Annual Report 2023
Fletcher Building Limited
PlaceMakers customer and home renovation specialist Al
Wilkinson of Craftsman Builders checks against their online
order with driver Manpreet Singh.
2
Fletcher Building Limited Annual Report 2023 Contents
Welcome to our FY23 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 We are Fletcher Building
05 At a Glance
06 Chair’s Report
07 CEO’s Report
09 Building an enduring sustainable business
10 Zero injuries, every day
62 Board and Executive Team
66 Corporate Governance
79
Sustainability Materiality
and Methodology
83 Remuneration Report
Frontline safety profile
Financial Report
12
14
Lower carbon cement and concrete
16 Customer-centric digital solutions
18 Driving sustainable business growth
20 Winstone Wallboards new GIB plant
26 Sustainability
30 Digging in for our communities
34 Our People
36 Growing a pipeline of female talent
38 Embracing cultural diversity
Performance
42 Group Performance
44 Group Overview
48 Building Products
50 Distribution
52 Concrete
54 Australia
56 Residential and Development
58 Construction
100 Trend Statement
101 Financial Statements
107 Notes to the Financial Statements
154 Independent Auditor’s Report
Other Disclosures
158 Statutory Disclosures
166 Corporate Directory
This Annual Report is dated 16 August 2023
and is signed on behalf of the Board by:
Bruce Hassall
Chair
Robert McDonald
Director
Front cover: Project
Director, Stewart Vaughan,
with Distribution site
coordinator, Keri Wyrill,
oversee final touches
made at the new Winstone
Wallboards® facility,
Tauriko, Bay of Plenty as it
gets set to begin shipping
GIB® plasterboard.
Front cover: Project Director, Stewart
Vaughan, with Distribution site
coordinator, Keri Wyrill, oversee final
touches made at the new Winstone
Wallboards® facility, Tauriko, Bay
of Plenty as it gets set to begin
shipping GIB® plasterboard.
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Fletcher Building Limited Annual Report 2023 We are
Fletcher
Building
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.
(1) Measures before significant items are non-GAAP measures used by management to assess
the performance of the Group and have been derived from Fletcher Building’s consolidated
financial statements for the year ended 30 June 2023.
(2) Total Recordable Injury Frequency Rate. Total number of recorded injuries per million hours
worked. Does not include Restricted Work Injuries. Excludes Rocla®, Tumu® and Waipapa.
(3) Net Promoter Score measures how satisfied our customers are with our business; excludes
Altus and the Construction division.
(4) Combined Scope 1 and Scope 2 emissions reduction for the Group. Refer to page 26 for
further details.
4
Safety TRIFR (2)
3.1
Employee eNPS
26
Carbon
emissions (4)
16%
reduction from
FY18 baseline year
Customer NPS (3)
40
Fletcher Building Limited Annual Report 20232022 3.42022 362022 23 At a glance
14,900+
People in New Zealand,
Australia and the South Pacific
980
Operating sites
Revenue
Net earnings – reported
$8,469m
2022 $8,498m
$235m
2022 $432m
EBIT before
significant items (1)
$798m
2022 $756m
Cash flows from
operating activities
$388m
2022 $592m
Earnings per share
30.0¢
2022 53.5¢
EBIT margin before
significant items (1)
9.4%
2022 8.9%
Leverage ratio
(net debt/EBITDA)
1.2x
2022 0.6x
Total dividend
34.0¢
2022 40.0¢
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Fletcher Building Limited Annual Report 2023 Chair’s Report
Bruce Hassall, Chair
Dear Shareholders
I am pleased to introduce Fletcher Building’s Annual Report
for FY23. Fletcher Building successfully continues to execute
its strategy with the delivery of another strong year. In a
rapidly changing environment, we continue to be guided by
our purpose of 'improving the world around us through smart
thinking, simply delivered'. Our purpose connects the different
parts of our business and demonstrates how the work we do
can make a positive impact on the people and communities
around us.
In a slowing residential market, the Group held revenue flat
and delivered further improved year-on-year underlying profit
and margins while return on funds employed remained ahead
of target. Net earnings attributable to shareholders was $235
million compared to $432 million in FY22. This included $255
million additional construction provisions relating to the New
Zealand International Convention Centre and Hobson Street
Hotel (‘NZICC’). Despite good progress on the site, these
provisions reflect the significant complexity of the rebuild
and where costs are expected to exceed insurance proceeds.
The Company will continue to pursue its rights to recovery
under the Third Party Liability ('TPL') policy. This is in addition
to an amount recoverable from the Contract Works Insurance.
NZICC is Fletcher Construction’s last project in the vertical
sector, as a decision to fully exit this sector was made in 2021.
The Board is focused on seeing the project to completion
whilst remaining focused on driving the continued success of
our overall Group strategy.
Significantly, approximately $640 million was strategically
invested back into the business during the year. This included
the construction of the new Winstone Wallboards plant at
Tauriko, growth investments such as the acquisitions of
Waipapa Timber in Northland and Tumu stores in the Hawke's
Bay, the commencement of organic investments into a new
Laminex panels plant in Taupō and land acquired for our new
frame & truss operations in Auckland. Additional investments
are focused on developing more sustainable building solutions
for our customers along with circular initiatives that focus on
reducing waste.
Against this backdrop, the Board was pleased to approve a
final dividend for the year ended 30 June 2023 of 16.0 cents
per share (fully imputed and unfranked) to be paid on 5
October 2023. Combined with the 18.0 cents per share interim
dividend, this brings the total dividend to 34.0 cents per share
for FY23. This is in line with the policy to pay dividends in the
range of 50% to 75% of net earnings before significant items
and having regard to available cash flow.
During the year, the Board oversaw the implementation of a
more ambitious sustainability strategy and targets which are
outlined in this report. We have committed to become a net
zero business by 2050. We also have targets to derive 75% of
the revenue from products made or sold by our manufacturing
businesses from sustainably certified products and to divert
70% of our waste from landfill by FY26.
Further enhancing our safety performance remains a key
priority as we target our long-term goal of zero serious injuries
and 100% of our sites being injury free.
We are also prioritising building an inclusive culture and
on cultivating a better gender and ethnicity balance in
leadership. As a demonstration of our commitment, we are
aiming to achieve 30% female representation in leadership
roles by FY27. These initiatives are ambitious, but we believe
that as an industry leader, we can have a direct influence in
addressing these gaps.
We are making good progress in enhancing our digital
capabilities across the Group, growing our online presence
and services to deliver better experiences for our customers
and more personalised data-led insights.
It is pleasing to see the performance culture that is becoming
embedded to deliver long-term sustainable performance
across both financial and non-financial metrics. Importantly,
this focus is aligned to driving meaningful outcomes for our
people and customers.
On governance, we appointed Sandra Dodds as a non-
executive director of the Company effective 1 September
2023. With over thirty years’ experience in senior executive
and board roles, Sandra brings strong leadership skills,
relevant industry experience, commercial acumen and
governance expertise to the Board. We also increased the
minimum share ownership by directors as well as reducing the
Nominations Committee to a subset of the Board, comprising
three members.
Continued enhancements were made to remuneration as
outlined in the Remuneration Report. Given the improvement
of our safety performance and maturity, with TRIFR at record
low levels and nearing global best, we reviewed our approach
to safety in the STI plan, so that it aligns to our strategic
approach.
As a Board we remain focused on our core responsibilities to
ensure Fletcher Building has the right strategy and execution,
talent and risk management to deliver value in the near- and
longer-term. While we are anticipating a tougher market in
FY24, we have a good operational cadence which positions
us well for through-the-cycle performance and the growth
investments we are making will further enhance the strength
and earnings of our business. Notwithstanding the risks
related to the Construction legacy projects and the Iplex
Australia Pro-fit pipes matter, as outlined in the CEO’s Report,
we are confident about the pathway Fletcher Building is on
which strongly positions the organisation for the future, both
in New Zealand and Australia.
I would like to express my gratitude, on behalf of the Board,
to our people across the Group for their commitment and
efforts to deliver another successful year. We also thank our
shareholders for your continued support.
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Bruce Hassall
Chair
Fletcher Building Limited Annual Report 2023 CEO’s Report
Ross Taylor, CEO
Fletcher Building’s FY23 financial result continues to build
on the progress we have made in both EBIT levels and EBIT
margins over the last several years.
Despite softer residential markets in New Zealand and Australia
and the major New Zealand weather events in the second
half of FY23, Group revenue for the year was $8,469 million
compared to $8,498 million in FY22 and EBIT before significant
items was $798 million, up 6% from $756 million in FY22.
Group EBIT margin of 9.4% in FY23 lifted from 8.9% in FY22
which was a good performance in a slowing market where
overall FY23 volumes fell 5% to 7% below the 2H22 peak. Our
New Zealand residential business sold 617 homes in FY23,
while this was less than the prior year, it was a strong result in
a challenging market. Our return on funds employed (ROFE)
remained ahead of target at 17.1%.
Net profit after tax was $235 million, after adjusting for
significant items of $301 million. This included the additional
Construction provisions of $255 million, which relates to the
NZICC project.
Cash flows from operating activities were $388 million,
compared to $592 million in FY22. Adjusting for tax, funding
costs and lease principal repayments, Fletcher Building
businesses generated trading cash flows of $475 million
compared to $462 million in FY22. Our balance sheet remains
strong with $1.4 billion liquidity.
Importantly, we continue to look forward and are focused
on positioning the business for growth in the medium
term. We are now well into our $800 million investment
programme in a number of opportunities across our markets
and businesses. Projects commenced in FY23 include
the expansion of Laminex New Zealand’s Taupō plant,
the expansion of our insulation plant in Auckland, and the
commitment to grow and automate our Auckland frame &
truss operation. The acquisition of Northland’s Waipapa Pine
Limited and Renewable Fuels Limited (‘Waipapa’) has seen us
establish a new Wood Products business and we increased
our distribution network in the lower North Island through
the purchase of six Tumu building supply stores and a frame
& truss plant. All growth opportunities have been assessed
against robust criteria including exceeding our ROFE target
rates of 15%. These will progressively mature over the coming
couple of years and by FY27 we would expect to see a full run-
rate EBIT uplift of approximately $120 million to our underlying
earnings base.
Our $400 million investment in Winstone Wallboards GIB
plasterboard manufacturing and distribution facility in Tauriko,
Tauranga has now commenced production and will be fully
operational by the end of October 2023. The new plant’s
state-of-the-art technology, delivers more production capacity
allowing for product innovation and future growth.
Underpinning our financial performance is our commitment to
raising the bar across all our non-financial goals; safety, people
engagement, customer experience and the sustainability of
our business and activities.
Our people’s commitment to workplace safety achieved a 12%
improvement in Total Recordable Injury Frequency Rate (TRIFR)
from 3.4 to 3.1 and 90% of sites were injury free over the year.
People engagement lifted again in FY23, and we received an
employee Net Promoter Score (eNPS) of 26 which is in line with
the global median. The feedback we collected from our people
in the engagement survey will support our efforts to make
Fletcher Building an even better place to work.
Improved service offerings, product availability, commitment
to delivery in full, on time (DIFOT) and product innovation
contributed to a 4 point lift in our customer Net Promoter
Score (NPS) to 40 in FY23.
We continue to make good progress on decarbonising our
operations and products with our combined scope 1 and 2
emissions of 1.021 Mt CO2e in FY23. This was 4% lower than
FY22, and 16% lower than our FY18 baseline year.
The majority of our Construction legacy projects are now
nearing conclusion. The opening of the Ara Tūhono – Pūhoi to
Warkworth motorway to vehicles in June 2023 was a significant
step towards this. While the need to take further provisions
through the year on the NZICC project was very disappointing,
the project continues to move closer to final completion.
We expect all carpark levels and the Hotel component to
be complete through this year and the overall project to be
completed by December 2024.
We have acknowledged that Iplex Australia has received a
number of product quality complaints in Western Australia
relating to polybutylene hot and cold-water pipe product it
manufactured under the name "Pro-fit". While Iplex Australia
has not yet determined the cause of the problem, we also
acknowledge the frustration and inconvenience impacted
homeowners have been facing. In April we established a
A$15 million fund to provide financial support to builders
and plumbers to repair leaks and damage and replace pipes,
while gathering data to understand causation. Iplex Australia
continues to focus on a resolution for all stakeholders.
Looking forward to FY24, we expect some further tightening
in our overall volumes and so our focus remains on strong
customer performance, cost control and pricing disciplines
across our businesses. We have shown we are well equipped
to continue performing solidly through the cycle.
Reflecting on all we’ve accomplished over the past year, I’m
pleased with the way our people have continued to show their
resilience, innovative spirit and commitment to supporting our
customers and each other. I also wish to extend once again
my thanks to our shareholders, customers, and suppliers. I
look forward to connecting you with further updates on our
progress in FY24.
Ross Taylor
CEO
7
Fletcher Building Limited Annual Report 2023 General manager, Mike Arthur,
and HR advisor, Joyce Lau, inspect
stock at Laminex® New Zealand
distribution centre in Penrose.
8
Fletcher Building Limited Annual Report 2023 Building an enduring
sustainable business
Five goals have driven Fletcher Building’s strategic direction over the past five years. We have lifted
our safety performance, delivered better outcomes for our customers, strengthened our cost and
pricing disciplines, elevated our businesses’ relative market positions and led the way by advancing
our sustainability and innovation outcomes.
We are confident the New Zealand and Australian building sectors provide an attractive environment to invest and continue
growing our business. We work within stable economic and political environments, and our relative isolation combined with
our deep commercial understanding of these markets provides the right conditions for Fletcher Building to be industry leaders
across our portfolio of businesses.
By understanding the opportunities we have within our markets, we have adapted and shaped what we need do, and how we
need to do it.
Maximise local market opportunities
Build market leadership
The size, scale and isolation of our local markets allow us to
be competitive against importers, as well as lead the way
on disruptive innovation. In both New Zealand and Australia,
the long-term growth outlook for the sector is robust owing
to a combination of strong population growth, and an
infrastructure deficit across both countries that requires
major catch-up expenditure.
Align to our purpose
We invest where opportunities align to our purpose. Our
commitment to living up to our purpose of 'improving the
world around us through smart thinking simply delivered',
continues to underpin the choices we make for Fletcher
Building’s future success.
Our investments are aligned to areas in which we are
confident we can reach a market position of #1 or #2.
We also look for opportunities that can achieve sufficient
scale to provide us with a sustainable competitive
advantage against local and global competition.
Apply global best practice for competitive advantage
We source and apply global best practice in the local
market for each of our businesses, to support our
aspiration to provide our customers with market leading
products and services.
Driven through key focus areas
SAFETY
CUSTOMER
OPERATIONAL
& FINANCIAL
PERFORMACE
INNOVATION
& GROWTH
SUSTAINABILITY
CAPABLE &
HIGHLY ENGAGED
PEOPLE
Anchored by our values
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Fletcher Building Limited Annual Report 2023 SAFETY
CAPABLE & HIGHLY
ENGAGED PEOPLE
Zero injuries, every day
In FY23
3.1
TRIFR
a 12% reduction
since FY22
89%
of our people
believe leaders take
responsibility for safety
25,000
hours of Power Up
frontline engagement
1,700+
high severity risks
contained
2,500+
Fully trained safety leaders
We continued to make progress in delivering our Protect programme
and our people-led further safety performance improvements this year.
Our Total Recordable Injury Frequency Rate (TRIFR) of 3.1 reduced 12%
from last year. In addition, all recordable injuries reduced to 146 this
year compared to 156 in FY22. This means that 10 more people went
home safe and healthy to their families.
In the past 12 months, we recorded three serious injuries (compared to two in FY22), and
90% of our sites were injury free. This shows that while we have improved safety significantly
in recent years, getting to our goal of zero injuries needs persistence, innovation and
sustained effort.
Our leaders at the frontline are responsible for daily safety practices on our sites and
continue to drive and embed our safety culture as our safety performance improves. They
delivered more than 25,000 hours of Power Up frontline training this year, an important
formalisation of what we know already, that our frontline people are our safety experts on
site. Feedback from our people was very positive with over 95% saying that they believed
that Power Up would make them safer as a team.
Looking ahead to manage and monitor risk
Our focus on our critical risks continued
throughout the year. In addition to our
Life Saving Rules, focus on high potential
incidents and our Risk Containment
sweeps, we started the verification of the
Critical Controls we expect to be in place
across the business across our 21 Critical
Risks. In addition to Leader Walks and Risk
Containment sweeps, Critical Control
Verification (CCV) provides leaders with
another tool in their toolkit for our people
to engage meaningfully with safety on
site. Importantly it also provides leaders a
measure of confidence that safety culture is
having an effect on safety practices, and that
our critical risks are contained and controlled
to the standards that leaders expect. In
FY23, we completed more than 4,400 risk
containment sweeps, contained more than
1,700 high severity risks, and completed
more than 2,800 critical control verifications
across the business.
Adopting critical controls marks a significant
change in the way we measure and review
our progress on safety as our culture
across the Group matures towards a more
‘interdependent’ state, characterised by high
competency and a collective supportive
safety environment. We have been
continually moving towards lead indicators
to help guide our approach to safety and
CCVs will form an important part of this
movement towards risk elimination. We are
starting to use our data to predict injuries
before they happen and innovate how we
control our risks.
One example of how we do this is Fletcher
Construction’s piloting of digital exclusion
zones with machine-control technology at
the Eastern Busway project in Auckland.
This year, the Engineering Services team
has been successfully building and testing
a workflow to lock out an excavator from
contact with Auckland’s most significant
water pipe. The opportunity for this
technology goes beyond preventing possible
harm to also avoiding further cost and
delay disruption for customers and local
stakeholders.
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Fletcher Building Limited Annual Report 2023 I live and breathe this [Protect] Value at work and at home. I want to
be able to come to work in the mornings and go home safe to my
family at the end of every day. I am very passionate about my ‘why’!
Anon, FBuSay Survey 2023.
Action on building belief
Our progress in the four years since we made
Protect a value and reset our safety culture
through its namesake programme, has been
a point of pride for our 14,900+ people
across the Group. We understand that as a
safer business, we are a better business for
ourselves, our customers and the communities
we support.
In FY23, we sent 18 more people home safe
and serious injury-free, than four years ago.
On the same time horizon, 130 more people
also went home without any injury this year
(a 47% improvement on FY19). As a result, our
Total Recordable Injury Frequency Rate (TRIFR)
reduced from 5.2 in FY19 to TRIFR of 3.1.
We put these improvements down to a simple
concept which we have embraced and which
has been shown to be life changing in how our
people think about safety at Fletcher Building:
We believe all injuries are preventable.
In FY23, the results of our annual engagement
survey highlighted that our people in all areas
of the business feel a powerful connection to
this belief – 86% in fact - and that the belief
has inspired a strong connection among safety
leaders with 89% of people reporting that their
immediate leader, supervisor or manager takes
responsibility for safety at work.
When it comes to safety, we know we can
never be too comfortable. We still have high
potential incidents which remind us that our
work is never done.
But we also know there is time to celebrate
success, and with each improvement we make
sure we recognise those that do the hard work
- our people. They are doing a fantastic job of
caring for each other.
Video:
This is Protect - our
safety programme
Since Protect Reset:
47%
reduction
in recordable injuries
since FY19
86%
reduction
in serious Injuries
since FY19
This means
18
more people sent home
serious injury free this
year compared to FY19
Our Protect strategy is having an impact
21
Protect as
a Value
Safety
Leadership
Programme
Risk
Containment
Sweeps
Power Up
Frontline
Programme
7
8
5.2
5.7
5.0
2
3
3.4
3.1
FY19
FY20
FY21
FY22
FY23
Serious Injury (A3+)
TRIFR (A2+)
11
Fletcher Building Limited Annual Report 2023 SAFETY
CAPABLE & HIGHLY
ENGAGED PEOPLE
Norman York, Easysteel – Northern Distribution Manager
Passionate about frontline safety
Northern Distribution Manager at Easysteel, Norman York, oversees the day-to-day operations
and safety practices for 47 people at Penrose sites in Auckland where his energy for delivering
exceptional safety is legendary. In May 2023, Norm was awarded the Protect Individual
Achievement award at Fletcher Building’s biennial Excellence Awards.
2.29
Total Recordable Injury
Frequency Rate (TRIFR)
at Fletcher Steel
480
Power Up training
sessions in Steel in
FY23
Video: Living the
Values - Protect
Widely regarded by his team as a ‘safety
leader champion’ with great respect,
Norm has been quick to understand the
opportunity for personal growth and
development to all people regardless of their
role or job site through our Protect safety
programme.
Following his own transformative experience
as a member of one of the very first Safety
Leadership Programme cohorts, Norm
jumped at the chance to use his own
expertise and insight to tailor the frontline
programme, as the new Power Up safety
training programme for site-based people
took shape. Made up of 15 bite-sized
activities, Power Up is delivered in 30-minute
sessions that can be easily inserted into
existing toolbox talks or team meetings,
common to frontline teams who are heavily
shift-led. During the past year, Power Up
modules have been the subject of 25,000+
of training hours across the Group, and in
Steel business units alone, 54 teams, across
27 sites have participated in 480 Power Up
sessions.
As Easysteel is organised into a number of
shifts and separate operational teams, Norm
opted to break the mould, bringing several
groups together for Power Up, to maximise
the chance to grow a Protect culture onsite
based on shared values.
“Protect is a culture. It’s a culture that we
live and breathe on our site, it’s not just a
value that we put on the wall. Before, when
I thought of the word ‘protect’, I thought of
shield or armour keeping somebody safe.
Now when I hear the word ‘protect’, I think
development and encouragement. To now
see people embracing development through
Power Up and pushing themselves, it’s
amazing to see. It’s really rewarding for the
team” he said.
Protect is a culture. It’s a
culture that we live and
breathe on our site, it’s
not just a value that we
put on the wall
Norman York, Easysteel – Northern
Distribution Manager.
Importantly, more Steel people are returning
home safely every day, and the new goal is to
consider what may lie ‘beyond zero injuries’,
meaning how we can enrich our people’s
working lives further to return them home
in better shape mentally and physically than
how they came to us.
In the past twelve months, Norm and his
team have built on this momentum of care
to champion a range of supporting causes
that promote a more positive protective
working environment. Wellness initiatives
like ‘the Biggest Loser’ team-based healthy
eating and exercise programme and Speak
Up safety programme to empower people
to find their voice and call out anything that
they are worried about at work, are having
a real impact. In Norm’s team employee
engagement scores have been consistently
high over the past years with an employee
Net Promoter Score (eNPS) of 39 in FY23.
“For me, the beauty that I see through our
Protect programme is our people want to
develop and grow", said Norm.
12
Fletcher Building Limited Annual Report 2023 Norman York and his team at
Easysteel catch-up on important
Protect safety updates.
We believe all
injuries are
preventable
We never walk
past – we speak
up and take action
We celebrate
the good stuff
We care for
each other
13
Fletcher Building Limited Annual Report 2023 SUSTAINABILITY
INNOVATION
& GROWTH
CUSTOMER
Lower carbon cement
and concrete solutions
for customers to use at scale everyday
27%
less embodied carbon
in EcoSure® than the
ISC baseline using 46%
alternative fuels
Firth® take EcoSure®
cement and make
EcoMix®, at scale
85%
of their concrete
is lower carbon
~100,000
tonnes
of waste diverted from landfill
Fletcher Building’s Concrete division is leading the way in
decarbonising cement and concrete in New Zealand. Inspired
to help customers ‘build a better future’, the division has made
impressive progress in developing a comprehensive and highly
competitive range of more sustainable products and solutions to
meet growing demand.
Their decarbonisation success has
stemmed from taking a customer-
centric, holistic view to innovating, and
by embracing the challenge to make it
easy for customers to meet their own
sustainability goals.
The key to achieving this is focusing
on understanding the end-consumer
goals, and meeting customers’ needs
for more sustainable, lower carbon
solutions that don’t add complexity to
the build. At the same time the division
has taken a comprehensive look across
all business units, reviewing its own
operations from supply chain through
to product, and making some changes
all to deliver the lowest carbon products
on the market. This has included using
renewable energy sources, recycled
water, reducing carbon in their supply
chain through moving freight from
roads to sea, along with the introduction
of electric vehicles including the
country’s first electric concrete mixer
and an electric 90-tonne dump truck at
Winstone Aggregates®.
Another step on this carbon reduction
journey was the launch of EcoSure®
cement, which, produced by Golden
Bay®, is the lowest carbon general
purpose ‘GP’ cement in the New
Zealand market.
“The development of EcoSure®
represents an example of creating a
sustainable circular economy - make,
use, reuse and recycle,” says Nick
Traber, Chief Executive Concrete.
This has been achieved by replacing
a significant proportion of coal
with alternative fuels such as used
tyres and construction waste in the
manufacturing process, as well as using
the latest binder technology.
In FY23, Golden Bay® diverted close to
100,000 tonnes of waste from landfill
by coprocessing end-of-life tyres,
construction waste and pond ash.
Golden Bay® also introduced EcoZero®,
New Zealand's first carbon neutral
cement, made with EcoSure®, the
remaining carbon is offset through
quality third-party verified carbon
credits sourced and cancelled by Toitū
Envirocare.
EcoSure® is also being used by
Firth® to make EcoMix®, meaning the
company is now able to offer a lower
carbon concrete at scale across New
Zealand. The aim is to make it it easy
for customers to achieve their lower
carbon construction goals with a
10-20% reduction in every batch of
EcoMix® compared to the Infrastructure
Sustainability Council (ISC) baseline.
The innovation doesn’t stop there.
Golden Bay® has also partnered with
Genesis Energy to address the issue
of bottom ash waste product at Huntly
Power Station. This waste stream that
was previously taken to landfill, is now
being incorporated as material into the
cement, effectively upcycling waste as
an ingredient.
“Contributing to waste reduction at a
large scale for the benefit of all New
Zealanders is incredibly rewarding.
It is a win-win for the environment
and for Kiwis who want to use more
environmentally friendly products,” says
Gian Raffainer, Golden Bay®’s General
Manager.
14
Fletcher Building Limited Annual Report 2023 Contributing to waste reduction at a
large scale for the benefit of all New
Zealanders is incredibly rewarding.
It is a win-win for the environment
and for Kiwis who want to use more
environmentally friendly products,
Gian Raffainer, General Manager Golden Bay®.
We are prioritising cement decarbonisation.
Our carbon emissions per tonne of cement are
27% below the ISC 2020 baseline.
The Concrete division opened New Zealand’s
first commercial Concrete Innovation Lab in
Christchurch this year.
“Our Concrete Innovation Lab provides an
environment for our team to be bold and
creative so we can bring new products to the
market more quickly than ever before. In short,
it represents an opportunity to continue to solve
real-world challenges for our customers and
communities while improving the world around
us,” explains Nick.
Georgia Izzett of Golden Bay®.
15
Fletcher Building Limited Annual Report 2023 CUSTOMER
INNOVATION
& GROWTH
OPERATIONAL &
FINANCIAL PERFORMACE
Customer-centric digital solutions
making it even easier to do business with Laminex® Australia
Laminex® Australia credits its 'customer-first' approach and a mantra to always be ‘easy to do
business with’ for the impressive online growth of its laminex.com.au channel, Design Hub
tools and Trade Hub mobile app.
36%
Laminex® Australia
sales online
46%
of customers transacting
online monthly
49 NPS
for customer online
experience
The team also registered that customer
behaviours were moving towards an omni-
channel approach, meaning that individual
customers now prefer to use a combination
of showroom and online methods to engage
with their product ranges. This led the team
to check that interactions are unified across
all channels, including customer operations,
mobile app, webchat and e-commerce. The
team researched market leading innovation
opportunities and implemented sales order
automation in customer operations utilising
a robotic process automation solution.
Pivotal to these developments is a customer
panel that trials the new ideas.
New digital solutions are achieving a strong
uptake with 46% of Laminex® customers
now transacting on digital channels every
month,” says Amber.
“What’s more, thanks to being able to easily
monitor our customers’ spend, we know
they are ordering more products through
our digital channels than they were before.
And best of all, they have started calling us
with suggestions for what they want us to
focus on next, which truly is the best form of
customer engagement, evidenced by great
improvements in our NPS,” says Amber.
In just four years, the development of
an e-commerce platform has resulted in
Laminex® growing to become a highly digital
business in the Group, with its online sales
already representing 36% of total Laminex®
sales and a new way of doing business.
As a leading supplier of high-quality
laminates and surface materials, Laminex®
pins its e-commerce performance on
designing experiences based on customer
feedback and data insights around the
moments that matter for its customers.
Customers were invited to participate in
the design for the online tools. 856 people
provided detailed feedback on their ‘must-
haves’ to enhance their online experience.
Order status updates, delivery notifications
and the ability to edit orders themselves
came out as most important and, as such,
became the priorities for improvement.
Further, when compared with call centre
enquiry data and our Net Promoter Score
(NPS) tracking, we could see these were the
most common topics for discussion.
Laminex® Australia’s Head of Customer
Experience and Digital Transformation,
Amber McDougall, explains, that the
business has a history of innovating and
so it has aligned customer experience,
with digital transformation to accelerate
improvements for customers.
“We are committed to designing and
co-creating market leading experiences
with our customer communities to make
it easier to do business with Laminex®. We
have developed a range of digital solutions,
including a new Trade Hub mobile app that
enables busy tradies to place quick orders
on the go, a Specifier Design Hub that helps
architects and designers to manage their
many projects and samples, and we have
many new features being developed and
implemented by the expertise of our agile
digital team.”
16
Fletcher Building Limited Annual Report 2023 It is about bringing the wow factor, that comes from deeply
understanding our customers’ needs and daily challenges. They tell us
that they feel in control and they love the speed of placing a quick order
as it is locked into our product ordering system.
Amber McDougall, Head of Customer Experience and Digital Transformation at Laminex® Australia.
New online Laminex® tools making it much easier for
customers to browse, design, select and manage their orders.
17
Fletcher Building Limited Annual Report 2023 INNOVATION
& GROWTH
Driving sustainable
business growth
Over several years we have been deliberate in establishing a solid base on which we can drive growth
in the medium term. This has been achieved through a sustained focus on optimising our operating
discipline performance, while also maximising sensible growth opportunities where we see value for
our customers and the communities we serve.
$800m+
Investment programme
≥15%
ROFE
$120m+
full run-rate EBIT growth
Waipapa Pine Limited,
Kerikeri, Northland.
18
The focus for the Group has been to
identify attractive opportunities that
are both sustainable and scalable; that
will allow us to reach the number one
or number two market position; and
generate a sustainable competitive
advantage through the application of
innovative best practice.
Through this lens we have invested in
both new acquisitions and sensible
organic growth opportunities. Our
committed growth investment now sits
at over $800 million between FY23 and
FY26.
Joining the Group in June 2023,
Waipapa Pine Limited in Northland,
New Zealand is a well-run operation
specialising in industrial and structural
grades of sawn timber and includes a
renewable fuels business, Renewable
Wood Fuels. Geographically
advantaged with a sawmill in Kerikeri
and treatment plant in Whangarei,
Waipapa is highly valued by customers
from the Far North down to as far south
as Hamilton in the Waikato and has
good potential for production capacity
expansion, initially by 15%, and then
doubling output within the next three
years. The benefit of this flex is our
ability to distribute any demand outside
current customer requirements through
our PlaceMakers® network.
Further south, servicing the East
Coast and Lower North Island, the
acquisition of Tumu® completed in
FY23 expanded our New Zealand
Distribution division with six building
supply centres and a frame & truss
operation. This strengthens our
foothold in a strategically valuable
region where we have previously been
underrepresented by our PlaceMakers®
brand. Continuing to operate as Tumu®,
the transition has been a win-win for
customers and the community Tumu®
so proudly supports.
Our organic growth programme sees
us investing in our existing operations,
through identification of disruption
opportunities in the value chain. At
Comfortech®, we are expanding the
current Pink® Batts® manufacturing
site to triple production capacity
by 2027. This is a direct response
to the opportunity presented by
changes to the New Zealand Building
Code requiring increased thermal
performance in homes. Later this year,
Winstone Wallboards®’ will vacate the
Felix Street facility in Auckland. The
facility will be repurposed as a new,
highly automated PlaceMakers® frame
& truss operation, with increased
production by 2026.
Our current Laminex® site in Taupō is
expanding its base to include a $270
million new wood panels plant to
expand its product offering. Together
with the Waipapa acquisition, these
investments represent a significant
move into Wood Products for the
Group. It is a sector that fits with
strong customer preference trends in
our markets and that supports New
Zealand’s broader sustainability goals
through greater use of renewable
resources.
In Auckland, Winstone Aggregates® has
fast-tracked plans to extend its circular
and recycling solutions for customers
through the acquisition of The Urban
Quarry®. With sites located in the
west and south of the city, it provides
aggregate supply for city-based
construction sites while collecting
construction and demolition waste.
Fletcher Building Limited Annual Report 2023 We like the isolation and smaller relative scale of the New Zealand
and Australian markets. This allows for local players to be competitive
against importers and to be leaders on disruptive innovation.
Ross Taylor, CEO
Vernicia Kelleher at Waipapa Pine Limited in
the Far North of New Zealand. Specialising
in industrial and structural grades of sawn
timber, the plant provides sustainable wood
products, popular for modern building.
19
Fletcher Building Limited Annual Report 2023 INNOVATION
& GROWTH
Winstone Wallboards®
$400m new GIB® plant
Three and half years ago, Winstone Wallboards® made a commitment to invest $400 million to
build a state-of-the art plasterboard manufacturing and distribution facility in the heart of the
North Island, Tauranga.
A family affair
The construction of the new plant showcases the
breadth of Fletcher Building’s ability to operate
across the building and construction value chain with
14 of our businesses directly involved in delivering
the project alongside other local businesses.
Due to be fully commissioned by the end of
October 2023, the new technologically advanced,
highly automated, safer, and more sustainable,
Winstone Wallboards® manufacturing and
distribution facility will support New Zealand’s
building sector with an immediate increase in
capacity of the popular GIB® plasterboard range.
The well-considered design and layout of the
plant also promises opportunities for future
expansion, if required, in years to come.
In the meantime, the increased capacity will allow
the Winstone Wallboards® team to innovate and
bring new products to market.
45,000
tonnes
of gypsum (raw material) storage capacity
12.8
hectares
of land
20
Fletcher Building Limited Annual Report 2023 50%
more capacity
on the plasterboard
line than the previous
manufacturing plant
67,000
m2 of buildings
occupying approximately 50%
of the overall site
21
Fletcher Building Limited Annual Report 2023 INNOVATION
& GROWTH
SUSTAINABILITY
Winstone Wallboards® $400m new GIB® plant
(continued)
4,000
tonnes of structural steel
Improved sustainability
Environmental improvements
Designing in sustainability was part of Fletcher Building’s
decision to invest in the new Tauriko plant from the start.
The new plant is more energy efficient, and reduces carbon
emissions per square metre of plasterboard, supporting
Fletcher Building’s carbon reduction target of a 30% reduction
in carbon emission by 2030. There will also be onsite recycling
and reuse of process wastewater plus innovative technology is
providing the capability for waste plasterboard recycling.
Building from the ground up and
applying smart thinking has seen us
future-proof plasterboard manufacturing
in New Zealand. Our products will be
more sustainable, and through driving
the growth of Winstone Wallboards® we
will have a meaningful impact on the
regional economy and create positive
opportunities for the community.
Hamish McBeath, Chief Executive Building Products.
• 13% reduction in CO2e emissions per square
metre compared with the Auckland plant.
• Upward of 10% of total board volume can use
recycled gypsum.
• Zero manufacturing trade waste.
• Highly energy efficient LED lighting and smart
controls panels.
• Extra Low Energy Dryer - 15% more efficient
than Auckland plants dryer.
• Energy monitoring and reporting system to
monitor and maintain energy efficiency.
• Heat recovery systems linking multiple
processes to improve energy efficiency.
• Single site reduces truck movement between
warehouse facilities.
• Plant future-proofed to hold solar panels and
switch to alternative energy sources.
22
Fletcher Building Limited Annual Report 2023 30,000
m3 concrete
foundations, slabs and yard areas
Building a new
local team
• 97 employees.
• 70% of employees have been
employed from the Bay of
Plenty area.
• 30% of employees relocated
from Auckland to Tauranga.
• 30% of new hires at GIB®
Tauriko are female.
• 7,000 training hours
deployed since January 2023.
Part of the community
Winstone Wallboards® knew that moving to a new region
came with responsibilities to the local community.
Engaging with their new neighbours has been a priority
throughout the construction of the plant.
They connected early with local hapū, Ngai Tamarawaho
and Ngāti Hangarau, to understand what their aspirations
were. The local school, Taumata School, took on the role of
kaitiaki (guardian) of the site's whenua while construction
was underway and the team worked closely with local
employment agencies, including Priority One and Māori
training provider Solomon Group to find local talent to join
the team.
The new plant will bring significant benefit to the region,
both through employment and through the take up of
ancillary services needed to support a plant of this scale –
such as cleaning companies right through to engineering,
maintenance and logistics companies.
