report. We will continue to review this scheme each year ensuring it remains fit for purpose with our strategy.
The mix of remuneration components for the CEO under the new remuneration framework is set out below (after the transition year).
27%
LTI*
19%
STI*
Equity
34%
BR*
CEO on
Target
Performance
Pay Mix
19%
STI* Cash
1%
Other
Benefits
23%
LTI*
28%
BR*
CEO
Maximum
Performance
Pay Mix
24%
STI* Cash
24%
STI*
Equity
1%
Other
Benefits
Equity Pay
Variable Pay (at risk)
LTI*: Long-term incentive
STI*: Short-term incentive
BR*: Base Remuneration
58
Fletcher Building Limited Annual Report 2021 FY21 REMUNERATION FRAMEWORK
The following sections describe the remuneration framework in place during FY21.
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 executives, 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 and reviews undertaken by the Remuneration Committee during FY21 included: approval of changes to the remuneration
framework for FY22, review of succession depth and development for the executive, approval of an updated inclusion and diversity policy,
review and approval of the FY21 STI framework for senior leaders, review of pay parity, and pension plan governance matters.
PERFORMANCE AND THE IMPACT ON INCENTIVES
Short-term incentives (STI)
EBIT performance during FY21 was at or above target levels for the CEO and executives resulting in all meeting the performance thresholds
required for eligibility for payment on EBIT and individual goals. Cash and working capital performance during FY21 was in some cases well
above target performance levels, resulting in eligibility for payment for the CEO and most executives. Safety performance across the Group
is tracking well with TRIFR down from 5.7 in FY20 to 5.0 in FY21. Good progress was made against other goals of exit run rate margin,
talent, diversity, sustainability, and innovation which in most cases were at or around target levels noting there is no opportunity for stretch
performance on these goals. Further detail on the CEO’s STI outcome is provided on page 64.
Long-term incentives (LTI)
The July 2017 long-term share scheme grant, which was within the 12 month retest period up to 30 June 2021, was below the minimum
threshold performance levels and therefore was forfeited. The July 2018 long-term share scheme grant was below the minimum threshold
performance level, and has therefore entered the 12 month retest period.
Further details on each of these incentive schemes are provided on the following pages.
Executive remuneration strategy and framework
The remuneration framework and how it supports the strategy set out on the next page is based on the FY21 framework.
The FY22 annual report will reflect the updated framework in place from FY22.
59
Fletcher Building Limited Annual Report 2021 Remuneration Report (Continued)
FY21 REMUNERATION FRAMEWORK
Vision
To be the leader in New Zealand and Australian
building products and solutions
Governance
Our Board is responsible for the Group’s remuneration policy, which is available on our website, 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 is 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 composed
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
Aim 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
Retain and
motivates key talent,
and drive 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
60
Fletcher Building Limited Annual Report 2021
Remuneration levels are reviewed and benchmarked annually for market competitiveness, and alignment with strategic and performance
priorities. A peer group which comprises 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. The peer
group also generally reflects where the Group wins talent from and loses talent to.
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.
Financial targets
For the CEO and executives in Corporate, the financial target is based on the Group EBIT and operating cash. For executives operating in
specific divisions, the financial target is based on their own division EBIT and operating cash or working capital depending on the division's
priorities. Each of these financial measures is assessed separately at the time of determining STI payments. To ensure an appropriate balance
between focusing on individual division financials where executives are most able to directly influence, and that of the Group where working
together creates additional value, a multiplier (either up or down) is applied based on achievement of Group EBIT.
Financial targets are set at three levels: a threshold level, which must be met before any STI is paid, a target level, and a maximum level that
reflects stretch performance. For FY21, the financial threshold level was set at 90% of target. The maximum financial level is generally set at
110% of target.
The CEO, Chief Financial Officer, and operating executives have 70% of their STI opportunity based on financial measures, with the remaining
30% on individual goals. As functional executives 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 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, sustainability 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 of the Board.
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 executives completing no fewer 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.
In FY21, we had 8 serious injuries across 4 divisions (7 business units). In accordance with our senior leaders STI Discretionary Rules, a
review was conducted to assess whether any impact to STI should be applied relating to each incident. First, each incident was investigated
for the root cause and all relevant individuals (at all levels) were assessed against a Just Culture framework where required. The review then
used a mix of lead and lag performance indicators as well as an assessment of safety leadership and the merits of the incidents themselves
to determine whether an impact should be applied to individual leader STIs. Through this process, it was determined that all those assessed
were showing strong leadership, investment in safety and overall strong performance indicators with some areas that are being acted on for
improvement. There was one incident where best practice wasn’t being applied at the time; however, the associated leaders are no longer with
the organisation. As a result, there was no impact to individual leaders on the STI scheme this year.
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. During FY21 no adjusting subsequent events were identified,
therefore the Board was not required to consider application of the clawback provision during FY21.
61
Fletcher Building Limited Annual Report 2021 Remuneration Report (Continued)
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 CEO and executives. The scheme is a share-based scheme and 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 12 months if the TSR criteria are not met at the end of the initial three-year restrictive period.
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 2020 ELSS grant
The performance criteria for the 2020 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. For any shares to
vest under the ELSS, Fletcher Building’s relative TSR performance must be at or above the 51st percentile of the comparator group. The
comparator group used for the 2020 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 are set out in the following table:
Date of grant
July 2020
July 2019
July 2018 (1)
July 2017
July 2016
Shares granted
1,998,635
% vested
% forfeited
EPS Target
1,386,100
In-Flight
1,041,605
890,075
905,211
0%
0%
100% (2)
100%
N/A
N/A
N/A
N/A
70.1 – 76.3
(1) Fletcher Building's TSR did not meet the minimum vesting threshold for the three years ended 30 June 2021 for the 2018 issue. Therefore, the restrictive period has been extended to
30 June 2022.
(2) The restrictive period for the 2017 issue was extended for 12 months until 30 June 2021. Fletcher Building's TSR did not meet the minimum vesting threshold for the period ended
30 June 2021. Therefore, 100% of the shares in the 2017 issue will be forfeited in August 2021.
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 on 30 June 2022, subject to his remaining employed with the Group.
Minimum shareholding requirement
Over time, the CEO and executives 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. Any shares granted under the ELSS scheme
do not count towards the minimum shareholding requirement unless they vest. This shareholding requirement strengthens the alignment of
executives with the interests of shareholders and puts their own remuneration at risk to long-term Group performance.
In addition, 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.
62
Fletcher Building Limited Annual Report 2021 As at 30 June 2021, the CEO had a holding in the Group’s ordinary shares equal to 66% 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$250 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.
CEO’S REMUNERATION
Remuneration package
Ross Taylor’s annual base remuneration as at 30 June 2021 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*
CEO on
Target
Performance
Pay Mix
33%
BR*
28%
LTI*
28%
BR*
CEO
Maximum
Performance
Pay Mix
33%
STI*
1%
Other
Benefits
43%
STI*
1%
Other
Benefits
Variable Pay (at risk)
LTI*: Long-term incentive
STI*: Short-term incentive
BR*: Base Remuneration
Remuneration received
The base remuneration received for FY21 is lower than the base remuneration set out above as a result of a 30% pay reduction due to
COVID-19 that was in place through to end of Q1 FY21. The remuneration Ross Taylor received for FY21 and FY20 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
FY21
$1,894,073
$129,879
$2,888,967
FY20
$1,903,302
$61,802
$0
Received (3)
$4,912,919
$1,965,104
Long-term incentive - number of shares granted
Long-term incentive - face value of grant
Refer above for details of the STI and ELSS.
FY21
375,273 (4)
$2,050,000
FY20
263,628 (5)
$2,050,000
(1) A 30% reduction on this value due to COVID-19 was in place from Q4 FY20 through to end of Q1 FY21.
(2) Includes KiwiSaver, Australian superannuation for days worked in Australia as required by Australian taxation law, and medical insurance.
(3) This table sets out remuneration awarded for the relevant financial year. The table on page 65 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$3.66, being the volume weighted average price for the five business days prior to 1 July 2020.
(5) 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.
63
Fletcher Building Limited Annual Report 2021 Remuneration Report (Continued)
CEO FY21 STI OUTCOME
For FY21, 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 FY21 STI.
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
Talent & Diversity targets
delivered across businesses
in accordance with Board
approved plans
Overall Construction
provisions maintained within
the agreed provision allowance
as approved at the August 2020
Board meeting
20%
(0%-30%)
5%
(0%-5%)
7.5%
(0%-7.5%)
Achieve Exit Run Rate EBIT
margins for FY21 that support
the FY22 EBIT margin targets
10%
(0%-10%)
FY21 actions that support the
FY24 Strategic plan, identified
and being implemented
7.5%
(0%-7.5%)
Actual
Outcome Comment
Provided active and authentic leadership for safety on site through safety
walks and leadership of the Protect Safety Leadership Programme.
The EBIT (before significant items) result of $669 million materially
outperformed target, including when normalised for the more favourable
market. This resulted in maximum payment for this measure. As EBIT (before
significant items) is also the gate to eligibility for payment against individual
goals, gate to payment for the individual goals has been opened.
Operational cash flow performance for the FY21 year was materially
above target, driven by effective management of working capital.
Cash flow performance was effectively balanced with operational
requirements to manage inventory and continuity of supply for customers
in a complex environment due to COVID-19.
Quality validated senior talent plan delivering. Whilst the number of women
in operational roles was largely flat, clear targets and actions are in place to
improve. Pay parity gap narrowed with ongoing plans in place to close.
Provision envelope maintained, four key legacy projects remaining
to complete. Three major roading projects are on track to complete.
Convention Centre team reset and performing.
Run-rate margin improvement delivered in all core divisions, with FY21
margins +100bps ahead of FY19. Uplift is the result of operational excellence
and profitability focus that the Group has driven over the last three years,
including through FY21.
Solid pipeline of performance improvement and growth initiatives in place
to support the Group’s growth and profitability plans. For example: off-site
manufacturing and apartments; a range of new product and customer service
innovations across the core businesses; acceleration of digitisation initiatives;
sector adjacencies; and ongoing operational improvements.
Safety
Safety Performance
Multiplier
of between
0.9-1.1
Group Total Recordable Injury Frequency Rate (TRIFR) for FY21 was 5.0 a
decrease from FY20’s TRIFR of 5.7. As such the targeted improvement was
overachieved. A positive outcome from the ongoing Protect programme being
line-led and implemented across the Group.
FY21 STI Outcome
100%
(0%-150%)
141%
The STI outcome reflects strong business performance and strength of its
position as it enters FY22.
Key:
Above Target Achievement
Full achievement against target
Partial achievement against target
No achievement against target
64
Fletcher Building Limited Annual Report 2021 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
493
349
273
206
131
118
78
77
58
47
36
28
29
30
22
16
14
14
6
7
9
4
3
6
7
3
2
7
3
1
3
0
420,000 - 430,000
440,000 - 450,000
460,000 - 470,000
470,000 - 480,000
490,000 - 500,000
500,000 - 510,000
510,000 - 520,000
520,000 - 530,000
530,000 - 540,000
540,000 - 550,000
550,000 - 560,000
560,000 - 570,000
590,000 - 600,000
600,000 - 610,000
620,000 - 630,000
630,000 - 640,000
640,000 - 650,000
650,000 - 660,000
690,000 - 700,000
700,000 - 710,000
730,000 - 740,000
790,000 - 800,000
900,000 - 910,000
1,240,000 - 1,250,000
1,360,000 - 1,370,000
2,020,000 - 2,030,000
359
286
267
181
139
89
97
60
49
27
24
26
17
17
13
15
9
9
8
2
6
6
5
4
2
1
5
4
1
3
0
4
852
635
540
387
270
207
175
137
107
74
60
54
46
47
35
31
23
23
14
9
15
10
8
10
9
4
7
11
4
4
3
4
1
0
0
2
1
3
1
2
1
1
1
2
0
1
1
1
1
0
1
0
1
1
1
1
0
1
1
1
1
0
0
1
0
0
0
1
0
0
1
0
0
1
0
1
0
1
1
0
0
0
1
0
2
1
1
2
1
4
1
2
1
2
1
2
1
1
1
2
1
1
1
1
2
1
1
1
1
1
2,105
1,746
3,851
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).
65
Fletcher Building Limited Annual Report 2021 Remuneration Report (Continued)
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 in aggregate per annum
must be within the remuneration pool 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 122.
As a result of COVID-19, the Board agreed to a reduction of 30% to the Chair and non-executive director fees effective 1 April 2020
through to the end of September 2020.
In June 2021, the Nominations Committee considered the appropriateness of current fees and recommended to the Board increases
to the directors’ fees for FY22 to be paid out of the current shareholder approved remuneration pool of $2 million per annum, as shown
in the following table.
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
Expense allowance
Overseas based directors - travelling allowance (3)
Position
Chair (2)
Non-Executive director
Chair
Member
Chair
Member
Chair
Member
Chair
Member
FY21
$367,200
$142,800
$37,000
$19,000
$28,000
$14,000
-
$8,000
$28,000
$14,000
$5,000
$18,000
FY22
$376,500
$146,500
$38,000
$19,500
$29,000
$14,500
-
$8,500
$29,000
$14,500
$5,000
$18,000
(1) This table shows FY21 fees before the application of 30% reduction in Board fees (referred to above) for the period 1 July 2020 to 30 September 2020. FY22 fees are effective from 1 July 2021.
(2) No additional fees are paid to the Board Chair for committee roles.
(3) Reduced to 50% until COVID-19 travel restrictions are lifted.
