Fletcher Building announces HY24 Results
Fletcher Building Limited, Private Bag 92114, Auckland 1142, 810 Great South Road, Penrose, Auckland 1061, New Zealand
Fletcher Building announces HY24 Results
Auckland, 14 February 2024: Fletcher Building Limited today announced its financial
results for the first half of FY24.
• Revenue of $4,248 million, down 1% from $4,284 million in HY23
• EBIT before significant items of $264 million, down 27% from $360 million in HY23
• EBIT margin of 6.2%, down from 8.4% in HY23
• Net Loss After Tax of $120 million (incl. $180 million flagged legacy provisions and
$122 million non-cash write-down on Tradelink) compared to Net Profit After Tax of
$92 million in HY23
• Underlying trading cash flows robust on good working capital management offset
by legacy cash impact
Fletcher Building chief executive Ross Taylor said: “Against the backdrop of materially
weaker trading conditions, particularly in the NZ residential sector where volumes
declined 20%, Group revenue of $4,248 million was in line with the prior period’s $4,284
million. EBIT before significant items was $264 million, compared to $360 million in the
prior period. The Group reported a net loss after tax of $120 million, compared to a profit
of $92 million in the prior period. Disappointingly, the result was heavily impacted by the
$165 million significant items provision on the New Zealand International Convention
Centre announced on 5 February and a $122 million non-cash impairment and write-
down on the Tradelink Australia business.”
In New Zealand, revenue for the materials and distribution divisions (Building Products,
Concrete and Distribution) was 8% lower than HY23. However, this compares to overall
market volumes which were 15% lower compared to HY23. The market decline was
driven primarily by the residential sector, which weakened by around 20%, to which
these divisions have a 60% exposure.
Mr. Taylor said: “In a more challenging trading environment, the New Zealand materials
and distribution divisions performed solidly. Gross margins remained robust at 29.3%
(HY23: 30.3%), with the reduction versus HY23 primarily due to a shift in revenue mix
towards the lower-margin commercial and infrastructure sectors. The divisions
proactively managed price and costs to help offset increased competitive intensity and
ongoing inflationary pressure.
“For our Residential and Development division, the house sales market was a relative
bright spot in New Zealand, with improved buyer activity, especially first-home buyers,
Fletcher Building Limited, Private Bag 92114, Auckland 1142, 810 Great South Road, Penrose, Auckland 1061, New Zealand
and a stabilising of house prices after 18 months of decline. Fletcher Residential
increased EBIT to $41 million (HY23: $33 million), with 419 units taken to profit compared
to 189 in HY23.
“A particular highlight of the half was the performance of the Australian division which
delivered EBIT and EBIT margin broadly in line with HY23 despite a softer market.
Effective price disciplines and a shift toward higher-margin products saw the gross
margin lift to 33.1% (HY23: 31.9%) and overhead costs were 3% lower than the prior
period.
“A full review of the Australian Tradelink
®
business over the half year combined with
disappointing results led to a $122 million non-cash impairment and write-down in its
carrying value. We have concluded that whilst we believe there is a compelling
opportunity for Tradelink, further ownership of the business is not in line with the
strategic objectives of Fletcher Building. Consequently, we intend to commence a
divestment process for Tradelink shortly.
“Cash flows from operating activities for the Group were an outflow of $126 million,
compared to an outflow of $203 million in the prior period. The materials and distribution
divisions produced strong first half trading cash flows of $253 million compared to $206
million in HY23, driven by good working capital management and despite the lower
earnings.
“Regarding the ongoing Perth plumbing issues, our testing and expert reports on
causation continue to show that that the leaks are caused by installation failures and
that there is no manufacturing defect. We remain committed to developing a workable
and appropriate industry solution.
“Given the current market conditions, the expected legacy cash outflows and in line with
the Company’s dividend policy, the Board has made the prudent decision to not declare
and pay an interim dividend in order to maintain our balance sheet settings.
“As we look ahead to the remainder of the year, we expect FY24 Group EBIT before
significant items to be in a range of $540 million to $640 million, with the mid-point
assuming a continuation of current market conditions for the balance of FY24.”
“Finally, I would again like to express my appreciation to our dedicated team for their
hard work and commitment, to our customers for their trust and loyalty, and to our
shareholders for their ongoing support.”
#Ends
Fletcher Building Limited, Private Bag 92114, Auckland 1142, 810 Great South Road, Penrose, Auckland 1061, New Zealand
Authorised by:
Ashleigh Harding
Company Secretary
For further information please contact:
MEDIA
Christian May
General Manager – Corporate Affairs
+64 21 305 398
Christian.May@fbu.com
INVESTORS AND ANALYSTS
Aleida White
Head of Investor Relations
+64 21 155 8837
Aleida.White@fbu.com
---
Fletcher Building Limited
Fletcher Building
Half Year Results to
31 December 2023
14 February 2024
Important Information
ThispresentationhasbeenpreparedbyFletcherBuildingLimitedanditsgroupofcompanies(“FletcherBuilding”)forinformationalpurposes.Thisdisclaimerappliestothis
documentandtheverbalorwrittencommentsofanypersonpresentingit.
Thispresentationprovidesadditionalcommentonthe2024InterimFinancialResultsdated14February2024.Assuch,itshouldbereadinconjunctionwithandsubjecttothe
explanationsandviewsgiveninthatdocument.Unlessotherwisespecified,allinformationisforthesixmonthsended31December2023.
Incertainsectionsofthispresentation,FletcherBuildinghaschosentopresentcertainfinancialinformationexclusiveoftheimpactofsignificantitems.Anumberofnon-GAAP
financialmeasuresareusedinthispresentationwhichareusedbymanagementtoassesstheperformanceofthebusinessandhavebeenderivedfromFletcherBuilding’sfinancial
statementsforthesixmonthsended31December2023.Youshouldnotconsideranyofthesestatementsinisolationfrom,orasasubstitutefortheinformationprovidedinthe
FinancialStatementsforthesixmonthsended31December2023,whichareavailableatwww.fletcherbuilding.com.
TheinformationinthispresentationhasbeenpreparedbyFletcherBuildingwithduecareandattention,however,neitherFletcherBuildingnoranyofitsdirectors,employees,
shareholdersnoranyotherpersongivenanyrepresentationsorwarranties(eitherexpressorimplied)astotheaccuracyorcompletenessoftheinformationandtothemaximum
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Thispresentationmaycontainforwardlookingstatements,thatisstatementsrelatedtofuture,notpast,eventsorothermatters.Forwardlookingstatementsmayinclude
statementsregardingourintent,belieforcurrentexpectationsinconnectionwithourfutureoperatingorfinancialperformance,ormarketconditions.Suchforwardlooking
statementsarebasedoncurrentexpectations,estimatesandassumptionsandaresubjecttoanumberofrisksanduncertainties,includingmaterialadverseevents,significantone-
offexpensesandotherunforeseeablecircumstances.Thereisnoassurancethatresultscontemplatedinanyoftheseprojectionsandforwardlookingstatementswillbe
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Theinformationinthispresentationdoesnotconstitutefinancialproduct,legal,financial,investment,taxoranyotheradviceorarecommendation.