23
Fletcher Building Limited Annual Report 2023 INNOVATION
& GROWTH
CAPABLE & HIGHLY
ENGAGED PEOPLE
Leading a New Zealand
manufacturing generational project
Stewart Vaughan has walked every step of the
five and a half year journey to design and build
Winstone Wallboards®’ new plant. He’s also quite
possibly walked every inch of the expansive
67,000 sqm set of buildings!
As project lead, Stewart steered the project from feasibility
study, design, consenting, business case, land acquisition,
procurement, plant construction oversight through to the the
installation and commissioning of the manufacturing plant.
Following Board approval in December 2019, the project
quickly took shape. Four months later COVID-19 hit along with
disruptions to global procurement, shipping and ongoing
supply chain challenges. Fast-forward three years, the project
is completing on-time and on-budget with the plant set to be
fully commissioned by the end of October 2023.
“To lead a greenfield project of this size and scale and be part
of a team delivering an iconic New Zealand manufacturing
legacy for the next 50 years has been the opportunity of a
lifetime.” says Stewart. “Getting through to the commissioning
of the plant and manufacturing that first piece of plasterboard
has been cause for huge celebration and relief.”
“Aside from dealing with the impacts of COVID-19, the biggest
complexity by far has been the onsite building construction
works’ interface with plant and equipment installation. These
were two huge projects in themselves, inter-meshed with each
other and led exceptionally well by my Capital Works Manager
Nick Stenson,” Stewart says.
Developing strong community partnerships and relationships
has been pivotal to the project’s success, and Stewart is
particularly proud of the enduring relationship forged with
local iwi and hapū, Ngai Tamarawaho and Ngati Hangarau.
“At our first meeting, Winstone Wallboards®, General
Manager, David Thomas and I stood alongside mana whenua
representatives on a hill right in the middle of where the site is
All the passionate people we’ve worked
with along the way have come to
understand that Winstone Wallboards®
is more than just a manufacturing and
distribution business. We want to have a
real, positive impact on this community.
Stewart Vaughan, Project Lead – Winstone Wallboards® Tauriko build.
now and genuinely committed to delivering a positive impact
for the community,” Stewart says.
“Throughout the project we worked with so many passionate
people and it gives me great satisfaction that this has allowed
us to show them Winstone Wallboards® is more than just a
new local business. We are in fact part of the community and
committed to doing our best to support it now and in the
future.”
Stewart praises the commitment of his project team who in
most cases uprooted their lives to move to Tauranga to help
deliver the facility as well as the support and governance
provided by the Winstone Wallboards® senior management
team, in particular David Thomas and Simon Cooper.
“A project of this scale takes a village,” he says. “No one person
can deliver a project of this size and scale alone. It’s about
involving the right people, with the right passion, and giving
them the autonomy to do their jobs and as leader, having
intimate knowledge across all parts of the project to be able to
guide and support them.”
He says it’s with satisfaction, not sadness, the project is
coming to a close.
“The new plant is a legacy that will take Winstone Wallboards®
and New Zealand into the future. Not only that, but it will enrich
the region by creating wealth, economic benefits, exciting job
opportunities and a strong sense of community.”
24
Fletcher Building Limited Annual Report 2023 Sustainability
Winstone Aggregates®' Head of Sustainability, Ian Wallace (front) and Mary-Jane Vavetuki,
testing water near the Pukekawa Quarry. The team are at the centre of developing a new
biodiversity strategy for the Concrete division, which will start in FY24.
25
Fletcher Building Limited Annual Report 2023 SUSTAINABILITY
Leading in sustainability
We have a genuine commitment to making a positive impact environmentally and socially. With our
purpose, ‘Improving the world around us through smart thinking, simply delivered' in mind, we have
set ourselves some ambitious goals to make a difference.
16%
reduction in carbon
emissions since FY18
A-
CDP ‘Leadership’ level
for management of
Greenhouse Gas (GHG)
emissions
46%
Coal substitution
with lower emission
alternatives
We engaged with
suppliers covering
65%
of our Scope
3 emissions to
encourage them to
reduce their emissions
Fletcher Building Limited
Building Products
Sustainability
Yearbook Member
S&P Global ESG Score 2022
Within our overarching sustainability strategy, we have set long-term goals to work
toward a net positive environmental impact, lead the way in offering sustainable
products and building solutions, and will continue our efforts to reduce waste as part of
committing to a circular economy approach across our business. We are also focused
on nurturing a safe, diverse and inclusive workplace and putting our community at the
heart of everything we do.
You can read about how we have lifted our safety performance in the ‘Zero injuries,
every day’ section of this report, and find more detail about our people initiatives and
some of the community initiatives the Fletcher Building businesses have been involved
in over the past year in the ‘Our People’ and ‘Our Communities’ sections.
Net positive environmental impact
We understand that that our business activities can have impacts on the environment.
While we expect this will always be the case to some extent, our long-term goal is for the
balance to be positive. This means we are putting significant effort into actions that can
create meaningful change.
We have set targets and we are progressing against the goals in our sustainability
strategy, with a particular focus on mitigating climate change by reducing our
greenhouse gas emissions(1).
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
FY18 FY19 FY20 FY21
FY22
FY23
Scope 2 emissions (t CO2e)
Scope 1 emissions (t CO2e)
Scope 3 emissions for FY23 were 1.45 Mt CO2e
February 7
As of , 2023.
Position and Score are industry specific and reflect exclusion
screening criteria. Learn more at spglobal.com/esg/yearbook
Our combined Scope 1 and 2 emissions in FY23 were 1.021 Mt CO2e, which is 4% lower
than FY22 and a reduction of 16% from our FY18 baseline year. This puts us well underway
to achieving our Science-based Target of 30% reduction by 2030 and moves us toward
our long-term goal of net zero emissions by 2050.
(1) Refer to page 80 for further details on the Greenhouse Gas (GHG) emissions calculation.
26
Fletcher Building Limited Annual Report 2023
Tyler Sharratt from the Winstone Aggregates® Environmental Team at Pukekawa Quarry.
We have a carbon reduction roadmap in place across our
businesses, which we use to identify the areas we can achieve
the most significant reductions. For us, this involves focusing
on our major sources; our cement operations at Golden Bay®,
electricity used in our Australian businesses, and fuel used as
part of our construction operations in New Zealand. We made
solid progress in all these areas in FY23.
• At Golden Bay®, we have reduced our reliance on fossil
fuels, substituting 46% of the energy demand from coal
with waste wood and waste end-of-life tyres in FY23. This
emissions reduction is part of how we’ve been able to
produce EcoSure®, our lower carbon cement. Carbon
emissions from Golden Bay® reduced by 17,000 t CO2e from
FY22 to FY23.
• In Australia, we have an established plan to move toward
greener electricity across our operations. This includes
purchasing a proportion of offsite renewable energy for our
Australian operations, and in FY23 we started installation
of rooftop solar systems on three of our larger facilities
in Victoria and Queensland. These actions, together with
increasing renewable content of grid electricity in Australia,
reduced emissions by over 15,000 t CO2e from FY22 to
FY23. In FY24 we will continue to review renewable energy
and energy efficiency options for our Australian businesses.
• In our Construction operations, the most significant action
we can take to reduce direct emissions is to reduce fuel
emissions through low emission vehicles. We are well
underway, with 18% hybrid vehicles in our Construction
fleet of cars and utility vehicles. In FY24, we’ll also be using
low emission options within our heavy vehicle fleet - our
team at Brian Perry Civil® is planning our first zero emission
construction crew, with an electric excavator, tipper and
wheel loader. We will be trialling electric equipment in our
Concrete division as well, with our first electric dumper in
our quarry business, Winstone Aggregates®, and an electric
concrete mixer in Firth®.
We recognise that for our Construction operations, what we
build and the energy used during operation can be more
significant than our direct emissions during the construction
process. We talk about what we are doing to produce lower
carbon building products, and buildings, in the next section of
this report.
Working with our supply chain to support reduction in their
emissions is another significant action we can take and is
critical to our long-term goal of reaching net zero emissions.
To reduce our Scope 3 emissions, we are working directly
with the highest emitters in our supply chain to quantify the
emissions associated with the products and services they
provide us, and to understand their reduction pathways. We
are starting with the most significant suppliers who provide
us with steel products, logistics and transport services,
representing an estimated 57% of our Scope 3 emissions.
In addition to direct engagement with our highest emitters,
we provide free access to Carbon Disclosure Project (CDP)
supplier engagement programme for 40 suppliers, who
represent a further 8% of our emissions, to report and reduce
their own emissions.
In FY23, our Scope 3 (supply chain) emissions were 1.450 Mt
CO2e, an increase from FY22. This increase reflects improved
information we have gained because of engaging directly with
our supply chain. We were proud to be recognised for our
supplier engagement by the CDP in FY23 with an ‘A’ rating for
our supplier engagement on carbon reduction.
As we progress toward net zero carbon, we’ll continue to work
with the Science-based Targets initiative and with the Global
Cement and Concrete Association’s net zero workstream to
understand what the pathway to net zero looks like for us.
We know that a range of solutions will be needed to fully
decarbonise our operations, and some of these solutions don’t
exist at present. We will track innovation and progress in our
industry, while remaining firmly focused on what we know that
we can do now.
Beyond carbon reduction, in FY23 we began working with
Nature Positive on biodiversity commitments we can make
within our quarry operations, and we will implement this work
in FY24.
27
Fletcher Building Limited Annual Report 2023 SUSTAINABILITY
In our Residential and Development
division, the Low Carbon home (LowCO)
pilot is now underway with the build at
Waiata Shores, South Auckland. In May
23 the LowCO Home project team won
the Fletcher Building Excellence Awards
Better Together: Exceptional Business
Collaboration award.
Website: scan for more
information on the
LowCO home, and a
video in timelapse
71%
Product revenue from
sustainably certified
products
Leading the way in sustainable products and solutions
We believe the future of our sector relies
on using and developing more sustainable
building products and solutions. We are
proud of the progress we have made in FY23.
the equivalent standard-built home over its
lifetime. The benefits extend into water and
energy efficiency, meaning it is warmer, drier
and cheaper to operate.
Our product revenue from sustainably
certified products has increased
approximately 20% over the past three
years to 71% in FY23, well on the way to
our goal of 75% by FY26. When we refer to
‘sustainably certified’ products, we mean
products made or sold by our manufacturing
businesses that hold a credible, third party
verified, sustainability certification, that is
recognised in green building and sustainable
infrastructure ratings.
We focus on changing our own products, and
also on working with our supply chain.
In FY23 we recertified several products from
our Iplex® Australia pipe range, and updated
the Environmental Product Declaration
for our cement, now known as EcoSure®,
with information demonstrating its lower
embodied carbon content. We also worked
with suppliers to encourage certification of
their products where we on-sell those in our
product ranges, and pleasingly our major
steel suppliers increased the number of
certifications they held this year.
As well as sustainably certified products, our
goal is to provide lower carbon and more
sustainable building solutions into the market.
We began construction on our LowCO pilots
in FY23 with a freestanding 3-bedroom
family home and three 3-bedroom terrace
homes being built in Auckland. LowCO is
designed to use seven times less carbon than
LowCO has been designed as a smart home.
Building performance will be measured
to help the occupants to understand and
optimise the benefits of their new home,
and to improve our design.
LowCO is an industry leading sustainable
housing offer and has already opened
up a number of new product offerings
and opportunities for us to partner with
likeminded industry partners. In FY24, we
will integrate key energy efficiency and low
embodied carbon learnings from LowCO into
our standard build.
Beyond our direct impacts and building
solutions, we want to drive positive change
in our industry. We are active members of
industry associations who focus on more
sustainable products and building solutions,
including the New Zealand Green Building
Council, the Infrastructure Sustainability
Council, and the Global Cement and
Concrete Association.
To help our customers understand and
use more sustainable products, we help
customers choose lower carbon options
for cement and concrete by providing our
Firth carbon calculator, we published our
'Understanding Environmental Product
Declarations’ explainer in FY23, and we
are working with partners to create an
Environmental Product Declaration library
for New Zealand.
28
Fletcher Building Limited Annual Report 2023 60%
Waste diverted
from landfill
In three years, a range of focused initiatives have enabled
Fletcher Living® to increase waste diverted from landfill
from 10% in 2019 to over 40% in the year to December
2022. In October 2022 the team were recognised for
these efforts in WasteMINZ National Excellence Awards.
Circular economy commitment across our business
Our commitment to the circular economy is
a core part of our sustainability strategy, and
one as a portfolio of businesses across the
value chain, we are in a unique position to
lead the way on.
To drive this commitment, we are
collaborating across all our operations to
find opportunities to reduce or reuse waste
and we are also opening doors to work with
other businesses who have a common goal
to drive positive environmental change
through the circular economy.
We are already making good progress. In
FY23 we achieved 60% diversion of waste
from landfill, an improvement from 51%
in FY22.
We have product stewardship schemes
in place for plasterboard in New Zealand,
and our Tauriko plant will expand our
ability to include recycled content into new
plasterboard. Our ‘Pipeback’ consumer
take-back programme has been running
for over a year for a range of pipe products
and fittings in Australia. In FY24 we will be
expanding this in New Zealand with a trial
of collection stations on customer sites to
enable off-cuts of PVC and PE to be returned
to our production site for re-processing into
new pipe.
We were proud to receive a WasteMINZ
National Excellence Award for Fletcher
Living in FY23 which recognised our
outstanding contribution to minimising
waste to landfill generated in the
construction of homes. Fletcher Living®
addresses one of the main waste streams
from housing construction by implementing
segregation of plasterboard at all house
building sites in Auckland, enabling the
gypsum in plasterboard to be recovered and
reused. Fletcher Living also began collecting
hard to recycle soft plastics which will be
made into SaveBOARD, a 100% recyclable
alternative to plywood. These initiatives
add to the waste reduction from the one
in six homes delivered to Fletcher Living®
by Clever Core®, in which the approach of
designing out waste produces much less
waste per home than a traditional build.
Teaming up with other businesses to grow
the circular economy is essential and
rewarding. We are pleased to help others
find new ways to reduce waste by using their
waste as a raw material. As an example, our
partnership with Genesis will see 20,000
tonnes of pond ash from Huntly Power
station diverted from landfill and used in
our cement manufacturing process at
Golden Bay®.
Business collaboration and a commitment
to circular economy solutions is supported
by acquisition of The Urban Quarry®. The
Urban Quarry® caters specifically for the
needs of urban development, providing a
dual service hub of aggregate supply for
city-based construction sites, and collection
of construction and demolition waste. It will
provide the platform to capture sufficient
waste quantities at a central point to enable
recycling on an efficient scale and will
accelerate access to expanded circular
economy and recycling solutions for our
customers.
29
Fletcher Building Limited Annual Report 2023 Digging in for our
communities
Our businesses are encouraged to ‘act local’ to support the communities they work in. These
contributions take many forms, big and small financial contributions, national and grassroot
sponsorships, volunteering and product donations. The commonality is to make a positive
difference to the lives of others.
Below is a snapshot of some of the contributions Fletcher Building businesses made
throughout the last year.
$105,000
Habitat for
Humanity donation
Comfortech® (plus
team built 12 new beds
for Northland families)
15 Volunteers
Ashburton River
Clean up
Iplex® New Zealand
$40,000
Mens Shed Donation
Stramit®
$250,000
Red Cross donation
Hawkes Bay Recovery
Pipes donated
JCU Caraplace Turtle
Research
Iplex® Australia
$160,000
Clubhouse Rescue
PlaceMakers®
$25,000
New Zealand Asthma and
Respiratory Foundation
annual donation
Comfortech®
$25,000
Wish4Fish Charity
Winstone Wallboards®
$107,167
Southern Scooter
Challenge for
Hospice Southland
and The Charity
Hospital
PlaceMakers®
$32,815
Make a Wish
Fundraiser
Mico®
$36,615
Mates in Construction
partnership
PlaceMakers®
$2,500
product donated to
Awapuni Primary School
bike park - Gisborne
Firth®
30
Fletcher Building Limited Annual Report 2023 $20,000
Portland School
Sponsorship
Golden Bay®
$30,000
GIB® donated to
help build Heart
Foundation Lottery
homes
Winstone Wallboards®
$7,500
Central Northland
Science and Tech
fair Sponsorship
Golden Bay®
$80,000
WaterAid Australia
partnership
Iplex® Australia
$10,000
Westpac Rescue
Helicopter
Pacific Coilcoaters
GIB® plasterboard
donated
to support 20 degrees project
repair homes and make them
healthier & warmer
Bay of Plenty
$1,500
Concrete for
Gisborne’s
Children’s Hospital
Firth®
$1,500
Fielding
Grassroots and
Youth Rugby
Firth®
Concrete offcut
planter boxes donated
to Hamilton kindergartens,
schools, and community groups
Humes®
$41,000
Oke School Garden
sponsorship and working bee
at Mangapikopiko School &
Oranga School
Fletcher Living®
$50,000
product donated to House for Karen
Cancer Retreat, Taranaki and Sanctuary
Mountain Ecological Park, South Waikato
Pacific Coilcoaters
$1,900 donated
plus volunteer time
Sustainable Coastlines clean
up event at Avon Ōtākaro River
Fletcher Living®
31
Fletcher Building Limited Annual Report 2023 People
32
Fletcher Building Limited Annual Report 2023 Members of the Pride Group, Eric Yu (left) and Charlie Gray (second
from right), working on new initiatives. The group have led policies
to increase workplace inclusivity, such as new Transitioning at Work
Guidelines and related Gender Affirmation Leave.
33
Fletcher Building Limited Annual Report 2023 CAPABLE & HIGHLY
ENGAGED PEOPLE
Our People
We want Fletcher Building to be a place where everyone truly feels they belong. The foundation for
this is a strong culture which celebrates our diversity while bringing us together as teams. This kind
of inclusivity supports our people develop and grow great careers.
We believe delivering an exceptional experience for the talented people working for us is
fundamental to our ability to deliver excellence for our customers and communities.
Connecting with our people
Measuring how our people think and feel about their
experience of working at Fletcher Building is important to
understanding our ability to enhance their experience.
In 2023 we changed our employee engagement methodology
to the employee Net Promoter Score (eNPS). In 2023 our eNPS
score was 26. To put this in context this result is at the median
for global organisations and approximately three points higher
than our 2022 result. Organisations in the global top quartile
score 40 or above.
A key driver of people engagement across our business is
recognising their contribution to our collective success.
In 2023 we celebrated the return of the Fletcher Building
Excellence Awards, our groupwide awards programme
centred on recognising high performing teams and
individuals. We received more than 200 high quality
nominations, each sharing impressive business outcomes
and customer impact, all while demonstrating the power of
our organisational values. Thirty-three finalists were celebrated
for their contribution to Fletcher Building at a very special
night in Auckland.
Driving inclusion
We understand that creating space for our people to live
authentically and be themselves at work is vital to support
them to do their best work. It is for this reason, and as a proud
Rainbow Tick accredited organisation, we have implemented
a number of small changes that can make a big difference to
a feeling of belonging.
We are pleased that 253 parents in the past year accessed
our gender-neutral parental leave policy. These parents say
they are delighted to know they can provide a great start for
their children through the improved financial benefit and
having greater return to work flexibility.
While we have focused on improving our pay parity position
over the last three years and made good progress, some of
our previous gains have been eroded. This was mainly due to
the tight labour market and rising wages in an already male
dominated industry, increasing our pay parity gap from 3.5%
in FY22 to 4.2%. We will undertake a comprehensive review of
our practices in FY24 and introduce enhancements to close
the gap.
Led by our Pride employee action group, Gender Affirmation
Leave and Transitioning at Work Guidelines were introduced
in recognition that gender transitioning can mean different
things to different people and included our Pride and Rainbow
Commitment into new employee inductions.
Coming out at work is daunting and scary,
there can be a lot of mental anxiety; like
wondering if the people you’re working
with will accept you when they hear that
you’re transitioning, wondering if and
how your working life may change.
Having helpful information out there
is really valuable for both sides of a
workplace transition.
Jacob Hassan, Customer Service Dimond Roofing, Wellington.
Growing and recognising talent
We believe Fletcher Building is a place where our people can
grow their career and develop personally and professionally.
To be true to that belief, in FY23, we invested over $6.8
million and 195,000+ hours in dedicated learning and
development with a specific focus on key areas aligned
with our overall purpose and strategy. These include
nurturing high-quality leadership, fostering our culture of
safety excellence and enhancing operational capabilities
in areas such as customer experience, pricing and sales. In
addition to this we continue to invest in our people’s ongoing
recurrency and compliance training to ensure they stay safe
on the job.
The investment in our award-winning1 Protect Safety
Leadership Programme has developed more than 3,000 fully-
fledged safety leaders. These leaders are now successfully
passing on their knowledge and experience by introducing
their own teams to the power of safety leadership through
our frontline safety programme. This programme, Power
Up, has been the recipient of more than 25,000 of training
hours across the Group in the past 12 months, supporting
a collaborative workforce of safety-passionate people who
have achieved our best ever safety performance.
1 Safety Leadership Programme winner of Best Leadership Development Programme at the New Zealand Association for Training and Development Awards 2022.
34
Fletcher Building Limited Annual Report 2023
Sustainability Manager, Jamie
Rodriguez, and team at Laminex®
New Zealand distribution centre.
26
eNPS
Employee Net Promoter Score
195,000
training hours
undertaken
253
people accessed
enhanced parental
leave policy in FY23
Transitioning
at Work
guidelines and Gender
Affirmation leave introduced
Video:
Excellence
Awards
In addition to employee training
opportunities and on-the-job
development, the Fletcher Building
Employee Education Fund (EEF) offers
a range of benefits and support.
In FY23, 173 employees accessed
support for study, and close to 400
families received extra tuition offered
by the fund. Additionally, 127 children
participated in highly regarded
development opportunities for young
people run by Outward Bound, the
YMCA and Artz on Show.
Fletcher Building has a strong history
of growing great leaders inhouse
and in 2023 we re-designed our
programme to develop mid-level
leaders to enable a greater emphasis
on innovation for growth, and to
foster better inclusion and diversity
in our teams. 73 established leaders
participated in Gear Up this year.
Delivered through a mix of live events,
self-paced learning, coaching and
small group work, the programme
focuses on helping create a culture
of innovation, experimentation
and continuous improvement. The
programme will also drive performance
in challenging environments, build
leadership bench strength, as well
as support skills to deliver change
programmes and improve adaptability
and resilience in the business.
Encouraging female leaders
Increasing the presence and impact of women in our operations continues to be
a focus area. During the past 12 months, 296 more women have been placed in
operational roles across our businesses. Typically, women have been less well
represented in our male-dominated industry. We believe that to grow a healthier,
more diverse industry we have a responsibility to encourage women to take up
a rewarding career within the industry. We have set an ambitious target to have
30% of women in leadership by FY27. Our businesses have each committed to
their own action plans to achieve this goal, which features a mix of development
opportunities, flexible working conditions, cadet programmes, mentoring and
recruitment strategies.
More women are taking on operational leadership roles across Fletcher Building.
This year we have 36 more women leading operational teams, this means 15.7%
of our operational leaders are now female, up from 14.4% in FY22. Women across
Fletcher Building are benefiting from programmes designed to build their leadership
confidence and skills. In the past 12 months, 90 women took part in leadership
mentoring. Participants engaged with senior male and female mentors, with
the mentors themselves commenting on how effective the programme was in
helping them really engage with the benefits that greater gender balance brings to
leadership. In Australia, 10 emerging women leaders took part in the Rise Up pilot.
Rise Up is designed to set participants up with the skills they need to have successful
careers through an interactive programme including psychometric assessment to
raise insight, individual coaching and facilitated workshops.
35
Fletcher Building Limited Annual Report 2023 CAPABLE & HIGHLY
ENGAGED PEOPLE
Growing a pipeline
of female talent
At Fletcher Building we are focused on making our business a great place for women to work and
grow, personally and professionally. There are plenty of opportunities for women at all stages of
their careers to grow their leadership, and we are working on targeted initiatives to attract more
women into our industry.
Here we share stories of three women at different points on their career journey, demonstrating
how diverse and rewarding working at Fletcher Building can be.
90
emerging female leaders
in mentoring activities
22.6%
women in operational roles
378
female operational
leaders across the Group
AURELIE LE GALL
Fletcher Living® branch manager – Auckland North
Aurelie Le Gall’s progression at Fletcher Building
demonstrates what is possible with an open mind and the
courage to step into a new career path within the Group.
She initially joined Fletcher Building as talent acquisition
manager, where she gained insight into all the different
business units of Fletcher Building. After going through
a leadership development programme, she shifted her
career path and accepted an opportunity to join Fletcher
Living® as Operations Manager – Residential.
One year later, she was promoted to Fletcher Living®
Manager – Auckland North, a senior, operational role
leading a branch team that designs, procures, builds and
sells residential homes.
Aurelie mentors other females at Fletcher Living® and, as a founding member of our
Group-wide employee action group, The Equality Network, is one of our greatest
champions for encouraging women to seize leadership opportunities within the operating
side of our business.
“People tend to focus on career progression in a vertical sense, within your function. But
there are only so many leadership roles available if you are just looking to get the next job
title in the space you are in,” Aurelie says.
“We have a deep pool of talented females in functional roles across the business, who
would be amazing leaders in operational roles, if they’re open to considering a different
path.”
Aurelie loves connecting people and inspiring them to think about different roles and
opportunities on their career journey.
Her inspiration has made a difference, forging a path for three female site managers within
Fletcher Living®. There were none when she arrived.
Under Aurelie’s leadership, work will begin in late 2023 on ‘BUILDhers’, the first all-female
build where women will lead the planning, designing, building, marketing and selling of a
new Fletcher Living® home at Whenuapai.
“Few businesses would match the diversity of Fletcher Building. There are a phenomenal
range of career paths you can take within the Group, which keeps it interesting. I
encourage any female wanting to grow their career to be open to the many opportunities
that can present themselves working in such a diverse set of businesses,” Aurelie says.
In May, Aurelie was awarded the Fletcher Building Excellence Award for Better Together:
Inclusion and Diversity Champion and the CEO Supreme Award.
36
Fletcher Building Limited Annual Report 2023 LUCY CLARK
Crane Operator, Brian Perry Civil®
Lucy Clark scaled new heights
when she joined Brian Perry
Civil® as its first female crane
operator.
The 32 year-old began her ten-
year construction career as a
piling foundations apprentice
in England and moved to New
Zealand with her family to join
Brian Perry Civil® in 2022.
The qualified crawler crane
operator and site crew
supervisor has since worked
across a range of large
construction projects including the RNZAF Base in Whenuapai
and the Snells Beach wastewater treatment plant.
Lucy was used to being the only woman on the construction
site in the UK and says it’s encouraging to see more females in
the construction industry, generally, in New Zealand.
MARY-JANE VAVETUKI
Environmental coordinator
– Winstone Aggregates®
New graduate Mary-Jane Vavetuki is embracing every learning
opportunity as she takes her first steps in her career.
The 21 year-old joined the teams at Winstone Wallboards®
and Fletcher Living® over summer on the TupuToa internship
programme for Māori and Pacific tertiary students.
She then secured a role as environmental coordinator at Winstone
Aggregates® where her work covers site rehabilitation planning,
compliance management, planting and plant maintenance,
pest control, sponsorship and environmental monitoring and
reporting. While she is based at head office, she visits sites up to
twice a week to meet with quarry managers, contractors, iwi and
ecological trusts.
Winstone Aggregates®’ positive biodiversity strategy is a new
project she is involved with and is excited for the year ahead.
“I have felt so supported coming in as a graduate and have been
surrounded by people willing to help me along the way. I also
meet with my development manager fortnightly to talk about my
role and career,” Mary-Jane says.
With the approach of always saying yes to opportunities, she is
now enrolled in a Tikanga Māori course through Fletcher Building,
to strengthen her understanding of Māori culture and community
relationships with iwi.
Mary-Jane will return to university part-time next year to complete
her Bachelor of Advanced Science (Honours) in Ecology with the
support of the Employee Education Fund that supports employees
returning to university by paying a portion of the fees.
“I am excited to return to study, as I can see how everything fits
into place within the workplace. So much of what I’m doing at
work relates to what I’ve studied,” she says.
Her message to other young females embarking on construction
industry careers: “I say just go for it. Put yourself out there and
keep pursuing what you want to do and what makes you happy.”
“When I arrived here, a lot of the team on site had never worked
with a female crane operator before. I’m often the biggest joker
on site as I love to have a laugh and some banter, and they
probably didn’t know how to take me, so it has been a learning
curve,” Lucy says.
Lucy is grateful for the career support females receive within
Fletcher Building. For her this could include furthering her
development towards management and site supervision.
For now, she takes every chance to promote the opportunities
that construction careers offer to women.
“I have a five-year-old daughter and I tell her that when it comes
to her career, she can do whatever she wants. It is important to
educate kids in this way when they are young and to get in and
show them what they can be capable of,” Lucy says.
“I always say, being a female should not affect what you want
to do in life, even in a male-dominated industry. The younger
generation should never question or doubt themselves and
their abilities and they should be encouraged to follow their
dreams. Do what you want to do. Nothing should stop you.”
Mary-Jane Vavetuki is getting stuck in early in her career, as
a member of Winstone Aggregates® Environment team. She
is looking forward to continuing her study and taking further
development opportunities offered by the business.
37
Fletcher Building Limited Annual Report 2023 CAPABLE & HIGHLY
ENGAGED PEOPLE
Embracing cultural diversity
across our business
Video: Winstone
Aggregates® Kotuia
Workshop
Whakatupu's impact can be felt across our businesses. Winstone Aggregates®
have adopted the Whakatupu-initiated rōpū (project) Kotuia programme, which
is supporting senior leaders to develop deeper understanding and cultural
capability. This will enhance the ongoing development of relationships with
mana whenua across the regions we operate.
38
Fletcher Building Limited Annual Report 2023 36
Māori/Pasifika
participants in
Whakatupu-ia tupu
200+
Māori leaders
developed through Whakatupu
We have found the development of our first
Reflect Reconciliation Action Plan to be a
thoughtful and reflective process for us and
lays the foundation for listening and learning.
Dean Fradgley, Chief Executive Australia
As a diverse business, with 29 cultures represented in our
operations in New Zealand, Australia and the South Pacific, we
recognise the importance of fostering a culture that celebrates
our differences.
In Australia, an important first step forward was taken this year in establishing
Fletcher Building’s own Reconciliation Action Plan (RAP), a significant milestone
for our Australian division and the Group as it embraces its role in the country’s
reconciliation journey.
Now endorsed by Reconciliation Australia (the lead governing body for
reconciliation in Australia) the plan sets out our commitment to tangible and
impactful actions, both in the present and the future, to actively contribute
to the ongoing process of reconciliation. To signify this important first step, a
piece of artwork was commissioned from a First Nations artist to explore and
represent Fletcher Building’s values, people, customers and community.
Similarly in Aotearoa New Zealand, our dedicated Māori strategy Te Kākano, is
now in place to help our business continue to embrace and adopt the Māori
identity and world view into our business practices, which will in turn create
stronger relationships with mana whenua in the community.
We start with attracting diverse talent at the start of their careers. In New
Zealand, we continued our support of First Foundation with eight scholarships
and by employing nine Tupu Toa interns in the last year, each initiative set up to
create career opportunities for Māori and Pasifika tertiary students.
In June we celebrated our landmark Whakatupu dedicated Māori leadership
programme as the final 16 tauira (students) graduated, before the programme
opens up to include Pasifika leaders in the first FY24 intake. Over seven years,
Whakatupu has grown Māori leaders right across our organisation, many of
whom have enthusiastically gone on to continue building internal connections
via our Māori leadership network Tātai.
Whakatupu-ia tupu is a combined Māori / Pasifika leadership programme, and
builds on the success of its predecessor Whakatupu. Cross-cultural values
form the basis for holistic and indigenous leadership, resilience and wellbeing
learning to develop prosperous, confident and resilient leaders. The refreshed
curriculum will include the addition of a fifth wananga (training session) specific
to principles of Pasifika leadership and led by Pasifika people.
39
Fletcher Building Limited Annual Report 2023 Group Performance
Quarry manager, Lance Gosling (right),
and digital channels manager, Michelle
Starns, onsite at Pukekawa Quarry,
northern Waikato.
40
Fletcher Building Limited Annual Report 2023 41
Fletcher Building Limited Annual Report 2023 Group Performance
Revenue
EBIT before significant items (1)
Significant items (2)
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
Investments
Revenue
Building Products
Distribution
Concrete
Australia
Materials and distribution divisions
Residential and Development
Construction
Other
Gross revenue
Less: intercompany revenue
External revenue
2023
NZ$M
8,469
798
(301)
497
(60)
(94)
343
(89)
254
(19)
235
452
30.0
57.7
34.0
388
461
183
2023
NZ$M
1,443
1,824
1,085
3,016
7,368
607
1,319
10
9,304
(835)
8,469
2022
NZ$M
8,498
756
(54)
702
(58)
(46)
598
(159)
439
(7)
432
484
53.5
60.0
40.0
592
409
12
Restated (3)
2022
NZ$M
1,458
1,789
1,033
2,806
7,086
692
1,559
11
9,348
(850)
8,498
(1) EBIT before significant items is a non-GAAP measure used by management to assess the performance of the business and has been derived from Fletcher Building
Limited’s consolidated financial statements for the period ended 30 June 2023. Further details of Significant items can be found in note 2.2 of the consolidated financial
statements.
(2) Further details of Significant items can be found in note 2.2 of the consolidated financial statements.
(3) The comparatives have been restated as a result of a change in segmental classification of Humes Pipeline Systems which was previously under the Building Products
division has been re-presented within the Concrete division. Further details of the change can be found in note 4 of the consolidated financial statements.
Note: Revenue includes income from the Group's Vertical Buildings Business (2023: $101 million; 2022: $265 million), which the Group is in the process of exiting. The
New Zealand International Convention Centre and Hobson Street Hotel (NZICC) represent the last projects to complete in this sector. EBIT before significant items,
however, excludes any earnings from these projects.
42
Fletcher Building Limited Annual Report 2023 Group Performance (cont.)
Focus across NZ & Australia
Revenue weighted to market
Value chain revenue
7% Residential and Development
$3b revenue
22%
Infrastructure
26%
Commercial
52%
Residential
15%
Construction
32%
AU Materials
& Distribution
46%
NZ Materials
& Distribution
$5.4b revenue
Group
EBIT* ($m)
756
798
668
598
7.2%
Group
EBIT* Margin
8.9%
9.4%
8.2%
Materials & Distribution divisions
EBIT* Margin
9.4%
8.0%
8.3%
6.6%
4.5%
160
2.2%
FY191
FY202
FY21
FY22
FY23
FY191
FY202
FY21
FY22
FY23
FY191
FY202
FY21
FY22
FY23
* Before significant items
1 FY19 is a pro forma number adjusted for discontinued operations and NZ IFRS 16 to allow for like-for-like comparison
2 FY20 significantly impacted by COVID-19 lockdowns
Building Products
Distribution
Concrete
Australia
Materials and distribution divisions
Residential and Development
Construction
Corporate and other
Total EBIT
Lease interest expense
Funding costs
Earnings before tax
Tax expense
Earnings after tax
Non-controlling interests
Net earnings
EBIT
EBIT before significant items (2)
Reported
2023
NZ$M
Restated (1)
2022
NZ$M
Reported
2023
NZ$M
Restated (1)
2022
NZ$M
200
140
154
170
664
147
(247)
(67)
497
(60)
(94)
343
(89)
254
(19)
235
192
136
146
67
541
217
3
(59)
702
(58)
(46)
598
(159)
439
(7)
432
215
141
156
180
692
147
26
(67)
798
(60)
(94)
644
(173)
471
(19)
452
192
137
146
113
588
217
14
(63)
756
(58)
(46)
652
(161)
491
(7)
484
(1) The comparatives have been restated as a result of a change in segmental classification. Humes Pipeline Systems which was previously under the Building Products
division has been re-presented within the Concrete division. Further details of the change can be found in note 4 of the consolidated 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 consolidated financial statements for the period ended 30 June 2023. Further details of Significant items can be found in note 2.2 of the consolidated financial
statements.
43
Fletcher Building Limited Annual Report 2023 Group Overview
External revenue of $8,469 million was broadly in line with the prior year’s $8,498 million. EBIT before
significant items was $798 million, up 5.6% compared to $756 million in the prior year, with Group EBIT
margin before significant items improving to 9.4%. Group net earnings were $235 million, compared to
$432 million reported in the prior year. Cash flows from operating activities were $388 million, compared
to $592 million in the prior year. Return on funds employed (ROFE) was 17.1%, down on prior year of 19.3%.
The FY23 result reflects a solid operational performance in a
market where activity levels were lower than the prior year,
and which was impacted by significant weather events. Market
volumes for the materials and distribution divisions (Building
Products, Concrete, Distribution and Australia) in New Zealand
and Australia were 5% to 7% lower in FY23 compared to the
peak in the second half of FY22. The decline was driven
primarily by the residential sector, while commercial and
infrastructure markets were more robust, which also supported
workload in the Construction division. For the Residential
and Development division, the New Zealand housing market
proved challenging, as a sharp increase in interest rates led to
a material reduction in both housing demand and prices.