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 FY21 and none are budgeted for FY22. 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 FY21 (ie after including the 30% reduction in Board fees
from 1 July 2020 - 30 September 2020) are as follows:
Directors
Bruce Hassall
(Chair)
Board Fees
$339,660
Martin Brydon (2)
$132,090
Barbara Chapman
$132,090
Peter Crowley
$132,090
$17,575
Rob McDonald
$132,090
$29,909
Doug McKay
$132,090
(Chair)
$17,575
$ -
(Chair)
$7,400
$7,400
$7,400
$7,400
$7,400
Audit
and Risk
Committee
Nominations
Committee (1)
Remuneration
Committee
Safety, Health,
Environment and
Sustainability
Committee
Overseas
based
directors
travelling
allowance
$9,000
$9,000
Expense
allowance
$5,000
$5,000
$5,000
$5,000
$5,000
Total
Remuneration
$344,660
$173,440
$170,390
$184,015
$187,349
$7,000
$25,900
(Chair)
$12,950
$12,950
$12,950
$25,900
$5,000
$187,965
(Chair)
Cathy Quinn
$132,090
$17,575
$7,400
$12,950
$5,000
$175,015
Total
$1,132,200
$82,634
$44,400
$45,850
$64,750
$35,000
$18,000
$1,422,834
(1) All non-executive directors are members of the Nominations Committee.
(2) Martin Brydon was appointed a member of the Remuneration Committee effective 1 January 2021.
66
Fletcher Building Limited Annual Report 2021
Financial Report
67
Fletcher Building Limited Annual Report 2021 Trend Statement
NZ$M
Financial performance
Operating revenue
June
2021
June
2020
June
2019
June
2018
June
2017
June
2016
June
2015
June
2014
June
2013
June
2012 (1)
8,120
7,309
9,307
9,471
9,399
9,004
8,661
8,401
8,517
8,839
Earnings before interest and taxation (EBIT)
Net earnings
Cash flow from operations
541
305
889
(116)
(196)
410
Earnings per share - basic (cents per share)
37.0
(23.5)
Dividends for the period (cents per share)
Return on average funds (%) (2)
Return on average equity (%) (3)
Financial performance - before significant items
Earnings before interest and taxation (EBIT)
Net earnings
Earnings per share - basic (cents per share)
Return on average funds - before significant
items (%) (2)
Return on average equity - before significant
items (%) (3)
30.0
15.0
8.5
669
413
50.1
18.6
-
(2.7)
(5.1)
160
3
0.4
3.7
397
164
153
19.2
23.0
7.4
4.0
631
367
43.0
(118)
(190)
396
(25.5)
-
(2.2)
(5.2)
50
(60)
(8.1)
273
94
243
13.5
39.0
4.9
2.5
719
462
660
67.0
39.0
13.4
12.4
503
270
575
39.2
37.0
9.6
7.7
592
339
489
49.3
36.0
11.7
9.9
525
321
682
418
653
399
624
362
46.3
60.6
58.0
52.7
569
326
559
47.6
34.0
10.8
9.4
569
326
47.6
403
185
448
27.2
34.0
7.4
5.2
556
317
46.5
11.8
0.9
9.4
12.7
12.5
12.3
10.8
10.2
11.5
0.1
8.8
(1.7)
8.7
11.6
11.3
10.5
9.4
9.0
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Capital
Reserves
Minority equity
Total equity
3,125
3,824
4,121
3,944
3,419
3,222
3,272
2,958
2,868
3,112
4,885
4,954
3,589
4,601
4,254
4,045
4,229
3,983
4,257
4,367
8,010
8,778
7,710
8,545
7,673
7,267
7,501
6,941
7,125
7,479
1,906
2,385
2,330
2,356
1,996
1,997
1,947
1,596
1,557
1,936
2,333
2,858
1,207
2,047
2,097
1,557
1,844
1,891
2,014
2,091
4,239
5,243
3,537
4,403
4,093
3,554
3,791
3,487
3,571
4,027
3,248
3,280
3,427
3,425
2,678
2,650
2,633
2,624
2,606
2,582
507
16
220
35
714
32
693
24
878
1,041
1,050
24
22
27
795
35
913
35
838
32
3,771
3,535
4,173
4,142
3,580
3,713
3,710
3,454
3,554
3,452
Total liabilities and equity
8,010
8,778
7,710
8,545
7,673
7,267
7,501
6,941
7,125
7,479
Other financial data
Total shareholders return (%) (4)
Net tangible assets per share ($)
Gearing (%) (5)
Leverage (%) (6)
107
3.30
4.4
0.2
(21)
2.87
12.3
0.9
(29)
3.53
7.2
0.4
(6)
2.85
23.5
4.8
-
2.70
35.3
2.7
11
2.87
27.3
1.6
(3)
2.80
31.8
2.0
9
2.60
32.3
2.0
51
2.61
33.5
2.3
(27)
2.65
37.4
2.6
(1) The June 2012 balance sheet has been restated following revisions to IAS 19 Employee Benefits adopted by the Group.
(2) EBIT to average funds (net debt and equity less deferred tax asset).
(3) Net earnings to average shareholders' funds.
(4) Share price movement in year and gross dividend received, to opening share price.
(5) Net debt (borrowings less cash and deposits) to net debt and equity.
(6) Net debt to EBITDA before significant items.
68
Fletcher Building Limited Annual Report 2021 Consolidated Income Statement
For the year ended 30 June 2021
Revenue
Cost of goods sold
Gross margin
Selling, general and administration expenses
Share of profits of associates and joint ventures
Significant items
Earnings before interest and taxation (EBIT)
Lease interest expense
Funding costs
Earnings before taxation
Taxation (expense)/benefit
Earnings after taxation
Earnings attributable to non-controlling interests
Net earnings/(loss) attributable to the shareholders
Net earnings per share (cents)
Basic
Diluted
Weighted average number of shares outstanding (millions of shares)
Basic
Diluted
Dividends declared per share (cents)
Note
3
2.1
14
16
25
5
5
18
The accompanying notes form part of and are to be read in conjunction with these financial statements.
On behalf of the Board, 18 August 2021
2021
NZ$M
8,120
(5,778)
2,342
(1,692)
19
(128)
541
(64)
(44)
433
(116)
317
(12)
305
37.0
36.4
824
867
30.0
Bruce Hassall
Chair
Robert McDonald
Director
2020
NZ$M
7,309
(5,496)
1,813
(1,660)
7
(276)
(116)
(69)
(80)
(265)
81
(184)
(12)
(196)
(23.5)
(23.5)
835
835
69
Fletcher Building Limited Annual Report 2021
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
Net earnings/(loss) attributable to shareholders
Net earnings attributable to non-controlling interests
Net earnings/(loss)
Other comprehensive income
Items that do not subsequently get reclassified to income statement:
Movement in pension reserve
Items that may be reclassified subsequently to income statement:
Movement in cash flow hedge reserve
Movement in currency translation reserve
Other comprehensive income
Total comprehensive income/(loss) for the year
2021
NZ$M
305
12
317
68
68
(7)
3
(4)
64
381
2020
NZ$M
(196)
12
(184)
(17)
(17)
(6)
35
29
12
(172)
70
Fletcher Building Limited Annual Report 2021 Consolidated Statement of Movements in Equity
For the year ended 30 June 2021
e
v
r
e
s
e
r
s
t
n
e
m
y
a
p
d
e
s
a
b
-
e
r
a
h
S
e
v
r
e
s
e
r
e
g
d
e
h
w
o
fl
h
s
a
C
l
n
o
i
t
a
s
n
a
r
t
y
c
n
e
r
r
u
C
e
v
r
e
s
e
r
g
n
i
l
l
o
r
t
n
o
c
-
n
o
N
t
s
e
r
e
t
n
i
y
t
i
u
q
E
l
a
t
o
T
i
n
o
s
n
e
P
e
v
r
e
s
e
r
l
a
t
o
T
e
t
o
N
e
r
a
h
S
l
a
t
i
p
a
c
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
3,427
898
11
(6)
(184)
(5)
4,141
32
4,173
(183)
(183)
NZ$M
Total equity at 30 June 2019
Change in accounting policies
Adjusted equity at 30 June 2019
3,427
715
11
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
20
18
Repurchase of shares
Total equity at 30 June 2020
19
(147)
3,280
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 2021
20
18
19
19
3
(24)
(11)
(196)
(128)
391
305
(99)
1
1
12
16
(6)
(6)
(184)
(5)
3,958
35
(17)
(184)
(128)
1
(147)
(12)
(7)
(149)
(22)
3,500
3
68
369
(99)
20
(24)
(11)
32
12
(9)
35
12
(31)
(183)
3,990
(172)
(9)
(128)
1
(147)
3,535
381
(31)
(99)
20
(24)
(11)
3,248
598
28
(19)
(146)
46
3,755
16
3,771
The accompanying notes form part of and are to be read in conjunction with these financial statements.
71
Fletcher Building Limited Annual Report 2021
Consolidated Balance Sheet
As at 30 June 2021
Assets
Current assets:
Cash and cash equivalents
Current tax assets
Contract assets
Derivatives
Debtors
Inventories
Total current assets before held for sale
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
Total current liabilities before held for sale
Liabilities directly associated with assets held for sale
Total current liabilities
Non-current liabilities:
Creditors, accruals and other liabilities
Provisions
Lease liabilities
Derivatives
Borrowings
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Shareholders' funds
Non-controlling interests
Total equity
Total liabilities and equity
Note
2021
NZ$M
2020
NZ$M
7
25
3
17
8
9
2.4
12
13
14
21
9
26
17
25
10
11
14
25
17
3
15
2.4
10
11
14
17
15
19
20
666
9
37
9
1,133
1,186
3,040
85
3,125
1,586
1,120
1,392
173
272
108
10
224
4,885
8,010
1,314
178
178
14
87
106
1,877
29
1,906
23
30
1,519
10
751
2,333
4,239
3,248
507
3,755
16
3,771
8,010
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
The accompanying notes form part of and are to be read in conjunction with these financial statements.
72
Fletcher Building Limited Annual Report 2021 Consolidated Statement of Cash Flows
For the year ended 30 June 2021
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
Purchase of property, plant and equipment and intangible assets
Net cash from investing activities
Cash flow from financing activities
Issue of capital notes
Repurchase of capital notes
Repurchase of shares
Repurchase of shares - transferred to treasury stock
Drawdown of borrowings
Repayment of borrowings
Principal elements of lease payments
Distribution to non-controlling interests
Dividends paid to shareholders of the parent
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.
2021
NZ$M
7,927
3
(6,922)
(116)
(3)
889
20
(231)
(211)
142
(145)
(24)
(11)
(761)
(182)
(31)
(99)
(1,111)
(433)
1,104
(5)
666
2020
NZ$M
7,512
1
(6,957)
(146)
410
5
1
(240)
(234)
100
(220)
(147)
401
(269)
(171)
(9)
(128)
(443)
(267)
1,372
(1)
1,104
73
Fletcher Building Limited Annual Report 2021 Contents
Note
Description
Note
Description
Financial Performance
Note 2
Note 3
Note 4
Note 5
Note 6
Key estimates and judgements
Revenue from contracts with customers
Segmental information
Net earnings per share
Income statement disclosures
Working Capital Management
Note 7
Note 8
Note 9
Cash and cash equivalents
Debtors
Inventories, including land and developments
Note 10
Creditors, accruals and other liabilities
Note 11
Provisions
Long-term Investments
Note 12
Property, plant and equipment
Note 13
Intangible assets
Note 14
Leases
Funding and Financial Risk Management
Note 15
Note 16
Note 17
Borrowings
Net funding costs
Financial risk management
Group Structure and Related Parties
Note 18
Note 19
Dividends and shareholder tax credits
Capital
Note 20
Non-controlling interests
Note 21
Investments in associates and joint ventures
Note 22
Related party disclosures
Other Information
Note 23
Capital expenditure commitments
Note 24
Contingent liabilities
Note 25
Taxation
Note 26
Retirement plans
Note 27
Share-based payments
Note 28
Subsequent events
74
Fletcher Building Limited Annual Report 2021 Notes to the Financial Statements 2021
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 (FMCA) 2013 reporting entity in terms
of the Financial Reporting Act 2013. The Group is a for-profit entity.
Basis of presentation
These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand, which
is the New Zealand equivalent to International Financial Reporting Standards (NZ IFRS). They also comply with International Financial
Reporting Standards.
These financial statements are presented in New Zealand dollars ($), which is the Group’s presentation currency and rounded to the nearest
million unless otherwise stated.
The consolidated financial statements comprise the income statement, statement of comprehensive income, statement of movements
in equity, balance sheet, statement of cash flows, and statement of accounting policies, as well as the notes to these financial statements.
Accounting convention
The financial statements are based on the general principles of historical cost accounting, except that certain financial assets and liabilities,
as described below are stated at their fair value.
The accounting policies have been applied consistently by the Group and are in line with prior year, unless otherwise stated.
Where necessary, certain comparative information has been reclassified to conform to changes in presentation in the current year.
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 and are marked with this icon, or where applied to the financial statements as a whole, are detailed below.
Basis of consolidation
The consolidated financial statements comprise the Company, its 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.
75
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
2. Key estimates and judgements
This section provides details of the key estimates and judgements undertaken when preparing these financial statements.
CHANGES IN ACCOUNTING POLICIES, INTERPRETATIONS AND AGENDA DECISIONS
Configuration or Customisation Costs in a Cloud Computing Arrangement (NZ IAS 38 Intangible Assets)
In April 2021, the International Financial Reporting Standards Interpretations Committee (IFRIC) issued a final agenda decision, Configuration
or customisation costs in a cloud computing arrangement. The IFRIC concluded that costs incurred in configuring or customising software in
a cloud computing arrangement can only be recognised as intangible assets if the activities create an intangible asset that the entity controls
and the intangible asset meets the recognition criteria.
The Group has historically capitalised costs incurred in configuring or customising a supplier’s application software in a cloud computing
arrangement as intangible assets as the Group considered that it would benefit from those costs to implement the cloud-based software over
the term of the cloud computing arrangement.
As at 30 June 2021:
– The impact of the change cannot be reliably measured as the Group has yet to fully complete its assessment of the impact of the IFRIC
agenda decision. The Group expects to adopt this IFRIC agenda decision in its half year financial statements as at 31 December 2021.
– The process to quantify the impact of the agenda decision is ongoing. A project team has been appointed and a timeline has been
determined. The project is ongoing due to the effort required in obtaining the underlying information from historical records covering
multiple projects and assessing the nature of each of the costs.
