Building for tomorrow
Fletcher Building Limited - Annual Report 2022
Australia
New Zealand
South Pacific
Fletcher Building has operations in
Papua New Guinea, Fiji, Samoa and
American Samoa, Tonga, Vanuatu
and the Solomon Islands.
Front cover image: In Auckland, Georgia Izzett and Clint Fouche of Golden Bay Cement Transport oversee the safe unload of cement from the
Aotearoa Chief transport ship. The ship travels from the Golden Bay facility in Northland, around New Zealand and can carry as much as 8,200
tonnes of cement per load (the equivalent of more than 330 truckloads).
2
Fletcher Building Limited Annual Report 2022
Contents
Welcome to our FY22 Annual Report, which describes our business operations, approach to doing
business and performance for the year. As with our previous reports, we have included commentary on
our strategy, governance, environmental and social performance of our business alongside our financial
results. We welcome questions, comments or suggestions about this report to investor.relations@fbu.com.
This report and our previous reports and presentations are available at fletcherbuilding.com.
Our Year
Governance
04 Building for Tomorrow
58 Board and Executive Team
05 At a Glance
06 Chair’s Report
07 CEO’s Report
09 Delivering our Strategy
10 Our Purpose
12
Zero Injuries, Every Day
18
Leadership in Sustainability
and Innovation
32 Our People
Performance
38 Group Performance
42 Group Overview
46 Building Products
48 Distribution
50 Concrete
52 Australia
54 Residential and Development
56 Construction
64 Corporate Governance
75
Sustainability Materiality
and Methodology
77 Remuneration Report
Financial Report
90 Trend Statement
91 Financial Statements
97 Notes to the Financial Statements
141 Independent Auditor’s Report
Other Disclosures
145 Statutory Disclosures
154 Corporate Directory
This Annual Report is dated 17 August 2022
and is signed on behalf of the Board by:
Bruce Hassall
Chair
Robert McDonald
Director
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Fletcher Building Limited Annual Report 2022 We are building
for tomorrow
Fletcher Building is a significant manufacturer, retailer, home builder and partner
on major construction and infrastructure projects. Spanning the full value chain,
we operate diversified businesses across our core markets of New Zealand and
Australia, from resource extraction, product manufacturing and distribution
through to property development and infrastructure construction.
Our purpose, ‘improving the world around us through smart thinking, simply
delivered’ is focused on accessing the best ideas from around the world, or through
innovating in our own right, and bringing them to market in ways that make our
customers’ lives easier. As a business, we are decarbonising, recycling, minimising
waste and continually innovating to produce better, more sustainable products and
homes. In doing so, we are building better environments for our customers and
communities, and a more sustainable future for generations to come.
Fletcher Building is dual listed on the NZX and ASX, and operates through six
divisions – Building Products, Distribution, Concrete, Australia, Residential and
Development and Construction.
Safety TRIFR (1)
Employee engagement
Carbon emissions
Customer NPS (2)
3.4
69%
1,087,181
tCO2e
36
2021 5.0
2021 66%
2018 1,238,380 tCO2e
2021 41
(1) Total Recordable Injury Frequency Rate. Total number of recorded injuries per million hours worked. Does not include Restricted Work Injuries.
(2) Net Promoter Score measures how satisfied our customers are with our business; excludes the Group's joint venture and associates, and the Construction Division.
(3) Measures before significant items are non-GAAP measures used by management to assess the performance of the Group and have been derived from Fletcher
Building’s financial statements for the year ended 30 June 2022.
Unless otherwise specified, the safety, environmental and people-related Group metrics provided in this Annual Report represent our direct operations across all markets.
4
Fletcher Building Limited Annual Report 2022 At a glance
14,700+
People in New Zealand,
Australia and the South Pacific
980
Operating sites
Revenue
$8,498m
2021 $8,120m
EBIT before
significant items (3)
$756m
2021 $668m
Return on funds
employed (ROFE) before
significant items (3)
19.3%
2021 18.8%
Net earnings –
reported
$432m
2021 $305m
Cash flows from
operating activities
$592m
2021 $879m
Leverage ratio
(net debt/EBITDA)
0.6x
2021 0.2x
Earnings
per share
53.5¢
2021 37.0¢
Total dividend
40.0¢
2021 30.0¢
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Fletcher Building Limited Annual Report 2022 Chair’s Report
Bruce Hassall, Chair
Dear Shareholders
Fletcher Building delivered another strong year of
performance and growth as the business continued to
successfully execute its strategy. This was thanks to the hard
work of our people who every day serve our customers and
communities, produce our products, drive innovation, make
the strategic decisions and manage the risks, all against the
background of continued COVID-19-related disruption.
The Group delivered improved revenue, profit and margins
while return on funds employed was ahead of target. Net
earnings attributable to shareholders was $432 million, an
uplift of 42% compared to FY21. Cash flow from operating
activities was solid at $592 million. Meanwhile, approximately
$400 million was invested into the business during the year,
including the ongoing construction of the new Winstone
Wallboards plant at Tauriko near Tauranga.
We are pleased with the delivery of continued operational
improvements and the strong financial result for FY22. The
Board has approved a final dividend for the year ended
30 June 2022 of 22.0 cents per share (fully imputed and
unfranked) to be paid on 6 October 2022. Combined with
the 18.0 cents per share interim dividend, this brings the total
dividend to 40.0 cents per share for FY22, an uplift of 33%
from FY21. In addition, Fletcher Building completed its on-
market share buyback programme in FY22, investing $250
million during the year ($24 million in FY21).
The Board is confident that Fletcher Building’s strategy will
continue to drive shareholder value in the short and long-term.
As the Group navigated a further stringent COVID-19
lockdown in New Zealand during the year, the Board regularly
monitored the approach to and compliance with the various
requirements. We were pleased to confirm ‘essential’ work
status for some of our key manufacturing operations which
secured continuity of service to our customers as restrictions
eased. However, the unprecedented levels of orders for one
of our key products, GIB® plasterboard, required us to move
to an allocation sales model early in February 2022.
6
We are confident that the steps we have taken to increase
our manufacturing output and sourcing our own imports will
see the market return to equilibrium by October 2022. The
Board acknowledges that this has been a difficult time for
many of our end customers. We have learned a lot through
the supply challenges over the past two years and the Board,
along with management, will ensure the lessons learned
are embedded in our operational and risk management
processes into the future.
The Board is very encouraged by the ongoing improvement
in safety performance as the team drives leadership and
a safety-focused culture through the Protect programme.
We will continue to prioritise these critically important
outcomes, ensuring achieving ‘zero injuries, every day’ is
possible and that everyone returns home from work safely.
We are continuing to invest in ambitious sustainability
initiatives. Climate change is an urgent global priority, and
we are committed to playing our part in reducing our impact
on climate change and managing the climate-related risks
to our organisation. Pleasingly, our carbon emitted in FY22
continued to reduce in line with our plans to achieve our 30%
by 2030 reduction target, and in FY22 we also published our
first Climate-related Disclosure report.
The Board is focused on continuing to support the business
as it builds a culture of innovation which is central to
achieving our goals of ongoing sustainable performance.
This means advocating investment in all parts of the value
chain, championing an environment for the continual
generation of new customer-solutions as well as leveraging
major global trends. Ongoing investments in technology and
data will further enhance the strength of our business and is
critical for future success.
Further changes were made to our executive remuneration
framework during the year to increase shareholder alignment
as outlined in the Remuneration Report. We have also
overseen a materially enhanced parental leave policy and we
are pleased to see the improvement in pay parity in FY22.
Achieving our environmental, social and governance
objectives is critically important as we deliver on
Fletcher Building’s vision to be the leader in New
Zealand and Australian building products and solutions.
The business is in excellent shape with a strong focus on
continued sustainable performance into the future.
On behalf of the Board, I would like to express my
gratitude to the skilled and committed team across
Fletcher Building as they delivered strong outcomes and
shareholder value, especially in view of the significant
number of external challenges.
I look forward to continued engagement with our
shareholders throughout the next year and at this year’s
Annual Shareholders' Meeting.
Bruce Hassall
Chair
Fletcher Building Limited Annual Report 2022 CEO’s Report
Ross Taylor, CEO
Fletcher Building delivered strong results in FY22 across all
key metrics. The result highlighted our ability to manage
through a dynamic operating environment, while remaining
focused on delivering long-term, sustainable growth.
Group revenue for the year was $8,498 million compared to
$8,120 million in FY21, while EBIT before significant items was
$756 million, compared to $668 million in FY21. Group EBIT
margin lifted materially in FY22 to 8.9% and we delivered a
second half margin of 9.5%. Our return on funds employed
(ROFE) remained ahead of target at 19.3%.
Fletcher Building’s businesses generated cash flows from
operating activities of $592 million, compared to $879
million in FY21. Our balance sheet remains robust with $1.1
billion liquidity and net debt of $670 million at year end.
This positions us well as we move into the new financial year.
FY22 has not been without its challenges. Global and
national supply chain disruptions have continued into the
third year of the COVID-19 pandemic. In New Zealand,
surging plasterboard orders following the first quarter
lockdown outstripped our ability to supply, despite our
manufacturing facilities running at record levels. In
recognition of our key role as a local manufacturer in keeping
the market supplied, we carried out a range of measures
to address the shortage including operating production
lines 24/7, running down inventory, importing additional
product, and establishing an emergency supply pool. In the
longer term, our new $400 million manufacturing facility
in Tauranga is scheduled to begin operations in May 2023
which will more than meet current and future demand levels.
In addition, the New Zealand Commerce Commission recently
publicised its interim market study report into residential
building supplies. The final report and recommendations will
be published in December 2022 and in the meantime we will
continue to work collaboratively with both the Commission
and the Government.
We have made meaningful progress towards achieving our
strategic goal of ‘zero injuries every day’. Total Recordable
Injury Frequency Rate (TRIFR) has lowered by 32% to 3.4 and
90% of our sites were injury free. This has been the result of
the continued efforts from our leaders across our business
who are driving a relentless line-led focus to our Protect
safety programme.
For us, ‘Building for tomorrow’ is about building a sustainable
future. We are confident that if we focus on bringing to our
markets the global trends in decarbonisation, innovation and
disruption, that there will be significant growth opportunities
available to us. In this report you will find a selection of the
projects we are most proud to showcase as indicative of the
better business we are becoming.
Innovation-led initiatives, which will reimagine our business
as a delivery vehicle for sustainable homes of the future,
have increased in pace and impact this year. We also share
a range of programmes that strengthen our ability to enter
adjacencies, disrupt markets, and enhance both our products
and service offerings, while at the same time demonstrating
the leadership our industry demands of us.
Looking ahead, our strategy positions us well to drive
shareholder value in the short and long-term. We continue
to drive our ambitious agenda for the future and our vision,
purpose, and strategic focus will underpin the next steps of
our journey. In FY23 we expect to see solid profit growth as
there continues to be a solid pipeline of work to get through in
our end markets, and there is unlikely to be another COVID-19
forced shutdown of our operations. Our balance sheet and
overall financial position are strong and we plan to keep it
that way. I want to acknowledge our people in New Zealand,
Australia and across the Pacific who are directly responsible
for our strong performance these past twelve months. I also
wish to extend my thanks to our shareholders, customers, and
suppliers for their continued support. I look forward to sharing
with you further updates on our progress in FY23.
Ross Taylor
CEO
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Fletcher Building Limited Annual Report 2022 To be the leader in New Zealand and Australian building products and solutions
Vision
Purpose
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
Focused on
operational
excellence
Global expertise –
locally delivered
Obsession for
customers
Strive for growth
and innovation
Driven by purpose
and values
Our People
Group Measures
Zero Serious Injuries
NPS ≥ 55
Engagement ≥ 80%
30% Carbon Reduction
Growing Market Share
EBIT Margin ≥ 10%
Cash Conversion > 60%
ROFE ≥ 15%
The Aotearoa Chief departs Ports
of Auckland. The cement ship can
carry as much as 8,200 tonnes of
cement per load (the equivalent
of more than 330 truckloads).
8
Fletcher Building Limited Annual Report 2022 Delivering our strategy
Performance and growth
Over the past four years, Fletcher Building has focused on delivering a strategy that has set the
business up for sustainable performance and growth over the longer-term.
This has seen us: significantly improve our
safety performance; drive better outcomes for
our customers; strengthen our pricing and cost
disciplines; push our businesses to deliver industry
top quartile economic performance; and develop
an innovation and sustainability mindset.
Our strategic goals support our vision ‘to be the leader in New Zealand
and Australian building products and solutions’. We are confident that
focusing our energy on delivering against these strategic goals will
drive shareholder value over the short- and longer-term.
Equally, our commitment to living our purpose, ‘improving the world
around us through smart thinking, simply delivered’, means that we
are building a better tomorrow for the communities we operate in.
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
Group
Measures
Focused on
operational
excellence
Global expertise –
locally delivered
Obsession for
customers
Strive for growth
and innovation
Driven by purpose
and values
Zero Serious Injuries
NPS ≥ 55
Engagement ≥ 80%
30% Carbon Reduction
Growing Market Share
EBIT Margin ≥ 10%
Cash Conversion ≥ 60%
ROFE ≥ 15%
Anchored by our values
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Fletcher Building Limited Annual Report 2022 Our Purpose
Improving the world around us through
smart thinking, simply delivered
Improving the world around us…
61%
of product revenue from
sustainably certified
products, an increase
from 49% in FY21
12%
reduction in carbon
emissions since
FY18 baseline year
80%
recycled window glass
in Pink® Batts® glass
wool insulation
10
1.5
degree
home
designed and being
built as LowCO home
3m
tyres
p.a
(around half of NZ's waste tyres)
diverted from landfill, reducing
coal use and carbon emissions
2,400
safety leaders upskilled
and leading safer
working environments
Watch Video
See how Fletcher Building is
delivering on our purpose
Fletcher Building Limited Annual Report 2022 … through smart thinking,
~300
Global technologies scanned
and best ideas delivered for our
customers in NZ and Australia
20-40%
less carbon in
ready-mix concrete
100%
recyclable
new concrete X-Pod
foundation system
6 styles
Laminex™ Surround sculptural
wall panels, innovative new
interiors category
… simply delivered.
190k
customers now using
online services with us
$500m
e-commerce sales, up
from nil 3 years ago
1 day
delivery
of complete kitchen through
Haven at Laminex™ Australia
1 day
from concrete slab to weathertight
envelope, fast-tracking house build
time through Clever Core™ offsite
manufactured housing
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Fletcher Building Limited Annual Report 2022 Zero injuries, every day
Although we will never be totally comfortable, it’s our belief that all injuries are
preventable that is leading to real change and the results we are aiming for.
Retaining a sense of unease and a commitment to learning is what fuels our action
to always improve our safety culture.
Wendi Croft, Chief Health and Safety Officer.
3.4
Total Recordable Injury
Frequency Rate (TRIFR)
5.0 in FY21
32%
Reduction in work
related injuries
90%
Sites injury free in FY22
85% in FY21
In FY22 we recorded two serious injuries, a reduction of 75% in the past
12 months. Our Total Recordable Injury Frequency Rate (TRIFR) is now at
3.4, a 32% improvement over last year. This is a key milestone that marks
the pathway to our goal of zero injuries every day.
Our Protect safety strategy’s five pillars: shift mindsets, develop our leaders, enable our
frontline, manage our critical risks, and drive accountability isn’t just a one or even a three-
year strategic plan, because we know that it will take many years to embed the culture
change we need to get to great safety. We are only about halfway through the main rollout
of our safety strategy and are really pleased that our efforts and focus are already starting to
protect our people from harm.
Throughout our journey, we have consistently focused on the ‘why’ and sharing of stories.
Some sites even have 'Why' boards they share with contractors (pictured) – the reasons
why they want to go home safe every day. We are proud of the culture we are building that
empowers our people to share. It’s not surprising that everyone has a story to tell – no one’s
life is untouched by personal loss or injury and the ripple effect from that.
A new generation of safety leaders
Three years ago only 54% of our leaders
believed all injuries were preventable and
we had an average of 25 serious injuries
every year. Now over 90% of our leaders
believe all injuries are preventable and
our injury rates have fallen. This shift in
mindset and drop in injury rates are largely
attributable to two key programmes.
Firstly, our Safety Leadership Programme.
Over 2,400 of our leaders participated in
16 hours of workshop discussions ,followed
by months of coaching. These were led by
their own operational leaders and focused
on shifting hearts and minds.
The second major activity was Risk
Containment led by our operations
teams. This is an 'eyes wide open' sweep
of our sites to hunt out the dangerous
stuff and contain it.
We completed over 3,500 risk containment
sweeps and contained over 1,400
potentially serious or fatal risks.
These two activities together created a
new mindfulness about risk and a new
commitment to containing exposed
operating conditions. In this way, our
business is now ready to take our
programme into our next phase where
our operations leaders, line-leaders, shift
supervisors and site managers will 'Power
Up' our front line and start focusing on our 21
Critical Risks and associated critical controls.
Our Power Up frontline programme will
have all the same line-led, hearts and minds
focus as our leaders’ programme, but will
also lift our engagement to a whole new
level and secure our safety culture to be led
by a new generation of safety leaders.
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Fletcher Building Limited Annual Report 2022 'Why' boards are now featuring at
Fletcher Living developments for site
based teams to share the reasons
'why' they choose to work safely.
Our Protect Safety Strategy
FY20
FY21
FY22
FY23
FY24
Protect Value & Behaviours
Safety Leadership Programme (2,400 Leaders)
Power Up Frontline Programme (13,000 frontline)
Life Saving
Rules
Risk Containment (3,500 sweeps)
Critical Control Verification (CCV) (21 Critical Risks Identified)
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Fletcher Building Limited Annual Report 2022 Y
D
U
T
S
E
S
A
C
FB Safety leaders
Our safety leadership journey
Higgins' Head of Maintenance Dave
Adams (rear) has evolved into a
proud safety leader and coach for
the many teams he works with.
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Fletcher Building Limited Annual Report 2022
As Head of Maintenance at Higgins, Dave Adams’ day job is to oversee as many as 500 full-time road
workers across 13 contracts out and about maintaining, fixing and rebuilding New Zealand roads.
It is dangerous work and for a long time he shared the view that safety was the domain of the front
line and safety teams. Dave participated in the Safety Leadership Programme in 2021 and now leads
his own new intake into the programme.
Q Tell us about your
safety ‘why’?
Realising that my work 'why' and my home 'why' are the
same was a real wow moment for me and has helped
me become a passionate advocate for safety.
My 'why' is a pretty typical one. It’s my two boys,
Jay (14) and Alfie (9). I want to be around to see
them grow up. Our team very tragically lost three
colleagues in a roadside accident several years ago.
To go through that grief and loss is not something
any of us want to experience again.
Q Can you share your
safety leadership
journey?
I admit that when we first learned that safety would first be a line-led ‘leadership’
activity, I was sceptical. How wrong I was.
I have personally seen the impact that strong safety leadership has at the front line.
For me, safety leadership has changed the way I manage teams. Every day I have
coaching conversations to positively support our people to work more safely. It’s
effective not because I’m policing what people do, but because they know I do it
because I care.
Q What do people
tell you about the
changes they
have observed?
My team works really closely with Waka Kotahi, who have been so impressed with our
shared progress in improving safety outcomes for workers that they have initiated their
own safety review with a similar approach. It’s so great to work with partners who share
the same vision for sending people home safely every day.
I don’t think I’ll ever be totally at-ease or convinced that we are 100% safe, and I am
learning to accept that discomfort. It’s not always easy calling out unsafe behaviours
at work, but the more we do it the more we understand that it’s because we care about
each other.
Q How have those
safety outcomes
changed at Higgins?
Achieving zero injuries is now very real for us, and we now go long periods
without any injuries being incurred out on our roads. Our TRIFR is currently
sitting at below 3, a ten-fold improvement on where we were only three years
ago. We have enormous pride in our progress.
C
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Fletcher Building Limited Annual Report 2022
Y
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U
T
S
E
S
A
C
Power Up for great
frontline safety
Teams across Fletcher Building are now
working through the new frontline focused
safety programme Power Up to develop
our safety leaders of the future.
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Fletcher Building Limited Annual Report 2022
We are now ready to Power Up and transform the way frontline
teams think and act on safety at work.
Power Up, our frontline safety programme, has a strong teams-based approach
which builds on our toolbox interactions and provides every team and individual
worker the tools and the opportunity to experience the same shift in safety belief that
their leaders have experienced.
Designed as a series of short, fun, interactive activity sessions, the programme
aligns to the concepts of the Safety Leadership Programme and gets groups working
together to build on key concepts we know are central to building the belief that ‘all
injuries can be prevented’.
Power Up includes four modules broken into 15, bite-sized, 30-minute learning
sessions led by line-leaders, site managers and supervisors. Sessions can be
delivered as part of the normal safety rhythm such as during toolbox talks, or over a
longer period. Topics include building our team ‘why’, connecting with our personal
'why', working together as a team and jumpstarting our thinking around safety.
The Power Up programme has landed really well
across Fletcher Insulation. We are talking about things
that make a real difference to how people think and
act on safety, it's easy to roll out the key messages.
Andrew Rowe, General Manager Fletcher Insulation (Australia).
Feedback from early participants has been fantastic, with many indicating they would
be taking the learning home to share with their families and 92% of participants said
they believe Power Up will make them safer as a team. As the first frontline-focused
safety culture initiative of this size and scale, Power Up is the focus of a study for
University of Auckland's Department of Management and International Business.
1
2
3
4
Module one
Module two
Module three
Module four
Build our
'why'
Prepare
yourself
Trust your
team mates
Jumpstart
your thinking
13,000
employees and contractors
to experience Power Up
15
bite-sized modules, delivered
in 30 minute sessions
Fun,
interactive
‘toolbox style’ sessions
Watch Video
Further insights into
our Power Up frontline
safety programme
C
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S
T
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Fletcher Building Limited Annual Report 2022
Leadership in sustainability
and innovation
Sustainability, in what we do and the products we make, is central
to building for a better tomorrow. We are looking across our
business, and working with our customers, to bring sustainable
solutions and low carbon products to market.
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.
Our commitment to this is why we were first in our industry in Australasia to set a
Science-Based Target (SBT) for carbon reduction. We are on track to meet our target
of reducing our combined Scope 1 and 2 emissions by 30% by 2030.
Our emissions for FY22 were 1.1 million tCO2e which is a sustainable reduction of over
4% from FY21 and a 12% reduction from our baseline year of FY18.
This year, to support the reduction in our Scope 3 emissions, we also provided our
major suppliers with tools and resources through the Carbon Disclosure Project
(CDP) to help them to disclose and reduce their carbon emissions.
Combined Scope 1 and 2 carbon emissions*
)
e
2
O
C
t
(
s
n
o
i
s
s
i
m
E
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Combined Scope 1 & 2 emissions
Scope 1 emissions
Scope 2 emissions
*Figures exclude International division.
Scope 3 emissions for FY22 were
730,327 tCO2e.
FY18 FY19 FY20 FY21
FY22
Our sustainability aims
Careful management
of our resources
and emissions.
Be the leader in
making sustainable
building products.
Partner with our
supply chain to deliver
sustainable outcomes.
Build healthy homes
and deliver sustainable
infrastructure.
Support our
people and our
communities.
Transparent
environmental, social and
governance reporting.
61%
of product revenue derived
from products that hold
sustainability certifications
12%
reduction in carbon
emissions from baseline
470
suppliers provided with
support to reduce emissions
51%
of waste diverted
from Class 1 landfill
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Fletcher Building Limited Annual Report 2022
While we are making significant
progress on sustainability, we
are determined to go further.
In FY23 we will continue to
bring sustainable products and
solutions to market, working
with our supply chain to increase
sustainability within our industry.
Claire Carroll, Chief People Officer.
Fletcher Living’s Waiata Shores
development in South Auckland,
where the LowCO home is being
built and where reserves have been
maintained for community use and
protection of the local environment.
Building for a sustainable future
To move further on carbon reduction, we are progressing
with reduction plans across all of our business units. Our
focus in New Zealand is to continue to reduce coal usage
and emissions from cement production, build our new
and significantly more energy efficient wallboards plant at
Tauriko, and continue the transition from diesel to alternatives
in our fleet. Our Australian businesses are working on
solar electricity, having completed planning for four major
installations that will start construction in FY23.
Over the past two years, we have had a clear focus on
offering products with sustainability certifications to our
customers, playing our part to decarbonise the building
sector and supporting our customers’ own sustainability
goals. These products are featured in our LowCO house
and across our construction projects.
Within our product portfolio, revenue from sustainably
certified products increased from 49% in FY21 to 61% in FY22.
We now hold certification for all of our concrete value chain –
cement, aggregate, and Firth’s EcoMix™ concrete – as well as
products across our GIB®, Pink® Batts®, Iplex, Laminex™ and
ColorCote® brands.
We also remain firmly focused on the fundamentals. In FY22
we reduced our waste to landfill. We continued to manage
our quarries and developments to maintain local and regional
biodiversity. Our revised environmental policy continues to
ensure that our people, and those we work with, understand
and meet their environmental responsibilities.
Fletcher Building Limited Annual Report 2022
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Leadership in sustainability and innovation
At Fletcher Building, innovation is built into our purpose. ‘Improving the world around us through smart
thinking, simply delivered’ means thinking creatively and striving to adapt and disrupt ourselves and
our industry to meet the changing needs of our customers and the communities we operate within.
The LowCO home
In building for climate change, we must do things differently.
It was with this belief that Fletcher Residential and
Development took up the challenge to design and build a
home that minimises the embodied and operational carbon
in the home over its lifecycle without sacrificing the energy
performance of the home, all while maintaining the same
great style of a Fletcher Living development.
Partnering with the Building Products division, the pilot
provides the opportunity for the Group to select, trial, test
and innovate our own existing building products and also
consider what properties future building products will need
to meet emerging standards.
The result is the Low Carbon ‘LowCO’ home pilot, a new
three-bedroom detached home being built at Waiata Shores,
Auckland. This project is an ambitious initiative designed
to help New Zealand reach its climate change goals and to
reimagine how we will build houses in the future.
Ventilation system
with heat recovery
Solar PV on roof
Airflow
1 Firth low carbon concrete
The first LowCo home build as pictured is underway at the existing Fletcher Living
development at Waiata Shores, South Auckland. Plans for several pilot homes
trialling different house typologies and product combinations will begin in FY23.
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Compact house with
good orientation for sun
Fletcher Building Limited Annual Report 2022 Our customers are becoming much more aware in
today’s environment of the energy performance and
sustainability credentials of our new Fletcher Living
homes. So, we know that they are looking to us to
lead on developing more sustainable solutions that
contribute to an improved world around us. Our ultimate
goal, delivered through collaboration across Fletcher
Building businesses and other like minded partners, is to
deliver this kind of ‘home of tomorrow’ at an affordable
price point for customers in the near future,
Steve Evans, Chief Executive Residential and Development.
3 Clever Core™ structural core
1/3
of typical
space heating
requirement of a
standard build home (1)
7x
less carbon
emitted than a standard
home (1) over its lifetime
2 Comfortech™ insulation and GIB® wallboards
Special windows and frames
(1) Based on calculated heating requirements and projected carbon emissions for pilot LowCO home.
Airtight construction
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Fletcher Building Limited Annual Report 2022 Leadership in sustainability and innovation: The LowCO home (cont.)
1
Firth low carbon concrete
Relentlessly reducing embodied carbon in concrete: EcoMix™
We know that the production of concrete and cement are currently our
major source of carbon emissions and we are actively innovating to
address this. EcoMixTM can reduce carbon intensity between 20-40%
against the Infrastructure Sustainability Council baseline using lower
carbon cement made in NZ and supplementary additives that enhance
the durability of concrete.
Firth’s low carbon concrete(1) offers the combination of reduced
embodied carbon to the highest quality standard, ensuring strength,
performance, appearance, and ease of use. Additionally, Firth has
developed tools and expertise in designing mixes to support designers
and contractors to realise lower carbon results for their project.
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Comfortech™ insulation and GIB® wallboards
Creating warmer, drier homes by innovating our insulation systems
and wall design
A range of factors needed to be considered throughout the wall
design process. Firstly, air movement from inside to outside (or
the reverse) transfers significant amounts of energy, so controlling
air movement is key in designing a low energy home. The GIB®
Weatherline rigid air barrier system plays a major role in controlling
air movement. Once air movement is controlled, the next thing to
consider is how to keep any energy used in the home, in the home.
We opted to enhance the insulation performance of timber framing
by covering it with additional Comfortech™ wood fibre insulating
material. This helps keep more energy from escaping than if the
insulation was only placed between the framing members.
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Clever Core™ structural core
Prefabricated, high performance wall panels, with minimal waste
Clever Core™ has the unique ability to supply the structural core of a
home fully onsite, assembled and weathertight within one day from
completion of design and manufacture. Houses are prefabricated in
our Wiri offsite manufacturing facility with panelised walls and cassette
mid-floors and roofs. Each panel is designed to be dimensionally
accurate to ensure the best quality of fit, finish and compliance and
is built to above current code requirements which results in healthier,
warmer and drier homes. Use of Clever Core™ product also delivers
reduced waste, improved quality and repeatability, so that we produce
a more managed health and safety environment.
(1) Firth’s standard EC10 concrete is supplied at a 10-20% carbon reduction relative to the Infrastructure Sustainability Council (ISC) 2020 baseline. EcoMixTM can reduce
carbon intensity between 20-40%, using lower carbon cement made in NZ and supplementary additives that enhance durability of concrete. The cement used in
EcoMixTM is from Golden Bay, the leader in low carbon cement in New Zealand. Both Firth and Golden Bay Cement hold publicly available Environmental Product
Declarations (EPDs) for these products. EPDs are based on an externally verified life-cycle assessment of the product.
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Fletcher Building Limited Annual Report 2022 We're very confident that if we lean in on
the sustainability, innovation and disruption
trends around the world, that there will be
significant growth opportunities available to
us. We do this to ensure we understand the
key trends and have opportunity to cherry-
pick the best of these ideas,
Ross Taylor, Chief Executive Officer.
Environmental Advisor, Cameron Russell using drone
technology at Winstone Aggregates Hunua Quarry.