Despite the softer markets, the materials and distribution
divisions delivered strong year-on-year growth. EBIT before
significant items increased to $692 million compared to
$588 million in the prior year, and EBIT margins lifted by 110
basis points to 9.4%. Input cost inflation remained elevated
at 6% to 7% per annum on average, driven particularly by raw
materials, freight, and labour cost increases. Offsetting these
impacts were: good price recoveries; higher sales through
digital channels which have a lower cost-to-serve; and a
sustained focus on gaining share in higher-margin segments.
This resulted in gross margins for the four divisions expanding
by 170 basis points compared to the prior year. Investments in
improved customer service and solutions were also evident in
these divisions’ Net Promoter Score (NPS), which lifted to an
average of 38 from 33 in the prior year. ROFE lifted to 18.8%
from 18.2% in the prior year, notwithstanding the significant
investments in growth projects during the year.
The Residential and Development division delivered EBIT of
$147 million, compared to $217 million in the prior year. The
Fletcher Residential businesses reported EBIT of $112 million,
down from $169 million in FY22. A total of 617 units were
taken to profit compared to 670 in FY22, a solid result in the
challenging market environment. Lower house prices and
higher build costs saw EBIT margins reduce to 20% from 28%
in FY22, though remained above the business’s 15% – 20%
target level. The Industrial Development business reported
EBIT of $35 million, down from $48 million in FY22. ROFE for
the division remained solid at 16%.
The Construction division delivered EBIT before significant
items of $32 million (prior to elimination of intra-Group
margin), slightly ahead of the prior year’s $28 million. Brian
Perry Civil® performed well, while Higgins®' result was below
expectations due to low margins on maintenance work,
underperformance on a range of small construction projects,
and impacts of wet weather. Positively, the Construction
division’s order book exited the year in a strong position,
with $2.5 billion of work in hand (excluding legacy projects)
and a further $1.8 billion of preferred projects. The division’s
committed and preferred work consists primarily of lower risk
forms of contracts, notably alliances, enterprise agreements
and maintenance contracts.
The Group’s legacy construction projects are nearing
completion, with most of the remaining risks related to
claims and disputes on three projects. The New Zealand
International Convention Centre and Hobson Street Hotel
(NZICC) remains on schedule for completion at the end of
calendar year 2024, with progressive handover of carparks
and the hotel planned through the first half of FY24. In
FY23, additional provisioning of $255 million on NZICC was
required due to: project costs increasing above the Contract
Works Insurance policy limits; and targeted recoveries on
Third Party Liability (TPL) insurance not yet being virtually
certain, as required for recognition under accounting
standards. The Pūhoi to Warkworth motorway was opened in
June 2023, with some deferred works to finish through FY24.
The project has lodged >$200 million of claims (of which
the Group’s share is 50%), mainly related to COVID-19 delays
and which require successful resolution to hold the current
project provision. The balance of legacy projects (circa 80 in
total) is now complete, with a small number of disputes and
defects to resolve. The most substantial of these is on the
Wellington International Airport carpark, where a circa $40
million claim has been lodged against FCC, which it disputes.
Across the Group, significant item charges in the year totalled
$301 million, compared to $54 million in the prior year.
Outside of the additional NZICC provisioning, the principal
charges were; $22 million for property and equipment
damage from the significant weather events in New Zealand
in early 2023 and A$15 million to establish a fund to support
homebuilders in Western Australia related to the Iplex®
Australia Pro-fit pipes matter.
Net interest expense for the Group was $154 million in the
year, of which $94 million related to funding costs and $60
million related to lease expenses. Tax expense was $89
million in the year compared to $159 million in the prior year.
Basic earnings per share were 30.0 cents for the year,
compared to 53.5 cents in the prior year. Excluding the impact
of significant items, earnings per share were 57.7 cents, a 4%
decrease on the 60.0 cents reported in the prior year.
Group cash flows
Cash flows from operating activities for the Group were
$388 million, compared to $592 million in the prior period.
The year-on-year reduction in operating cash flows was due
mainly to higher cash tax payments ($191 million compared
to $13 million in FY22) and higher funding costs paid ($92
million compared to $43 million). Outside of these areas,
underlying trading cash flows (excluding significant items
and legacy construction projects) were robust at $548
million, compared to $525 million in the prior year.
In the materials and distribution divisions, trading cash
flows before significant items were strong at $720 million,
materially higher than the $450 million in the prior year.
44
Fletcher Building Limited Annual Report 2023 Group Overview (cont.)
Cash flow
EBIT before significant items (1)
Depreciation and amortisation
Lease principal payments and lease
interest paid
Provisions and other
Trading cash flow before working capital
movements
Working capital movements
Trading cash flow excluding significant
items and legacy projects
Legacy projects cash flow
Significant items cash flow
Trading cash flow
Add: lease principal repayments
Less: cash tax paid
Less: funding costs paid
Cash flows from operating activities
H1 2023
NZ$M
H2 2023
NZ$M
360
180
(127)
(19)
394
(457)
(63)
(28)
(16)
(107)
97
(154)
(39)
(203)
438
178
(129)
(39)
448
163
611
(3)
(26)
582
99
(37)
(53)
591
2023
NZ$M
798
358
(256)
(58)
842
(294)
548
(31)
(42)
475
196
(191)
(92)
388
2022
NZ$M
756
350
(244)
(11)
851
(326)
525
(35)
(28)
462
186
(13)
(43)
592
(1) EBIT before significant items is a non-GAAP measure used by management to assess the performance of the business and has been derived from Fletcher Building
Limited’s consolidated financial statements for the period ended 30 June 2023. Further details of Significant items can be found in note 2.2 of the consolidated
financial statements.
The improvement was driven by higher earnings and a
reduction in inventories in FY23, compared to a significant
stock-build in the prior year in response to stretched supply
chains.
The Residential and Development division reported a trading
cash outflow of $107 million. A working capital outflow of
$240 million in the year was driven by the settlement of circa
$235 million of land purchases, almost all of which were
contracted in prior periods, while housing work-in-progress
was actively controlled in line with the softer market. The
division made limited new land commitments in FY23 and
remains well-positioned to support its future sales pipeline
through a total of circa 4,800 sections under its control. For
the circa 3,100 sections and two rural properties on balance
sheet at June 2023, the assessed market valuation was circa
$330 million higher than the book value.
Construction recorded an underlying trading cash flow of
$5 million, with good cash generation in Brian Perry Civil®
offset by unwind of advance payment positions in Higgins®.
Legacy project cash outflows were $31 million, principally
driven by legacy roading projects, while NZICC was broadly
cash neutral as Contract Works Insurance receipts offset fire
remediation costs.
Total significant items cash outflows (excluding legacy
construction projects) in FY23 were $42 million, with the
largest item being $10 million of transition costs in Winstone
Wallboards® for the move to the new Tauriko plant.
Net capital expenditure and investments for the Group
were $641 million in FY23. Base capital expenditure of $230
million (consisting of maintenance, digital/ERP, sustainability,
and efficiency capital expenditure) remained in line with
the Group’s target range of $200 million to $250 million.
Capital expenditure for the new Winstone Wallboards®
plasterboard plant was $90 million, with the project entering
the commissioning phase in late FY23 and remaining on time
and on budget.
Growth capital expenditure and investments totalled $308
million in FY23 as the Group made material progress on its
push into growth adjacencies. Organic growth investments
included: $30 million on the new Laminex® Taupō wood
panels plant; $30 million on acquiring a new distribution
and processing site for Steel’s Auckland operations; and
$38 million on property acquisition for a new PlaceMakers®
frame and truss plant. Key acquisitions in FY23 were: the
purchase of six Tumu® building centres and a frame and truss
operation, expanding the PlaceMakers® offering servicing the
East Coast of the North Island ($50 million with an additional
$11 million working capital adjustment settled in January
2023); and Waipapa Pine Limited and Renewable Wood Fuels
Limited (together, “Waipapa”) in June 2023 as part of the
Building Products divisional growth strategy into the Wood
Products sector ($106 million with further potential earn-out
up to $13 million to be assessed through FY24). Other smaller
acquisitions in the year included a Water Filters operation ($6
million) to complement the Oliveri® business in Australia; and
the acquisition of The Urban Quarry® ($10 million) supporting
the Concrete division’s circular economy strategy.
In addition, the Group invested $19 million in the Vivid Living®
retirement village developments.
Dividend payments in the year were $311 million, consisting
of the FY22 final and FY23 interim dividends.
45
Fletcher Building Limited Annual Report 2023 Group Overview (cont.)
Balance sheet, returns and funding
The Group’s balance sheet and funding profile remain strong.
ROFE before significant items for the year was 17.1%. Funds
employed increased to $4.8 billion compared to $4.2 billion
at 30 June 2022, underpinned by the Group’s continued
investment in attractive growth opportunities to deliver at
least 15% ROFE when mature.
The Group’s leverage ratio (net debt / EBITDA before
significant items) at 30 June 2023 was 1.2 times, higher than
the 0.6 times at 30 June 2022, but remaining at the lower
end of the target range of 1.0 to 2.0 times. Looking ahead,
the Group expects its investments in growth initiatives and
construction legacy cash outflows to lift the leverage ratio
through FY24 but continue to remain within the target range.
The Group’s gearing at 30 June 2023 was 27.8% compared
with 15.1% at 30 June 2022.
In FY23, as part of its syndicated revolving credit facility,
the Group negotiated an additional Australian dollar
denominated tranche of $674.5 million together with an
extension of a New Zealand dollar denominated tranche
of $200 million for a further five years to 2028. In addition,
the Group negotiated a New Zealand dollar denominated
committed liquidity facility of $300 million which matures
in October 2024. Total funding available to the Group at 30
June 2023 was $2,791 million of which $1,014 million was
undrawn and there was an additional $365 million of cash
on hand. The Group’s liquidity was therefore strong at
$1.4 billion.
The average maturity of the Group’s debt at 30 June 2023
was 3.1 years, with the currency split being 19% Australian
dollar; 80% New Zealand dollar; and 1% spread over various
other currencies.
The Group currently has 61% of all borrowings with fixed
interest rates with an average duration of 2.8 years. Inclusive
of floating rate borrowings, the average interest rate on the
debt (based on period-end borrowings) was 5.7%.
Dividend
The 2023 final dividend is 16.0 cents per share. The final
dividend will be fully imputed but unfranked for tax purposes.
The final dividend will be paid on 5 October 2023 to holders
registered as at 5:00 pm (NZ time) on 15 September 2023.
The shares will be quoted on an ex-dividend basis from
14 September 2023 on the NZX and ASX. The Dividend
Reinvestment Plan will not be operative for this dividend
payment.
A seamless omni-channel experience enables
customers to simply navigate the best of PlaceMakers®'
services online, in-store and in the real world.
46
Fletcher Building Limited Annual Report 2023 Divisional Performance
Workers at Laminex® New Zealand distribution
centre in Penrose, Auckland, getting product
ready for customer collection.
47
Fletcher Building Limited Annual Report 2023 Revenue
$1,443m
Building Products
The Building Products division reported gross revenue of $1,443 million,
broadly in line with the prior year. EBIT before significant items was $215
million, $23 million higher than the prior year, with EBIT margin before
significant items expanding 170 basis points to 14.9%.
Capital expenditure in the year was
$191 million, of which $90 million was
for the new Winstone Wallboards®
plasterboard plant in Tauriko, with the
project progressing within planned cost
and timeline. This project is already in
its commissioning phase, with BRANZ
product certification underway across the
product range. Other key capital projects
in FY23 included: commencement of
the Laminex® Taupō wood panels plant
($30 million); purchase of a new Steel
distribution and processing site at Hunua
($30 million); new electric ovens in the
division’s coil business ($7 million); and
the preliminary planning and design of
the new glass wool manufacturing plant
($5 million).
As part of the divisional growth strategy
into the Wood Products sector, acquisition
of the Waipapa business was completed
in June 2023 for $119 million, $13 million
of which is a deferred earn-out expected
to be settled in H2 FY24. Together with
the Laminex® wood panels project, these
two wood-based product businesses
are aimed at strengthening the division’s
position in the broader building products
sector and delivering innovative new
products to customers.
For the Building Products division,
the FY23 trading environment was
characterised by a softening in the
residential market through the second
half of the year, as well as persistent
wet weather and sustained inflationary
pressure on input costs. Substantial cost
increases were absorbed on gypsum,
paper, resin and freight, partially offset
by lower utility costs from the drop in
electricity prices. The continuing focus on
cost management across all businesses,
combined with effective pricing disciplines
and focus on improved customer
offerings, resulted in 110 basis points
improvement in gross margin. Overall,
EBIT before significant items of $215
million was 12% higher than the prior year.
The division continues to build strong
relationships with customers through
positive product and service experience.
In FY23, Comfortech® developed the
Pink® Superbatts® glasswool insulation
range specifically suited to meet the New
Zealand H1 Building Code regulations
change. Iplex® successfully commissioned
a new PVC-O technology and Restrain
manufacturing which are both unique
to the New Zealand market, providing
market leading trenchless pipe solutions.
Pacific Coilcoaters switched to new
infra-red ovens, the first installation of this
technology for coil coating in Australasia,
which will see the delivery of substantial
carbon reduction in the coming years.
Laminex® launched a new wood veneer
emulation product that is both UV and
moisture resistant.
The division delivered a trading cash flow
of $172 million, $62 million higher than the
prior year, mainly owing to significantly
lower investments in stock. Inventory
holdings in most businesses returned
to normalised levels as supply chain
disruptions eased, except in Iplex® where
channel destocking meant inventory levels
remained elevated at year-end.
16%
of group
revenue
Revenue Weighted
Sector Exposure
46% Residential
33% Commercial
21% Infrastructure
EBIT*
EBIT* margin
13.2%
14.9%
215
192
FY22
FY23
ROFE: 18%
* before significant items
Safety
2.5
(TRIFR1)
Customer
49
(NPS1)
Environment
62,000 tCO2e
Carbon emissions2
73%
(Revenue from
sustainably certified
products)
People
41
(eNPS)
1 Excludes Altus® and Waipapa
2 Combined Scope 1 & 2 carbon
emissions with an allocation of
Corporate emissions. Excludes
Waipapa
48
Building Products Chief
Executive, Hamish McBeath
(right), and consultant, Grant
Arnold, at Waipapa Pine
Limited in Kerikeri, Northland.
Financial Summary
Year ended 30 June
Gross revenue
External revenue
Gross margin
EBIT before significant items (2)
Restated (1)
2022
NZ$M
1,458
1,155
2023
NZ$M
1,443
1,154
34.0%
32.9%
215
192
EBIT margin before significant items (2)
14.9%
13.2%
Significant items (3)
Funds
ROFE (4)
Trading cash flow
Capital expenditure
Investments (5)
EBIT before significant items (2)
Year ended 30 June
Light Building Products
Metals
Wood Products
Divisional costs
Total
(15)
1,210
18%
172
191
106
892
22%
110
191
Restated (1)
2022
NZ$M
2023
NZ$M
159
63
(7)
215
146
59
(13)
192
(1) The comparatives have been restated as a result of a change in segmental
classification. Humes Pipeline Systems (which was previously under the Building
Products division has been re-presented within the Concrete division being
reclassified into the Concrete division. Further details of the change can be found in
note 4 of the consolidated 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 consolidated financial statements for the period ended 30 June 2023.
(3) Details of Significant items can be found in note 2.2 of the consolidated financial
statements.
(4) EBIT before significant items / closing funds.
(5) Excludes $13 million deferred settlement of Waipapa earn-out.
Our Building Products businesses
Light Building Products
Metals
Wood Products
49
Fletcher Building Limited Annual Report 2023 Revenue
$1,824m
Distribution
The Distribution division reported gross revenue of $1,824 million,
which was 2% higher than the prior year. EBIT before significant items
was $141 million, compared to $137 million in the prior year, with EBIT
margin before significant items remaining in line with the prior year
at 7.7%.
Capital expenditure in the year was
$62 million, primarily comprising: the
purchase of a property to relocate
PlaceMakers®’ frame and truss
manufacturing plant in Auckland, which
will contribute to greater operational
efficiency and increased capability to
enable share growth for the business;
and continued investment in digital
programmes, including the launch of
Mico®’s new Trade Portal and Customer
App. PlaceMakers® opened new
branches in Dunedin and Winton during
FY23, while Mico® opened new branches
in Mangawhai and Kaitāia.
In addition, the acquisition of the Tumu®
business was completed in September
2022, strengthening the division’s
network in the eastern North Island and
delivering FY23 EBIT of $9 million. The
focus remains on retaining key talent
and preserving a strong team culture to
deliver exceptional customer service to
the region and favourable earnings to
the division.
For the Distribution division, FY23
represented a return to more normal
trading conditions from the prior
year where demand had outstripped
supply in many areas. The division’s
gross revenue was 2% higher than the
prior year and gross margin improved
by 80 basis points. The improvement
in gross margin was primarily driven
by the ongoing focus on operational
efficiency, including the expansion
of PlaceMakers®’ Regional Hub
programme, and improved pricing and
sales disciplines. Along with the addition
of Tumu®, this helped offset inflationary
impacts across labour, property and
supply chain. Overall, EBIT before
significant items increased by 3% to
$141 million.
The division’s performance was
underpinned by its focus on customer
centricity, with ongoing investment in
the introduction of new tools to support
best-in-class customer service. During
FY23, the division focused on enhanced
sales team capability and the rollout
of the Sales & Service Transformation
in PlaceMakers®, which creates a 360°
view of the customer to support first
call resolution and seamless service. In
FY24, PlaceMakers® plans to introduce
innovative new store formats and
continue to drive market-leading
fulfilment through digitisation of end-to-
end supply chain.
Trading cash flow was $185 million for
the year, $115 million higher than the
prior year. This was a result of effective
working capital management, with
inventory levels reducing as supply
chain reliability improved. Customer
cash collections were tightly controlled,
with debtors’ days up circa 2 days on the
prior year. This was in line with a tougher
credit environment across the building
merchant industry.
20%
of group
revenue
Revenue Weighted
Sector Exposure
73% Residential
27% Commercial
EBIT*
EBIT* margin
7.7%
7.7%
137
141
FY22
FY23
ROFE: 45%
* before significant items
Safety
4.1
(TRIFR1)
Customer
31
(NPS1)
Environment
10,000 tCO2e
Carbon emissions2
People
30
(eNPS)
1 Excludes Tumu®
2 Combined Scope 1 & 2 carbon
emissions with an allocation of
Corporate emissions
50
Distribution Chief Executive,
Bruce McEwen (second
from right) at Hoani Waititi
Marae for the June 2023,
Whakatupu graduation.
Financial Summary
Year ended 30 June
Gross revenue
External revenue
Gross margin
EBIT before significant items (1)
EBIT margin before significant items (1)
Significant items (2)
Funds
ROFE (3)
Trading cash flow
Capital expenditure
Investments
2023
NZ$M
1,824
1,792
28.9%
141
7.7%
(1)
312
45%
185
62
61
2022
NZ$M
1,789
1,764
28.1%
137
7.7%
(1)
246
56%
70
11
(1) EBIT before significant items is a non-GAAP measure used by management to assess
the performance of the business and has been derived from Fletcher Building
Limited's consolidated financial statements for the period ended 30 June 2023.
(2) Details of Significant items can be found in note 2.2 of the consolidated financial
statements.
(3) EBIT before significant items / closing funds.
Our New Zealand
Distribution businesses
51
Fletcher Building Limited Annual Report 2023 Revenue
$1,085m
Concrete
The Concrete division reported gross revenue of $1,085 million, which
was 5% higher than the prior year. EBIT before significant items was
$156 million compared to $146 million in the prior year, with EBIT
margin before significant items expanding by 30 basis points to 14.4%.
Trading cash flow for the division was
strong at $156 million, although slightly
lower than the prior year due to the
phasing of raw material purchases.
Working capital remains tightly managed
and a key focus for the division.
Capital expenditure in the period of $65
million was focused on asset renewal,
quarry capacity expansion, and key
strategic projects to drive future growth
through innovation, digital and more
sustainable operations and customer
offers. The acquisition of The Urban
Quarry® was completed in April 2023
for $10 million, supporting the division
to fast-track recycling of deconstruction
waste and offering circular solutions to
customers.
Market activity remained supportive
in the commercial and infrastructure
sectors, while a softening residential
market and wet weather impacted
activity in the second half of the year.
Input cost inflation remained elevated,
averaging around 12% per annum,
particularly in areas such as coal, diesel
and freight. Good pricing disciplines
enabled the division to hold gross
margins broadly in line with the prior
year. The division also continued to
benefit from its recent investments
differentiating its customer offering,
extending capacity and debottlenecking
key operations. Overall, EBIT before
significant items of $156 million was up
7% on prior year, with EBIT margin before
significant items increasing slightly to
14.4%. These continued improvements
have seen the division increase its EBIT
margin before significant items by 420
basis points since FY19.
The division continues to focus on
offering market-leading solutions to
customers, notably through:
• New Zealand’s largest range of low
carbon products, such as Firth®
HotEdge®, a thermally insulated
flooring solution designed to increase
building lifecycle efficiency;
• Being at the forefront of the circular
economy – the division recycled and
reused >100,000 tonnes of waste
across alternative fuels and raw
materials, clinker substitution, and the
recycling of demolition waste;
• Embracing technology solutions that
enhance customer experience and
optimise production and supply chain
operations – e.g. in FY23 the division
launched a new customer portal in
Golden Bay® to provide real-time,
on-demand access to manage orders,
delivery, and fulfilment; and
• Improved market coverage and supply
resilience via capacity increases and
bolt-on acquisitions.
12%
of group
revenue
Revenue Weighted
Sector Exposure
43% Residential
27% Commercial
30% Infrastructure
EBIT*
EBIT* margin
14.1%
14.4%
146
156
FY22
FY23
ROFE: 20%
* before significant items
Safety
3.4
(TRIFR)
Customer
52
(NPS)
Environment
625,000 tCO2e
Carbon emissions1
76%
(Revenue from
sustainably certified
products)
People
28
(eNPS)
1 Combined Scope 1 & 2 carbon
emissions with an allocation of
Corporate emissions
52
Concrete Chief Executive, Nick Traber, overlooks
the new Winstone Aggregates® processing plant
at Whitehall Quarry, Waikato.
Financial Summary
Year ended 30 June
Gross revenue
External revenue
Gross margin
EBIT before significant items (2)
EBIT margin before significant items (2)
Significant items (3)
Funds
ROFE (4)
Trading cash flow
Capital expenditure
Investments
Restated (1)
2022
NZ$M
1,033
772
28.7%
146
14.1%
729
20%
172
94
2023
NZ$M
1,085
800
28.9%
156
14.4%
(2)
789
20%
156
65
10
(1) The comparatives have been restated as a result of a change in segmental
classification. Humes Pipeline Systems which was previously under the Building
Products division has been re-presented within the Concrete division being
reclassified into the Concrete division. Further details of the change can be found in
note 4 of the consolidated 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 consolidated financial statements for the period ended 30 June 2023.
(3) Details of Significant items can be found in note 2.2 of the consolidated financial
statements.
(4) EBIT before significant items / closing funds.
Our Concrete businesses
53
Fletcher Building Limited Annual Report 2023 Revenue
$3,016m
Australia
The Australia division reported gross revenue of $3,016 million, 7%
higher than the prior year. EBIT before significant items was $180
million, compared with $113 million in the prior year. EBIT margin
before significant items increased to 6.0% compared to 4.0% in the
prior year.
Significant item charges in the division
included an additional provision for
silica-related claims of A$7.5 million (see
note 11 of the consolidated financial
statements) and A$15 million to establish
a fund to support homebuilders in
Western Australia related to the Iplex®
Pro-fit pipes matter - see further
commentary on page 77.
Trading cash flow was $177 million
compared with $80 million in the prior
year. The cash flow result reflected
continued tight debtor controls and
unwinding of investments in inventories.
Capital expenditure in the year was $59
million, with key investments continuing
in the areas of new product development,
latest automation technologies in the
manufacturing businesses and digital
omni-channel programmes. Additionally,
the division acquired a Water Filters
operation for the Oliveri® business for
$6 million.
During FY23, market activity in Australia
remained broadly supportive in the
first half, while residential new-build
and alterations markets softened in the
second half as interest rate rises began
to impact activity. Revenue growth in
the year was driven mainly by Laminex®
and Iplex®, which both reported gross
revenue in local currency 13% higher than
the prior year, with Iplex® benefiting from
good levels of civil project activity.
Significant input cost inflation remained
a feature of the trading environment.
This was particularly in areas such as
steel, resin, freight and labour, although
these pressures eased somewhat in the
second half. Strong pricing discipline and
governance ensured higher input costs
were successfully recovered, with gross
margins increasing 300 basis points on
the prior year. Earnings and profitability
in the division also continued to benefit
from simplification of business models
and rationalisation of manufacturing
and distribution footprints in prior years.
Overall EBIT before significant items of
$180 million was a pleasing 59% higher
than the prior year, with EBIT margin
before significant items increasing 200
basis points to 6.0%.
The division’s focus on customer and on
growing in margin-accretive segments,
was evident in FY23 through:
• Continued build-out of digital omni-
channel solutions, with digital sales
now 15% of total divisional revenue;
• Investment in new product
development – e.g. Laminex®
Surround and Fletcher Insulation®
Firmasoft®;
• Ongoing focus on improving
DIFOTIS (Delivery in Full on Time in
Specification); and
• Share growth in higher margin
segments – e.g. Stramit® sheds and
doors, Laminex® decorative, and the
bathroom category for Oliveri®.
32%
of group
revenue
Revenue Weighted
Sector Exposure
61% Residential
27% Commercial
12% Infrastructure
EBIT*
EBIT* margin
4.0%
6.0%
180
113
FY22
FY23
ROFE: 13%
* before significant items
Safety
3.2
(TRIFR1)
Customer
20
(NPS2)
Environment
282,000 tCO2e
Carbon emissions3
67%
(Revenue from
sustainably certified
products4)
People
14
(eNPS)
1 Excludes Rocla®
2 Excludes Haven and Water
Filters Australia
3 Combined Scope 1 & 2 carbon
emissions. Excludes Rocla®
4 Excludes Tradelink® revenue
54
Dean Fradgley, Chief Executive Australia, with learning
and organisational development team members,
Rita Slogrove (left) and Jordyn McCosker (right).
Financial Summary
Year ended 30 June
Gross revenue
External revenue
Gross margin
EBIT before significant items (1)
EBIT margin before significant items (1)
Significant items (2)
Funds
ROFE (3)
Trading cash flow
Capital expenditure
Investments
EBIT before significant items (1, 4)
Year ended 30 June
Building Products Australia
Distribution Australia
Steel Australia
Divisional costs
Total
2023
NZ$M
3,016
2,953
32.4%
180
6.0%
(10)
1,368
13%
177
59
6
2022
NZ$M
2,806
2,740
29.4%
113
4.0%
(46)
1,365
8%
80
55
2023
NZ$M
2022
NZ$M
141
16
31
(8)
180
85
22
20
(11)
116
(1) EBIT before significant items is a non-GAAP measure used by management to assess
the performance of the business and has been derived from Fletcher Building
Limited's consolidated financial statements for the period ended 30 June 2023.
(2) Details of Significant items can be found in note 2.2 of the consolidated financial
statements.
(3) EBIT before significant items / closing funds.
(4) Excluding the impact of Rocla®.
Our Australia businesses
Building Products Australia
Distribution Australia
Steel Australia
55
Fletcher Building Limited Annual Report 2023 Revenue
$607m
7%
of group
revenue
Revenue Weighted
Sector Exposure
92% Residential
8% Commercial
EBIT
EBIT margin
31.4%
217
24.2%
147
FY22
FY23
ROFE: 16%
Safety
3.0
(TRIFR)
Customer
72
(NPS)
Environment
<1,000 tCO2e
Carbon emissions1
People
40
(eNPS)
1 Combined Scope 1 & 2 carbon
emissions with an allocation
of Corporate emissions
56
Residential and
Development
The Residential and Development division reported gross revenue of
$607 million, 12% lower than the prior year. EBIT of $147 million was a
material decrease on the $217 million in the prior year. EBIT margin of
24.2% compares to 31.4% in the prior year.
Trading cash flow in FY23 was an outflow
of $107 million and divisional funds
employed at 30 June 2023 were $915
million, compared to $651 million at 30
June 2022. This increase was driven
primarily by the settlement of circa $235
million of land purchases, almost all of
which were contracted in prior periods,
while housing work-in-progress was well-
controlled.
The division made limited new land
commitments in FY23 and remains well-
positioned to support its future sales
pipeline through a total of circa 4,800
sections under control. For the circa
3,100 sections and two rural properties
on balance sheet at June 2023, the
assessed market valuation was circa
$330 million higher than the book value,
providing a degree of margin resilience
for the business in future periods.
Trading conditions in the New Zealand
housing market proved challenging in
FY23. A rapid increase in interest rates
resulted in a material drop in buyer
demand and an average circa 15%
reduction in house prices. Increased
materials and labour costs further
compressed margins, while extended
consenting timelines and delays in
apartment construction led to late
delivery of some units.
In this environment Fletcher Residential
delivered a solid result, with 617 units
taken to profit compared to 670 in the
prior year. The business’s focus on lower
price points meant it was operating in the
most active part of the housing market
in FY23, and it continued to benefit from
its high-quality developments and strong
customer reputation. Clever Core®,
the division’s panelisation business,
delivered 147 homes in the year, a 40%
increase on FY22. Overall, Fletcher
Residential reported EBIT of $112 million,
down from $169 million in FY22, and
EBIT margins of 20% compared to 28% in
FY22. The FY23 margin remained above
the business’ 15% to 20% target level,
and above the 16% delivered in FY19.
The Industrial Development business
delivered EBIT of $35 million for FY23,
driven by one large land transaction in
Auckland in the second half of the year.
This compares to $48 million in the prior
year, which resulted from two significant
transactions in Australia.
The division continues to optimise
house typologies in proven locations to
meet customer preferences and target
price points. In Auckland, Vivid Living®
provides a previously unavailable offering
to retirement age customers within their
existing developments, with completion
of the first settlements at Red Beach due
in the first half of FY24, and construction
soon commencing at Karaka and Waiata
Shores. The division also continues to
lead on sustainability through innovation
in low carbon homes, and in FY23
diverted over 40% of waste away from
landfill.
Residential and Development
Chief Executive, Steve Evans
(left) at turning the sod at
Fletcher Living® Ōkahukura
site in Albany.
Financial Summary
Year ended 30 June
Gross revenue
External revenue
EBIT (1)
EBIT margin
Funds
ROFE (2)
Trading cash flow
Capital expenditure (3)
EBIT (1)
Year ended 30 June
Fletcher Residential
Industrial Development
Total
2023
NZ$M
2022
NZ$M
607
594
147
692
680
217
24.2%
31.4%
915
16%
(107)
23
651
33%
107
8
2023
NZ$M
2022
NZ$M
112
35
147
169
48
217
(1) The EBIT result includes revaluation gains totalling $16 million. This consists of $10
million gain from transfer of land from Fletcher Living® to Vivid Living® (2022: $9 million)
and $6 million gain on revaluation of Vivid Living® investment property (2022: nil).
(2) EBIT / closing funds.
(3) Capital expenditure includes investment property development.
Our Residential and
Development businesses
57
Fletcher Building Limited Annual Report 2023 Revenue
$1,325m
Construction
The Construction division reported gross revenue of $1,325 million,
which was 16% lower than the prior year. EBIT before significant items
(and prior to elimination of intra-Group margin) was $32 million,
compared $28 million in the prior year.
Trading cash flow for the division in
FY23 was an outflow of $26 million. This
comprised legacy cash outflows of $31
million, with the balance of the business
generating a $5 million inflow.
Capital expenditure in the year of $19
million compared to $29 million in prior
period, with a concentration of spend on
cyclical replacement of civil equipment
for Higgins® and Brian Perry Civil®
businesses.
The reduction in revenue relative to
FY22 was driven by the reducing volume
of work on legacy roading and vertical
building projects. During the year, road
openings were achieved on Hamilton
City Edge, Peka Peka to Ōtaki and Pūhoi
to Warkworth. Pūhoi to Warkworth was
materially impacted in time and cost by
COVID-19, with contractual claims being
pursued. Work continues on NZICC
with completion expected by the end of
calendar 2024. Revenue to go on legacy
projects is $0.3 billion, consisting mainly
of remaining works on NZICC.
In the go-forward business, Brian
Perry Civil® performed well in FY23,
as it executed on a strong pipeline of
specialist civil work. Higgins® had a
disappointing year owing to low margins
on maintenance work and poor execution
on a range of small construction projects.
Higgins® was additionally impacted in
the year by significant and numerous
weather events, resulting in lower levels
of plant and labour recoveries. Overall,
EBIT for the division was $32 million and
EBIT margin was 2.4%, with overheads
relatively flat year on year.
Significant items for the year included
the additional $255 million provisions
for completion works at NZICC plus
$17 million of costs associated with the
impacts of Cyclone Gabrielle on fixed
plant, mobile equipment and buildings in
the Hawke’s Bay region. Insurance claims
for Cyclone Gabrielle have been lodged
with no insurance proceeds having been
recognised as at 30 June 2023.
The Construction division orderbook
closed the financial year at $2.5 billion
excluding legacy projects. A further $1.8
billion of contracts are in exclusive and/
or negotiated position at June 2023,
including the Riverlink, Eastern Busway
second phase, and Auckland Airport
Taxiway Mike projects. The orderbook
continues to reflect alliance projects,
framework and maintenance agreements,
which are lower risk forms of contracts.
14%
of group
revenue
Revenue Weighted
Sector Exposure
76% Infrastructure
24% Commercial
EBIT*
EBIT* margin
1.8%
2.4%
28
FY22
32
FY23
ROFE: 38%
* before significant items
Safety
2.9
(TRIFR3)
Environment
41,000 tCO2e
Carbon emissions1
People
25
(eNPS)
1 Combined Scope 1 & 2 carbon
emissions with an allocation
of Corporate emissions
58
Construction Chief
Executive, Phil Boylen
(centre right), at Watercare
project at Snell’s Beach.
Financial Summary
Year ended 30 June
Gross revenue (1)
External revenue
EBIT before significant items (1, 2)
EBIT margin before significant items (1, 2)
Significant items (3)
Funds
ROFE (1, 4)
Trading cash flow (1)
Capital expenditure
2023
NZ$M
1,325
1,176
32
2.4%
(273)
85
38%
(26)
19
2022
NZ$M
1,573
1,387
28
1.8%
(11)
278
10%
(24)
29
(1) Prior to elimination of intra-Group margin in relation to Winstone Wallboards® Tauriko plant and
Laminex® NZ Taupō Plant.
(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 consolidated
financial statements for the period ended 30 June 2023.
(3) Details of Significant items can be found in note 2.2 of the consolidated financial statements.
(4) EBIT before significant items / closing funds.
Note: Revenue includes income from the Group's Vertical Buildings Business (2023: $101 million;
2022: $265 million), which the Group is in the process of exiting. The New Zealand International
Convention Centre and Hobson Street Hotel (NZICC) represent the last projects to complete in
this sector. EBIT before significant items, however, excludes any earnings from these projects.
Our Construction businesses
59
Fletcher Building Limited Annual Report 2023 Our Board and
Executive Team
Members of the Board and Executive team visit Waipapa
Pine Limited, in Kerikeri, Northland in March 2023.
60
Fletcher Building Limited Annual Report 2023 61
Fletcher Building Limited Annual Report 2023 Our Board
Bruce Hassall
BCom, CMInstD
Chair and Independent
Non-Executive Director
Term of office: Appointed
director 1 March 2017,
last elected 2020 annual
meeting.
Board committees:
Chair of the Nominations
Committee, Member of the
People and 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 Profile Group
Holdings Limited and is a
director of Fonterra Co-
operative Group Limited.
Martin Brydon
Barbara Chapman
Peter Crowley
MBA, FAICD, FAIM, Dip Elect
Eng, Dip Elron Eng
Independent Non-Executive
Director
Term of office: Appointed
director 1 September 2018,
last elected 2020 annual
meeting.
Board committees:1
Member of the People and
Remuneration Committee,
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.
CNZM, BCom, CMInstD
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 2022 annual
meeting.
Board committees:
Chair of the People and
Remuneration Committee,
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,
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.
(1) M Brydon, R McDonald, D McKay, C Quinn were members of the Nominations Committee until 31 March 2023.
62
Fletcher Building Limited Annual Report 2023 Rob McDonald
Doug McKay
Cathy Quinn
Sandra Dodds
ONZM, LLB, CMInstD
BCom, FCA, GAICD
As announced in June
2023, Sandra Dodds was
appointed an independent
non-executive director of
Fletcher Building Limited
and Fletcher Building
Industries Limited, effective
1 September 2023, and
will stand for election at
Fletcher Building’s Annual
Shareholders’ Meeting in
October 2023.
Independent Non-Executive
Director
Term of office: Appointed
director 1 September 2018,
last elected 2021 annual
meeting.
Board committees:1
Member of the Audit and Risk
Committee, 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.
BCom, FCA, CMInstD
Independent Non-Executive
Director
Term of office: Appointed
director 1 September 2018,
last elected 2021 annual
meeting.