– Intangible assets relating to cloud computing arrangements of $75 million have been capitalised in the consolidated balance sheet and are
currently subject to this detailed assessment.
– The Group’s preliminary analysis of 599 applicable cloud computing projects has identified a material amount of historical spend
that would be expensed under the new interpretations that would result in a reduction of intangible assets and a restatement of
retained earnings.
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 useful information on the performance of the business. The non-GAAP measures are consistent with how the
business performance is planned and reported to the Board and Audit and Risk Committee.
The Group makes certain significant item adjustments to the statutory profit measures in order to derive non-GAAP measures. The Group
discloses certain non-operating items as significant items. The Group’s policy is to recognise significant items for transactions or events
outside of the Group's ongoing operations that have a significant impact on reported profit. This policy provides stakeholders with additional
useful information as a means 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 2021:
– 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 events that have a material effect on the Group's financial performance and asset valuation.
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 and business where a commitment to close has been demonstrated.
76
Fletcher Building Limited Annual Report 2021
2021
Building Products
Distribution
Concrete
Construction
Australia
Other
Total significant items before taxation
Tax benefit on above items
Total significant items after taxation
Restructuring
and other (1)
NZ$M
Property
rationalisation
(2)
NZ$M
Impairment of
assets (3)
NZ$M
M&A
activity (4)
NZ$M
(5)
(2)
(3)
(19)
(4)
(33)
10
(23)
(1)
1
2
(12)
1
(9)
3
(6)
(3)
(2)
(89)
5
(89)
7
(82)
6
(3)
3
3
2020
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Other
Total significant items before taxation
Tax benefit on above items
Total significant items after taxation
(1) Restructuring and other costs
Restructuring
and other (1)
NZ$M
Property
rationalisation
(2)
NZ$M
Impairment of
assets (3)
NZ$M
M&A
activity (4)
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
(9)
1
4
(3)
(120)
(1)
(128)
20
(108)
Total
NZ$M
(19)
(18)
(13)
(1)
(13)
(166)
(46)
(276)
77
(199)
The Group announced its New Zealand and Australia restructuring programme on 20 May 2020. Ongoing implementation of the programme,
together with costs of other significant one-off events outside the normal operations of the Group, has resulted in a net charge of $33 million
recognised in the year ended 30 June 2021. These charges consist predominantly of redundancy and other employee costs associated
with the restructuring programme.
(2) Property rationalisation
In line with the restructuring strategy announced on 20 May 2020 the Group undertook a review of its operational property footprint.
The costs incurred by the Group in the year ended 30 June 2021 relate primarily to the exit of manufacturing and distribution sites in Iplex
Australia and retail sites in Tradelink.
(3) Impairment of assets
Rocla Pty Limited ($78 million)
The Rocla business continues to be classified as a disposal group held for sale (refer to note 2.4). Under this classification, the net assets
of the business are measured at the lower of carrying value or fair value less cost to sell. As at 30 June 2021 the fair value of the business
has been assessed to be lower than the carrying value of the net assets. A write down of $78 million has therefore been recognised against
these assets.
Iplex Australia ($6 million)
Iplex Australia has recognised a net impairment charge of $6 million to account for the write down of property, plant and equipment and
inventory as a result of the restructuring strategy mentioned above.
77
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
(4) M&A activity
Winstone Aggregates ($6 million)
On 31 July 2020 the Group completed the sale of Winstone Aggregates quarry assets in Manawatu- , the assets had been reported
as property, plant and equipment prior to the disposal. The Group recognised a transaction gain of $6 million in the year ended 30 June 2021
for these assets.
Rocla Pty Limited ($3 million)
Transaction costs of $3 million have been recognised in relation to the sales process of the Rocla business.
2.2 INTANGIBLE ASSET IMPAIRMENT TESTING
Goodwill and brands were tested for impairment in June 2021. Each cash-generating unit (CGU) that carries goodwill is valued on a value-in-
use or fair value less costs of disposal basis using a discounted cash flow model. Management has used its past experience of sales growth,
operating costs and margin, and external sources of information where appropriate, to determine their expectations for the future. These cash
flow projections are principally based on the 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 employed was between 2.0% and 2.5% for Australia
(2020: 1.75%) and 2.0% for New Zealand (2020: 1.75%).
New Zealand and South Pacific CGUs
The goodwill and brand balances for the 15 New Zealand and South Pacific CGUs represent 45% 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 7.0% and 11.0% (2020: between 9.0% and 10.0%), and the South Pacific business has employed a discount rate of 17.5% (2020:
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 2021.
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 CGUs
The goodwill and brand balances for the four Australia CGUs represent 55% of the total balance for the Group. The cash flows are discounted
using a nominal rate specific to each business. Australian business units employed discount rates between 7.0% and 9.0% (2020: 8.1%),
reflecting the risk profile of each business and for the regions in which the CGUs operate.
Sensitivity to reasonably possible changes in assumptions
Group and divisional management completed a comprehensive strategic review of the Australia division and identified a number of
strategic initiatives for the near to medium term to set the division up for long term margin growth. Implementation of these initiatives,
coupled with strengthening of Australian residential and construction market activity, has contributed to a lift in the division's business
performance and profitability. Management recognises that full benefits of implemented strategic changes will be achieved over the longer
term, and, in part, will be dependent on the sustained growth 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 noted below 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)
Discount rate
2.80%
9.50%
7.90%
Decrease by 0.5 ppts
Decrease by 2.8 ppts
Increase by 2.8 ppts
Tradelink (representing 11% of Group goodwill and brands balances)
Key assumption
Value attributed
Sensitivity (absolute movement)
Revenue growth (5-year Cumulative Average Growth Rate (CAGR))
EBIT margin (5-year average)
Discount rate
4.50%
3.70%
7.30%
Decrease by 0.7 ppts
Decrease by 1.8 ppts
Increase by 5.3 ppts
78
Fletcher Building Limited Annual Report 2021 Other CGUs
Based on current economic conditions and CGU performances, no reasonably possible change in any one of the key assumptions used in the
determination of the recoverable value of other Australian CGUs would result in a material impairment to the Group.
2.3 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 (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 (cents)
Net earnings per share - as per income statement (cents)
2.4 ASSETS HELD FOR SALE
2021
NZ$M
305
108
413
50.1
37.0
2020
NZ$M
(196)
199
3
0.4
(23.5)
Rocla Pty Limited
On 19 February 2020, the Group announced its intention to divest the Rocla business, a wholly owned subsidiary reported under the Australia
segment. The announcement to suspend the divestment process was made on 25 March 2020 in response to COVID-19 and the process
was recommenced on 1 June 2020. The Rocla business met the classification requirements of a disposal group held for sale and ceased
depreciation of the relevant assets from 1 June 2020. The business, including its assets and associated liabilities, had been classified as held
for sale as at 30 June 2020. At 30 June 2021 the Group has assessed the latest facts and circumstances in relation to the Rocla divestment
process and concluded that the classification of Rocla as a disposal group remains appropriate.
During the year the Group transferred land at Rocla's Brisbane and Sydney sites, which was previously classified as property, plant and
equipment, to inventory. The transferred land is developed and realised in the ordinary course of business. These assets have been excluded
from held for sale classification and presented under the Residential and Development reportable segment.
The Group has reassessed the fair value less costs to sell of the business' remaining net assets as at 30 June 2021 and recognised a write-
down of funds by $81 million. The fair value of Rocla's net assets has been assessed based on information received through the divestment
process. The summary of Rocla's assets and associated liabilities classified as held for sale is presented below:
Assets
Debtors
Inventories
Property, plant and equipment
Right-of-use assets
Provision for deferred taxation
Assets held for sale
Liabilities
Creditors, accruals and other liabilities
Provisions
Lease liabilities
Liabilities directly associated with assets held for sale
Net assets directly associated with disposal group
2021
NZ$M
2020
NZ$M
21
49
10
5
85
21
2
6
29
56
30
50
118
6
204
28
13
7
48
156
79
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
2.5 SUPPLEMENTARY DISCLOSURES: CONSTRUCTION ACCOUNTING
The Group's Construction division is engaged by a wide variety of customers to construct and maintain building and infrastructure projects
across New Zealand and the South Pacific. Services provided by the division include construction contract works, engineering and maintenance
services. Each project has a different risk profile based on its individual contractual and delivery characteristics.
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 in note 3.
The division performs regular reviews of its customer contracts including reassessment of cost to complete estimates at each reporting date.
Onerous contract provisions are recognised under NZ IAS 37: Provisions where the unavoidable costs (i.e., the costs that the division cannot
avoid because it has the contract) of meeting the obligations under a contract exceed the economic benefits expected to be received under it.
Onerous contract provisions recognised in relation to the Group's legacy building and infrastructure projects have been disclosed in note 11.
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.
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 is
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.
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.
Contract assets/liabilities are stated at cost plus profit recognised to date, less progress billings. Costs include 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;
- Subcontractor costs, in particular costs that are 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;
- Future weather and ground conditions.
80
Fletcher Building Limited Annual Report 2021
A summary of the major construction projects and their approximate stage of completion is disclosed to demonstrate the uncertainty that
remains on these projects.
Status of construction projects (> $200 million original contract value) as at 30 June 2021:
NZICC reinstatements - Cost plus margin
NZICC - Guaranteed maximum price and fixed price contract
Pu- hoi to Warkworth - Fixed price contract (Public Private Partnership)
Hamilton City Edge Expressway - Alliance contract
-
Peka Peka to O
taki Expressway - Fixed price contract
* Calendar year
Revenue backlog by business unit as at 30 June 2021:
Buildings
Infrastructure*
Brian Perry Civil*
Higgins
South Pacific
Business unit
Buildings
Buildings
Infrastructure
Infrastructure / Higgins
Infrastructure / Higgins
Forecast
completion*
Percentage
of completion
(% cost)
2024
2024
2022
2022
2022
35%
83%
82%
88%
75%
Current revenue backlog
NZ$M
Top 5 projects as a % of
revenue backlog
317
329
1,318
856
122
2,942
100%
78%
11%
30%
95%
N/A
* During the year the Watercare Enterprise Framework Agreement contract has moved to being predominately delivered by Brian Perry Civil, previously the estimated backlog was equally
allocated to Infrastructure and Brian Perry Civil business units.
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%
NA
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.
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 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 additional requirement for provisions in these financial
statements. The Group’s assessment of the cost to complete relies on application of estimates and judgements (e.g. measurement
of remediation’s cost to complete, the likelihood of receipt of insurance recoveries and quantification of any claims and costs that
are outside of insurance cover) and as such may be subject to change as the project progresses.
81
Fletcher Building Limited Annual Report 2021 Notes to the Financial Statements 2021 (Continued)
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 projects
- Construction of building and infrastructure projects (refer to note 2.5)
- Maintenance service contracts (refer to note 2.5)
Revenue from contracts with customers is recognised when control of the goods or services is 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.
2021
Sale of
building
products and
materials
NZ$M
Development
and sale of
residential
properties
NZ$M
Construction
contract
revenue
NZ$M
Maintenance
contract
revenue
NZ$M
Goods and services transferred at a point in time
6,052
721
Goods and services transferred over time
Total revenue from contracts with customers
6,052
721
834
834
513
513
2020
Sale of
building
products and
materials
NZ$M
Development
and sale of
residential
properties
NZ$M
Construction
contract
revenue
NZ$M
Maintenance
contract
revenue
NZ$M
Goods and services transferred at a point in time
5,588
460
Goods and services transferred over time
Total revenue from contracts with customers
5,588
460
760
760
501
501
Total
NZ$M
6,773
1,347
8,120
Total
NZ$M
6,048
1,261
7,309
82
Fletcher Building Limited Annual Report 2021
Contract assets
The gross amount of construction and maintenance work in progress consists of costs attributable to work performed and emerging
profit after providing for any foreseeable losses. In applying the accounting policies on providing for these losses, accounting judgement
is required.
Construction contracts with cost and margin in advance of billings are presented as part of contract assets for all contracts in which costs
incurred plus recognised profits exceed progress billings. If progress billings and recognised losses exceed costs incurred plus recognised
profits, then the difference is presented as contract liabilities.
Contract liabilities
Construction contracts where the total progress billings issued to clients (together with foreseeable losses if applicable) on a project exceed
the costs incurred to date plus recognised profit on the contract are recognised as a liability.
Construction contracts with cost and margin in advance of billings
Contract assets
Construction contracts with billings in advance of cost and margin
Contract liabilities
4. SEGMENTAL INFORMATION
2021
NZ$M
37
37
87
87
2020
NZ$M
69
69
223
223
Segmental information is presented in respect of the Group’s industry and geographical segments. The use of industry segments as the
primary format is based on the Group’s management and internal reporting structure, which recognises groups of assets and operations
with similar risks and returns. Inter-segment pricing is determined on an arm’s length basis.
Industry segments
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Other
Group
Less: intercompany revenue
Group external revenue
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Corporate
Group
2021
Gross revenue
NZ$M
2020
Gross revenue
NZ$M
2021
External revenue
NZ$M
2020
External revenue
NZ$M
1,401
1,714
849
734
1,456
2,758
10
8,922
(802)
8,120
1,173
1,471
740
466
1,318
2,802
10
7,980
(671)
7,309
2021
EBIT before
significant items
NZ$M
2020
EBIT before
significant items
NZ$M
197
127
113
154
31
103
(56)
669
87
85
74
65
(147)
33
(37)
160
1,101
1,684
583
721
1,347
2,684
8,120
8,120
2021
Funds*
NZ$M
726
215
573
534
219
1,327
177
3,771
922
1,440
503
460
1,261
2,723
7,309
7,309
2020
Funds*
NZ$M
678
209
607
604
50
1,494
(107)
3,535
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes. Group balances such as borrowings and taxation are allocated to Corporate as
these are managed at a Group level.