Page 2| Fletcher Building Limited Half Year Results Presentation| © February 2024
Fletcher Building Limited
Agenda
1. ResultsOverviewRoss Taylor
2. Market ContextBevan McKenzie
3.Financial ResultsBevan McKenzie
4.OutlookRoss Taylor
HY24 summary
Margins, costs & cash flows well-controlled; earnings impacted by tough trading environment & sig items
➔HY24 performance
➔Revenues solid overall but tough trading conditions vs. 1H23, esp. in NZ residential sector volumes -20%
➔Group EBIT $264m, lower YoY due to weaker markets; partly offset by cost-out & higher Fletcher ResiEBIT
➔Group EBIT margin 6.2% with resilient Materials & Distribution EBIT margin of 7.4% in context of activity levels
➔Net loss $120m –impacted by disappointing $180m provisions on legacy projects & $122m Tradelink non-cash
write-down; decision made to divest Tradelink
➔Trading cash flows (ex legacy) $176m –material uplift YoY from effective working capital management
➔Leverage ratio 1.8x in line with prior guidance, liquidity strong at c.$0.9b
➔FY24 outlook
➔FY24 Group EBIT guidance to be in a range of $540m-$640m, with the mid-point assuming a continuation of
current market conditions for the balance of FY24
➔NZICC on track for completion in 2024; WA pipes industry solution, risks to manage
Performance
through
the cycle
Note: EBIT, EBIT margin and Trading Cash Flow are before significant items
Page 4| Fletcher Building Limited Half Year Results Presentation| © February 2024
HY24 results at a glance
Revenue mix change YoY and lower EBIT from market volume decline; sales uplift in Fletcher Residential
Revenue ($b)
EBIT
1
($m)
3.5
4.3
3.2
4.2
Materials & Dist.Group
HY23HY24
▪Group revenue flat YOY, with higher revenues in Resi& Devt and
Construction, offset by lower revenues in Materials & Distn
▪Materials & Distnrevenues c.$270m lower YoY and EBIT $78m
lower YoY due to materially weaker market volumes (c.$100m EBIT
impact), partly offset by cost-out. EBIT margin solid at 7.4% given
strong price competition & higher mix of comm/infra revenue
▪Resi& Devtrevenue up c.$130m YoY and ResiEBIT $8m higher YoY
as NZ housing market improves with strong sales in lower house
price categories; Industrial Devt EBIT nil in 1H24 ($16m in 1H23)
impacting EBIT margin
▪Construction revenue up c.$50m YoY, EBIT $10m lower, earnings
seasonally weighted to 2H24; EBIT margin dilutive to Group
▪Group ROFE slightly below ≥15% target; but higher funds base
from investments
339
360
261
264
Materials & Dist.Group
HY23HY24
Page 5| Fletcher Building Limited Half Year Results Presentation| © February 2024
HY24 trading highlights
1. Before significant items; Materials & Distribution EBIT Margin is calculated on gross revenue
2. Return on Funds Employed (ROFE) is EBIT excluding significant items to average funds (net debt and equity less deferred tax asset)
Note: Measures before significant items are non-GAAP measures used by management to assess the performance of the business & have been derived from
Fletcher Building Limited’s financial statements for the period ended 31 December 2023. Details of sig items can be found in note 2.1 of the financial statements
EBIT Margin (%)
1
ROFE
1,2
(%)
8.9%
8.4%
7.4%
6.2%
Materials & Dist.Group
HY23HY24
17.8%
13.8%
HY23HY24
HY24 results at a glance
Strong trading cash flow outside of FCC legacy projects, reflecting tight control of working capital
Trading Cash ex Legacy ($m
1
)
Trading Cash ($m)
▪Trading cash impacted by Construction legacy cash outflows of
$295m due to NZICC steel remediation costs
▪Trading cash ex Legacy:
•Materials & distribution trading cash
1
strong at $253m,
+$47m ahead of 1H23 despite lower earnings. Reflects tight
control of inventories and receivables
•Resi& Devtmaterially improved YoY as investments in land
and build WIP tightly managed; market valuation of Resiland
+$300m higher than book value
▪Group net capex in line with guidance, above base capex reflects
growth investments & final stage of WWB plant (fully operational)
▪Group leverage ratio moved to 1.8x as flagged, driven by legacy
cash-flows & above base capex, remains within target 1x-2x range
▪Liquidity remains strong at $0.9b
Page 6| Fletcher Building Limited Half Year Results Presentation| © February 2024
(63)
176
HY23HY24
(107)
(148)
HY23HY24
Leverage (Net Debt/EBITDA
1
)
1.2x
1.8x
FY23HY24
Group Net Capex ($m)
82
108
210
79
HY23HY24
Base & otherAbove Base
292
187
2
1. Before significant items
2. HY24 Base & other = Base capex of $111m less proceeds on disposal of PPE of $3m; HY23 Base & other = Base capex of $87m less proceeds
on disposal of PPE of $5m
HY24 trading highlights
HY24 results at a glance
Earnings impacted by legacy provisions and Tradelink write-down
Net Earnings after sig items ($m)
203
117
HY23HY24
Net Earnings before sig items ($m)
Page 7| Fletcher Building Limited Half Year Results Presentation| © February 2024
▪Net Loss of $120m impacted by $180m legacy provisions and
$122m Tradelink write-down
▪The Company dividend policy is to target a payoutin the range of
50% to 75% of net earnings before significant items and having
regard to available cash flows
▪In line with the Company’s dividend policy, the Board has not
declared an interim dividend for HY24
EPS before sig items (cps)
25.9
14.9
HY23HY24
92
(120)
HY23HY24
Basic EPS (cps)
11.7
(15.3)
HY23HY24
HY24 trading highlights
Balanced Scorecard
Continuing to drive safety culture and lowering our carbon emissions
Safety
Total Recordable Injury
Frequency Rate
1
1. TRIFR = Total no. of recorded injuries per million hours worked. Does not include Restricted Work Injuries; CY = Calendar Year
2. Carbon Emissions are ‘000 Tonnes Combined Scope 1 and Scope 2 emissions for Group; Carbon Emissions Intensity = FBU CO
2
Tonnes for every $1m
of revenue. ISO 14064-1; CY = Calendar Year
Sustainability
1,213
1,003
153
118
-15
5
25
45
65
85
105
125
145
165
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY18CY23
Carbon (CO
2
) Emissions&
Intensity
2
▪94% (920) of sites injury free
in HY24; 5 businesses injury
free
▪TRIFR stable, amongst best
in class globally
▪>3,400 Risk Containment
Sweeps & 6,300 Critical
Control Verifications
▪On track for 30% lower carbon
by 2030; targeting net zero by
2050
▪74% of product revenue from
products with sustainability
certifications
▪CDP rating of A for our supply
chain engagement & B for our
