Fletcher Building subject to investigation by NZX

### tvnz.co.nz 11:54am
1 News
Source: NZN
Fletcher Building to be investigated by NZX as company announces much-reduced earnings
The New Zealand stock exchange says it will be investigating Fletcher Building’s additional profit warning for the year ended June 30 and the departure of chief executive and managing director Mark Adamson.
“NZX will be making inquiries into today’s disclosures, given FBU’s continuous disclosure obligations under the listing rules,” the NZX Head of Market Supervision Joost van Amelsfort said in a release.
Separately – in accordance with NZX’s routine surveillance processes – trading ahead of today’s announcement would be assessed in detail, it said.
That would be on top of NZX’s ongoing investigation into the disclosure of FBU’s previous earnings downgrade in March 2017,” it said.
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### interest.co.nz
Posted in Property July 20, 2017 – 09:13am
Fletcher Building has announced the immediate departure of chief executive Mark Adamson and says operating earings this year will be around $100 million less than previously indicated
By David Hargreaves
Construction giant Fletcher Building says chief executive Mark Adamson is leaving immediately, while the company’s now forecasting operating earnings of around $100 million less than its last forecast.
Additionally, the company says it’s writing down the value of two business units by about $220 million. This will not be a ‘cash’ loss per se, but will carve about 3% off the value of the company’s assets.
The share price fell – down about 8.5% to $7.40.
….The $220 million write-down relates to the Iplex Australia and Tradelink subsidiaries.
Fletcher indicated that most of the reduced earnings forecast would come through two major projects: “A major project subject to previous write-downs, which has required an increase in project resourcing and therefore cost as it nears completion,” and “a second major project where construction timelines and the likely completion date have been extended”.
This is the third major profit warning the company has issued this year. After the last one in March it was speculated – and never denied by the company – that the two projects causing the biggest problems were Government projects; namely the new Sky City International Convention Centre in Auckland and the new Justice and Emergency precinct in Christchurch.
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Sky City International Convention Centre

Remember the National government waffle:

### ODT Online Wed, 28 Oct 2015
Fletcher signs with SkyCity
By Simon Hartley
SkyCity’s $700 million convention centre and hotel project in central Auckland has contracted Fletcher Building for $477 million of the work, expected to begin by December. […] Despite controversy over the project, there was negligible political response to yesterday’s announcement, other than Minister of Economic Development Steven Joyce talking up the importance of the “national facility”.
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20 July 2017
STATEMENT FROM FLETCHER (via interest.co.nz)

– Fletcher Building announces expected earnings for the financial year ended 30 June 2017
– Operating earnings expected to be approximately $525 million, down from previous guidance of $610-$650 million
– Likely impairment up to $220 million relating to Iplex Australia and Tradelink business units
– Departure of Chief Executive Officer (CEO) and Managing Director Mark Adamson
– Appointment of Francisco Irazusta as interim CEO, effective Monday 24 July 2017

Fletcher Building has today announced it expects operating earnings before interest, tax and significant items (‘EBIT’) to be approximately $525 million for the year ended 30 June 2017.

Trading in the Building Products, International, Distribution and Residential and Land Development divisions, as well as three of the four business units in the Construction division (Infrastructure, Higgins and South Pacific), are in line with the Company’s expectations, previously provided at the time of the interim results on 22 February 2017.

However, as work on major projects in the Building + Interiors (‘B+I’) business unit has progressed, it has become apparent that losses in B+I will exceed those previously estimated. The deterioration is due to:
– A major project subject to previous write-downs, which has required an increase in project resourcing and therefore cost as it nears completion;
– A second major project where construction timelines and the likely completion date have been extended;
– Reduced profit expectations on a number of smaller projects in the remainder of the B+I portfolio.

Fletcher Building Chairman Sir Ralph Norris said: “It is very disappointing to see further losses being reported in our B+I business, particularly when the vast majority of the remaining Fletcher Building business units have performed so well during the year. I know our people in B+I are working incredibly hard to deliver a number of projects for our clients and I would like to acknowledge their efforts.”

In addition, consistent with standard practice at the end of each financial period, Fletcher Building has undertaken a review of the Balance Sheet carrying values of its business units. This review has indicated that the value of two business units, Iplex Australia and Tradelink, are likely to be subject to an impairment charge of approximately $220 million, when the company finalises its financial statements in August. An impairment of this nature would be reported below the EBIT line and have no impact on cash earnings.

An impairment charge of $220 million would represent approximately 3% of the group’s total assets as at 30 June 2017. The amount of asset impairment is indicative at this stage and is subject to finalisation of the year-end audit.

“With regards to the impairment of Iplex Australia and Tradelink, while we do see progress in these business units the Board felt it was prudent to recognise that the near to medium term estimates of profitability in each business are not aligned with current carrying values,” continued Sir Ralph.

The Board also announced the departure of Chief Executive Officer (CEO) and Managing Director, Mark Adamson.

Sir Ralph Norris said: “The Board believes it is the right time for Mark to leave the Company, to allow a new CEO to lead Fletcher Building through this period and into the next phase of its strategy. The Board would like to thank Mark for his work and we wish him the best in his future endeavours.”

Mark Adamson said: “I am disappointed to finish my tenure on the back of a challenging result in the Construction Division, however I am proud of what has been achieved over the last five years – most notably the turnaround of Formica, double-digit earnings growth in Distribution, our acquisition of Higgins and the significant progress in our residential development division.”

The Board has appointed Francisco Irazusta interim CEO effective Monday 24 July 2017.

“Francisco joined Fletcher Building in March 2015 and is currently Chief Executive of the International Division. Prior to joining the Company he held senior leadership positions with a number of building products companies in North America and Europe and will provide stable leadership for the business during this transition, with the support of myself and the Board,” finished Sir Ralph.

The Board will now commence a process to appoint a new CEO.

[ends]

Fletcher Building http://www.fletcherbuilding.com/

Christchurch Justice and Emergency Services Precinct

Other news:
NZH: Fletcher CEO sorry for inflammatory internal email: Chairman
Stuff: SkyCity confirms delay to international convention centre as Fletchers feels ‘pain’
NZH: CEO departs amid Fletcher’s $415m fortune turnaround, stock drops to 16-month low

Posted by Elizabeth Kerr

This post is offered in the public interest.

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1 Comment

Filed under Architecture, Business, Construction, Design, Economics, Finance, Geography, Media, Name, New Zealand, Politics, Project management, Property, Public interest, Urban design

One response to “Fletcher Building subject to investigation by NZX

  1. Elizabeth

    Fletcher Building has made a series of very bad executive appointments. And somewhere under that tier of overpaid riff-raff have been an accumulation of failings and frauds carried out in the company name brought to housing repair and new builds in the Christchurch recovery – that’s not mentioned in yesterday’s company statement.

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