83
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
Corporate
Group
Geographic segments
New Zealand
Australia
Other jurisdictions
Group
Significant items (note 2.1)
Earnings before interest and taxation (EBIT)
New Zealand
Australia
Other
Debt and taxation
Group
2021
Depreciation,
depletion and
amortisation expense
NZ$M
2020
Depreciation,
depletion and
amortisation expense
NZ$M
2021
Capital
expenditure
NZ$M
2020
Capital
expenditure
NZ$M
56
49
71
3
40
128
16
363
53
47
74
3
40
135
18
370
112
12
36
1
25
42
4
232
53
21
50
3
32
65
8
232
2021
External revenue
NZ$M
2020
External revenue
NZ$M
2021
EBIT before
significant items
NZ$M
2020
EBIT before
significant items
NZ$M
5,237
2,773
110
8,120
4,466
2,740
103
7,309
2021
Non-current
assets
NZ$M
2020
Non-current assets+
NZ$M
2,845
1,646
52
4,543
2,836
1,670
53
4,559
510
151
8
669
(128)
541
2021
Funds*
NZ$M
2,230
1,348
69
124
3,771
110
42
8
160
(276)
(116)
2020
Funds*
NZ$M
2,221
1,495
83
(264)
3,535
+ 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 net debt and taxation are allocated to Corporate as
these are managed at a Group level.
Description of industry segments
Building Products
Distribution
Concrete
Residential and Development
Construction
Australia
84
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 the sale of the 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.
Fletcher Building Limited Annual Report 2021
5. NET EARNINGS PER SHARE
Earnings per share is the portion of a company's profit allocated to each outstanding ordinary share and is calculated by dividing
the earnings attributable to shareholders by the weighted average of ordinary shares on issue during the year excluding impacts of 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. The Group may, at its option, purchase or redeem the capital notes for cash
at the principal amount plus any accrued but unpaid interest.
Net earnings per share (cents)
Basic
Diluted
Numerator
Net earnings/(loss)
Numerator for basic earnings per share
Dilutive capital notes
Numerator for diluted net earnings per share
Denominator (millions of shares)
Weighted average number of shares outstanding (refer to note 19)
Conversion of dilutive capital notes
Denominator for diluted net earnings per share
6. CONSOLIDATED INCOME STATEMENT DISCLOSURES
The following items are specific disclosures required to be made and are included within
the income statement:
Net periodic pension cost
Employee related short-term costs (1)
Other long-term employee related benefits
Research and development expenditure
Amortisation of intangibles
Bad debts written off
Donations and sponsorships
Maintenance and repairs
(1) Short-term employee benefits for the executive committee are included in the above is disclosed in note 22.
Auditor's remuneration
Audit and review of the financial statements (1)
Total audit and assurance services
Other services (2)
Total non-assurance services
Total auditor's remuneration
(1) The audit includes fees for both the annual audit of the financial statements and the review of the interim financial statements
(2) Other services relate to agreed upon procedures
2021
37.0
36.4
NZ$M
305
305
11
316
824
43
867
2020
(23.5)
(23.5)
NZ$M
(196)
(196)
(196)
835
835
2021
NZ$M
2020
NZ$M
2
1,420
54
2
24
3
3
151
2
1,446
58
1
24
5
3
143
2021
NZ$000's
2020
NZ$000's
3,262
3,262
16
16
3,278
2,858
2,858
14
14
2,872
85
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
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 $17 million (2020: $102 million).
At 30 June 2021, approximately $42 million (2020: $19 million) of total cash and deposits were held in subsidiaries that operate in countries
where exchange controls and other legal restrictions apply and are not immediately available for general use by the Group.
2021
NZ$M
252
18
396
666
2021
NZ$M
305
12
317
363
91
113
3
570
105
(179)
(62)
(22)
160
2
889
2020
NZ$M
503
24
577
1,104
2020
NZ$M
(196)
12
(184)
370
240
(81)
7
536
50
(19)
95
(1)
(67)
58
410
Cash and bank balances
Contract retention bank balances
Short-term deposits
Reconciliation of net earnings to net cash from operating activities
Net earnings
Earnings attributable to minority interest
Add/(less) non-cash items:
Depreciation, depletions and amortisation
Other non-cash items
Taxation
Loss on disposal of businesses and property, plant and equipment
Net working capital movements
Residential and Development
Construction
Other divisions:
Debtors
Inventories
Creditors
Net cash from operating activities
86
Fletcher Building Limited Annual Report 2021
8. DEBTORS
Debtors are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due
for settlement within 30 to 90 days and are therefore all classified as current. Debtors are recognised initially at the amount of consideration
that is unconditional, unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade
receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the
effective interest method. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in note 17.3.
Trade debtors
Contract debtors
Contract retentions
Less expected credit loss provisions
Trade and contract debtors
Other receivables
Current
0 - 30 days over standard terms
31 - 60 days over standard terms
61+ days over standard terms
Provision
Trade and contract debtors
2021
NZ$M
829
55
35
(18)
901
232
2020
NZ$M
746
69
35
(25)
825
216
1,133
1,041
802
82
14
21
(18)
901
739
75
6
30
(25)
825
Fair values of debtors
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
Impairment and risk exposure
Information about the impairment of trade receivables and the Group’s exposure to credit risk and foreign currency risk can be found in
note 17.3.
9. INVENTORIES, INCLUDING LAND AND DEVELOPMENTS
Raw materials, work in progress and finished goods
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct
materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of
normal operating capacity. Cost includes the reclassification from equity of any gains or losses on qualifying cash flow hedges relating to
purchases of raw material but excludes borrowing costs. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated
costs necessary to make the sale.
Land held for resale
Land held for resale is stated at the lower of cost and net realisable value. Cost is assigned by specific identification and includes the cost of
acquisition and development costs during development.
87
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Raw materials
Work in progress
Finished goods
Consumable stores and spare parts
Inventories held at cost
Inventories held at net realisable value
Current portion
Non-current portion
2021
NZ$M
418
314
690
36
1,458
1,153
305
1,458
1,186
272
1,458
2020
NZ$M
364
377
736
39
1,516
1,192
324
1,516
1,215
301
1,516
Inventory classified as non-current
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 $321 million, 2020: $367 million).
The Group's Residential and Development division has commitments for the purchase of land and building services totalling $430 million
(2020: $257 million), of which $105 million is expected to be delivered in the year to 30 June 2022 (2020: $77 million).
10. CREDITORS, ACCRUALS AND OTHER LIABILITIES
Trade creditors and other liabilities are stated at cost or estimated liability where accrued. Employee entitlements include annual leave
which is recognised on an accrual basis and the liability for long service leave which is measured as the present value of expected future
payments to be made in respect of services provided by employees.
Assumptions in determining long service leave relate to the discount rate, estimates relating to the expected future long service leave
entitlements, future salary increases, attrition rates and mortality.
Trade creditors
Contract retentions
Accrued interest
Other liabilities
Employee entitlements
Workers' compensation schemes
Current portion
Non-current portion
Carrying amount at the end of the year
2021
NZ$M
729
24
15
333
225
11
1,337
1,314
23
1,337
2020
NZ$M
609
30
30
299
181
9
1,158
1,098
60
1,158
The non-current portion of creditors and accruals as at 30 June 2021 relates to long service employee entitlement obligations.
88
Fletcher Building Limited Annual Report 2021
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 the amount can be reliably estimated. Provisions are not recognised for future operating losses other than losses recognised on
onerous contracts.
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 at the end of the reporting period of the expenditure required to
settle the present obligation. 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 and 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 is individually material.
Restructuring
NZ$M
Warranty &
environmental
NZ$M
Onerous
contracts
NZ$M
Other
NZ$M
Total
NZ$M
2021
Carrying amount at the beginning of the year
Charged to earnings
Settled or utilised
Released to earnings
2020
Carrying amount at the beginning of the year
Charged to earnings
Settled or utilised
Released to earnings
Held for sale
Current portion
Non-current portion
Carrying amount at the end of the year
48
37
(34)
(5)
46
32
75
(45)
(1)
(13)
48
22
8
(2)
28
34
2
(10)
(4)
22
162
(78)
45
23
(18)
84
50
264
150
(252)
162
34
33
(20)
(2)
45
2021
NZ$M
178
30
208
During the year the Group utilised $34 million (2020: $45 million) in respect of restructuring obligations at certain businesses.
Of the remaining balance $37 million is expected to be utilised within the next 12 months. Warranty and environmental provisions
are expected to be utilised over the next three years.
277
68
(132)
(5)
208
364
260
(327)
(7)
(13)
277
2020
NZ$M
251
26
277
89
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Long-term Investments
This section details the long-term assets of the Group including property, plant and equipment, intangible assets and leases.
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
Plant and machinery
Fixtures and equipment
Intangible assets, including software
30–50 years
5–15 years
2–10 years
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.
2021
Carrying value at 1 July 2020
Additions
Disposals
Depreciation expense
Impairment
Transfer of assets to inventory
Currency translation
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
136
32
(3)
158
43
(10)
(1)
1,009
112
(106)
(4)
1
1,012
157
25
(19)
(29)
(1)
95
7
(4)
(12)
Total
NZ$M
1,555
219
(23)
(157)
(6)
(3)
1
Carrying value at 30 June 2021
165
190
133
86
1,586
Represented by:
Cost
Accumulated depreciation and impairment
166
(1)
165
318
(128)
190
2,282
(1,270)
1,012
384
(251)
133
121
(35)
86
3,271
(1,685)
1,586
90
Fletcher Building Limited Annual Report 2021
2020
Carrying value at 1 July 2019
Additions
Disposals
Depreciation expense
Impairment
Transfer of assets to inventory
Held for sale
Currency translation
Carrying value at 30 June 2020
Represented by:
Cost
Accumulated depreciation and impairment
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
181
8
(1)
(5)
(50)
3
136
137
(1)
136
204
10
(10)
(12)
(37)
3
158
283
(125)
158
1,074
131
(11)
(111)
(57)
(25)
8
1,009
2,214
(1,205)
1,009
162
33
(28)
(6)
(6)
2
157
412
(255)
157
95
12
(12)
Total
NZ$M
1,716
194
(12)
(161)
(75)
(5)
(118)
16
95
1,555
125
(30)
95
3,171
(1,616)
1,555
As at 30 June 2021 property, plant and equipment includes $214 million of assets under construction that are not depreciated until they are
commissioned and brought into use (2020: $133 million).
Government Grants
The Ministry for the Environment (New Zealand) part-funded Fletcher Building’s waste tyre capital project with a grant of $16 million
awarded to the Group through its Waste Minimisation Fund. In the year ended 30 June 2021 $16 million (2020: $8 million) has been recognised as a
deduction from the carrying amount of related qualifying property, plant and equipment assets. The Group did not benefit directly from any other
forms of government assistance in the year ended 30 June 2021.
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 (CGU) 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 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 the consolidated income statement immediately.
Assessing the carrying value of goodwill and indefinite life brands requires management to estimate future cash flows to be generated
by the related CGU. The key assumptions used in the value-in-use or fair value less costs of disposal basis include the expected rate of
growth of revenues and earnings, the terminal growth rate and the appropriate discount rate to apply.
91
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Impairment
2021
Carrying value at the beginning of the year
Additions
Impairment
Amortisation expense
Currency translation
Represented by:
Cost
Accumulated amortisation and impairment
Carrying value at the end of the year
2020
Carrying value at the beginning of the year
Additions
Impairment
Amortisation expense
Currency translation
Represented by:
Cost
Accumulated amortisation and impairment
Carrying value at the end of the year
Goodwill
NZ$M
708
(2)
706
706
706
Brands
NZ$M
281
1
282
361
(79)
282
Other
Intangibles*
NZ$M
144
13
(1)
(24)
132
345
(213)
132
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
1,133
13
(3)
(24)
1
1,120
1,412
(292)
1,120
Total
NZ$M
1,129
39
(22)
(24)
11
1,133
1,401
(268)
1,133
As at 30 June 2021 other intangible assets include $25 million of assets being developed (2020: $26 million).
* As disclosed in note 2 changes in accounting policies, interpretations and agenda decisions, the Group is in the process of assessing the
impact of IFRIC's interpretation of Configuration or Customisation Costs in a Cloud Computing Arrangement (NZ IAS 38: Intangible Assets).
Preliminary analysis has identified a material amount of historical spend that would be expensed under the new interpretations that would
result in a reduction of intangible assets and a restatement of retained earnings.
Significant intangible balances within cash generating units (CGUs)
Laminex Australia
Higgins New Zealand
Iplex New Zealand
Stramit
Tradelink
Other
Goodwill
2021
NZ$M
Goodwill
2020
NZ$M
Brands
2021
NZ$M
Brands
2020
NZ$M
154
114
105
61
61
211
706
154
114
105
61
61
213
708
122
19
7
41
51
42
282
122
19
7
41
51
41
281
The goodwill allocated to significant CGUs accounts for 70% (2020: 70%) of the total carrying value of goodwill. The remaining 'other' CGUs,
which comprise 14 (2020: 14) in total, are each less than 7% of total carrying value. The significant brand assets account for 85% (2020: 85%)
of the total carrying value of brands. The remaining 'other' brand assets are each less than 5% of total carrying value (2020: 5%).
92
Fletcher Building Limited Annual Report 2021
14. LEASES
The Group leases various offices, warehouses, retail stores, equipment and vehicles. Rental contracts are typically made for fixed periods,
but may have extension options as described below.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and
non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has
elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not
impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as
security for borrowing purposes.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value
of the following lease payments:
- fixed payments (including in-substance fixed payments), less any lease incentives receivable
- variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
- amounts expected to be payable by the Group under residual value guarantees
- the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and
- payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally
the case for property leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would
have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with
similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
-
where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third party financing was received
- uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have
recent third party financing, and
- makes adjustments specific to the lease, e.g. term, country, currency and security.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period.
In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease
payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change
in the assessment of an option to purchase the underlying asset.
Right-of-use assets are measured at cost comprising the following:
- the amount of the initial measurement of lease liability
- any lease payments made at or before the commencement date less any lease incentives received
- any initial direct costs, and
- restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group
is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line
basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT
equipment and small items of office furniture. Expenses in relation to short-term and low-value leases amounted to $53 million in the year to
30 June 2021 (2020: $33 million).
Extension options
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.