Board committees:1
Chair of the Audit and Risk
Committee, Member of the
People and 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.
ONZM, BA, AMP (Harvard),
CFInstD
Independent Non-Executive
Director
Term of office: Appointed
director 1 September 2018,
last elected 2021 annual
meeting.
Board committees:1
Chair of the Safety, Health,
Environment and
Sustainability Committee,
Member of the Audit and
Risk Committee
Doug brings considerable
business leadership and
commercial experience,
as the former CEO of
major manufacturing and
distribution businesses such
as Lion Nathan, Carter Holt
Harvey, Goodman Fielder,
Sealord and Independent
Liquor, and as the inaugural
CEO of the amalgamated
Auckland Council.
Doug is the Chair of Bank
of New Zealand, a director
(and Chair elect) of Vector
Limited, IAG New Zealand
Limited and National
Australia Bank. Doug’s
previous governance
experience includes
directorships in Ryman
Healthcare, Eden Park Trust,
Genesis Energy and other
prominent New Zealand
companies.
Doug is a chartered fellow
of the New Zealand Institute
of Directors. In 2015, he was
made an Officer of the New
Zealand Order of Merit for
services to business and
local government.
(1) M Brydon, R McDonald, D McKay, C Quinn were members of the Nominations Committee until 31 March 2023.
63
Fletcher Building Limited Annual Report 2023 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.
64
Fletcher Building Limited Annual Report 2023 Winstone Wallboards® project director, Stewart
Vaughan, onsite at the new Tauriko GIB® facility.
65
Fletcher Building Limited Annual Report 2023 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
dated 17 June 2022 (“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 2023 and was approved by the Board on 15 August 2023.
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 FY23. All Fletcher Building personnel
must adhere strictly to the requirements of this policy. There were no reported breaches of this policy in FY23.
Fletcher Building has a free phone and online service (“FBuCall”) which can be used by any directors and employees of
Fletcher Building Limited and its subsidiaries (“Fletcher Building personnel”), to report suspected unacceptable, unethical or
illegal behaviour in the workplace. This service is operated by independent external providers so 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 Australian legislation 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 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
more 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.
66
Fletcher Building Limited Annual Report 2023 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 who have an appropriate balance of skills to optimise
the performance of the Group.
The Board currently comprises seven directors, with a wide range of skills and experience. The appointment of an eighth director
on 1 September 2023 has been announced. 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 deciding whether a director is ‘independent’ are set out Appendix A to the Nominations
Committee 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 2023 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.
67
Fletcher Building Limited Annual Report 2023 Corporate Governance (continued)
INCLUSION AND DIVERSITY
Fletcher Building’s Inclusion and Diversity Policy is available on the Group’s website. The People and 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: greater female representation,
more diverse ethnicity in leadership and creating an inclusive culture.
We are members of the Champions for Change network in New Zealand and continue to provide diversity reporting as input into the
Champions for Change Annual Diversity Report. This report provides a benchmark against appropriate external comparators as per
current policy requirements. Participating in the report holds us accountable year on year to increase our representation of women
across our business at all levels.
Our goal to increase annually females in operational roles, at both a leadership and individual contributor level, continues. The
original targeted increase of 1% across the Group each year was achieved in FY23 and has helped to shift mindsets and build
confidence and momentum. We now have strong foundations to set a more ambitious but achievable goal of 30% women in leader
and individual contributor roles by the end of FY27.
Throughout this year, we have focused our efforts on creating targeted Gender Action Plans for each business unit to support us
achieving our FY27 gender goal. These business plans are supported by group initiatives, including our enhanced parental leave
policy, as well as development and mentoring programmes.
As announced in June 2023, Sandra Dodds will join as an independent director, effective 1 September 2023, which will increase
female representation on our Board to 37.5%. Sandra will stand for election at the Annual Shareholders’ Meeting in October 2023.
Our Australian division launched their first Reconciliation Action Plan that represents our commitment to tangible and impactful
actions, both in the present and the future, to actively contribute to the ongoing process of reconciliation in Australia. Te Kakano,
our Māori strategy was also launched this year to help our business embrace and adopt the Māori identity and world view in our
business practices which will in turn create stronger relationships with mana whenua in the community.
We have strong people led Employee Action Groups to support our inclusive culture. FB Pride were instrumental in developing and
launching our Gender Affirmation Leave and Transitioning at Work Guidelines. We are also pleased to have been re-accredited with
the Rainbow tick through to June 2024. The results of our re-accreditation report exemplify Fletcher Building’s improvement over
the past year to make our workplace safer and more inclusive for our employees. Our leading gender-neutral parental leave policy
(introduced in FY22, and strongly advocated for by the Equality Network) has also been featured on the New Zealand Parental Leave
Register this year.
Comparison of gender composition within Fletcher Building between 30 June 2022 and 30 June 2023 is set out in the table below.
2023
Male
5 (71%)
10 (83%)
55 (74%)
75%
Female
2 (29%) (1)
2 (17%)
19 (26%)
25%
Gender
Diverse (2)
0 (0%)
0 (0%)
0 (0%)
0%
Female
2 (29%)
2 (17%)
18 (24%)
24%
2022
Male
5 (71%)
10 (83%)
57 (76%)
76%
Gender
Diverse (2)
0 (0%)
0 (0%)
0 (0%)
0%
Board of directors
Executive committee
Senior management (3)
All employees
(1) In June 2023, Sandra Dodds agreed to join the Board, effective 1 September, taking female representation to 37.5%.
(2) Pursuant to NZX Listing Rule 3.8.1(c), gender diverse data was introduced to annual report reporting in June 2022.
(3) Senior management for these purposes includes any leader who reports to a member of the executive committee.
68
Fletcher Building Limited Annual Report 2023 Corporate Governance (continued)
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
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
Environmental, social
and governance
Shareholder engagement, sustainability
frameworks, ESG indexes and reporting
Government, legal,
regulatory
Engagement with government stakeholders,
legal, policy and regulatory environments,
NZX/ASX experience
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 to observe first-hand the safety and other management
practices and business responses to issues. In addition, all directors carried out an in-depth cyber training workshop which
included simulating a cyber crisis situation.
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.
Further to comprehensive reviews of its performance and processes completed in 2019 and 2021, the Board conducted a
performance review in 2023 with the assistance of the NZ Institute of Directors. The next comprehensive review is scheduled for
early 2024.
69
Fletcher Building Limited Annual Report 2023 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, committees have been set up to enhance the Board’s effectiveness in key areas, while still
retaining overall responsibility. As at 30 June 2023, the Board committees were:
– Audit and Risk Committee (ARC) (1)
– Nominations Committee
– People and Remuneration Committee
– Safety, Health, Environment and Sustainability Committee (SHES) (1)
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 oversees all matters relevant to the composition of the Board and
its committees (including renewal, succession, independence, and diversity), Board
performance, and professional development for directors.
People and
Remuneration
Committee
The principal role of the committee is to oversee and regulate compensation and
organisation matters affecting the Group, including remuneration and benefits,
people-related policies (including diversity), performance and remuneration of the
Group’s senior executives and management development, and succession planning of
the CEO and his direct reports.
Safety, Health,
Environment
and
Sustainability
Committee
The role of the committee is to support and advise the Board on strategies related to
safety, health, environment, and sustainability (SHES); monitor emerging trends; oversee
management of risks, opportunities and impacts; review SHES governance framework
and management systems; monitor performance of related targets and commitments;
incorporate appropriate metrics into operating frameworks and reporting; and approve
public disclosures related to its roles and responsibilities.
Members as at
30 June 2023
Rob McDonald (Chair)
Peter Crowley
Doug McKay
Cathy Quinn
Bruce Hassall (Chair)
Barbara Chapman
Peter Crowley
Barbara Chapman
(Chair)
Martin Brydon
Bruce Hassall
Rob McDonald
Doug McKay (Chair)
Martin Brydon
Peter Crowley
Cathy Quinn
(1) As announced in June 2023, Sandra Dodds agreed to be appointed an independent director of Fletcher Building Limited and Fletcher Building Industries Limited,
effective 1 September 2023. Ms Dodds will join the Audit and Risk Committee and the Safety, Health, Environment and Sustainability Committee.
70
Fletcher Building Limited Annual Report 2023 Corporate Governance (continued)
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 2023.
Board
Audit and Risk
Committee
Nominations
Committee (2)
People and
Remuneration
Committee
Safety, Health,
Environment and
Sustainability
Committee
Number of meetings held
Bruce Hassall (Chair) (1)
Martin Brydon
Barbara Chapman
Peter Crowley
Rob McDonald
Doug McKay
Cathy Quinn
11
11
10
11
11
11
11
11
4
2
4
4
4
4
3
3
3
3
3
3
3
3
3
3
3
3
3
4
1
3
4
4
4
(1) Bruce Hassall attended Committee meetings in an ex officio capacity.
(2) From April 2023, the members of the Nominations Committee are Bruce Hassall, Barbara Chapman and Peter Crowley. Prior to that date all directors were members of this
Committee. Martin Brydon, Rob McDonald, Doug McKay and Cathy Quinn attended June 2023 Nominations Committee meeting in an ex officio capacity.
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.
71
Fletcher Building Limited Annual Report 2023 Corporate Governance (continued)
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.
INTEGRITY IN NON-FINANCIAL REPORTING
The Board has approved an overarching Sustainability Policy and a sustainability strategy for the business.
That strategy was developed by evaluating non-financial environmental, social and governance issues that are material to the
business. It includes non-financial goals and measures for the business. The strategy and progress measures are published on
our website.
Progress against the strategy is reported to the Board Committee responsible for the strategy area, as determined in each board
charter.
Annual progress against the non-financial measures in the sustainability strategy goals and measures are reviewed by
management and by the relevant Board Committee. This internal review covers matters including the methodology applied to
calculate the measure (with reference to external benchmarks, frameworks, and global standards if relevant); the coverage of the
measure; the completeness of the measure; any key assumptions in relation to the measure; the comparability of the measure to
historic reporting; the materiality of the measure; and management’s confidence that the measure and supporting information is
materially correct.
Climate-related reporting
In addition to the internal review for Group measures described above, the Group receives third party assurance on reported
greenhouse gas emissions for Scope 1, 2 and 3. The assurance statement is publicly available on our website.
The Group also issues a statement in relation to Climate-related risks, which covers aspects required under the TCFD framework.
Significant transitional risks resulting from climate change are reported to the Safety, Health, Environment and Sustainability
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 a Climate-related Disclosure document which is available on our website.
NEW ZEALAND CLIMATE-RELATED DISCLOSURE FRAMEWORK
In December 2022, the External Reporting Board (XRB) issued the climate-related disclosure (CRD) framework for New
Zealand which aligns closely with the emerging international standards, primarily the standard published by the International
Sustainability Standards Board (ISSB); IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
and IFRS S2 Climate-related Disclosures.
The framework includes:
• Aotearoa New Zealand Climate Standard 1 (NZ CS 1): Climate-related disclosures;
• Aotearoa New Zealand Climate Standard 2 (NZ CS 2): Adoption of Aotearoa New Zealand Climate Standards (i.e. transitional
provisions); and
• Aotearoa New Zealand Climate Standard 3 (NZ CS 3): General Requirements for Climate-related disclosures.
This framework on climate-related disclosures is mandatory for Fletcher Building as a climate reporting entity for accounting
periods commencing on or after 1 January 2023.
Fletcher Building intends to provide a separate disclosure on this matter for the 30 June 2024 reporting period.
72
Fletcher Building Limited Annual Report 2023 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 People and
Remuneration Committee in line with its charter, which is available on our website.
The ‘Remuneration Report’ section 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.
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 (ARC). In this reporting period, the Group commenced additional
reporting to the Safety, Health, Environment and Sustainability Committee (SHES) on responsible procurement processes and
practices and Fletcher Building’s approach to management of human rights including modern slavery aspects.
3rd Line of Defence:
Board, Executive and
Internal Assurance
2nd Line of Defence:
Group Functions
FBU Board
SHES Committee
ARC Committee
Internal Audit
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 note 2.6 of the consolidated financial statements. The SHES Committee
and the People and Remuneration Committee also periodically receive risk updates related to matters specifically covered by
the relevant board charters.
73
Fletcher Building Limited Annual Report 2023 Corporate Governance (continued)
ACTIVITIES IN FY23
In FY23, 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 25 risk workshops were held with the individual business unit leadership teams in FY23. 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.
During FY23, a review of the Group’s significant supply chain exposures was completed focusing on risk management strategies
being deployed to manage disruptions. Several initiatives to improve the Group’s preparedness in respect of cyber events were
also completed through FY23.
Fletcher Building utilises a number of external experts to enhance risk management and help manage some of its key risks, such
as business resilience, product quality and information security. As part of our risk engineering programme, external engineers
conducted 28 site surveys, including seismic assessments for 4 of our Christchurch sites. The reports and recommendations
produced from these site surveys provide valuable risk and resilience insights to Group management as well as our insurers. In
relation to information security, we use the international NIST Cybersecurity Framework to help reduce our risk and protect our
network data.
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.
In FY22, the Group appointed Aon New Zealand to assess climate related transitional and physical related risks and issued its first
Climate-related Risk Disclosure. The physical risk assessment was a refresh of an exercise completed by Aon New Zealand in
2020 using the ‘reasonable worst case’ climate scenario known as RCP8.5 against a 2030 and 2070 timeframe. The assessment
focused on a number of climate-related hazards, including rainfall, temperature, sea level rise and extreme storm events. The
assessment generated a number of key outputs including:
• no material change in risk is expected in the FY30 time frame;
• some change in risk is expected for the FY70 timeframe due to changes in climate stressors; and
• less than 2% of the Group’s asset value has high or extreme flood hazard exposure.
As part of this FY22 assessment, AON supported the Group to assess transitional risks and opportunities in the areas of
policy, regulation, market risk, technology risk and reputational risk within the short to medium term. Key transitional risks and
opportunities were also included in the FY22 disclosure.
In FY23, the Group reviewed sector-wide risks as part of the New Zealand property sector Climate-Related Disclosures group,
which was convened to develop consistent climate risk scenarios for property sector entities to use as part of meeting incoming
mandatory climate risk reporting requirements in New Zealand. For the Group, these mandatory reporting requirements will
apply for our FY24 reporting year, and therefore in FY24, the group will expand its climate risk assessment to encompass the
three scenarios developed for the property sector and will include these in a FY24 Climate-related Risk Disclosure, to meet
mandatory disclosure requirements.
74
Fletcher Building Limited Annual Report 2023 Corporate Governance (continued)
KEY RISKS
The Fletcher Building risk management framework is focused on ten key commercial (non-health and safety) risks that the Group
faces across its business. However, these risks are dynamic and new risks and uncertainties may materialise in the future due to
changes in economic conditions, regulatory environment, and other factors. The current ten key risks are:
How this risk may impact
Fletcher Building
How we manage this risk at Fletcher Building
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.
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
address the identified operational continuity risks. Our
focus is on continuous improvement to strengthen these
plans in respect of various risks including natural events
and in particular, flooding.
– 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 FY22. 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.
– Senior leadership teams of business units and divisions
monitor their key markets and are supported by its
Corporate centre with in-depth market analysis.
– Regular operational reviews are undertaken with
businesses units and divisions as well as the Board
undertaking divisional deep dives.
– Strong focus on working capital, capital expenditure and
balance sheet management.
– The Group has developed a broad range of policies that
address the regulatory and legal risks that are faced by
the businesses. 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.
– 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 Product Quality
Review (PQR) audits on business units’ manufacturing and
product quality control processes.
– For more information on material product quality
claims currently being managed, please refer to
page 77 and notes 11 and 25 of the consolidated financial
statements.
– 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.
75
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.
Regulatory and legal
With the Group operating in a number
of different business sectors as well
as countries, it is subject to a wide
range of regulatory requirements and
jurisdictions. These regulations and
jurisdictions can be complex, subject
to change and may affect the Group’s
operations.
Failure to adhere to, or adapt
to changes in, the various
regulatory requirements
may lead to the imposition
of penalties, operational
disruption and/or reputational
damage.
Product quality
The Group constructs, manufactures
as well as sources from third parties
a range of structures and building
products that are required to meet
local and international standards and
regulations.
Products and structures
manufactured, supplied and/
or purchased that may not
meet relevant international or
local standards and regulations
may lead to product recalls,
remediation costs and/or
financial penalties.
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.
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.
Fletcher Building Limited Annual Report 2023 Corporate Governance (continued)
Description
People
The failure by the Group to attract,
retain and engage our people
(including engagement with
collective representation groups)
negatively impacting business units
or the Group.
Environment
Business unit operations may cause
environmental damage through the
failure to comply with the required
environmental laws, resource
consents and regulations.
Additionally, execution of strategic
sustainability initiatives is required
for the Group to achieve its purpose
of ‘improving the world around us’
in relation to sustainability goals, in
particular achieving a 30% reduction
of carbon emissions by 2030.
Technology resilience
Like many businesses, Fletcher
Building is dependent on information
technology systems to maintain its
operations.
Failure to provide reliable, resilient,
adaptable and efficient technology
infrastructure may impact the
operations of the business units or
the Group.
Additionally, the Group is also exposed
to threats by third parties that can
create operational disruption or result
in the loss of personal information or
confidential data.
Contractual
The Group has a diverse portfolio of
business units and the execution of
onerous contract(s) by any one of
the business units may result in the
Group being liable for liabilities or
performance under contracts that are
commercially adverse.
How this risk may impact
Fletcher Building
How we manage this risk at Fletcher Building
The failure of the current
processes to attract and
retain talented staff can have
a negative impact on the
functioning of a business unit
and the Group.
Additionally, industrial action
by collective representation
groups can cause operational
disruption.
Failure to comply with the
environmental laws, resource
consents and regulations
may result in imposition of
penalties and reputational
damage.
Additionally, a failure to meet
the Group’s sustainability
objectives may result in
decreased demand from
customers for the Group’s
building materials.
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 personal
information or confidential
information may also result
in the imposition of penalties
and reputational damage.
– 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.
– Business units that have potential significant
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 group
progress measures.
– Continued capital expenditure investment in technology
systems across the Group to support our operations.
– A dedicated team within Group Technology to address
the constantly evolving cybersecurity threats that the
Group faces.
– Group-wide education and awareness training, including
the Board of Directors, in relation to cyber-threats and
cyber breach preparedness.
– We use international experts and partners to enhance our
cyber resiliency.
– We proactively undertake disaster recovery planning for
our systems and infrastructure.
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 risks and claims relating
to our construction contracts, please see note 2.6 of
the consolidated financial statements, "Construction
Accounting".
– 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 in
which 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.
76
Fletcher Building Limited Annual Report 2023 Corporate Governance (continued)
IPLEX® AUSTRALIA PIPES UPDATE
As noted in the 2023 Interim Financial Results and an NZX announcement on 17 April 2023, Iplex® Australia has received a number of
product quality complaints relating to a hot and cold water polybutylene pipe product it previously manufactured (under the name
"Pro-fit"). The complaints relate to leaks in homes, primarily built by group home builders in Western Australia, which have required
repair or replacement of the pipes and, in some cases, damage to the affected homes.
Reports to Iplex® Australia are that, to date, about 1,500 (up from about 1,200 in April) of the houses constructed in Western Australia
using Pro-fit in the period mid-2017 to mid-2022 have experienced leaks. Iplex® Australia ceased the sale of Pro-fit in mid-2022.
The Pro-fit product was also sold into other States of Australia in that period. Reports to Iplex® Australia are that the leak rate in those
other States is not materially unusual for a product of this type. The Pro-fit product was sold only in Australia.
The Western Australia building regulator (the Department of Mines, Industry Regulation and Safety, known as DMIRS) has investigated
the matter. It has informed Iplex® Australia that, as foreshadowed in the Company's 17 April 2023 NZX announcement, "concerns
were identified" regarding the manufacturing process used for Pro-fit by Iplex® Australia. Neither the results of those investigations or
the basis for that statement have been provided to Iplex® Australia. DMIRS has referred the matter to the Australian Competition and
Consumer Commission (ACCC). Iplex® Australia expects to continue to engage with both DMIRS and the ACCC on this issue. Third
party plumbers and builders in Western Australia have also asserted to Iplex® Australia their belief that the cause is a manufacturing
defect.
For its own part, Iplex® Australia continues to consider a range of factors which may be relevant to determining root cause. At this
time, the work that Iplex® Australia has undertaken or commissioned that has been completed does not identify a manufacturing
defect. Iplex® Australia's investigation into the cause(s) include a range of factors it believes needs to be considered.
In the near term, Iplex® Australia continues to work with relevant stakeholders on an appropriate path forward. That path will be
informed by the cause(s) identified, whether those matters are agreed or contested, the facts and patterns observed in the data
provided by all parties, whether regulator(s) and homeowners accept any proposed response plan and the availability of resources
in the market to undertake work. The range of outcomes of that work plan may include product replacement in the homes where the
Pro-fit product was installed, in whole or in part. There are a number of factors which may impact any work plan, including whether it
extends to product that has not leaked.
As advised to the market, Iplex® Australia has made a provision for this matter of A$15 million which is treated as a Significant Item.
That provision is not an indication of Iplex® Australia's view as to the costs it will or may incur in relation to this matter. The provision
is in respect of costs expected to be incurred by Iplex® Australia in investigating this matter and providing funds to Western Australia
builders who choose to take advantage of its offer to contribute to the cost of repairs and replacement work in the interim, as
described in the Company’s April 17 NZX announcement. Iplex® Australia has not adjusted that provision at balance date but will
continue to review that treatment as facts and circumstances evolve.
Ultimately, if Iplex® Australia is found to bear some responsibility, the cost to it in rectifying homes with Pro-fit installed (as well as to
meet any damages claims, fines and other costs) may be a sum that could have a material impact on the Group’s financial position.
However, the extent to which Iplex® Australia is ultimately held to have any responsibility and the impact that may have on the Group is
not able to be established at this time. Those matters will depend on resolution of a number of matters, including:
•
•
the final determination as to cause(s) and the allocation of responsibility between Iplex® Australia and other parties;
the type and scale of remediation required, including the cost of undertaking it;
• other losses suffered by third parties ultimately attributable to Iplex® Australia;
•
•
if and how any relevant insurance policies respond; and
the time frames over which payments may be required. For example, removing Pro-fit from houses in Western Australia may take
a number of years to do, given the scale of that task and the constrained resources in the Western Australia market likely to be
available to undertake that work. If Iplex® Australia was to become subject to litigation in respect of this matter, final judgment may
not be reached for some time.
As these matters may continue to take some time to be identified and settled, Iplex® Australia will continue to work with relevant
stakeholders including homebuilders on an appropriate path forward.
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.
In addition to the risks captured in RADAR, specific updates on Group level impacts, such as risks associated with regulatory change,
climate change and modern slavery, are reviewed annually and reported to the Board or to the relevant Board Committee.
77
Fletcher Building Limited Annual Report 2023 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 note 6 of the consolidated financial statements included in this
Annual Report. The other work performed by the external auditor beyond the statutory audit was pre-approved in accordance with
the policy and is not considered to compromise independence as the services did not constitute material sums of money or relate to
strategic matters affecting the Group.
Representatives from EY attend our 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 contains information about Fletcher Building’s financial performance, operational
activities, corporate governance and other information of specific relevance to investors and stakeholders. The website has been
enhanced to include detailed information on Fletcher Building’s ESG (environmental, social and governance) measures which
allows our stakeholder community to monitor our performance and easily identify and access the processes, measures, initiatives
and certifications that underpin our commitment in these areas. The core requirements on communicating with shareholders are
formalised in a Shareholder Communications Policy, most recently approved in May 2022, and available on our 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 Chief Executive Officer, Chief
Financial Officer, and at times, 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 2023 with
presentations by the Chief Executive Officer, Chief Financial Officer and operational executives. Each presentation included question
and answer sessions. Site visits also form part of the investor relations programme throughout the year. 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 2023, the Board has been addressing governance matters including increasing the minimum share ownership by
directors, increasing female representation to the Board, and reducing the Nominations Committee to three members. In addition, all
directors carried out an in-depth cyber training workshop which included simulating a cyber crisis situation.
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.
78
Fletcher Building Limited Annual Report 2023 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 impacts, and they form the
basis of the goals within our sustainability strategy.
Material impacts assessment
In FY22 we engaged an independent specialist consultancy to conduct a materiality assessment. The assessment followed 2021
Global Reporting Initiative (GRI) Standards, in particular GRI 3: Material Topics, to identify and assess our impacts. Our FY18
materiality assessment served as a starting point, complemented by analysis of external benchmarks including those from, at
that time, the Sustainability Accounting Standards Board (SASB), the Living Standards Framework, leading industry peers, and
sustainability investor indices including the Dow Jones Sustainability Index (DJSI) and MSCI together with internal workshops
with subject matter experts from several of our divisions.
Following the principle of double materiality, the analysis was designed to look at external environmental, social and governance
impacts on our organisation and also to identify our impacts on the economy, environment, and people across Fletcher Building’s
activities and business relationships. The impacts identified included those caused by our activities, impacts where our activities
contribute to an impact, and impacts that are neither caused nor contributed to by our activities but where our operations are
associated with the impact. The severity of the impacts was assessed based on the scale of the impact, scope of the impact, and
the degree to which remediation of the impact is possible.
Stakeholder insights
As part of the assessment, our consultant conducted confidential interviews with selected subject matter experts, following
the AA1000 Stakeholder Engagement Standard (SES). Representatives from the public sector, infrastructure providers, industry
peers and experts, industry associations, sustainability consultancy, investor experts, academia and a cohort of early career
employees from within our business were interviewed. 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. Internal and
external stakeholders saw great potential for Fletcher Building to contribute to society, largely in areas we already focus on,
including greenhouse gas emissions, material usage and waste, and health safety and wellbeing.
Material impacts and integration with our strategy
The assessment identified 26 sustainability impacts that are material for Fletcher Building, which we prioritised to 12 impacts with
highest severity. These fall into the three broad categories summarised below:
• 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
Both the material impacts and the stakeholder insights from our FY22 materiality analysis have been integrated into our refreshed
FY23 sustainability strategy, which was signed off by our board in September 2022.
Climate change impacts are addressed in the Net positive environmental impact strategic goal, as well as in the net zero carbon
group measure. Resources, emissions and the circular economy impacts are addressed in the Leading the way in sustainable
building products and solutions and Circular economy commitment across our business goals, as well as the Revenue from
sustainably certified products and Waste avoided, recycled, and/or reused measures. These goals also reflect stakeholders
desire to see sustainability embedded within our business strategy and value chain. Health, safety and wellbeing impacts are
addressed in the Safe, diverse and inclusive workspace and in the Our community at the heart of what we do goals, as well as the
rest of the group measures.
As part of partnering and providing thought leadership within our sectors of operation, we are active member of the following
sustainability organisations:
– Infrastructure Sustainability Council of Australia
– New Zealand Green Building Council
– Sustainable Business Council
– Sustainable Business Network
– Green Building Council Australia
– Climate Leaders Coalition
Progress against the goals in our sustainability strategy is reported in the front sections of this Annual Report. We note the recent
issue of ISSB standards, and will refer to these in our next assessment of material impacts.
79
Fletcher Building Limited Annual Report 2023 Sustainability Materiality and Methodology (continued)
METHODOLOGY USED FOR NON-FINANCIAL MEASURES
Greenhouse Gas (GHG) emissions
The Greenhouse Gas (GHG) emissions included in this report were calculated for the period from 1 July 2022 to 30 June 2023 in
accordance with the GHG Protocol and ISO 14064-1:2018 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.
The divisional GHG emissions included in this report represent the share of our Group GHG emissions resulting from operations
within those divisions. As with Group emissions, these were calculated on the equity share basis. Divisional emissions in this
report also include an allocation of corporate GHG emissions from our head office operations in New Zealand. These corporate
GHG emissions have been allocated to the New Zealand divisions in proportion to the divisional contribution to overall GHG
emissions for Fletcher Building.
Scope 3 emissions, those from our supply chain, were calculated in accordance with the GHG Protocol. Reported supplier data
was used for circa 58% of reported emissions. For the balance of emissions, 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 (tCO2e). Where specific data on quantities of supply
chain goods and services was not available, we have estimated emissions using spend based factors, using the internationally
recognised DEFRA factor set, corrected for exchange rates and inflation.
As required periodically by the Greenhouse Gas Protocol accounting standard, we have re-baselined our emissions from FY18
to FY23 to account for acquisitions, divestments, methodology changes and improved availability of historic data. Re-baselined
figures have been used in this report for all years. Re-baselining means that the GHG emissions and emission reductions
are based on what our real-world emissions would have been for all years from, and including, FY18 if the boundary of our
operations for those years had been the same as for FY23.
The main adjustments were the divestment of our Rocla® operations, the acquisition of the Laminex® Monkland operations,
the acquisition of the Tumu® business, and an adjustment of the emissions factors for coal and biomass used at Golden Bay®
to provide improved specificity on emissions from the actual fuels used. Collectively, these adjustments result in slightly lower
reported emissions for the Group across all reporting years, including the baseline year of FY18 which changes from 1.238 m
tCO2e to 1.213 m tCO2e.
Our reported Scope 3 emissions for FY23 now include data sourced directly from our largest steel and cement suppliers. By
doing this, we are more accurately accounting for the emissions associated with the production of these products that we use
in our operations. It is important to note that this increase does not necessarily mean that our actual emissions have increased
compared with previous reporting periods. We expect that our Scope 3 emissions will have further changes in future reports as
we obtain more accurate emissions data on our purchased goods and services. Our Scope 1, Scope 2 and Scope 3 emissions,
including all adjustments related to the re-baselining, have been externally verified by Toitū Envirocare in accordance with ISO
14064-1:2018. Their assurance statements for FY18 to FY23 are available on our website.
Waste diverted from landfill
The waste diverted from landfill figure included in this report is the tonnage of waste diverted from landfill, and includes waste
managed as part of our principal waste contracts, which represents most of the waste generated from our operations. The figures
for waste diverted from landfill do not include waste material resulting from our operations that was reused as cleanfill or hardfill,
or waste used for energy recovery. The waste figures in this report do not include waste that is not managed under our principal
waste contracts, and where specific waste measurements for our operations are not provided to us.
Revenue from sustainably certified products
The revenue from sustainably certified products 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 GreenTag GreenRate) and the Type III
environmental declaration requirements under the ISO 14025 Standard.
These certifications qualify for the sustainable products credits in either the Green Star or IS Rating 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.
80
Fletcher Building Limited Annual Report 2023 Total Recordable Incident Frequency Rate (TRIFR)
Total Recordable Incident Frequency Rate (TRIFR) included in this report is the total number of recordable injuries and illnesses
per million hours worked in a year by Fletcher Building.
TRIFR calculation is on a 12-month rolling period and is the total number of recordable injuries multiplied by a million and
divided by total number of hours worked. Recordable injury definitions are derived from the Occupational Safety and Health
Administration standards, and include Medical Treatment Injuries, Lost Time Injuries, Serious injuries and Fatal Injuries, and
exclude Restricted Work Injuries. Total number of hours worked excludes holiday time and includes contractors, it is estimated
where required based on work activities.
TRIFR in this report includes all employees and contractors working under Fletcher Building control or on Fletcher Building
controlled sites.
Employee Net Promotor Score (eNPS)
Employee Net Promotor Score (eNPS) included in this report is the result from a Group-wide employee engagement survey
which provides insights on employees’ engagement and provides them the opportunity to share their experience working for
Fletcher Building. The survey is run using an external survey platform. eNPS is measured by surveying our people and measuring
the difference between the promoters and detractors. This is then compared to the provider’s benchmark data set, to show how
Fletcher Building compares to other organisations.
eNPS is calculated by subtracting the percentage of detractors (i.e. those who gave scores of 0 – 6) from the percentage of
promoters (i.e. those who gave scores of 9 – 10). The range of possible eNPS scores ranges from -100 to 100. The eNPS figure in
this report is based on a survey of all permanent employees of Fletcher Building and excludes fixed term casual employees and
contingent workers.
Fletcher Building changed to using eNPS in FY23. In light of this, the FY22 comparative (reported as engagement percentile using
the previous methodology) has been recalculated in line with the presentation for FY23.
Net Promotor Score (NPS)
Net Promotor Score (NPS) is a widely used measure for customer satisfaction. NPS ranges from -100 to 100 and is calculated by
subtracting the percentage of detractors (i.e. those who gave survey scores of 0 – 6 out of 10) from the percentage of promoters
(i.e. those who gave survey scores of 9 – 10 out of 10). NPS is measured at regular intervals via surveys at a cadence appropriate
for each business. An external third-party platform is used to conduct surveys, receive and follow-up on feedback, and generate
insights. Businesses refresh customer lists regularly to make sure a representative sample is surveyed.
NPS in this report includes all business units other than the Group's joint ventures and associates, newly acquired business units
(Tumu®, Waipapa, Haven Kitchens and Water Filters Australia), and the Construction division.
81
Fletcher Building Limited Annual Report 2023 Remuneration Report
Winstone Wallboards®' production team leaders, Victor
Peyroux (centre), with operators, Brandon Chase and Silvia
Fianco, in the control room at the Tauriko GIB® facility.
82
Fletcher Building Limited Annual Report 2023 Remuneration Report
In addition to financial returns, we are
committed to having a positive impact on
the environment, creating a safe, diverse
and inclusive workplace, and enriching
the lives of our customers and the
communities in which we operate. These
ESG targets are incorporated into the STI
scorecards of our senior leaders to drive
focus and action.
Barbara Chapman
People and Remuneration Committee Chair
Message from the People and Remuneration Committee Chair
Dear Shareholders
On behalf of the Board, I am pleased to present Fletcher Building’s Remuneration Report for the financial year ended 30 June 2023.
The year in review
The year ahead
Fletcher Building has continued to perform well despite softer
market activity and wet weather conditions, and we remain well-
positioned for growth over the longer-term. Short-term incentive
(STI) outcomes of our CEO and Chief Executives range between
13% to 66% of maximum, reflecting solid performance against
stretching targets set by the Board.
We take a prudent and responsible approach towards executive
remuneration, tailored across each of our divisions and based
on a range of financial and non-financial metrics. Based on this
approach, the Executives in our Residential and Development
and Construction divisions were not eligible for individual goal
achievement, having not achieved their financial gateways.
In addition to financial returns, we are committed to having a
positive impact on the environment, creating a safe, diverse and
inclusive workplace, and enriching the lives of our customers and
the communities in which we operate. Our approach to assessing
this performance is guided by our sustainability strategy which
includes targets of a 30% reduction in carbon emissions by FY30
(and achieving net zero by FY50), 30% women in leadership by
FY27 and top quartile customer and employee engagement.
These ESG (Environmental, Social & Governance) targets are
incorporated into the STI scorecards of our senior leaders to
drive focus and outcomes beyond the financial year. We have
been impressed by the considerable progress our teams have
made this year, through applying innovative technologies and
approaches to achieve these goals. This is reflected in our world-
class sustainability credentials such as being a member of the
2023 S&P Sustainability Yearbook and listed in the Dow Jones
Sustainability Index for Australia.
As a reminder, we introduced three changes to our executive
long-term incentive (LTI) framework in FY23 to increase
shareholder alignment and the link between sustainable
performance and remuneration outcomes. These were the
addition of ROFE (return on funds employed) as a performance
measure (in addition to rTSR); removing the LTI retest dates; and
aligning the grant and test dates to the Group’s full year results.
We also adjusted the financial vs non-financial weightings of the
STI scorecard for the Group CEO and Operational leaders from
70%:30% to 65%:35% at target. This resulted in a more balanced
approach between financial and non-financial measures,
enabling us to better incorporate strategic ESG goals.
To carefully manage costs through the expected economic
downturn, the CEO, Chief Executives and General Managers will
receive no fixed remuneration increases next year. However, in
lieu of a salary increase, and to motivate and engage our leaders
through FY24, the STI pay-out at target for this group will increase
from 100% to 110% for FY24 only. This uplift only applies to the
financial component of the STI, and it is therefore closely linked
to performance and is self-funded.
While we have focused on improving our pay parity position
over the last three years and made good progress, some of our
previous gains have been eroded. This was mainly due to hiring
externally in a tight labour market, with increasing wages in a
male-dominated industry. The gap increased from 3.5% in FY22 to
4.2% this year. We will undertake a comprehensive review of our
practices in FY24 and introduce enhancements to close the gap.
Given the improvement of our safety performance and maturity,
with TRIFR levels in some of our businesses nearing global best,
we have also reviewed our approach to safety in the STI, so it
aligns to our strategic approach. 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 FY23.
We have introduced a number of reporting enhancements
to increase disclosure about the alignment of performance
and remuneration outcomes, and to ease investor analysis.
These enhancements include a 5-year summary of STI and
LTI performance measure results and the CEO’s remuneration
outcomes; STI and LTI term sheet tables; the CEO’s maximum
remuneration opportunity in dollar terms; and a Frequently Asked
Questions (FAQ) section.
The Committee and I would like to thank all our teams for their
contribution to the achievements delivered in FY23. I invite you to
review the 2023 remuneration report.