Watch
Video
for an insight into
innovation at Fletcher
Building from the team.
Innovation at Fletcher Building
Guiding Principles
At Fletcher Building
everyone is an innovator
Innovation is a process
and a discipline
We empower our people to
challenge old assumptions and
consider new ways to meet
customer needs.
We direct our innovation activity
in line with our strategic priorities,
we adopt best practice agile ways
of working, we ‘fail fast’ where our
experiments are not working and
we ‘double down’ on investments
that are showing real promise.
We bring the outside
in and partner with
disruptors
We foster a network of eco-system
partners (researchers, accelerators,
venture funds, start-ups) so we
can get early access to leading
innovations, both in our home
markets and across the globe.
Fletcher Building Limited Annual Report 2022
Fletcher Building Limited Annual Report 2022
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Everything and
the kitchen sink
At Laminex™, customers are able
to agree and order a Haven kitchen
complete with accessories, and also
have it delivered within the week.
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Fletcher Building Limited Annual Report 2022
Tradies love to work
quickly and not be
held up by a kitchen
that isn’t simple, easy,
and fast to install. At
Haven Kitchens we
take care of the initial
measurement and
design for the trade
so they can complete
more jobs in a week.
Steve Reid, Laminex™ Australia.
1 day
delivery of
complete kitchen
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Haven kitchen
design-styles
New kitchen business model piloted in Melbourne, Australia
Laminex™ Australia is our Australian manufacturer of quality
laminated panels, engineered stone and more. They recently
introduced a new kitchen business model that provides a quality
range of pre-assembled kitchens. Haven Kitchens is a one-stop shop
offering everything included from handles, benchtops, sinks and
taps to appliances and splashbacks.
Introduced in Melbourne in 2021, Haven Kitchens is the first offering of its kind in Australia.
Sold directly to trade with delivery-in-a-day convenience and an extensive range
of styles, these kitchens are built with all the great specifications you want to fit the
customer’s lifestyle.
Laminex's Steve Reid says "Given the market is capacity-constrained across all aspects,
from core materials through to the manufacturing and installation trades, we've
responded to the need to do things differently for the benefit of the customer."
“Given the market is capacity-constrained across all aspects, from core materials
through to the manufacturing and installation trades, we’ve responded to the need to do
things differently for the benefit of the customer,” says Steve.
“There’s no need to wait months for a kitchen. Home-owners have great variety,
addressing all tastes and budgets, and we’ve got everything on-the-shelf, ready to go.
It’s possible to place the order in the morning and start installing that afternoon.”
Using as many locally-made products as possible, Haven Kitchens is supporting
the Australian-made kitchen industry while providing trade customers the ability to
complete more jobs each week.
The Haven model is built for the long-term and is likely to have further opportunities to
expand into complementary products such as storage systems and wardrobes.
The kitchen category market within Australia is believed to be worth as much as $6.5
billion Australian dollars. While the pilot has focused this year on South-East Melbourne
with four pilot sites, the model will be refined before being rolled out across Australia.
Following the 2021 launch, more than 50 Haven Kitchens were sold in the last six
months of FY22.
“What’s giving us confidence in the model is the high repurchase rate among our trade
customers, with strong word-of-mouth referral to other trades,” Steve says.
“We know of trade customers who have changed their business model based around
the Haven Kitchen offer, that’s a real endorsement,” he says.
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Living a vivid life
Artist's impression of
upcoming Vivid Living homes
at Red Beach, Whangaparāoa.
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Fletcher Building Limited Annual Report 2022
Retiring from work is not retiring from life. What is important is the ability to
unlock more time to spend with friends and family by removing some of the
mundane aspects of home ownership, which is what Vivid Living offers.
Fletcher Living’s General Manager, Sam Rapson.
70+
years old
eligible for the first
Vivid Living retirement
communities
50%
share of
capital gains
for Vivid Living
homeowners
Fletcher Living’s expansion into retirement living is designed to provide
a new way of independent living for people in their golden years.
Vivid Living is designed for residents aged 70+ who want to keep living independently,
surrounded by like-minded people and supported by the level of care they choose.
The integration of Vivid Living into already thriving Fletcher Living communities, is one of
the key differences to the traditional, stand-alone retirement village model.
Vivid Living's financial structure is also different. Residents moving into a Vivid Living
community will enter an Occupational Rights Agreement (ORA) with a 15% Deferred
Management Fee (DMF) - lower than most traditional villages. Additionally, when the time
comes to leave the Vivid Living community, residents will share in 50% of the capital
gains, less the cost of refurbishment, that results from the sale.
Vivid Living’s single-level villas will be purpose-built for easy living with modern
appliances and award-winning, age-friendly touchscreen technology provided by
Spritely which will help residents stay safe and connected with friends and family.
House and property maintenance will be provided by Fletcher Living, along with an
onsite village manager. Residents can enjoy a shared central hub for social connections
and activities, helping to provide a positive lifestyle village experience.
Residents are also supported to live independently with care packages that are specific
to their needs and paid for separately.
All residents receive the basic healthcare package through our partnership with
healthcare provider Private Care NZ. This includes an annual health check and monthly
wellbeing check-in, with the option to purchase further services if required.
“It’s a tailored healthcare package, so you pay for what you need, when you need it,” says
Fletcher Living General Manager, Sam Rapson.
“Choosing to move to a retirement village is a big decision. Vivid Living provides a
very different proposition to what the market generally offers. A move to a Vivid Living
community will mean residents can spend more time doing the things they want to,
secure in the knowledge they are also making smart choices about their individual care
needs and finances."
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Delivering a better
online experience
Tradelink in Australia has enhanced
its online offering for customers.
These improvements and new
tools are being shared with their
New Zealand counterparts at Mico.
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80%
increase in traffic
at tradelink.com.au
212%
increase
in online sales
70,000
products
available online
60%
of customers
now interact with us online
25,000
products
available online
Fletcher Building Limited Annual Report 2022
Cross-collaboration is how we want to work in the future. Ultimately we can
improve customer experiences and create shareholder value as we scale
technology upgrades across the Group.
Continuing digital enablement for
PlaceMakers trade customers
PlaceMakers’ aim is to create an unmatched digital experience
in the New Zealand distribution market, moving away from a
traditional analogue approach to doing business with trade
customers. In the past year, the team have accelerated its shift
to an online, ‘always on’ omnichannel experience.
The business has increased customer adoption with 60% of
PlaceMakers trade customers now registered with e-tools.
Annual digital sales are over $100 million, comprising over
7% of total sales.
Also this year, investments in data and analytics are helping
to drive personalised product offerings and suggested next
actions after a sale.
The focus is not solely on digital sales, but also in predicting
and solving key customer challenges to support them to
manage their own workload and address pain-points.
“We have seen the opportunities this rich data represents
and have created a data and analytics capability within the
business and built the technology to mine and utilise this data
for insights. The opportunities for delivering an optimised
customer experience are vast, and initially we are working on
personalisation for digital onboarding, to re-engage lapsed
customers online and to test and learn targeted promotions,”
says PlaceMakers Chief Executive Bruce McEwen.
“It’s enabling us to move from a one-to-many connection with
our customers, to personalised one-to-one communication.
It will also allow us to focus on customers where spend has
lapsed or target specific category promotions to enhance the
share of wallet spend by the customer.”
Mark Phillips, General Manager E-commerce.
Our digital transformation for customers on both sides of
the Tasman has made further progress in the past twelve
months with continued delivery of modern e-commerce
and web-based tools.
Australia-wide plumbing supply business Tradelink, has
launched its trade portal and prioritised improved website
functionality for retail customers which in-turn allows for
customers to browse online catalogues, select and customise
products, right through to managing trade accounts and
connecting to third party accounting systems.
Tradelink.com.au now enables improved customer
experience with features including product availability, order
management, access to promotional offers, and a vast array
of inspiration and design content for bathroom, kitchen,
and laundry. Site improvements include faster page loading,
core search functionality and customised options of popular
vanities for bespoke design requirements.
Fletcher Building’s General Manager of E-commerce Mark
Phillips says in a short space of time, the website once
mostly used by in-the-know tradies, has become a more
sophisticated digital shop window reaching a broader
audience from home renovators through to licensed
plumbing specialists.
In the three months since the online trade portal launched
in April 2022, 3,000 trade customers have signed up and
this has generated product sales of $500,000.
Applying tested ideas across markets
As well as creating a better experience for our customers,
Tradelink’s digital upgrade provided the opportunity for
cross-collaboration with other businesses within the Group.
After Tradelink’s trade website went live in April, the same
platform was used to develop a new trade portal for New
Zealand-based plumbing supplier Mico. Mico in turn has
developed a mobile app which went live in June 2022 that
will be launched by Tradelink in early FY23, taking less than
half the time to build and deploy.
“This business cross-collaboration is how we want to work in
future. It demonstrates how having a common platform allows
us to ‘build once, deploy multiple times' resulting in better
customer experiences and significant cost savings,” says Mark.
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Internationally
competitive manufacturing
New Winstone Wallboards
plant at Tauriko, Bay of Plenty
is nearing completion and
due to be operating in FY23.
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Fletcher Building Limited Annual Report 2022
It is our vision to be the leader in New Zealand and Australian building products
and solutions. To do that, we must not sit back and allow our manufacturing
facilities to be anything less than internationally competitive, delivering the
best quality products for customers exactly when and where they need them.
Hamish McBeath, Chief Executive Building Products.
48 NPS
(Net Promoter Score)
across Building
Products Division
60%
fewer carbon
emissions
with new steel oven
technology at Pacific
Coil Coaters
3x
capacity
each new Comfortech™
insulation plant upgrade
and steel purlin mill
View
flyover
of new GIB® factory at
Tauriko, Bay of Plenty
Fletcher Building’s New Zealand Building Products operation is split into products, pipes and
steel. These products touch almost every new home, building or key piece of infrastructure
built or remodelled in any given year from underground pipe-works, insulation, wallboards
through to roofing steel. With ongoing global supply constraints significantly affecting the
availability of imports, in-country manufacturing is critical for customers.
We continue to drive the economic performance of each business to be in its industry upper
quartile. This means having efficient, automated and digitised operations which are ‘best in
class’ and our customers expect nothing less.
Investing for growth
Our Winstone Wallboards’ new world class Tauriko GIB® plant is nearing completion
for commissioning in 2023. The plant will bring an additional 30% capacity to a highly
stretched market for a high-demand product. The plant will also contribute to the delivery
of the Group’s 30% reduction target in carbon emissions by 2030 as well as creating 100
new jobs in the region.
In June this year, Tasman Insulation New Zealand’s (TINZ) glasswool insulation operations were
combined with Forman Building Systems to create Comfortech™, offering customer solutions
for better, more comfortable, more sustainable homes and workplace environments.
Comfortech’s Pink® Batts® insulation manufacturing facility is set for a plant upgrade and
expansion due to get underway during 2023.
The expanded operation will triple production of insulation fibre products, an important
flex given changes to the New Zealand Building Code will increase the minimum
requirements for insulating Kiwi homes. The larger facility will also enable new product
variations to deliver enhanced properties for thermal comfort, acoustic performance,
moisture vapour and air control, seismic protection and fire safety.
In Taupō, Laminex’s local plant is set to upgrade for its wood fibre products which will allow
for a wider range of panel products. Additionally, the expansion will support demand for
export sales, opportunities we have previously not had the capacity to address.
Pacific Coil Coaters has successfully installed stage one of our infrared oven conversion.
Once fully completed, this will remove the use of gas within our oven processes, delivering
a significant reduction in carbon emissions and will improve operational efficiencies as well
as product offerings.
At Humes we have driven efficiencies through the consolidation to two nationwide pipe
manufacturing sites in Auckland and Christchurch, and three nationwide precast sites.
With upgrades and new process technology at our Papakura plant, capacity is expected to
lift by 30%, and new product developments are now possible. Our distribution branches
are also being refreshed and we opened new branches in Timaru and Taupō, with two more
branches planned in the coming year.
World class logistics
We’re investing to achieve world class logistics to our customers. We’re leveraging off our
Papakura-Humes footprint and have plans to construct a purpose-built steel distribution and
processing centre to deliver significant handling capacity and efficiency gains. A new steel
purlin mill has been ordered and will be commissioned on the new site in early 2024 with the
remaining site to be completed by FY26.
We are proud to be driving highly-modern, fit-for-future operations with the aim of improved
customer service and even better building products solutions.
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Fletcher Building Limited Annual Report 2022
Our People
Our team of over 14,700 talented people continue to be the foundations of our success. Over the
past year, the people of Fletcher Building have remained steadfastly focused on delivering for our
customers, communities and each other. They have done so while also striving to turn our purpose
and values into a day-to-day reality.
Providing an inclusive workplace, where our people know they are valued, safe and able to reflect their true selves is a key priority
for Fletcher Building. In actively surveying our people for feedback on their experiences at work, we were pleased to see our
engagement score increase by 3% to 69% this year. We want to continue to lift engagement and build a better workplace and by
using the findings of our engagement survey, we are confident we will achieve this.
Investing in learning and development
Cultivating inclusion and diversity
We remain focused on ensuring our people feel supported
and trusted, while creating opportunities for them to learn and
innovate. We are committed to supporting our people reach
their full potential, both professionally and personally, through
our Learning and Development programmes.
Customers are at the heart of everything we do. To be the
best we can be, we are constantly challenging ourselves so
that our team reflects the world around us. While we have
made good progress, we know there is more to be done and
we’re committed to accelerating change.
To do this we invested $6.2 million in upskilling our teams
across a range of development opportunities which align to
our growth strategy. This included programmes to nurture
high-quality leadership, continue building our culture of safety
excellence, and to enhance operational capabilities in areas
such as customer experience, pricing and sales.
Providing our people with career growth is a priority. In FY22,
nearly 40% of our vacancies were filled internally, showing the
positive outcomes of our approach to supporting our people
build their careers at Fletcher Building.
The Fletcher Building Employee Education Fund (EEF) offers a
range of benefits and support, including funding for learning
programmes and for employees and their dependants
pursuing their own educational initiatives.
More than 300 family members of Fletcher Building
employees received support for study or extra tuition.
Nearly 200 children of Fletcher Building people were able to
experience inspiring programmes such as Outward Bound's
Spirit of Adventure, YMCA and Artz on Show through the
support of the EEF.
Fletcher Building continues to support the future of talented
young New Zealanders through partnerships with the First
Foundation and TupuToa. Five tertiary scholarships were given
to the First Foundation and six TupuToa interns were sponsored
in FY22. Fletcher Building is committed to continue supporting
both organisations in their mission to grow career pathways
that will ultimately foster greater diversity and inclusion across
not just our own business, but many others as well.
Our Inclusion and Diversity strategy centres around three
pillars: cultivating an inclusive culture; increasing female
representation; and growing ethnicity in leadership. By
progressing each of these elements, we are fostering
a workplace where our people have a strong sense of
belonging and can be their best. At the same time we have
the opportunity to capitalise on the diversity of thought and
experience our people bring to lift our overall performance.
As part of our values-led approach, we believe we are
‘better together’, and as such, Fletcher Building is a
workplace where everyone belongs. Our people-led
action groups have continued to inspire action across
the business. Our Pride network has led the conversation
around being mindful of inclusiveness by creating a
business-wide cartoon series highlighting the impact
thoughtless comments can have on one another.
Tātai, our Māori network continues to focus on increasing
the voice of Māori by lifting Māori leadership. This has been
supported by 29 people participating in our Whakatupu
programme in FY22 and contributed to three promotions
from those who took part.
Our Equality network has supported Fletcher Building to
lean into the opportunity to lift female representation across
the business through promoting access to mentoring,
professional development and networking opportunities.
These groups play an invaluable role in building confidence
in our actions to promote diversity, but more importantly
how our people feel about us as an employer.
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Fletcher Building Limited Annual Report 2022 Fletcher Living site
managers Tim Willmot and
Nerissa Ross at Stonefields
development, Auckland.
A spotlight on gender
Supporting family and career
Making Fletcher Building a great place for women to
work remains a priority. While women hold more than
50% of our functional roles, we need to continue lifting
female representation in operational roles. Progress is
being made and this past year we have 242 more women
in frontline operational roles and 36 new female leaders.
Continued dedication to increasing these numbers will
see further improvements in the year ahead.
Winstone Wallboards’ Project Engineer Hannah Orchard,
talks first-hand about the opportunities women have in
Fletcher Building operational roles on
.
Addressing the issue of gender pay parity remains a key
priority. We continue to focus on closing the gap with
pay parity improving from 95.7% at the end of FY21 to
96.5% this year.
Fletcher Building has developed a new parental leave
policy that helps our people create a great start for their
children, as well as making it easier to continue their career
with us when they return.
Starting or growing a family is a life changing moment that
we are committed to supporting. We wanted to deliver a
parental leave policy that shows we stand by our people
during this important time and one that reflected that
modern families come in many different forms. To get this
right we looked to our people to help shape the policy and
their feedback provided valuable insights.
Financial security is a key benefit, with our commitment
to top-up a primary carer’s full normal pay to 100% for 26
weeks or they can choose to receive 50% of their normal
pay for 52 weeks. Employer retirement contributions will
continue to be paid during the parental leave period.
Secondary carers will receive four weeks paid leave.
When it’s time to return to work, we now support our
people to balance their family and career commitments
with phased return-to-work options. This includes the
option to work part-time and receive full pay for six months.
Primary and secondary carers are also entitled to an extra
five days ‘New Parents Leave' in their child’s first year.
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Parental leave policy
It definitely makes you feel seen but also respected as an employee
- not to mention pretty proud of the place you work for.
Samantha Riley, second time Mum, and civil engineer at Higgins.
Samantha Riley, second
time Mum, and civil
engineer at Higgins.
Fletcher Building Limited Annual Report 2022
6
months fully paid
primary carers leave
4
weeks paid leave
for secondary carers
5
days
new parents leave
Supporting our families
Our new parental leave policy is providing second time around Mum,
Samantha Riley, with the peace of mind she can go on leave and enjoy the
first few months of her new baby’s life without financial worries.
As a solo Mum, Samantha has been saving to make sure she is in a good financial position to take
seven months parental leave with her second baby. To learn she will receive her full pay for the
first six months of her parental leave was an enormous relief for the Higgins civil engineer.
“I was so happy when I heard about the new parental leave policy, I did a little dance. Those first
few months are irreplaceable; you can’t rewind the clock. To know I can pay my mortgage and
support my children and not actually have to worry has just been so freeing,” says Samantha.
“It definitely makes you feel seen but also respected as an employee - not to mention pretty
proud of the place you work for.”
A lifetime goal-setter, Samantha is impressed that Fletcher Building is also taking the affirmative
step to continue to pay the employer retirement contributions while she’s on parental leave.
“To know that my KiwiSaver is still being paid, ensuring there is that growth fund for the future
is huge,” says Samantha.
When Samantha returns to work, she will make the transition with four-day weeks to start with,
allowing her to have a scheduled family day each week.
“The return-to-work elements of the policy is definitely a huge relief as well, not only for myself
but also for my children as it just eases that transition.”
“It is so great Fletcher Building is offering this to their employees, I know first-hand what a
positive impact it will have on so many people’s lives.”
Having a child is a life changing moment and our new policy was shaped, adjusted and
delivered by listening to the experiences of many of our working parents, in order to really
understood what mattered most to them at this important stage in their lives. We thank them
for championing this policy and helping us build a better workplace.
Parental leave benefits
26 weeks
fully paid leave for
primary carers
4 weeks
fully paid leave for
secondary carers
Continued employer
retirement contributions
Phased return-to-work benefits
Return to work
part-time at 80%
on full pay
for six months
5 additional days
‘New Parents Leave’ for a year for
primary and secondary carers during
their first year back at work
Annual leave accumulated and
paid at their normal pay
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Improving gender diversity
Leading the charge for women
in construction engineering
Hannah Orchard, Project
Engineer outside the new
Winstone Wallboards plant
at Tauriko, Bay of Plenty.
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Fletcher Building Limited Annual Report 2022
It’s not every day you get to be part of something so big and that you’ve worked
on from scratch. Now, we’re finally seeing what we’ve spent the last two years
putting down on paper, go up in real life as a 14-hectare manufacturing facility.
Hannah Orchard, Project Engineer - Winstone Wallboards.
Winstone Wallboards’ Project Engineer Hannah Orchard is proudly advocating for more opportunities
for women in frontline construction engineering roles, as her own career rapidly advances.
The 31-year-old is one of the youngest engineers on the
capital works delivery team that’s building the new GIB®
plasterboard manufacturing and distribution facility in
Tauriko, Bay of Plenty.
It’s a dream job, and a big leap from her start as a summer
intern in 2013. Joining Fletcher Building formally as a
contractor shortly before finishing her chemical and process
engineering degree, it was not long before Hannah was
snapped-up with a permanent position as a Continuous
Process Improvement Engineer based in Winstone
Wallboards Christchurch plant. A role in Auckland as a Project
Engineer followed and then last year she moved to Tauranga
as construction on the $400 million plant ramped-up.
Hannah prefers to be in the thick of the action on-site, rather
than in the office, but her job offers a balance of both. Her
day-to-day work involves project management of one key
aspect of the plant as well as being a quality manager for all
plant and equipment.
“There’s design coordination between building and
infrastructure versus plant and equipment, as well as the
closeout of on-site issues that need to be clarified from
design to construction,” Hannah says.
“When we reach the commissioning phase for plant and
equipment, that’s where the exciting stuff begins.”
Having advanced from her internship to where she is now,
Hannah is a great example of how careers can be developed
within the Fletcher Building Group. As a recipient of the
Group’s internal leadership and development programmes
and on-site training, Hannah’s career has gone from strength
to strength. On-the-job opportunities have emerged to
advance from a process engineer to a construction engineer,
all while developing project management skills.
While women make up around half of the functional roles
across the business, Fletcher Building has committed to
increasing the number of women in operational roles and in
leadership year-on-year.
For Hannah, defying gender stereotypes has been just part
of her career journey.
“Engineers don’t always have the best reputation of having
social skills, and females don’t always have the best
reputation in the industry for having technical skills! My
constant challenge is to prove both these assumptions
wrong,” says Hannah.
For her own career, Hannah is ambitious to keep seeking
more opportunities for growth, and to be involved in more
major projects.
More broadly, she says she’d love to see more women in
engineering careers and proving they can hold their own.
“There should be nothing stopping you. Just get amongst it!”
she says.
C
A
S
E
S
T
U
D
Y
37
Fletcher Building Limited Annual Report 2022
Group Performance
Workers inspect
installation of new
plant at GIB® factory in
Tauriko, Bay of Plenty.
38
Fletcher Building Limited Annual Report 2022 39
Fletcher Building Limited Annual Report 2022 Group Performance
Reported results
Total revenue
EBIT before significant items (2)
Significant items (3)
EBIT
Lease interest expense
Funding costs
Earnings before tax
Tax expense
Earnings after tax
Non-controlling interests
Net earnings
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
Australia
Residential and Development
Construction
Other
Gross revenue
Less: intercompany revenue
External revenue
2022
NZ$M
8,498
756
(54)
702
(58)
(46)
598
(159)
439
(7)
432
484
53.5
60.0
40.0
592
421
2022
NZ$M
1,610
1,789
881
2,806
692
1,559
11
9,348
(850)
8,498
Restated (1)
2021
NZ$M
8,120
668
(128)
540
(64)
( 44)
432
(115)
317
(12)
305
413
37.0
50.1
30.0
879
222
Restated (4)
2021
NZ$M
1,436
1,679
849
2,758
734
1,456
10
8,922
(802)
8,120
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
(2) EBIT before significant items is a non-GAAP measure used by management to assess the performance of the business and has been derived from Fletcher Building
Limited's financial statements for the period ended 30 June 2022.
(3) Further details of significant items can be found in
of the financial statements.
(4) The comparatives have been restated as a result of a change in segmental classification as a result of Forman Building Systems (business unit previously within the
Distribution division) being reclassified into the Building Products division, as a result of Forman Building Systems combining with Tasman Insulation New Zealand, to
the newly formed business unit - Comfortech™.
40
Fletcher Building Limited Annual Report 2022 Group Performance (cont.)
Building Products
EBIT* 2022
Distribution
EBIT* 2022
$210m $137m
EBIT* 2021 $198m
EBIT* 2021 $124m
Concrete
EBIT* 2022
$128m
EBIT* 2021 $113m
Australia
EBIT* 2022
$113m
EBIT* 2021 $102m
* before significant items (1)
Building Products
Distribution
Concrete
Australia
Residential and Development
Construction
Corporate
Total EBIT
Lease interest expense
Funding costs
Earnings before tax
Tax expense
Earnings after tax
Non-controlling interests
Net earnings
Residential and Development
EBIT* 2022
$217m
EBIT* 2021 $154m
Construction
EBIT* 2022
$14m
EBIT* 2021 $31m
EBIT
EBIT before significant items (2)
Reported
2022
NZ$M
Restated (1)
2021
NZ$M
Reported
2022
NZ$M
Restated (1)
2021
NZ$M
210
136
128
67
217
3
(59)
702
(58)
(46)
598
(159)
439
(7)
432
189
125
117
(18)
154
28
(55)
540
(64)
(44)
432
(115)
317
(12)
305
210
137
128
113
217
14
(63)
756
(58)
(46)
652
(161)
491
(7)
484
198
124
113
102
154
31
(54)
668
(64)
(44)
560
(135)
425
(12)
413
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
(2) EBIT before significant items is a non-GAAP measure used by management to assess the performance of the business and has been derived from Fletcher Building
Limited's financial statements for the period ended 30 June 2022.
41
Fletcher Building Limited Annual Report 2022 Group Overview
External revenue of $8,498 million was $378 million or 5% higher than the prior year’s $8,120 million.
EBIT before significant items was $756 million, compared to $668 million in the prior year. Group net
earnings were $432 million, compared to $305 million reported in the prior year. Cash flows from
operating activities were $592 million, compared to $879 million in the prior year. Return on funds
employed was 19.3%, ahead of prior year.
The FY22 result reflects a strong operational performance
across the Group, achieved despite the significant impact
of COVID-19 restrictions in the first part of the year. The
requirement to shut down almost all New Zealand operations
for up to five weeks in August-September, plus rolling
COVID-19 restrictions in Australia, resulted in an earnings
impact of approximately $100 million in the first half. In the
second half, COVID-19 restrictions had limited impact in
most divisions and the Group reported a result significantly
ahead of the prior year. Excluding the Industrial Development
business, the Group’s second half revenue was 11% ahead
of the prior period; EBIT before significant items increased
46%; and EBIT margin before significant items of 9.5% was an
improvement of 230 basis points (bps) on the prior period.
These results reflected the benefits of the Group’s strategy
in recent years to drive performance and growth through:
investment in more efficient manufacturing and digital
channels to market; growth in new products and higher-
margin market segments; improved pricing disciplines; and a
cost-out programme to materially lower overhead costs.
The New Zealand materials and distribution divisions
(Building Products, Distribution and Concrete) performed
strongly outside of the lockdown period. Market demand
remained high across all sectors and well ahead of the
industry’s capacity to deliver. This was particularly evident
in the residential sector, with annual consents of new homes
near 50,000 compared to industry capacity of c.35,000
to 40,000. The high levels of demand combined with
global and local supply chain constraints, labour shortages
and high levels of inflation, led to a challenging operating
environment. Pleasingly, the divisions’ focus on customer
service and solutions saw Net Promoter Scores (NPS) remain
broadly in line with the prior year, while gross margins lifted
by 30bps reflecting the effective pass-through of input cost
increases. Overall, FY22 EBIT before significant items for
the three divisions was $40 million or 9% higher than FY21.
In the second half, revenue was 11% higher and EBIT before
significant items was 25% higher than the prior period, while
EBIT margins expanded by 130bps to 11.9%.
In Australia, market activity levels were generally robust, though
were subdued by COVID-19 restrictions in the first half and
also impacted by floods on the East Coast in the second half
of the year. The division continues to benefit from structural
changes made to the business over the past four years, notably:
manufacturing rationalisation and overhead cost reduction;
increased digital, new product, and own-brand sales; exit from
underperforming categories; and increased focus on the more
resilient additions & alterations (A&A) and small to medium
(SME) market segments. FY22 EBIT before significant items
(excluding Rocla which was divested in August 2021) was $116
million, an increase of 25% on the prior year.
In the second half, revenue (adjusted for Rocla) was 10% higher
and EBIT before significant items was 47% higher than the prior
period, with EBIT margins expanding by 130bps to 4.8%.
The Residential and Development division delivered EBIT of
$217 million, compared to $154 million in the prior year. The
Fletcher Living business reported earnings of $176 million,
up from $102 million in FY21. Market demand was strong and
house prices rose significantly in the first half of the year.
While the market began to moderate through the second
half, Fletcher Living benefited overall with FY22 EBIT margins
of 28% compared to 17% in the prior year. Partially offsetting
this, FY22 house sales volumes of 670 units were lower
than targeted due to the COVID-19 lockdowns and industry
capacity constraints. The division continued to invest in its
Clever Core™ (panelisation), Apartments and Vivid Living
(retirement) offers, as key areas of future growth. In total,
these three operations reported an FY22 operating loss of $7
million. The Industrial Development business completed two
key transactions in the year, both in the first half, resulting
in EBIT before significant items of $48 million compared to
$57 million in the prior year. Looking ahead, while the New
Zealand housing market is expected to continue to soften in
FY23, the division remains well-placed to deliver sustained
results through a land pipeline of c.5,600 units in attractive
locations acquired at amounts materially below current
market values.
The Construction division delivered EBIT before significant
items of $28 million (prior to elimination of intra-Group
margin), in line with the prior year. The division experienced
the most significant impact in FY22 from the COVID-19
restrictions, with on-site productivities materially impacted
through the year by the national and regional lockdowns,
labour shortages, and supply chain disruptions. Pleasingly,
the division has continued to improve the quality of its order
book. At year-end, work in hand was $3.2 billion, focused on
low to medium risk contracts in the New Zealand roading,
marine, airports and water sectors where there is a strong
pipeline of investment. Two key legacy projects remain to be
completed: the International Convention Centre (2025); and
the Pūhoi to Warkworth motorway (2023), where the division
is currently negotiating a significant claim, including for
COVID-19 related delays.