The Group has some lease contracts that include extension and termination options. These options provide flexibility in managing the leased
asset portfolio and align with the Group’s business needs. Management exercises significant judgement in determining whether these
extension and termination options are reasonably certain to be exercised.
Property leases represent 84% of the Group’s leased-asset portfolio. Even though the lease term (including extension and termination options
that are reasonably certain to be exercised) is determined on a lease-by-lease basis, the intended use and current market environment
generally impact the determination of the lease term at initial recognition of a lease and at each subsequent reporting date.
As at 30 June 2021, the five largest lease contracts have all related extension options included in the estimated lease term, resulting in future
lease payments being included in the measurement of the lease liability recorded in the consolidated balance sheet.
93
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Right-of-use assets
2021
Opening net book value 1 July 2020
Additions and renewals
Depreciation
Impairment
Terminations
Currency translation
Closing balance 30 June 2021
2020
Opening net book value 1 July 2019
Additions and renewals
Depreciation
Impairment
Terminations
Held for sale
Currency translation
Closing balance 30 June 2020
Lease liabilities
Opening balance
Additions
Repayments
Terminations
Held for sale
Currency translation
Closing balance
Current portion
Non-current portion
Carrying amount at the end of the year
Lease expenses recognised in consolidated
income statement
Right-of-use asset depreciation
Right-of-use asset impairment
Lease interest expense
94
Land
NZ$M
Buildings
NZ$M
Plant &
machinery
NZ$M
20
(1)
(6)
13
18
2
(2)
2
20
1,172
166
(119)
(5)
(44)
2
1,172
1,311
70
(122)
(23)
(65)
(2)
3
1,172
221
53
(62)
(6)
1
207
209
73
(61)
(3)
(4)
7
221
2021
Total
NZ$M
1,721
219
(183)
(61)
1
1,697
178
1,519
1,697
2021
Total
NZ$M
182
5
64
251
Total
NZ$M
1,413
219
(182)
(5)
(56)
3
1,392
1,538
145
(185)
(23)
(68)
(6)
12
1,413
2020
Total
NZ$M
1,803
146
(171)
(67)
(7)
17
1,721
172
1,549
1,721
2020
Total
NZ$M
185
23
69
277
Fletcher Building Limited Annual Report 2021 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 has various debt facilities and covenants. A key measure is a through-the-cycle net debt to EBITDA ratio (leverage). Net debt
represents the value of the Group's drawn borrowings adjusted for debt hedging activities and available cash funding. The target leverage ratio
range is 1.0 to 2.0 times. It is intended that the Group will not be materially outside the target leverage ratio ranges on a long-term basis.
The Group has not sought and does not hold a credit rating from an accredited rating agency.
15. 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 16.
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 17.
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.
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
Cash flows
NZ$M
Currency
translation
NZ$M
Other non-cash
movements
(including hedge
accounting)
NZ$M
(23)
(1)
(24)
24
(458)
(396)
(3)
(4)
(861)
97
(764)
433
(331)
(44)
(4)
(1)
(49)
51
2
5
7
2020
NZ$M
1,001
400
365
25
1,791
(190)
1,601
(1,104)
497
2021
NZ$M
476
361
20
857
(18)
839
(666)
173
95
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
2019
NZ$M
Cash flows
NZ$M
Currency
translation
NZ$M
Reclassified
to lease
liabilities
NZ$M
Other non-cash
movements
(including hedge
accounting)
NZ$M
Private placements
Bank loans
Capital notes
Other loans
Carrying value of borrowings
(as per balance sheet)
Less: value of derivatives used to
manage changes in hedged risks on
debt instruments
Economic debt
Less: cash and cash equivalents
Net debt
886
258
485
68
1,697
(107)
1,590
(1,372)
218
(8)
142
(120)
2
16
(4)
12
267
279
35
(2)
33
(22)
11
1
12
(44)
(44)
(44)
(44)
Carrying value of borrowings included within the balance sheet as follows:
Current borrowings
Non-current borrowings
Total borrowings
At reporting date, the Group had the following funding facilities:
Utilised facilities
Unutilised syndicate bank loan facilities
Total facilities
2020
NZ$M
1,001
400
365
25
1,791
88
1
89
(57)
(190)
32
32
1,601
(1,104)
497
2021
NZ$M
106
751
857
839
925
1,764
2020
NZ$M
581
1,210
1,791
1,601
525
2,126
Private placements
Private placements comprise loans of USD246 million, CAD15 million, EUR41 million and GBP10 million with maturities between
2026 and 2028.
On 29 July 2020, the Group prepaid AUD99 million and USD200 million of notes on issue with original maturities of 2022 and 2024.
These were classified as current at 30 June 2020. The Group recognised a significant item of $2 million in the year (2020: $30 million) related to
the private placement make-whole component of the prepayment (including the impact of debt hedging activities) as governed by the private
placement borrowing agreement.
Capital notes
At 30 June 2021 the Group had issued $361 million of listed capital notes to retail investors (2020: $365 million) with maturities
between 2022 and 2026. 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 accrued interest into shares of
Fletcher Building Limited, at approximately 98% of the current market price. If the principal amount of these notes held at 30 June 2021 were
to be converted to shares, 49 million (2020: 101 million) Fletcher Building Limited shares would be issued at the share price as at
30 June 2021, of $7.52 (2020: $3.70).
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 2021, the Group held $140 million (2020: $135 million) of its own capital notes.
96
Fletcher Building Limited Annual Report 2021 Bank Loans
At 30 June 2021 the Group had a $925 million syndicated revolving credit facility on an unsecured, negative pledge and borrowing
covenant basis, 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,Ltd., The Hongkong and Shanghai Banking Corporation Limited and
Westpac New Zealand Limited.
The facility has two tranches, $525 million maturing in July 2022 (Tranche 1) and $400 million maturing in July 2024 (Tranche 2).
The funds under this facility can be borrowed in United States, Australian and New Zealand dollars. At 30 June 2021, the Group
was in compliance with the applicable covenants.
Other Loans
At 30 June 2021 the Group had unsecured loans of $20 million (2020: $25 million) some of which were subject to the negative pledge.
Other loans include bank overdrafts, short-term loans, working capital facilities and amortising loans.
Negative pledge
The Group borrows certain funds based on a negative pledge arrangement. The negative pledge includes a cross guarantee between a number
of wholly owned subsidiaries and ensures that external senior indebtedness ranks equally in all respects and includes the covenant that security
can be given only in very limited circumstances. At 30 June 2021 the Group had debt subject to the negative pledge of $471 million (2020:
$1,230 million).
Covenants
On 10 June 2020, the Group agreed amendments to its syndicate and private placement borrowing arrangements which enabled the Group
to rely on more favourable terms for covenant testing for the period June 2020 to December 2021 (inclusive). Under the agreement, the Group
tested covenants with a level of Total Interest Cover ratio of 1.5 times (normally 2.0 times) and a level of Senior Interest Cover ratio of 2.25
times (normally 3.0 times). In February 2021, the amendments were revised to allow the Group to pay an interim dividend to shareholders.
The amendments to the borrowing facilities between the Group and its lenders ceased in June 2021 and the Group returned to normal financial
covenant levels.
The Group was in compliance with all financial covenants as at the balance date.
The impact of debt hedging activities on borrowings is represented in the table below:
2021
Underlying borrowing
exposure
Economic debt
exposure
Currency of borrowings
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
2020
Currency of borrowings
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
Fixed rate
NZ$M
Floating rate
NZ$M
Impact of
hedging
NZ$M
Fixed rate
NZ$M
Floating rate
NZ$M
361
20
17
71
368
837
2
4
14
20
137
321
(20)
(17)
(71)
(368)
(18)
375
212
587
125
113
14
252
Underlying borrowing
exposure
Economic debt
exposure
Fixed rate
NZ$M
Floating rate
NZ$M
Impact of
hedging
NZ$M
Fixed rate
NZ$M
Floating rate
NZ$M
365
118
20
17
73
773
1,366
405
6
14
425
246
447
(20)
(17)
(73)
(773)
(190)
415
317
732
601
254
14
869
% Fixed
75%
65%
-
-
-
-
-
70%
% Fixed
41%
56%
-
-
-
-
-
46%
97
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial commitments as they fall due. The Group manages its
liquidity risk by maintaining a target level of undrawn committed credit facilities and a spread of the maturity dates of the Group's debt facilities
that it reviews on an ongoing basis.
The following maturity analysis table sets out the remaining contractual undiscounted cash flows, including estimated interest payments for
non-derivative financial liabilities and derivative financial instruments. Creditors and accruals are excluded from this analysis as they are not part
of the Group's assessment of liquidity risk because these are offset by debtors with similar payment terms.
Contractual
cash flows
NZ$M
Up to 1 Year
NZ$M
1–2 Years
NZ$M
2–5 Years
NZ$M
Over 5 Years
NZ$M
360
460
20
840
780
(782)
(2)
838
157
2,192
3,187
100
6
106
321
(323)
(2)
104
35
233
372
56
14
70
105
(107)
(2)
68
28
217
313
204
204
204
69
529
802
460
460
354
(352)
2
462
25
1,213
1,700
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$M
400
365
1,001
25
1,791
906
(1,096)
(190)
1,601
175
2,317
4,093
100
100
100
470
11
581
447
(566)
(119)
462
100
49
244
755
37
226
363
400
165
14
579
105
(109)
(4)
575
60
564
1,199
531
531
354
(421)
(67)
464
29
1,283
1,776
2021
Bank loans
Capital notes
Private placements
Other loans
Borrowings - Principal cash flows
Gross settled derivatives - to pay
Gross settled derivatives - to receive
Debt derivatives financial instruments -
Principal cash flows
Total principal cash flows
Contractual interest cash flows
Total lease cash flow
Total contractual cash flows
2020
Bank loans
Capital notes
Private placements
Other loans
Borrowings - Principal cash flows
Gross settled derivatives - to pay
Gross settled derivatives - to receive
Debt derivatives financial instruments -
Principal cash flows
Total principal cash flows
Contractual interest cash flows
Total lease cash flow
Total contractual cash flows
98
Fletcher Building Limited Annual Report 2021 16. NET FUNDING COSTS
Interest expense and income are recognised on an accrual basis in the profit or loss using the effective interest method.
Funding costs also include the changes in fair value relating to derivatives used to manage interest rate risk, and the associated changes in
fair value of the borrowings designated in a hedge relationship attributable to the hedged risk.
Interest income
Interest on borrowings and derivatives
Interest expense other
Net interest expense
Changes in fair value relating to:
Borrowings designated in a hedging relationship
Derivatives designated in a hedging relationship
Total changes in fair value
Bank fees, registry and other expenses
Line fees
Other (gains)/losses
Net funding costs
2021
NZ$M
2020
NZ$M
(4)
39
3
38
(22)
22
1
7
(2)
44
(9)
65
5
61
50
(50)
10
7
2
80
Included in interest on borrowings and derivatives is the net settlement of the Group's interest derivatives. This consists of $18 million
of interest income and $20 million of interest expense (2020: $39 million interest income; $35 million interest expense). Other (gains)/losses
includes credit valuation adjustment (CVA)/debit valuation adjustments (DVA) on derivatives.
Interest rate risk
At 30 June 2021, 70% of the Group's debt was subject to a fixed interest rate (2020: 46% fixed).
(i) Interest rate repricing
The following tables set out the interest rate repricing profile of interest bearing financial liabilities assuming floating rate facilities are utilised
to maintain debt levels.
Fixed financial liabilities
Floating financial liabilities
Economic debt
% Fixed
2021
NZ$M
587
252
839
70%
2022
NZ$M
376
463
839
45%
2023
NZ$M
355
484
839
42%
2024
NZ$M
135
704
839
16%
2025
NZ$M
55
784
839
7%
2026
NZ$M
839
839
0%
The Group's overall weighted average interest rate (based on year end borrowings) excluding fees is 4.04% (2020: 3.67%).
(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
$2.5 million pre-tax on the Group's debt portfolio exposed to floating rates at balance date (2020: $8.7 million) assuming that all other
variables remain constant.
99
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
17. FINANCIAL RISK MANAGEMENT
Exposures to credit, liquidity, foreign 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 risks are managed:
Financial risk
Description
Management of risk
Foreign currency
trade transaction risk
(note 17.1(i))
Foreign currency
balance sheet
translation risk
(note 17.1(ii))
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.
Arises due to the translation of the Group’s
foreign denominated assets and liabilities,
overseas operations and subsidiaries to the
company’s functional currency of NZD, such
that the Group’s reporting of financial ratios
would be materially affected.
Interest rate risk
(note 15 & note 17.2)
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 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. The majority of
these transactions have maturities of less than one year from the
reporting date.
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 from
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 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 2021 was NZ$/MWh 99 (2020: NZ$/MWh 118). The average
hedged diesel price for 2021 was NZ$/litre 0.45 (2020: NZ$/litre
0.73).
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.
Disclosure about the credit risk associated with financial instruments and fair value measurement of financial instruments is included in notes
17.3 and 17.4.
100
Fletcher Building Limited Annual Report 2021 Derivative financial instruments and hedge accounting
Derivatives are recorded at fair value 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.
If the hedge no longer meets the criteria for hedge accounting, hedge accounting is discontinued. The cumulative gain or loss previously
recognised in the cash flow hedge reserve remains there until the forecast transaction occurs, or is immediately recognised in the income
statement if the transaction is no longer expected to occur.
Net investment hedges
Where the derivative financial instruments are designated as a hedge of a net investment in a foreign operation, the derivative financial
instruments are accounted for on the same basis as cash flow hedges through the foreign currency translation reserve (FCTR) within equity.
Cost of hedging
The forward elements of foreign exchange forwards and swaps are excluded from designation as the hedging instrument and the foreign
currency basis spreads of CCIRS are separately accounted for and recognised in other comprehensive income as a 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.