Barbara Chapman
People and Remuneration Committee Chair
83
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
CONTENTS
1. FY24 Remuneration Framework Changes
2. FY23 Remuneration Framework
3. Performance Outcomes
4. CEO Remuneration
5. Frequently Asked Questions
6. Employee Remuneration
7. Directors’ Remuneration
84
84
89
91
94
95
96
1. FY24 REMUNERATION FRAMEWORK CHANGES
The following table summarises key changes to our remuneration policies and frameworks for FY24 and beyond and provides the
rationale and outcomes of these changes.
Change
Detail
Rationale and outcome
As our safety performance improves and our
businesses mature, we needed to review our
approach to incorporating safety in the STI.
TRIFR is at record low levels for some of our
businesses (<2.0). As such, using TRIFR as a
target becomes less meaningful, with some
businesses only experiencing incremental
improvement. Therefore, we needed to look to
lead measures to drive continued improvement
in safety excellence.
This approach creates closer alignment between
our safety strategy (recognising our businesses
can be at different stages of maturity) and the
approach to safety in the STI.
Increasing the STI pay-out at target motivates
and engages our senior leaders through a
challenging FY24 and carefully manages costs
given that this approach is performance-based
and self-funded.
A revised approach for
incorporating safety
performance into our
short-term incentive
(STI).
For businesses with TRIFR (Total Recordable Injury Frequency
Rate) >2.0, the safety component of the STI will continue to
include a safety lead (risk) and lag (TRIFR) measure, weighted at
5% each.
For businesses with TRIFR <2.0 (i.e. top quartile performance
globally), the safety component will move to lead indicators only,
weighted at 10%. TRIFR will still be tracked for these businesses,
and if it increases past the overall group TRIFR, they will lose 5%
of the total 10% safety weighting in the STI.
Nil fixed remuneration
increases for senior
leaders, and a 10%
increase in STI pay-out
at target for FY24
only. The uplift only
applies to the financial
component of the STI.
The CEO, Chief Executives, and General Managers will receive no
fixed remuneration increase for FY24.
In lieu of an increase for this group, STI pay-out at target will
increase from 100% to 110% for FY24 only.
The 110% pay-out at target will be delivered via a 10% step
increase when financial targets are achieved only, as follows:
•
•
•
straight-line between threshold to target (0% - 100%);
increase with a 10% step at target; and
straight-line between target and maximum (110% - 150%), with
the maximum opportunity remaining at 150%.
The STI uplift only applies to the financial component of the STI
and the additional cost of this approach will be added to our
EBIT targets – i.e. additional STI will only be achieved if more
stretching EBIT targets are met.
2. FY23 REMUNERATION FRAMEWORK
The following sections describe the remuneration framework in place during FY23.
2.1 The role of the People and Remuneration Committee
The principal role of the People and 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, culture, 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 People and 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 People and Remuneration Committee during FY23 included: review and
approval of the FY23 STI and LTI for senior leaders, review of succession depth and development for the CEO, approval of
updated remuneration proposals, review of pay parity, and pension plan governance matters.
2.2 Remuneration strategy and framework
The remuneration framework and how it supports the strategy set out on the next page, is based on the FY23 framework.
84
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
FY23 REMUNERATION FRAMEWORK
Improving the world around us through smart thinking, simply delivered
Purpose
To be the leader in New Zealand and Australian building products and solutions
Vision
Our Board is responsible for the Group’s remuneration policy, which is available on our website, with the People and
Remuneration Committee assisting in the conduct of its responsibilities. A key role of the Committee is to oversee and
regulate remuneration and organisation matters affecting the Group.
Governance
(a full set of our remuneration principles is available in our remuneration policy)
Remuneration Principles
Remuneration framework and how it supports the strategy
Shareholder
Our People
Focus on the creation of
shareholder value by driving
an ownership culture with
‘skin-in-the-game’
Attract and retain high
calibre people, rewarding
high standards of
performance and values
Strategy
Risk
Focus on sustainable
earnings, growth and
key Company goals and
objectives (short and
long-term)
Encourage conduct that
does not expose the Group
to inappropriate risk while
promoting high standards
and accountability
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,
any allowances, 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 Incentive
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 Incentive
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
Two equally weighted
measures: Relative Total
Shareholder Return (rTSR)
referenced to an industry
comparator peer group
and Return on Funds
Employed (ROFE)
Retains and motivates
key talent, and drives
alignment by rewarding for
achievement of the Group
goals and creation of
shareholder value
Supporting the alignment
of our most senior people
with shareholder interests,
ensuring value is created for
our people where relative
TSR is realised and ROFE
is achieved. Encouraging
long-term sustainability, a
focus on performance and
growth, and achievement of
the Group strategy
85
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
2.3 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.
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
reflects where the Group wins talent from and loses talent to.
2.4 Short-Term Incentive (STI)
The following table summarises the Senior STI which applied to the CEO and Chief Executives in FY23.
STI Element
Description
Eligibility
• Participation in the STI is by annual invitation at the discretion of the Board and typically includes senior
leaders who have a direct impact on the Group’s performance.
l
a
r
e
n
e
G
Opportunity
• Group CEO: Target = 112% of Base Salary
• Chief Executives: Target = 70% - 80% of Base Salary (role dependent)
• Maximum opportunity is 150% of Target for all participants
Vehicle
• Group CEO: 50% cash; 50% deferred into equity (share rights) for 2 years
• Chief Executives: 60% cash; 40% deferred into equity (share rights) for 2 years
• The weightings of financial, safety and individual goals vary by role, as outlined below.
s
n
o
i
t
i
d
n
o
C
e
c
n
a
m
r
o
f
r
e
P
Performance
conditions
and
weightings
Measure
Description
Safety
gateway
• Safety leadership interactions reinforce a line-led safety culture,
and places emphasis on the importance of active and authentic
leadership for safety on-site.
• CEO and Functional Executives in Corporate: Group EBIT, EBIT
margin and trading cash (excluding significant items).
• Operational Executives in divisions: Divisional EBIT and trading
cash, capital management or work won, depending on the
division's priorities.
Financial
• EBIT is a gateway to the individual goals, i.e. if the EBIT threshold
is not met, no individual component of the STI is payable.
• To strike an appropriate balance between focusing on division
financials and those of the Group, a multiplier (either up or
down) is applied based on the achievement of a Group EBIT
target.
• All roles have a safety lead and lag measure, weighted at 5%
each.
Operational
Executives
Functional
Executives
12
6
Target: 65%
Target: 50%
(115% max)
(100% max)
Safety
• 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.
10%
10%
• The safety lag measure is based on injury reduction targets, i.e.
reduction in TRIFR (Total Recordable Injury Frequency Rate).
• Individual goals for the executives are aligned to the different
priorities of their businesses or functions, and may include
above plan growth, employee engagement (eNPS), customer
(NPS), talent, diversity, sustainability, innovation, and other
strategic goals that drive performance beyond the current
financial year.
Individual
25%
40%
Total STI scorecard at target (Financial Target + Safety + Individual)
Total STI scorecard at maximum (Financial Max + Safety + Individual)
100%
150%
100%
150%
• Performance hurdles for our financial measures are set at two levels: a threshold level, which must be met
before any STI is paid, and a maximum level that reflects stretch performance. Financial thresholds are
generally set at 80% of maximum hurdles.
• The performance range for individual and safety measures is between 0% and 100% of the goal, with no
opportunity for stretch performance.
86
Fletcher Building Limited Annual Report 2023
Remuneration Report (continued)
STI Element
Description
i
g
n
m
T
i
• An assessment of performance against the performance conditions occurs following finalisation of the
Group’s full year results.
Assessment
of awards
Deferred
Equity:
Disposal
restrictions
and
dividends
• Each of these financial measures is assessed separately at this time and achievement against each
executive’s individual goals is reviewed and approved by the Board.
• Eligibility for consideration of a payment under the STI requires a participant to remain employed by the
Group at the date of payment, following the end of the financial year.
• Both the cash and deferred equity (share rights) components are awarded as soon as reasonably
practicable after the announcement of the Company’s full year results in August each year.
• A participant is entitled to receive one ordinary share for each vested share right.
• The share rights will vest and be automatically exercised into shares on the second anniversary of the
grant date, subject to the plan’s leaver provisions.
• There will be no disposal restrictions on the shares received following the vest and exercise of share
rights, subject to any minimum shareholding obligations and insider trading policies.
• No dividends (or voting rights) are received on the deferred share rights during the deferral period.
2.5 Long-Term Incentive (LTI)
The table below summarises the Group's share based executive long-term share scheme (ELSS).
LTI Element
Description
Eligibility
Opportunity
• Participation in the ELSS is by annual invitation at the discretion of the Board and includes the Group CEO
and Chief Executives.
• Group CEO: Target = 80% of Base Salary
• Chief Executives: Target = 40% - 50% of Base Salary (role dependent)
• Maximum opportunity is 100% of Target for all participants
l
a
r
e
n
e
G
• 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.
• 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.
Vehicle
• To the extent that the performance criteria are not met, or the participant ceases to be employed by the
Group, the shares are forfeited, and the proceeds used to repay the interest-free loan. Exceptions to this
are considered in the case of redundancy or retirement.
• A taxable bonus is paid sufficient to repay the loan related to the vested shares. Subject to the impact of
any increase in the tax rate since allocation, net after-tax dividends related to the vested shares are paid to
the employee.
• The legal title to the shares is transferred to the employee.
87
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
LTI Element
Description
Overview
• The ELSS is designed to align executive remuneration with sustainable financial outcomes for
shareholders over the longer term, and to attract and engage participants.
• The 2022 ELSS grant is subject to two equally weighted performance criteria, tested at the end of a 3-year
s
n
o
i
t
i
d
n
o
C
e
c
n
a
m
r
o
f
r
e
P
Performance
conditions,
weightings,
and timing
(2022 ELSS
grant)
restrictive period:
• Relative total shareholder return (rTSR); and
• Return on Funds Employed (ROFE).
• 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 group of Australasian companies. The
comparator group used for the 2022 offer comprises Adelaide Brighton, BlueScope, Boral, Brickworks,
CSR, GWA Group, James Hardie, Metro Performance Glass, Reece and Steel & Tube.
• Note: The Board have sought independent advice as to whether the continued presence of Boral in the
comparator group is appropriate given its recent corporate activity. If that advice confirms that it is not
appropriate (i.e. that it distorts the cohort), the Board will follow advice on how to measure rTSR going
forward, while adjusting for that distortion. This may require adjustment to remove Boral from those tests.
The Board is obtaining independent advice as to the most appropriate composition to provide the right
balance for ELSS participants, the Company, and shareholders.
• The relative TSR performance and vesting entitlements are set out in the table below:
TSR Percentile
Percentage entitlement
Below 51st
At 51st
NIL
50%
Above 51st to below 75th
51% - 99% linear pro-rata
At 75th or above
100%
• ROFE performance is determined by dividing EBIT by average funds employed and assessing it using the
following performance thresholds:
• The ROFE performance range includes a threshold at the point where ROFE equals the weighted average
cost of capital and a maximum of 15%. Performance is assessed in the year of vesting based on EBIT,
excluding the impact of M&A and restructuring costs.
• The ROFE performance and vesting entitlements are set out below:
ROFE Percentile
Percentage entitlement
At or below weighted average cost of
capital (WACC)
NIL
Between WACC and 15%
1% - 99% linear pro-rata
At or above 15%
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.
2.6 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,
LTI 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’ equity with long-term Group performance and the
interests of shareholders.
As at 30 June 2023, the CEO had a holding in the Group’s ordinary shares equal to 91% of his base remuneration. 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. This does not include any in-flight STI or LTI equity awards.
88
Fletcher Building Limited Annual Report 2023
Remuneration Report (continued)
2.7 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$5,000 per annum (or the equivalent currency in other countries). Directors are not eligible to participate
in FBuShare.
2.8 Malus & clawback
Our malus and clawback framework applies to unvested and vested STI, both cash and deferred, and unvested and vested LTI
awards. Under this framework, the company has the right to reduce the incentive remuneration component prior to payment
or vesting, and clawback the incentive remuneration amount from a participant for a period of three years from the end of the
financial year for which the STI payment is made or vesting of the LTI.
There are four key steps in the framework, each of which contain a set of parameters and/or questions that guide management
and Directors in determining the extent to which any STI or LTI would be impacted. These steps include:
1.
Identifying & investigating trigger events;
2. Assessing trigger events and required consequences;
3. Determining accountability and intent; and
4. Quantifying the adjustment and application.
Although a list of financial and non-financial trigger events have been identified for which this framework would apply, this list
is not exhaustive and management, the People and Remuneration Committee or Board may determine other events apply in its
ultimate discretion.
During FY23, no trigger events were identified and therefore, the Board was not required to consider application of the malus &
clawback framework.
3. PERFORMANCE OUTCOMES
3.1 5-year performance summary
Financial year
Short-term performance
Net earnings/(loss) ($m)
EBIT ($m)(1)
Cash ($m)(2)
CEO STI achieved (as a % of maximum)
FY23
FY22
FY21
FY20
FY19
235
782
517
36.0
432
756
592
92.5
305
668
879
94.0
(196)
160
410
0.0
164
631
153
36.0
(1) EBIT is excluding significant items but including the impact of Iplex® Australia Pro-Fit costs.
(2) The Cash measure was operational cash flow in FY19-FY22, and trading cash flow (excluding significant items) in FY23. Trading cash flow excluding significant items
is calculated consistently with the published Group cash flow from operations, excluding cash tax, non-lease interest costs and significant items, but adjusting/
deducting for lease principal payments classified as part of cash flows from financing activities, to represent business unit-controlled cash flows.
Long-term performance
1-year TSR (%)(3)
3-year TSR (%)(4)
ROFE (%)
Dividends (cents per share)(5)
Year-end share price ($)
CEO LTI Vested (as a % of maximum)
15
74.4
17.1
40.0
5.42
0.0
(28)
11.5
19.3
36.0
5.04
0.0
107
12.0
18.8
12.0
7.52
0.0
(21)
(44.7)
3.7
15.0
3.70
0.0
(29)
(23.1)
11.8
8.0
4.85
N/A
CEO LTI grant date(6)
1 July 2020 1 July 2019
1 July 2018
1 July 2017
1 July 2016
(3) Share price movement in year and gross dividend received, to prior year closing share price.
(4) Using 5-day VWAP as per the ELSS.
(5) Gross dividend paid during the period.
(6) The current CEO commenced employment on 22 November 2017.
89
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
3.2 FY23 Short-term incentive (STI) performance
Safety performance
All executives met or exceeded the required safety leadership interactions in FY23 and fully achieved their safety lead
performance measures. TRIFR performance across the Group is tracking well, with the FY23 result down to 3.1 from 3.4 in FY22.
This performance resulted in the 5% safety lag goal of the STI scorecard being achieved.
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
considers 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 it appropriate.
In FY23, we had 3 serious injuries, 2 of which were non-life-threatening hand injuries, and the other was a vehicle related incident
where the individual suffered a spinal cord injury resulting in paraplegia. 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 People and Remuneration Committee to review the impact
on remuneration outcomes using the STI Discretionary Impact Framework. As per this framework, only serious injuries which
were fatal or serious with potentially fatal consequences are reviewed to assess whether discretion should be applied to impact
STI outcomes. This ensures that leaders are not unfairly sanctioned for events which, under slightly different circumstances,
would not have caused serious harm.
Given that the two non-life-threatening hand injuries were not potentially fatal, and after considering all associated factors, there
has been no impact to relevant individual leaders on the STI this year. We have also been impressed by the extensive actions
undertaken following these incidents such as the glove awareness campaigns, information sessions and mandatory glove policy
for contractors.
Following the impact assessment conducted for the vehicle related incident, Directors exercised their discretion to reduce the
STI outcome of the following relevant leaders:
• Business Unit GM and functional leaders (-10%): Planning and resources were being allocated and there was genuine
commitment by leadership, however, the severity of the injury required some impact to be made.
• Country Manager (-50%): This manager is responsible for enforcing the Life Saving Rules and ensuring subcontractors are
prequalified, inducted and have fit-for-purpose equipment.
Financial performance
While EBIT performance during FY23 was below threshold for our Construction and Residential & Development divisions, it was
at or above threshold levels for the Group and remaining divisions. This resulted in the CEO and CEs of the remaining divisions
meeting the gateway requirement to be eligible for payment on individual goals.
With the exception of the Residential & Development division which performed below the threshold hurdle, cash performance
was between threshold and maximum for the remainder of divisions and the Group. The Residential & Development division also
has a Capital Envelope measure, and the team maintained sensible limits on working capital investment resulting in performance
for this measure between threshold and maximum.
Our Construction division similarly exceeded the threshold for their division-specific New Work Won measure to deliver a strong
future pipeline.
Further details about the Group’s financial performance in FY23 is set out on page 100.
Individual performance
Where the EBIT gateway to individual goals were met, achievement against individual goals for executives in FY23 range from
60% to 100%. Further details of the CEO’s individual goal performance are outlined in section 4.4 on page 93.
Throughout the year, Iplex® Australia increased the provision for issues related to its previously manufactured Pro-Fit products
in Western Australia, from A$2 million to A$15 million. As a result, the Board applied discretion to deduct the A$15 million
from Group, divisional and business unit EBIT performance (see CEO FY23 STI Outcome on page 93). After incorporating this
adjustment, the FY23 STI outcomes of our CEO and Chief Executives range between 13% to 66% of maximum. In reviewing these
outcomes, the Board considered that the team delivered solid performance against stretching targets set by the Board. Given
that performance was good but not exceptional, the outcomes are appropriate against the stretching and robust targets set by
the Board. No further discretionary adjustments were made.
90
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
3.3 Long-term incentive (LTI) performance
The July 2019 long-term share scheme grant, which was within the 12-month retest period up to 30 June 2023, was below the
minimum threshold performance level and therefore was forfeited. The July 2020 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 in section 2 of the report.
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
September 2022 (1)
July 2021 (2)
July 2020 (3)
July 2019 (4)
July 2018 (5)
Shares granted
% vested
% forfeited
616,654
395,085
1,998,635
1,386,100
1,041,605
In-flight
0%
0%
100%
100%
(1) As per the prospective LTI changes introduced in FY23, grant and test dates were aligned to the announcement of the Group’s full year results, and the retests were
removed.
(2) 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 GMs through the equity deferral of their STI component.
(3) Fletcher Building's TSR did not meet the minimum vesting threshold for the three years ended 30 June 2023 for the 2020 issue. Therefore, the restrictive period has
been extended to 30 June 2024.
(4) The restrictive period for the 2019 issue was extended for 12 months until 30 June 2023. Fletcher Building's TSR did not meet the minimum vesting threshold for the
period ended 30 June 2023. Therefore, 100% of the shares in the 2019 issue will be forfeited in August 2023.
(5) 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 were forfeited in August 2022.
4. CEO REMUNERATION
4.1 Remuneration package overview
The following diagram shows how remuneration is delivered to the CEO.
Start of the
year
End of
Year 1
End of
Year 2
End of
Year 3
Fixed Remuneration
Base salary and other benefits
Short-term incentive
Cash (50%)
Deferred equity (50%)
Long-term incentive
Shares
50% Relative TSR and 50% ROFE
91
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
4.2 Remuneration mix
Ross Taylor’s annual base remuneration as at 30 June 2023 was $2,223,600, with an on-target STI of 112% of base salary and
LTI of 80% of base salary. The current mix of remuneration components for the CEO is set out below, and clearly shows the
significant weighting of variable pay (at risk), which is subject to achievement of short-term and long-term strategic goals.
The charts below show the CEO’s remuneration package pay mix as a percentage of total package for both on-target
performance and maximum performance.
Equity Pay
Variable Pay (at risk)
LTI: Long-Term Incentive
STI: Short-Term Incentive
FR: Fixed Remuneration
(includes base salary and
other benefits)
27%
LTI
19%
STI
Equity
35%
FR
CEO
on Target
Performance
Pay Mix
19%
STI Cash
22%
LTI
24%
STI
Equity
30%
FR
CEO
Maximum
Performance
Pay Mix
24%
STI Cash
The table below outlines the CEO's remuneration package at target and at maximum in NZD.
At target
At maximum
Remuneration element
Value in NZD
% of total package
Value in NZD
% of total package
Fixed Remuneration
STI Cash
STI Equity
LTI
Total remuneration package
4.3 Remuneration received
$2,358,511
$1,245,216
$1,245,216
$1,778,880
$6,627,823
35.6%
18.8%
18.8%
26.8%
100%
The remuneration Ross Taylor received for FY23 and FY22 is set out in the table below.
Base remuneration
Other benefits (1)
Short-term incentive accrued in the financial year
One-off share-based retention award – granted in 2019, vested on 30 June 2022 (3)
$2,358,511
$1,867,824
$1,867,824
$1,778,880
$7,873,039
FY23
$2,223,600
$134,911
$1,345,286 (2)
30.0%
23.7%
23.7%
22.6%
100%
FY22
$2,148,400
$131,032
$3,338,614
$970,981
Received (4)
$3,703,797
$6,589,027
Long-term incentives
Granted but only awarded after 3 years, if performance criteria are met
Long-term incentive - number of shares granted
Long-term incentive - face value of grant
Refer above for details of the STI and ELSS.
FY23
168,296 (5)
$1,778,880
FY22
121,663 (6)
$1,718,720
(1) Includes medical insurance, KiwiSaver and Australian superannuation for days worked in Australia as required by Australian taxation law.
(2) FY23 base remuneration x STI Target (112% of base remuneration) x FY23 STI maximum outcome (36%) x 150%. 50% payable in September of the following financial year
and 50% deferred into equity for 2 years.
(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 page 95 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$5.61/AU$5.01, being the volume weighted average price for the five business days prior to 1 September 2022. 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$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.
92
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
4.4 CEO FY23 STI outcome
For FY23, the following financial and non-financial measures were considered by the Board to incentivise earnings and operating
cash, and to drive sustainable business performance. STI performance for FY23 was measured between threshold and maximum
hurdles, with straight-line pro-rate from 0% at threshold to 150% at maximum. The table below summarises performance against
targets for each of these measures under the CEO’s FY23 STI.
Measure
Safety gateway
Financial goals
Scorecard weighting
pay-out range
Actual
outcome: %
of maximum 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)
0%-85%
FB Group Cash
0%-30%
Safety goals
Risk containment sweep and critical control
verification plans, sweeps completed to plan
and actions closed within timeframes.
0%-5%
FB Group Total Recordable Injury Frequency
Rate (TRIFR) at or below: 3.1
0% OR
5%
The annual EBIT (excluding significant items but including the impact
of Iplex® Australia Pro-Fit costs) result of $782 million outperformed
threshold but was below the maximum performance hurdle. This was
due mainly to lower-than-expected earnings in the Group’s Residential
& Development businesses.
This EBIT result, combined with forward-looking margin outcomes for
FY24, resulted in a partial payment being achieved for this financial
goal. Given that EBIT is also the gate to eligibility for payment against
individual goals, the gateway for individual goals was opened
Trading cash flow performance (excluding significant items) of
$517 million was between the threshold and maximum performance
hurdle, mainly due to lower-than-expected cash-flow delivery in the
Residential & Development businesses.
The focus on the roll-out of critical risk initiatives is key in driving the
right behaviours and focus. With high uptake, the number of sweeps
completed across FB materially exceeded the target, resulting in
more risks controlled and creating a safer workplace.
The Group Total Recordable Injury Frequency Rate (TRIFR) has
decreased by 12% during FY23. As such, the targeted reduction was
exceeded. This is a positive outcome of the ongoing Protect strategy
implementation across the Group.
0%-5%
Not achieved.
Individual goals
Legacy construction projects continue to track
within provision envelope
Development of a multi-year social license
strategy, including the organisational structure
and capability required to deliver. Successfully
deliver against the FY23 component of this plan.
Increase female operational leaders and develop
a plan for FY24 to increase female operational
leaders in line with a 30% target by FY27.
0%-5%
0%-5%
Digital@Fletcher: delivering to Board approved
plan with all FY23 milestones met.
0%-5%
Performance and Growth: Group set up to
achieve 100bps to 200bps of EBIT margin
improvement in FY26 with initiatives and plans
progressively locked in to support delivery of
this improvement.
0%-5%
FY23 STI Outcome (as a % of maximum)
0%-150%
36%
Strategy and roadmap delivering to agreed plan. Phase one
completed, which included an in-depth stakeholder research
programme to understand current perceptions of the brand and to
identify the key levers to build social license.
Increases in the percentage of female operational leaders
outperformed the FY24 target and a stretching yet viable plan has
been developed for FY27, resulting in the full achievement of the
related STI goal.
The first implementation has gone well in Iplex® NZ, but the lessons
learned from this have delayed the other pilots by a few months and
have required adjustments to the overall project approach.
Our FY26 plan is above target with significant and credible growth /
margin expansion initiatives incorporated. As a result, the related STI
payment was fully achieved.
Key:
Maximum achievement
Partial achievement
At or below threshold achievement
93
Fletcher Building Limited Annual Report 2023
Remuneration Report (continued)
5. FREQUENTLY ASKED QUESTIONS
Key Questions
Fletcher Building Response
FY24 Changes
Given that only some of your
businesses have top quartile
TRIFR performance, is it the right
time to introduce an evolved
safety approach in the STI?
Our businesses can be at different phases of safety maturity and our safety strategy
provides a framework which recognises this. By introducing this change, we are aligning
the safety goals in our STI to our strategic framework. The safety approach will only be
adjusted for businesses where TRIFR is <2.
Furthermore, TRIFR will continue to play a critical role in our assessment of safety
performance across all businesses. As a 5% goal for those businesses with TRIFR > 2.
For those businesses with TRIFR < 2, if the business' TRIFR increases past the Group value,
5% of the total 10% safety weighting in the STI will be forfeited.
Reference
Section 1
Is there a talent / retention risk of
not awarding increases to senior
leaders in FY24?
We have low turnover in Senior Leadership group (14%) and they are highly engaged and
committed. They have been supportive of this approach to careful cost management in
FY24.
Section 1
A 10% increase in STI pay-out at target provides our leaders with the opportunity to ‘earn
back’ the foregone increase, noting they are currently competitively remunerated. We will
continue to monitor potential retention risks of critical skills on a case-by-case basis.
How will the 10% in STI pay-out at
target be “self-funded”?
The STI uplift only applies to the financial component of the STI and the additional costs
will be added to our EBIT targets – i.e. the additional STI will only be achieved if more-
stretching EBIT targets are met or exceeded.
Section 1
Remuneration Framework
Do you think the executives’
remuneration framework
balances the short and long
term?
Executives are focused on the quality of earnings over the longer term via the LTI
component (which is a significant element of total remuneration), the two-year STI deferral
(which is aligned with shareholders via share price appreciation or depreciation during that
time), and those individual STI goals which are future-focused.
Section 2
The introduction of STI deferral in FY22 was also accompanied by an increase in the
mandatory shareholding for the CEO from 50% to 100% of base salary, and from 50% to
75% for other executives.
Why did you make changes to the
LTI performance measures?
Given that the LTI has to be achievable yet stretching, ROFE (return on funds employed)
plus rTSR (relative total shareholder return) provides it:
Section 2.5
• The relative TSR measure was chosen because it is a direct alignment of LTI outcomes
with shareholders’ experience. Many of our investors have a similar performance
measure.
• The use of ROFE in our LTI aligns well with our focus on “performance and growth”. It
places emphasis on both earnings performance and effective use of capital to drive
growth. It provides a strong link between performance and management’s reward
outcomes which is valued by executives, and supports attracting, retaining, and
motivating them.
The inclusion of 2 performance measures in our LTI is also aligned to market practice and
investor feedback received.
Why is the ROFE maximum value
set at 15%?
Our view is that the 15% target value is achievable but sufficiently stretching. Given that the
organisation is focused on driving both performance and growth, it is important for our
executives to keep focused on returns as they employ capital but that they are sufficiently
incentivised to make sensible growth investments for the longer term.
Section 2.5
A target too far above WACC (or too far above the long-term Group target of 15%) may
discourage investments. Also, the Group’s growth investments are expected to be
primarily organic, and the 15% target takes account of the period in which we build out
these organic investments but are not generating earnings from them.
How is ROFE calculated?
ROFE is EBIT on average funds. With regards the treatment of significant items for the
purposes of calculating LTI, ROFE will include any asset impairments that have been made
but exclude any M&A divestments and restructuring costs.
Section 2.5
We take the deduction on asset impairment because management hasn’t supported the
value of the business. But for M&A, almost invariably a divestment is not being made
by the management team who bought it. We don’t want to have perverse incentives
where management might not look to do a divestment if there’s going to be a write down
and negatively impact their LTI. Or conversely, asset sales just because of the gain, to
positively impact their LTI.
ROFE is measured in the year of
vesting – i.e. the 2022 grant will
be tested on the Group’s FY25
ROFE. Why are you measuring it
in this way?
We consider that it is clearer and more transparent to use the ROFE in the year of vesting –
i.e. vs. an average ROFE across the three-year grant period.
Section 2.5
Furthermore, major investment decisions in the Company can often have longer-term
payback horizons – we want to ensure that executive management have regard to returns
over the longer-term.
94
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
6. 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
490,000 – 500,000
New Zealand
business
activities
International
business
activities
Total
From NZ$ to NZ$
New Zealand
business
activities
International
business
activities
Total
598
474
317
275
260
168
118
87
73
65
46
35
46
30
32
28
22
17
13
13
13
9
10
11
7
7
7
8
5
5
3
0
4
6
2
6
4
4
2
3
378
279
223
181
172
150
100
78
57
43
37
26
28
22
21
10
3
14
6
8
7
6
4
4
5
3
4
1
2
3
5
1
3
0
1
2
0
0
0
2
500,000 – 510,000
510,000 – 520,000
520,000 – 530,000
530,000 – 540,000
540,000 – 550,000
550,000 – 560,000
560,000 – 570,000
570,000 – 580,000
580,000 – 590,000
590,000 – 600,000
600,000 – 610,000
610,000 – 620,000
620,000 – 630,000
630,000 – 640,000
660,000 – 670,000
680,000 – 690,000
800,000 – 810,000
810,000 – 820,000
830,000 – 840,000
860,000 – 870,000
880,000 – 890,000
970,000 – 980,000
1,020,000 – 1,030,000
1,030,000 – 1,040,000
1,040,000 – 1,050,000
1,060,000 – 1,070,000
1,070,000 – 1,080,000
1,110,000 – 1,120,000
1,130,000 – 1,140,000
1,160,000 – 1,170,000
1,390,000 – 1,400,000
1,420,000 – 1,430,000
1,600,000 – 1,610,000
1,700,000 – 1,710,000
1,740,000 – 1,750,000
1,850,000 – 1,860,000
2,430,000 – 2,440,000
2,570,000 – 2,580,000
6,670,000 – 6,680,000
976
753
540
456
432
318
218
165
130
108
83
61
74
52
53
38
25
31
19
21
20
15
14
15
12
10
11
9
7
8
8
1
7
6
3
8
4
4
2
5
1
2
2
2
2
1
0
1
2
2
0
2
1
3
1
3
2
0
1
1
0
2
1
0
1
0
0
1
1
1
1
1
1
1
1
1
0
1
1
2
1
0
0
2
1
2
1
1
1
1
1
1
0
0
1
0
1
0
0
1
0
0
1
0
1
1
0
0
0
0
0
0
0
0
0
1
0
0
3
3
2
2
4
2
2
2
3
3
1
3
2
3
1
4
2
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2,877
1,910
4,787
The increase in the highest bracket in FY23 (6,670,000 – 6,680,000) compared to the highest bracket in FY22 (5,160,000 –
5,170,000) is as a result of the one-off share-based retention award granted to the Group CEO in 2019, which vested on 30 June
2022 but was allocated in FY23.
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).
95
Fletcher Building Limited Annual Report 2023 Remuneration Report (continued)
7. 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 2023, the Nominations Committee considered the appropriateness of current fees and recommended to the Board no
change to the directors’ fees for FY24 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)
Position
Board of directors
Audit and Risk Committee
Nominations Committee
People and Remuneration Committee (3)
Chair (2)
Non-Executive director
Chair
Member
Chair
Member
Chair
Member
Safety, Health, Environment and Sustainability Committee
Chair
Member
Overseas based directors - travelling allowance
(1) FY24 fees are effective from 1 July 2023.
(2) No additional fees are paid to the Board Chair for committee roles.
(3) Remuneration Committee changed to People and Remuneration Committee from September 2022.
FY23
$391,000
$155,500
$38,000
$19,500
-
$8,500
$29,000
$14,500
$29,000
$14,500
$18,000
FY24
$391,000
$155,500
$38,000
$19,500
-
$8,500
$29,000
$14,500
$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. 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 FY23 are as follows:
Directors
Bruce Hassall
(Chair) (2)
Martin Brydon
Barbara Chapman
Peter Crowley
Rob McDonald
Board Fees
$391,000
$155,500
$155,500
$155,500
$155,500
Audit and Risk
Committee
Nominations
Committee (1)
$ -
(Chair)
$6,375
Safety, Health,
Environment
and
Sustainability
Committee
Overseas
based directors
travelling
allowance
People and
Remuneration
Committee
$ -
Total
Remuneration
$391,000
$14,500
$14,500
$18,000
$208,875
$8,500
$29,000
$193,000
$19,500
$38,000
(Chair)
$8,500
$6,375
(Chair)
$14,500
$14,500
$18,000
$216,000
Doug McKay
$155,500
$19,500
$6,375
Cathy Quinn
$155,500
$19,500
$6,375
$29,000
(Chair)
$14,500
$214,375
$210,375
$195,875
Total
$1,324,000
$96,500
$42,500
$58,000
$72,500
$36,000
$1,629,500
(1) From April 2023, the members of the Nominations Committee are Bruce Hassall, Barbara Chapman and Peter Crowley. Prior to that date all non-executive directors were
members of this Committee.
FY23 fees are effective from 1 July 2022.
(2) No additional fees are paid to the Board Chair for committee roles.
96
Fletcher Building Limited Annual Report 2023
Fletcher Building Excellence Awards 2023
In May we celebrated the return of the Fletcher Building Excellence Awards at the
Auckland Museum. The night featured 200 of our best and brightest, people and teams
who exemplify our values and who are committed to delivering outstanding outcomes
for our people, customers and communities.
Watch: Fletcher Building
Excellence Awards
highlights video
97
Fletcher Building Limited Annual Report 2023 Financial Report
Kitchen installation onsite at
Fletcher Living’s Waiata Shores
development, South Auckland.
Continuous improvement lead, Victer
Veldman (left), and plant trainer, Rhon Reddy,
inspect plans at the Tauriko GIB® facility.
98
Fletcher Building Limited Annual Report 2023 99
Fletcher Building Limited Annual Report 2023 Trend Statement
Notes
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
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
2023
NZ$M
June
2022
NZ$M
June
2021 (3)
NZ$M
June
2020 (2)
NZ$M
June
2019 (1)
NZ$M
8,469
8,498
8,120
7,309
9,307
497
235
388
30.0
34.0
10.6
6.4
798
452
57.7
17.1
12.2
3,330
5,751
9,081
2,201
3,203
5,404
702
432
592
53.5
40.0
18.0
11.7
756
484
60.0
19.3
13.2
3,277
5,144
8,421
2,157
2,499
4,656
540
305
879
37.0
30.0
15.2
8.6
668
413
50.1
18.8
11.6
3,125
4,849
7,974
1,906
2,333
4,239
(116)
(196)
410
(23.5)
(2.7)
(5.1)
160
3
0.4
3.7
0.1
3,824
4,954
8,778
2,385
2,858
5,243
397
164
153
19.2
23.0
7.4
4.0
631
367
43.0
11.8
8.8
4,121
3,589
7,710
2,330
1,207
3,537
2,993
3,003
3,248
3,280
3,427
657
27
3,677
9,081
15
3.17
27.8
1.2
747
15
3,765
8,421
(28)
3.47
15.1
0.6
471
16
3,735
7,974
107
3.30
4.4
0.2
220
35
3,535
8,778
(21)
2.87
12.3
0.9
714
32
4,173
7,710
(29)
3.53
7.2
0.4
(1) The Group divested Roof Tile Group business on 1 November 2018 and the global Formica business on 3 June 2019.
(2) Includes the impacts of NZ IFRS 16 .
(3) Restated following revisions to NZ IAS 38 Intangible Assets adopted by the Group.
(4) EBIT to average funds (net debt and equity less deferred tax asset).
(5) Net earnings to average shareholders' funds.
(6) Share price movement in year and gross dividend received, to opening share price.
(7) Net debt (borrowings less cash and deposits) to net debt and equity.
(8) Net debt to EBITDA before significant items.
100
Fletcher Building Limited Annual Report 2023 Consolidated Income Statement
For the year ended 30 June 2023
Note
Revenue
Cost of goods sold
Gross margin
Selling, general and administration expenses
Share of profits of associates and joint ventures
Revaluation gain on investment property
Significant items
Earnings before interest and taxation (EBIT)
Lease interest expense
Funding costs
Earnings before taxation
Taxation expense
Earnings after taxation
Earnings attributable to non-controlling interests
Net earnings attributable to the shareholders
Net earnings per share (cents)
Basic
Diluted
Weighted average number of shares outstanding (millions of shares)
Basic
Diluted
Dividends declared per share (cents)
2023
NZ$M
8,469
(5,838)
2,631
(1,883)
34
16
(301)
497
(60)
(94)
343
(89)
254
(19)
235
30.0
28.4
783
848
34.0
The accompanying notes form part of and are to be read in conjunction with these consolidated financial statements.