Across the Group, significant items charges in the year
were $54 million. These charges related principally to the
reclassification of the currency translation reserve through
the consolidated income statement following the sale of the
Rocla business.
Net interest expense for the Group was $104 million in the
year, of which $58 million related to lease expenses. A tax
expense of $159 million in the year compares to $115 million in
the prior year.
Basic earnings per share were 53.5 cents for the year,
compared to 37.0 cents in the prior year. Excluding the impact
of significant items, earnings per share were 60.0 cents, a
20% increase on the 50.1 cents reported in the prior year.
42
Fletcher Building Limited Annual Report 2022 Group Overview (cont.)
Group cash flows
Funding and balance sheet
The Group’s balance sheet and funding profile remains
strong. Total funding available to the Group as at 30 June
2022 was $1,766 million of which $745 million was undrawn
and there was an additional $351 million of cash on hand.
The Group’s liquidity was therefore strong at $1.1 billion.
The Group’s gearing at 30 June 2022 was 15.1% compared
with 4.4% at 30 June 2021.
The Group’s leverage ratio (net debt / EBITDA) at 30 June
2022 was 0.6 times, compared with 0.2 times at 30 June
2021 and compared to a target range of 1.0 – 2.0 times.
Looking ahead, the Group expects its investments in growth
to lift the leverage ratio into the lower end of the target
range over the FY23-25 period. The Group will maintain a
preference for relatively conservative balance sheet metrics
to enable resilience through any economic cycle.
The average maturity of the Group’s debt at 30 June 2022
is 4.1 years and the hedged currency split is 33% Australian
dollar; 66% New Zealand dollar; and 1% spread over various
other currencies.
The Group currently has 76% of all borrowings with fixed
interest rates with an average duration of 3.2 years.
Inclusive of floating rate borrowings, the average interest
rate on the debt (based on period-end borrowings) is 4.6%.
Dividend
The 2022 final dividend is 22.0 cents per share and will
be fully imputed but unfranked for tax purposes. This
brings the total FY22 dividend to 40.0 cents per share.
The final dividend will be paid on 6 October 2022
to holders registered as at 5:00 pm (NZ time) on 16
September 2022. The shares will be quoted on an ex-
dividend basis from 15 September 2022 on the NZX and
ASX. The Dividend Reinvestment Plan will not be operative
for this dividend payment.
Cash flows from operating activities for the Group were
$592 million, compared to $879 million in the prior year.
Underlying trading cash flows were strong across the
Group, partially offset by increased working capital
investment. This investment was particularly focused in
inventories in the materials and distribution divisions,
which resulted in a $239 million cash outflow in the
year. There were three key drivers here: a rebuild of
stock levels following a draw-down in FY21, as previously
signalled; investment in resilience stocks so the Group
could effectively meet high levels of customer demand
in an environment of significant supply chain disruption;
and the impact of higher input prices on the value of
inventories, notably in the steel businesses. The first
two drivers accounted for around 50% of the inventory
investment, with higher input prices accounting for
around 50%.
In Residential and Development, working capital cash
outflows for the year were $103 million, with $88 million of
this relating to investment in land and housing inventories.
This is consistent with the previously signalled commitment
to invest in land and housing inventories, following
the significant draw-down of these stocks in FY21. The
investment in the year was inclusive of $134 million of land
purchases, with the remainder reflecting higher housing
work-in-progress as the division scales its volumes, as well
as a delayed settlement on the Emu Plains land sale.
Net capital expenditure for the Group in the year was $397
million. This included $156 million for the new Winstone
Wallboards plant, for which delivery timeline and cost
remain in line with plan, and $18 million for quarry land as
Winstone Aggregates invested in aggregate reserves in key
regions. Additional capital investments in the year were
focused on strategic priorities in manufacturing efficiency
and digitisation, including $30 million on the Group’s project
to create a fit-for-purpose backbone IT system environment.
Group cash flows in the year were also inclusive of: a $51
million inflow from the divestment of the Rocla business
in Australia; a $292 million outflow for the two dividend
payments with the interim 2022 dividend being fully
imputed for tax; and a $250 million outflow from the
Group’s on-market share buyback programme. This buyback
programme was completed in May 2022 with a total of 41.2
million of shares bought back for $274 million.
43
Fletcher Building Limited Annual Report 2022 Group Overview (cont.)
Cloud computing arrangements
Outlook
In April 2021, the International Financial Reporting
Standards Interpretations Committee (IFRIC) issued a final
agenda decision which concluded that costs incurred in
configuring or customising software in a cloud computing
arrangement can only be capitalised if the activities create
an intangible asset that the entity controls, and that meet
certain other criteria. The Group has historically capitalised
such costs. The adoption of the above agenda decision by
the Group has two impacts: it creates an expense in the
FY22 consolidated income statement of the relevant cloud
computing costs; and it leads to derecognition of previously
capitalised costs as an opening balance adjustment to the
prior year, thereby reducing amortisation of historically
capitalised costs in FY22. The net of these impacts in the
Group’s consolidated income statement in the current
year is an increased expense of approximately $15 million
compared to the prior year. This impact was principally in
the Australia, Distribution and Construction divisions.
In FY23, a backlog of residential activity as well as a solid
pipeline of non-residential work is expected to support
robust trading volumes in both New Zealand and
Australia. For FY24 and beyond, the market outlook has a
heightened degree of uncertainty.
The Group’s target for FY23 EBIT before significant items
is an uplift of at least $100 million above FY22. This FY23
target assumes: broadly flat market volumes compared
to the second half of FY22; Fletcher Living EBIT margins
around 10 percentage points lower than FY22 due
to softening house prices; Industrial Development
EBIT of c.$20 million; and Corporate costs of c.$75
million (including c.$15 million for the Digital@Fletcher
Foundations ERP project). Significant items charges of
c.$20 million are expected in FY23 associated with the
transition to the new Winstone Wallboards plant.
In the medium-term, and assuming stable market
volumes, the Group is targeting 100 – 200bps of EBIT
margin expansion above the 9.5% reported in the
second half of FY22. The three drivers of this targeted
uplift are: 50 – 100bps from investment in growth in
margin-accretive segments of the New Zealand business
(materials, distribution, and residential development); 25
– 50bps from ongoing improvement in EBIT margins in
Australia; and 25 – 50bps resulting from a more focused
and profitable construction business. At mid-cycle levels
of market activity, the Group is targeting EBIT margins
of 9% – 10%. The Group sees mid-cycle activity levels as
around 10% – 15% below the second half of FY22.
Rotesh Patel, General Manager
Digital and Transformation and team.
44
Fletcher Building Limited Annual Report 2022 Divisional Performance
Fletcher Construction
teams onsite at Waikato 50,
North Waikato.
45
Fletcher Building Limited Annual Report 2022 Building products
Building products
Distribution
Concrete
View contents page
The Building Products division reported gross revenue of $1,610
million, an increase of 12% compared to the prior year. EBIT before
significant items was $210 million, 6% ahead of the prior year. In
the second half, revenue was 15% higher and EBIT before significant
items was 19% higher than the prior period, with EBIT margins
expanding by 40bps to 13.5%.
Following a significant impact from the
COVID-19 restrictions in the first half,
the division delivered strong trading
volumes and continued to focus on
share gains in key categories and pricing
initiatives to offset input cost inflation.
Cost increases were seen particularly on
imported raw materials for steel, resin
and paper, concurrent with significant
freight increases. Businesses also faced
labour shortages and supply chain
disruptions, including from COVID-19
absenteeism. In this context, each of the
division’s segments performed well: the
Steel business delivered earnings 40%
higher than last year, pipes 11% higher
and the finishing trade businesses' 4%
higher. Included in the Steel business’s
result was a c.$10 million uplift due to the
rise in steel values through the year. For
the division, the second half EBIT margin
of 13.5% compared to 12.4% in 2019 and
reflects improved pricing disciplines,
new product development, and
investments in manufacturing efficiency.
Trading cash flow was $119 million, a
decrease of 51% or $126 million compared
to prior year. This was driven by an
increase of $115 million in inventory
across Building Products in response to
global supply chain delays, which have
required higher safety stock levels, as well
as higher inventory valuation from the
elevated input costs. The increase was
particularly evident in the Steel business,
which represented approximately 75% of
the inventory investment in the year.
Capital expenditure in the year was
$204 million, including $156 million
on the ongoing build of the Winstone
Wallboards new plant in Tauriko.
Other major investments were in new
electric ovens, gas cutting machines
and a purlin mill in Steel, and the
redevelopment of the main Humes
concrete pipes manufacturing facility.
These investments reflect the division’s
ongoing focus on more modern,
efficient, and sustainable manufacturing.
The division also progressed key
initiatives in several other areas in FY22.
The Comfortech™ brand was launched,
successfully merging Tasman Insulation
and Forman Building Systems, enabling
a unified and improved product and
service offering. Iplex completed
product refreshes for PVC-O and
fittings and introduced new Restrain
and Rainwater product lines. Laminex™
launched its online “See and Buy Tool”
designed to drive consumer demand
to trade customers and also launched
new product ranges including Surround
wall panelling and Superpine Square
Edge Particleboard Flooring. Winstone
Wallboards focused on responding to
unprecedented demand, including the
installation of a new heat exchanger to
increase production capacity from July
2022, ahead of the new Tauriko plant
coming on line in May 2023.
Looking ahead, the division’s future
focus will continue to be in three key
areas: more modern and automated
manufacturing plants which can drive
operational efficiency and address
capacity constraints to facilitate share
growth; investment in new product
development aimed at broadening
the division’s addressable market;
and implementation of digital tools
in the areas of e-commerce, data
management, and integrated business
planning. The division is targeting EBIT
margins of approximately 14% over the
medium-term. In FY23 the new Winstone
Wallboards plant will be commissioned
and enable volumes 30% higher than
present, provide capacity for product
innovation, and deliver significant
carbon and waste reductions. FY23 will
also see the completion of the Humes
Papakura manufacturing plant using
state of the art pipe technology to drive
process simplification and a lower cost
position. The construction of the new
Comfortech™ glasswool manufacturing
plant, due to commence mid-2023, will
enable the business to respond to the
New Zealand Building Code change
requiring greater ceiling insulation.
In Steel, the consolidation of four
operating sites in Auckland by 2026
will also address capacity constraints,
while the Laminex™ Taupō plant
upgrade by 2027 will deliver a new
range of latest generation wood-fibre
based panel products not currently
available in New Zealand.
46
15%
10%
5%
0%
Revenue
Revenue
$1,610m
$1,610m
Group revenue
$1,714m
Group revenue
$849m
17%
of group
revenue
19%
of group
revenue
9%
of group
revenue
44%
28%
28%
Revenue Weighted
Revenue Weighted
Sector Exposure
Sector Exposure
Residential
Residential
Commercial
Commercial
Infrastructure
Infrastructure
Residential &
Development
EBIT margin %
78%
21%
1%
44%
27%
29%
Revenue Weighted
Sector Exposure
Residential
Commercial
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Construction
Australia
Group revenue
$1,456m
Group revenue
$2,758m
Group revenue
$734m
12.4
13.5
2019
2H22
8%
of group
revenue
17%
of group
revenue
30%
of group
revenue
88% 12%
66%
34%
61%
27%
12%
View
Revenue Weighted
Building Products
Sector Exposure
Presentation of
Investor Day 2022
?
Revenue Weighted
Sector Exposure
?
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Fletcher Building Limited Annual Report 2022 Our Building Products businesses
Financial Summary
Year ended 30 June
Gross revenue
External revenue
Gross margin
EBIT before significant items (2)
2022
NZ$M
1,610
1,301
32.8%
210
EBIT margin before significant items
13.0%
Significant items (3)
Funds
ROFE (4)
Trading cash flow
Capital expenditure
1,024
21%
119
204
Restated (1,5)
2021
NZ$M
EBIT before significant items (2,5)
Year ended 30 June
Building Products
Steel
2022
NZ$M
154
56
Restated (1)
2021
NZ$M
158
40
(1) The comparatives have been restated as a result of 1) a change in accounting
policy as detailed in
and presented in
statements and 2) a change in segmental classification as a result of Forman
Building Systems (business unit previously within the Distribution division) being
reclassified into the Building Products division, as a result of Forman Building
Systems combining with Tasman Insulation New Zealand, to the newly formed
business unit - Comfortech™.
of the financial
(2) EBIT before significant items is a non-GAAP measure used by management to
assess the performance of the business and has been derived from Fletcher
Building Limited's financial statements for the period ended 30 June 2022.
(3) Details of significant items can be found in
of the financial statements.
(4) EBIT before significant items / closing funds.
(5) The comparatives have been restated as a result of a change in segmental
classification as noted in note 1 above.
1,436
1,134
33.9%
198
13.8%
(9)
744
27%
245
111
Hamish McBeath, Chief Executive
Building Products (left) and Ryan
Ashmore, Commercial Manager
at Comfortech™ in Penrose.
47
Fletcher Building Limited Annual Report 2022 Distribution
Building products
Distribution
Concrete
View contents page
The Distribution division reported gross revenue of $1,789 million,
which was $110 million or 7% higher than the prior year. EBIT before
significant items was $137 million, compared to $124 million in the
prior year. In the second half, revenue was 9% higher and EBIT before
significant items was 27% higher than the prior period, with EBIT
margins expanding by 130bps to 9%.
Revenue
$1,610m
Group revenue
Revenue
$1,714m
$1,789m
Group revenue
$849m
The division saw sustained market
demand outside of the lockdown
periods, driven particularly by the
residential sector. Constrained supply
for several key building products led to
a complex operating environment, and
inflationary pressures were also strong.
This was particularly evident in employee
costs, where the business has focused
on reviewing wages and salaries so that
they are in line with the market to retain
key talent. In this context, the division’s
ongoing focus has been on: customer
service and solutions, especially through
digital tools; operational efficiency,
including through the expansion of its
PlaceMakers Regional Hub programme;
and improved pricing and sales
disciplines. The impact of the latter focus
was evident through an expansion of the
division’s gross margins by 90 bps in
FY22 compared to the prior year.
Trading cash flow was $70 million for
the year, $47 million down on the prior
year. This was the result of investment
in working capital, reflective of the
additional levels of activity in the
market. Cash collections remain
strong, with debtors’ days consistent
with the prior year. Inventory
levels are elevated as supply chain
constraints resulted in higher safety
stock to meet customer needs in the
face of supply chain challenges.
Capital expenditure during the year was
$11 million, in line with the previous year
and focused mainly on investment in
new and refurbished branches. Digital
investment of $8 million was expensed
to the consolidated income statement
under the new Cloud Computing
accounting policy, offset by a $1 million
amortisation saving.
44%
17%
of group
revenue
This digital programme remained a
key focus for the division in FY22, as it
differentiates its customer offering while
also enabling increased efficiencies.
In PlaceMakers, c.7% of sales are now
transacted through e-commerce tools,
60% of trade customers are registered
for e-tools, and 150,000 advanced
28%
delivery notifications to customers
are sent per month. The PlaceMakers
Regional Hub programme of rolling
individual branches into operating
hubs has also progressed with ten hubs
now in place. The Hub model delivers
scale efficiencies and consistency of
execution, increasing ease for customers
shopping across multiple branches.
Revenue Weighted
Sector Exposure
28%
Residential
Commercial
Infrastructure
Looking ahead, the division’s strategic
focus will remain on the key areas of:
innovation in customer-focused digital
solutions; supply chain efficiency and
profitable network expansion; and
data-driven pricing and sales disciplines,
Residential &
to enable growth in key segments and
Development
support margin expansion. The division
is targeting 50 – 100bps of EBIT margin
expansion over the medium-term.
In FY23, a suite of new Mico e-tools,
Group revenue
mobile app and portal capability
will be launched, leveraging similar
$734m
programmes in the PlaceMakers and
Tradelink businesses. The division’s
digital investments will also focus
particularly on customer onboarding and
personalisation, supported by improved
data analytics tools. In the branch
network FY23 will see PlaceMakers
8%
integrate six branches and a Frame
of group
and Truss manufacturing facility in the
revenue
eastern North Island. Over the next
three years, PlaceMakers will also invest
in new automated frame and truss
capability, which will provide significant
improvements in safety, operational
efficiency, and increased capacity to
allow for share growth.
88% 12%
Revenue Weighted
Sector Exposure
19%
of group
revenue
9%
of group
revenue
78%
21%
1%
44%
27%
29%
Revenue Weighted
Revenue Weighted
Sector Exposure
Sector Exposure
Residential
Residential
Commercial
Commercial
Infrastructure
Construction
EBIT margin %
Group revenue
$1,456m
9.0
7.4
10%
5%
0%
2019
2H22
17%
of group
revenue
66%
34%
View
Distribution
Presentation of
Revenue Weighted
Investor Day 2022
Sector Exposure
48
?
?
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Australia
Group revenue
$2,758m
30%
of group
revenue
61%
27%
12%
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Fletcher Building Limited Annual Report 2022 Our New Zealand Distribution businesses
Financial Summary
Year ended 30 June
Gross revenue
External revenue
Gross margin
EBIT before significant items (2)
EBIT margin before significant items
Significant items (3)
Funds
ROFE (4)
Trading cash flow
Capital expenditure
2022
NZ$M
1,789
1,764
28.1%
137
7.7%
(1)
246
56%
70
11
Restated (1,5)
2021
NZ$M
1,679
1,651
27.2%
124
7.4%
1
177
70%
117
9
(1) The comparatives have been restated as a result of 1) a change in accounting
and presented in
of the financial statements
policy as detailed in
and 2) a change in segmental classification as a result of Forman Building Systems
(business unit previously within the Distribution division) being reclassified into the
Building Products division, as a result of Forman Building Systems combining with
Tasman Insulation New Zealand, to the newly formed business unit - Comfortech™.
(2) EBIT before significant items is a non-GAAP measure used by management to
assess the performance of the business and has been derived from Fletcher
Building Limited's financial statements for the period ended 30 June 2022.
(3) Details of significant items can be found in
of the financial statements.
(4) EBIT before significant items / closing funds.
(5) The comparatives have been restated as a result of a change in segmental
classification as noted in note 1 above.
Bruce McEwen (left)
volunteering with the team.
49
Fletcher Building Limited Annual Report 2022 Our Concrete businesses
Financial Summary
Year ended 30 June
Gross revenue
External revenue
Gross margin
EBIT before significant items (2)
2022
NZ$M
881
626
28.4%
128
EBIT margin before significant items
14.5%
Significant items (3)
Funds
ROFE (4)
Trading cash flow
Capital expenditure
597
21%
163
81
Restated (1)
2021
NZ$M
849
583
27.1%
113
13.3%
4
573
20%
164
36
(1) The comparatives have been restated as a result of a change in accounting policy
as detailed in
and presented in
of the financial statements.
(2) EBIT before significant items is a non-GAAP measure used by management to
assess the performance of the business and has been derived from Fletcher
Building Limited's financial statements for the period ended 30 June 2022.
(3) Details of significant items can be found in
of the financial statements.
(4) EBIT before significant items / closing funds.
Concrete Chief Executive, Nick
Traber (on right), onsite at Firth.
51
Fletcher Building Limited Annual Report 2022 View contents page
Building products
Distribution
Concrete
Revenue
$1,610m
Group revenue
$1,714m
Group revenue
$849m
17%
of group
revenue
19%
of group
revenue
9%
of group
revenue
44%
28%
28%
78%
21%
1%
44%
27%
29%
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Australia
Residential &
Development
Revenue Weighted
Sector Exposure
Residential
Commercial
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Construction
Australia
Group revenue
$734m
The Australia division, after adjusting for the divestment of Rocla
business, recorded gross revenue of $2,783 million, 7% higher than the
prior year. EBIT before significant items was $116 million, compared to
$93 million in the prior year, a 25% uplift.
Group revenue
$1,456m
17%
of group
revenue
The Stramit steel business grew revenue by
7% while EBIT was broadly in line with prior
year at $20 million. Supply constraints and
rapid increases in steel costs unfavourably
impacted earnings, particularly in the first
half. Pricing increases resulted in improved
performance, with second half EBIT
margins improving by c.100 bps compared
to the prior period. Share growth continued
throughout the year in the higher-margin
sheds and doors segments.
34%
66%
Significant item charges in the division
were $46 million for the year, relating
to the finalisation of the Rocla pipe
business divestment.
?
Trading cash flows excluding significant
Revenue Weighted
items were $92 million, compared to $166
Sector Exposure
million in the prior year. The cash flow
result reflected strong debtor collections
and their continued tight control, offset
by targeted investments in inventory
which positioned the division well to meet
customer demand expectations despite
the supply chain constraints.
Capital expenditure in the year was $55
million, with key investments continuing
in the areas of new product development
and automation in the manufacturing
businesses. Digital investment of $8
million was expensed to the consolidated
income statement under the new Cloud
Computing accounting policy.
Looking ahead, the Australia division will be
focused on: investment in digital and omni-
channel strategies; share growth in the
A&A and SME market segments; expansion
into product adjacencies; and maintaining
operational leverage through logical cost
management and continuing to improve
pricing disciplines. In addition, investments
in sustainability initiatives, including hybrid
motor vehicle fleet, reducing waste to
landfill programmes, energy procurement
and solar mean the division is well-placed
to exceed its 30% carbon reduction target
by 2030. The Australia division is on track
to deliver EBIT margins of 5%+ in FY23 and
is targeting 200 – 300bps of expansion in
the medium term.
Market activity was broadly in line with the
prior year. COVID-19 impacts in the first
half and weather events in the second
8%
of group
half did, however, cause some market and
revenue
operational disruption. Pleasingly, a second
half EBIT margin of 4.8% was achieved.
This reflects the division’s focus in recent
years on: manufacturing rationalisation and
overhead cost reduction; increased digital
transactional capability and implementing
omnichannel customer propositions, new
product, and own-brand expansion sales;
exit from underperforming categories; and
increased focus on the more resilient A&A
and SME market segments.
88% 12%
The Australian building products
Revenue Weighted
businesses (excluding Rocla) delivered
Sector Exposure
10% revenue growth, and EBIT before
significant items of $85 million was $24
?
million or 39% higher than the prior
year. EBIT margin for these businesses
expanded 130 bps year-on-year. In
Laminex™, revenue grew 3% and earnings
increased by 8%, with benefits of growth
in core categories and a market leading
decorative category offer. Key highlights
were Laminex's entry into the vertical
wall space market with Surround, while
digital transactions now account for 30%
of Laminex™ revenue. Fletcher Insulation
grew revenue by 7% and earnings by 87%
driven by pricing activities, supported
by lower costs to manufacture and
distribute. Iplex revenue increased by
27% with execution of strategy in core
markets and increased market activity.
This simplification of the business model
and optimised manufacturing base
helped deliver a $16 million earnings
improvement compared to the prior year.
The Tradelink and Oliveri distribution
businesses reported revenues in line with
the prior year, while EBIT before significant
items increased by 29% and EBIT margin
expanded by 50 bps year-on-year.
Increased earnings and margins were
a result of: growth in the SME plumber
segment and bathroom categories;
improved pricing performance; and
higher own-brand and digital sales. The
consumer transactional website and the
recently launched business to business
website offering delivered well ahead
of plan and are providing new revenue
streams and increased margins.
52
Group revenue
Revenue
$2,758m
$2,806m
30%
of group
revenue
61%
27%
12%
Revenue Weighted
Sector Exposure
Revenue Weighted
Residential
Sector Exposure
Commercial
Residential
Infrastructure
Commercial
Infrastructure
EBIT margin % (5)
5%
0%
2.6
2019
4.8
2H22
View
Australia
Presentation of
Investor Day 2022
Fletcher Building Limited Annual Report 2022 Our Australia businesses
Financial Summary
Year ended 30 June
Gross revenue
External revenue
Gross margin
EBIT before significant items (2)
2022
NZ$M
2,806
2,740
29.4%
113
EBIT margin before significant items
4.0%
Significant items (3)
Funds
ROFE (4)
Trading cash flow
Capital expenditure
(46)
1,365
8%
80
55
Restated (1)
2021
NZ$M
EBIT before significant items (2, 5)
Year ended 30 June
2022
NZ$M
Restated (1)
2021
NZ$M
2,758
2,684
29.6%
102
3.7%
(120)
1,312
8%
133
39
Laminex™ AU, Iplex AU &
Fletcher Insulation
Tradelink & Oliveri
Stramit
Divisional costs
Total
85
22
20
(11)
116
61
17
21
(6)
93
(1) The comparatives have been restated as a result of a change in accounting policy
as detailed in
and presented in
of the financial statements.
(2) EBIT before significant items is a non-GAAP measure used by management to
assess the performance of the business and has been derived from Fletcher
Building Limited's financial statements for the period ended 30 June 2022.
(3) Details of significant items can be found in
of the financial statements.
(4) EBIT before significant items / closing funds.
(5) Excluding the impact of Rocla.
Australia Chief Executive
Dean Fradgley (left) with
Tradelink’s Luke Naish.
53
Fletcher Building Limited Annual Report 2022 View contents page
Building products
Distribution
Concrete
Revenue
$1,610m
Group revenue
$1,714m
Group revenue
$849m
17%
of group
revenue
19%
of group
revenue
9%
of group
revenue
44%
28%
28%
78%
21%
1%
44%
27%
29%
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Residential &
Development
Group revenue
Revenue
$734m
$692m
Revenue Weighted
Sector Exposure
Residential
Commercial
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Construction
Australia
Group revenue
$1,456m
Group revenue
$2,758m
8%
of group
revenue
17%
of group
revenue
30%
of group
revenue
88% 12%
66%
34%
61%
27%
12%
Revenue Weighted
Revenue Weighted
Sector Exposure
Sector Exposure
Residential
?
Commercial
Revenue Weighted
Sector Exposure
?
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
EBIT margin %
31.4
21.5
2019
2022
30%
20%
10%
0%
View
Residential and
Development
Presentation of
Investor Day 2022
Residential and
Development
The Residential and Development division reported gross revenue
of $692 million, a decrease of 6% compared to the prior year. EBIT
for the division of $217 million was $63 million, or 41%, higher than
the prior year.
In FY22, the division increased its land
pipeline to c.5,600 lots, comprising:
c.2,700 residential lots and two rural
properties held on balance sheet;
c.2,000 units of both zoned and
future zoned land under unconditional
contracts; and a further c.900 units
under conditional contracts. In FY22,
the division also made good progress on
its pilot of building low carbon homes
(LowCO), and reduced waste from
residential construction sites to landfill.
Looking to the future, the division remains
focused on sensible growth in volumes
across the residential, apartments,
retirement and panelisation businesses.
The current land holding is sufficient to
support at least the next three years of
house volumes, with two larger land
parcels also held outside the present
urban boundary for longer-term
development. The division maintains a
disciplined approach to investing in land,
with the current market value of the land
portfolio assessed at $350 – $400 million
higher than book value. This is expected
to provide a degree of resilience to
the business’s performance in FY23
as house prices soften, with Fletcher
Living margins expected to compress
by around 10 ppts in FY23 compared to
FY22. The Apartments business should
see approximately 120 sales across three
sites in FY23, while Vivid Living expects
to see its first residents occupy new
homes. Overall, the division will continue
to add value from: targeting attractive
locations that make sense through the
cycle; delivering product into a lower-to
mid-market price point; flexing housing
typologies to meet customer demand;
and using innovation to deliver faster
build times and reduce build costs.
Fletcher Living delivered EBIT of $176
million, 73% higher than the prior year’s
$102 million. 670 units were taken to profit
as compared to 836 in FY21, with the
20% lower volumes a result of COVID-19
lockdowns and broader industry capacity
constraints leading to construction and
consenting delays. Countering this,
strong house sale pricing across both
the Auckland and Canterbury markets
resulted in Fletcher Living revenues
growing 5% year-on-year. House prices
appreciated materially during FY22, more
than offsetting the increased land and
build costs experienced through the year.
As a result, Fletcher Living’s EBIT margin
expanded from 17% in FY21 to 28% in
FY22. The Fletcher Living result included
a revaluation gain of $9 million from the
transfer of land from Fletcher Living to
Vivid Living as the business commenced
construction of its first retirement villages.
Clever Core™, the division’s panelisation
business, made an EBIT loss of $5
million having delivered 105 homes in
the year. The first sales to an external
customer were made in the second
half, with a second shift also introduced
in the manufacturing operation as the
business scales its volumes to profitability.
Apartments made an EBIT loss of $2
million on revenue of $6 million, reflecting
the first settlements of apartments in
Auckland offset by fixed costs associated
with building a new team to deliver larger
volumes in future years.
The Industrial Development business
reported EBIT of $48 million, $9 million
lower than the prior year. The current
year result was driven by two significant
land sales in the first half of the year
in Australia: Rocla Emu Plains and the
Fletcher Insulation site at Rooty Hill.
Divisional funds employed at 30 June
2022 were $651 million, compared
to $534 million at 30 June 2021. The
increase in funds during FY22 reflects a
rebuild of stocks following a significant
drawdown in the prior year.
54
Fletcher Building Limited Annual Report 2022 Our Residential and Development businesses
Restated (1)
2021
NZ$M
EBIT
Year ended 30 June
2022
NZ$M
Restated (1)
2021
NZ$M
Financial Summary
Year ended 30 June
Gross revenue
External revenue
EBIT
EBIT margin
Funds
ROFE (2)
Trading cash flow
Capital expenditure
2022
NZ$M
692
680
217
734
721
154
Fletcher Living
Apartments
Clever Core™
31.4%
21.0%
Industrial Development
Total
651
33%
107
8
534
29%
261
1
(1) The comparatives have been restated as a result of a change in accounting policy
as detailed in
and presented in
of the financial statements.
(2) EBIT / closing funds.
176
(2)
(5)
48
217
102
(1)
(4)
57
154
Steve Evans, Chief Executive
Residential and Development
at the division’s Three Kings
development in Auckland.