17.1 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 and the Euro. The gross value of these foreign exchange derivatives at 30 June 2021 was $656 million
(2020: $570 million).
101
Fletcher Building Limited Annual Report 2021 Notes to the Financial Statements 2021 (Continued)
(ii) Currency translation risk
The effect of the Group’s hedge accounting policy in managing foreign exchange risk related to the Group’s net investments in foreign
operations is presented in the table below:
Hedging investments and hedging instruments used (NZ$M)
Amount of investment hedged
Foreign currency borrowings
Notional amount
Foreign currency swaps
Hedge effectiveness
Change in value used for calculating hedge ineffectiveness
Net investment hedge gain/(loss) recognised in other comprehensive Income
2021 AUD
Maturity:
0-4 months
2020 AUD
Maturity:
0-4 months
321
235
(321)
(235)
(2)
2
2
(2)
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 $149 million (2020: $138 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 exchange risks
- 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.
102
Fletcher Building Limited Annual Report 2021
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.
2021
Cash flow hedging and fair value hedging
Cross currency interest rate swaps
Nominal amount of the hedging instrument
Carrying amount
Accumulated cost of hedging
Change in value used for calculating hedge ineffectiveness
Hedging loss recognised in other comprehensive income
Fair value hedge (income statement) (gain)/loss
USD
61-85 months
Floating
NZD/USD
0.7055
NZ$M
CAD
13 months
Floating
NZD/CAD
0.8795
NZ$M
EUR
13 months
Floating
NZD/EUR
0.5994
NZ$M
GBP
13 months
Floating
NZD/GBP
0.5419
NZ$M
71
1
20
2
352
17
6
(4)
23
1
22
Total
NZ$M
460
9
(4)
23
1
22
USD
73-97 months
Floating
NZD/USD
0.7055
NZ$M
CAD
25 months
Floating
NZD/CAD
0.8795
NZ$M
EUR
25 months
Floating
NZD/EUR
0.5994
NZ$M
GBP
25 months
Floating
NZD/GBP
0.5419
NZ$M
USD
18-42 months
Floating
AUD/USD
1.0082
NZ$M
Total
NZ$M
2020
Cash flow hedging and fair value hedging
Cross currency interest rate swaps
Nominal amount of the hedging instrument
383
17
Carrying amount
Accumulated cost of hedging
Change in value used for calculating
hedge ineffectiveness
Hedging (gain) recognised in other
comprehensive income
63
(8)
43
(4)
Hedging (gain) reclassified to income statement
Fair value hedge (income statement) (gain)/loss
(39)
20
1
73
3
(1)
(1)
312
121
(1)
10
(7)*
(11)
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 private placement make-whole in significant items.
17.2 Interest rate risk
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.
103
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
2021
Cash flow hedging
Interest rate swaps
Nominal amount of the hedging instrument
Carrying amount - derivative (liabilities)
Change in value used for calculating hedge ineffectiveness
Hedging (gain)/loss recognised in other comprehensive income
2020
Cash flow hedging
Interest rate swaps
Nominal amount of the hedging instrument
Carrying amount - derivative (liabilities)
Change in value used for calculating hedge ineffectiveness
Hedging loss recognised in other comprehensive income
NZD Borrowings
9-21 Months
3.08%
NZ$M
AUD Borrowings
6-30 Months
1.87%
NZ$M
Total NZ$M
14
(1)
1
(1)
212
(7)
3
(3)
226
(8)
4
(4)
21 Months
3.10%
NZ$M
18-42 Months
1.87%
NZ$M
Total NZ$M
50
(2)
211
(10)
(4)
4
261
(12)
(4)
4
There was no hedge ineffectiveness recognised in profit or loss during the year.
17.3 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: Financial Instruments, the identified
impairment loss was immaterial.
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.
104
Fletcher Building Limited Annual Report 2021
In response to COVID-19 the Group undertook a review of its customer credit portfolio and its exposure to Expected Credit Losses (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. As at 30 June 2020 this resulted in an additional Group ECL provision of $6m which
was recognised within significant items. During the year to 30 June 2021 only $0.6m of this was utilised. Key estimates and judgements used
in measurement of the Group's ECL provision as at 30 June 2021 resulting in a full reversal of remaining provision of $5.4m to significant
items. Key factors considered as at 30 June 2021 included strong trading conditions, improved economic and market outlook, and absence
of increased delinquency rates. The gain on reversal of provision was recognised as a significant item as at 30 June 2021.
The table below provides movement in the Group's ECL provision:
Opening provision for expected credit losses as at 1 July 2020
Increase in provision for doubtful debts recognised in profit or loss
Receivables written off during the year as uncollectible
Unused amount reversed
Closing provision for expected credit losses as at 30 June 2021
2021
NZ$M
(25)
1
6
(18)
2020
NZ$M
(15)
(15)
5
(25)
Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.
Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit. Subsequent
recoveries of amounts previously written off are credited against the same line item.
(ii) Derivative financial instruments and the investment of cash
The Group enters into derivative financial instruments and invests cash with various counterparties in accordance with established
Board approved credit limits as to credit rating and dollar value but does not require collateral or other security except in limited circumstances.
In accordance with the established counterparty limits, there are no significant concentrations of credit risk in respect of these financial
instruments and no loss is expected.
The Group has not renegotiated the terms of any financial assets that would otherwise be overdue or impaired. The carrying amount
of non-derivative financial assets represents the maximum credit exposure. The carrying amount of derivative financial assets is at their
current fair value.
17.4 Fair Values
The estimated fair value measurements for financial assets and liabilities compared to their carrying values in the balance sheet, are as follows:
2021
Carrying
value
NZ$M
2021
Fair value
NZ$M
2020
Carrying
value
NZ$M
2020
Fair value
NZ$M
Classification
Financial assets
Cash and liquid deposits
Debtors
Amortised cost
Amortised cost
666
1,072
666
1,072
Forward exchange contracts - fair value through profit or loss Fair value
Forward exchange contracts - cash flow hedge
Forward exchange contracts - net investment hedge
Cross currency interest rate swaps - split designation
Commodity price swaps - cash flow hedge
Fair value
Fair value
Fair value
Fair value
3
4
2
9
1
3
4
2
9
1
1,104
991
1
2
188
1
1,104
991
1
2
188
1
Total financial assets
1,757
1,757
2,287
2,287
105
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
2021
Carrying
value
NZ$M
2021
Fair value
NZ$M
2020
Carrying
value
NZ$M
2020
Fair value
NZ$M
Classification
Financial liabilities
Creditors and accruals
Bank loans
Private placements
Other loans
Capital notes
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
Commodity price swaps - cash flow hedge
Total financial liabilities
Fair value
Fair value
Fair value
Fair value
Amortised cost
1,050
1,050
Amortised cost
Amortised cost
Amortised cost
Amortised cost
931
400
931
400
1,001
1,007
25
365
2
4
2
12
25
372
2
4
2
12
476
20
361
1
14
8
1
499
20
374
1
14
8
1
1,931
1,967
2,742
2,755
Total financial instruments
(174)
(210)
(455)
(468)
Fair value measurement
All of the Group's derivatives are in designated hedge relationships and are measured and recognised at fair value.
All derivatives are level 2 valuations based on accepted valuation methodologies. Forward exchange fair value is calculated using quoted
forward exchange rates and discounted using yield curves derived from quoted interest rates matching maturity of the contract. The fair value
of 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 (0.6%) and 2.5%
(2020: (0.5%) and 4.0%) including margins, for both accounting and disclosure purposes.
106
Fletcher Building Limited Annual Report 2021
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.
18. DIVIDENDS AND SHAREHOLDER TAX CREDITS
Dividends
Final paid dividend October 2020
Interim dividend paid March 2021
2021
NZ$M
99
99
2020
NZ$M
128
128
In line with the Company's dividend policy, the Board determined that it would declare a final dividend of 18.0 cents per share for the
2021 financial year.
Shareholder tax credits
Imputation and franking credits allow the Company to transfer the benefit from the tax it has paid in New Zealand and Australia respectively
to its shareholders when it pays dividends.
Imputation credit account
Imputation credits at the beginning of the year
Taxation paid
Franking credit account
Franking credits at the beginning of the year
Taxation paid/(refunded)
Franking credits received
19. CAPITAL
2021
NZ$M
2020
NZ$M
4
1
5
3
1
4
2021
A$M
2020
A$M
32
3
35
32
(1)
1
32
Ordinary shares are classified as shareholders’ funds. Costs directly attributable to the issue of new shares or options are shown in
shareholders’ funds as a reduction from the proceeds. Acquired shares are classified as treasury stock and presented as a deduction from
share capital under the treasury stock method, as if the shares are cancelled, until they are reissued or otherwise disposed of.
Reported capital at the beginning of the year including treasury stock
Repurchase of shares
Vested share-based payment
Reported capital at the end of the year including treasury stock
Treasury stock
2021
NZ$M
3,300
(25)
3
3,278
(30)
3,248
2020
NZ$M
3,447
(147)
3,300
(20)
3,280
All ordinary shares are issued and fully paid and carry equal rights in respect of voting, dividend payments and distribution upon winding up.
107
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (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
2021
2020
824,256,416
853,347,141
(3,104,397)
(29,090,725)
821,152,019
824,256,416
(4,573,148)
(3,031,034)
816,578,871
821,225,382
The Group recommenced an on-market share buyback in June 2021 after it suspended the programme in March 2020 in response to COVID-19
and its impact on the Group's operating cash flow. For the year ended 30 June 2021, the Group had repurchased 3,104,397 (2020: 29,090,725)
shares for the total consideration of $24 million (2020: $147 million). These purchased shares were subsequently cancelled, leaving the total
number of shares on issue at 30 June 2021 of 821,152,019 shares. In line with NZ IFRS, $0.1 million of transaction costs relating to the buyback
were offset against share capital.
20. NON-CONTROLLING INTERESTS
Non-controlling interests are allocated their share of profit for the year in the income statement and are presented separately within equity in
the balance sheet. The effect of all transactions with non-controlling interests that change the Group’s ownership interest but do not result in
a change in control are recorded in equity.
Share capital
Reserves
2021
NZ$M
2020
NZ$M
9
7
16
21
14
35
21. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Investments in associates are measured using the equity method. The equity method has been used for associate entities over which the Group
has significant influence but not control.
A joint arrangement is an arrangement where two or more parties have joint control. The Group classifies its joint arrangements as either joint
operations or joint ventures depending on the legal, contractual and other rights and obligations.
Investment by associate/joint venture:
Wespine Industries Pty Ltd
Hexion Australia Pty Ltd
Altus NZ Limited
Other
Equity accounted earnings comprise:
Sales - 100%
Earnings before taxation - 100%
Earnings before taxation - Fletcher Building share
Taxation expense
Earnings after taxation - Fletcher Building share
108
2021
NZ$M
2020
NZ$M
57
22
71
23
173
53
21
64
20
158
425
359
53
26
(7)
19
18
9
(2)
7
Fletcher Building Limited Annual Report 2021
22. RELATED PARTY DISCLOSURES
The disclosures below sets out transactions and outstanding balances that Group companies and other related parties have with each other.
Transactions with related parties are conducted on normal business terms.
Key management personnel are defined as the Executive Committee and Board of Directors.
Sales to
related parties
NZ$M
Purchases from
related parties
NZ$M
Amounts owing
from related
parties (within
debtors)
NZ$M
Amounts owing
to related parties
(within creditors)
NZ$M
2021
Wespine Industries Pty Ltd and Hexion Australia Pty Ltd
Interpipe Holdings Limited
Altus NZ Limited
2020
Wespine Industries Pty Ltd and Hexion Australia Pty Ltd
Interpipe Holdings Limited
Altus NZ Limited
Key management personnel compensation
Directors' fees
Executive committee remuneration paid, payable or provided for:
Short-term employee benefits
Long-term employee benefits
Termination benefits
Fletcher Building Retirement Plan
63
5
12
38
4
11
3
1
3
2021
NZ$M
2020
NZ$M
2
20
1
2
10
1
As at 30 June 2021, Fletcher Building Nominees Limited (the New Zealand retirement plan) held $4.5 million of shares in Fletcher Building
(2020: $1.8 million of shares).
Fletcher Building Retirement Plan holds an investment in a property leased by Winstone Wallboards, a subsidiary of Fletcher Building Limited.
The Group, through its subsidiary Fletcher Residential Limited, during the year exercised its right to purchase the property at an arm's length
sales price of $36 million with settlement expected in 2022.
109
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Other information
This section provides additional required disclosures that are not covered in the previous sections.
23. CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure commitments are those where future expenditure has been committed at year-end, but not recognised as liabilities is as follows:
Committed at year end:
Property, plant and equipment and other long term assets
Equity accounted investments
24. CONTINGENT LIABILITIES
Claims
2021
NZ$M
344
12
2020
NZ$M
411
12
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
As at 30 June 2021, Laminex Australia (together with other engineered stone manufacturers and fabricators) was the subject of a number of
silica related personal injury claims based in Queensland. The Group has accrued for this known exposure in Queensland.
No silica related injury claims have been lodged in any other states. The Group has concluded it is too early to make a reliable estimate of any
future potential claims and the extent of liability (if any) Laminex Australia may have in states outside Queensland. Accordingly, the Group
has not recognised any provisions in respect of possible future silicosis claims as at 30 June 2021.
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 2.5, 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 2021.
Contingent liabilities with respect to guarantees extended on trading
transactions, performance bonds and other transactions
Contingent liabilities with respect to claims
2021
NZ$M
353
2020
NZ$M
394
353
394
110
Fletcher Building Limited Annual Report 2021
25. TAXATION
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 for a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss.
There are no significant deferred tax liabilities in respect of the undistributed profits of subsidiaries and associates.
Judgements are required about the application of income tax legislation. These judgements and assumptions are subject to risk and
uncertainty as there is a possibility of future changes in the interpretation and/or application of tax legislation. This may impact the amount
of current and deferred tax assets and liabilities recognised in the balance sheet and the amount of other tax losses and temporary
differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised tax assets and liabilities may
require adjustment, resulting in a corresponding credit or charge to the income statement.