On behalf of the Board, 16 August 2023.
Bruce Hassall
Chair
Robert McDonald
Director
2022
NZ$M
8,498
(5,989)
2,509
(1,786)
24
9
(54)
702
(58)
(46)
598
(159)
439
(7)
432
53.5
50.3
807
880
40.0
101
Fletcher Building Limited Annual Report 2023
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023
Net earnings attributable to shareholders
Net earnings attributable to non-controlling interests
Net earnings after tax
Other comprehensive income
Items that do not subsequently get reclassified to Consolidated Income Statement:
Movement in pension reserve
Items that may be reclassified subsequently to Consolidated Income Statement in the
future:
Movement in cash flow hedge reserve
Movement in currency translation reserve
Reclassification of foreign currency reserve to Consolidated Income Statement
Other comprehensive income
Total comprehensive income for the year
2023
NZ$M
235
19
254
2
(23)
(21)
(21)
233
2022
NZ$M
432
7
439
17
17
27
49
42
118
135
574
The accompanying notes form part of and are to be read in conjunction with these consolidated financial statements.
102
Fletcher Building Limited Annual Report 2023 Consolidated Statement of Movements in Equity
For the year ended 30 June 2023
NZ$M
l
a
t
i
p
a
c
e
r
a
h
S
e
t
o
N
i
s
g
n
n
r
a
e
d
e
n
a
t
e
R
i
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
g
d
e
h
w
o
l
f
h
s
a
C
e
v
r
e
s
e
r
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
e
v
r
e
s
e
r
n
o
i
s
n
e
P
g
n
i
l
l
o
r
t
n
o
c
-
n
o
N
s
t
s
e
r
e
t
n
i
l
a
t
o
T
y
t
i
u
q
e
l
a
t
o
T
Total equity at 30 June 2021
3,248
562
28
(19)
(146)
46
3,719
16
3,735
Total comprehensive income for the year
432
27
91
17
567
Movement in non-controlling interests
Dividends paid to shareholders of the parent
19
(292)
Movement in share-based payment reserve
5
3
(2)
Repurchase of shares
Total equity at 30 June 2022
20
(250)
3,003
705
26
8
(55)
63 3,750
15
3,765
7
(8)
574
(8)
(292)
6
(250)
(292)
6
(250)
Total comprehensive income for the year
Movement in non-controlling interests
Dividends paid to shareholders of the parent
19
235
(311)
Movement in share-based payment reserve
3
5
2
2
(23)
214
(311)
10
(13)
19
(7)
233
(7)
(311)
10
(13)
Movement in treasury stock
Total equity at 30 June 2023
20
(13)
2,993
634
28
10
(78)
63 3,650
27
3,677
The accompanying notes form part of and are to be read in conjunction with these consolidated financial statements.
103
Fletcher Building Limited Annual Report 2023
Consolidated Balance Sheet
As at 30 June 2023
Assets
Current assets:
Cash and cash equivalents
Current tax assets
Contract assets
Derivatives
Debtors
Inventories
Total current assets
Non-current assets:
Property, plant and equipment
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
Non-current liabilities:
Creditors, accruals and other liabilities
Provisions
Lease liabilities
Derivatives
Borrowings
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Shareholders' funds
Non-controlling interests
Total equity
Total liabilities and equity
Note
7
26
2.6
18
8
9
12
13
14
15
22
9
27
18
26
10
11
15
26
18
2.6
16
10
11
15
18
16
20
2023
NZ$M
365
6
141
18
1,176
1,624
3,330
2,072
58
1,253
1,324
225
456
126
44
193
5,751
9,081
1,416
403
192
20
82
88
2,201
52
31
1,404
1
1,715
3,203
5,404
2,993
657
3,650
27
3,677
9,081
2022
NZ$M
351
127
17
1,275
1,507
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
28
24
1,470
1
976
2,499
4,656
3,003
747
3,750
15
3,765
8,421
The accompanying notes form part of and are to be read in conjunction with these consolidated financial statements.
104
Fletcher Building Limited Annual Report 2023 Consolidated Statement of Cash Flows
For the year ended 30 June 2023
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
7
Cash flow from investing activities
Sale of property, plant and equipment
Sale of subsidiaries
Purchase of subsidiaries
Purchase of property, plant and equipment and intangible assets
Payments for investment property and investment property under development
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
7
7
2023
NZ$M
8,496
4
(7,769)
(152)
(191)
388
6
(183)
(445)
(19)
(641)
50
(56)
(13)
774
(3)
(196)
37
(13)
(311)
269
16
351
(2)
365
The accompanying notes form part of and are to be read in conjunction with these consolidated financial statements.
2022
NZ$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
105
Fletcher Building Limited Annual Report 2023 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
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:
• The Group announced additional loss provisions on the New Zealand International Convention Centre and Hobson Street Hotel
(NZICC) project, the additional provisions of $255 million have been recognised as a Significant item in the Consolidated Income
Statement. Refer to
and
.
• Cyclone Gabrielle and North Island floods, that took place during January and February 2023, had an impact on the Group's
operations. The cumulative cost associated with remedial works and damages to stock, buildings, leased assets and sites have been
recognised in Significant items. Business interruption costs and trade losses are excluded from these amounts. Refer to
.
• During the year, the Group acquired a number of businesses in New Zealand and Australia which have been recognised under the
Concrete, Building Products, Distribution and Australia divisions. Refer to
and
.
• The Group has updated its segmental reporting disclosure as a result of the operational restructure of Humes Pipeline Systems
under the Concrete division. Refer to
.
• During the year, the Group increased the total borrowing facilities available to it with the addition of; a new Australian Dollar
denominated, three year tranche syndicated revolving credit facility (“Tranche D”) of A$674.5 million; and a new a short-term New
Zealand Dollar denominated facility of $300 million with Westpac New Zealand Limited, expiring on 31 October 2024. Additionally,
the Group extended $200 million of its New Zealand Dollar denominated Tranche A syndicated revolving credit facility for an
additional five year term. Refer to
.
•
Iplex® Australia has received a number of product quality complaints relating to polybutylene pipe product it previously
manufactured (under the name of "Pro-fit"). These complaints relate to leaks in homes, which have required repair or replacement
of pipes and, in some cases, damage to the affected homes. The underlying root cause or causes of the leak continue to be
investigated, including whether they are the consequence of pipe defect, building practices, local conditions or a combination of
factors. Refer to
.
106
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023
1. Statement of accounting policies
General information
The consolidated financial statements presented are those of Fletcher Building Limited (the Company) and its subsidiaries (the
Group). The Group is primarily involved in the manufacturing and distribution of building materials and residential, commercial
and infrastructure construction. Fletcher Building Limited is domiciled in New Zealand. The registered office of the Company is 810
Great South Road, Penrose, Auckland.
The Company is registered under the Companies Act 1993 and is a Financial Markets Conduct Act (FMCA) 2013 reporting entity in
terms of the Financial Reporting Act 2013. The Group is a for-profit entity.
Basis of presentation
These consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New
Zealand, which is the New Zealand equivalent to International Financial Reporting Standards (NZ IFRS). They also comply with
International Financial Reporting Standards.
These consolidated financial statements are presented in New Zealand dollars ($), 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
consolidated financial statements.
Accounting convention
The consolidated 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 amounts;
• Defined benefit pension plans – net plan assets measured at fair value; and
•
Investment property – measured at fair value.
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 consolidated financial statements and are marked with
this colour.
Critical accounting estimates and judgements
The preparation of consolidated 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 consolidated 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. 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 consolidated financial statements
have been disclosed with the relevant notes in the consolidated financial statements and are marked with this colour, 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.
107
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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 are 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.
The following key exchanges rates were applied in the preparation of the consolidated financial statements:
NZD/AUD
Average rates
Closing rates
2023
0.9142
0.9173
2022
0.9365
0.9045
Change
(2.4%)
1.4%
2. Key estimates, judgements and other financial information
This section provides details of the key estimates and judgements undertaken when preparing these consolidated financial statements.
2.1 CHANGES IN ACCOUNTING POLICIES, INTERPRETATION AND AGENDA DECISIONS
New and amended accounting standards and interpretation adopted
There are no new or amended standards and interpretations that became effective for the year ended 30 June 2023 that have a material
impact to the Group.
No new or amended standards that are issued but not yet effective have been early adopted by the Group. These standards,
amendments or interpretations are not expected to have a material impact in the current or future reporting periods.
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. On this basis, the following items are included
within Significant items:
– Restructuring and other associated costs arising from significant strategy changes that are not considered by the Group to be part of the
normal operating costs of the business.
– Impacts of significant one off events that have a material effect on the Group's financial performance and asset valuation.
– Impairment charges and provisions that are considered to be significant in nature and/or value to the trading performance of the business.
– Net gains and losses on the disposal of properties and businesses where a commitment to close has been demonstrated.
108
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
Significant items totalled $301 million for the year ended 30 June 2023 (30 June 2022: $54 million) and comprise the following
categories:
New Zealand International Convention Centre and Hobson Street Hotel (NZICC)
$255 million relates to additional announced provisions for costs to complete the New Zealand International Convention Centre and
Hobson Street Hotel (NZICC) build, the Group's last project as it winds down its operations in the vertical building sector.
Cyclone Gabrielle and North Island Floods in New Zealand
Property damage losses and direct remedial works resulting from impacts of Cyclone Gabrielle and North Island Floods recognised
in the New Zealand business amounted to $22 million. Impacted business units include Higgins® New Zealand ($17 million), Winstone
Aggregates® ($2 million), Fletcher Steel® ($1 million), PlaceMakers® and Mico® ($1 million) and others.
Cyclone and flood losses include impairment of property, plant and equipment ($8 million), write down of inventories ($3 million),
and other direct remediation works of owned sites ($1 million) and rectification of damages to leased assets ($10 million). Any future
insurance recoveries related to these losses will be recognised by the Group as Significant items when confirmed. Business interruption
costs and trade losses are excluded from these amounts.
Australia property
The Group recognised significant item gains of $14 million associated with leased and owned properties in Australia, including:
• $10 million impact from terminations and modifications of leases by Laminex® Australia and Iplex® Australia. The gains originated
from the estimates assumed on adoption of NZ IFRS 16 in 2020, with opening balance adjustments taken to retained earnings; and
• $4 million reversal of land impairment, previously recognised in Significant items, in relation to land held in Queensland by Iplex®
Australia.
Winstone Wallboards® transition to Tauriko
$10 million has been incurred by the Group in the year as it transitions Winstone Wallboards® operations from Auckland to Tauriko (Bay
of Plenty, New Zealand).
Iplex® Australia Pro-Fit claims remediation fund
A provision of $16 million (A$15 million) has been recognised by Iplex® Australia in relation to Pro-Fit pipes matter, to establish a fund to
identify and support homebuilders in Western Australia with remedial works and repair of the affected homes. Iplex® Australia’s exposure
to future claims, if any, will depend on the final determination as to their causes and the extent to which it and/or third parties are
responsible and any relevant insurance policies respond. Refer to
and further information on page 77 of the Annual Report.
Silica-related claims
The Group recognised an additional A$7.5 million ($8 million) provision as it considered the exposure Laminex® Australia may have for
the existing and future claims. Refer to
.
M&A activity
During the year, the Group acquired five businesses in New Zealand and Australia which have been presented under the Building
Products, Concrete, Distribution and Australia operating segments. All transaction and integration related costs of acquired business
are treated as Significant items, $3 million of costs have been recognised in relation to the acquisition of Waipapa business in the year
ended 30 June 2023. Refer to
.
NZ$M
Building Products
Distribution
Concrete
Australia
Materials and distribution divisions
Residential and Development
Construction
Corporate and other
Group
2023
Significant
items
EBIT before
significant
items
(15)
(1)
(2)
(10)
(28)
(273)
(301)
215
141
156
180
692
147
26
(67)
798
EBIT
200
140
154
170
664
147
(247)
(67)
497
2022
Significant
items
Restated (1)
EBIT before
significant
items
(1)
(46)
(47)
(11)
4
(54)
192
137
146
113
588
217
14
(63)
756
EBIT
192
136
146
67
541
217
3
(59)
702
(1) The comparatives have been restated as a result of a change in segmental reclassification. Humes Pipeline Systems which was previously under the Building Products division has
been re-presented within the Concrete division. This results in an increase to the Concrete division and decrease in Building Products division of the comparative EBIT (June 2022:
$18 million) and EBIT before significant items (June 2022: $18 million) recognised.
109
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
2.3 INTANGIBLE ASSET IMPAIRMENT TESTING
The Group tests indefinite life intangible assets, including goodwill and brands, for impairment on an annual basis. Each cash generating
unit (CGU) to which goodwill is allocated is valued on a fair value less cost to sell (FVLCS) basis using a discounted cash flow model. This is
representative of the higher 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 cash flow projections 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. Cash flows are discounted using a nominal rate specific to each business and jurisdiction.
New Zealand CGUs
The goodwill and brand balances for 15 New Zealand CGUs represent 48% of the Group. Discount rates between 8.6% and 10.7% (2022:
between 8.5% and 10.7%) have been used for New Zealand business units, reflecting the risk profile and the regions in which they
operate. The terminal growth rate employed for New Zealand businesses was 2.0% (2022: 2.0%).
Australia CGUs
The goodwill and brand balances for four Australia CGUs represent 49% of the Group. Discount rates between 7.6% and 8.1% (2022: 7.5%
and 7.8%) have been used for Australian business units, reflecting the risk profile and the regions in which they operate. The terminal
growth rates employed for Australia businesses was 2.5% (2022: 2.5%).
No impairment of indefinite life intangibles assets required at 30 June 2023
The impairment assessments confirmed that no impairment of indefinite life intangibles assets was required at 30 June 2023 for the Group.
With the exception of Higgins® New Zealand, Higgins® Fiji and Tradelink®, no reasonably possible change in key assumptions used
in the determination of the recoverable value of CGUs would result in a material impairment to the Group. At 30 June 2023, Group
management classified Higgins® New Zealand, Higgins® Fiji and Tradelink® (2022: Higgins® Fiji, Laminex® Australia and Tradelink®) as
'watchlist' business units for the purpose of the Group’s impairment testing procedures, where these CGUs demonstrate a heightened
sensitivity/risk of impairment to reasonably possible changes in key assumptions.
Sensitivity to reasonably possible changes in assumptions
The following table sets out the Goodwill and Brands balance for those CGUs, where a reasonably possible change in key assumptions
could result in impairment:
2023
Goodwill
Brands
Tradelink®
NZ$M
Higgins® NZ
NZ$M
Higgins® Fiji
NZ$M
62
53
114
19
32
2
Higgins® New Zealand (Higgins® NZ)
The combined impact of the adverse operating environment, weather events and focus to complete legacy and low margin projects
have negatively impacted the earnings result of Higgins® NZ in the year ended 30 June 2023. These challenges are expected to
continue to impact the forecast cash flows over the near term and as such have been included in the discounted cash flow model used
to support the carrying value of the business.
Group and Construction divisional management implemented a number of strategic and operational initiatives through FY22 and FY23
aimed at resetting the business to generate margin growth and improve productivity. These initiatives, coupled with a lower-risk and
higher quality forward order book (alliance contracts, national and local maintenance cost plus contracts) are expected to support
productivity and drive better profitability going forward.
Management recognises that the full benefits of implemented strategic changes and the business unit's transition to higher profitability
will be achieved over the longer-term, and, in part, will be dependent on the sustained long-term growth of the New Zealand economy
and infrastructure construction market, overcoming of strategic challenges, and capturing potential market opportunities. This
transition is expected to begin generating meaningful contributions to earnings in years beyond FY24 where cash flow forecast
show a higher rate of growth in years four and five compared to years one to three, as Higgins® NZ works to fully realise benefits of
implemented initiatives.
No impairment was recognised during the financial year, however, a change in any of the key assumptions noted below would result in a
break-even position with no remaining headroom.
Key Assumptions
Value attributed
Sensitivity (absolute movement)
Revenue growth (5-year Cumulative Average Growth Rate (CAGR))
EBIT margin (5-year average)
Discount rate
110
4.10%
4.50%
10.10%
Decrease by 1.2 ppts
Decrease by 1.4 ppts
Increase by 0.8 ppts
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
Tradelink®
Group and Australia divisional management undertook a comprehensive strategic review of the Tradelink® business in 2018, identifying
a number of initiatives to implement over the near to medium-term to set the business up for long-term earnings margin growth.
While implementation of these initiatives has contributed to a lift in Tradelink®'s performance to date, current profitability is behind
managements original long-term targets and expectations. Management recognise that opportunities continue to exist for the business
to transition to higher profitability, and are focused on executing and delivering initiatives to do so. These are largely underpinned by
the business' ability to improve pricing strategies and gross margins, which need only be incremental to avoid any impairment. No
impairment was recognised during the financial year, however, a change in any of the key assumptions noted below would result in a
break-even position with no remaining headroom.
Key Assumptions
Value attributed
Sensitivity (absolute movement)
Revenue growth (5-year Cumulative Average Growth Rate (CAGR))
EBIT margin (5-year average)
Discount rate
Higgins® Fiji
2.20%
2.40%
8.10%
Decrease by 0.5 ppts
Decrease by 0.3 ppts
Increase by 1.2 ppts
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 19.4% (2022: 18.7%), reflecting the risk profile of the
region in which the CGU operates. The terminal growth rate employed for Fiji business was 2.5% (2022: 2.5%).
Contracts to maintain and build infrastructure projects remain key to the long-term sustainability of Higgins® operations in Fiji.
Partnering with the Fijian authorities to deliver these projects enable Higgins® Fiji to generate steady earnings and reliable cash flows.
Recent change in the Fijian government and the impact it may have on transport and infrastructure policy are a key risk in assessing
the recoverable value of Higgins® Fiji's assets. Group and Construction divisional management have considered a range of possible
outcomes including the Fijian Road Authority (FRA) shifting away from foreign suppliers of civil construction when awarding future work.
The final outcome of any future policy changes and its impact on Higgins®' operations in Fiji remain uncertain and will be subject to
further assessment once the final set of reforms are finalised and announced. The government's recent budget announcement has been
seen as favourable to the business unit's present and future economic outlook. No impairment was recognised during the financial year,
however, any adverse changes in the FRA's contracting policy would require management to review the assumptions used in Higgins®
Fiji's impairment assessment, where impairment may be required.
Key Assumptions
Value attributed
Sensitivity (absolute movement)
Revenue growth (5-year Cumulative Average Growth Rate (CAGR))
Discount rate
3.70%
19.40%
Decrease by 1.7 ppts
Increase by 3.2 ppts
2.4 SUPPLEMENTARY DISCLOSURES: EARNINGS PER SHARE
Earnings per share is disclosed in full in
. The below disclosure has been included to provide additional useful information by
removing the impact of Significant items in the current and prior year, and the resulting impact on the earnings per share measure.
The effect of Significant items on earnings per share is as follows:
Net earnings after taxation (as per Consolidated Income Statement)
Add back: significant items before taxation (note 2.2)
Less: tax benefit on signification items (note 26)
Net earnings before significant items
Net earnings per share before significant items (cents)
Net earnings per share - as reported per Consolidated Income Statement (cents)
2023
NZ$M
235
301
(84)
452
57.7
30.0
2022
NZ$M
432
54
(2)
484
60.0
53.5
111
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
2.5 BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the
acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value
or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in
Significant items.
The Group determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive
process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical
to the ability to continue producing outputs, and the inputs acquired include an organised workforce with the necessary skills, knowledge,
or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or
scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent
consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
Goodwill
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-
controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). After initial recognition,
goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from
the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Provisional values at acquisition date
Assets
Property, plant and equipment
Debtors, prepayments and other assets
Inventories
Deferred tax asset
Right-of-use assets
Liabilities
Creditors, accruals and other liabilities
Lease liabilities
Deferred tax liability
Total identifiable net assets at fair value
Minority interest recognised
Goodwill arising on acquisition
Purchase consideration transferred
Tumu®
Tumu®
NZ$M
Waipapa
NZ$M
Other
acquisitions
NZ$M
Total
NZ$M
3
19
16
1
19
58
16
19
35
23
38
61
63
6
4
3
76
5
3
6
14
62
57
119
2
1
3
6
1
3
4
2
(1)
15
16
68
25
21
1
25
140
22
25
6
53
87
(1)
110
196
On 1 September 2022, the Group acquired six Tumu® building supply centres and a frame and truss operation, servicing the East Coast,
Hawkes Bay and Wairarapa regions from the Tumu® Group. The acquired branches are full service building supplies merchants selling to
both wholesale and retail customers as well as a frame and truss manufacturing business.
The acquisition delivers a stronger proposition and level of capability in the building supply market in the East Coast of the North Island,
seen as a strategically valuable region for the Distribution division. The table above considers all seven entities.
For the entities acquired, less than 100% of the equity shares were acquired. Non-controlling interest share ownership percentages
range from 2.12% to 25% with the Group electing to measure the non-controlling interests in the acquiree by reference to the non-
controlling interests proportionate ownership of net assets of the acquiree.
The fair values of the identifiable assets and liabilities of the seven entities combined as at the date of acquisition are above. The Group has
12 months from the date of acquisition to finalise the acquisition accounting and therefore the amounts presented above are provisional.
112
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
The fair value of trade receivables recognised at acquisition was $19 million, representing the full contracted amount to be collected.
The Group measured acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition.
The right-of-use assets were measured at an amount equal to the lease liabilities and adjusted to reflect the favourable terms of the
lease relative to market terms.
Goodwill is allocated to PlaceMakers® as a single cash-generating unit, reflecting the synergies created with PlaceMakers® through
operational and supply chain efficiencies and access to the untapped regional market. PlaceMakers® is part of the Distribution
division. The amount recognised is not expected to be deductible for tax purposes.
The Group incurred acquisition related costs of $1 million in FY22 which were recognised in Significant items. The transaction was
debt free and therefore after consideration of acquisition costs, the net cash flow on acquisition was $62 million, including a $11
million working capital adjustment settled in January 2023 that was subsequently realised through unwinding of inventory and
debtors as at 30 June 2023.
Waipapa
On 9 June 2023, Fletcher Building Products Limited, a fully owned subsidiary of Fletcher Building Limited, acquired 100% of the
issued share capital of Waipapa Pine Limited and Renewable Wood Fuels Limited ("Waipapa"), a manufacturer of structural, industrial
grade timber and wood pallets, serving Building merchants, independents and frame and truss plants between the Northland and
Auckland regions.
The acquisition complements the Group’s existing building products offering.
The fair values of the identifiable assets and liabilities of the two entities combined as at the date of acquisitions are above. The
Group has 12 months from the date of acquisition to finalise the acquisition accounting and therefore the amounts presented above
are provisional.
The purchase consideration of $119 million includes a $13 million deferred consideration liability recognised as Contingent
Consideration, in provisions, which represents the remaining undiscounted value of the Group’s probability-weighted estimate of the
cash outflow associated with earn-out. The earn-out is payable only if the certain pre-determined production output rates from May
2022 to April 2024 are achieved. It reflects management’s estimate and expectation that the maximum targets will be achieved. The
final consideration is estimated to be paid by June 2024.
As at 30 June 2023, there have been no changes in the estimate of the probable cash outflow and change in fair value.
The fair value of trade receivables recognised at acquisition was $6 million, representing the full contracted amount to be collected.
The Group measured acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition.
The right-of-use assets were measured at an amount equal to the lease liabilities and adjusted to reflect the favourable terms of the
lease relative to market terms.
Goodwill is allocated to Waipapa as a single cash-generating unit, reflecting the synergetic benefit seen through vertical integration
of Building Products division and distribution supply chain through the rest of the Group. The amount recognised is not expected to
be deductible for tax purposes.
The net cash outflow of the acquisition is expected to be $123 million which includes transaction and integration related costs of $3
million in FY23, recognised as Significant items.
Other acquisitions
During the year, the Group acquired three other businesses in New Zealand and Australia. These acquisitions have been recognised
within the Concrete and Australia divisions. The considerations paid for the acquisitions in New Zealand were $10 million (plus $0.1
million relating to deed of covenant) and A$5.2 million (plus A$0.2 million working capital adjustment) for Australia. The goodwill
recognised for these New Zealand and Australia acquisitions were $9.4 million and A$4.8 million respectively.
Financial impact
If the above combinations had taken place at the beginning of the year, Group revenue would have been $8,629 million and Group
EBIT would have been $517 million. From the date of acquisition, Tumu®, Waipapa and other acquisitions have contributed $100
million to Group revenue and $10 million to Group EBIT.
Cromwell JV
At 30 June 2023, the Group had entered into a conditional Sale and Purchase Agreement to acquire the remaining interest of
Cromwell Certified Concrete Limited, which the Group currently holds a 50% share, for consideration of $7 million. The acquisition
was completed in July 2023.
113
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
2.6 CONSTRUCTION ACCOUNTING
The Group's Construction division is engaged with 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. The
Group's policies for accounting for such projects are outlined below, including related estimate and judgements made by management
that have the most significant effect on the carrying value of assets and liabilities of the Group as at 30 June 2023.
Estimates and judgements are made relating to a number of factors when accounting for construction contracts. On the income side,
these include estimates and judgements made on variations to consideration which typically include variations due to changes in scope
of work, recoveries of claim income or bonus elements from customers, and potential liquidated damages or penalties that may be levied
by customers. On the cost side, these include estimates and judgements related to the assessment of future costs after considering; the
programme of work throughout the contract, any changes in the scope of work, any maintenance and defect liabilities, expected inflation
(for unlet sub-trades), and the recovery of any cost through insurance claims. For cost reimbursable contracts, there are also estimates
required on the level of disallowable costs which requires an assessment of whether costs are recoverable under the terms of the contract
and therefore should be recognised as income. 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.
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. Construction divisional management perform regular reviews of their project positions
including reassessment of cost to complete estimates, including any cost contingencies and estimated recoverability of any variations at
each reporting date. Significant estimates and judgements 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 project has been
completed.
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 or penalties;
– Sub-contractor costs, in particular costs that are yet to be agreed in scope or price (including inflationary pressures) or cost increase that
may arise due to programme prolongation;
– Recovery of any insurance claims;
– The outcome of ongoing commercial negotiations, including elements of variable consideration and changes in project scope with
customers; and
– Future weather and ground conditions.
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.
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 delivery of several projects. Where this occurs, management determine whether a single
or multiple performance obligations exist, and allocate the total contract price across each performance obligation based on the relative
stand-alone selling prices. The nature of construction projects ordinarily lead to variations in the project size and scope over time, it is also
normal practice for contracts to include bonus and penalty elements based on timely construction or other performance criteria, recognised
as variable consideration.
Generally, contracts identify various inter-linked activities required in the construction process and the performance obligation is fulfilled over
time and as such revenue is recognised over time. Revenue is invoiced based on the measured output of each process based on appraisals that
are agreed with the customer on a regular basis, with the Group's right to payment occurring on a performance to date basis also.
Revenue on construction contracts (including sub-contracts) are determined using the percentage of completion method and represent the
value of work carried out during the period, 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. Margin on a contract is
not recognised until the outcome of the contract can be reliably estimated. Management use their professional judgement to assess
both the timing of physical completion of the project and the risks associated with forecast financial result of the contract as part of this
determination.
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 it is highly probable that a significant reversal of
revenue recognised will not occur and is approved by the Board of Directors.
114
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
Contract assets, contract liabilities and provisions for onerous contracts
Contract assets/liabilities are usually 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.
Onerous contract are defined in NZ IAS 37 Provisions; where the unavoidable costs (i.e. the costs that the division cannot avoid because it
has to fulfil the contract) of meeting the obligations under a contract exceed the economic benefits expected to be received under it. When
a contract is identified as onerous ('loss-making'), a provision is made for estimated future losses on the entire contract. Onerous contract
provisions recognised in relation to the Group's legacy building and infrastructure projects have been disclosed in note 11.
A summary of the major construction projects and their approximate stage of completion is disclosed to demonstrate the uncertainty
that remains on these projects.
Status of construction projects (> $200 million original contract value) as at 30 June 2023:
New Zealand International Convention Centre and Hobson Street
Hotel (NZICC) - Fixed price contract and fire reinstatement
Business unit
Buildings
Pūhoi to Warkworth - Fixed price contract (Public Private Partnership)
Infrastructure
Forecast
completion*
Percentage of
completion 2023
(% cost)
2024
2024
76%
94%
* Calendar year
Revenue backlog
Revenue backlog, as disclosed below, refers to the level of construction work the Group is contracted to but is not yet complete as at
period end. This represents the performance obligations that are yet to be completed for the construction contracts active as at 30 June
2023. The long-term nature of the contracts held by the Buildings, Infrastructure, Brian Perry Civil® and Higgins® businesses will see
these performance obligations completed over a period generally between one to five years, although some may extend longer.
Revenue backlog by business unit as at 30 June 2023:
Buildings
Infrastructure
Brian Perry Civil®
Higgins®
South Pacific
Revenue backlog by business unit as at 30 June 2022:
Buildings
Infrastructure
Brian Perry Civil®
Higgins®
South Pacific
Current Revenue Backlog
NZ$M
Top 5 projects as a % of
Revenue Backlog
292
348
1,298
807
71
2,816
100%
97%
45%
39%
97%
NA
Current Revenue Backlog
NZ$M
Top 5 projects as a % of
Revenue Backlog
417
813
1,133
777
77
3,217
100%
68%
17%
39%
84%
NA
115
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
Contract assets
The gross amount of construction and maintenance work in progress consists of costs attributable to work performed and emerging profit
after providing for any foreseeable losses. In applying the accounting policies on providing for these losses, accounting judgement is
required.
Construction contracts with cost and margin in advance of billings are presented as part of contract assets.
Contract liabilities
Construction contracts where the total progress billings issued to clients (together with foreseeable losses if applicable) on a project exceed
the costs incurred to date plus recognised profit on the contract are recognised as a liability.
Construction contracts with cost and margin in advance of billings
Contract assets
Construction contracts with billings in advance of cost and margin
Contract liabilities
New Zealand International Convention Centre and Hobson Street Hotel (NZICC)
2023
NZ$M
141
141
82
82
2022
NZ$M
127
127
112
112
On 22 October 2019, there was a significant fire at the project construction site causing damage to both the New Zealand International
Convention Centre and Hobson Street Hotel (NZICC). 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.
As announced to the NZX on 16 December 2022, the Group expects the costs of the rebuild to exceed the Contract Works Insurances
(CWI) coverage. As a consequence, an additional provision of $150 million to complete the project was recognised in the interim financial
statements as at 31 December 2022, classified as a Significant Item. The increased project costs were attributed mainly to: (1) significant
complexity of the remediation approach and rebuild environment, particularly due to remediation of the water damage and mould that
occurred following the fire; (2) as a result of this complexity, a greater number of project resources being required to complete the rebuild
works; and (3) inflation of labour, trade and material costs, as is being experienced across the broader construction industry.
At 30 June 2023, a further provision of $105 million was recognised, classified as a Significant Item. This reflected: $50 million of project cost
risks recognised; a $20 million reduction in expected Contract Works Insurance (CWI) recoveries, due to additional claims paid to SkyCity
(also an insured under the CWI policy); and a reassessment of assumed Third Party Liability (TPL) insurance recoveries to nil, compared to
$35 million previously.
While the Company considers it has good grounds to recover material amounts under the TPL policy, it has determined that these proceeds
are not yet “virtually certain” in accordance with NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets to be recognised. As
such, no amount has been recognised to be recovered under the TPL policy in the project position. The Company will continue to pursue its
rights to recovery under the TPL policy, though this is not expected to be settled until calendar year 2025.
The project is continuing to track to a target completion date in late 2024.
The assessment of the net cost to complete the project continues to rely on the application of estimates and judgements (e.g. programme
to complete, remediation costs, the expected 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. Certain costs resulting from the fire may fall outside the
scope of the Contract Works policies, with the possibility they may be 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.
As part of the estimate of final margin loss on the project, it is expected that FCC will secure remaining CWI proceeds of circa $100 million,
with a further circa $50 million of ‘BAU’ client revenues to be received (i.e. for work that was still to complete at time of fire). Risks associated
with proceeds under the Contract Works policy include insurers disputing FCC's claims, as while coverage has been confirmed, the extent of
damage and recoverable costs have not all been agreed.
It is possible that the final provision could be below or above the levels currently allowed for, either through changes in costs to complete or
the final level of insurance recoveries. As the project approaches completion, there is also risk of dispute over delay and cost with SkyCity.
No claims have been received to date and project forecast and expected final margin does not allow for any.
116
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (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), which is undertaking the project on behalf Waka
Kotahi NZ Transport Agency (Waka Kotahi).
Road Opening was achieved on the 14 June 2023. Deferred works are targeted to be completed in March 2024.
The project was initially set to be completed in December 2021. However, programme delays and inefficiencies were experienced, as a result
of constraints on resource and productivity 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 certain COVID-19 events.
COVID-19 events – further lockdowns in 2021, introduction of a traffic light system and national and regional border closures – and the
consequent impacts of those matters on supply chain and resource availability, further adversely impacted the progress of project
construction and associated costs.
The Construction JV has lodged a claim of more than $200 million with NX2 and Waka Kotahi for the impacts and delays arising from
COVID-19 events. In December 2022, the Construction JV entered into an agreement with Waka Kotahi, which provided it with some interim
and potentially refundable financial support, but without any party agreeing variations for compensation or extensions of time for the
project to reach the contract Service Commencement Date. If no variations or extension of time are agreed between the parties or ultimately
determined under the contract, the Construction JV will incur unrecoverable costs and liquidated damages (from 16 August 2022, being the
current contractual Planned Service Commencement Date to mid-June 2023). Unless the Construction JV and Waka Kotahi agree otherwise,
that claim will be resolved through an agreed dispute resolution process, unlikely to be earlier than 2025.
Separately, 18 landslips and 3 weather events have occurred on the project, resulting in damages to Works. For claims that have been
notified, coverage has been confirmed under Construction JV’s Contract Works Insurance policy, with the cost impact of these events being
discussed with insurers. An assessment of recovery for all events has been included in the determination of the final project position and
estimated final margin.
Finally, as the project completes the Construction JV will expect to make claims against some of its suppliers and may be subject to claims
against it by suppliers and subcontractors.
The Group has assessed the facts and circumstances known to it relating to the Construction JV’s estimate of net cost to complete
programme works, including the merits of Construction JV’s claims and likelihood of receipt of further relief under the Project Agreement,
quantification of any claims and costs under this relief, the expected recovery under insurance policies, and concluded that no additional
provision is required to be recognised as at 30 June 2023. There remains a risk that, ultimately, the full amount of the Construction JV’s
claims will not be recovered.
Wellington International Airport Limited (WIAL)
In October 2018, Fletcher Construction Company Limited (FCC) completed a multi-level carpark for Wellington International Airport Limited
(WIAL), which has alleged there are a number of defects to the carpark and the adjacent storm water drainage. It is claiming the cost of
remediation and other related losses in the order of $40 million. FCC disputes and will defend these claims and will also bring claims against
WIAL including for unpaid variations and extensions of time.
These matters may take some time to be resolved, but there is a risk that FCC will be liable to WIAL for some or all of its claims. As FCC is
exiting its vertical Buildings business, any such loss will be treated as a Significant item.
117
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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 note 2.6)
– Maintenance service contracts (refer to note 2.6)
Revenue from contracts with customers is recognised when control of the goods or services 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.
2023
Sale of
building
products and
materials
NZ$M
Development
and sale of
properties
NZ$M
Construction
contract
revenue
NZ$M
Maintenance
contract
revenue
NZ$M
Goods and services transferred at a point in time
6,699
Goods and services transferred over time
Total revenue from contracts with customers
6,699
594
594
644
644
532
532
2022
Sale of
building
products and
materials
NZ$M
Development
and sale of
properties
NZ$M
Construction
contract
revenue
NZ$M
Maintenance
contract
revenue
NZ$M
Goods and services transferred at a point in time
6,430
680
Goods and services transferred over time
Total revenue from contracts with customers
6,430
680
851
851
537
537
Total
NZ$M
7,293
1,176
8,469
Total
NZ$M
7,110
1,388
8,498
118
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
4. SEGMENTAL INFORMATION
Segmental information is presented in respect of the Group’s industry and geographical segments. The use of industry segments as the
primary format is based on the Group’s management and internal reporting structure, which recognises groups of assets and operations
with similar risks and returns. Inter-segment pricing is determined on an arm’s length basis.
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 and plumbing product 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, concrete and concrete products. 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 supplier of building and maintenance services for infrastructure projects across New Zealand
and the South Pacific. The division is exiting the vertical building sector, with NZICC being the last project for the Group.