emissions
▪DJ Sustainability
TM
Australia
Index member; Member of
S&P Sustainability Yearbook
5.0
3.4
3.1
3.5
FY21FY22FY23CY23
Page 8| Fletcher Building Limited Half Year Results Presentation| © February 2024
Customer
Net Promoter Score
1
Balanced Scorecard
Customer NPS and People engagement continue to trend positively
36
40
48
FY22FY23HY24
1. Net Promoter Score (NPS) measures how satisfied our customers are with our business (excludes the Group JV’s and associates)
2. DIFOT = Delivered In Full On Time
3. Leadership includes all employees that are classified as frontline leaders, leaders of leaders, GMs & CEs
Engagement
Employee Engagement Rating
23
26
30
FY22FY23HY24
▪Strong HY24 NPS of 48, up
8pt from FY23; on track to
our target NPS ≥ 55
▪Continued focus on product
& customer service offerings,
product availability & DIFOT
2
▪Ongoing competitive
benchmarking NPS
programme (customers &
non-customers)
▪Digital remains a top priority
across the group
▪Continued improvement, on
track to our target eNPS> 40
(global upper quartile)
▪Women in leadership
3
roles
improved to 21% in 1H24
moving us towards our target
of 30% by FY27
Page 9| Fletcher Building Limited Half Year Results Presentation| © February 2024
Divisional Performance
Solid underlying results in tough market with strong focus on aligning cost base to current market
EBIT
1
Margin
12.3%
HY23: 14.6%
4.2%
HY23: 6.7%
11.1%
HY23: 14.5%
5.4%
HY23: 5.3%
(0.1)%
HY23: 1.4%
11.7%
HY23: 22.4%
Distribution
Building
Products
Concrete
Construction
2
Residential and
Development
Australia
Division
1. Before significant items
2. Construction EBIT before significant items in 1H23 is prior to elimination of $4m intra-group margin on the construction of WWB plant
EBIT
1
$70m
HY23: $81m
$35m
HY23: $65m
$78m
HY23: $111m
$78m
HY23: $82m
$(1)m
HY23: $9m
$41m
HY23: $49m
▪Building Products, Distribution and Concrete materially softer
volumes in NZ resisector. Price & cost well managed despite strong
competition and inflation of c.5% p.a. Gross Margin held within
1%pt of 1H23, and overhead costs reduced by 1% YoY
▪AustraliaEBIT
1
and EBIT margin
1
solid YoY despite lower market &
poor Tradelink result. Price and costs well managed, divisional gross
margins +1%pt & overhead costs 3% lower YoY; we intend to
commence a divestment process for Tradelink
▪Residential & Development unit sales higher (419 vs. 189 in 1H23),
house prices now stabilising. Ind DevtEBIT nil in 1H24 vs. $16m in
1H23, main reason for lower divisional margin
▪Constructionseasonally weighted to H2, 1H24 result impacted by
remedial costs in Higgins. Order book quality remains strong
Page 10| Fletcher Building Limited Half Year Results Presentation| © February 2024
HY24 trading highlights
WA plumbing update
Testing complete; leaks are caused by installation practices
➔Testing of Pro-Fit pipe with Typlexresin for causation has completed
➔Experts’ advice on causation has been received and confirms the leaks are caused by installation practices
➔Iplex has inspected hundreds of homes and continues to see the same installation failures and the same correlation between them and a leak as
described in our Oct 2023 presentation
➔Based on recent information from builders, Iplex has decreased its estimate of the total number of Perth homes built with TyplexPro-Fit pipes to
c.15,000
1
(down from ~17,500 in Oct 2023).
➔Update on number of affected homes (i.e. homes with TyplexPro-Fit pipes which have reported a leak to Iplex):
➔Perth:~2,200(which includes an estimate for BGC as it does not provide Iplex with data)
➔Rest of Australia: 37
➔No change to provision, but risk remains
➔There are circumstances, including a recall, where the financial impact could be significantly material and adverse to the Group
➔Iplex is committed to engaging with others to develop and deliver a pragmatic industry solution
➔Even if adopted, an industry solution would not preclude legal options for any party
1. Estimate, given not all builders provide Iplex with data
Page 11| Fletcher Building Limited Half Year Results Presentation| © February 2024
WA plumbing update
Testing and expert reports
Page 12| Fletcher Building Limited Half Year Results Presentation| © February 2024
Iplex has completed 24 different types of tests across 900 pipe samples -multiple local and external labs
The expert reports of Ross Brown, Dr.Lucy Bakerand Prof. Graeme George have been received and submitted to WA Consumer Protection
In combination, these tests and experts have concluded:
➔The Pro-fit pipes conform to Australian Standards;
➔There is no manufacturing defect;
➔The observed plumbing installation failures, either in isolation or combination, create excessive stress on the pipes and pipework system, which is the cause of
the failures;
➔But for these installation failings, the Pro-fit pipes would perform as expected; with compliant conditions, there are no differences in performance
characteristics as between Pro-fit pipe manufactured from Typlexresin or the Basellresin;
➔The change to Typlexresin from Basellresin has not caused the pipe to fail;
➔The analysis and ultimate conclusions in the ScheirsReport (BGC's expert) are without foundation, incorrect (both in methodology and interpretation), and
demonstrate a failure to properly consider all relevant factors when seeking to determine the cause(s) of failure; and
➔The theories proposed by Dr. Haberecht(DEMIRS’ consultant) have been disproven by the evidence.
While causation is clear and all Iplex pipes conform to Australian Standards, Iplex is conducting other tests with an international laboratory to try to emulate the
conditions and poor installations practices seen in Western Australian homes and so isolate the same mode of failures and thesame rate of failures as between resin
types. To date, it has not been able to do so. The results of these tests, which are likely to take months to be obtained,may help identify further repair initiatives
for the industry solution that is needed to effectively and efficiently address the plumbing failures that are occurring.
WA plumbing update
The data from Perth homes shows installation is the cause
Page 13| Fletcher Building Limited Half Year Results Presentation| © February 2024
➔In the last 9 months, Iplex has collected data from 505 homes (270 by its own plumbers and 235 by other builders/plumbers).