Below is the reconciliation of earnings before taxation to taxation expense:
Earnings/(loss) before taxation
Taxation at 28 cents per dollar
Adjusted for:
Difference in tax rates
Non-assessable income
Non-deductible expenses
Tax losses for which no deferred tax asset was recognised
Utilisation of previous unrecognised tax losses
Tax in respect of prior years
Tax expense/(benefit) on earnings
Tax on earnings before significant items
Tax benefit on significant items
Total current taxation expense/(benefit)
Total deferred taxation benefit
2021
NZ$M
433
2020
NZ$M
(265)
121
(74)
(9)
5
17
(17)
(1)
116
116
116
137
(21)
116
130
(14)
116
(4)
(3)
4
2
(3)
(3)
(81)
(81)
(81)
(4)
(77)
(81)
(78)
(3)
(81)
111
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Current tax assets/(liabilities)
Included within the balance sheet as follows:
Current tax assets
Current tax liabilities
Movement during the year:
Opening provision for current tax assets
Taxation (expense)/benefit
Transfer from/(to) deferred taxation
Non-controlling interest share of taxation expense
Tax recognised directly in reserves
Net tax payments
Provision for deferred tax assets
Included within the balance sheet as follows:
Deferred tax assets
Movement during the year:
Opening provision for deferred tax assets
Taxation expense
Transfer (from)/to current tax
Held for sale
Tax recognised directly in reserves
Composed of:
Provisions and other liabilities
Inventories
Debtors
Property, plant and equipment
Brands
Tax losses
Pensions
Leases
Other
2021
NZ$M
2020
NZ$M
9
9
61
(130)
72
3
1
2
9
66
(5)
61
61
78
(85)
3
3
1
61
2021
NZ$M
2020
NZ$M
224
224
285
14
(72)
(5)
2
224
145
16
5
(37)
(83)
92
85
1
224
285
285
119
3
85
78
285
162
17
8
(26)
(83)
128
(3)
84
(2)
285
The Group has recognised certain tax losses available in Australia (and in New Zealand in FY20) 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.
112
Fletcher Building Limited Annual Report 2021 26. RETIREMENT PLANS
Fletcher Building Limited is the principal sponsoring company of a plan that provides retirement and other benefits to employees of the Group
in New Zealand. Participation in this plan has been closed for a number of years, although defined contribution savings plans have been made
available. Various defined benefit and defined contribution plans exist in Australia following the acquisition of the Crane, Amatek, Tasman Building
Products, and Laminex businesses which Group Business Units contribute to on behalf of their employees. Where the plans have a deficit in their
funded status, the companies are making additional contributions, as recommended by the Trustees of the plans, to improve the funded status.
The 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. The refund of the New Zealand surplus
is subject to Financial Markets Authority (FMA) approval under FMCA 2013 Section 177.
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
2021
%
1.89
2.12
2020
%
1.02
2.18
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 (2020: less than $1 million) in respect of its Australian defined benefit
plans. It contributed $54 million (2020: $58 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 2021, the value
of the plan assets was 167% of the actuarial liability and the funded surplus was $117 million (31 March 2020: 142%, $73 million). In applying
sensitivity analysis, a 1% lower discount rate assumption increases the defined benefit obligation by $20 million, whilst adding one additional
year of life expectancy of scheme members increases the obligation by $9 million.
The Group expects to contribute less than $1 million to its New Zealand and Australian defined benefit plans during the year to 30 June 2022.
The Group is currently not contributing to the New Zealand plan.
Net periodic pension cost
Service cost
Net interest cost
Net periodic pension cost - recognised in earnings before interest and taxation
Recognised net asset
Assets of plans
Projected benefit obligation
Funded surplus
Asset ceiling effect
Recognised net asset
2021
NZ$M
2020
NZ$M
2
2
401
(293)
108
108
3
(1)
2
369
(327)
42
42
113
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (Continued)
Recognised net asset by jurisdiction:
New Zealand plan
Australian plans
Retirement plan assets - recognised within non-current assets
Recognised net asset
Movement in recognised net asset
Recognised net asset at the beginning of the year
Currency translation
Actuarial movements for the year
Net periodic pension cost
Recognised net asset
Assets of the plans
Assets of plans at the beginning of the year
Actual return on assets
Total contributions
Benefit payments
Assets of the plans consist of:
Australasian equities
International equities
Property
Bonds
Cash and short-term deposits
Other assets
Projected benefit obligation
2021
NZ$M
2020
NZ$M
97
11
108
108
42
(1)
69
(2)
108
369
65
1
(34)
401
35
132
33
113
27
61
401
31
11
42
42
61
(17)
(2)
42
400
8
1
(40)
369
45
110
30
104
29
51
369
Projected benefit obligation as at the beginning of the year
(327)
(339)
Service cost
Interest cost
Member contributions
Actuarial (loss)/gain arising on changes in financial assumptions
Actuarial gain arising on other assumptions - experience adjustments
Benefit payments
Currency translation
(2)
(3)
(1)
21
(13)
33
(1)
(3)
(6)
(1)
(21)
3
40
(293)
(327)
114
Fletcher Building Limited Annual Report 2021 27. SHARE-BASED PAYMENTS
The Group has a long-term share-based performance incentive scheme targeted at selected employees (invited to participate at the discretion
of the Company) most able to influence the results of the Group.
The long-term share scheme allows scheme participants to acquire shares in the Company at market price, funded by an interest-free loan from
the Group. The scheme participants are entitled to vote on the shares and to receive cash dividends, the proceeds of which are used to reduce
the loan. The shares are held in trust for the scheme participants by the Trustee, Fletcher Building Share Schemes Limited.
Entitlement under the scheme is dependent upon the Group's total shareholder return (TSR) exceeding the 51st percentile of the TSR of the
comparator Group over a three year restricted period. 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.
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.
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
2020
Award
1 July 2020
1,998,635
$3.66
2019
Award
1 July 2019
1,386,100
$5.21
Total value at grant date (NZ$)
$7,315,004
$7,221,581
2018
Award
1 July 2018
1,041,605
$6.99
$7,280,819
2017
Award
1 July 2017
890,075 (1)
$7.85
$6,985,959
Vesting date
30 June 2023
30 June 2022
30 June 2021
30 June 2020
Number of shares:
Number of shares originally granted
Less forfeited over life of scheme
Number of shares held at 30 June 2021
1,998,635
(71,291)
1,927,344
1,386,100
(112,523)
1,273,577
1,041,605
(205,979)
835,626
(1) This is an average share price which includes 182,561 shares granted at $7.34 to Ross Taylor as Chief Executive Officer and the remainder issued to other participants at $7.98.
Total fair value expense in year for executive performance share scheme
Amount recognised at year end for related bonus payable
Fair value has been determined using Monte Carlo valuation methodology.
Employee retention share scheme
2021
NZ$M
6
15
890,075
(353,474)
536,601
2020
NZ$M
5
10
Special retention arrangements in the form of one-off share-based arrangements have also been put in place for selected employees.
The scheme is an equity settled scheme and the value recognised is based on the fair value of the shares at grant date.
The Group accounts for fair value of award shares over the service period.
115
Fletcher Building Limited Annual Report 2021
Notes to the Financial Statements 2021 (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 Company (purchased shares) at market prices. At the end of rolling three year qualification periods,
and provided they remain employed by a Group company, employees will be awarded one free award share for every two purchased shares
acquired in the first year of each three year qualification period and still held at the end of those periods.
Dividends payable will be re-invested in additional shares. Employees will receive award shares on any additional shares, subject to the same
conditions set out above. The employees are responsible for any income tax liability payable on dividends and on the value of any award shares.
At the end of each three year qualification period, employees may continue to hold any purchased, additional and award shares or they may sell
some or all of the shares.
The Group accounts for fair value of award shares over the three year qualification periods.
28. SUBSEQUENT EVENTS
Dividend
On 18 August, the Directors declared a final dividend of 18.0 cents per share, payable on Friday 17 September.
COVID-19
COVID-19 restrictions have been introduced by New Zealand and Australian governments since 30 June 2021. The Group will continue to
monitor and respond to the changing nature of the pandemic.
Rocla disposal
On 29 July 2021, the Group entered an agreement to dispose 100% of the issued shares in Rocla Pty Limited, a wholly owned subsidiary under
the Australia segment, for consideration of A$55 million. The impact of this transaction on carrying value of Rocla Pty Limited’s net assets has
been recognised at 30 June 2021 (as disclosed in note 2.4).
Other than the items above, there is no other matter or circumstance that has arisen since the end of the financial year that has significantly
affected, or may significantly affect, the Group’s operations or the Group’s consolidated financial statements.
116
Fletcher Building Limited Annual Report 2021
Independent Auditor's Report
Independent Auditor's Report to the Shareholders of Fletcher Building Limited
OPINION
We have audited the financial statements of Fletcher Building Limited (“the Company”) and its subsidiaries (together “the Group”)
on pages 69 to 116, which comprise the consolidated balance sheet of the Group as at 30 June 2021, and the consolidated income
statement, consolidated statement of comprehensive income, consolidated statement of movements 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
summary of significant accounting policies.
In our opinion, the consolidated financial statements on pages 69 to 116 present fairly, in all material respects, the consolidated
financial position of the Group as at 30 June 2021 and its consolidated financial performance and cash flows for the year then ended
in accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial Reporting
Standards.
This report is made solely to the Company's 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
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's
shareholders, as a body, for our audit work, for this report, or for the opinions we have formed.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
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
Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Ernst & Young provides agreed upon procedure 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
interest in, the Group.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each
matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of
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.
117
Fletcher Building Limited Annual Report 2021 Independent Auditor's Report (Continued)
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 2.5, 3 and 11 of the
financial statements.
In obtaining sufficient appropriate audit evidence, we:
– evaluated the Group’s processes 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
other 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 certain selected contracts, undertook site visits (to either
contract sites and/or commercial offices) to understand the nature
of risks in completion 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 and
current forecasts;
› 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;
› assessed variable consideration, where material, to supporting
documentation and by reference to underlying contracts; and
› 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.
Specifically in relation to the New Zealand International Convention
Centre project (“NZICC”) we also:
› assessed the recognition of insurance recoveries by reference to
payment certificates from the insurer; and
› evaluated the forecast costs to complete the remediation works to
ensure the forecast costs were within the indemnity limits and the
level of cover available under the contract works policy.
– considered the adequacy of the associated disclosures in the
financial statements.
118
Fletcher Building Limited Annual Report 2021 Goodwill and other intangible assets’ impairment assessments
Why significant
How our audit addressed the key audit matter
The Group holds goodwill and other intangible assets of $1.1
billion at 30 June 2021.
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.
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, for those CGUs with a
higher risk of impairment, agreed forecasts to a combination of
the Board approved FY22 budget and as applicable the FY23 -
FY26 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 the appropriateness of the valuation methodology
employed;
– performed sensitivity analysis in relation to the discount rate
and forecast cash flows to consider the potential impact of
changes in these 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.
119
Fletcher Building Limited Annual Report 2021 Independent Auditor's Report (Continued)
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
18 August 2021
120
Fletcher Building Limited Annual Report 2021 Statutory Disclosures
DISCLOSURE OF INTERESTS BY DIRECTORS
The following are particulars of general disclosures of interest by directors holding office as at 30 June 2021, 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 2021 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
Duratec Limited (appointed September 2020)
Brydon Investment Holdings Pty Limited
Fletcher Building Industries Limited
Rytysh Pty Ltd
Barbara Chapman
APEC CEO Summit 2021
Genesis Energy Limited
NZME Limited
The New Zealand Initiative
Fletcher Building Industries Limited
Two Tin Pigs Limited
Peter Crowley
Barrambin Trading Company Pty Limited
Reserve Bank Independent Expert Advisory Panel
Fletcher Building Industries Limited
Interlaken Estates Pty Limited
The Riverside Coal Transport Company Pty Limited
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
The University of Auckland Council (appointed June 2021)
Eden Park Trust Board
Fletcher Building Industries Limited
Genesis Energy Limited
IAG New Zealand Limited
National Australia Bank Limited
Wymac Consulting Limited
Cathy Quinn
Fertility Associates Holdings Limited
MinterEllisonRuddWatts
The University of Auckland Council (appointed June 2021)
Fletcher Building Industries Limited
Fonterra Co-operative Group Limited (appointed November 2020)
Pin Twenty Limited (corporate trustee of Kintyre Trust replacing St Jude’s Trust,
appointed November 2020)
Rangatira Limited
Tourism Holdings Limited
Chair
Chair
Chair
Director
Director
Chair
Director
Director
Director
Chair
Chair
Chair
Deputy Chair
Director
Director
Member
Director
Director
Director
Director
Director
Chair
Chair
Director
Director
Director
Director
Trustee
Member
Chair
Chair
Director
Director
Director
Director
Director
Chair
Consultant
Pro-Chancellor
Director
Director
Director / Shareholder
Director
Director
121
Fletcher Building Limited Annual Report 2021 Statutory Disclosures (Continued)
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 2021.
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 director/shareholder of Pin Twenty Limited (corporate trustee of Kintyre Trust).
Non-Beneficial (1)
121,197
28,122,500
DISCLOSURE OF DIRECTORS’ INTERESTS IN SHARE TRANSACTIONS
There were no director disclosures, pursuant to section 148(2) of the Companies Act 1993, of acquisitions of relevant interests in Fletcher
Building shares during the year ended 30 June 2021.
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 2021 and 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 2021.
122
Fletcher Building Limited Annual Report 2021 DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS AS AT 30 JUNE 2021
The total number of voting securities of Fletcher Building at 30 June 2021 was 821,152,019 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
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Number of
shareholders
% of shareholders
Number of ordinary
shares
% of ordinary shares
15,400
12,617
2,833
2,112
137
33,099
46.53
38.12
8.56
6.38
0.41
100.00
6,488,738
30,448,808
20,260,345
48,360,679
715,593,449
821,152,019
0.79
3.71
2.47
5.89
87.14
100.00
SUBSTANTIAL PRODUCT HOLDERS
According to notices given under the Financial Markets Conduct Act 2013, the following persons were a substantial product holder of the
Company as at 30 June 2021. The total number of voting securities of Fletcher Building Limited at 30 June 2021 was 821,152,019 fully paid
ordinary shares.