Industry segments
Building Products
Distribution
Concrete
Australia
Materials and distribution divisions
Residential and Development
Construction
Corporate and other
Group
Less: intercompany revenue
External revenue
Gross revenue
2023
NZ$M
Restated (1)
Gross revenue
2022
NZ$M
External revenue
2023
NZ$M
Restated (1 )
External revenue
2022
NZ$M
1,443
1,824
1,085
3,016
7,368
607
1,319
10
9,304
(835)
8,469
1,458
1,789
1,033
2,806
7,086
692
1,559
11
9,348
(850)
8,498
1,154
1,792
800
2,953
6,699
594
1,176
8,469
8,469
1,155
1,764
772
2,740
6,431
680
1,387
8,498
8,498
Note: Revenue includes income from the Group's Vertical Buildings Business (2023: $101 million; 2022: $265 million), which the Group is in the process of exiting. The New Zealand
International Convention Centre and Hobson Street Hotel (NZICC) represent the last projects to complete in this sector. EBIT before significant items, however, excludes any earnings
from these projects.
Building Products
Distribution
Concrete
Australia
Materials and distribution divisions
Residential and Development
Construction
Corporate and other
Group
EBIT before
significant items
2023
NZ$M
Restated (1)
EBIT before
significant items
2022
NZ$M
215
141
156
180
692
147
26
(67)
798
192
137
146
113
588
217
14
(63)
756
Funds*
2023
NZ$M
1,210
312
789
1,368
3,679
915
85
(1,002)
3,677
Restated (1)
Funds*
2022
NZ$M
892
246
729
1,365
3,232
651
278
(396)
3,765
(1) The comparatives have been restated as a result of a change in segmental reclassification. Humes Pipeline Systems which was previously under the Building Products division have
been re-presented under the Concrete division. This results in an increase to the Concrete division and decrease in Building Products division of the comparative Gross Revenue (June
2022: $152 million), External Revenue (June 2022: $146 million), EBIT before significant items (June 2022: $18 million), Funds base (June 2022: $132 million), Depreciation, depletion
and amortisation expense (June 2022: $6 million) and Capital expenditure (June 2022: $13 million) recognised.
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes. Group balances such as borrowings and taxation are allocated to
Corporate as these are managed at a Group level.
119
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
Building Products
Distribution
Concrete
Australia
Materials and distribution divisions
Residential and Development
Construction
Corporate and other
Group
Depreciation,
depletion and
amortisation
expense
2023
NZ$M
Restated (1)
Depreciation,
depletion and
amortisation
expense 2022
NZ$M
Capital
expenditure+
2023
NZ$M
Restated (1)
Capital
expenditure+
2022
NZ$M
48
53
70
132
303
3
39
13
358
46
48
72
128
294
3
41
12
350
191
62
65
59
377
23
19
42
461
191
11
94
55
351
8
29
33
421
+ Capital expenditure represents additions to the balance sheet of property, plant and equipment and intangible assets, excluding the impacts of the investments/acquisitions of
companies or businesses.
(1) The comparatives have been restated as a result of a change in segmental reclassification. Humes Pipeline Systems which was previously under the Building Products division have
been re-presented under the Concrete division. This results in an increase to the Concrete division and decrease in Building Products division of the comparative Gross Revenue (June
2022: $152 million), External Revenue (June 2022: $146 million), EBIT before significant items (June 2022: $18 million), Funds base (June 2022: $132 million), Depreciation, depletion
and amortisation expense (June 2022: $6 million) and Capital expenditure (June 2022: $13 million) recognised.
Geographic segments
New Zealand
Australia
Other jurisdictions
Group
Significant items (note 2.2)
Earnings before interest and taxation (EBIT)
External revenue
2023
NZ$M
External revenue
2022
NZ$M
EBIT before
significant items
2023
NZ$M
EBIT before
significant items
2022
NZ$M
5,353
2,959
157
8,469
5,527
2,813
158
8,498
New Zealand
Australia
Other (including debt and taxation)
Group
Non-current assets+
2023
NZ$M
Non-current assets+
2022
NZ$M
3,762
1,574
52
5,388
3,101
1,634
53
4,788
+ Excludes deferred tax assets, retirement plan surplus and financial instruments.
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes. Group balances such as borrowings and taxation are allocated to
Corporate as these are managed at a Group level.
120
612
177
9
798
(301)
497
Funds*
2023
NZ$M
3,403
1,381
(1,107)
3,677
594
152
10
756
(54)
702
Funds*
2022
NZ$M
2,788
1,424
(447)
3,765
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
5. NET EARNINGS PER SHARE
Earnings per share is the portion of a company's profit allocated to each outstanding ordinary share and is calculated by dividing the
earnings attributable to shareholders by the weighted average of ordinary shares on issue during the year including treasury stock. Capital
notes and options are convertible into the Company's shares and may therefore result in dilutive securities for purposes of determining the
diluted net earnings per share. The Group may, at its option, purchase or redeem the capital notes for cash at the principal amount plus any
accrued but unpaid interest.
Net earnings per share (cents)
Basic
Diluted
Numerator
Net earnings
Numerator for basic earnings per share
Dilutive capital notes
Numerator for diluted net earnings per share
Denominator (millions of shares)
Weighted average number of shares outstanding (note 20)
Conversion of dilutive capital notes
Denominator for diluted net earnings per share
6. CONSOLIDATED INCOME STATEMENT DISCLOSURES
The following items are specific disclosures required to be made and are included
within the Consolidated Income Statement:
Net periodic pension cost
Employee related short-term costs (1)
Other long-term employee related benefits
Research and development expenditure
Amortisation of intangibles
Bad debts written off
Donations and sponsorships
Maintenance and repairs
Loss on disposal of property, plant and equipment
(1) Short-term employee benefits for the executive committee included in the above are disclosed in note 23.
Auditor's remuneration
2023
30.0
28.4
2022
53.5
50.3
NZ$M
NZ$M
235
235
6
241
783
65
848
432
432
11
443
807
73
880
2023
NZ$M
2022
NZ$M
2
1,581
58
5
16
4
4
158
2
1,493
55
2
18
4
3
154
2
2023
NZ$000's
2022
NZ$000's
Audit and review of the financial statements (1)
Total audit and assurance services
Other services (2)
Total non-assurance services
Total auditor's remuneration
3,652
3,652
73
73
3,725
(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 ($10,000), taxation compliance ($3,000), financial statement compilation services ($10,000) and pre-assurance over
non-financial metrics ($50,000).
3,284
3,284
38
38
3,322
121
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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 $40 million (2022: $15 million).
At 30 June 2023, approximately $42 million (2022: $37 million) of total cash and deposits were held in subsidiaries that operate in
countries where exchange controls and other legal restrictions apply and are not immediately available for general use by the Group.
2023
NZ$M
271
18
76
365
2023
NZ$M
235
19
254
358
211
(102)
467
(240)
(52)
34
21
(96)
(333)
388
2022
NZ$M
148
17
186
351
2022
NZ$M
432
7
439
350
(27)
146
45
514
(103)
(55)
(48)
(239)
84
(361)
592
Cash and bank balances
Contract retention bank balances
Short-term deposits
Cash and cash equivalents
Reconciliation of net earnings to net cash from operating activities
Net earnings
Earnings attributable to minority interest
Add/(less) non-cash items:
Depreciation, depletions and amortisation
Other non-cash items
Taxation
Net loss on disposal of businesses and property, plant and equipment
Net working capital movements
Residential and Development
Construction
Other divisions:
Debtors
Inventories
Creditors
Net cash from operating activities
122
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
8. DEBTORS
Debtors are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due
for settlement within 30 to 90 days and are therefore all classified as current. Debtors are recognised initially at the amount of consideration
that is unconditional, unless they contain significant financing components, when they are recognised at fair value. The Group holds the
trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost
using the effective interest method. Details about the Group’s credit risk policies and the calculation of the loss allowance are provided in
note 18.3.
Trade debtors
Contract debtors
Contract retentions
Less expected credit loss provisions
Trade and contract debtors
Other receivables
Current
0 - 30 days over standard terms
31 - 60 days over standard terms
61+ days over standard terms
Provision
Trade and contract debtors
Fair values of debtors
2023
NZ$M
875
126
35
(20)
1,016
160
1,176
893
94
12
37
(20)
1,016
2022
NZ$M
844
124
38
(20)
986
289
1,275
855
104
15
32
(20)
986
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 notes 18.1 and 18.3.
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 in the
ordinary course of business less the estimated costs of completion and the estimated costs and replacement costs in the consumable stores
and spares 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
comprises land acquisition and development 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.
123
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
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
2023
NZ$M
249
16
797
41
1,103
1,003
100
1,103
26
455
364
132
977
1,624
456
2,080
2022
NZ$M
235
14
835
41
1,125
986
139
1,125
26
303
273
72
674
1,507
292
1,799
Inventory classified as non-current
The non-current portion of inventories relates to land and developments that are expected to be held for greater than 12 months
(current portion of $522 million, 2022: $382 million).
Land and property commitments
The Group's Residential and Development division has commitments for the purchase of land and building services totalling $455
million (2022: $787 million), of which $236 million is expected to be delivered in the year ending 30 June 2024.
Emissions units
Emissions units held for own use are allocated to the Group under the New Zealand Emissions Trading Scheme (ETS) and used to
settle the Group's emissions obligation. The units are initially recognised at cost with subsequent reassessment for lower of cost or net
realisable value. Emissions units held by the Group as at 30 June 2023 have been recognised at nil value (2022: nil).
10. CREDITORS, ACCRUALS AND OTHER LIABILITIES
Trade creditors and other liabilities are stated at cost or estimated liability where accrued. Employee entitlements include annual leave
which is recognised on an accrual basis and the liability for long service leave which is measured as the present value of expected future
payments to be made in respect of services provided by employees.
Assumptions in determining long service leave relate to the discount rate, estimates relating to the expected future long service leave
entitlements, future salary increases, attrition rates and mortality.
Trade creditors
Contract retentions
Accrued interest
Other liabilities
Employee entitlements
Workers' compensation schemes
Current portion
Non-current portion
Carrying amount at the end of the year
2023
NZ$M
772
23
18
429
219
7
1,468
1,416
52
1,468
2022
NZ$M
791
23
15
455
247
9
1,540
1,512
28
1,540
The non-current portion of creditors and accruals as at 30 June 2023 primarily relates to long service employee entitlement obligations
and deferred land purchases.
124
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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.
Restructuring
NZ$M
Warranty &
environmental
NZ$M
Onerous
contracts
NZ$M
Other
NZ$M
Total
NZ$M
2023
Carrying amount at the beginning of the year
Charged to earnings
Settled or utilised
Released to earnings
Recognised on balance sheet
Currency translation
2022
Carrying amount at the beginning of the year
Charged to earnings
Settled or utilised
Released to earnings
Recognised on balance sheet
Currency translation
Current portion
Non-current portion
Carrying amount at the end of the year
16
2
(7)
(1)
1
11
28
5
(14)
(3)
25
7
(6)
(2)
24
28
4
(4)
(3)
16
25
78
78
255
(52)
78
47
(22)
(13)
28
281
118
84
(6)
68
24
(15)
(3)
3
1
78
2023
NZ$M
403
31
434
197
311
(87)
(16)
28
1
434
208
33
(39)
(9)
3
1
197
2022
NZ$M
173
24
197
During the year, the Group utilised $7 million (2022: $14 million) in respect of restructuring obligations across various businesses. The $11
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 two years. Onerous contracts include a charge to earnings of $255 million associated with
the completion of the NZICC project (refer to note 2.6). Other provisions include a charge to earnings for the recognition of a fund related to
the Iplex® Australia Pro-fit pipes matter (refer to note 25), and an additional provision for the settlement of silicosis claims in Australia.
125
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
Silicosis
Laminex® Australia (together with other engineered stone manufacturers and fabricators in Australia) is the subject of a number of
silica related personal injury claims in Australia and more such claims were received in the period ended 30 June 2023. While Laminex®
Australia has settled the majority of claims that have been brought against it to date, further claims are possible in the future. The Group
has considered the exposure Laminex® Australia may have for existing and future claims, with a provision recognised based on the facts
and circumstances known at balance date. In FY23, an additional A$7.5 million provision for these costs has been made, which has been
classified as Significant items. Despite the information obtained from settling claims in recent years, the Group’s full exposure to these
claims remain significantly uncertain, with risk associated to:
– the number of claims that may be received and the timing of them;
– the nature of those claims and the amounts sought to be recovered, which vary considerably based on the condition and circumstances of
the injured worker;
– the size of any settlement amounts agreed or damages awarded, particularly given different laws in various States; and
– the degree to which other parties, such as the worker’s employer and other manufacturers, are liable to (and do) contribute to any amount
owed to the worker.
So there remains a risk that, ultimately, the final exposure of Laminex® Australia to these claims will be greater than the amount currently
allowed.
Product Claims
Fletcher Insulation® Australia is the subject of a small number of customer complaints relating to installed glass wool insulation containing an
imported foil. Fletcher Insulation® is currently investigating the complaints to ascertain the cause and extent of the issue, including whether
any other products may be impacted. Fletcher Building’s New Zealand insulation business, Comfortech®, did not use the same imported
foil. The Group has considered the exposure Fletcher Insulation® Australia may have for the existing and future claims, with a provision
recognised based on the facts and circumstances known at balance date. Fletcher Insulation® Australia is also assessing potential recoveries
from its supplier of the product. There remains a risk that the Groups full exposure will be greater than the amount currently allowed as
investigations are completed.
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. To the extent acquisition, development and construction of capital projects extend over a period of 12 months, attributable
borrowing costs are capitalised as part of the cost of the asset while the asset is being developed or constructed. On completion of
development, all assets included in assets under construction are reclassified appropriately into the relevant categories of property, plant
and equipment.
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.
Assets are reviewed annually for impairment indicators. 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.
126
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
2023
Carrying value at the beginning of the year
Additions
Acquisitions from business combination
Disposals
Depreciation expense
Reversal of impairment
Impairment
Transfer of assets to inventory
Currency translation
Represented by:
Cost
Accumulated depreciation and impairment
Carrying value at the end of the year
2022
Carrying value at the beginning of the year
Additions
Acquisitions from business combination
Disposals
Depreciation expense
Impairment
Transfer of assets to inventory
Currency translation
Represented by:
Cost
Accumulated depreciation and impairment
Carrying value at the end of the year
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
1,123
209
48
(2)
(98)
(6)
(4)
133
40
2
(2)
(32)
(1)
102
11
Total
NZ$M
1,800
391
68
(6)
(9)
(148)
4
(6)
(25)
(6)
1,270
140
104
2,072
183
68
10
(1)
4
(22)
242
242
242
259
63
8
(1)
(9)
(2)
(2)
316
448
(132)
316
2,678
(1,408)
1,270
417
(277)
140
147
(43)
104
Land
NZ$M
Buildings
NZ$M
Plant &
Machinery
NZ$M
Fixtures &
Equipment
NZ$M
Resource
Extraction
NZ$M
3,932
(1,860)
2,072
Total
NZ$M
1,586
371
(8)
(147)
(13)
11
133
31
(1)
(30)
86
28
(11)
(1)
133
102
1,800
409
(276)
133
142
(40)
102
3,598
(1,798)
1,800
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
As at 30 June 2023, property, plant and equipment includes $607 million of assets under construction that are not depreciated until they
are commissioned and brought into use (2022: $454 million).
Physical impacts from climate-related risk
In FY22, the Group appointed Aon New Zealand to assess climate transitional and physical related risks and issued its first Climate-
related Disclosure. The physical risk assessment was a refresh of an exercise completed by Aon New Zealand in 2020 using the
'reasonable worst case' climate scenario known as RCP8.5 against a 2030 and 2070 timeframe. The assessment focused on a number of
climate-related hazards, including rainfall, temperature, sea level rise and extreme storm events. The assessment generated a number of
key outputs including:
•
that no material change in risk is expected in the 2030 timeframe;
• some change in risk is expected for the 2070 timeframe due to changes in climate stressors; and
•
less than 2% of the Group's asset value has high or extreme flood hazard exposure.
During the year, there were property damages and direct remedial works resulting from the impacts of Cyclone Gabrielle and North
Island Floods in New Zealand, which amounted to $22 million as detailed in note 2.2. Those businesses and locations impacted, are
included within the 2% of identified Groups assets exposed to high or extreme flood hazards per the report. Overall, the analysis
quantified a physical risk which is not material to the Group’s future cash flows. The analysis confirmed no change to the expected useful
economic lives of non-current assets as disclosed.
127
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
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.
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, and determined by way of an independent valuation undertaken of the retirement village assets in accordance
with professional valuation standards as at 30 June 2023.
All investment property has been determined to be level 3 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
Completed retirement units at fair value
Movement in the Group's investment property balances is outlined below:
Opening balance
Additions
Transferred from inventory
Transferred to inventory
Change in fair value
Closing balance
2023
NZ$M
14
17
27
58
2023
NZ$M
34
19
3
(14)
16
58
2022
NZ$M
22
12
34
2022
NZ$M
5
20
9
34
The Group’s interest in all completed investment property was valued on 30 June 2023 by Colliers Limited, at a total of $27 million
(2022: nil).
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 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).
128
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
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.
To the extent the acquisition and development of capital intangible projects extend over a period of 12 months, attributable borrowing
costs are capitalised as part of the cost of the asset while the asset is being developed. On completion, all cost included in asset under
development are reclassified as Other Intangibles and amortised when available for use.
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 note 2.3.
2023
Carrying value at the beginning of the year
Additions
Disposals
Acquired from business combination
Impairment
Amortisation expense
Currency translation
Represented by:
Cost
Accumulated impairment/amortisation
Carrying value at the end of the year
2022
Carrying value at the beginning of the year
Additions
Disposals
Acquired from business combination
Impairment
Amortisation expense
Currency translation
Represented by:
Cost
Accumulated impairment/amortisation
Carrying value at the end of the year
Goodwill
NZ$M
717
110
(4)
823
823
823
Brands
NZ$M
289
(2)
287
367
(80)
287
Goodwill
NZ$M
706
Brands
NZ$M
282
11
717
717
717
7
289
370
(81)
289
Other
Intangibles
NZ$M
110
53
(3)
(1)
(16)
143
310
(167)
143
Other
Intangibles
NZ$M
82
45
(1)
(18)
2
110
260
(150)
110
As at 30 June 2023, Other intangible assets include $82 million of assets under development (2022: $42 million).
Total
NZ$M
1,116
53
(3)
110
(1)
(16)
(6)
1,253
1,500
(247)
1,253
Total
NZ$M
1,070
45
(1)
(18)
20
1,116
1,347
(231)
1,116
129
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
Significant intangible balances within cash-generating units (CGUs)
Laminex® Australia
Higgins® New Zealand
Iplex® New Zealand
Stramit®
Tradelink®
PlaceMakers®
Waipapa
Higgins® Fiji
Other
Goodwill
2023
NZ$M
Goodwill
2022
NZ$M
Brands
2023
NZ$M
Brands
2022
NZ$M
157
114
105
62
62
56
57
32
178
823
159
114
105
63
63
18
32
163
717
124
19
7
41
53
2
41
287
126
19
7
42
53
2
40
289
The goodwill allocated to significant CGUs accounts for 78% (2022 restated to include PlaceMakers®: 77%) of the total carrying value of
goodwill. The remaining 'other' CGUs, which comprise 12 (2022 restated to exclude PlaceMakers®: 12) in total, are each less than 6% of total
carrying value. The significant brand assets account for 86% (2022 restated to include PlaceMakers®: 86%) of the total carrying value of
brands. The remaining 'other' brand assets are each less than 5% of total carrying value (2022: 5%).
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.
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 2023, the four largest property lease contracts (2022: five) have all related extension options included in the estimated
lease term (where management is reasonably certain to exercise the options), resulting in future lease payments being included in the
measurement of the lease liability recorded in the Consolidated Balance Sheet.
130
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
Land
NZ$M
Buildings
NZ$M
Plant &
machinery
NZ$M
12
1
(1)
12
13
2
(1)
(2)
12
1,135
102
24
(126)
(31)
(2)
1,102
1,172
128
(119)
(1)
(58)
13
1,135
Right-of-use assets
2023
Opening net book value at the beginning of the year
Additions and renewals
Acquisitions from business combination
Depreciation
Impairment
Terminations
Currency translation
Closing balance at the end of the year
2022
Opening net book value at the beginning of the year
Additions and renewals
Acquisitions from business combination
Depreciation
Impairment
Terminations
Currency translation
Closing balance at the end of the year
Lease liabilities
Opening balance
Additions and renewals
Acquisitions from business combination
Repayments
Terminations
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 asset expense
204
75
(67)
(1)
(1)
210
207
60
(65)
(1)
3
204
Total
2023
NZ$M
1,655
177
25
(196)
(59)
(6)
1,596
192
1,404
1,596
Total
2023
NZ$M
194
60
59
313
Total
NZ$M
1,351
177
25
(194)
(32)
(3)
1,324
1,392
190
(185)
(1)
(59)
14
1,351
Total
2022
NZ$M
1,697
190
(186)
(62)
16
1,655
185
1,470
1,655
Total
2022
NZ$M
185
1
58
53
297
131
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (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 in place. 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 note 17.
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 note 18.
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.
2022
NZ$M
Cash flows
NZ$M
Currency
translation
NZ$M
Private placements
Bank loans
Capital notes
Other loans
481
180
350
29
Carrying value of borrowings (as per balance sheet)
1,040
Less: value of derivatives used to manage changes in
hedged risks on debt instruments
Economic debt
Less: Cash and cash equivalents
Net debt
(19)
1,021
(351)
670
773
(6)
1
768
(3)
765
(16)
749
16
(7)
9
(16)
(7)
2
(5)
Other non-cash
movements
(including hedge
accounting)
NZ$M
(13)
(1)
2023
NZ$M
484
946
343
30
(14)
1,803
12
(2)
(2)
(26)
1,777
(365)
1,412
132
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
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$M
476
361
20
857
(18)
839
(666)
173
Cash flows
NZ$M
Currency
translation
NZ$M
44
180
(10)
170
(4)
166
321
487
2
46
(36)
10
(6)
4
Carrying value of borrowings included within the Consolidated Balance Sheet as follows:
Current borrowings
Non-current borrowings
Total borrowings
At reporting date, the Group had the following funding facilities:
Utilised facilities
Unutilised bank loan facilities
Total facilities
Private placements
Other non-cash
movements
(including hedge
accounting)
NZ$M
(39)
(1)
7
(33)
39
6
6
2023
NZ$M
88
1,715
1,803
1,777
1,014
2,791
2022
NZ$M
481
180
350
29
1,040
(19)
1,021
(351)
670
2022
NZ$M
64
976
1,040
1,021
745
1,766
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 2023, the Group had issued $343 million of listed capital notes to retail investors (2022: $350 million) with maturities
between 2024 and 2028. 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 market price. 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. If the principal amount of
these notes held at 30 June 2023 were to be converted to shares, $65 million (2022: 71 million) Fletcher Building Limited shares would
be issued at the share price as at 30 June 2023, of $5.42 (2022: $5.04).
As at 30 June 2023, the Group held $157 million (2022: $151 million) of its own capital notes.
133
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
Bank Loans
At 30 June 2023, the Group had a NZD925 million (2022: $925 million) and AUD674.5 million (2022: nil) syndicated revolving credit
facility on an unsecured, negative pledge and borrowing covenant basis. The participating lenders are both New Zealand registered
and offshore banks. The facility comprises of four Tranches as follows: AUD674.5 million expiring on 31 October 2025, NZD325 million
expiring on 22 November 2026, NZD400 million expiring on 1 July 2027 and NZD200 million expiring on 31 May 2028. The funds under
the syndicated revolving credit facility can be borrowed in Australian and New Zealand dollars only.
Below are the activities in relation to the syndicated revolving credit facility and other bank loans during the year:
• On 31 October 2022, the AUD674.5 million three year Tranche was added to the syndicated revolving credit facility. This Tranche can be
borrowed in Australian Dollars only.
• On 31 May 2023, the NZD200 million Tranche of the syndicated revolving credit facility was extended from 22 July 2024 to 31 May 2028.
There were no other material changes to the terms of the syndicated revolving credit facility.
On 28 June 2023, the Group executed a NZD300 million revolving credit facility with Westpac New Zealand Limited, expiring on 31
October 2024. As at 30 June 2023, no drawdowns have been made from the facility.
Other Loans
At 30 June 2023, the Group had other loans of $30 million (2022: $29 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 2023, the Group had debt subject to the negative
pledge of $1,424 million (2022: $660 million).
Covenants
The Group’s financial covenants under its senior borrowing arrangements include interest cover and leverage ratio. The Group was in
compliance with all financial covenants during the year and at balance date.
The impact of debt hedging activities on borrowings is represented in the table below:
Underlying borrowing
exposure
Fixed rate
NZ$M
Floating rate
NZ$M
Impact of
hedging
NZ$M
Economic debt
exposure
Fixed rate
NZ$M
Floating rate
NZ$M
351
21
19
74
369
834
727
227
15
969
826
256
354
103
(21)
(19)
(74)
(369)
(26)
1,082
606
74
15
695
Underlying borrowing
exposure
Fixed rate
NZ$M
Floating rate
NZ$M
Impact of
hedging
NZ$M
Economic debt
exposure
Fixed rate
NZ$M
Floating rate
NZ$M
357
20
19
70
372
838
183
4
15
202
521
260
133
329
(20)
(19)
(70)
(372)
(19)
781
152
73
15
240
% Fixed
58%
77%
61%
% Fixed
77%
78%
76%
2023
Currency of borrowings
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
2022
Currency of borrowings
New Zealand Dollar
Australian Dollar
British Pound
Canadian Dollar
Euro
United States Dollar
Other
Total
134
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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.
2023
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 flows
Total contractual cash flows
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 flows
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
946
343
519
30
1,838
458
(519)
(61)
1,777
183
1,861
3,821
79
15
94
94
63
224
381
80
80
80
42
197
319
946
184
283
15
1,428
249
(283)
(34)
1,394
75
467
1,936
236
236
209
(236)
(27)
209
3
973
1,185
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$M
180
350
504
29
1,063
684
(726)
(42)
1,021
193
2,109
3,323
56
7
63
224
(222)
2
65
45
236
346
69
7
76
76
42
216
334
180
225
274
15
694
250
(274)
(24)
670
90
513
1,273
230
230
210
(230)
(20)
210
16
1,144
1,370
135
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
17. NET FUNDING COSTS
Interest income and expense are recognised on an accrual basis in the Consolidated Income Statement using the effective interest method.
Interest costs relating to qualifying assets under development are capitalised as a component of the cost of development or construction.
Where funds are borrowed specifically for qualifying projects, the actual borrowing costs incurred are capitalised. Where the projects are
funded through general borrowings, the borrowing costs are capitalised based on the weighted average cost of borrowing. Borrowing costs
incurred after commencement of commercial operations are expensed to the Consolidated Income Statement.
Funding costs also include the changes in fair value relating to derivatives used to manage interest rate risk, and the associated changes in
fair value of the borrowings designated in a hedge relationship attributable to the hedged risk.
Interest income
Interest on borrowings and derivatives
Interest capitalised to balance sheet
Interest expense other
Net interest expense
Changes in fair value relating to:
Borrowings designated in a hedging relationship
Derivatives designated in a hedging relationship
Total changes in fair value
Bank fees, registry and other expenses
Line fees
Other losses
Net funding costs
2023
NZ$M
2022
NZ$M
(4)
87
(5)
4
82
12
(12)
1
11
94
(2)
37
1
36
39
(39)
1
7
2
46
Included in interest on borrowings and derivatives is the net settlement of the Group's interest derivatives. This consists of $35 million
of interest income and $44 million of interest expense (2022: $21 million interest income; $24 million interest expense). Other losses
includes credit valuation adjustment (CVA)/debit valuation adjustments (DVA) on derivatives.
Capitalisation of borrowing costs
The Group funds capital projects with general borrowings and has applied a weighted average capitalisation rate of 5.20% in FY23,
resulting in $4.8 million of interest cost being capitalised to the balance sheet, mainly in relation to the new Winstone Wallboards®
Tauriko plant.
Interest rate risk
At 30 June 2023, 61% of the Group's debt was subject to a fixed interest rate (2022: 76% fixed).
(i) Interest rate repricing
The following tables set out the interest rate repricing profile of interest bearing financial liabilities assuming floating rate facilities are
utilised to maintain debt levels.
Fixed financial liabilities
Floating financial liabilities
Economic Debt
% Fixed
2023
NZ$M
1,082
695
1,777
61%
2024
NZ$M
844
933
1,777
48%
2025
NZ$M
538
1,239
1,777
30%
2026
NZ$M
474
1,303
1,777
27%
2027
NZ$M
285
1,492
1,777
16%
2028
NZ$M
170
1,607
1,777
10%
The Group's overall weighted average interest rate (based on year end borrowings) excluding fees is 5.74% (2022: 4.61%).
(ii) Interest rate risk
It is estimated an increase of 100 basis points in interest rates would result in an increase in the Group's interest costs by approximately
$7 million pre-tax on the Group's debt portfolio exposed to floating rates at balance date (2022: $2.4 million) assuming that all other
variables remain constant.
136
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (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.
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.
Commodity price
risk
Arises from committed or highly probable
trade transactions that are linked to
commodities.
It is Group policy that no currency exchange risk may be
entered into or allowed to remain outstanding should it arise
on committed transactions. The Group uses foreign currency
forward contracts and foreign currency options to manage the
risk on firm commitments and recognised material trade related
exposures. The majority of these transactions have maturities of
less than one year from the reporting date.
It is the Group's policy to hedge this foreign currency translation
risk by borrowing in the currency of the asset in proportion to the
Group's 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.
The Group manages the fixed interest rate component of its
borrowings by entering into CCIRS, interest rate swaps, forward
rate agreements and options. It aims to maintain fixed interest rate
borrowings between certain ranges over specific time periods.
The Group manages its commodity price risks through negotiated
supply contracts and, for certain commodities, by using
commodity price swaps and options. The Group manages its
commodity price risk depending on the underlying exposures,
economic conditions and access to active derivatives markets.
Cash flow hedge accounting is applied to commodity derivative
contracts. At 30 June 2023, the Group has hedged a portion of its
electricity and diesel usage for the period 1 July to 31 March 2024
and 30 June 2024 respectively. The average hedged electricity
price is NZ$149/MWh and the average hedged diesel price (ex-
Singapore) is NZ$0.97/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
notes 18.3 and 18.4.
137
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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.
The Group may designate derivatives as:
– Fair value hedges (where the derivative is used to manage the variability in the fair value of recognised assets and liabilities);
– Cash flow hedges (where the derivative is used to manage the variability in cash flows relating to recognised liabilities or forecast
transactions); or
– Net investment hedges (where borrowings or derivatives are used to manage the risk of fluctuation in the translated value of its foreign
operations).
The Group holds derivative instruments until expiry except where the underlying rationale from a risk management point of view changes,
such as when the underlying asset or liability that the instrument hedges no longer exists, in which case early termination occurs.
Fair value hedges
Where a derivative financial instrument is designated as a hedge of a recognised asset or liability, or of a firm commitment, any gain or
loss on the derivative (hedging instrument) is recognised directly in the 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.
138
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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 2023 was $592 million
(2022: $551 million).
(ii) Currency translation risk
The effect of the Group’s hedge accounting policy in managing foreign exchange risk related to the Group’s net investments in foreign
operations is presented in the table below:
Hedged investments and hedging instruments used
Amount of investment hedged
Foreign currency AUD
Notional amount
Cross currency interest rate swaps (37-61 months)
Foreign currency swaps (0-1 months)
Hedge effectiveness
Change in value used for calculating hedge ineffectiveness
Net investment hedge (gain)/loss recognised in Other comprehensive income
2023
Maturity:
0-61 months
NZ$M
2022
Maturity:
0-73 months
NZ$M
103
329
(105)
(224)
(103)
1
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 $104.7 million (2022: $153 million) and no material
impact on the Consolidated Income Statement.
The Group applies hedge accounting to foreign currency denominated borrowings that are managed by CCIRS. The hedge ratio
applied is 1:1. The hedge relationship may be designated into separate cash flow hedges and fair value hedges to manage the different
components of foreign currency and interest rate risk:
•
fair value hedge relationship where CCIRS are used to manage the interest rate and foreign exchange risks;
• currency risk in relation to foreign currency denominated borrowings with fixed interest rates; and
• cash flow hedge relationship where CCIRS are used to manage the variability in cash flows arising from interest rate movements on
floating interest rate payments and foreign exchange movements on payments of principal and interest.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the
currency, reference interest rates, tenors, repricing dates and maturities and the notional amounts. The Group assesses whether the
derivative designated in each hedging relationship is expected to be effective in offsetting changes in the fair value of the hedged item
using the hypothetical derivative method.
In these hedging relationships, the main sources of ineffectiveness are:
• changes in counterparty credit risk and cross currency basis spreads that are not reflected in the change in the fair value of the
hedged item; and
• differences in repricing dates between the cross currency interest rate swaps and the borrowings.
139
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
The effect of the Group’s hedge accounting policies in managing both its foreign exchange risk and interest rate risk related to
borrowings denominated in foreign currency is presented in the table below:
USD
37-61 Months
Floating
NZD/USD
0.6944
NZ$M
CAD*
61 Months
Fixed - 4.43%
AUD/CAD
0.927
NZ$M
EUR*
37 Months
Fixed - 4.30%
AUD/EUR
0.684
NZ$M
GBP*
61 Months
Fixed - 4.80%
AUD/GBP
0.568
NZ$M
19
1
74
6
(3)
3
21
(2)
2
405
14
(3)
(8)
(4)
12
USD
49-73 Months
Floating
NZD/USD
0.6944
NZ$M
CAD*
73 Months
Fixed - 4.43%
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
519
21
(3)
(13)
1
12
Total
NZ$M
395
15
(2)
(32)
(7)
39
19
1
(1)
70
3
(1)
(1)
1
20
504
19
(4)
(33)
(6)
39
2023
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 cash flow relationship only
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 cash flow relationship only
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.
140
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
2023
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
2022
Cash flow hedging
Interest rate swaps
NZD Borrowings
25-60 Months
4.34%
NZ$M
AUD Borrowings
7 months
1.91%
NZ$M
475
7
6
(6)
153
2
(1)
1
NZD Borrowings
9-61 Months
3.83%
NZ$M
AUD Borrowings
18 months
1.91%
NZ$M
Nominal amount of the hedging instrument
Carrying amount - derivative assets/(liabilities)
Change in value used for calculating hedge ineffectiveness
Hedging (gain)/loss recognised in Other comprehensive income
164
1
2
(2)
155
3
9
(9)
There was no hedge ineffectiveness recognised in the Consolidated Income Statement during the year.
Total
NZ$M
628
9
5
(5)
Total
NZ$M
319
4
11
(11)
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 note 8 for debtor
balances and ageing analysis.
The Group has two types of financial assets that are subject to the expected credit loss model:
• Debtors (including trade debtors, contract debtors and contract retentions) (note 8)
• Construction contract assets (note 2.6)
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.
141
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
The table below provides movement in the Group's expected credit loss provision:
Opening provision for expected credit losses as at 1 July 2022
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 2023
2023
NZ$M
(20)
1
(1)
(20)
2022
NZ$M
(18)
(3)
1
(20)
Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.
Impairment losses on trade receivables and contract assets are presented as net impairment losses in the Consolidated Income
Statement. Subsequent recoveries of amounts previously written off are credited against the same line item.
(ii) Derivative financial instruments and the investment of cash
The Group enters into derivative financial instruments and invests cash with various counterparties in accordance with established
Board approved credit limits as to credit rating and dollar value but does not require collateral or other security except in limited
circumstances. In accordance with the established counterparty limits, there are no significant concentrations of credit risk in respect
of these financial instruments and no loss is expected.
The Group has not renegotiated the terms of any financial assets that would otherwise be overdue or impaired. The carrying amount of
non-derivative financial assets represents the maximum credit exposure. The carrying amount of derivative financial assets is at their
current fair value.
18.4 FAIR VALUES
The estimated fair value measurements for financial assets and liabilities compared to their carrying values in the Consolidated Balance
Sheet, are as follows:
Financial assets
Cash and liquid deposits
Debtors
2023
2022
Classification
Carrying
value
NZ$M
Fair value
NZ$M
Carrying
value
NZ$M
Fair value
NZ$M
Amortised cost
Amortised cost
365
1,109
365
1,109
351
1,180
351
1,180
Forward exchange contracts - fair value through profit or loss
Fair value
Forward exchange contracts - cash flow hedge
Forward exchange contracts - net investment hedge
Cross currency interest rate swaps - split designation
Cross currency interest rate swaps - cash flow hedge
Interest rate swaps - cash flow hedge
Commodity price swaps - cash flow hedge
Total financial assets
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
2
8
30
7
13
2
2
8
30
7
13
2
6
8
15
4
5
2
6
8
15
4
5
2
1,536
1,536
1,571
1,571
142
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
2023
2022
Classification
Carrying
value
NZ$M
Fair value
NZ$M
Carrying
value
NZ$M
Fair value
NZ$M
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
Cross currency interest swaps - split designation
Interest rate swaps - cash flow hedge
Commodity price swaps - cash flow hedge
Total financial liabilities
Fair value
Fair value
Fair value
Fair value
Fair value
Amortised cost
1,197
Amortised cost
Amortised cost
Amortised cost
Amortised cost
946
484
30
343
1
16
4
1,197
946
480
30
315
1
16
4
1,217
1,217
180
481
29
350
1
1
2
1
180
468
29
338
1
1
2
1
3,021
2,989
2,262
2,237
Total financial instruments
(1,485)
(1,453)
(691)
(666)
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 2.7% and 7.5% (2022: (0.3%)
and 5.65%) including margins, for both accounting and disclosure purposes.