55
Fletcher Building Limited Annual Report 2022 View contents page
Building products
Distribution
Concrete
Revenue
$1,610m
Group revenue
$1,714m
Group revenue
$849m
17%
of group
revenue
19%
of group
revenue
9%
of group
revenue
44%
28%
28%
78%
21%
1%
44%
27%
29%
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Revenue Weighted
Sector Exposure
Residential
Commercial
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
Construction
Residential &
Development
The Construction division reported gross revenue of $1,559 million,
which was $103 million or 7% higher than the prior year. Prior to
elimination of intra-Group margin on the new Winstone Wallboards
plant, EBIT before significant items was $28 million, in line with the
prior year. On a reported basis, FY22 EBIT before significant items
was $14 million.
Group revenue
$734m
8%
of group
The division maintained its strong order
revenue
book position through the year closing
at $3.2 billion, having generated new
work won in the year of $1.6 billion
and with around 80% of FY23 revenue
already secured. Against a backdrop of
a constrained labour market and wage
inflation in the construction sector,
the division has also established more
robust controls on pricing, costs and
contractual protections.
88% 12%
Trading cash flow for the division in FY22
was an outflow of $38 million compared
Revenue Weighted
to an outflow of $124 million in prior year.
Sector Exposure
This comprised net cash outflow of $35
million from legacy projects, and $3
million from the balance of the business.
?
Capital expenditure in the year of $29
million was mainly focused on paving
equipment and asphalt plants for Higgins
in New Zealand and Fiji, and investment in
mobile cranes and marine equipment to
service key projects for Brian Perry Civil.
Looking ahead, the division’s focus will
continue to be on: maintaining an order
book of predominantly low-to-medium
risk contracts in targeted sectors;
improving operational performance to
deliver gross margins above 10% and
EBIT margins in a range of 3% – 5%; and
closing out the remaining legacy projects.
Revenue was underpinned by an order
book that has been materially reshaped
in the past three years. It is focused
on the roading, marine, airports and
water sectors where gross margins,
contracting structures, and the forward
pipeline of investment are robust. In
FY22, and excluding legacy projects,
around 81% of revenue was from the
Higgins and Brian Perry Civil businesses,
which principally perform smaller, lower-
risk work packages.
Progress on legacy projects continued.
The Hamilton City Edge and Peka Peka
to Ōtaki motorway projects are both
nearing completion and will open in the
first half of FY23. This leaves two key
legacy projects to complete. On Pūhoi
to Warkworth, the project was materially
impacted in time and cost by COVID-19,
with completion now expected in 2023
and significant contractual claims being
pursued. COVID-19 also resulted in
delays to reinstatement work on the New
Zealand International Convention Centre,
with completion forecast for 2025.
COVID-19 restrictions had a material
impact on the division’s earnings
and margin performance in the year.
National and regional lockdowns,
supply chain disruption, and labour
shortages reduced on-site productivities
for most of the year and drove higher
costs. Despite this, gross margin for the
division in FY22 was 9.0%, only slightly
below the prior year. Ongoing operating
efficiencies resulted in FY22 overheads
being 7.3% of revenue compared to 7.6%
in prior year. Significant items charges
of $11 million related to restructuring
associated with driving a lower-cost
overhead structure.
Construction
Australia
Group revenue
Revenue
$1,456m
$1,559m
Group revenue
$2,758m
17%
of group
revenue
30%
of group
revenue
66%
34%
61%
27%
12%
Revenue Weighted
Revenue Weighted
Sector Exposure
Sector Exposure
Infrastructure
?
Commercial
Revenue Weighted
Sector Exposure
Residential
Commercial
Infrastructure
EBIT margin %
5%
0%
3.0
3.9
2019
2H22 (5)
56
Fletcher Building Limited Annual Report 2022 Our Construction businesses
Financial Summary
Year ended 30 June
Gross revenue
External revenue
EBIT before significant items (2, 5)
2022
NZ$M
1,559
1,387
28
EBIT margin before significant items (5)
1.8%
Significant items (3)
Funds
ROFE (4)
Trading cash flow
Capital expenditure
(11)
278
10%
(38)
29
Restated (1)
2021
NZ$M
1,456
1,347
31
2.1%
(3)
215
14%
(124)
24
(1) The comparatives have been restated as a result of a change in accounting policy
as detailed in
and presented in
of the financial statements.
(2) EBIT before significant items is a non-GAAP measure used by management to
assess the performance of the business and has been derived from Fletcher
Building Limited's financial statements for the period ended 30 June 2022.
(3) Details of significant items can be found in
of the financial statements.
(4) EBIT before significant items / closing funds.
(5) Prior to elimination of intra-Group profit in relation to Winstone Wallboards
Tauriko plant.
Construction Chief Executive Phil
Boylen, onsite at the new GIB®
plant at Tauriko, Bay of Plenty.
57
Fletcher Building Limited Annual Report 2022 Our Board
Doug McKay
Cathy Quinn
Rob McDonald
Bruce Hassall
58
Fletcher Building Limited Annual Report 2022 Barbara Chapman
Peter Crowley
Martin Brydon
The Fletcher Building
Board at Winstone
Wallboards’ new GIB®
plant build at Tauriko,
Bay of Plenty (May 2022).
59
Fletcher Building Limited Annual Report 2022 Our Board
Bruce Hassall
BCom, FCA (CAANZ)
Martin Brydon
MBA, FAICD, FAIM, Dip Elect Eng, Dip Elron Eng
Chair and Independent Non-Executive Director
Independent Non-Executive Director
Term of office: Appointed director 1 March
2017, last elected 2020 annual meeting.
Board committees:
Chair of the Nominations Committee and
Member of the Remuneration Committee.
Bruce 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.
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
Peter Crowley
BEcon, BA, FAICD
Independent Non-Executive Director
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, deputy Chair of The New Zealand Initiative
and is a director of Bank of New Zealand.
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 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 Limited and The
Riverside Coal Transport Company Pty Limited.
60
Fletcher Building Limited Annual Report 2022 Rob McDonald
BCom, FCA
Doug McKay
ONZM, BA, AMP (Harvard), CMInstD
Independent Non-Executive Director
Independent Non-Executive Director
Term of office: Appointed director 1 September 2018,
last elected 2021 annual meeting.
Term of office: Appointed director 1 September 2018, last
elected 2021 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.
Board committees:
Chair of the Audit and Risk Committee, Member of
the Nominations Committee and Member of the
Remuneration Committee.
Rob'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 2021 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 practised 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 and Rangatira Limited, chairs Tourism Holdings
Limited and Fertility Associates Holdings Limited, and
is Pro-Chancellor of the University of Auckland Council.
61
Fletcher Building Limited Annual Report 2022 Executive Team
Ross Taylor
Chief Executive Officer
Bevan McKenzie
Chief Financial Officer
Phil Boylen
Chief Executive Construction
Claire Carroll
Chief People Officer
Andrew Clarke
Group General Counsel and
Company Secretary
Wendi Croft
Chief Health and Safety Officer
Steve Evans
Chief Executive Residential
and Development
Dean Fradgley
Chief Executive Australia
Joe Locandro
Chief Information Officer
Hamish McBeath
Chief Executive Building Products
Bruce McEwen
Chief Executive Distribution
Nick Traber
Chief Executive Concrete
For the full biographies of our Executive Team, please see www.fletcherbuilding.com/about-us/board-and-management.
62
Fletcher Building Limited Annual Report 2022 Adrian Blake, General
Manager Fletcher Steel
at Pacific Coilcoaters
in Penrose Auckland.
63
Fletcher Building Limited Annual Report 2022 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 2022 and was approved by the Board on 17 August 2022.
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, the Group’s purpose and values, operating safely and
responsibly, acting with integrity and honesty, protecting our assets, complying with the law, and speaking up.
In addition, the Group’s Anti-bribery and Corruption Policy 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 FY22. All Fletcher Building personnel
must adhere strictly to the requirements of this policy. There were no reported breaches of this policy in FY22.
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 strongly believes in 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 our website and in the online modern slavery
register controlled by the Australian Border Force.
SECURITIES TRADING POLICY
The Group has a Securities Trading Policy which applies to all directors and employees of Fletcher Building Limited and its
subsidiaries (“Fletcher Building personnel”), and their related persons.
The policy also applies to any Fletcher Building 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 Securities 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.
64
Fletcher Building Limited Annual Report 2022 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.
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.
The factors that the Board will consider in whether a director is ‘independent’ are set out in the Board Charter. Any director who
has a change in relevant circumstance to any of those factors 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 2022 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.
Given that 58% of our functional roles are female, we are continuing to focus on annually increasing females in operational roles,
at both a leadership and individual contributor level, by at least 1% across the Group. This approach provides our operational
teams with female role models, creates an environment of support for females in operational areas of the business and enhances
the pipeline for future female leaders. It is supported by targeted action plans and performance measures which are included in
the balanced scorecards of operational executives, including the Group CEO.
Throughout the year, we have placed a spotlight on the various stages of the talent attraction process to pinpoint where current
practices may be helping the attraction of women into operational roles and where process corrections may be required. We have
reviewed our advertising and collateral with a gender-neutral lens, along with our approach to shortlisting and interview panels.
Our action plans aim to develop targeted initiatives to enable the retention of the women we have, and provide opportunities for
their development and progression. These business unit plans are supported by Group initiatives, such as our enhanced parental
leave policy and inclusive leader training programme.
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 2022, providing a benchmark against appropriate
external comparators as per current policy requirements.
Our people-led Equality Network, Pride and Tātai action groups are sponsored by Chief Executives and support our inclusive
culture. We have also assessed diversity of ethnicity in leadership across the business this year.
65
Fletcher Building Limited Annual Report 2022 Corporate Governance (continued)
Gender composition within Fletcher Building as at 30 June 2022 is set out in the table below.
Board of directors
Executive committee
Senior management (1)
All employees
2022
2021
Female
2 (29%)
2 (17%)
18 (24%)
24%
Male Gender Diverse (2)
5 (71%)
10 (83%)
57 (76%)
76%
0 (0%)
0 (0%)
0 (0%)
0%
Female
2 (29%)
2 (17%)
17 (25%)
21%
Male
5 (71%)
10 (83%)
51 (75%)
79%
(1) Senior management for these purposes includes any leader who reports to a member of the executive committee.
(2) Pursuant to NZX Listing Rule 3.8.1(c), gender diverse data was introduced to annual report reporting in June 2022.
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
Prior CFO, Audit and Risk Committee Chair
experience, financial risk management
Commercial depth
Technology and
digital innovation
Sales and go-to-
market
M&A, divestments,
corporate
restructuring
Government,
legal, regulatory,
governance
Business operations at scale, commercialisation of
research-based innovation
Cybersecurity, data analytics, disruptive
technology, digital platforms
Marketing, retail, service delivery, customer
engagement, omnichannel
M&A, divestments, corporate and balance sheet
structuring
Engagement with government stakeholders, legal,
policy and regulatory environments, NZX/ASX
experience, ESG, shareholder engagement
Health and safety
Safety standards and best practice
People, culture
transformation
Leading transformation / cultural turnaround, talent
management and remuneration
Key:
Very strong
Strong
Solid
Some gaps
This key represents the assessment of the strength of the skills and experience of the Board as a whole.
DIRECTOR INDUCTION AND 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 assist the Board as a whole and individual
directors to perform to a high standard.
The Board completed comprehensive reviews of its performance and processes in 2019 and 2021. Both reviews were conducted
with the assistance of an independent consultant, Propero Consulting Limited.
66
Fletcher Building Limited Annual Report 2022 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 2022 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 committee meetings 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
Roles and Responsibilities
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.
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.
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.
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 requirement and the promotion of good SHES governance.
Safety, Health,
Environment
and
Sustainability
Committee
Members as at
30 June 2022
Rob McDonald
(Chair)
Peter Crowley
Doug McKay
Cathy Quinn
All non-executive
directors are
members of the
Nominations
Committee.
Bruce Hassall (Chair)
Barbara Chapman
(Chair)
Martin Brydon
Bruce Hassall
Rob McDonald
Doug McKay (Chair)
Martin Brydon
Peter Crowley
Cathy Quinn
67
Fletcher Building Limited Annual Report 2022 Corporate Governance (continued)
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
The table below shows directors’ attendance at the Board and committee meetings during the year ended 30 June 2022.
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
Barbara Chapman
Peter Crowley
Rob McDonald
Doug McKay
Cathy Quinn
13
13
13
13
13
13
13
13
4
4
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.
2
2
2
2
2
2
2
2
6
6
6
6
6
4
4
4
4
4
4
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 were 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 providing all of our investors with timely access to full and accurate material information about
the Group. Our Disclosure Policy sets out the internal processes designed to enable the Group to comply 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 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.
68
Fletcher Building Limited Annual Report 2022 Corporate Governance (continued)
INTEGRITY IN NON-FINANCIAL REPORTING
The Board has approved an overarching Sustainability Policy and a sustainability strategy for the business which are summarised
on our website.
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 Group receives third party assurance on reported greenhouse gas emissions for Scope 1, 2 and 3 and our assurance
statement is publicly available on our website.
The SHES Committee also receives 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. These risks are
summarised in our Climate-related Disclosure document which is available on our website.
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
– New Zealand Green Building Council
– Sustainable Business Council
– Green Building Council Australia
– Sustainable Business Network
– Climate Leaders Coalition
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. Our frameworks provide
incentive to drive for both annual and long-term results, and to 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’ details 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.
69
Fletcher Building Limited Annual Report 2022 Corporate Governance (continued)
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 identify, assess, control, monitor and report the key risks we face
so that the Group can achieve its objectives and protect its staff, customers and reputation. The framework provides a consistent
structure for risk management and is aligned 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. This includes key risks, uncertainties and judgments on key
construction projects as disclosed in
of the financial statements.
70
Fletcher Building Limited Annual Report 2022 Corporate Governance (continued)
ACTIVITIES IN FY22
In FY22, 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 24 risk workshops were held with the individual business unit leadership teams in FY22. These workshops are a key
component of the Group’s risk management approach and assist in developing a bottom-up reporting process. Additionally,
the risk workshops process supports the individual business units’ leadership teams to consider that the appropriate risk
management strategies are being pursued.
Fletcher Building utilises a number of external experts to enhance risk management 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 26 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.
We have continued our product quality assurance programme with the assistance of external product quality auditors surveying
selected 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:
Through FY22, Fletcher Building actively managed risks arising from the COVID-19 pandemic, particularly the Omicron outbreak.
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 check that they remain fit for purpose and help respond to a range of crises.
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 in the future due to
changes in economic conditions, regulatory environment, and other factors. The current ten key risks are:
Description
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.
How this risk may impact
Fletcher Building
How we manage this risk at Fletcher Building
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 consider
that key risks are appropriately covered by insurance, where
practical and cost-effective.
– An established independent risk engineering review
programme is in place for our key sites.
– The business has carried out scenario analysis for physical
climate change risk in FY20 and repeated the exercise in FY22
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 cause 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.
– Regular operational reviews are undertaken with business
units and divisions as well as the Board undertaking divisional
deep dives.
– Strong focus on working capital, capital expenditure and
balance sheet management.
71
Fletcher Building Limited Annual Report 2022 Corporate Governance (continued)
Description
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.
Product quality
The Group constructs,
manufactures as well as
sources from third parties a
range of structures and building
products that are required to
meet local and international
standards and regulations.
Supply chain
Disruption to business unit operations
through the ineffective coordination
and control of the organisational
supply chain. The Group’s supply
chain may face a variety of challenges
such as pandemics, logistical and
public infrastructure constraints or
disruption to key suppliers.
People
How this risk may impact
Fletcher Building
How we manage this risk at Fletcher Building
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.
– 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://fletcherbuilding.com/investor-centre/corporate-
governance/
– The Group periodically reviews emerging regulation and
emerging international standards and frameworks to identify
potential future regulatory changes.
– The Group’s Golden Rules provide a framework for all staff
on the type of contractual risks that the Group is prepared
to accept.
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.
– Product quality control systems and processes exist within our
businesses to manage this risk.
– Supplier vetting and reviews are undertaken by both our
businesses, and where appropriate, by third parties.
– External experts provide independent audits on business units’
manufacturing and product quality control processes.
Disruption to business unit
or group operations through
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.
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.
The failure of the current
processes to attract and retain
talented staff can have a negative
impact on the functioning of a
business unit and the Group.
Additionally, industrial action by
collective representation groups
can cause operational disruption.
– 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.
– Business units and the Group benefit from the development
and learning activities provided by the central Organisational
Development team.
– FBuSay, the Group-wide employee engagement survey,
provides valuable insights about staff engagement.
Environment
Business unit operations may cause
environmental damage through the
failure to comply with the required
environmental laws, resource consents
and regulations.
Failure to comply with the
environmental laws, resource
consents and regulations may
result in imposition of penalties
and reputational damage.
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.
Additionally, a failure to meet the
Group’s sustainability objectives
may result in decreased demand
from customers for the Group’s
building materials.
– 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 with short and
medium term goals and accompanying annual targets.
72
Fletcher Building Limited Annual Report 2022 Corporate Governance (continued)
Description
Technology resilience
How this risk may impact
Fletcher Building
How we manage this risk at Fletcher Building
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.
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 capital expenditure 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.
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.
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 Golden Rules which govern the way
we contract with external parties.
– For more information about our construction contracts, please
see
Disclosures: Construction Accounting".
of the financial statements, "Supplementary
– Engagement with the communities and how we work with
stakeholders takes different forms for each business unit
and project.
Corporate reputation and social licence 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 whether its operations
continue 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.
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.
73
Fletcher Building Limited Annual Report 2022 Corporate Governance (continued)
Principle 7 – Auditors
“The board should ensure the quality and independence of the external audit process.”
The Audit and Risk Committee performs an annual performance assessment of the external auditor to ensure ongoing quality
and effectiveness. EY is our external auditor.
The Auditor Independence Policy includes requirements for the rotation of external audit engagement partners. The Auditor
Independence Policy is available on our website. In addition, the policy covers the provision of non-audit services by the
Group’s auditor. Auditor’s fees and expenses paid to EY are presented within
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.
of the Group financial statements
Representatives from EY attend Fletcher Building’s Annual Shareholders’ Meeting each year, where they are available to
answer questions from shareholders relevant to the audit.
INTERNAL AUDIT
Fletcher Building has an internal audit function, which evaluates and improves the effectiveness of key risk management,
control and governance processes. Internal audit develops an annual internal audit plan for approval by the Audit and Risk
Committee and is accountable for its implementation. To provide for the independence of the internal audit function, internal
audit reports functionally to the Audit and Risk Committee and administratively to the Chief Financial Officer.
Principle 8 – Shareholder Rights and Relations
“ The board should respect the rights of shareholders and foster constructive
relationships with shareholders that encourage them to engage with the issuer.”
COMMUNICATING WITH SHAREHOLDERS
Fletcher Building maintains a website, which includes information about Fletcher Building’s financial performance, operational
activities, corporate governance and other information of specific relevance to investors and stakeholders. Core requirements
on communicating with shareholders are formalised in a Shareholder Communications Policy, which was updated in May 2022
and 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 and operational executives 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. A hybrid investor day was held in June 2022
with presentations by the Chief Executive Officer, Chief Financial Officer and operational executives including question and
answer sessions. The Board bi-annually obtains research on the perceptions that the New Zealand and Australian investment
community has of the Group, management and performance. In 2022, an indepth investor perception study was carried out to
identify perceptions and key issues that face the Company from the standpoint of both current shareholders and non-holders.
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 a representative.
Resolutions at the 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 days 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 2022 as a virtual meeting.
74
Fletcher Building Limited Annual Report 2022 Sustainability Materiality
and Methodology
MATERIALITY ANALYSIS
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 and again in FY22 as part of a refresh of our
sustainability strategy that will be completed in FY23.
The FY22 materiality assessment was aligned to the 2021 SDG Impact Standard for Enterprises and the 2021 update of the Global
Reporting Initiative (GRI) Standards, in particular GRI3: Material Topics 2021.
Previous assessments by Fletcher Building served as a starting point for the FY22 materiality analysis, which was complemented
by a review of external benchmarks including those from the Sustainability Accounting Standards Board (SASB), the Living
Standards Framework, leading industry peers and sustainability investor indexes including the DJSI and MSCI. The analysis
was designed to identify impacts on the economy, environment, and people across Fletcher Building’s activities and business
relationships. As such, the scope included both impacts within our operations and impacts within our value chain.
The assessment identified 26 sustainability impacts that are material for Fletcher Building, with the twelve issues with highest
impact falling into the three broad categories summarised below. Our progress on these impacts is summarised in the "Our Year"
section of this Annual Report.
Climate change impacts:
• Scope 1 and Scope 2 emissions and climate mitigation; Scope 3 supply chain emissions and embodied carbon, and Scope 3
emissions from use of our products
Resources, emissions and the circular economy
• Use of raw materials; operational waste and resources efficiency; modern methods of construction and innovation; circularity
in construction; ecosystem impacts; and healthy products
Health, safety and wellbeing
• Health, safety and wellbeing of our workforce; employment practices; and employee, community and civic engagement
As part of the assessment, an independent sustainability advisory consultant also conducted confidential interviews with
selected subject matter experts, including representatives from the public sector, infrastructure providers, industry, standards
bodies, sustainability consultancy, investor experts, academia and a cohort of early career employees from within our business.
The interviews provided specific insights on the significance of different impacts; expectations and requirements about
performance; and how Fletcher Building could further accelerate and refine its approach to sustainability.
The key insights from the interviews were that stakeholders want to see sustainability embedded within the business strategy for
Fletcher Building, and for the business to look at impacts and opportunities to improve sustainability not just within the business
but across the value chain through partnering and providing thought leadership within our sectors of operation. Some of the
ways we are doing this are summarised in the "Our Year" section of this Annual Report.
METHODOLOGY
Greenhouse gas emissions
Greenhouse Gas (GHG) emissions included in this report were calculated for the period from 1 July 2021 to 30 June 2022 in
accordance with the GHG Protocol and ISO 14064 International Standard for GHG Emissions Inventories and Verification.
Scope 1 and Scope 2 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.
Scope 3 emissions, those from our supply chain, were calculated in accordance with the GHG Protocol. Where emission factors
from goods and services are published by the New Zealand or Australian governments, as applicable, we have used these factors
to convert the mass, volume or other units for goods and services into tonnes of CO2 equivalent (t CO2e).
Where specific data on quantities of supply chain goods and services is not available, we have estimated emissions using spend
based factors, using the internationally recognised DEFRA factor set, corrected for exchange rates and inflation.
Our Scope 1, Scope 2 and Scope 3 emissions have been externally verified by Toitū Envirocare in accordance with ISO
14064-1:2018. Their assurance and verification statements for the past three years are available on our website.
75
Fletcher Building Limited Annual Report 2022 Sustainability Materiality and Methodology (continued)
Revenue from sustainably certified products
The revenue from products that hold sustainability certifications included in this report is revenue from products that hold a
credible, third party verified, sustainability certification.
The sustainability certifications that we include are Type I environmental labelling requirements under the ISO 14024 Standard
(Environmental Choice New Zealand, Good Environmental Choice Australia, Global Green Tag ‘GreenRate’) and the Type III
environmental declaration requirements of the ISO 14025 Standard.
These certifications qualify for the sustainable products credits in either the Green Star or IS construction sustainability ratings
within New Zealand and Australia.
We calculate the revenue for sustainably certified products as a percentage of the total revenue from products made or sold
by our manufacturing businesses. We exclude revenue from non-manufacturing businesses (our distribution and construction
businesses) from the total revenue used for this calculation.
76
Fletcher Building Limited Annual Report 2022 Remuneration Report
Performance remains the critical lens
through which remuneration outcomes
are assessed and the organisation’s
performance against our FY22 strategic
goals has been strong.
Barbara Chapman
Remuneration Committee Chair
As a reminder, we introduced two material changes to our
executive remuneration framework in FY22 to increase
shareholder alignment and the link between sustainable
performance and remuneration outcomes. These were the
introduction of an equity deferral in our STI scheme and
increasing the mandatory shareholding requirements for
the CEO and executive team. Other changes included the
introduction of a safety key performance indicator (KPI)
and a strengthened malus & clawback framework.
Message from the Remuneration Committee Chair
Dear Shareholders
Key changes for FY23
On behalf of the Board, I am pleased to present Fletcher
Building’s remuneration report for the financial year
ended 30 June 2022.
The year in review
Management and the Board have been impressed by
the tenacity of our people as we successfully navigated
the continued impacts of COVID-19, lockdowns,
bushfires and floods across Australia to support each
other and our customers.
Performance remains the critical lens through
which remuneration outcomes are assessed and
the organisation’s performance against our FY22
strategic goals has been strong. This is reflected in the
short-term incentive (STI) outcomes of the CEO and
executive team which range between 114% to 150% of
target. Further details about our incentive plans and
performance are set out in the Performance And The
Impact On Incentives section of this report.
Throughout the year, our focus has been on keeping teams
safe, enabling different ways of working and attracting
and engaging talent in a highly competitive market. This is
reflected in the 3% increase in employee engagement across
the Group as well as the 75% reduction in serious injuries.
We have been particularly impressed by the safety capability
demonstrated by our leaders and their commitment to the
Safety Leadership Programme and risk containment sweeps
to obtain these results.
We are, furthermore, continuing to focus remuneration spend
on areas where it has the greatest impact such as retaining
talent and pay parity, which has improved from 95.7% at the
end of FY21 to 96.5% this year.
In FY22, we welcomed two leaders to our executive team:
Joe Locandro who joined as Chief Information Officer (CIO)
in April 2022, and Phil Boylen who was promoted to Chief
Executive of the Construction division in May 2022. These
individuals have a wealth of knowledge and experience
in their respective fields and are already making valuable
contributions to the leadership of the Group.
Aligned to our strategy to attract and retain talent and
foster an inclusive culture, we have materially enhanced
our parental leave policy. The details of these changes are
set out on the following page.
We also undertook a detailed review of our long-term-
incentive (LTI) scheme so it remains well-aligned to our
business strategy, investor views and prevalent practices in
the market. Particular focus was applied to the ability of the
scheme to drive performance and growth, to attract, retain
and motivate executives, and align to the needs of our
shareholders. We sought input from multiple stakeholders
throughout this review and would like to thank those who
provided valuable input.
One of the key changes that will be implemented
prospectively following our review is the introduction of a
return on funds employed (ROFE) measure in addition to
the current relative total shareholder return (rTSR) measure.
The use of ROFE in our LTI plan aligns well with our focus
on performance and growth. It places emphasis on both
earnings performance and effective use of capital to
drive growth, which enables strong, sustainable long-
term performance.
Further details about these and other changes are set
out on the next page of this report. The remainder of the
remuneration section of the Annual Report provides an
overview of the remuneration framework that applied
for FY22.
I would like to recognise and thank our people for their
continued commitment and performance during the year.
I invite you to review the full remuneration report.
Barbara Chapman
Remuneration Committee Chair
77
Fletcher Building Limited Annual Report 2022 Remuneration Report (continued)
FY22 REMUNERATION FRAMEWORK CHANGES
The following table summarises key changes to our remuneration policies and frameworks for FY23 and beyond and provides
the rationale and outcomes of these changes.
Change
Detail
Rationale and outcome
Add ROFE as an
LTI performance
measure in addition
to rTSR
Retain the rTSR (relative total shareholder return)
measure but reduce the weighting from 100% to 50%
and introduce a ROFE (return on funds employed)
measure at a weighting of 50%.
The ROFE performance range will include a threshold
at the point where ROFE equals the weighted average
cost of capital (currently circa 11%) and a maximum
of 15%.
The relative TSR measure directly aligns LTI
outcomes with shareholders’ experience.
We have introduced ROFE as an absolute
measure because it aligns well with our focus on
“performance and growth”, and places emphasis
on both earnings performance and effective use
of capital to drive growth, which enables strong,
sustainable long-term performance.
ROFE will be measured in the year of vesting
based on EBIT, excluding the impact of M&A and
restructuring.
The inclusion of two performance measures in
our LTI is aligned to market practice and investor
feedback received.
For both measures, 0% vests at threshold and 100%
at maximum (i.e. up to 50% for each measure) with
straight-line vesting in between.
Remove the LTI
retest dates
Together with the introduction of the ROFE measure,
we have removed the retest for any new LTI grants.
Align the LTI grant
and test dates to
the Group's full
year results
Adjust the
weightings of the
STI scorecard for
the Group CEO
and Operational
Leadership roles
Introduce
market-leading
enhancements to
our parental leave
policy
The testing date for any new LTI grants will align to
the announcement of our year-end results (i.e., at the
end of August).
Increase the on-target weighting of individual goals
from 20% to 25% and reduce the weighting of
financial goals from 70% to 65%. The weighting of
safety goals to be maintained at 10%.
Note: EBIT remains the gateway to individual goals
while the maximum STI upside continues to be driven
by financial performance only – this results in a 77%
weighting of financial goals in the STI at maximum.
The new policy applies to all permanent team
members with at least 12 months’ service and
includes paid primary and secondary carer leave of
up to 26 and 4 weeks respectively.
We will continue to contribute to KiwiSaver
/ Superannuation during this period and are
supporting new parents upon their return to the
workplace with a phased return to work and 5 days’
new parents leave.
Based on feedback received from investors, we have
removed the ability to retest performance in the LTI
scheme. ROFE plus rTSR without a retest provides an
LTI that is stretching, yet achievable.
This approach helps to ensure the share price reflects
a market that is fully informed, better aligns the
remuneration outcomes of our executives to actual
performance outcomes achieved and is aligned to
investor feedback received.
This change results in a more balanced approach
between financial and non-financial measures in
short-term variable remuneration and in total variable
remuneration (STI + LTI) outcomes because both the
STI and LTI are currently mainly financially focused.
It provides more room to set individual strategic
goals that have a significant impact on executives'
remuneration outcomes and aligns to investor
community views that there is a market trend of reducing
financial weightings to focus on ESG measures.
We are committed to supporting our people through
the most important moments of their lives. Our market-
leading parental leave policy takes a holistic approach
to supporting new parents during both the first stage of
becoming a new parent and on return to work.
We have developed a modern parental leave policy to
reflect our modern world, where parents make choices
about who will be the primary and secondary caregiver
based on their families’ individual circumstances. To
support this and aligned to our strategy of being an
inclusive employer, we have made our parental leave
policy gender neutral.
78
Fletcher Building Limited Annual Report 2022 Remuneration Report (continued)
FY22 REMUNERATION FRAMEWORK
The following sections describe the remuneration framework in place during FY22.