Substantial product holder
Schroder Investment Management Australia Limited (and its
related bodies corporate)
Number of ordinary shares in
which relevant interest is held
Date of notice
51,334,882
16 April 2021
The Vanguard Group, Inc.
47,403,706
18 December 2018
20 LARGEST SHAREHOLDERS AS AT 30 JUNE 2021
Holder Name
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
HSBC Nominees (New Zealand) Limited - NZCSD
Citicorp Nominees Pty Limited
Citibank Nominees (New Zealand) Limited - NZCSD
HSBC Nominees (New Zealand) Limited A/C State Street - NZCSD
JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct - NZCSD
National Nominees Limited
Accident Compensation Corporation - NZCSD
BNP Paribas Nominees (NZ) Limited - NZCSD
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited - NZCSD
BNP Paribas Nominees (NZ) Limited - NZCSD
National Nominees Limited - NZCSD
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
ANZ Wholesale Australasian Share Fund - NZCSD
New Zealand Depository Nominee Limited
JBWere (NZ) Nominees Limited
Tea Custodians Limited Client Property Trust Account - NZCSD
HSBC Custody Nominees (Australia) Limited
Total
Number of ordinary
shares
99,258,880
73,060,069
70,439,066
57,492,595
51,718,641
43,355,040
37,643,385
30,790,399
25,865,250
18,536,271
18,078,230
13,951,769
13,574,625
13,389,684
12,537,825
10,172,676
9,626,757
8,199,954
7,065,324
6,989,646
621,746,086
% of issued capital
12.09
8.90
8.58
7.00
6.30
5.28
4.58
3.75
3.15
2.26
2.20
1.70
1.65
1.63
1.53
1.24
1.17
1.00
0.86
0.85
75.72
123
Fletcher Building Limited Annual Report 2021
Statutory Disclosures (Continued)
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 2021, total holding in NZCSD were
337,697,692 or 41.12% 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 2021.
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 FY21. All political donations must be approved by the Board.
SUBSIDIARY COMPANY INFORMATION
The persons listed below respectively held office as directors of Fletcher Building Limited and its subsidiary companies as at 30 June 2021,
or in the case of those persons with the letter (R) after their name ceased to hold office during the year. Except where shown below, Fletcher
Building’s indirect ownership interest as at 30 June 2021 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 65. 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
Approach Signs Limited
Austral Bronze Crane Copper Pty Limited
Australian Construction Products Pty Limited
Bandelle Pty Limited
Baron Insulation Pty Ltd
Boden Building Supplies Limited (70%)
Brian Perry Civil Limited
Building Choices Limited (75%)
Building Prefabrication Solutions Limited
Directors
M Brodie, B McKenzie
M Brodie, B McKenzie
M Brodie, B McKenzie
B McKenzie, P Reidy
M Brodie, B McKenzie
B McKenzie, N Sumich
M Brodie, N Sekul
P Lavelle, B McKenzie
P Boden (R), B McEwen
B McKenzie, P Reidy
G Close (R), B McEwen
B McEwen, B McKenzie
Burnham 2020 Limited
I Jones (R), B McKenzie, N Traber
Cleaver Building Supplies Limited (75%)
Clever Core New Zealand Limited
Crane Enfield Metals Pty Limited
Crane Group Pty Limited
Crane Share Plan Pty Ltd
Crevet Pipelines Pty Ltd
Crevet Pty Ltd
CTCI Pty Limited
Davis & Casey Building Supplies Limited
Delcon Holdings (No. 11) Limited
ee-Fit Pty Limited
Efa Technologies Pty Limited
124
M Cleaver, B McEwen
S Evans, B McKenzie
M Brodie, B McKenzie
M Brodie, B McKenzie
M Brodie, B McKenzie
B McKenzie, N Sumich
M Brodie, B McKenzie
J Burgess, B McKenzie
B McEwen
D Fradgley, B McKenzie
P Lavelle, B McKenzie
M Brodie, B McKenzie
Fletcher Building Limited Annual Report 2021 Company
Fairbairn Building Supplies Limited
FBHS (Aust) Pty Limited
FBII (Puhoi) Limited
FBSOL Pty Limited
Directors
B McEwen
T Broxham, B McKenzie
B McKenzie, P Reidy
T Broxham, B McKenzie
Fletcher Building (Australia) Pty Limited
M Brodie, A Clarke, B McKenzie, N Sekul
Fletcher Building (Fiji) Pte Limited
H Clarke, A Kumar, B Leach (R), P Reidy, C White
Fletcher Building Educational Fund Limited
C Carroll, J McDonald, P Muir
Fletcher Building Holdings Limited
Fletcher Building Holdings New Zealand Limited
Fletcher Building Industries Limited
A Clarke, B McKenzie
A Clarke, B McKenzie
M Brydon, B Chapman, P Crowley, B Hassall, R McDonald,
D McKay, C Quinn
Fletcher Building Infrastructure Investments Limited
B McKenzie, P Reidy
Fletcher Building Limited
Fletcher Building Nominees Limited
M Brydon, B Chapman, P Crowley, B Hassall, R McDonald,
D McKay, C Quinn
M Binns, J Chapman, G Clarke, M Farrell, J McDonald (R),
H McKenzie, C Munkowits, G Niccol, T Williams
Fletcher Building Products Australia Pty Limited
Fletcher Building Products Limited
M Brodie, B McKenzie
H McBeath, B McKenzie
Fletcher Building Share Schemes Limited
J Chapman, J McDonald (R), G Niccol
Fletcher Building Welfare Fund Nominees Limited
R Linton (R), D Lucas, S Schulz, D Sixton
Fletcher Challenge Building Bolivia S.A.
M Binns, K Cowie, H Ritchie
Fletcher Challenge Building UK Limited
Fletcher Challenge Forest Industries Limited
Fletcher Challenge Industries S.A.
Fletcher Concrete (Fiji) Pte Limited
S Evans, B McKenzie
S Evans, B McKenzie
M Binns, K Cowie, H Ritchie
A Kumar, B Leach (R), P Reidy, C White
Fletcher Concrete and Infrastructure Limited
I Jones (R), H McBeath, B McKenzie, N Traber
Fletcher Construction (Solomon Islands) Limited
B Leach (R), P Reidy, C White
Fletcher Construction Buildings Limited
B McKenzie, P Reidy
Fletcher Construction Company (Fiji) Pte Limited
B Leach (R), J Matthews, P Reidy
Fletcher Construction Infrastructure Limited
Fletcher Development Limited
Fletcher Distribution Limited
Fletcher Insulation Pty Limited
B McKenzie, P Reidy
S Evans, B McKenzie
B McEwen, B McKenzie
P Lavelle, B McKenzie
Fletcher Morobe Construction Limited
B Leach (R), P Reidy, R Simpson
Fletcher Property Limited
Fletcher Residential Limited
Fletcher Retirement Limited
Fletcher Steel Limited
Forman Building Systems Limited
Gatic Pty Limited
Geoff Brown Building Supplies Limited
A Clarke, B McKenzie
S Evans, B McKenzie
S Evans, B McKenzie
H McBeath, B McKenzie
B McEwen, B McKenzie
B McKenzie, N Sumich
B McEwen
Geraldton Independent Building Supplies Pty Limited
J Burgess, B McKenzie
Higgins Contractors Limited
Higgins Group Holdings Limited
Homai MFR General Partner Limited (51%)
Iplex Pipelines Australia Pty Limited
Iplex Pipelines NZ Limited
B McKenzie, P Reidy
B McKenzie, P Reidy
S Evans, P Majurey
B McKenzie, N Sumich
H McBeath, B McKenzie
125
Fletcher Building Limited Annual Report 2021 Statutory Disclosures (Continued)
Company
Iplex Properties Pty. Limited
Jeffcoats Building Supplies Ltd (68%)
Key Plastics Pty. Ltd.
Kimura Building Supplies (2016) Limited
Kingston Bridge Engineering Pty Ltd
Kinsey Kydd Building Supplies Limited (75%)
Koning Building Supplies Limited
Koyana Rocla Pipes Limited
Kusabs Building Supplies Limited (75%)
Laminates Holdings Pty Limited
Laminex Group Pty Limited
Laminex Overseas Holdings Pty Limited
Laminex US Holdings Pty Limited
Leary Building Supplies Limited (75%)
Macready Building Supplies Limited (75%)
Matt Orr Building Supplies Limited (75%)
McGill Building Supplies Limited (75%)
McInnes Building Supplies Limited (75%)
Mico New Zealand Limited
Milnes Holdings Pty Limited
Directors
B McKenzie, N Sumich
R Jeffcoat, B McEwen
B McKenzie, N Sumich
B McEwen
B McKenzie, N Sumich
S Kinsey, B McEwen
B McEwen
M Kotnis, G Sharma, C Shiralkar
G Kusabs, B McEwen
J Burgess, B McKenzie
J Burgess, B McKenzie
M Brodie, N Sekul
M Brodie, N Sekul
B Leary, B McEwen
J Macready, B McEwen
B McEwen, M Orr
B McEwen, J McGill
B McEwen, G McInnes
B McEwen, B McKenzie
M Brodie, B McKenzie
Moire Road General Partner Limited (51%)
A Crocker, S Evans, S Rapson
Morinda Australia Pty Limited
T Broxham, B McKenzie
New Zealand Ceiling & Drywall Supplies Limited (90%)
D Thomas
Northern Iron and Brass Foundry Pty. Ltd.
Oliveri Solutions Pty Limited
Paul Robinson Building Supplies Limited (75%)
Pavement Technology Limited
Penny Engineering Limited
Penrose Retirement Nominees Limited
PlaceMakers Christchurch Limited (75%)
PlaceMakers Limited
PlaceMakers Supply, Fix & Install Limited (75%)
Polymer Fusion Education Pty Ltd
Raylight Aluminium Limited (87.5%)
Reece Building Supplies Limited (75%)
Rocla Australia Pty Limited
Rocla Concrete Pipes Pty Limited
Rocla Industries Pty Limited
Rocla Pty Limited
Rocla Vic Pty Limited
S Cubed Pty Limited
Selwyn Quarries Limited
Shed Boss NZ Limited
126
B McKenzie, N Sumich
B McKenzie, S Naish
B McEwen, P Robinson
B McKenzie, P Reidy
B McKenzie, P Reidy
M Binns, J Chapman, G Clarke, M Farrell, J McDonald (R),
H McKenzie, C Munkowits, G Niccol, T Williams
G Close, B McEwen
B McEwen, B McKenzie
G Close, B McEwen
B McKenzie, N Sumich
G Close, B McEwen
B McEwen, J Reece
M Brodie, B McKenzie
M Brodie, B McKenzie
M Brodie, N Sekul
B McKenzie, N Sumich
M Brodie, N Sekul
T Broxham, B McKenzie
I Jones (R), B McKenzie, N Traber
D Fradgley, B McKenzie
Fletcher Building Limited Annual Report 2021 Company
Southbound Building Supplies Limited
Stanley Building Supplies Limited (75%)
Steven Marshall Building Supplies Limited
Stickland Building Supplies Limited
Stramit Corporation Pty Limited
Sullivan & Armstrong Building Supplies Limited
Tasman Australia Pty Limited
Tasman Building Products Pty Limited
Directors
B McEwen, A Rance (R)
B McEwen, B Stanley-Joblin
B McEwen
B McEwen
T Broxham, B McKenzie
B McEwen
M Brodie, N Sekul
M Brodie, N Sekul
Tasman Insulation New Zealand Limited
H McBeath, B McKenzie
Tasman Sinkware North America, Inc.
TBP Group Pty Limited
Terrace Insurances (PCC) Limited
M Brodie
M Brodie, N Sekul
C Bell, K Carten (R), M Eades, B McKenzie, T Williams
The Fletcher Construction Company (Fanshawe Street) Limited
B McKenzie, P Reidy
The Fletcher Construction Company Limited - NZ
B McKenzie, P Reidy
The Fletcher Construction Company Limited (Samoa Branch)
B McKenzie, P Reidy
The Fletcher Organisation (Vanuatu) Limited
B Leach (R), Diract Ltd, Lotim Ltd, P Reidy
The Fletcher Trust and Investment Company Limited
Tradelink Pty Ltd
Winstone Wallboards Limited
Young Building Supplies Limited
B McKenzie, P Reidy
B McKenzie, S Naish
H McBeath, B McKenzie, D Thomas
B McEwen
As at 30 June 2021, Fletcher Building held an indirect ownership interest in the following associates and joint ventures.
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
Kaipara Water Transport Limited
NX2 Hold GP Limited
Oamaru Shingle Supplies Limited
P2W Services Limited
Rangitikei Aggregates Limited
Rodney Aggregates Supplies Limited
Saltus Apartments General Partner Limited
South Pacific Cement Pte Limited
Verto Apartments General Partner Limited
Wespine Industries Pty Limited
50%
50%
50%
50%
50%
33.33%
50%
50%
50%
50%
25%
13.40%
33.33%
50%
50%
50%
50%
50%
50%
50%
127
Fletcher Building Limited Annual Report 2021 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
Hamish McBeath
Chief Executive Building Products
Bruce McEwen
Chief Executive Distribution
Peter Reidy
Chief Executive Construction
Nick Traber
Chief Executive Concrete
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
1051 Nudgee Road, Banyo,
QLD 4014, Australia
Locked Bag 71, Virginia BC,
QLD 4014, Australia
Phone: +61 7 3260 9777
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.
128
Fletcher Building Limited Annual Report 2021 Construction on-site at Fletcher Living’s
Waiata Shores community, South Auckland.
129
Fletcher Building Limited Annual Report 2021 This Annual Report uses stock sourced from sustainably managed forests.