143
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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 other related parties.
19. DIVIDENDS AND SHAREHOLDER TAX CREDITS
Dividends
Full year dividend paid October 2021 (18.0 cents per share)
Interim dividend paid March 2022 (18.0 cents per share)
Full year dividend paid October 2022 (22.0 cents per share)
Interim dividend paid April 2023 (18.0 cents per share)
2023
NZ$M
172
139
311
2022
NZ$M
148
144
292
In line with the Company's dividend policy, the Board declared a final dividend of 16.0 cents per share for the 2023 financial year.
Shareholder tax credits
Imputation and franking credits allow the Company to transfer the benefit from the tax it has paid in New Zealand and Australia respectively
to its shareholders when it pays dividends.
Imputation credit account
Imputation credits at the beginning of the year
Taxation paid
Imputation credits attached to dividend paid
Taxation payable
Imputation credits available for use in subsequent accounting periods
Franking credit account
Franking credits at the beginning of the year
Taxation paid
Franking credits received
Franking credits available for use in subsequent accounting periods
20. CAPITAL
2023
NZ$M
2022
NZ$M
67
58
(92)
4
37
2023
A$M
38
38
5
4
(42)
100
67
2022
A$M
35
3
38
Ordinary shares are classified as shareholders’ funds. Costs directly attributable to the issue of new shares or options are shown in
shareholders’ funds as a reduction from the proceeds. Acquired shares are classified as treasury stock and presented as a deduction from
share capital under the treasury stock method, as if the shares are cancelled, until they are reissued or otherwise disposed of.
Reported capital at the beginning of the year excluding treasury stock
Repurchase of shares
Vested share-based payment
2023
NZ$M
3,003
(13)
3
2022
NZ$M
3,248
(250)
5
Reported capital at the end of the year excluding treasury stock
2,993
3,003
144
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
All ordinary shares are issued and fully paid and carry equal rights in respect of voting, dividend payments and distribution upon
winding up.
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
2023
2022
783,043,596
821,152,019
(38,108,423)
783,043,596
783,043,596
(6,655,828)
(4,999,501)
776,387,768
778,044,095
The Group completed an on-market share buyback in June 2022, where the Group had repurchased 38,108,423 shares for the total
consideration of $250 million. These purchased shares were subsequently cancelled, leaving the total number of shares on issue at 30
June 2022 of 783,043,596 shares.
21. NON-CONTROLLING INTERESTS
Non-controlling interests are allocated their share of profit for the year in the Consolidated Income Statement and are presented separately
within equity in the Consolidated Balance Sheet. The effect of all transactions with non-controlling interests that change the Group’s
ownership interest but do not result in a change in control are recorded in equity.
Share capital
Reserves
2023
NZ$M
2022
NZ$M
14
13
27
9
6
15
22. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Investments in associates and joint ventures are measured using the equity method. The equity method has been used for associate entities
over which the Group has significant influence but not control.
A joint arrangement is an arrangement where two or more parties have joint control. The Group classifies its joint arrangements as either
joint operations or joint ventures depending on the legal, contractual and other rights and obligations.
Investment by associate/joint venture:
Wespine Industries Pty Ltd
Hexion Australia Pty Ltd
Altus NZ Limited
NX2 Hold LP
Other
Equity accounted earnings comprise:
Sales - 100%
Earnings before taxation - 100%
Earnings before taxation - Fletcher Building share
Taxation expense
Earnings after taxation - Fletcher Building share
2023
NZ$M
2022
NZ$M
72
23
78
28
24
225
66
23
71
12
23
195
596
589
117
42
(8)
34
67
34
(10)
24
145
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
23. RELATED PARTY DISCLOSURES
The disclosures below set out transactions and outstanding balances that Group companies and other related parties have with each other.
Key management personnel are defined as the Executive Committee and Board of Directors.
2023
Wespine Industries Pty Ltd and Hexion Australia Pty Ltd
Interpipe Holdings Limited
Altus NZ Limited
NX2 Hold LP
Others
2022
Wespine Industries Pty Ltd and Hexion Australia Pty Ltd
Interpipe Holdings Limited
Altus NZ Limited
NX2 Hold LP
Others
Sales to
related parties
NZ$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
42
4
15
2
47
7
10
2
72
4
89
4
6
9
1
1
3
As at 30 June 2023, the Group held $2.5 million of cash deposits on behalf of three alliances/joint operations; M2PP, Ground
Improvement and Hamilton Expressway. The Group holds 75%, 50% and 61% respective interest in these alliances/joint operations.
Key management personnel compensation
Directors' fees
Executive committee remuneration paid, payable or provided for:
Short-term employee benefits
Long-term employee benefits
Fletcher Building Retirement Plan
2023
NZ$M
2022
NZ$M
2
18
2
23
2
As at 30 June 2023, Fletcher Building Nominees Limited (the New Zealand retirement plan) held $3.5 million of shares in Fletcher
Building (2022: $2.9 million of shares).
146
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
Other Information
This section provides additional required disclosures that are not covered in the previous sections.
24. CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure commitments are those where future expenditure has been committed at year-end, but not recognised as liabilities
as follows:
Committed at year end
Property, plant and equipment and other long-term assets
25. CONTINGENT LIABILITIES
2023
NZ$M
284
2022
NZ$M
204
Contingent liabilities are possible legal or constructive obligations arising from past events and whose existence will be confirmed only by
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. A contingent liability may
also be a present obligation arising from past events but is not recognised on the basis that an outflow of economic resources to settle the
obligation is not viewed as probable, or the amount of the obligation cannot be reliably measured. When the Group has a present obligation,
an outflow of economic resources is assessed as probable and the Group can reliably measure the obligation, a provision is recognised.
The Group, in the normal course of business, may be subject to legal claims and other exposures in respect of which no provision has been
made. Obligations assessed as having probable future economic outflows capable of reliable measurement are provided for at reporting
date and matters assessed as having possible future economic outflows capable of reliable measurement are included in the total amount of
contingent liabilities below.
Individually significant matters, including narrative on potential future exposures incapable of reliable measurement, are disclosed below, to
the extent that disclosure does not prejudice the Group.
Guarantees
In certain circumstances, the Group guarantees the performance of particular business units in respect of their obligations. This includes
bonding and bank guarantee facilities used primarily by the construction business as well as performance guarantees for certain Group’s
subsidiaries.
Contingent liabilities in relation to guarantees, claims and others
Contingent liabilities with respect to guarantees extended on trading transactions,
performance bonds and other transactions
Contingent liabilities with respect to claims
Product claims
2023
NZ$M
391
40
431
2022
NZ$M
383
383
Iplex® Australia has received a number of product quality complaints relating to a hot and cold water polybutylene pipe product it previously
manufactured (under the name "Pro-fit"). The complaints relate to leaks in homes, primarily built by group home builders in Western
Australia, which requires repair or replacement of the pipes and, in some cases, damage to the affected homes. Reports to Iplex® Australia
are that the leak rate in other States is not materially unusual for a product of this type. No legal proceeding has been commenced but
the complaints directed at Iplex® Australia assert that the cause of the failures is attributable to it. Iplex® Australia has not identified the
root cause or causes of the leak. At this time the work Iplex® Australia has undertaken or commissioned that has been completed does not
identify a manufacturing defect. The Western Australia building regulator (the Department of Mines, Industry Regulation and Safety, known
as DMIRS) has investigated the matter and informed Iplex® Australia that, as foreshadowed in the April 17 NZX announcement, "concerns
were identified" regarding the manufacturing processes used for Pro-fit by Iplex® Australia. Subsequent to balance date, DMIRS has referred
the matter to the Australian Competition and Consumer Commission (ACCC). Iplex® Australia’s exposure to future costs incurred by the
leaks, if any, will depend on the final determination of a number of matters. As advised to the market, Iplex® Australia has made a provision
of A$15 million, which is treated as a Significant Item. That provision is not an indication of Iplex® Australia's view as to the costs it will
or may incur in relation to this matter, but in respect of costs expected to be incurred in investigating this matter and providing funds to
Western Australia builders who choose to take advantage of its offer to contribute to the cost of repairs and replacement work in the interim.
At balance date, given current facts and circumstances, Iplex® Australia has concluded that the evidence obtained by it to date does not
establish it is responsible for the matter and, as such, an outflow of funds is not probable. Ultimately, if Iplex® Australia is found to bear some
responsibility, the cost to it in rectifying homes with Pro-fit installed (as well as to meet any damages claims, fines and other costs) may be a
sum that could have a material impact on the Group’s financial position. Further information about this matter is outlined in the Risk Section
of the Annual Report (refer to page 77).
147
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
Construction defects
As part of its business, the Group’s Construction division has exposure for defects in construction projects post their completion. That exposure
arises either from the terms of the relevant contract or at law. As at 30 June 2023, the Group was subject to claims of this type. In assessing
them, the Group has applied estimates and judgements, including assessing the merits of the claim, the cost to repair and the likelihood of
receipt of payment or other recovery. These estimates and judgements may change as the claim or repair work progresses. The Group has
considered its exposure to the claims received to date and, where it considers appropriate to do so, has provided for them. There remains a risk
that, ultimately, the final exposure of the Group to these claims will be greater than the amount allowed.
Class action proceedings
On 13 March 2023, the Group announced that class action proceedings had been filed against it in the Supreme Court of Victoria making
allegations that between 17 August 2016 and 23 October 2017 the Group misrepresented the performance and financial position of its
Building + Interiors (B+I) business and failed to disclose information as to its true financial position. The claim is said to be brought on behalf
of shareholders who acquired an interest in fully paid ordinary shares in the Group on the Australian Securities Exchange or NZX Main Board
between those dates.
The Group will defend the proceedings. Based on current status of the proceedings the Group has determined there is no present obligation
and the claims against the Group have not been quantified.
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; and
– 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 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 Consolidated 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.
148
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
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 Consolidated Balance Sheet as follows:
Current tax assets
Current tax liabilities
Movement during the year:
Opening provision for current tax assets
Taxation expense
Transfer from deferred taxation
Non-controlling interest share of taxation expense
Tax recognised directly in reserves
Net tax payments
Currency movement
Provision for deferred tax assets
Included within the Consolidated Balance Sheet as follows:
Deferred tax assets
2023
NZ$M
343
96
2022
NZ$M
598
167
2
(14)
4
1
89
173
(84)
89
130
(41)
89
6
6
(107)
(130)
50
4
(2)
191
6
193
193
1
(8)
3
13
(13)
(4)
159
161
(2)
159
163
(4)
159
(107)
(107)
9
(163)
27
4
4
13
(1)
(107)
209
209
149
Fletcher Building Limited Annual Report 2023
Notes to the Consolidated Financial Statements 2023 (Continued)
Movement during the year:
Opening deferred tax assets
Taxation expense
Transfer from current tax
Tax recognised directly in reserves
Acquisitions
Currency movement
Composed of:
Provisions and other liabilities
Inventories
Debtors
Property, plant and equipment
Brands
Tax losses
Right-of-use assets
Lease liabilities
Other
2023
NZ$M
2022
NZ$M
209
41
(50)
(5)
(2)
193
167
16
6
(37)
(85)
53
(369)
444
(2)
193
238
4
(27)
(10)
4
209
124
15
6
(32)
(86)
91
(377)
463
5
209
The net deferred tax asset balance of $193 million at 30 June 2023 largely comprises of Construction division provisions and Australian
tax losses incurred in the current and 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.
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 4.76% has been applied in 2023 on benefit obligations (2022: 4.03%). In applying
sensitivity analysis, a 1% lower discount rate assumption increases the defined benefit obligation by $12 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
150
2023
%
4.76
2.37
2022
%
4.03
2.11
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
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 2023, the value of the plan assets was 184% of the actuarial liability and the funded surplus was $122
million (31 March 2022: 182%, $132 million).
During the year the Group contributed less than $1 million (2022: less than $1 million) in respect of its Australian defined benefit plans.
It contributed $58 million (2022: $55 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 (2022: $2 million). The Group
expects to contribute less than $1 million to its New Zealand and Australian defined benefit plans during the year to 30 June 2024. The
Group is currently not contributing to the New Zealand plan.
Recognised net asset
Assets of plans
Projected benefit obligation
Funded surplus
Asset ceiling effect
Recognised net asset
Movement in recognised net asset
Recognised net asset at the beginning of the year
Currency translation
Actuarial movements for the year
Net periodic pension cost
Recognised net asset
Assets of the plans
Assets of plans at the beginning of the year
Actual return on assets
Total contributions
Benefit payments
Assets of the plans consist of:
Australasian equities
International equities
Property
Bonds
Cash and short-term deposits
Other assets
Projected benefit obligation
2023
NZ$M
348
(222)
126
126
124
(1)
3
126
360
7
2
(21)
348
29
136
12
93
23
55
348
2022
NZ$M
360
(236)
124
124
108
(1)
18
(1)
124
401
2
1
(44)
360
29
128
32
97
14
60
360
Projected benefit obligation as at the beginning of the year
(236)
(293)
Service cost
Interest cost
Past service cost/curtailments
Actuarial loss arising on changes in demographic assumptions
Member contributions
Actuarial gain arising on changes in financial assumptions
Actuarial loss arising on other assumptions - experience adjustments
Benefit payments
Currency translation
(2)
(9)
(1)
9
(3)
22
(2)
(2)
(5)
(1)
(1)
(1)
32
(7)
41
1
(222)
(236)
151
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (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 grant date. 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 a 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 most able to influence the
results of the Group (invited to participate at the discretion of the Company). The aim is to drive long-term, sustainable results and
create shareholder value by aligning our most senior people with the shareholders' interests, ensuring value is only created for our
people where relative Total shareholder Return (TSR) is realised.
The long-term share scheme allows scheme participants to acquire shares in the Company at market price (i.e. face value at the time of
grant), 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.
During the year, there was an 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 the LTI share scheme aligns to the Group's focus on performance and growth.
The weighting of rTSR has been adjusted from 100% to 50% with ROFE sitting at 50%. 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. All grants do not include the opportunity to
extend the restrictive period.
The following are details with regard to the scheme:
Grant date
1 September 2022
1 July 2021
Number of shares granted
Market price per share at grant date
616,654
$5.61
395,085
$7.48
2022
Award
2021
Award
2020
Award
1 July 2020
1,998,635
$3.66
Total value at grant date (NZ$)
$3,459,429
$2,955,236
$7,315,004
2019*
Award
1 July 2019
1,386,100
$5.21
$7,221,581
Vesting date
31 August 2025
30 June 2024
30 June 2023
30 June 2022
Number of shares:
Number of shares originally granted
616,654
395,085
Less forfeited over life of scheme
Less vested over life of scheme
Number of shares held at 30 June 2023
616,654
395,085
* As of 1 July 2023, this scheme did not vest.
1,998,635
(372,296)
(40,803)
1,585,536
1,386,100
(328,844)
1,057,256
152
Fletcher Building Limited Annual Report 2023 Notes to the Consolidated Financial Statements 2023 (Continued)
Total fair value expense in year for LTI
Amount recognised at year end in the share based payment reserve
Fair value has been determined using Monte Carlo valuation methodology.
Deferred short-term incentive (STI) plan
2023
NZ$M
4
16
2022
NZ$M
3
15
A senior short-term incentive (STI) share-based payment scheme has been put in place for selected senior employees (invited to
participate at the discretion of the Company), which is recognised on the achievement of the Group and individual performance
objectives using a balanced scorecard. The aim is to align the financial interests of participating senior employees with the Company’s
shareholders and recognise the differing priorities, and development phases in which our businesses are operating through individual
targets and measures.
The scheme grant date is 1 July each year, with 1 July 2021 being the first scheme offered. Following the release of the final audited
financial year results, the selected employees STI's are split between a cash payment and a deferred STI portion entitling the employee
to share rights. Achievement is calculated based on various non-market conditions specific to the individual, safety goals, as well as
financial goals and is performed one year after grant date, generally in September, with the cash component settled at this time. The
share rights portion of award convert into Fletcher Building ordinary shares two years from achievement date, where the number of
share rights awarded are determined based on the share price at 30 June, one year after grant date. For most employees, the award is
subject to the participant remaining employed with the Group for three years.
Total fair value expense in year for deferred STI
Employee retention share scheme
2023
NZ$M
5
2022
NZ$M
3
The employee retention share scheme is a special retention arrangement in the form of one-off share-based payments that have been put
in place for certain senior management and executives.
Total fair value expense in year for employee retention share scheme
Employee share purchase scheme - FBuShare
2023
NZ$M
1
2022
NZ$M
1
FBuShare is Fletcher Building’s employee share purchase scheme available to all eligible Group employees. The plan aims to connect
our people with our performance, and to promote employee engagement and retention. Employees purchase shares (purchased shares)
at market prices 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$5,000 per annum (or the equivalent currency in other countries) of the employees after-
tax pay. Directors are not eligible to participate in FBuShare.
Dividends paid will be re-invested in additional shares. Employees will receive award shares on any additional shares, subject to the
same conditions set out above. The employees are responsible for any income tax liability payable on dividends and on the value of any
award shares.
At the end of each three year qualification period, employees may continue to hold any purchased, additional and award shares or they
may sell some or all of the shares.
During the year, approximately 0.5 million award shares vested. At 30 June 2023, approximately 1.5 million shares would be required to
satisfy the obligation to provide award shares to FBuShare participants based on the purchased share balances.
Total fair value expense in year for employee share purchase scheme
29. SUBSEQUENT EVENTS
2023
NZ$M
1
2022
NZ$M
2
On 16 August 2023, the Directors declared a final dividend of 16.0 cents per share, payable on Thursday 5 October 2023.
153
Fletcher Building Limited Annual Report 2023 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 101 to 153 which comprise the consolidated balance sheet of the Group as at 30 June 2023, 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 101 to 153 present fairly, in all material respects, the
consolidated financial position of the Group as at 30 June 2023 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, taxation compliance, financial statement compilation services, pre-
assurance over non-financial metrics 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.
154
Fletcher Building Limited Annual Report 2023 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 over time as the
services are performed under 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 the unavoidable costs of meeting
the obligations under a contract exceed the
economic benefits expected to be received
under that contract, a provision is recorded
for the difference between these amounts.
There is a high level of management
judgement and 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;
– 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; and
– the consideration of the unavoidable cost
and economic benefits expected when a
contract has become onerous.
Disclosures regarding the Group’s
construction contracts are included in
,
,
statements.
and
of the financial
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
and Audit & Risk Committee.
– 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 onerous 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 controls as they pertain to contract costs incurred in the
year and validated 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 or to
current estimates of cost to complete, assessing the reason for changes
to the estimate;
› evaluated, utilising our legal specialists where appropriate, external legal
and construction experts’ reports on contentious matters, to identify
factors which might influence the recognition of variable consideration
or liquidated or other damages included in management’s assessment of
the least net cost to fulfil onerous contracts;
› checked variable consideration, where material, to executive leadership
team and Board approvals, supporting documentation and to underlying
contracts, where relevant;
› 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; and
› evaluated any insurance recoveries relevant to the expected value of
onerous contract provisions. In these situations, we considered whether
forecast recoveries assumptions were appropriate and whether incurred
and forecast costs claimed and expected to be claimed were within the
total indemnity limits and the sub limits, if relevant.
– considered the adequacy of the associated disclosures in the financial
statements including whether they appropriately describe the assumptions
made and uncertainties in estimating the onerous contract provisions.
155
Fletcher Building Limited Annual Report 2023 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 $1.2 billion at 30 June 2023.
The recoverable amount of the Group’s Cash
Generating Units (“CGUs”) is determined each
reporting period by reference to valuations
prepared using discounted cash flow models
(“DCF models”). DCF models contain significant
judgement and estimation in respect of future cash
flow forecasts, discount rate and terminal growth
rate assumptions. Changes in certain assumptions
can lead to significant changes in the assessment of
the recoverable amount.
Disclosures regarding the Group’s key assumptions
adopted and the sensitivity to reasonably possible
changes in key assumptions which could result
in impairment for certain CGUs are included in
of the financial statements.
In obtaining sufficient appropriate audit evidence, we:
– understood the Group’s goodwill impairment assessment
process and identified relevant controls;
– assessed the Group’s determination of CGUs 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 EBIT forecasts to a
combination of the Board approved FY24 budget and the FY25
- 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.
156
Fletcher Building Limited Annual Report 2023 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
16 August 2023
157
Fletcher Building Limited Annual Report 2023 Statutory Disclosures
DISCLOSURE OF INTERESTS BY DIRECTORS
The following are particulars of general disclosures of interest by directors holding office as at 30 June 2023, 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 2023 are noted in brackets, for the purposes of
section 211(1)(e) of the Companies Act 1993.
Bruce Hassall
Fletcher Building Industries Limited
Prolife Group Holdings Limited
The Farmers' Trading Company Limited
Bank of New Zealand (retired December 2022)
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
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 (retired June 2023)
Fletcher Building Industries Limited
Genesis Energy Limited (resigned September 2022)
IAG New Zealand Limited
National Australia Bank Limited
Vector Limited (appointed September 2022; Chair-elect effective Vector’s 2023
ASM)
Wymac Consulting Limited
Cathy Quinn
Fertility Associates Holdings Limited
Tourism Holdings Limited
MinterEllisonRuddWatts
The University of Auckland Council
Fletcher Building Industries Limited
Fonterra Co-operative Group Limited
Rangatira 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
Director
Chair
Chair
Consultant
Pro-Chancellor
Director
Director
Director
Pin Twenty Limited (corporate trustee of Kintyre Trust)
Director / Shareholder
158
Fletcher Building Limited Annual Report 2023 Statutory Disclosures (Continued)
There were no specific disclosures made during the year of any interests in transactions entered by Fletcher Building or any of its
subsidiaries by a director.
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 policy of the Board is that non-executive directors (or their associates) hold at least 40,000 shares in the Company or a
number equivalent to a director’s base fee at the time of joining the Board to demonstrate their commitment and alignment with
the Company. Directors have three years from their date of appointment to accumulate that holding. 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 2023.
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
42,242
30,000
40,000
40,000
60,000
20,000
40,000
(1) Cathy Quinn also held a non-beneficial interest in securities as a director/shareholder of Pin Twenty Limited (corporate trustee of Kintyre Trust).
Non-Beneficial (1)
121,197
28,360,500
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 2023.
Director
Date of transaction
Nature of relevant interest
Consideration
Cathy Quinn
20 March 2023
On-market purchase of ordinary shares
Barbara Chapman 21 March 2023
On-market purchase of ordinary shares
Bruce Hassall
21 March 2023
On-market purchase of ordinary shares
Rob McDonald
22 March 2023
On-market purchase of ordinary shares
Martin Brydon
28 March 2023
On-market purchase of ordinary shares
Peter Crowley
23 June 2023
On-market purchase of ordinary shares
NZ $42,823
NZ $85,924
NZ $64,314
NZ $43,527
AU $40,907
AU $72,969
Number of
securities
10,000
20,000
15,000
10,000
10,000
15,000
159
Fletcher Building Limited Annual Report 2023 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 2023 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 2023.
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS AS AT 30 JUNE 2023
The total number of voting securities of Fletcher Building at 30 June 2023 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
15,490
12,615
3,127
2,454
164
33,850
45.76
37.27
9.24
7.25
0.48
100.00
6,556,851
30,926,217
22,613,584
58,555,598
664,391,346
783,043,596
0.84
3.95
2.89
7.48
84.84
100.00
SUBSTANTIAL PRODUCT HOLDERS
According to notices given under the Financial Markets Conduct Act 2013, the following persons were a substantial product
holder of the Company as at 30 June 2023. The total number of voting securities of Fletcher Building Limited at 30 June 2023
was 783,043,596 fully paid ordinary shares.
Substantial product holder
Allan Gray Group
Number of ordinary shares in
which relevant interest is held
77,173,047
Date of notice
21 February 2023
160
Fletcher Building Limited Annual Report 2023 Statutory Disclosures (Continued)
20 LARGEST SHAREHOLDERS AS AT 30 JUNE 2023
Holder Name
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
HSBC Nominees (New Zealand) Limited - NZCSD
Citibank Nominees (New Zealand) Limited - NZCSD
HSBC Nominees (New Zealand) Limited A/C State Street - NZCSD
JP Morgan Nominees Australia Limited
BNP Paribas Nominees (NZ) Limited - NZCSD
JPMorgan Chase Bank NA NZ Branch - Segregated Clients Acct - NZCSD
Accident Compensation Corporation - NZCSD
National Nominees Limited - NZCSD
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited - NZCSD
National Nominees Limited
New Zealand Depository Nominee Limited
BNP Paribas Noms Pty Ltd
JBWere (NZ) Nominees Limited
Custodial Services Limited
ANZ Wholesale Australasian Share Fund - NZCSD
Tea Custodians Limited Client Property Trust Account - NZCSD
FNZ Custodians Limited
Simplicity Nominees Limited - NZCSD
Total
Number of
ordinary shares
% of issued capital
73,198,224
51,197,375
46,218,831
45,447,875
45,059,255
43,012,497
42,500,392
34,223,115
28,722,522
25,054,395
21,079,286
18,904,684
16,057,515
15,918,672
13,323,756
12,021,285
11,135,929
10,927,470
8,860,003
7,097,180
9.35
6.54
5.90
5.80
5.75
5.49
5.43
4.37
3.67
3.20
2.69
2.41
2.05
2.03
1.70
1.54
1.42
1.40
1.13
0.91
569,960,261
72.79
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 2023, total holding in
NZCSD were 341,971,748 or 43.67% of shares on issue.
AUDITOR FEES
EY has continued to act as auditors of the Group. Please refer to note 6 of the consolidated financial statements for audit fees
paid to EY in the financial year to 30 June 2023.
CREDIT RATING
The Group does not currently hold a credit rating from an accredited rating agency.
DONATIONS
Please refer to note 6 of the consolidated financial statements for donations made in FY23. All political donations must be
approved by the Board.
161
Fletcher Building Limited Annual Report 2023 Statutory Disclosures (Continued)
SUBSIDIARY COMPANY INFORMATION
The persons listed below respectively held office as directors of Fletcher Building Limited or one or more of its subsidiary
companies as at 30 June 2023, 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 in these companies as at 30 June 2023 was 100%.
No employee of Fletcher Building appointed as a director of a Fletcher Building Limited company 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
Baron Insulation Pty Limited
Directors
M Brodie, B McKenzie
M Brodie, B McKenzie
M Brodie, B McKenzie
P Boylen, B McKenzie
M Brodie, N Sekul
B McKenzie, A Rowe
Boden Building Supplies Limited
B McEwen
Brian Perry Civil Limited
Building Choices Limited
P Boylen, B McKenzie
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
M Brodie, B McKenzie
J Burgess, B McKenzie
Davis & Casey Building Supplies Limited
B McEwen
Delcon Holdings (No. 11) Limited
ee-Fit Pty Limited
D Fradgley, B McKenzie
B McKenzie, A Rowe
Fairbairn Building Supplies Limited
B McEwen
FBHS (Aust) Pty Limited
FBII (Puhoi) Limited
FBSOL Pty Limited
J Chan (R), B McKenzie, D Orr
P Boylen, B McKenzie
J Chan (R), B McKenzie, D Orr
Fletcher Building (Australia) Pty Limited
M Brodie, A Clarke, B McKenzie, N Sekul
Fletcher Building (Fiji) Pte Limited
P Boylen, A Kumar, C White (R), A Morton
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
Fletcher Building Limited
Fletcher Building Nominees Limited
M Brydon, B Chapman, P Crowley, B Hassall, R McDonald,
D McKay, C Quinn
M Brydon, B Chapman, P Crowley, B Hassall, R McDonald,
D McKay, C Quinn
M Binns, J Chapman, G Clarke, M Farrell (R), H McKenzie,
C Munkowits, G Niccol, T Williams
162
Fletcher Building Limited Annual Report 2023 Statutory Disclosures (Continued)
Company
Directors
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 UK Limited
Fletcher Challenge Forest Industries Limited
S Evans, B McKenzie
S Evans, B McKenzie
Fletcher Concrete and Infrastructure Limited
H McBeath, B McKenzie, N Traber
Fletcher Construction (Solomon Islands) Limited
P Boylen, C White (R), A Morton
Fletcher Construction Buildings Limited
P Boylen, B McKenzie
Fletcher Construction Company (Fiji) Pte Limited
P Boylen, J Matthews
Fletcher Construction Holdings Limited
P Boylen, B McKenzie
Fletcher Construction Infrastructure Limited
P Boylen, B McKenzie
Fletcher Construction Management Services Limited
P Boylen, B McKenzie
Fletcher Development Limited
Fletcher Distribution Limited
Fletcher Industries Australia Pty Limited
Fletcher Insulation Pty Limited
Fletcher Morobe Construction Limited
Fletcher Property Limited
Fletcher Residential Limited
Fletcher Steel Limited
Fletcher Wood Products Limited
Gatic Pty Limited
S Evans, B McKenzie
B McEwen, B McKenzie
M Brodie, N Sekul
B McKenzie, A Rowe
P Boylen, R Simpson
A Clarke, B McKenzie
S Evans, B McKenzie
H McBeath, B McKenzie
H McBeath, B McKenzie
P Lavelle, B McKenzie
Geoff Brown Building Supplies Limited
B McEwen
Geraldton Independent Building Supplies Pty Limited
J Burgess, B McKenzie
Higgins Contractors Limited
Higgins Group Holdings Limited
Higgins Holdings (Fiji) Pte Limited
Homai MFR General Partner Limited (51%)
P Boylen, B McKenzie
P Boylen, B McKenzie
P Boylen, A Kumar
S Evans, P Majurey
HotForm Products Limited (51%)
S Hansen, J Mainwaring, R Sutherland, D Sutton
Iplex Pipelines Australia Pty Limited
Iplex Pipelines NZ Limited
Iplex Properties Pty. Limited
Jeffcoats Building Supplies Limited (68%)
P Lavelle, B McKenzie
H McBeath, B McKenzie
P Lavelle, B McKenzie
R Jeffcoat, B McEwen
Kaipatiki FRL General Partner Limited (51%)
S Evans, P Majurey
Key Plastics Pty. Limited.
Kingston Bridge Engineering Pty Limited
P Lavelle, B McKenzie
P Lavelle, B McKenzie
Kinsey Kydd Building Supplies Limited (75%)
S Kinsey, B McEwen
Kusabs Building Supplies Limited (74.94%)
G Kusabs, B McEwen
Laminex Group Pty Limited
Leary Building Supplies Limited (75%)
J Burgess, B McKenzie
B Leary, B McEwen
Macready Building Supplies Limited (75%)
J Macready, B McEwen
163
Fletcher Building Limited Annual Report 2023 Statutory Disclosures (Continued)
Company
Matt Orr Building Supplies Limited (75%)
McGill Building Supplies Limited (75%)
Directors
B McEwen, M Orr
B McEwen, J McGill
McInnes Building Supplies Limited (75%)
B McEwen, G McInnes (R)
Mico New Zealand Limited
Milnes Holdings Pty Limited
B McEwen, B McKenzie
M Brodie, B McKenzie
Moire Road General Partner Limited (51%)
A Crocker (R), N Donnelly, S Evans, S Rapson
Morinda Australia Pty Limited
J Chan (R), B McKenzie, D Orr
New Zealand Ceiling & Drywall Supplies Limited (90%)
D Thomas
Northern Iron and Brass Foundry Pty. Limited.
P Lavelle, B McKenzie
Okahukura GP Limited (51%)
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 Boylen, B McKenzie
M Binns, J Chapman, G Clarke, M Farrell (R), 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
B McEwen
PlaceMakers Waiheke Limited (75%)
D Banks, B McEwen
PlaceMakers Wanaka Limited (80%)
B McEwen, B Stanley-Joblin
Polymer Fusion Education Pty Limited
P Lavelle, B McKenzie
Raylight Aluminium Limited (87.50%)
Reece Building Supplies Limited (75%)
D Close, B McEwen
B McEwen, J Reece
Renewable Wood Fuels Limited
H McBeath, B McKenzie
S Cubed Pty Limited
Selwyn Quarries Limited
Shed Boss NZ Limited
J Chan (R), B McKenzie, D Orr
B McKenzie, N Traber
D Fradgley, B McKenzie
Southbound Building Supplies Limited
B McEwen
Stanley Building Supplies Limited
B McEwen, B Stanley-Joblin (R)
Steven Marshall Building Supplies Limited
B McEwen
Stramit Corporation Pty Limited
J Chan (R), B McKenzie, D Orr
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
Tauoma FRL GP Limited (51%)
TBP Group Pty Limited
S Evans, P Majurey
M Brodie, N Sekul
Terrace Insurances (PCC) Limited
C Bell, K Burke, J Crowder, M Eades (R), B McKenzie
The Fletcher Construction Company (Fanshawe Street)
Limited
P Boylen, B McKenzie
The Fletcher Construction Company Limited - NZ
P Boylen, B McKenzie
The Fletcher Construction Company Limited (Samoa Branch)
P Boylen, B McKenzie
The Fletcher Organisation (Vanuatu) Limited
P Boylen, A Care, Diract Limited (R), Lotim Limited (R)
164
Fletcher Building Limited Annual Report 2023 Statutory Disclosures (Continued)
Company
Directors
The Fletcher Trust and Investment Company Limited
P Boylen, B McKenzie
Tumu Dannevirke Limited (97.88%)
K Gerken (R), B McEwen, B McKenzie
Tumu Frame & Truss Limited
Tumu Gisborne Limited (75%)
Tumu Hastings Limited
Tumu Havelock North Limited
K Gerken (R), B McEwen, B McKenzie
K Gerken (R), B McEwen, B McKenzie
K Gerken (R), B McEwen, B McKenzie
K Gerken (R), B McEwen, B McKenzie
Tumu Hawkes Bay 2022 Limited (96.05%)
K Gerken (R), B McEwen, B McKenzie
Tumu Masterton Limited (94.50%)
K Gerken (R), B McEwen, B McKenzie
Tumu Napier Limited
Tradelink Pty Limited
Vivid Living Limited
Waipapa Pine Limited
Water Filters Australia Pty Limited
Wednesday Pte Limited
Winstone Wallboards Limited
K Gerken (R), B McEwen, B McKenzie
B McKenzie, S Naish
S Evans, B McKenzie
H McBeath, B McKenzie
B McKenzie, S Naish
P Boylen, A Kumar, C White (R)
H McBeath, B McKenzie, D Thomas
Young Building Supplies Limited
B McEwen
As at 30 June 2023, 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%
165
Fletcher Building Limited Annual Report 2023 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 2 8311 2588
AUDITOR
EY
PO Box 2146
Auckland 1140, New Zealand
SOLICITOR
Bell Gully
PO Box 4199
Auckland 1140, New Zealand
INVESTOR RELATIONS
ENQUIRIES
Aleida White
Head of Investor Relations
Email: investor.relations@fbu.com
Phone: +64 21 155 8837
COMPANY NUMBERS
NZ Incorporation 1104175
NZBN 9429037065836
ARBN 096 046 936
Computershare Investor Services
Limited (Computershare) looks after
our share register and is your first
point of contact for any queries
regarding your investment in
Fletcher Building. You can view your
investment portfolio, elect to enrol
in our Dividend Reinvestment Plan,
indicate your preference for electronic
communications, supply your email
address, change your details or update
your payment instructions relating to
Fletcher Building at any time by visiting
the Computershare Investor Centre at
www.investorcentre.com/nz.
New Zealand
Computershare Investor Services
Limited, Private Bag 92119,
Auckland 1142, New Zealand
Level 2, 159 Hurstmere Road,
Takapuna, Auckland 0622,
New Zealand
Phone: +64 9 488 8777
Email: enquiry@computershare.co.nz
Web: www.computershare.com/nz
Australia
Computershare Investor Services Pty
Limited, GPO Box 3329, Melbourne,
VIC 3001, Australia
Yarra Falls, 452 Johnston Street,
Abbotsford, VIC 3067, Australia
Phone: 1800 501 366 (within Australia)
Phone: +61 3 9415 4083 (outside
Australia)
Receiving your communications
electronically
We encourage shareholders to
receive investor communications
electronically as it is faster and
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.
166
Fletcher Building Limited Annual Report 2023
Acknowledgement of Country
Reflect Reconciliation Action Plan (Australia)
Fletcher Building Australia honours the 65 000-years history of this nation. We recognise
that Aboriginal and Torres Strait Islander peoples, have cared for, and conserved this
land since the Dreaming. Their ties to the land, animals, oceans, and rivers are intrinsic
to their being. Fletcher Building respects the Traditional Custodians of the land on which
we operate, work, and live. We honour Elders past and present and we are dedicated to a
bright future as we move forwards on our road towards reconciliation.
Artist: Elaine Chambers Hegarty
Fletcher Building Limited Annual Report 2023
167
This Annual Report uses stock sourced from sustainably managed forests.