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, diversity and inclusion,
performance and remuneration of the Group’s senior executives, development and succession planning for the CEO and
executives (i.e. leadership roles reporting directly to the CEO), and major organisation changes.
The Remuneration Committee is kept apprised of relevant market information and best practice, obtaining advice from external
advisors when necessary.
Key decisions made and reviews undertaken by the Remuneration Committee during FY22 included: approval of changes to the
long term incentive scheme, review of succession depth and development for the executive, approval of updated remuneration,
parental leave and human rights policies and code of conduct, review and approval of the FY22 STI framework for senior leaders,
a malus and clawback framework, review of pay parity, and pension plan governance matters.
PERFORMANCE AND THE IMPACT ON INCENTIVES
Short-term incentives (STI)
All executives met or exceeded the required safety leadership interactions which act as a gateway to the entire STI plan.
EBIT performance during FY22 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 was strong
across divisions, with the Group and divisions outperforming cash targets.
The Residential and Development division also has a capital envelope measure. The team delivered strong, stable earnings and
growth whilst maintaining sensible limits on investment and therefore achieved the target measure.
Our Construction division similarly exceeded their division-specific New Work Won measure to deliver a strong future pipeline.
Further details about the Group's financial performance in FY22 is set out on
.
The formulaic outcome of the FY22 STI highlights strong performance on improved earnings and profitability in a volatile
environment, substantial improvements in safety and positive outcomes on sustainability and innovation. While our leaders
undertook extensive measures in response to the plasterboard supply shortage, we recognise the adverse impact on some of our
customers and our reputation. The Directors therefore exercised their discretion to reduce the STI cash component of the Group
CEO by 10% and relevant executives by between 5% - 10%. Further detail on the CEO’s STI outcome is provided on
.
Long-term incentives (LTI)
The July 2018 long-term share scheme grant, which was within the 12-month retest period up to 30 June 2022, was below the
minimum threshold performance level and therefore was forfeited. The July 2019 long-term share scheme grant was below the
minimum threshold performance level and 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 FY22 framework.
79
Fletcher Building Limited Annual Report 2022 Remuneration Report (continued)
FY22 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 the creation of
shareholder value by driving
an ownership culture with
‘skin-in-the-game’
Our People
Attract and retain high
calibre people, rewarding
high standards of
performance and values
Strategy
Focus on sustainable
earnings, growth and
key company goals and
objectives
(short and long-term)
Risk
Encourage conduct that
does not expose the Group
to inappropriate risk while
promoting and high standards
and accountability
Remuneration framework and how it supports the strategy
Remuneration
Element
Element
Delivery
Performance
Measure
Relationship
to Strategy
Guaranteed remuneration components
Fixed Remuneration
Executives are
benchmarked against a
peer group composed of
New Zealand and Australian
companies generally
comparable in size,
complexity and industry
Includes base salary and
any non-cash benefits and
superannuation/ KiwiSaver
Set based on capability,
performance, job size, and
industry benchmarks
Attract and retain key
talent to drive the delivery
of the Group strategy.
Rewards ongoing
performance in role
At-risk remuneration components (subject to performance outcomes)
Short-Term Incentives
Recognises on a
discretionary basis,
achievement of the
Group and individual
performance objectives
Following the release of
the final audited financial
year results, a portion
is paid in cash and the
remainder is deferred into
equity for 2 years
Rewards for safety,
financial and individual
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*
* A 50% ROFE measure will apply
from FY23
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
80
Fletcher Building Limited Annual Report 2022 Remuneration Report (continued)
Remuneration levels are reviewed and benchmarked annually for market competitiveness, and alignment with strategic and
performance priorities. A peer group which comprises New Zealand and Australian companies, generally comparable in size,
complexity and industry is used to benchmark executives. Our peer organisations display similar characteristics to Fletcher
Building by way of industry/sector, market capitalisation, revenue, geographic scope and employee numbers and generally
reflect where the Group wins talent from and loses talent.
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. For executives, target levels of STI opportunity range from 67% to 112%
of base salary depending on the role. For the CEO, the target STI opportunity is set at 112% of base salary with 50% deferred
into equity for a two-year vesting period. The deferred component for other executives is 40%. Given that STI deferral is a new
mechanism which was introduced in FY22, this year will be treated as a transition year where only half of the deferral weightings
will apply (25% for the CEO and 20% for executives). At the end of the two-year deferral period, subject to minimum shareholding
requirements, there are no further restrictions on this equity.
FY22 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, all roles have a safety KPI comprising a safety lead and safety lag measure. The safety lead target differs by role, with
operating executives based on risk containment sweeps, and functional executives on those areas of safety culture they are most
able to influence. The safety lag measure is based on injury reduction targets (i.e., reduction in TRIFR) for all executives. TRIFR
(Total Recordable Injury Frequency Rate) is an important measure that provides us with year-on-year comparisons of actual safety
performance. It 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 FY22, we had 2 serious injuries, both of which were non-life-threatening hand injuries. Aligned to our belief that all injuries are
preventable, the Safety Health Environment and Sustainability (SHES) Committee considered all factors associated with these
incidents, including leadership performance and efforts of the teams. Where appropriate, the SHES Committee provides its
findings to the Remuneration Committee to review the impact on remuneration outcomes using the STI Discretionary Impact
Framework. As per this framework, only fatal and (potentially fatal) serious injuries are reviewed to assess whether discretion
should be applied to impact STI outcomes. This process is designed to protect leaders from being unfairly sanctioned for events
which, under slightly different circumstances, would not have caused serious harm. Considering all associated factors, there has
been no impact to individual leaders on the STI plan this year.
FY22 financial targets
For the CEO and executives in Corporate, the financial target is based on the Group EBIT, EBIT margin and operating cash. For
executives operating in specific divisions, the financial target is based on their own division's EBIT and operating cash, working
capital or work won depending on the division's priorities. Each of these financial measures is assessed separately at the time of
determining STI payments. To strike an appropriate balance between focusing on individual division financials, which executives
are most able to directly influence, and those of the Group, where working together creates additional value, a multiplier (either
up or down) is applied based on the achievement of a Group EBIT margin target.
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 FY22, 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 20% on individual goals and 10% on a safety KPI. As functional executives have a greater ability to directly influence
company performance through their individual goals, 40% of their STI opportunity is based on individual goals, 10% on a safety
KPI, with the remaining 50% on financial measures.
81
Fletcher Building Limited Annual Report 2022 Remuneration Report (continued)
FY22 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, customer, 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.
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, and to attract and engage participants, is in place. The Group has a share based executive long-
term share scheme (ELSS) which is offered to 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. For FY22, 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 is not met at the end of the initial three-
year restrictive period. Note: From FY23 all grants will also be subject to a ROFE (return on funds employed) measure and not include
the opportunity to extend the 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 is 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 2021 ELSS grant
The performance criteria for the 2021 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 2021 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.
82
Fletcher Building Limited Annual Report 2022 Remuneration Report (continued)
Vesting and forfeiture history
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 2021(1)
July 2020
July 2019(2)
July 2018(3)
July 2017(4)
Shares granted
% vested
% forfeited
395,085
1,998,635
1,386,100
1,041,605
890,075
In-Flight
0%
0%
100%
100%
(1) Due to a change in the remuneration framework for General Managers (GMs) during FY21, this employee group is no longer eligible for LTI awards, resulting in a lower
number of shares granted in July 2021 compared to previous years. Equity is delivered for General Managers through the equity deferral of their STI component.
(2) Fletcher Building's TSR did not meet the minimum vesting threshold for the three years ended 30 June 2022 for the 2019 issue. Therefore, the restrictive period has been
extended to 30 June 2023.
(3) The restrictive period for the 2018 issue was extended for 12 months until 30 June 2022. Fletcher Building's TSR did not meet the minimum vesting threshold for the
period ended 30 June 2022. Therefore, 100% of the shares in the 2018 issue will be forfeited in August 2022.
(4) 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 were 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 has resulted in the vesting of 191,939 share
rights on 30 June 2022, which will be allocated in August 2022.
Minimum shareholding requirement
Over time, the CEO, Executives (reporting directly to the CEO) and General Managers must acquire and maintain a holding in
the Group’s ordinary shares until such time as the greater of the sum invested or the market value of their shareholding exceeds
100%, 75% and 50% of their base remuneration respectively. Any shares granted under the ELSS scheme do not count towards
the minimum shareholding requirement unless they vest.
Although there is no time limit in which the CEO and executives must build this investment, any shares which vest under the STI
Plan, LTI Plan or any similar scheme can't be sold until their shareholding equals or exceeds the minimum requirement.
These shareholding requirements strengthen the alignment of executives with the interests of shareholders and puts their own
remuneration at risk based on long-term Group performance.
As at 30 June 2022, the CEO had a holding in the Group’s ordinary shares equal to 55% of his base remuneration. With the vesting
of his 191,939 share rights on 30 June 2022, his total equity holdings as a percentage of base salary is 100% which satisfies
the minimum requirement for this role. It 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.
Malus & clawback
Our malus and clawback framework applies to unvested and vested Short Term Incentive (STI), both cash and deferred, and
unvested and vested Long Term Incentive (LTI) awards. Under this framework, the company has the right to reduce the incentive
remuneration component prior to payment or vesting, and clawback the incentive remuneration amount from a participant for a
period of three years from the end of the financial year for which the STI payment is made or vesting of the LTI.
There are four key steps in the framework, each of which contain a set of parameters and / or questions that guide management
and directors in determining the extent to which any STI or LTI would be impacted. These steps include:
1.
Identifying & investigating trigger events;
2. Assessing trigger events and required consequences;
3. Determining accountability and intent; and
4. Quantifying the adjustment and application.
83
Fletcher Building Limited Annual Report 2022 Remuneration Report (continued)
Although a list of financial and non-financial trigger events have been identified for which this framework would apply, this list is not
exhaustive and management, the Remuneration Committee or Board may determine other events apply in its ultimate discretion.
During FY22 no trigger events were identified and, therefore, the Board was not required to consider application of the malus &
clawback framework.
CEO REMUNERATION
Remuneration package
Ross Taylor’s annual base remuneration as at 30 June 2022 was $2,148,400, with an on-target STI of 112% of base salary and LTI of
80% of base salary. While 50% of the STI award is deferred into equity, only half of the deferral (i.e. 25%) is applied during the FY22
transition year.
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.
35%
FR
27%
LTI
CEO
on Target
Performance
Pay Mix
19%
STI
Equity
19%
STI Cash
23%
LTI
29%
FR
CEO
Maximum
Performance
Pay Mix
24%
STI
Equity
24%
STI Cash
Equity Pay
Variable Pay (at risk)
LTI: Long-term incentive
STI: Short-term incentive
FR: Fixed Remuneration
(includes base salary and
other benefits)
Remuneration received
The remuneration Ross Taylor received for FY22 and FY21 is set out in the table below. The base remuneration received for FY21
reflects the 30% pay reduction due to COVID-19 that was in place through to end of Q1 FY21.
Base remuneration
Other benefits (1)
Short-term incentive accrued in the financial year, payable in September of the
following financial year
FY22
$2,148,400
$131,032
$3,338,614 (2)
FY21
$1,894,073
$129,879
$2,888,967
One-off share-based retention award – granted in 2019, vested on 30 June 2022 (3)
$970,981
-
Received (4)
$6,589,027
$4,912,919
Long-term incentive - number of shares granted
Long-term incentive - face value of grant
Refer above for details of the STI and ELSS.
FY22
121,663 (5)
$1,718,720
FY21
375,273 (6)
$2,050,000
(1) Includes medical insurance, KiwiSaver and Australian superannuation for days worked in Australia as required by Australian taxation law.
(2) FY22 base remuneration x STI Target (112% of base remuneration) x Adjusted FY22 STI Outcome (138.75%)
(3) Calculated based on 191,939 share rights and a volume weighted average share price as at 30 June 2022 of $5.06.
(4) This table sets out remuneration awarded for the relevant financial year. The table on
shows remuneration received during the year, which includes amounts
relating to prior years but paid in the year due to timing differences.
(5) Based on a share price of NZ$7.48/AU$6.97, being the volume weighted average price for the five business days prior to 1 July 2021. The number of shares granted was
calculated by converting the Long-term incentive value to the Australian dollar equivalent and using the Australian tax rate for the relevant financial year.
(6) 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.
84
Fletcher Building Limited Annual Report 2022 Remuneration Report (continued)
CEO FY22 STI OUTCOME
For FY22, 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 FY22 STI.
Measure
Safety gateway
Financial goals
Scorecard weighting
‘target’ (payout range)
Actual
Outcome Comment
Gate for any
payment
Provided active and authentic leadership for safety on-site through
safety walks and active leadership of the Protect Strategy and
Executive EHS Council.
FB Group EBIT
(gateway to individual goals)
50%
(0%-86%)
The annual EBIT (before significant items) result of $756 million
significantly outperformed target.
H2 EBIT margin performance was of particular importance in FY22
to deliver both FY22 in-year EBIT and run-rate margin. At 9.5%, the
maximum performance hurdle was achieved.
The combined EBIT and margin outcomes resulted in the maximum
payment being achieved for this financial goal. Because EBIT is
also the gate to eligibility for payment against individual goals, the
gateway for individual goals has been opened.
FB Group Cash
Safety goals
20%
(0%-34%)
Operational cash flow performance for FY22 was $464m which
outperformed the maximum performance value.
Risk containment sweep plan agreed through
July and sweeps completed to plan and actions
closed within timeframes.
5%
(0%-5%)
The number of sweeps completed materially exceeded the targeted
number of sweeps and resulted in the safety lead goal being fully
achieved with high uptake and positive feedback.
FB Group Total Recordable Injury Frequency
Rate (TRIFR) at or below: 4.5
5%
(0%-5%)
Individual goals
Overall Group Strategy refreshed and approved
by Board with a particular emphasis on
evolving how and where we drive the overall
group, and ensuring we are progressively
locking in our overall growth targets
Construction strategy and repositioning
successfully implemented through FY22 and
overall provisions maintained.
Digital@Fletcher: Design phase finished to plan,
within budget and pilots ready to start in FY23.
Overall Digital@Fletcher delivering to Board
approved plan i.t.o. capex / opex and time.
Increase female operational leaders
5%
(0%-5%)
5%
(0%-5%)
5%
(0%-5%)
5%
(0%-5%)
The Group Total Recordable Injury Frequency Rate (TRIFR) has
decreased by 32% since FY21. As such, the targeted reduction was
exceeded. This is a positive outcome of the ongoing Protect strategy
implementation across the Group.
Our refreshed strategy positions us well to drive shareholder
value in the short- and long-term. The organisation has made
progress on a number of ‘above base’ growth projects to deliver
on planned EBIT growth.
All construction projects have either been implemented successfully
in FY22 or are progressing aligned to plan for future completion, with
only two legacy projects to complete. The Fletcher Construction
order book is well-placed to deliver 3%-5% margins and the
provisions envelope has been maintained throughout the year.
We made material progress with this critical project to future-proof
the organisation in FY22. The design phase has been completed
within budget and on time for pilots to commence in FY23.
A quantitative and qualitative assessment of this goal resulted in
outperformance and full achievement of the related STI payment.
FY22 STI Outcome
Discretionary Board Adjustment
(150% x 7.5%)
100%
(0%-150%)
150%
(of target)
The STI outcome reflects strong business performance and growth,
the successful completion of strategic projects and the overall
sustainability and resilience of the organisation as it enters FY23.
-11.25%
(of target)
Adjusting the resulting STI cash component (75% of the total award)
down by 10% to reflect the adverse impact of the plasterboard
supply shortage on some of our customers and our reputation.
Adjusted FY22 STI Outcome
(150% - 11.25%)
100%
(0%-150%)
138.75%
Key:
Above Target Achievement
Full achievement against target
Partial achievement against target
No achievement against target
85
Fletcher Building Limited Annual Report 2022
Remuneration Report (continued)
EMPLOYEE REMUNERATION
Section 211(1)(g) of the Companies Act 1993 requires disclosure of the number of employees or former employees of the Group
whose remuneration and any other benefits received by them during the year in their capacity as employees, was equal to or
exceeded $100,000 per annum and to state the number of such employees or former employees in brackets of $10,000. These
amounts are included below and include all applicable employees or former employees of Fletcher Building worldwide. The
remuneration amounts include all monetary amounts and benefits actually paid during the year, including redundancies and the
face value of long-term incentives vested.
From NZ$ to NZ$
100,000 - 110,000
110,000 - 120,000
120,000 - 130,000
130,000 - 140,000
140,000 - 150,000
150,000 - 160,000
160,000 - 170,000
170,000 - 180,000
180,000 - 190,000
190,000 - 200,000
200,000 - 210,000
210,000 - 220,000
220,000 - 230,000
230,000 - 240,000
240,000 - 250,000
250,000 - 260,000
260,000 - 270,000
270,000 - 280,000
280,000 - 290,000
290,000 - 300,000
300,000 - 310,000
310,000 - 320,000
320,000 - 330,000
330,000 - 340,000
340,000 - 350,000
350,000 - 360,000
360,000 - 370,000
370,000 - 380,000
380,000 - 390,000
390,000 - 400,000
400,000 - 410,000
410,000 - 420,000
420,000 - 430,000
430,000 - 440,000
440,000 - 450,000
450,000 - 460,000
460,000 - 470,000
470,000 - 480,000
480,000 - 490,000
New Zealand
business
activities
International
business
activities
Total
From NZ$ to NZ$
New Zealand
business
activities
International
business
activities
Total
532
412
286
227
181
133
123
72
62
50
48
42
36
27
30
23
22
20
12
8
17
11
6
12
5
11
8
7
6
5
5
1
3
1
6
2
3
2
1
314
281
217
171
156
91
87
59
53
34
34
27
22
15
9
16
6
6
8
5
10
7
5
6
2
2
1
2
3
2
0
1
0
3
0
2
5
1
1
490,000 - 500,000
500,000 - 510,000
520,000 - 530,000
530,000 - 540,000
550,000 - 560,000
560,000 - 570,000
570,000 - 580,000
580,000 - 590,000
590,000 - 600,000
600,000 - 610,000
610,000 - 620,000
620,000 - 630,000
630,000 - 640,000
640,000 - 650,000
660,000 - 670,000
670,000 - 680,000
750,000 - 760,000
760,000 - 770,000
770,000 - 780,000
780,000 - 790,000
810,000 - 820,000
860,000 - 870,000
940,000 - 950,000
950,000 - 960,000
1,010,000 - 1,020,000
1,030,000 - 1,040,000
1,050,000 - 1,060,000
1,080,000 - 1,090,000
1,090,000 - 1,100,000
1,120,000 - 1,130,000
1,250,000 - 1,260,000
1,360,000 - 1,370,000
1,690,000 - 1,700,000
1,910,000 - 1,920,000
2,010,000 - 2,020,000
2,620,000 - 2,630,000
2,930,000 - 2,940,000
5,160,000 - 5,170,000
846
693
503
398
337
224
210
131
115
84
82
69
58
42
39
39
28
26
20
13
27
18
11
18
7
13
9
9
9
7
5
2
3
4
6
4
8
3
2
3
3
1
1
0
3
0
1
2
1
2
1
2
0
0
1
2
1
1
1
1
0
0
2
0
0
1
2
1
1
1
1
1
0
1
0
1
1
1
0
2
1
2
1
1
0
0
0
1
0
0
1
1
0
1
0
0
0
0
1
1
1
1
1
0
0
0
0
0
0
0
1
0
1
0
0
4
3
3
2
2
4
1
1
2
1
3
1
2
1
1
1
3
1
1
1
1
1
1
3
1
1
1
2
1
1
1
1
1
1
1
1
1
1
2,498
1,683
4,181
The increased number of individuals in higher remuneration brackets compared to FY21 is as a result of no incentive being paid
during FY21 (based on STI outcomes of FY20) and the temporary COVID-19 related reductions in executive remuneration that
were in place from Q4 of FY20 to Q1 of FY21.
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).
86
Fletcher Building Limited Annual Report 2022 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 in the Statutory Disclosures section..
In June 2022, the Nominations Committee considered the appropriateness of current fees and recommended to the Board
increases to the directors’ fees for FY23 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 (3)
Overseas based directors - travelling allowance
(1) FY23 fees are effective from 1 July 2022.
(2) No additional fees are paid to the Board Chair for committee roles.
(3) Removed for FY23 and added to Board fee.
Position
Chair (2)
Non-Executive director
Chair
Member
Chair
Member
Chair
Member
Chair
Member
FY22
$376,500
$146,500
$38,000
$19,500
$29,000
$14,500
-
$8,500
$29,000
$14,500
$5,000
$18,000
FY23
$391,000
$155,500
$38,000
$19,500
$29,000
$14,500
-
$8,500
$29,000
$14,500
-
$18,000
Fees to directors for unscheduled additional work required for the Group is time based payable at $1,200 per half day and for
the reporting period were required for the Construction Project Review Committee – see below table. 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 FY22 are as follows:
Committees
Directors
Board
Fees
Bruce Hassall
$376,500
(Chair)
Audit and
Risk Nominations (1) Remuneration
$ -
(Chair)
$ -
Safety,
Health,
Environment
and
Sustainability
Construction
Project
Review (2)
Overseas
based
directors
travelling
allowance
Expense
allowance
$5,000
Total
Remuneration
$381,500
Martin Brydon
$146,500
$8,500
$14,500
$14,500
$12,000
$5,000
$18,000
$219,000
Barbara Chapman $146,500
$8,500
$29,000
$5,000
$189,000
(Chair)
Peter Crowley
$146,500
$19,500
$8,500
$14,500
$5,000
$18,000
$212,000
Rob McDonald
$146,500
$38,000
$8,500
$14,500
$12,000
$5,000
$224,500
Doug McKay
$146,500
$19,500
$8,500
(Chair)
$29,000
(Chair)
$5,000
$208,500
Cathy Quinn
$146,500
$19,500
$8,500
$14,500
$12,000
$5,000
$206,000
Total
$1,255,500 $96,500
$51,000
$58,000
$72,500
$36,000
$35,000
$36,000
$1,640,500
(1) All non-executive directors are members of the Nominations Committee.
(2) Temporary review committee
87
Fletcher Building Limited Annual Report 2022
Financial Report
Kitchen installation onsite at
Fletcher Living’s Waiata Shores
development, South Auckland.
88
Fletcher Building Limited Annual Report 2022 89
Fletcher Building Limited Annual Report 2022 Trend Statement
Financial performance
Operating revenue
Earnings before interest and taxation (EBIT)
Net earnings/(loss)
Cash flow from operations
Earnings per share - basic (cents per share)
Dividends for the period (cents per share)
Return on average funds (%) (4)
Return on average equity (%) (5)
Financial performance - before significant items
Earnings before interest and taxation (EBIT)
Net earnings/(loss)
Earnings per share - basic (cents per share)
Return on average funds - before significant items (%) (4)
Return on average equity - before significant items (%) (5)
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Capital
Reserves
Minority equity
Total equity
Total liabilities and equity
Other financial data
Total shareholders' return (%) (6)
Net tangible assets per share ($)
Gearing (%) (7)
Leverage (%) (8)
June
2022
NZ$M
June
2021 (3)
NZ$M
June
2020 (2)
NZ$M
June
2019 (1)
NZ$M
June
2018
NZ$M
8,498
8,120
7,309
9,307
9,471
702
432
592
53.5
40.0
18.0
11.7
756
484
60.0
19.3
13.2
3,277
5,144
8,421
2,157
2,499
4,656
540
305
879
37.0
30.0
15.2
8.6
668
413
50.1
18.8
11.6
3,125
4,849
7,974
1,906
2,333
4,239
(116)
(196)
410
(23.5)
-
(2.7)
(5.1)
160
3
0.4
3.7
0.1
3,824
4,954
8,778
2,385
2,858
5,243
397
164
153
19.2
23.0
7.4
4.0
631
367
43.0
11.8
8.8
4,121
3,589
7,710
2,330
1,207
3,537
(118)
(190)
396
(25.5)
-
(2.2)
(5.2)
50
(60)
(8.1)
0.9
(1.7)
3,944
4,601
8,545
2,356
2,047
4,403
3,003
3,248
3,280
3,427
3,425
747
15
3,765
8,454
(28)
3.47
15.1
0.6
471
16
3,735
7,974
107
3.30
4.4
0.2
220
35
3,535
8,778
(21)
2.87
12.3
0.9
714
32
4,173
7,710
(29)
3.53
7.2
0.4
693
24
4,142
8,545
(6)
2.85
23.5
4.8
(1) The Group divested Roof Tile Group business on 1 November 2018 and the global Formica business on 3 June 2019.
(2) Includes the impacts of NZ IFRS 16.
(3) Restated following revisions to NZ IAS 38 Intangible Assets adopted by the Group.
(4) EBIT to average funds (net debt and equity less deferred tax asset).
(5) Net earnings to average shareholders' funds.
(6) Share price movement in year and gross dividend received, to opening share price.
(7) Net debt (borrowings less cash and deposits) to net debt and equity.
(8) Net debt to EBITDA.
90
Fletcher Building Limited Annual Report 2022 Consolidated Income Statement
For the year ended 30 June 2022
Note
Revenue
Cost of goods sold
Gross margin
Selling, general and administration expenses
Share of profits of associates and joint ventures
Revaluation gain on investment property
Significant items
Earnings before interest and taxation (EBIT)
Lease interest expense
Funding costs
Earnings before taxation
Taxation expense
Earnings after taxation
Earnings attributable to non-controlling interests
Net earnings attributable to the shareholders
Net earnings per share (cents)
Basic
Diluted
Weighted average number of shares outstanding (millions of shares)
Basic
Diluted
Dividends declared per share (cents)
2022
NZ$M
8,498
(5,989)
2,509
(1,786)
24
9
(54)
702
(58)
(46)
598
(159)
439
(7)
432
53.5
50.3
807
880
40.0
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
The accompanying notes form part of and are to be read in conjunction with these financial statements.
On behalf of the Board, 17 August 2022.
Bruce Hassall
Chair
Robert McDonald
Director
Restated (1)
2021
NZ$M
8,120
(5,778)
2,342
(1,693)
19
(128)
540
(64)
(44)
432
(115)
317
(12)
305
37.0
36.4
824
867
30.0
91
Fletcher Building Limited Annual Report 2022
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
Net earnings attributable to shareholders
Net earnings attributable to non-controlling interests
Net earnings
Other comprehensive income
Items that do not subsequently get reclassified to consolidated income statement:
Movement in pension reserve
Items that may be reclassified subsequently to consolidated income statement in the
future:
Movement in cash flow hedge reserve
Movement in currency translation reserve
Reclassification of foreign currency reserve to consolidated income statement
Other comprehensive income
Total comprehensive income for the year
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
The accompanying notes form part of and are to be read in conjunction with these financial statements.
2022
NZ$M
432
7
439
17
17
27
49
42
118
135
574
Restated (1)
2021
NZ$M
305
12
317
68
68
(7)
3
(4)
64
381
92
Fletcher Building Limited Annual Report 2022 Consolidated Statement of Movements in Equity
For the year ended 30 June 2022
NZ$M
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
l
f
h
s
a
C
e
v
r
e
s
e
r
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
C
g
n
i
l
l
o
r
t
n
o
c
-
n
o
N
t
s
e
r
e
t
n
i
y
t
i
u
q
E
l
a
t
o
T
n
o
i
s
n
e
P
e
v
r
e
s
e
r
l
a
t
o
T
e
t
o
N
l
a
t
i
p
a
c
e
r
a
h
S
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
Total equity at 30 June 2020 as previously presented
3,280
391
12
(12)
(149)
(22) 3,500
35 3,535
Change in accounting policies
(36)
(36)
(36)
Restated equity at 30 June 2020 (1)
3,280
355
12
(12)
(149)
(22) 3,464
35 3,499
Total comprehensive income for the year
305
(7)
3
68
369
12
381
Movement in non-controlling interests
Dividends paid to shareholders of the parent
(99)
Movement in share-based payment reserve
3
1
16
Repurchase of shares
Movement in treasury stock
Restated equity at 30 June 2021 (1)
Total comprehensive income for the year
Movement in non-controlling interests
Dividends paid to shareholders of the parent
(24)
(11)
3,248
562
432
(292)
Movement in share-based payment reserve
5
3
(2)
(31)
(99)
20
(24)
(11)
(31)
(99)
20
(24)
(11)
28
(19)
(146)
46
3,719
16
3,735
27
91
17
567
(292)
6
(250)
7
(8)
574
(8)
(292)
6
(250)
Repurchase of shares
Total equity at 30 June 2022
(250)
3,003
705
26
8
(55)
63 3,750
15
3,765
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
The accompanying notes form part of and are to be read in conjunction with these financial statements.
93
Fletcher Building Limited Annual Report 2022
Note
Consolidated Balance Sheet
As at 30 June 2022
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
Investment property
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
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
The accompanying notes form part of and are to be read in conjunction with these financial statements.
94
2022
NZ$M
351
127
17
1,275
1,507
3,277
3,277
1,800
34
1,116
1,351
195
292
124
23
209
5,144
8,421
1,512
173
185
107
4
112
64
2,157
2,157
28
24
1,470
1
976
2,499
4,656
3,003
747
3,750
15
3,765
8,421
Restated (1)
2021
NZ$M
666
9
37
9
1,133
1,186
3,040
85
3,125
1,586
1,070
1,392
173
272
108
10
238
4,849
7,974
1,314
178
178
14
87
106
1,877
29
1,906
23
30
1,519
10
751
2,333
4,239
3,248
471
3,719
16
3,735
7,974
Fletcher Building Limited Annual Report 2022
Consolidated Statement of Cash Flows
For the year ended 30 June 2022
Note
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
Purchase of property, plant and equipment and intangible assets
Purchase of investment property
Return of advances to associates and joint ventures
Investments in associates and joint ventures
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
Contributions from non-controlling interests
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
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
The accompanying notes form part of and are to be read in conjunction with these financial statements.