➔BGC has continued to not provide access to homes, information about their leaks or pipes for inspection or testing
➔Data Iplex has collected itself (which has been reviewed by an external independent plumber expert) shows:
➔the same correlation between poor installation and leaks as described in October;
➔if a home leaks, on average, first leak is about 3 years from construction;
➔trends imply that most homes will not leak; and
➔homes leaking for the first time are declining.
Extrapolating that data to all WA builds, Iplex expects fewer homes to leak in the future than have already leaked.
WA plumbing update
This remains a Perth problem
Page 14| Fletcher Building Limited Half Year Results Presentation| © February 2024
➔Pro-Fit with Typlex resin was first produced in mid 2017 and was the
bulk of the supply from then
➔The rate of plumbing failures alone points to local construction
practices compared to all other Australian markets
➔Failure rates between builders in Perth also differ materially, again
pointing to variability in installation practice
Estimated homes built with TyplexPro-fit
PerthRest of AU
c.15k homes
1
c.15k homes
1. This assumption is not verified, but reduction from Oct’23 based on public statements by BGC
14.6%0.24%
~2,20037
Homes
leaked in
last 2 years
WA plumbing update
Key updates across three workstreams
▪Our A$15m interim investigation fund is
less than 50% drawn
▪39 parties registered across Perth refuses)
▪Working to plan:
▪Streamlined claims process
▪Homes repaired quickly
▪More than 1,300 repairs funded at a
cost of c.$2.5m
▪Ongoing encouragement to builders and
plumbersto use the Fund to expedite
repairs for homeowners
▪Independent expert reports into causation
completed and confirm:
▪The observed plumbing installation
failures cause the leaks
▪There is no manufacturing defect
▪Pro-fit pipes conform to Australian
Standards
▪Where required, nearly 200 full ceiling
pipe replacements across multiple
builders so far
▪Largely completed the trial phase of leak
detector installation; positive feedback
with trial producing learnings about
settings
▪Wall pipe mapping and non-destructive
tile removal trials advancing
▪Pipere-lining trialled in a Perth demo
home;testing now being conducted to
measure performance & service life.
Commercial terms and regulatory
approvals still required
1
Page 15| Fletcher Building Limited Half Year Results Presentation| © February 2024
ESTABLISHING CAUSATION
2
INDUSTRY SOLUTION
3
SUPPORT CUSTOMERS &
HOMEOWNERS
1
1. These lined pipes were removed from the trial home and are not in service
WA plumbing update
Regulatory Update: Recall is not the solution
Page 16| Fletcher Building Limited Half Year Results Presentation| © February 2024
➔WA Regulatory investigation
➔The WA Consumer Protection’s investigation into whether there is evidence to support a recommendation to the Minister to recall the product
is ongoing. While nothing formal has been advised, we expect its final stages to occur in March 2024.
1
➔Recall
➔Iplex has submitted that the threshold for a recall has not been met and is therefore not supportable. On the evidence, there is no reason to
remove all the pipe; most homes will not leak.
➔Arecall is not the remedy for installation failures
➔A proportionate industry response
➔Homeowners need the industry to provide a solution,prioritising those most in need
➔Industry led and sustainably financed
➔Does not need to be prefaced on a finding of fault but will need to be scalable and practical to be embraced
➔Iplex reiterates its commitment to working with Industry to design, develop and roll such a solution out quickly
➔Based on its data and the trends it has drawn (and using BGC’s cost estimates), Iplex believes a viable and appropriate industrysolution is available.
If it is agreed, it would involve rectification costs (not other costs or losses) of around $100m for the industry, which would be incurred over an
estimated 5-6 years
1. A recall does not depend on whether the product is defective, but whether the Minister concludes there is a risk of injury and suppliers are
not doing enough
Fletcher Building Limited
Agenda
1. ResultsOverviewRoss Taylor
2. Market ContextBevan McKenzie
3.Financial ResultsBevan McKenzie
4. OutlookRoss Taylor
HY24 Market Context –New Zealand Materials & Distribution
NZ market c.15% lower vs. HY23, driven mainly by weaker resisector; FB revenues have held up solidly
Page 18| Fletcher Building Limited Half Year Results Presentation| © February 2024
1 M&D = Materials & Distribution = Building Products, Concrete and Distribution divisions
NZ M&D
1
Market Volumes HY24 vs HY23
Initial OutlookWhat we’ve seen in H1
Residential
c.20%c.12%
Commercial &
Infrastructure
(incl. rural)
c.7%c.4%
Overall
NZ M&D
Market
c.15%c.8%
▪FB NZ materials & distribution businesses revenue are c.60%
residential, c.40% commercial & infrastructure exposed
▪Resisector weakened materially in HY24, esp. 2Q24 and esp. larger
builders of new homes
▪Comm & infra sectors relatively solid, though comm. activity slowed
through HY24 and some roading work delayed. Rural market very
weak on reduced agricultural spend
▪Ongoing destocking evident in some channels in HY24, mainly pipes
and steel
▪FB has held share, revenues down 8% in an overall market down
15%
HY24 Market Commentary –NZ Materials & Distribution
FB NZ M&D revenue -8%
HY24 Market Context –Australia Materials & Distribution
AU market activity broadly in line with expectations, FB revenues solid
Page 19| Fletcher Building Limited Half Year Results Presentation| © February 2024
Residential
c.7%c.10%
Commercial &
Infrastructure
c.9%c.3%
Overall
AU M&D
Market
c.8%c.8%
AU Market Volumes HY24 vs HY23
Initial OutlookWhat we’ve seen in H1
▪FB AU businesses are c.60% residential, c.40% commercial &
infrastructure exposed
▪Resisector demand in finishing trades & renovation market held
up solidly, though run-rate softened in final two months of 1H24
▪Comm & infra project work weakened in our key sectors, notably
water projects for Iplex
▪FB revenues solid: down 6% in an overall market down 8%
FB AU revenue -6%
HY24 Market Commentary –AU Materials & Distribution
NB: fall-outs between conditional agreement and final settlement
(i.e. sales that don’t complete) average 1-2 per week.
HY24 Market Context –New Zealand Housing
Improved housing market in past 12 months has supported higher sales volumes of c.20 units per week
13
12
20
19
2H221H232H231H24
Fletcher Residential Average Weekly Sales
(Conditional Agreements Signed Per Week)
Page 20| Fletcher Building Limited Half Year Results Presentation| © February 2024
▪Despite ongoing elevated interest rates, market conditions
improved through 2H23 –esp. among first home buyers in
lower/mid market where Fletcher Residential is focused –and
sales momentum continued into 1H24
▪Chart shows average weekly house sales agreements signed by
Fletcher Residential through calendar 2022 & 2023. On average,
c.90% of these agreements convert into completed sales
▪House prices fell 15-20% from the peak in late-2021 to mid-2023.