2022
NZ$M
8,273
15
(7,582)
(101)
(13)
592
7
51
(399)
(5)
2
(12)
(356)
90
(100)
(250)
180
(4)
(186)
13
(8)
(292)
(557)
(321)
666
6
351
Restated (1)
2021
NZ$M
7,927
3
(6,932)
(116)
(3)
879
20
(221)
(201)
142
(145)
(24)
(11)
(761)
(182)
(31)
(99)
(1,111)
(433)
1,104
(5)
666
95
Fletcher Building Limited Annual Report 2022 Contents
Note
Description
Note
Description
Financial Performance
Funding and Financial Risk Management
Statement of accounting policies
Key estimates, judgements and other financial
information
Revenue from contracts with customers
Segmental information
Net earnings per share
Consolidated income statement disclosures
Working Capital Management
Cash and cash equivalents
Debtors
Inventories, including land and property
developments
Creditors, accruals and other liabilities
Provisions
Long-term Investments
Property, plant and equipment
Investment property
Intangible assets
Leases
Borrowings
Net funding costs
Financial risk management
Group Structure and Related Parties
Dividends and shareholder tax credits
Capital
Non-controlling interests
Investments in associates and joint ventures
Related party disclosures
Other Information
Capital expenditure commitments
Contingent liabilities
Taxation
Retirement plans
Share-based payments
Change in accounting policy
Subsequent events
Significant changes in the current reporting period
The financial position and performance of the Group were particularly affected by the following events and transactions during the
reporting period:
• A significant feature of the Group’s performance was the impact of COVID-19 restrictions in the first quarter, especially in the New
Zealand businesses, followed by a strong rebound in activity and earnings in the second quarter as restrictions eased. In August and
September, the Group was required to shut down almost all New Zealand operations for up to five weeks. This resulted in lost revenue
with a significant earnings impact. In Australia, COVID-19 restrictions in the first quarter resulted in revenues below expectations, with
the impact most noticeable in the Additions & Alterations sector, with weather events in the second half causing a disruption to supply
and demand.
• The change in accounting policy related to International Financial Reporting Standards Interpretations Committee (IFRIC) agenda
decision for the treatment of Configuration or Customisation Costs in a Cloud Computing Arrangement (NZ IAS 38 Intangible Assets).
Refer to
and
.
• The divestment of the Rocla business. Refer to
.
• The completion of the Group’s on-market share buyback programme. Refer to
.
• Announcement of retirement offering, Vivid Living, with Investment Property being recognised. Refer to
.
• The Forman Building Systems business combining with Tasman Insulation New Zealand, to form Comfortech™ Building Performance
Solutions, impacting segmental disclosures. Refer to
.
• Renegotiation and extension of the syndicated revolving credit facility. Refer to
.
96
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022
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.
The consolidated financial statements have been prepared on a historical cost basis, except for the following:
• Certain financial assets and liabilities (including derivative instruments) and investment property – measured at fair value or revalued
amount
• Assets held for sale – measured at the lower of carrying amount and fair value less costs to sell, and
• Defined benefit pension plans – plan assets measured at fair value.
Some of the amounts reported for the previous period have been restated following adoption of Configuration or Customisation
Costs in a Cloud Computing Arrangement Agenda decision issued by the International Financial Reporting Standards Interpretations
Committee (IFRIC) in April 2021. Detailed information about these adjustments can be found in
and
.
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 and balances 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. The acquisition method of accounting is used to account for all business combinations,
regardless of whether equity instruments or other assets are acquired.
97
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
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 and in other
comprehensive income. The cumulative exchange variations are reclassified subsequently to the consolidated income statement 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 in foreign currencies are translated at the exchange rates in effect when the amounts of these assets were
recognised.
2. Key estimates, judgements and other financial information
This section provides details of the key estimates and judgements undertaken when preparing these financial statements.
2.1 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 software applications in a cloud computing
arrangement as intangible assets. The adoption of the above agenda decision has resulted in an expense in the consolidated income
statement in the current year and derecognition of previously capitalised costs as an opening balance adjustment to the prior year's
retained earnings. The new policy is presented in
, with restatement of 30 June 2021 actuals presented in
.
2.2 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.
As at 30 June 2022, significant items totalled $54 million (2021: $128 million) of which $42 million relates to reclassification of the foreign
currency translation reserve to the consolidated income statement following divestment of the Rocla business, $11 million relates to
restructuring cost incurred in the Construction division, and $1 million relates to acquisition cost of Tumu ITM Building Supply Centres.
98
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
2.3 INTANGIBLE ASSET IMPAIRMENT TESTING
Goodwill and brands were tested for impairment in June 2022. Each cash generating unit (CGU) that carries goodwill is valued on a
value-in-use basis using a discounted cash flow model. This is representative of the lower of fair value less costs to dispose and value-in
use. Management has used its past experience of sales growth, operating costs and margin, and external sources of information where
appropriate, to determine 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 rates employed were 2.5% for Australia (2021: 2.0% to 2.5%), 2.5% for Fiji (2021: 2.0%) and 2.0% for New
Zealand (2021: 2.0%).
New Zealand CGUs
The goodwill and brand balances for the 14 New Zealand CGUs represent 42% of the total balance for the Group. The cash flows are
discounted using a nominal rate specific to each business and jurisdiction. New Zealand businesses have employed discount rates
between 8.5% and 10.7% (2021: between 7.0% and 11.0%), 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
2022. Based on current economic conditions and performances of New Zealand, 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 7.5% and 7.8%
(2021: 7.0% and 9.0%), reflecting the risk profile of each business and for the regions in which the CGUs operate.
Sensitivity to reasonably possible changes in assumptions
Group and Australia divisional management undertook a comprehensive strategic review of the Australia division in 2018, identifying a
number of strategic initiatives for the near to medium-term to set the division up for long term earnings margin growth. Implementation
of these initiatives, coupled with continued strengthening of the Australian residential, commercial and infrastructure construction
markets, has contributed to a lift in the division's normalised performance and profitability. Management recognises that the 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 construction market.
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
2.50%
10.30%
7.80%
Decrease by 3.6 ppts
Decrease by 3.7 ppts
Increase by 4.0 ppts
Tradelink (representing 12% 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
Other Australian CGUs
3.10%
4.70%
7.50%
Decrease by 3.5 ppts
Decrease by 3.0 ppts
Increase by 9.5 ppts
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.
Higgins Fiji CGU
The goodwill and brand balance for Higgins Fiji represent 3% of the total balance for the Group. The cash flows are discounted using
a nominal rate specific to Fiji with the business having employed a discount rate of 18.7% (2021: 17.5%), reflecting the risk profile of the
region in which the CGU operates.
The key assumptions used in the impairment test for the Higgins Fiji are as follows: Revenue, as assumed within the model, would need
to reduce by 10% on FY23 plan across all years in order to reduce the headroom to nil. The five-year EBIT margin average assumed is
12.5% and would need to reduce by 0.6 percentage points to 11.9% to reduce the headroom to nil, whilst the WACC rate of 18.7% would
need to increase by 0.8 percentage points to 19.5%. No impairment was recognised during the financial year, however, a change in any
of the key assumptions noted above would lead to the elimination of the excess of recoverable amount over carrying value.
99
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
2.4 SUPPLEMENTARY DISCLOSURES: EARNINGS PER SHARE
. The below disclosure has been included to provide additional useful information by
Earnings per share is disclosed in full in
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 after taxation (as per consolidated income statement)
Add back: Significant items after taxation (
)
Net earnings before significant items
Net earnings per share before significant items (cents)
Net earnings per share - as per consolidated income statement (cents)
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
2022
NZ$M
432
52
484
60.0
53.5
Restated (1)
2021
NZ$M
305
108
413
50.1
37.0
2.5 ASSETS HELD FOR SALE
On 31 August 2021, the Group divested the Rocla business, a wholly owned subsidiary reported under the Australia segment, for a total
purchase price of $58 million. This resulted in a loss on sale of $48 million recognised in significant items.
Consideration
Less: Debt-like items, minority interest and working capital
Less: Transaction costs and provisions
Sales proceeds net of transaction costs, provisions and working capital adjustments
Carrying value
Less: Reclassification of foreign currency translation reserve
Loss on sale
Assets and liabilities
Assets
Debtors
Inventories
Property, plant and equipment
Provision for deferred taxation
Assets held for sale
Liabilities
Creditors, accruals and other liabilities
Provisions
Liabilities directly associated with assets held for sale
Net assets directly associated with disposal group
2022
NZ$M
58
(9)
(5)
44
50
(6)
(42)
(48)
31 August 2021
NZ$M
30 June 2021
NZ$M
17
48
8
4
77
26
1
27
50
21
49
10
5
85
27
2
29
56
100
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
2.6 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
.
The division performs regular reviews of its customer contracts including reassessment of cost to complete estimates and recoverability
of any variations 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
.
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 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.
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;
- Sub-contractor costs, in particular costs that are yet to be agreed in scope or price (including inflationary pressures) or that relating to
programme prolongation;
- Recovery of any insurance claims;
- The outcome of ongoing commercial negotiations, including elements of variable consideration and changes in project scope and
- Future weather and ground conditions.
A summary of the major construction projects and their approximate stage of completion is disclosed to demonstrate the uncertainty
that remains on these projects.
101
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Status of construction projects (> $200 million original contract value) as at 30 June 2022:
New Zealand International Convention Centre (NZICC) - Fixed price
contract and fire reinstatement
Business unit
Buildings
Pūhoi to Warkworth - Fixed price contract (Public Private Partnership)
Infrastructure
Hamilton City Edge Expressway - Alliance contract
Peka Peka to Ōtaki Expressway - Fixed price contract
Infrastructure / Higgins
Infrastructure / Higgins
* Calendar year
Revenue backlog by business unit as at 30 June 2022:
Forecast
completion*
Percentage
of completion
(% cost)
2025
2023
2022
2023
67%
83%
99%
88%
Buildings
Infrastructure
Brian Perry Civil
Higgins
South Pacific
Revenue backlog by business unit as at 30 June 2021:
Buildings
Infrastructure
Brian Perry Civil
Higgins
South Pacific
Current revenue backlog
NZ$M
Top 5 projects as a % of
revenue backlog
417
813
1,133
777
77
3,217
100%
68%
17%
39%
84%
NA
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%
NA
Revenue backlog refers to the level of construction work the Group is contracted to but is not yet complete as at period end. This
represents the performance obligations that are yet to be completed for the construction contracts active as at 30 June 2022. The long-
term nature of the contracts held by the Buildings, Infrastructure, Brian Perry Civil and Higgins businesses will see these performance
obligations completed over a period generally between one to five years, although some may extend longer.
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 (FCC) 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
these maybe unrecoverable by the Group. The costs that are known or considered probable to be unrecoverable 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, or the recoverability of costs through Contract Works and Third Party Liability insurances may be lower than currently assessed,
these will need to be adjusted for in the onerous contract provision or as a separate provision as confirmed or determined probable.
The Group has recognised their best estimate of final margin loss on the project with no additional provision having been recognised
during the financial year ended 30 June 2022. The Group’s assessment of the cost to complete relies on the 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.
102
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Pūhoi to Warkworth (P2W)
The Fletcher Construction Company Limited (FCC) and its 50% joint venture partner, Acciona (together Construction JV), are subcontracted
for the design and construction of P2W motorway, by the Northern Express Group (NX2), who is undertaking the project on behalf Waka
Kotahi NZ Transport Agency (Waka Kotahi).
With the project initially set to be completed in December 2021, the project experienced programme delays and inefficiencies arising from
the impacts of the 2020 NZ Government's COVID-19 pandemic response. In July 2020, an agreement was reached between the parties
which included revising the planned service commencement date to May 2022, with Waka Kotahi issuing a notice acknowledging the right
to relief under the Project Agreement for COVID-19 events.
During the 2022 financial year, COVID-19 events – including national and regional border closures, and consequent impacts on supply chain
and resource availability – continued to adversely impact the progress of project construction and costs associated with its completion.
As at 30 June 2022, FCC and Acciona were working together with NX2 and Waka Kotahi to confirm a revision to the schedule of works
and resolution of Construction JV's claims for the impacts and delays arising from COVID-19 events, including agreeing variations to the
construction contract sum and seeking an extension of time to take the project to a new planned service commencement date in 2023. If no
variations or extension of time are agreed between the parties, the Construction JV will incur unrecoverable costs and liquidated damages
will apply beyond 18 July 2022, being the current contractual service commencement date.
The Group has assessed all relevant known facts and circumstances related to the estimation of cost to complete and merits of Construction
JV’s claims and concluded that no additional provision is required to be recognised.
The Group’s assessment of the cost to complete relies on application of estimates and judgements (e.g. the likelihood of receipt of further
relief under the Project Agreement and quantification of any claims and costs under this relief) and as such may be subject to change as the
project progresses.
103
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Financial Review
This section explains the results and performance of the Group, including the segmental analysis 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 properties
- Construction of building and infrastructure projects (refer to
- Maintenance service contracts (refer to
)
)
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 properties
Through the Residential and Development division the Group derives income from the sale of completed houses and apartments, and the
sale of development sites surplus to Group requirements. Revenue is recognised when control passes to the customer for each type of
transaction. Residential unit sales are commonly recognised at the time of settlement, when title passes to the customer and payment is
received. 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 to a customer is a single performance
obligation, as residential units are not constructed under contract from a customer. For development sales, the division reviews the terms of
the sale to determine whether the performance obligations are distinct and separately identifiable.
2022
Sale of
building
products and
materials
NZ$M
Development
and sale of
properties
NZ$M
Construction
contract
revenue
NZ$M
Maintenance
contract
revenue
NZ$M
Goods and services transferred at a point in time
6,430
680
Goods and services transferred over time
Total revenue from contracts with customers
6,430
680
851
851
537
537
2021
Sale of
building
products and
materials
NZ$M
Development
and sale of
properties
NZ$M
Construction
contract
revenue
NZ$M
Maintenance
contract
revenue
NZ$M
Goods and services transferred at a point in time
6,052
721
Goods and services transferred over time
Total revenue from contracts with customers
6,052
721
834
834
513
513
Total
NZ$M
7,110
1,388
8,498
Total
NZ$M
6,773
1,347
8,120
104
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Contract assets
The gross amount of construction and maintenance work in progress consists of costs attributable to work performed and emerging profit after
providing for any foreseeable losses. In applying the accounting policies on providing for these losses, accounting judgement is required.
Construction contracts with cost and margin in advance of billings are presented as part of contract assets.
Contract liabilities
Construction contracts where the total progress billings issued to clients (together with foreseeable losses if applicable) on a project exceed
the costs incurred to date plus recognised profit on the contract are recognised as a liability.
Construction contracts with cost and margin in advance of billings
Contract assets
Construction contracts with billings in advance of cost and margin
Contract liabilities
4. SEGMENTAL INFORMATION
2022
NZ$M
127
127
112
112
2021
NZ$M
37
37
87
87
Segmental information is presented in respect of the Group’s industry and geographical segments. The use of industry segments as the
primary format is based on the Group’s management and internal reporting structure, which recognises groups of assets and operations with
similar risks and returns. Inter-segment pricing is determined on an arm’s length basis.
Industry segments
Building Products
Distribution
Concrete
Australia
Residential and Development
Construction
Other
Group
Less: intercompany revenue
External revenue
Building Products
Distribution
Concrete
Australia
Residential and Development
Construction
Corporate
Group
Gross revenue
2022
NZ$M
Restated (1)
Gross revenue
2021
NZ$M
External revenue
2022
NZ$M
Restated (1)
External revenue
2021
NZ$M
1,610
1,789
881
2,806
692
1,559
11
9,348
(850)
8,498
1,436
1,679
849
2,758
734
1,456
10
8,922
(802)
8,120
EBIT before
significant items
2022
NZ$M
Restated (1)
EBIT before
significant items
2021
NZ$M
210
137
128
113
217
14
(63)
756
198
124
113
102
154
31
(54)
668
1,301
1,764
626
2,740
680
1,387
8,498
8,498
Funds*
2022
NZ$M
1,024
246
597
1,365
651
278
(396)
3,765
1,134
1,651
583
2,684
721
1,347
8,120
8,120
Restated (1)
Funds*
2021
NZ$M
744
177
573
1,312
534
215
180
3,735
* 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.
(1) The comparatives have been restated as a result of 1) a change in accounting policy as detailed in
and presented in
and 2) a change in segmental classification as a
result of Forman Building Systems (business unit previously within the Distribution division) being reclassified into the Building Products division, as a result of Forman Building Systems
combining with Tasman Insulation New Zealand to become one newly combined business unit, Comfortech™. This principally impacts the comparative Gross Revenue (June 2021: $35
million), External Revenue (June 2021: $33 million) and Funds (June 2021: $24 million) base recognised, with no significant impact to the other segment disclosures.
105
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Depreciation,
depletion and
amortisation expense
2022
NZ$M
Restated (1)
Depreciation,
depletion and
amortisation expense
2021
NZ$M
Capital
expenditure
2022
NZ$M
Restated (1)
Capital
expenditure
2021
NZ$M
52
48
66
128
3
41
12
350
57
46
71
126
3
39
12
354
External revenue
2022
NZ$M
External revenue
2021
NZ$M
5,527
2,813
158
8,498
5,237
2,773
110
8,120
Non-current
assets
2022
NZ$M
Restated (1)
Non-current assets+
2021
NZ$M
3,101
1,634
53
4,788
2,811
1,630
52
4,493
204
11
81
55
8
29
33
421
111
9
36
39
1
24
2
222
EBIT before
significant items
2022
NZ$M
Restated (1)
EBIT before
significant items
2021
NZ$M
594
152
10
756
(54)
702
Funds*
2022
NZ$M
2,788
1,424
(447)
3,765
510
150
8
668
(128)
540
Restated (1)
Funds*
2021
NZ$M
2,210
1,332
193
3,735
Building Products
Distribution
Concrete
Australia
Residential and Development
Construction
Corporate
Group
Geographic segments
New Zealand
Australia
Other jurisdictions
Group
Significant items (
)
Earnings before interest and taxation
(EBIT)
New Zealand
Australia
Other (including debt and taxation)
Group
+ Excludes deferred tax assets, retirement plan surplus and financial instruments.
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes. Group balances such as borrowings and taxation are allocated to
Corporate as these are managed at a Group level.
(1) The comparatives have been restated as a result of 1) a change in accounting policy as detailed in
and presented in
and 2) a change in segmental classification as
a result of Forman Building Systems (business unit previously within the Distribution division) being reclassified into the Building Products division, as a result of Forman Building
Systems combining with Tasman Insulation New Zealand to become one newly combined business unit, Comfortech™. This principally impacts the comparative Gross Revenue (June
2021: $35 million), External Revenue (June 2021: $33 million) and Funds base (June 2021: $24 million) recognised, with no significant impact to the other segment disclosures.
Description of industry segments
Building
Products
The Building Products division is a manufacturer, distributor, and marketer of building products used in the
residential, industrial and commercial markets in New Zealand.
Distribution
The Distribution division consists of building, plumbing, and pipeline distribution businesses in New Zealand.
Concrete
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.
Australia
The Australia division manufactures and distributes building materials for a broad range of industries across Australia.
Residential and
Development
The Residential and Development division operates both in New Zealand and Australia. In New Zealand, the
division's operations include building and sale of residential homes and apartments, development and sale
of commercial and residential land, and management of retirement village assets. In Australia, the division's
operations include development and sale of commercial and residential land. Development activity includes sale of
land property which are surplus to the Group's operating requirements.
Construction
The Construction division is a builder and maintainer of commercial buildings and infrastructure across New
Zealand and the South Pacific.
106
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
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 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
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
)
Conversion of dilutive capital notes
Denominator for diluted net earnings per share
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
6. CONSOLIDATED INCOME STATEMENT DISCLOSURES
The following items are specific disclosures required to be made and are included
within the consolidated income statement:
Net periodic pension cost
Employee related short-term costs (2)
Other long-term employee related benefits
Research and development expenditure
Amortisation of intangibles
Bad debts written off
Donations and sponsorships
Maintenance and repairs
Loss on disposal of property, plant and equipment
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
(2) Short-term employee benefits for the executive committee included in the above are disclosed in
.
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.
2022
53.5
50.3
Restated (1)
2021
37.0
36.4
NZ$M
NZ$M
432
432
11
443
807
73
880
2022
NZ$M
2
1,493
55
2
18
4
3
154
2
305
305
11
316
824
43
867
Restated (1)
2021
NZ$M
2
1,420
54
2
24
3
3
151
3
2022
NZ$000's
2021
NZ$000's
3,284
3,284
38
38
3,322
3,262
3,262
16
16
3,278
107
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (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 that are readily convertible to cash.
Cash and cash equivalents include the Group's share of amounts held by joint operations of $15 million (2021: $17 million).
At 30 June 2022, approximately $37 million (2021: $42 million) of total cash and deposits were held in subsidiaries that operate in
countries where exchange controls and other legal restrictions apply and are not immediately available for general use by the Group.
Cash and bank balances
Contract retention bank balances
Short-term deposits
Cash and cash equivalents
Reconciliation of net earnings to net cash from operating activities
Net earnings
Earnings attributable to minority interest
Add/(less) non-cash items:
Depreciation, depletions and amortisation
Other non-cash items
Taxation
Net loss on disposal of businesses and property, plant and equipment
Net working capital movements
Residential and Development
Construction
Other divisions:
Debtors
Inventories
Creditors
Net cash from operating activities
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
2022
NZ$M
148
17
186
351
2022
NZ$M
432
7
439
350
(27)
146
45
514
(103)
(55)
(48)
(239)
84
(361)
592
2021
NZ$M
252
18
396
666
Restated (1)
2021
NZ$M
305
12
317
354
91
112
3
560
105
(179)
(62)
(22)
160
2
879
108
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
8. DEBTORS
Debtors are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due
for settlement within 30 to 90 days and are therefore all classified as current. Debtors are recognised initially at the amount of consideration
that is unconditional, unless they contain significant financing components, when they are recognised at fair value. The Group holds the
trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost
using the effective interest method. Details about the Group’s credit risk policies and the calculation of the loss allowance are provided in
.
Trade debtors
Contract debtors
Contract retentions
Less expected credit loss provisions
Trade and contract debtors
Other receivables
Current
0 - 30 days over standard terms
31 - 60 days over standard terms
61+ days over standard terms
Provision
Trade and contract debtors
Fair values of debtors
2022
NZ$M
844
64
38
(20)
926
349
1,275
795
104
15
32
(20)
926
2021
NZ$M
829
55
35
(18)
901
232
1,133
802
82
14
21
(18)
901
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
Recoverability and risk exposure
Information about the recoverability of trade receivables and the Group’s exposure to foreign currency risk and credit risk can be found
in
and
.
9. INVENTORIES, INCLUDING LAND AND PROPERTY DEVELOPMENTS
Raw materials, stores, work in progress and finished goods
Raw materials, stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct
materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of
normal operating capacity. Cost includes the reclassification from equity of any gains or losses on qualifying cash flow hedges relating to
purchases of raw material but excludes borrowing costs. Costs are assigned to individual items of inventory on the first-in, first-out basis.
Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price, or
replacement cost in the consumable stores and spares, in the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
Property and land inventories
Residential units and freehold land held for resale are stated at the lower of cost and net realisable value. Freehold land under development
cost comprises land acquisition costs as well as any direct or indirectly attributable overheads. Residential units, both completed and under
development, comprise apportioned land costs as well as direct materials, labour costs, site overheads, associated professional charges
and other attributable overheads. Net realisable value represents the estimated selling prices less all estimated costs of completion and
overheads.
109
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
2022
NZ$M
2021
NZ$M
Manufacturing, distribution and other inventories
Raw materials
Work in progress
Finished goods
Consumable stores and spare parts
Inventories held at cost
Inventories held at net realisable value
Property and land inventories
Freehold land
Freehold land under development
Properties under development
Completed properties
All property and land inventories are held at cost.
Total inventories
Current portion
Non-current portion
Inventory classified as non-current
235
14
835
41
1,125
986
139
1,125
26
303
273
72
674
1,507
292
1,799
168
14
646
36
864
747
117
864
16
224
243
111
594
1,186
272
1,458
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 $382 million, 2021: $321 million).
Land and property commitments
The Group's Residential and Development division has commitments for the purchase of land and building services totalling $787 million
(2021: $430 million), of which $415 million is expected to be delivered in the year ending 30 June 2023.
Emissions units
Emissions units held for own use are allocated to the Group under the New Zealand Emissions Trading Scheme (ETS) and used to
settle the Group's emissions obligation. The units are initially recognised at cost with subsequent reassessment for lower of cost or net
realisable value. Emissions units held by the Group as at 30 June 2022 have been recognised at nil value (2021: nil).
10. CREDITORS, ACCRUALS AND OTHER LIABILITIES
Trade creditors and other liabilities are stated at cost or estimated liability where accrued. Employee entitlements include annual leave which
is recognised on an accrual basis and the liability for long service leave which is measured as the present value of expected future payments
to be made in respect of services provided by employees.
Assumptions in determining long service leave relate to the discount rate, estimates relating to the expected future long service leave
entitlements, future salary increases, attrition rates and mortality.
Trade creditors
Contract retentions
Accrued interest
Other liabilities
Employee entitlements
Workers' compensation schemes
Current portion
Non-current portion
Carrying amount at the end of the year
2022
NZ$M
791
23
15
455
247
9
1,540
1,512
28
1,540
2021
NZ$M
729
24
15
333
225
11
1,337
1,314
23
1,337
The non-current portion of creditors and accruals as at 30 June 2022 primarily relates to long service employee entitlement obligations
and deferred land purchases.
110
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
11. PROVISIONS
Provisions for restructuring, service and environmental warranties and other provisions are recognised when the Group has a present legal
or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and
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, including any make good provisions, none of which is individually
material.
Restructuring
NZ$M
Warranty &
environmental
NZ$M
Onerous
contracts
NZ$M
Other
NZ$M
Total
NZ$M
2022
Carrying amount at the beginning of the year
Charged to earnings
Settled or utilised
Released to earnings
Recognised on balance sheet
Currency translation
2021 (1)
Carrying amount at the beginning of the year
Charged to earnings
Settled or utilised
Released to earnings
28
5
(14)
(3)
16
31
30
(29)
(4)
28
28
4
(4)
(3)
25
22
8
(2)
28
84
(6)
78
162
(78)
84
68
24
(15)
(3)
3
1
78
62
30
(23)
(1)
68
208
33
(39)
(9)
3
1
197
277
68
(132)
(5)
208
(1) There has been a reclassification of provisions in 2021 from Restructuring to Other to better reflect the nature of the amounts included within these disclosures and to align with
current year presentation.
Current portion
Non-current portion
Carrying amount at the end of the year
2022
NZ$M
173
24
197
2021
NZ$M
178
30
208
During the year, the Group utilised $14 million (2021: $29 million) in respect of restructuring obligations at certain businesses. The $16
million remaining provision, in relation to restructuring, is expected to be utilised within the next 12 months. Warranty and environmental
provisions are expected to be utilised over the next three years.
111
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Long-term Investments
This section details the long-term assets of the Group including property, plant and equipment, investment property, 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 the consolidated income statement during the reporting period in which they are incurred.
Depreciation of property, plant and equipment is calculated on the straight line method. Expected useful lives, which are regularly reviewed,
typically range between:
Buildings
Plant and machinery
Fixtures and equipment
30–50 years
5–15 years
2–10 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 the consolidated income
statement .
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
161
27
(6)
1
183
187
(4)
183
194
78
(8)
(6)
1
259
386
(127)
259
1,012
207
(7)
(98)
9
1,123
2,474
(1,351)
1,123
133
31
(1)
(30)
86
28
(11)
(1)
Total
NZ$M
1,586
371
(8)
(147)
(13)
11
133
102
1,800
409
(276)
133
142
(40)
102
3,598
(1,798)
1,800
2022
Carrying value at 1 July 2021
Additions
Disposals
Depreciation expense
Impairment
Transfer of assets to inventory
Currency translation
Carrying value at 30 June 2022
Represented by:
Cost
Accumulated depreciation and impairment
112
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
2021
Carrying value at 1 July 2020
Additions
Disposals
Depreciation expense
Impairment
Transfer of assets to inventory
Currency translation
Carrying value at 30 June 2021
Represented by:
Cost
Accumulated depreciation and impairment
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
132
32
(3)
161
166
(5)
161
162
43
(10)
(1)
194
318
(124)
194
1,009
112
(106)
(4)
1
1,012
2,282
(1,270)
1,012
157
25
(19)
(29)
(1)
95
7
(4)
(12)
Total
NZ$M
1,555
219
(23)
(157)
(6)
(3)
1
133
86
1,586
384
(251)
133
121
(35)
86
3,271
(1,685)
1,586
As at 30 June 2022 property, plant and equipment includes $454 million of assets under construction that are not depreciated until they
are commissioned and brought into use (2021: $214 million).
Government Grants
The Ministry for the Environment (New Zealand) part-funded Fletcher Building’s waste tyre capital project with a grant of $16 million
awarded to the Group through its Waste Minimisation Fund.
13. INVESTMENT PROPERTY
The Group's investment property primarily relates to Vivid Living, the Group's retirement operations, and is held for long-term yields and is
not occupied by the Group. The Group's investment property includes freehold development land and building units under development
including adjacent common facilities.
Investment property is initially measured at cost and includes land and property construction costs, together with any directly attributable
overheads of bringing the asset to the condition necessary for it to be capable of operating in the manner intended by management. As at
30 June 2022, no units were available for sale or occupation.
The Group applies the fair value model for subsequent measurement of its development land and completed retirement units, with any
resulting gain or loss being recognised in the consolidated income statement. The measurement of fair value is within the scope of NZ IFRS
13: Fair Value Measurement. An independent valuation was undertaken of the Group's development land in accordance with professional
valuation standards as at 30 June 2022.
All investment property has been determined to be level 3 (2021: na) in the fair value hierarchy as the fair value is determined using inputs
that are unobservable.
The Group's investment property is categorised as follows:
Development land at fair value
Retirement units under construction at cost
Investment property
Movement in the Group's investment property balances is outlined below:
Opening balance
Additions
Transfer from inventory
Change in fair value
Closing balance
2022
NZ$M
22
12
34
2022
NZ$M
5
20
9
34
2021
NZ$M
2021
NZ$M
113
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
14 . INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangibles are carried at cost
less any accumulated amortisation and accumulated impairment losses.