Prices stabilised in 1H24 & showing slight improvement (low single
digit increases) in some developments. Overall, average prices in
1H24 were c.6% lower than 1H23
▪180 contracts already executed to settle in 2H24; expect FY24 Resi
sales target of c.900 units
Fletcher Building Limited
Agenda
1. ResultsOverviewRoss Taylor
2. Market ContextBevan McKenzie
3.Financial ResultsBevan McKenzie
4.OutlookRoss Taylor
Income Statement
Net earnings impacted by market activity and one-off costs related to legacy Construction & Tradelink
Income statement
NZ$m
Dec 2022
6 months
Dec 2023
6 monthsVar
Revenue4,2844,248(1%)
EBITDA before significant items540455(16%)
EBIT before significant items360264(27%)
Significant items(154)(308)NM
EBIT206(44)NM
Lease interest expense(30)(32)7%
Funding costs(39)(62)59%
Tax (expense) / benefit(34)21NM
Non-controlling interests(11)(3)(64%)
Net earnings / (loss)92(120)NM
Basic earnings per share before sig items (cents)25.914.9(42%)
Basic earningsper share (cents)11.7(15.3)NM
Dividends per share (cents)18.0-
▪EBIT
1
decline reflects softer operating environment, esp. NZ resi
sector
▪Input cost inflation remained elevated in the period: average c.5%
vs. 1H23
▪Significant items of $308m mainly relate to $165m NZICC provision
& Tradelink write-down of $122m
▪Funding costs $62m on higher borrowings & interest costs, as
flagged
▪Effective tax rate
1
of 29.4% in 1H24
1. Before significant items
Page 22| Fletcher Building Limited Half Year Results Presentation| © February 2024
HY24 income statement
Spotlight on Gross Margins & Overhead Costs –Materials & Distribution Divisions
Gross margins solid despite price pressure and ongoing COGS inflation; good overhead cost management
Gross Margin (%)
Overhead
1
Costs ($m)
30.3%
29.3%
HY23HY24
▪Building Products, Concrete, Distribution –
generally good price recovery of COGS inflation.
Gross margins slightly lower in 1H24 due to:
higher comm/infra vs. resisales mix, competitive
pressure in NZ Distn, higher WWB depreciation &
Steel inventory devaluation. Overhead costs
lower YoY despite inflationary pressure and
c$10m additional overheads in 1H24 from
acquisitions of Tumu, Urban Quarry, and Waipapa
▪Australia–gross margins benefiting from push
into higher-value segments, strong overhead cost
control in inflationary environment
Commentary
Building
Products,
Concrete,
Distribution
Australia
31.9%
33.1%
HY23HY24
448
442
HY23HY24
416
403
HY23HY24
1. Warehousing, Distribution and Selling, General & Administration costs
Page 23| Fletcher Building Limited Half Year Results Presentation| © February 2024
Cash flow
Underlying trading cash flows of $176m materially improved vs. 1H23; legacy cash impact significant
Cash flow
NZ$m
Dec 2022
6 months
Dec 2023
6 months
EBIT before significant items360264
Depreciation and amortisation180191
Lease principal payments and lease interest paid(127)(132)
Provisions and other(19)1
Trading cash flow before working capital movements394324
Working capital movements excl. legacy projects(457)(148)
Trading cash flow excluding legacy & significant items(63)176
Legacy projects cash flow(28)(295)
Significant items cash flow(16)(29)
Trading cash flow(107)(148)
Add: lease principal payments97100
Less: cash tax paid(154)(21)
Less: funding costs paid(39)(57)
Cash flows from operating activities(203)(126)
▪Underlying trading cash flow of $176m materially ahead of 1H23
▪Materials & distribution divisions: trading cash flow $253m vs
$206m in 1H23 despite lower earnings, good working capital mgmt
▪Resi& Devt: trading cash outflows of $31m, materially improved
vs. $229m outflow in 1H23. Limited new land commitments made,
some developments paused pending improved market
▪Construction:legacy projects cash outflow primarily from NZICC;
2H24F outflow of c.$150m
▪Cash tax payments lower due to legacy projects
▪Funding costs paid higher in 1H24 driven by elevated interest rates
& higher level of debt drawdowns
Page 24| Fletcher Building Limited Half Year Results Presentation| © February 2024
HY24 cash flows
Working Capital
Significant improvement vs. prior period through strong focus on receivables and inventory management
Page 25| Fletcher Building Limited Half Year Results Presentation| © February 2024
HY24 working capital
▪Materials & distribution divisions –significantly improved 1H24
working capital performance
▪Good receivables collections and low bad debts despite
deteriorating customer liquidity; DSO
1
flat on 1H23 at 41 days
▪Inventory typically builds in H1, stocks being actively managed
in line with market activity
▪Creditor balances reduced in line with lower sales; no change
in underlying supplier credit terms
▪Resi& Devtland stock payments (c.$110m) from prior land
commitments, offset by reduction in WIP through higher house
sales. Market valuation of Resiland at Dec-23 remains c.$300m
higher than book value
▪Construction (ex legacy) good cash generation in BPC offset by
temporary c.$20m bitumen purchases in Higgins as supply model
transitions from local to offshore sourcing
1. Days Sales Outstanding
Cash flow working capital movements
NZ$m
Dec 2022
6 months
Dec 2023
6 months
Materials and Distribution Divisions
•Debtors75150
•Inventories(58)3
•Creditors(194)(211)
Materials and Distribution Divisions(177)(58)
Residential and Development(270)(72)
Construction excluding legacy projects(10)(18)
Cash flow working capital movements excl. legacy(457)(148)
Capex
FY24 base capex in line with prior guidance, growth capex profile moderated
Capex and Investments
NZ$m
Dec 2022
6 months
Dec 2023
6 months
Base capex87111
Above Base: WWB new plant5731
Above Base: growth capex & investments15348
Less: Proceeds on disposal of PPE(5)(3)
Net Capex292187
Other capex: Vivid Living912
Total Capex and Investments301199
Page 26| Fletcher Building Limited Half Year Results Presentation| © February 2024
▪Base
1
capex (incl. ERP investment) expected to be c.$240m in
FY24, in line with prior guidance
▪Above Base growth capex
▪In flight growth projects continue on Laminex NZ wood panels
plant, automated Frame & Truss, Steel and Concrete / circular
▪Some growth capex deferred in light of tougher market
environment
▪Expect FY24 growth capex of c.$150m vs. prior guidance of
c.$250m
▪WWB new plant –fully operational, minor capex planned for 2H24
Investment focus
1. Base capex includes maintenance spend, manufacturing automation improvements, ERP improvements, data & analytics and
customer-facing eCommerce tools; and focus on cost & carbon emissions reduction
Net Debt
Increased debt levels due to legacy outflows
Page 27| Fletcher Building Limited Half Year Results Presentation| © February 2024
1. Other includes: Significant items trading cash $29m, FX/Hedging adjustment $(8m) & Net minority contribution $(4m)
2. Trading cash flow before working capital movements
Net Debt: Jun 23 to Dec 23 (NZ$m)
1,412
1,949
324
58
72
313
57
199
21
124
17
Net Debt
Jun-23
M&D and
Corporate
Working Cap
Resi & Dev't
Working
Capital
Construction
Working
Capital
Funding
Costs
Net
Capex &
Investments
Tax paidDividendOtherTrading
Cash
Net Debt
Dec-23
1
2
Leverage
Increase to upper end of range as flagged, maintain headroom under banking agreements
Leverage (Net Debt / EBITDA
1
)
1.2x
1.8x
FY23HY24
Target range
2.0x
1.0x
1. Before significant items
Page 28| Fletcher Building Limited Half Year Results Presentation| © February 2024
▪Group leverage increased as flagged due FCC legacy cash flows and
growth capex investments
▪Leverage remains within the Group’s target 1.0x-2.0x range
▪Upper end of target range provides headroom under banking
agreements
▪Expect leverage ratio to remain at upper end of range through
remainder of FY24
Leverage and Balance Sheet
Funding
Group is well-funded with long-dated debt maturity and strong liquidity of $0.9b
Page 29| Fletcher Building Limited Half Year Results Presentation| © February 2024
▪Undrawn credit lines of $709m and cash on hand of $215m as at
31 Dec 23; total liquidity of $0.9b
▪$300m bank facility refinanced in 1H24 to 2026 maturity, and upsized to a
$400m facility, strengthening liquidity position
▪Average maturity of debt 2.8 years; average interest rate on debt is 6.0%
1
▪First investment grade rating of Baa2 assigned by Moody’s
▪FY24F funding costs c.$140m, at low end of prior guidance
▪Group gearing after hedging 36.4% at Dec 23 (27.8% at Jun 23)
Debt maturity profile ($m)
Debt facilities and drawings
NZ$m
Facilities
31 Dec 23
Drawings
31 Dec 23
Bank Loans2,0531,344
USPP456456
Capital Notes343343
Other2121
Total2,8732,164
84
849
78
80
55
90
40
248
209
728
725
600
FY24FY25FY26FY27FY28+
Capital NotesUSPPBank LoansOther
80
1,063
797
1. Excludes line and other fees
▪The Group remains committed to its target balance sheet settings. Given tougher market conditions and higher legacy cash outflows, a number of
prudent steps have been taken to support these settings
▪Growth capex lower in FY24-FY25–now expected to be c.$150m in FY24 and c.$175m in FY25 (previously c. $250m FY24, c. $250m FY25)
▪Base capex lower in FY25 –now expected to be c.$175m in FY25 (previously $200m-$250m)
1
▪Resi& Devtfunds actively managed–some capital-intensive projects paused pending stronger housing market; expect Jun-24 funds of $800m-
$850m (vs. c.$915m at Jun-23). Expect broadly stable Resi& Devtfunds in FY25
▪Tradelink business to be exited
▪No interim dividend
▪Liquidity strengthened –$300m bank facility refinanced in 1H24 to 2026 maturity, and upsized to a $400m facility
▪Outlook for operating cash flow
▪Expect strong underlying trading cash flow in 2H24 due to typical seasonal weighting to the second half (esp. in Resi& Devt)
▪Legacy cash outflow of c.$150m in 2H24, subject to risk on cost & timing of claim and insurance recoveries
▪Cash tax payments expected to be low in 2H24 (c.$5m) and FY25 (c.$10m) due to timing of legacy cash outflows
▪Expect funding costs paid of c.$140m in FY24
1. Includes ERP
Outlook on Balance Sheet and Cash Flow
Prudent measures taken to support balance sheet settings; underlying cash flow remains robust
Page 30| Fletcher Building Limited Half Year Results Presentation| © February 2024
Fletcher Building Limited
Agenda
1. ResultsOverviewRoss Taylor
2. Market ContextBevan McKenzie
3. Financial ResultsBevan McKenzie
4.OutlookRoss Taylor
FY24 Outlook
Expect 2H24 EBIT well ahead of 1H24
➔Expect market volumes to remain under pressure for next 6 to 12 months,but improving conditions in NZ end housing market
➔FY24 Group EBIT
1
guidance to be in a range of $540m-$640m, with the mid-point assuming a continuation of current market
conditions for the balance of FY24
➔Ongoing focus on managing trading cash and remaining committed to balance sheet settings
➔NZICC on track for completion in 2024
➔With causation of the Perth pipe leaks now confirmed as faulty installation, we will now actively work to agree an industry solution
with government and builders
1. Before significant items
Page 32| Fletcher Building Limited Half Year Results Presentation| © February 2024
Fletcher Building Limited
Appendix
1. Before significant items
HY24 Results: Building Products
EBIT Margin (%)
1
EBIT ($m)
1
111
78
HY23HY24
14.5%
11.1%
HY23HY24
768
703
HY23HY24
Gross Revenue ($m)
80
95
HY23HY24
Trading cash flow ($m)
Page 34| Fletcher Building Limited Half Year Results Presentation| © February 2024
▪Revenue 8% lower YoY against market volume decline of 13%:
driven by lower resimarketactivity, destocking in pipes & steel
channels, and lower steel prices. WWB & Laminex® share gains
▪EBIT
1
and EBIT
1
margin lower due to weaker market (c.$35m EBIT
impact), $5m additional depreciation from WWB plant, and $4m
Steel inventory devaluation
▪Pricing generally solid, with divisional GM% in line with 1H23
(adjusted for WWB depreciation & Steel devaluation in 1H24)
▪Overhead costs well-controlled, 1% below 1H24 despite ongoing
inflation
▪Strong divisional trading cash reflects robust debtor collections &
ongoing inventory reductions (esp. Steel and Iplex NZ)
▪Seamless transition from Auckland to Taurikoof WWB
plasterboard manufacturing plant & DC; WaipapaPine operating
well, though weak timber market in 1H24 impacted earnings
HY24 trading performance
HY24 Results: Distribution
1. Before significant items
Page 35| Fletcher Building Limited Half Year Results Presentation| © February 2024
EBIT ($m)
1
65
35
HY23HY24
EBIT Margin (%)
1
6.7%
4.2%
HY23HY24
965
836
HY23HY24
Gross Revenue ($m)
98
42
HY23HY24
Trading cash flow ($m)
▪Revenue 13% lower YoY against 17% market volume decline, with
division c.80% exposed to resisector. Some share loss in
PlaceMakers in certain regions.