The Group's intangible assets with indefinite useful lives are not amortised but are tested for impairment annually, either individually or at
the cash-generating unit level. Intangible assets with a definite life are amortised on a straight-line basis.
Goodwill is stated at cost, less any impairment losses. Goodwill is allocated to cash-generating units (CGUs) and is not amortised but is
tested annually for impairment, and when an indication of impairment exists. Brands for which all relevant factors indicate that there is no
limit to the foreseeable net cash flows are considered to have an indefinite useful life and are held at cost and are not amortised but are
subject to an annual impairment test.
For the purposes of considering whether there has been an impairment, assets are grouped at the lowest level for which there are
identifiable cash flows that are largely independent of the cash flows of other groups of assets. When the book value of a group of assets
exceeds the recoverable amount, an impairment loss arises and is recognised in the consolidated income statement immediately.
Amortisation of definite life intangible assets are calculated on the straight line method. Expected useful lives, which are regularly reviewed,
typically range between:
Intangible assets, including software
5-15 years
Cloud computing arrangements
The Group recognises costs incurred in configuring or customising cloud application software as an intangible asset only if the activities
create a resource that the Group can control and from which it expects to benefit. Such costs are amortised over the estimated useful life
of the software application on a straight-line basis. The remaining useful life is reviewed at least at the end of each reporting period and any
changes are treated as changes in accounting estimates.
Where the Group cannot determine whether it has control of the cloud application software, the arrangement is deemed to be a service
contract and any implementation costs (i.e., cost incurred to configure or customise the cloud application software, are expensed to the
consolidated income statement as incurred).
Where the provider of the cloud application software provides both configuration and customisation services, judgement is required to
determine whether these services are distinct from the underlying use of the software application. Distinct configuration and customisation
costs are expensed as incurred as the software application is configured or customised (i.e., upfront). Non-distinct configuration and
customisation costs, that significantly enhance or modify the cloud-based application, are recognised as a prepaid asset and expensed over
the contract term on a straight-line basis.
Assessing the carrying value of goodwill and indefinite life brands requires management to estimate future cash flows to be generated by
the related cash-generating unit. The key assumptions used in the value-in-use 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, and are detailed in
.
Other
Intangibles
NZ$M
82
45
(1)
(18)
2
110
260
(150)
110
Total
NZ$M
1,070
45
(1)
(18)
20
1,116
1,347
(231)
1,116
2022
Carrying value at the beginning of the year
Goodwill
NZ$M
706
Brands
NZ$M
282
Additions
Impairment
Amortisation expense
Currency translation
Represented by:
Cost
Accumulated impairment/amortisation
Carrying value at the end of the year
114
11
717
717
717
7
289
370
(81)
289
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
2021
Carrying value at the beginning of the year
Additions
Impairment
Amortisation expense
Currency translation
Represented by:
Cost
Accumulated impairment/amortisation
Carrying value at the end of the year
Goodwill
NZ$M
708
(2)
706
706
706
Restated (1)
Other
Intangibles
NZ$M
95
3
(1)
(15)
82
213
(131)
82
Brands
NZ$M
281
1
282
361
(79)
282
Restated (1)
Total
NZ$M
1,084
3
(3)
(15)
1
1,070
1,280
(210)
1,070
As at 30 June 2022, other intangible assets include $42 million of assets being developed (2021(1): $11 million).
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
Significant intangible balances within cash generating units (CGUs)
Laminex™ Australia
Higgins New Zealand
Iplex New Zealand
Stramit
Tradelink
Higgins Fiji
Other
Goodwill
2022
NZ$M
Goodwill
2021
NZ$M
Brands
2022
NZ$M
Brands
2021
NZ$M
159
114
105
63
63
32
181
717
154
114
105
61
61
30
181
706
126
19
7
42
53
2
40
289
122
19
7
41
51
2
40
282
The goodwill allocated to significant CGUs accounts for 75% (2021 restated to include Higgins Fiji: 74%) of the total carrying value of
goodwill. The remaining 'other' CGUs, which comprise 13 (2021: 14) in total, are each less than 7% of total carrying value. The significant
brand assets account for 86% (2021 restated to include Higgins Fiji: 86%) of the total carrying value of brands. The remaining 'other'
brand assets are each less than 5% of total carrying value (2021: 5%).
115
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
15. 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.
Lease terms are negotiated on an individual basis and contain a wide range of 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. 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.
Right-of-use assets are measured at cost and include, after consideration of the initial measurement of the lease liability, any lease
incentives, initial direct costs and any make-good costs associated with the lease. 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 it is reasonably certain the Group will 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 the consolidated income statement. 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.
Extension options
The Group has some lease contracts that include extension options. The Group assesses at lease commencement date whether it is
reasonably certain it will exercise the extension options. The Group reassesses whether it is reasonably certain it will exercise the options if
there is a significant event or significant change in circumstances within its control. 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.
As at 30 June 2022, the five largest property 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.
Land
NZ$M
Buildings
NZ$M
Plant &
machinery
NZ$M
13
2
(1)
(2)
12
20
(1)
(6)
13
1,172
128
(119)
(1)
(58)
13
1,135
1,172
166
(119)
(5)
(44)
2
1,172
207
60
(65)
(1)
3
204
221
53
(62)
(6)
1
207
Total
NZ$M
1,392
190
(185)
(1)
(59)
14
1,351
1,413
219
(182)
(5)
(56)
3
1,392
Right-of-use assets
2022
Opening net book value 1 July 2021
Additions and renewals
Depreciation
Impairment
Disposals
Currency translation
Closing balance 30 June 2022
2021
Opening net book value 1 July 2020
Additions and renewals
Depreciation
Impairment
Disposals
Currency translation
Closing balance 30 June 2021
116
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Lease liabilities
Opening balance
Additions and renewals
Repayments
Disposals
Currency translation
Closing balance
Current portion
Non-current portion
Carrying amount at the end of the year
Lease expenses recognised in consolidated income statement
Right-of-use asset depreciation
Right-of-use asset impairment
Lease interest expense
Short-term and low-value lease expense
Total
2022
NZ$M
1,697
190
(186)
(62)
16
1,655
185
1,470
1,655
Total
2022
NZ$M
185
1
58
53
297
Total
2021
NZ$M
1,721
219
(183)
(61)
1
1,697
178
1,519
1,697
Total
2021
NZ$M
182
5
64
53
304
117
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
Funding and Financial Risk Management
This section includes details on the Group's funding and outlines the market, credit and liquidity risks that the Group is exposed to and
how these risks are managed, including the use of derivative financial instruments.
Capital risk management
The Group's objectives when managing capital are to provide returns to shareholders and benefits for other stakeholders and to
maintain an optimal capital structure that safeguards the Group's ability to continue as a going concern. In order to maintain or adjust
the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, undertake
share buybacks, 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 for the group is 1.0 to 2.0 times. It is intended that the Group will not be materially outside the target leverage ratio
range on a long-term basis.
The Group does not currently hold a credit rating from an accredited rating agency.
16. 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
.
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 forward foreign 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
.
Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s net debt arising from financing activities, including both cash and non-cash changes.
Cash flows
NZ$M
Currency
translation
NZ$M
Other non-cash
movements
(including hedge
accounting)
NZ$M
44
(39)
180
(10)
170
(4)
166
321
487
2
46
(36)
10
(6)
4
2022
NZ$M
481
180
350
29
(1)
7
(33)
1,040
39
6
6
(19)
1,021
(351)
670
Private placements
Bank loans
Capital notes
Other loans
Carrying value of borrowings
(as per balance sheet)
Less: value of derivatives used to manage
changes in hedged risks on debt instruments
Economic debt
Less: cash and cash equivalents
Net debt
2021
NZ$M
476
361
20
857
(18)
839
(666)
173
118
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Cash flows
NZ$M
Currency
translation
NZ$M
Other non-cash
movements
(including hedge
accounting)
NZ$M
2020
NZ$M
1,001
400
365
25
1,791
(458)
(396)
(3)
(4)
(861)
(190)
97
1,601
(1,104)
497
(764)
433
(331)
(44)
(4)
(1)
(49)
51
2
5
7
2021
NZ$M
476
361
20
857
(23)
(1)
(24)
24
(18)
839
(666)
173
2021
NZ$M
106
751
857
839
925
1,764
2022
NZ$M
64
976
1,040
1,021
745
1,766
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
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
Private placements
Private placements comprise loans of USD246 million, CAD15 million, EUR41 million and GBP10 million with maturities between 2026
and 2028.
Capital notes
At 30 June 2022, the Group had issued $350 million of listed capital notes to retail investors (2021: $361 million) with maturities
between 2023 and 2027. 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 fixed rate unsecured subordinated debt instruments that are traded on the NZDX. On election date, holders may
choose either to keep their capital notes on new terms or convert the principal amount and any interest into shares of Fletcher Building
Limited, at approximately 98% of the current market price. If the principal amount of these notes held at 30 June 2022 were to be
converted to shares, 71 million (2021: 49 million) Fletcher Building Limited shares would be issued at the share price as at 30 June 2022,
of $5.04 (2021: $7.52).
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 2022, the Group held $151 million (2021: $140 million) of its own capital notes.
119
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Bank Loans
At 30 June 2022, 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.
During the year, the Group renegotiated and extended its syndicated revolving credit facility. The facility has three tranches, $200
million maturing in July 2024 (Tranche 1), $400 million maturing in July 2027 (Tranche 2), and $325 million maturing in November 2026
(Tranche 3). As part of the refinancing of Tranche 1 and Tranche 3, the Group agreed a number of positive amendments to the terms of
the syndicated facility including replacing senior and total interest cover covenants with a senior interest cover covenant only.
The funds under this facility can be borrowed in Australian and New Zealand dollars.
Other Loans
At 30 June 2022, the Group had other loans of $29 million (2021: $20 million) some of which were subject to the negative pledge and
some secured ($7 million). Other loans include bank overdrafts, short-term loans, working capital facilities and vendor 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 2022, the Group had debt subject to the negative
pledge of $660 million (2021: $471 million).
Covenants
The Group’s financial covenants under its senior borrowing arrangements include interest cover and leverage ratio. The Group was in
compliance with all financial covenants as at balance date.
The impact of debt hedging activities on borrowings is represented in the table below:
2022
Underlying borrowing
exposure
Economic debt
exposure
Fixed rate
NZ$M
Floating rate
NZ$M
357
20
19
70
372
838
183
4
15
202
Fixed rate
NZ$M
Floating rate
NZ$M
361
20
17
71
368
837
2
4
14
20
Impact of
hedging
NZ$M
133
329
(20)
(19)
(70)
(372)
Impact of
hedging
NZ$M
137
321
(20)
(17)
(71)
(368)
Fixed rate
NZ$M
Floating rate
NZ$M
521
260
375
212
% Fixed
77%
78%
76%
% Fixed
75%
65%
70%
152
73
15
240
125
113
14
252
(19)
781
Underlying borrowing
exposure
Economic debt
exposure
Fixed rate
NZ$M
Floating rate
NZ$M
(18)
587
Currency of borrowings
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
2021
Currency of borrowings
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
120
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
Liquidity and funding risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial commitments as they fall due. Funding risk is
the risk that the Group under normal circumstances, will not be able to refinance its maturing debts in an orderly manner. The Group
manages its liquidity and funding risk by maintaining a target level of undrawn committed credit facilities and an appropriate spread of
maturity dates in respect 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.
2022
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
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
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
180
350
504
29
1,063
684
(726)
(42)
1,021
193
2,109
3,323
56
7
63
224
(222)
2
65
45
236
346
69
7
76
76
42
216
334
180
225
274
15
694
250
(274)
(24)
670
90
513
1,273
230
230
210
(230)
(20)
210
16
1,144
1,370
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$M
360
460
20
840
780
(782)
(2)
838
157
2,192
3,187
100
6
106
321
(323)
(2)
104
35
233
372
56
14
70
105
(107)
(2)
68
28
217
313
204
204
-
204
69
529
802
460
460
354
(352)
2
462
25
1,213
1,700
121
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
17. NET FUNDING COSTS
Interest income and expense are recognised on an accrual basis in the consolidated income statement using the effective interest method.
Funding costs also include the changes in fair value relating to derivatives used to manage interest rate risk, and the associated changes in
fair value of the borrowings designated in a hedge relationship attributable to the hedged risk.
Interest income
Interest on borrowings and derivatives
Interest expense other
Net interest expense
Changes in fair value relating to:
Borrowings designated in a hedging relationship
Derivatives designated in a hedging relationship
Total changes in fair value
Bank fees, registry and other expenses
Line fees
Other (gains)/losses
Net funding costs
2022
NZ$M
2021
NZ$M
(2)
37
1
36
39
(39)
1
7
2
46
(4)
39
3
38
(22)
22
1
7
(2)
44
Included in interest on borrowings and derivatives is the net settlement of the Group's interest derivatives. This consists of $21 million
of interest income and $24 million of interest expense (2021: $18 million interest income; $20 million interest expense). Other (gains)/
losses includes credit valuation adjustment (CVA)/debit valuation adjustments (DVA) on derivatives.
Interest rate risk
At 30 June 2022, 76% of the Group's debt was subject to a fixed interest rate (2021: 70% fixed).
(i) Interest rate repricing
The following tables set out the interest rate repricing profile of interest bearing financial liabilities assuming floating rate facilities are
utilised to maintain debt levels.
Fixed financial liabilities
Floating financial liabilities
Economic debt
% Fixed
2022
NZ$M
781
240
1,021
76%
2023
NZ$M
761
260
1,021
75%
2024
NZ$M
530
491
1,021
52%
2025
NZ$M
449
572
1,021
44%
2026
NZ$M
294
727
1,021
29%
2027
NZ$M
138
883
1,021
14%
The Group's overall weighted average interest rate (based on year end borrowings) excluding fees is 4.61% (2021: 4.04%).
(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
$2.4 million pre-tax on the Group's debt portfolio exposed to floating rates at balance date (2021: $2.5 million) assuming that all other
variables remain constant.
122
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
18. 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 supports compliance with the risk management policies and procedures.
Derivative financial instruments, including forward foreign 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
(i))
(
Foreign currency
balance sheet
translation risk
(
(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.
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 target debt to debt plus equity ratio.
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
and Australian dollar-denominated amounts of principal with
floating and fixed interest rates.
Interest rate risk
&
(
)
The risk that the value of borrowings or
cash flows associated with the borrowings
will change due to changes in market
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.
Commodity price
risk
Arises from committed or highly probable
trade transactions that are linked to
commodities.
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. At 30 June 2022, the Group has hedged a portion
of its electricity and diesel usage for the period 1 July to 31
December 2022. The average hedged electricity price is NZ$168/
MWh and the average hedged diesel price (ex-Singapore) is
NZ$0.90/Litre.
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
and
.
123
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
Derivative financial instruments and hedge accounting
Derivatives are recorded at fair value with the resulting gain or loss on remeasurement recognised in the consolidated 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 consolidated 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.
– 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 consolidated 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 consolidated income statement. The effective portion is reclassified to the
consolidated income statement when the underlying cash flows affect the consolidated 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 consolidated 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 consolidated income statement.
124
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
18.1 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 2022 was $551 million
(2021: $656 million).
(ii) Currency translation risk
The effect of the Group’s hedge accounting policy in managing foreign exchange risk related to the Group’s net investments in foreign
operations is presented in the table below:
Hedged investments and hedging instruments used
Amount of investment hedged
Foreign currency AUD
Notional amount
Cross currency interest rate swaps (49-73 months)
Foreign currency swaps (0-1 months)
Hedge effectiveness
Change in value used for calculating hedge ineffectiveness
Net investment hedge (gain)/loss recognised in other comprehensive Income
2022
Maturity:
0-73 months
NZ$M
2021
Maturity:
0-4 months
NZ$M
329
321
(105)
(224)
(321)
2
(2)
It is estimated a 10% weakening of the New Zealand dollar against the foreign currencies that the Group is exposed to on the net assets
of its foreign operations, would result in an increase to equity of approximately $153 million (2021: $149 million) and no material impact
on the income statement.
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 that 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.
125
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
The effect of the Group’s hedge accounting policies in managing both its foreign exchange risk and interest rate risk related to
borrowings denominated in foreign currency is presented in the table below:
2022
Cash flow hedging and fair value hedging
Cross currency interest rate swaps
Nominal amount of the hedging instrument
Carrying amount
Accumulated cost of hedging recognised in other
comprehensive income
Change in value used for calculating hedge ineffectiveness
Hedging (gain)/loss recognised in other
comprehensive income
Fair value hedge (consolidated income statement) (gain)/loss
* Designated in cashflow relationship only
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 recognised in other
comprehensive income
Change in value used for calculating hedge ineffectiveness
Hedging (gain)/loss recognised in other
comprehensive income
Fair value hedge (consolidated income statement) (gain)/loss
USD
49-73 Months
Floating
NZD/USD
0.6944
NZ$M
CAD*
73 Months
Fixed - 3.93%
AUD/CAD
0.927
NZ$M
EUR*
49 Months
Fixed - 4.30%
AUD/EUR
0.684
NZ$M
GBP*
73 Months
Fixed - 4.80%
AUD/GBP
0.568
NZ$M
Total
NZ$M
19
1
(1)
70
3
(1)
(1)
1
395
15
(2)
(32)
(7)
39
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
17
71
1
20
2
352
6
(4)
(23)
1
22
20
504
19
(4)
(33)
(6)
39
Total
NZ$M
460
9
(4)
(23)
1
22
18.2 INTEREST RATE RISK
The Group applies hedge accounting to the borrowings and the associated interest rate swaps, for movements in benchmark market
interest rates. Hedge accounting is applied to these instruments for floating-to-fixed instruments as cash flow hedges or for fixed-to-
floating instruments as fair value hedges. The Group applies a hedge ratio of 1:1.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the
reference interest rates, tenors, repricing dates and maturities and the notional amounts.
The Group assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in
the fair value of the hedged item using the hypothetical derivative method.
In these hedging relationships, the main sources of ineffectiveness are:
•
the effect of the counterparty and the Group's own credit risk on the fair value of the interest rate swaps that is not reflected in the
change in the fair value of the hedged item; and
• differences in repricing dates between the interest rate swaps and the borrowings.
126
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
2022
Cash flow hedging
Interest rate swaps
Nominal amount of the hedging instrument
Carrying amount - derivative assets/(liabilities)
Change in value used for calculating hedge ineffectiveness
Hedging (gain)/loss recognised in other comprehensive income
2021
Cash flow hedging
Interest rate swaps
NZD Borrowings
9-61 Months
3.83%
NZ$M
AUD Borrowings
18 Months
1.91%
NZ$M
164
1
2
(2)
155
3
9
(9)
NZD Borrowings
9-21 Months
3.08%
NZ$M
AUD Borrowings
6-30 Months
1.87%
NZ$M
Nominal amount of the hedging instrument
Carrying amount - derivative assets/(liabilities)
Change in value used for calculating hedge ineffectiveness
Hedging (gain)/loss recognised in other comprehensive income
14
(1)
1
(1)
212
(7)
3
(3)
There was no hedge ineffectiveness recognised in the consolidated income statement during the year.
Total
NZ$M
319
4
11
(11)
Total
NZ$M
226
(8)
4
(4)
18.3 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
balances and ageing analysis.
for debtor
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) (
• Construction contract assets (
)
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 (ECL) 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.
127
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
The table below provides movement in the Group's expected credit loss provision:
Opening provision for expected credit losses as at 1 July
Increase in provision for doubtful debts recognised in the consolidated
income statement
Receivables written off during the year as uncollectible
Unused amount reversed
Closing provision for expected credit losses as at 30 June
2022
NZ$M
(18)
(3)
1
(20)
2021
NZ$M
(25)
1
6
(18)
Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.
Impairment losses on trade receivables and contract assets are presented as net impairment losses in the consolidated income
statement. Subsequent recoveries of amounts previously written off are credited against the same line item.
(ii) Derivative financial instruments and the investment of cash
The Group enters into derivative financial instruments and invests cash with various counterparties in accordance with established
Board approved credit limits as to credit rating and dollar value but does not require collateral or other security except in limited
circumstances. In accordance with the established counterparty limits, there are no significant concentrations of credit risk in respect
of these financial instruments and no loss is expected.
The Group has not renegotiated the terms of any financial assets that would otherwise be overdue or impaired. The carrying amount of
non-derivative financial assets represents the maximum credit exposure. The carrying amount of derivative financial assets is at their
current fair value.
18.4 FAIR VALUES
The estimated fair value measurements for financial assets and liabilities compared to their carrying values in the balance sheet, are as
follows:
Financial assets
Cash and liquid deposits
Debtors
Carrying
value
2022
NZ$M
Fair value
2022
NZ$M
Carrying
value
2021
NZ$M
Fair value
2021
NZ$M
Classification
Amortised cost
Amortised cost
351
1,180
351
1,180
666
1,072
666
1,072
Forward exchange contracts - fair value through profit or loss
Fair value
Forward exchange contracts - cash flow hedge
Forward exchange contracts - net investment hedge
Cross currency interest rate swaps - split designation
Cross currency interest rate swaps - cash flow hedge
Interest rate swaps - cash flow hedge
Commodity price swaps - cash flow hedge
Total financial assets
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
6
8
15
4
5
2
6
8
15
4
5
2
3
4
2
9
3
4
2
9
1
1
1,571
1,571
1,757
1,757
128
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Carrying
value
2022
NZ$M
Fair value
2022
NZ$M
Carrying
value
2021
NZ$M
Fair value
2021
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
1,217
Amortised cost
Amortised cost
Amortised cost
Amortised cost
180
481
29
350
1
1
2
1
1,217
180
468
29
338
1
1
2
1
1,050
1,050
476
20
361
1
14
8
1
499
20
374
1
14
8
1
2,262
2,237
1,931
1,967
Total financial instruments
(691)
(666)
(174)
(210)
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 (0.3%) and 5.65% (2021:
(0.6%) and 2.5%) including margins, for both accounting and disclosure purposes.
129
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
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 related parties.
19. DIVIDENDS AND SHAREHOLDER TAX CREDITS
Dividends
Interim dividend paid March 2021 (12.0 cents per share)
Full year dividend paid October 2021 (18.0 cents per share)
Interim dividend paid March 2022 (18.0 cents per share)
2022
NZ$M
148
144
292
2021
NZ$M
99
99
In line with the Company's dividend policy, the Board determined that it would declare a final dividend of 22.0 cents per share for the
2022 financial year.
Shareholder tax credits
Imputation and franking credits allow the Company to transfer the benefit from the tax it has paid in New Zealand and Australia respectively
to its shareholders when it pays dividends.
Imputation credit account
Imputation credits at the beginning of the year
Taxation paid
Imputation credits attached to dividend paid
Taxation payable
Imputation credits available for use in subsequent accounting periods
Franking credit account
Franking credits at the beginning of the year
Franking credits received
Franking credits available for use in subsequent accounting periods
2022
NZ$M
2021
NZ$M
5
4
(42)
100
67
2022
A$M
35
3
38
4
1
5
2021
A$M
32
3
35
20. CAPITAL
Ordinary shares are classified as shareholders’ funds. Costs directly attributable to the issue of new shares or options are shown in
shareholders’ funds as a reduction from the proceeds. Acquired shares are classified as treasury stock and presented as a deduction from
share capital under the treasury stock method, as if the shares are cancelled, until they are reissued or otherwise disposed of.
Reported capital at the beginning of the year excluding treasury stock
Repurchase of shares
Vested share-based payment
2022
NZ$M
3,248
(250)
5
2021
NZ$M
3,270
(25)
3
Reported capital at the end of the year excluding treasury stock
3,003
3,248
All ordinary shares are issued and fully paid and carry equal rights in respect of voting, dividend payments and distribution upon
winding up.
130
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (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
2022
2021
821,152,019
824,256,416
(38,108,423)
(3,104,397)
783,043,596
821,152,019
(4,999,501)
(4,573,148)
778,044,095
816,578,871
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 2022, the Group had repurchased 38,108,423
shares (2021: 3,104,397) for the total consideration of $250 million (2021: $24 million). These purchased shares were subsequently
cancelled, leaving the total number of shares on issue at 30 June 2022 of 783,043,596 shares (2021: 821,152,019 shares). In line with
NZ IFRS, $0.3 million of transaction costs relating to the buyback were offset against share capital (2021: $0.1 million).
21. NON-CONTROLLING INTERESTS
Non-controlling interests are allocated their share of profit for the year in the consolidated income statement and are presented separately
within equity in the balance sheet. The effect of all transactions with non-controlling interests that change the Group’s ownership interest but
do not result in a change in control are recorded in equity.
Share capital
Reserves
2022
NZ$M
2021
NZ$M
9
6
15
9
7
16
22. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Investments in associates and joint ventures are measured using the equity method. The equity method has been used for associate entities
over which the Group has significant influence but not control.
A joint arrangement is an arrangement where two or more parties have joint control. The Group classifies its joint arrangements as either
joint operations or joint ventures depending on the legal, contractual and other rights and obligations.
Investment by associate/joint venture:
Wespine Industries Pty Ltd
Hexion Australia Pty Ltd
Altus NZ Limited
NX2 Hold LP
Other
Equity accounted earnings comprise:
Sales - 100%
Earnings before taxation - 100%
Earnings before taxation - Fletcher Building share
Taxation expense
Earnings after taxation - Fletcher Building share
2022
NZ$M
2021
NZ$M
66
23
71
12
23
195
57
22
71
23
173
589
499
67
34
(10)
24
53
26
(7)
19
131
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
23. RELATED PARTY DISCLOSURES
The disclosures below set out transactions and outstanding balances that Group companies and other related parties have with each other.
Key management personnel are defined as the Executive Committee and Board of Directors.
Sales to
related parties
NZ$M
Purchased from
related parties
NZ$M
Amounts owing
from related
parties (within
debtors)
NZ$M
Amounts owing
to related parties
(within creditors)
NZ$M
2022
Wespine Industries Pty Ltd and Hexion Australia Pty Ltd
Interpipe Holdings Limited
Altus NZ Limited
NX2 Hold LP
2021
Wespine Industries Pty Ltd and Hexion Australia Pty Ltd
Interpipe Holdings Limited
Altus NZ Limited
NX2 Hold LP
47
7
10
63
5
12
89
108
Key management personnel compensation
Directors' fees
Executive committee remuneration paid, payable or provided for:
Short-term employee benefits
Long-term employee benefits
Fletcher Building Retirement Plan
9
1
1
3
1
2021
NZ$M
2
20
1
3
10
2022
NZ$M
2
23
2
As at 30 June 2022, Fletcher Building Nominees Limited (the New Zealand retirement plan) held $2.9 million of shares in Fletcher
Building (2021: $4.5 million of shares).
Fletcher Building Retirement Plan holds an investment in a property leased by Winstone Wallboards, a subsidiary of Fletcher Building
Limited. The Group has agreed to repurchase the property and settlement is expected in November 2022.
132
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Other Information
This section provides additional required disclosures that are not covered in the previous sections.
24. CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure commitments are those where future expenditure has been committed at year-end, but not recognised as liabilities
as follows:
Committed at year end:
Property, plant and equipment and other long term assets
Equity accounted investments
25. CONTINGENT LIABILITIES
Claims
2022
NZ$M
204
2021
NZ$M
344
12
There are a number of legal claims and exposures that arise from the normal course of the Group's business in respect of which no provision
has been made. Where it is more likely than not that such a litigation will result in an outflow of resources that is already reasonably
estimated, a claims provision is recorded at the amount of the present value of the expected cash outflows. Such provisions cover the
estimated payments to the claimants, legal costs and the cost of potential settlements.
It is frequently impossible to reliably determine the existence of a present obligation or reasonably estimate the probability that a potential
outflow of resources will result from a pending or future litigation. Also the amount of liability, if any, that may arise, cannot be measured
reliably at this time.
Guarantees
In certain circumstances, the Group guarantees the performance of particular business units in respect of their obligations. This includes
bonding and bank guarantee facilities used primarily by the construction business as well as performance guarantees for certain of the
Group’s subsidiaries.
Silicosis
As at 30 June 2022, Laminex™ Australia (together with other engineered stone manufacturers and fabricators) was the subject of a number
of silica related personal injury claims based in Queensland. Further silica related injury claims have been received outside of Queensland in
the year ending 30 June 2022.
Where appropriate, the Group has considered the extent of the exposure Laminex™ Australia may have and has provided for these known
claims.
Contingent liabilities with respect to guarantees extended on trading
transactions, performance bonds and other transactions
Contingent liabilities with respect to claims
2022
NZ$M
383
2021
NZ$M
353
383
353
Onerous contract provisions
The Group's Construction division has a diverse portfolio of long term construction contracts. The nature and complexity of these contracts
means the outcome can be subject to a significant level of estimation uncertainty, particularly in relation to the likelihood and quantum
of any variation claims receivable, as well as the quantification and assessment of any other claims/counterclaims that may exist. Actual
outcomes could be different from estimated amounts which may impact projection positions recognised. The nature of significant estimates,
judgements and risk are outlined in
.
133
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
26. 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 consolidated income statement.
Below is the reconciliation of earnings before taxation to taxation expense:
Earnings 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 on earnings
Tax on earnings before significant items
Tax benefit on significant items
Total current taxation expense
Total deferred taxation benefit
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
Transfer from/(to) deferred taxation
Non-controlling interest share of taxation expense
Tax recognised directly in reserves
Net tax payments
Currency movement
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
134
2022
NZ$M
598
167
1
(8)
3
13
(13)
(4)
159
161
(2)
159
163
(4)
159
(107)
(107)
9
(163)
27
4
4
13
(1)
(107)
Restated (1)
2021
NZ$M
432
121
(9)
4
17
(17)
(1)
115
135
(20)
115
129
(14)
115
9
9
61
(129)
66
3
2
6
9
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Deferred tax assets
Included within the balance sheet as follows:
Deferred tax assets
Movement during the year:
Opening deferred tax assets
Taxation expense
Transfer (from)/to current tax
Held for sale
Tax recognised directly in reserves
Currency movement
Composed of:
Provisions and other liabilities
Inventories
Debtors
Property, plant and equipment
Brands
Tax losses
Right-of-use assets
Lease liabilities
Other
2022
NZ$M
Restated (1)
2021
NZ$M
209
209
238
4
(27)
(10)
4
209
124
15
6
(32)
(86)
91
(377)
463
5
209
238
238
285
14
(66)
(5)
10
238
145
16
5
(23)
(83)
92
(391)
476
1
238
(1) The comparatives have been restated as a result of a change in accounting policy as detailed in
and presented in
.