▪Lower EBIT
1
and EBIT
1
margin due to reduced revenue in weaker
market (c.$40m lower EBIT)
▪GM% held within 0.7%pts of 1H23 despite tough market, tight
management of COGS base
▪Overhead costs $10m lower than 1H23, despite inflation & full
period of Tumu ownership
▪Trading cash flow solid: cash collections remained robust reflected
in debtor days reduction to 38 days (from 39 days at Dec-22)
▪New PlaceMakers® & Mico® branchesin Rolleston; digital
programme ongoing focus on providing seamless omnichannel
customer experience
HY24 trading performance
HY24 Results: Concrete
Page 36| Fletcher Building Limited Half Year Results Presentation| © February 2024
EBIT Margin (%)
1
EBIT ($m)
1
81
70
HY23HY24
14.6%
12.3%
HY23HY24
Gross Revenue ($m)
554
567
HY23HY24
55
87
HY23HY24
Trading cash flow ($m)
▪Revenue up 2% YoY compared to market volume decline of 13%:
strategic shift to comm & infra segments delivered strong result
counter to market slowdown, Winstone Aggregates® revenue up
23%, Firth share gains
▪GM% 1.4%pts lower YoY reflecting higher mix of sales from
comm/infra market, higher energy and freight costs, partly offset
by focus on fleet utilisation & production efficiencies
▪Overheads slightly higher in 1H24 on addition of The Urban
Quarry®. Division focused on aligning fixed & variable cost base to
current market environment
▪Trading cash flow very strong, driven by disciplined working capital
management, esp. stock management in Humes®
▪Successful integration ofthe Urban Quarry® business into
Winstone Aggregates® providing a platform to fast-track recycling
of construction & demolition waste
HY24 trading performance
1. Before significant items
HY24 Results: Australia
1. Before significant items
Page 37| Fletcher Building Limited Half Year Results Presentation| © February 2024
EBIT Margin (%)
1
EBIT ($m)
1
5.3%
5.4%
HY23HY24
Gross Revenue ($m)
1,534
1,444
HY23HY24
Trading cash flow ($m)
(40)
11
HY23HY24
82
78
HY23HY24
▪Revenue 6% lower, slightly better than 8% decline in market
activity, with good performances from Laminex & Fletcher
Insulation, Tradelink disappointing
▪EBIT
1
and EBIT
1
margin solid: GM% improved c.1%pt YoY on good
pricing control & product mix, offsetting ongoing input cost
inflation in labour, property & utilities. Overheads -3% YoY from
proactive restructures in line with softening market
▪Trading cash improvement reflected solid debtor controls
▪Focus on customer satisfaction resulted in NPS improvement from:
improved DIFOT; new products (e.g. Laminex® Surround, Laminex®
silica-free engineered stone alternatives& Fletcher Insulation®
Firmasoft®). Continued digital sales growth & market share growth
in higher-margin segments
▪Decision made to divest Tradelink
HY24 trading performance
HY24 Results: Residential and Development
Page 38| Fletcher Building Limited Half Year Results Presentation| © February 2024
1. Before significant items
2. HY24 $985m funds balance: $750m housing land (at cost), $302m housing WIP, $76m industrial development land, $(141m) other
17.4%
11.7%
HY23HY24
ResiTotal EBIT Margin
33
41
16
HY23HY24
ResiInd. Dev't
EBIT Margin (%)
1
EBIT ($m)
1
11.7%
Funds employed ($m)
2
915
985
70
FY23Land &
Housing WIP
HY24
219
351
HY23HY24
Gross Revenue ($m)
49
41
22.4%
▪Revenue up 60% from higher unit sales: 419 unit sales incl. 47
apartments (vs. 189 unit sales incl. 6 apartments in 1H23). Strong
performance enabled by an offer targeted at most active part of NZ
housing market –first home buyers and lower/mid price levels
▪Residential EBIT of $41m up from $33m in 1H23 (prior period
included $9m revalgain from land transfer to Vivid Living vs $1m in
HY24). ResiEBIT margin of 11.4% in 1H24 compares to 12.8% in
1H23 (excluding revalgains in both periods)
▪Ind DevtEBIT nil vs $16m in 1H23; expect $5-10m EBIT in 2H24
▪Funds employed increase reflects settlement of $110m land from
prior commitments, offset by reduction in housing WIP from strong
sales; some apartments paused until market conditions improve
▪Land pipeline c.4,500 lots (c.3,200 residential lots & two rural
properties on balance sheet, c.960 units under unconditional
contracts & c.400 units under conditional contracts)
HY24 trading performance
HY24 Results: Construction
EBIT Margin (%)
1,2
EBIT ($m)
1,2
9
(1)
HY23HY24
1.4%
(0.1)%
HY23HY24
Gross Revenue ($m)
1
650
699
HY23HY24
(28)
(313)
HY23HY24
Trading cash flow ($m)
1
Page 39| Fletcher Building Limited Half Year Results Presentation| © February 2024
▪Revenue down 16%: reduced volume of work on legacy roading &
vertical build
▪EBIT $32m: BPC performed well; while Higgins lower due to
weather events, low margin on maintenance work & execution on
small projects
▪Legacy projects ($0.3b revenue to go):
▪Hamilton City Edge, PekaPekato Ōtaki and Pūhoito
Warkworthroads opened
▪$255m cost provision for additional costs on NZICC; work
continues with completion forecast for late 2024
▪Division trading cash outflow of $26m: legacy projects $31m
outflow, partly offset by $5m inflows on non-legacy
▪$2.5b orderbook & additional $1.8b preferred status, lower risk
infrastructure alliance projects & framework agreements
HY24 trading performance
▪Revenue up $49m in the period: higher work volumes in Higgins
following weather events & BPC significant programmes across
water, airports (Taxiway Mike underway) & marine works
▪Gross margin declined from 8.9% to 7.1% due to remedial costs on
historical Higgins projects & slippage of some BPC projects margin
recognition to 2H24; cost controls remained tight
▪Disappointing legacy provisions of $180m (NZICC $165m & WIAL
$15m); NZICC on track to complete 2024
▪Cash outflows from legacy projects of $295m; underlying trading
cash outflow (excl. Legacy) of $18m reflects increased bitumen
inventory levels held by Higgins® due to NZ bitumen supply chain
changes
▪Solid orderbook of $2.5b continues to be balanced to lower risk
projects. Transport Rebuild East Coast (TREC) alliance rebuild work
started 1H24
1. Before elimination of the construction of WWB plant at Tauriko; intra-group EBIT was $4m in HY23
2. Before significant items
Divisional revenue exposure and FB revenue by market
Resi, 49%Com, 33%Infra, 18%
Resi, 79%Com, 20%
Resi, 43%Com, 24%Infra, 33%
Resi, 63%Com, 26%
Infra,
11%
35%
15%
17%
20%
9%
4%
NZ
Residential
NZ
Commercial
NZ
Infrastructure
AU
Infrastructure
AU
Commercial
AU
Residential
Total FB Revenue by Market (%)
Divisional Revenue Exposure by Sector
Distribution
Building
Products
Concrete
Australia
Page 40| Fletcher Building Limited Half Year Results Presentation| © February 2024
---
Results Announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Results for announcement to the market
Name of issuer Fletcher Building Limited
Reporting Period 6 months to 31 December 2023
Previous Reporting Period 6 months to 31 December 2022
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$4,248,000 (0.8%)
Total Revenue $4,248,000 (0.8%)
Net profit/(loss) from continuing
operations
($120,000) NA
Total net profit/(loss) (120,000) NA
Final Dividend
Amount per Quoted Equity
Security
The Board has resolved not to declare an interim dividend for FY24.