The net deferred tax asset balance of $209 million at 30 June 2022 largely comprises timing differences on leases, construction
provisions and Australian tax losses incurred in the prior periods. It is expected there will be sufficient future earnings in New Zealand
and Australia to utilise the deferred tax asset in each of these jurisdictions.
135
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
27. 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 and Australia. Participation in this plan has been closed for a number of years, although defined contribution
savings plans have been made available.
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.
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. A discount rate of 4.03% has been applied in 2022 on benefit obligations (2021: 1.89%). In applying
sensitivity analysis, a 1% lower discount rate assumption increases the defined benefit obligation by $14 million, whilst adding one additional
year of life expectancy of scheme members increases the obligation by $7 million.
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
2022
%
4.03
2.11
2021
%
1.89
2.12
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. At 31 March 2022, the value of the plan assets was 182% of the actuarial liability and the funded surplus was $132
million (31 March 2021: 167%, $117 million).
During the year the Group contributed less than $1 million (2021: less than $1 million) in respect of its Australian defined benefit plans.
It contributed $55 million (2021: $54 million) in respect of its defined contribution plans worldwide, including Kiwisaver and Australia
Superannuation.
The net period pension cost recognised in the year in earnings before interest and taxation was $2 million (2021: $2 million). The Group
expects to contribute less than $1 million to its New Zealand and Australian defined benefit plans during the year to 30 June 2023. The
Group is currently not contributing to the New Zealand plan.
Recognised net asset
Assets of plans
Projected benefit obligation
Funded surplus
Asset ceiling effect
Recognised net asset
Movement in recognised net asset
Recognised net asset at the beginning of the year
Currency translation
Actuarial movements for the year
Net periodic pension cost
Recognised net asset
Assets of the plans
Assets of plans at the beginning of the year
Actual return on assets
Total contributions
Benefit payments
136
2022
NZ$M
360
(236)
124
2021
NZ$M
401
(293)
108
124
108
108
(1)
18
(1)
124
401
2
1
(44)
360
42
(1)
69
(2)
108
369
65
1
(34)
401
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Assets of the plans consist of:
Australasian equities
International equities
Property
Bonds
Cash and short-term deposits
Other assets
Projected benefit obligation
Projected benefit obligation as at the beginning of the year
Service cost
Interest cost
Past service cost/curtailments
Actuarial loss arising on changes in demographic assumptions
Member contributions
Actuarial (loss)/gain arising on changes in financial assumptions
Actuarial gain arising on other assumptions - experience adjustments
Benefit payments
Currency translation
2022
NZ$M
2021
NZ$M
29
128
32
97
14
60
360
(293)
(2)
(5)
(1)
(1)
(1)
32
(7)
41
1
35
132
33
113
27
61
401
(327)
(2)
(3)
(1)
21
(13)
33
(1)
(236)
(293)
137
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
28. SHARE-BASED PAYMENTS
The Group has a number of employee incentive schemes, and whilst some are offered to all employees, others are offered only to specific
individuals.
All schemes are equity-settled share-based payment arrangements, accounted for under NZ IFRS 2: Share-based Payments and are
measured at fair value at the date of grant. The fair value of shares or options granted to employees is recognised as an employee expense
in the consolidated income statement over the restrictive period, with the restrictive period being the period over which the service
requirement of the particular scheme is met, with a corresponding increase in the employee share-based payment reserve.
When shares or options vest and shares are awarded to employees, the amount in the share-based payment reserve relating to those
instruments is transferred to share capital. When share-based payments do not vest as a result of market conditions not being met,
the amount in the share-based payment reserve is reclassified to retained earnings. When share-based payments do not vest due to a
performance condition not being met, any amount previously recognised is released to the consolidated income statement.
Long-term incentive (LTI) share scheme
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 TSR exceeding the 51st percentile of the TSR of the comparator Group
over a three year restricted period. 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. The three-year restrictive period is
automatically extended for an additional year if the minimum vesting threshold is not met.
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.
If the performance hurdles are not met or are only partially 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, with the trustee acquiring 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 following are details with regard to the scheme:
Grant date
Number of shares granted
Market price per share at grant date
2021
Award
1 July 2021
395,085
$7.48
2020
Award
1 July 2020
1,998,635
$3.66
Total value at grant date (NZ$)
$2,955,236
$7,315,004
2019
Award
1 July 2019
1,386,100
$5.21
$7,221,581
2018
Award
1 July 2018
1,041,605
$6.99
$7,280,819
Vesting date
30 June 2024
30 June 2023
30 June 2022
30 June 2021
Number of shares:
Number of shares originally granted
395,085
Less forfeited over life of scheme
Number of shares held at 30 June 2022
395,085
1,998,635
(269,068)
1,729,567
1,386,100
(250,536)
1,135,564
Total fair value expense in year for LTI
Amount recognised at year end for related bonus payable
Fair value has been determined using Monte Carlo valuation methodology.
1,041,605
(361,732)
679,873
2021
NZ$M
6
15
2022
NZ$M
3
15
138
Fletcher Building Limited Annual Report 2022
Notes to the Financial Statements 2022 (Continued)
Deferred short-term incentive (STI) plan
A senior short-term incentive (STI) share-based payment scheme has been put in place in for selected senior employees (invited to
participate at the discretion of the Company). The aim is to align the financial interests of participating senior employees with the
Company’s shareholders and recognise the differing priorities, and development phases in which our businesses are operating through
individual targets and measures.
The scheme grant date is 1 July each year, with 1 July 2021 being the first scheme offered. The STI scheme is split between a cash
payment and a deferred STI portion entitling the employee to share rights. Achievement is calculated based on various non-market
conditions specific to the individual, safety goals, as well as financial goals and is performed one year after grant date, generally in
September, with the cash component paid at this time. The share rights portion of award convert into Fletcher Building ordinary shares
two years from achievement date, where the number of share rights awarded are determined based on the share price at 30 June, one
year after grant date. For most employees, the award is subject to the participant remaining employed with the Group for three years.
Total fair value expense in year for deferred STI
Employee retention share scheme
2022
NZ$M
3
2021
NZ$M
Special retention arrangements in the form of one-off share-based arrangements have also been put in place for senior executives, with the
CEO being one of these individuals as disclosed in more detail in the Remuneration Report.
There were no new share issues in the year.
Total fair value expense in year for employee retention share scheme
Employee share purchase scheme - FBuShare
2022
NZ$M
1
2021
NZ$M
1
The employee share purchase scheme, FBuShare, allows eligible Group employees to regularly save up to NZ$5,000 per annum of their
after-tax pay and purchase shares in the Company (purchased shares) at market prices. At the end of a rolling three-year qualification
period, and provided they remain employed by a Group company, employees will be awarded one free award share for every two
purchased shares acquired in the first year of each three year qualification period and still held at the end of those periods.
Dividends paid will be re-invested in additional shares. Employees will receive award shares on any additional shares, subject to the
same conditions set out above. The employees are responsible for any income tax liability payable on dividends and on the value of any
award shares.
At the end of each three year qualification period, employees may continue to hold any purchased, additional and award shares or they
may sell some or all of the shares.
During the year, approximately 0.5 million award shares vested. At 30 June 2022, approximately 1.2 million shares would be required to
satisfy the obligation to provide award shares to FBuShare participants based on the purchased share balances.
Total fair value expense in year for employee share purchase scheme
2022
NZ$M
2
2021
NZ$M
2
139
Fletcher Building Limited Annual Report 2022 Notes to the Financial Statements 2022 (Continued)
29. CHANGE IN ACCOUNTING POLICY
Configuration or Customisation Costs in a Cloud Computing Arrangement (NZ IAS 38 Intangible Assets)
During the year ended 30 June 2022 the Group revised its accounting policy in relation to configuration and customisation costs incurred
in implementing cloud computing arrangements, in response to the International Financial Reporting Standards Interpretations Committee
(IFRIC) agenda decision clarifying its interpretation of NZ IAS 38 Intangible Assets. The new accounting policy is disclosed in
Group's retrospective assessment and impact on reported results is disclosed within this note.
. The
The Group carried out a detailed assessment to quantify the impact of the change in accounting policy during the year to 30 June 2022. All
cloud computing arrangements were identified along with all previously capitalised costs associated with these arrangements. A review was
completed in conjunction with the Group finance and technology teams to determine whether these costs were incurred in relation to cloud
application software that the Group controls.
The Group has applied judgement in determining whether it controls the cloud application software it utilises based on the underlying
contractual terms it has entered into with its providers. The Group has also applied judgement in determining whether any configuration and
customisation services provided directly by the application providers are distinct and therefore are to be recognised separately from access
rights granted under the service agreements.
For those arrangements where it was determined that the Group does not control the cloud application software, previously capitalised
costs that did not meet the asset recognition criteria, have been retrospectively derecognised in the year they were incurred.
This resulted in a reduction in the intangible asset value by $50 million at 30 June 2021 with an associated reduction in amortisation
expense of $8 million for the year to 30 June 2022 (June 2021: $9 million). The decrease in amortisation expense to the consolidated income
statement has been offset for the year to 30 June 2022 by $23 million (June 2021: $10 million) of configuration and customisation costs that
would have been capitalised previously. The net impact of these changes is reflected in selling, general and administration expenses in the
consolidated income statement.
The below table reflects the impact of the restatement (as of 1 July 2020) on the comparative information presented in the financial
statements:
Consolidated balance sheet as at 30 June 2021
Published
NZ$M
Adjustment
NZ$M
Restated
NZ$M
Intangible assets
Deferred tax assets
Total assets
Reserves
Total equity
Consolidated income statement as at 30 June 2021
Selling, general and admin expenses
Earnings before taxation
Taxation expense
Earnings after taxation
Basic EPS (cents)
Diluted EPS (cents)
Consolidated statement of cash flows for the year to 30 June 2021
Payments to suppliers, employees and other
Net cash from operating activities
Purchase of property, plant and equipment and intangible assets
Net cash from investing activities
30. SUBSEQUENT EVENTS
1,120
224
1,344
507
3,771
Reported
NZ$M
(1,692)
433
(116)
317
37.0
36.4
Reported
NZ$M
(6,922)
889
(231)
(211)
(50)
14
(36)
(36)
(36)
Adjustment
NZ$M
(1)
(1)
1
Adjustment
NZ$M
(10)
(10)
10
10
1,070
238
1,308
471
3,735
Restated
NZ$M
(1,693)
432
(115)
317
37.0
36.4
Restated
NZ$M
(6,932)
879
(221)
(201)
On 17 August 2022, the Directors declared a final dividend of 22.0 cents per share, payable on Thursday 6 October 2022.
In March 2022, the Group entered into a conditional Sale and Purchase Agreement to acquire, in a debt free transaction, seven Tumu
ITM building supply centres including a Frame & Truss operation, servicing the East Coast, Hawkes Bay and Wairarapa regions from the
Tumu Group for consideration of $50 million. The transaction received all necessary legislative approvals in July 2022 with an expected
acquisition date of 1 September 2022. As part of the agreement there is a working capital target, to be calculated post completion,
which may change the total consideration paid. Acquisition related costs of $1 million were incurred in FY22, as part of the transaction,
which are recognised in significant items.
140
Fletcher Building Limited Annual Report 2022
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 91 to 140, which comprise the consolidated balance sheet of the Group as at 30 June 2022, 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 91 to 140 present fairly, in all material respects, the consolidated
financial position of the Group as at 30 June 2022 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 procedures and other assurance 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.
141
Fletcher Building Limited Annual Report 2022 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 are fixed price and 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. Expected revenue comprises
fixed contractual revenue and where relevant other
amounts, for example variations due to scope
changes or extension of time claims. Where a
contract is loss making or expected to be loss
making, a provision is immediately recorded for the
best estimate of future losses on the contract.
There is a high level of estimation involved in
accounting for the Group’s fixed price and long-term
duration 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
the financial statements.
and
,
,
of
In obtaining sufficient appropriate audit evidence, we:
– confirmed our understanding of the Group’s processes regarding
accounting for contract revenues and costs. We tested controls
including:
›
›
the performance of monthly project reviews, which involves
management assessing key aspects of contract performance; and
the project reviews undertaken by the divisional and Group
management, Audit & Risk Committee and the Board;
– selected a sample of contracts for testing based on a number of
quantitative and qualitative factors. These qualitative factors included
known or expected to be loss making contracts, those 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;
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, 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;
› evaluated, utilising our legal specialists where appropriate, the
Group’s external legal and construction experts’ reports received on
contentious matters to identify factors which might influence the
recognition of variable consideration or liquidated or other damages
used by management in their best estimate of onerous contract
provisions;
› assessed variable consideration, where material, to executive
leadership team and Board approval, supporting documentation and
by reference to underlying contracts;
› evaluated the objectivity and expertise of the external experts
utilized by the Group to support the best estimate of onerous
contract provisions;
› 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;
› evaluated any insurance recoveries relevant to the best estimate
of onerous contract provisions. In these situations, we considered
whether forecast costs expected to be claimed were within the
total indemnity limits and the sub limits, if relevant; and.
– considered the adequacy of the associated disclosures in the financial
statements.
142
Fletcher Building Limited Annual Report 2022 Independent Auditor's Report (Continued)
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 billion at 30 June 2022.
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
of the financial statements.
CGUs are included in
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 and of those
CGUs considered to have a higher risk of impairment based on
our understanding of the nature and financial performance 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 FY23 budget and the FY24 - FY26 strategic
plan;
– assessed key inputs to the DCF models including future cash
flow forecasts, discount rates and terminal growth rates;
– considered the accuracy of previous Group cash flow
forecasting to inform our evaluation of forecasts included in the
DCF models;
– for those CGUs with a higher risk of impairment, involved
our valuation specialists to assess the Group’s discount and
terminal growth rates. Our valuation specialists were also
involved in benchmarking the Group’s assessed recoverable
values with relevant market multiples and assessing the
integrity of the DCF models;
– performed sensitivity analysis in relation to the discount rate,
terminal growth 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.
143
Fletcher Building Limited Annual Report 2022 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
17 August 2022
144
Fletcher Building Limited Annual Report 2022 Statutory Disclosures
DISCLOSURE OF INTERESTS BY DIRECTORS
The following are particulars of general disclosures of interest by directors holding office as at 30 June 2022, 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 2022 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
Brydon Investment Holdings Pty Limited
Fletcher Building Industries Limited
Rytysh Pty Limited
Barbara Chapman Genesis Energy Limited
NZME Limited
The New Zealand Initiative Limited
Bank of New Zealand (appointed October 2021)
Fletcher Building Industries Limited
Two Tin Pigs Limited
Peter Crowley
Barrambin Trading Company Pty Limited
Fletcher Building Industries Limited
The Riverside Coal Transport Company Pty 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
The University of Auckland Council
Doug McKay
Bank of New Zealand
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
Chair
Chair
Chair
Director
Director
Chair
Director
Director
Director
Chair
Chair
Deputy Chair
Director
Director
Director
Director
Director
Director
Chair
Chair
Director
Director
Director
Director
Trustee
Member
Chair
Chair
Director
Director
Director
Director
Director
Chair
Tourism Holdings Limited (director since September 2017, appointed Chair in June 2022)
Chair
MinterEllisonRuddWatts
The University of Auckland Council
Fletcher Building Industries Limited
Fonterra Co-operative Group Limited
Rangatira Limited
Consultant
Pro-Chancellor
Director
Director
Director
Pin Twenty Limited (corporate trustee of Kintyre Trust)
Director / Shareholder
145
Fletcher Building Limited Annual Report 2022 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 2022.
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
27,242
20,000
20,000
25,000
50,000
20,000
30,000
Non-Beneficial (1)
121,197 28,360,500
(1) Cathy Quinn also held a non-beneficial interest in securities as a director/shareholder of Pin Twenty Limited (corporate trustee of Kintyre Trust).
DISCLOSURE OF DIRECTORS’ INTERESTS IN SHARE TRANSACTIONS
Directors disclosed, pursuant to section 148(2) of the Companies Act 1993, the following acquisitions of relevant interests in
Fletcher Building shares during the year ended 30 June 2022.
Director
Date of transaction
Nature of relevant interest
Consideration
Bruce Hassall
29 November 2021
On-market purchase of ordinary shares
Peter Crowley
22 February 2022
On-market purchase of ordinary shares
NZ $33,500
AU $31,396
Number of
securities
5,000
5,000
146
Fletcher Building Limited Annual Report 2022 Statutory Disclosures (Continued)
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 2022 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 2022.
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS AS AT 30 JUNE 2022
The total number of voting securities of Fletcher Building at 30 June 2022 was 783,043,596 fully paid ordinary shares, each
conferring on the registered holder the right to one vote on a poll at a meeting of shareholders.
Size of holding
Number of shareholders
% of shareholders
Number of ordinary shares
% of ordinary shares
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
15,207
12,329
2,923
2,212
140
32,811
46.35
37.57
8.91
6.74
0.43
100.00
6,394,193
30,034,412
21,007,480
51,520,234
674,087,277
783,043,596
0.82
3.84
2.68
6.58
86.08
100.00
SUBSTANTIAL PRODUCT HOLDERS
According to notices given under the Financial Markets Conduct Act 2013, there were no substantial product holders of the
Company as at 30 June 2022.
147
Fletcher Building Limited Annual Report 2022 Statutory Disclosures (Continued)
20 LARGEST SHAREHOLDERS AS AT 30 JUNE 2022
Holder Name
HSBC Nominees (New Zealand) Limited - NZCSD
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Citibank Nominees (New Zealand) Limited - NZCSD
JP Morgan Nominees Australia Limited
HSBC Nominees (New Zealand) Limited A/C State Street - NZCSD
JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct - NZCSD
BNP Paribas Nominees (NZ) Limited - NZCSD
Accident Compensation Corporation - NZCSD
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited - NZCSD
National Nominees Limited
National Nominees Limited - NZCSD
New Zealand Depository Nominee Limited
Custodial Services Limited
BNP Paribas Noms Pty Limited
ANZ Wholesale Australasian Share Fund - NZCSD
Tea Custodians Limited Client Property Trust Account - NZCSD
JBWere (NZ) Nominees Limited
BNP Paribas Nominees (NZ) Limited - NZCSD
Simplicity Nominees Limited - NZCSD
Total
Number of
ordinary shares
% of issued capital
74,187,084
71,945,928
49,956,302
49,163,843
48,948,517
45,559,646
38,514,676
28,849,316
27,072,373
24,057,344
19,701,964
19,589,149
13,117,770
12,635,309
12,227,609
11,771,121
10,852,144
10,719,683
8,877,824
6,519,111
584,266,713
9.47
9.19
6.38
6.28
6.25
5.82
4.92
3.68
3.46
3.07
2.52
2.50
1.68
1.61
1.56
1.50
1.39
1.37
1.13
0.83
74.61
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 2022, total holding in
NZCSD were 369,569,625 or 47.20% of shares on issue.
AUDITOR FEES
EY has continued to act as auditors of the Group. Please refer to
financial year to 30 June 2022.
of the financial statements for audit fees paid to EY in the
CREDIT RATING
The Group does not currently hold a credit rating from an accredited rating agency.
DONATIONS
Please refer to
Board.
of the financial statements for donations made in FY22. All political donations must be approved by the
148
Fletcher Building Limited Annual Report 2022 Statutory Disclosures (Continued)
SUBSIDIARY COMPANY INFORMATION
The persons listed below respectively held office as directors of Fletcher Building Limited and its subsidiary companies as at 30
June 2022, 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 2022 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 in the Employee Remuneration section. 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
Bandelle Pty Limited
Directors
M Brodie, B McKenzie
M Brodie, B McKenzie
M Brodie, B McKenzie
P Boylen, B McKenzie, P Reidy (R)
M Brodie, N Sekul
Baron Insulation Pty Limited
P Lavelle (R), B McKenzie, A Rowe
Boden Building Supplies Limited (70%)
B McEwen
Brian Perry Civil Limited
P Boylen, B McKenzie, P Reidy (R)
Building Choices Limited (75%)
B McEwen
Building Prefabrication Solutions Limited
B McEwen, B McKenzie
Burnham 2020 Limited
Cleaver Building Supplies Limited (75%)
Clever Core New Zealand Limited
Crane Enfield Metals Pty Limited
Crane Group Pty Limited
Crane Share Plan Pty Limited
Crevet Pipelines Pty Limited
Crevet Pty Limited
CTCI Pty Limited
B McKenzie, N Traber
M Cleaver, B McEwen
S Evans, B McKenzie
M Brodie, B McKenzie
M Brodie, B McKenzie
M Brodie, B McKenzie
P Lavelle, B McKenzie, N Sumich (R)
M Brodie, B McKenzie
J Burgess, B McKenzie
Davis & Casey Building Supplies Limited
B McEwen
Delcon Holdings (No. 11) Limited
D Fradgley, B McKenzie
ee-Fit Pty Limited
P Lavelle (R), B McKenzie, A Rowe
Fairbairn Building Supplies Limited
B McEwen
FBHS (Aust) Pty Limited
FBII (Puhoi) Limited
FBSOL Pty Limited
T Broxham (R), J Chan, B McKenzie, N Sumich (R)
P Boylen, B McKenzie, P Reidy (R)
T Broxham (R), J Chan, B McKenzie, N Sumich (R)
Fletcher Building (Australia) Pty Limited
M Brodie, A Clarke, B McKenzie, N Sekul
Fletcher Building (Fiji) Pte Limited
P Boylen, H Clarke (R), A Kumar, P Reidy (R), C White
Fletcher Building Educational Fund Limited
C Carroll, J McDonald, P Muir
Fletcher Building Holdings Limited
A Clarke, B McKenzie
Fletcher Building Holdings New Zealand Limited
A Clarke, B McKenzie
Fletcher Building Industries Limited
M Brydon, B Chapman, P Crowley, B Hassall, R McDonald, D
McKay, C Quinn
Fletcher Building Infrastructure Investments Limited
P Boylen, B McKenzie, P Reidy (R)
Fletcher Building Limited
M Brydon, B Chapman, P Crowley, B Hassall, R McDonald, D
McKay, C Quinn
149
Fletcher Building Limited Annual Report 2022 Statutory Disclosures (Continued)
Company
Directors
Fletcher Building Nominees Limited
M Binns, J Chapman, G Clarke, M Farrell, H McKenzie, C
Munkowits, G Niccol, T Williams
Fletcher Building Products Australia Pty Limited
M Brodie, B McKenzie
Fletcher Building Products Limited
H McBeath, B McKenzie
Fletcher Building Share Schemes Limited
J Chapman, G Niccol
Fletcher Building Welfare Fund Nominees Limited
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
S Evans, B McKenzie
S Evans, B McKenzie
Fletcher Challenge Industries S.A.
M Binns, K Cowie, H Ritchie
Fletcher Concrete (Fiji) Pte Limited
P Boylen, A Kumar, P Reidy (R), C White
Fletcher Concrete and Infrastructure Limited
H McBeath, B McKenzie, N Traber
Fletcher Construction (Solomon Islands) Limited
P Boylen, P Reidy (R), C White
Fletcher Construction Buildings Limited
P Boylen, B McKenzie, P Reidy (R)
Fletcher Construction Company (Fiji) Pte Limited
P Boylen, J Matthews, P Reidy (R)
Fletcher Construction Infrastructure Limited
P Boylen, B McKenzie, P Reidy (R)
Fletcher Construction Management Services Limited
P Boylen, B McKenzie, P Reidy (R)
Fletcher Development Limited
Fletcher Distribution Limited
S Evans, B McKenzie
B McEwen, B McKenzie
Fletcher Industries Australia Pty Limited
M Brodie, N Sekul
Fletcher Insulation Pty Limited
P Lavelle (R), B McKenzie, A Rowe
Fletcher Morobe Construction Limited
P Boylen, P Reidy (R), R Simpson
Fletcher Property Limited
Fletcher Residential Limited
Fletcher Steel Limited
A Clarke, B McKenzie
S Evans, B McKenzie
H McBeath, B McKenzie
Forman Building Systems Limited
H McBeath, B McEwen (R), B McKenzie
Gatic Pty Limited
P Lavelle, B McKenzie, N Sumich (R)
Geoff Brown Building Supplies Limited
B McEwen
Geraldton Independent Building Supplies Pty Limited
J Burgess, B McKenzie
Higgins Contractors Limited
Higgins Group Holdings Limited
P Boylen, B McKenzie, P Reidy (R)
P Boylen, B McKenzie, P Reidy (R)
Homai MFR General Partner Limited (51%)
S Evans, P Majurey
Iplex Pipelines Australia Pty Limited
P Lavelle, B McKenzie, N Sumich (R)
Iplex Pipelines NZ Limited
Iplex Properties Pty. Limited
H McBeath, B McKenzie
P Lavelle, B McKenzie, N Sumich (R)
Jeffcoats Building Supplies Limited (68%)
R Jeffcoat, B McEwen
Key Plastics Pty. Limited.
P Lavelle, B McKenzie, N Sumich (R)
Kimura Building Supplies (2016) Limited
B McEwen
Kingston Bridge Engineering Pty Limited
P Lavelle, B McKenzie, N Sumich (R)
Kinsey Kydd Building Supplies Limited (75%)
S Kinsey, B McEwen
Kusabs Building Supplies Limited (75%)
Laminex Group Pty Limited
Laminex US Holdings Pty Limited
Leary Building Supplies Limited (75%)
G Kusabs, B McEwen
J Burgess, B McKenzie
M Brodie, N Sekul
B Leary, B McEwen
Macready Building Supplies Limited (75%)
J Macready, B McEwen
150
Fletcher Building Limited Annual Report 2022 Statutory Disclosures (Continued)
Company
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 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 (R), J Chan, B McKenzie, N Sumich (R)
New Zealand Ceiling & Drywall Supplies Limited (90%)
D Thomas
Northern Iron and Brass Foundry Pty. Limited.
P Lavelle, B McKenzie, N Sumich (R)
Okahukura GP Limited
Oliveri Solutions Pty Limited
D Clay, S Evans
B McKenzie, S Naish
Paul Robinson Building Supplies Limited (75%)
B McEwen, P Robinson
Pavement Technology Limited
Penny Engineering Limited
Penrose Retirement Nominees Limited
P Boylen, B McKenzie, P Reidy (R)
P Boylen, B McKenzie, P Reidy (R)
M Binns, J Chapman, G Clarke, M Farrell, H McKenzie, C
Munkowits, G Niccol, T Williams
PlaceMakers Christchurch Limited (75%)
D Close, B McEwen
PlaceMakers Limited
B McEwen, B McKenzie
PlaceMakers Supply, Fix & Install Limited (75%)
D Close, B McEwen
PlaceMakers Waiheke Limited
D Banks, B McEwen
Polymer Fusion Education Pty Limited
P Lavelle, B McKenzie, N Sumich (R)
Raylight Aluminium Limited (87.5%)
Reece Building Supplies Limited (75%)
D Close, B McEwen
B McEwen, J Reece
S Cubed Pty Limited
Selwyn Quarries Limited
Shed Boss NZ Limited
T Broxham (R), J Chan, B McKenzie, N Sumich (R)
B McKenzie, N Traber
D Fradgley, B McKenzie
Southbound Building Supplies Limited
B McEwen
Stanley Building Supplies Limited (75%)
B McEwen, B Stanley-Joblin
Steven Marshall Building Supplies Limited
B McEwen
Stramit Corporation Pty Limited
T Broxham (R), J Chan, B McKenzie, N Sumich (R)
Tasman Australia Pty Limited
Tasman Building Products Pty Limited
M Brodie, N Sekul
M Brodie, N Sekul
Tasman Insulation New Zealand Limited
H McBeath, B McKenzie
Tasman Sinkware North America, Inc.
M Brodie
TBP Group Pty Limited
M Brodie, N Sekul
Terrace Insurances (PCC) Limited
C Bell, K Burke, M Eades, B McKenzie, T Williams (R)
The Fletcher Construction Company (Fanshawe Street)
Limited
P Boylen, B McKenzie, P Reidy (R)
The Fletcher Construction Company Limited - NZ
P Boylen, B McKenzie, P Reidy (R)
The Fletcher Construction Company Limited (Samoa Branch)
P Boylen, B McKenzie, P Reidy (R)
The Fletcher Organisation (Vanuatu) Limited
P Boylen, Diract Limited, Lotim Limited, P Reidy (R)
The Fletcher Trust and Investment Company Limited
P Boylen, B McKenzie, P Reidy (R)
Tradelink Pty Limited
Vivid Living Limited
B McKenzie, S Naish
S Evans, B McKenzie
Winstone Wallboards Limited
H McBeath, B McKenzie, D Thomas
Young Building Supplies Limited
B McEwen
151
Fletcher Building Limited Annual Report 2022 Statutory Disclosures (Continued)
As at 30 June 2022, 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
Ilico Apartments General Partner Limited
Interpipe Holdings Limited
JFC Pumps Limited
Kaipara Water Transport Limited
NX2 Hold LP Limited
Oamaru Shingle Supplies Limited
P2W Services Limited
Rangitikei Aggregates Limited
Rodney Aggregates Supplies Limited
Saltus Apartments General Partner 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%
152
Fletcher Building Limited Annual Report 2022 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.
153
Fletcher Building Limited Annual Report 2022 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
Phil Boylen
Chief Executive Construction
Claire Carroll
Chief People Officer
Andrew Clarke
Group General Counsel and Company
Secretary
Wendi Croft
Chief Health and Safety Officer
Steve Evans
Chief Executive Residential and
Development
Dean Fradgley
Chief Executive Australia
Joe Locandro
Chief Information Officer
Hamish McBeath
Chief Executive Building Products
Bruce McEwen
Chief Executive Distribution
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
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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.
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Fletcher Building Limited Annual Report 2022 Better
together
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Fletcher Building Limited Annual Report 2022 This Annual Report uses stock sourced from sustainably managed forests.