Imputed amount per Quoted
Equity Security
Record Date
Dividend Payment Date
Current period Prior comparable period
Net tangible assets per Quoted
Equity Security
$3.11 $3.24
A brief explanation of any of the
figures above necessary to enable
the figures to be understood
Refer to Half Year Announcement Presentation
Authority for this announcement
Name of person authorised to
make this announcement
Ashleigh Harding, Company Secretary
Contact person for this
announcement
Aleida White, Head of Investor Relations
Contact phone number +64 21 155 8837
Contact email address investor.relations@fbu.com
Date of release through MAP 14/02/2024
Unaudited financial statements accompany this announcement.
---
Fletcher Building Limited
2024 Interim Financial Results
Contents
Welcome to the interactive
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use Adobe Acrobat Reader.
Click on the sections above
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CONTENTS
menu button on the
top right of each page. The financial
statements, notes, and references are
also clickable for your convenience.
When used in these Interim Financial
Results, references to the ‘Company’
are references to Fletcher Building
Limited. References to ‘Fletcher
Building’ or the ‘Group’ are to
Fletcher Building Limited, together
with its subsidiaries and its interests
in associates and joint ventures.
References to $ and NZ$ are to New
Zealand dollars unless otherwise stated.
Fiona Thornley, Mel Henshaw and
project manager Jasmin Lawrence (L-
R) examine plans as New Zealand’s first
all-female residential home build gets
underway in Whenuapai, Auckland.
The Project named ‘BUILDhers’ is set
to challenge stereotypes by providing
female tradespeople with a platform to
show what is possible and encourage women interested
in a career in building and construction to give it a go.
Fletcher Building Limited 2024 Interim Financial Results
2
03
Chair and CEO's Review
05
Group Performance
07
Group Overview
10
Building Products
11
Distribution
12
Concrete
13
Australia
14
Residential and Development
15
Construction
16
Consolidated Financial Statements
21
Notes to the Consolidated Financial Statements
34
Independent Auditor's Review Report
Progress on non-financial targets
Achieving our non-financial targets across the Group remains
a high priority. After several years of continued improvement,
our safety performance remains best-in-class globally. Our
Total Recordable Injury Frequency Rate (TRIFR) in the half was
3.5 compared to 3.1 in FY23 and we recorded one serious
injury. Pleasingly, 94% of our sites and five of our Business
Units were injury free in the period, proving that achieving
‘zero injuries’ is possible - a commitment we drive for on all
our sites, for our people and teams.
We are tracking well on our sustainability measures and our
work continues to be recognised as leading our sector by the
Carbon Disclosure Project and the Dow Jones Sustainability
Index. Our carbon emissions reduced by 17% from the 2018
baseline year, showing good progress towards our goal
to reduce our emissions by 30% by 2030. We are similarly
making headway in our commitment to Net Zero carbon
emissions by 2050, working with suppliers to reduce their
(Scope 3) emissions.
Customers are responding positively to our continued focus
on product and service offerings. Our Net Promoter Score of
48 improved significantly by 8 points from FY23 and indicates
we are on track as we drive towards our target NPS ≥ 55.
Overall employee engagement continues to strengthen, with
an eNPS of 30, up four points since FY23 and getting closer
to the industry upper quartile target eNPS of 40.
Chair and CEO's Review
We are pleased to report Fletcher Building’s financial results for the six months ended 31 December 2023 (HY24).
Against the backdrop of materially weaker trading conditions, particularly in the NZ residential sector where volumes
declined 20%, Group revenue of $4,248 million was in line with the prior period’s $4,284 million. EBIT before significant
items was $264 million compared to $360 million in the prior period. The Group reported a net loss after tax of $120
million compared to a profit of $92 million in the prior period. Disappointingly, the result was heavily impacted by the
$165 million significant items provision on the New Zealand International Convention Centre and a $122 million non-cash
impairment and write-down on the Tradelink® Australia business. Cash flows from operating activities for the Group were
an outflow of $126 million, compared to an outflow of $203 million in the prior period.
Solid trading performance in a
tough environment
Overall, market volumes for our materials and distribution
businesses declined by 15% and 8% in New Zealand and
Australia respectively. In this more challenging trading
environment, we continued to focus on maintaining pricing
disciplines and managing cost and efficiency initiatives to
help offset increased competitive intensity and ongoing
inflationary pressure. Gross margins in the New Zealand
materials and distribution divisions remained robust at 29.3%
compared to 30.3% in HY23. In Australia, effective price
disciplines and a shift toward higher-margin products saw
the gross margin lift to 33.1% compared to 31.9% in HY23.
A full review of the Australian Tradelink® business over the
half year combined with disappointing results led to a $122
million non-cash impairment and write-down in its carrying
value. We have concluded that whilst we believe there is a
compelling opportunity for Tradelink®, further ownership
of the business is not in line with the strategic objectives of
Fletcher Building. Consequently, we intend to commence a
divestment process for Tradelink® shortly.
For our Residential and Development division, the house
sales market was encouraging, with improved buyer activity,
especially first-home buyers, and a stabilising of house prices
after 18 months of decline. The combination of the quality of
the communities and product we develop, and with a skew
towards a lower average unit price, meant we continued to
sell good volumes, ahead of HY23, at solid margins.
Perth plumbing update
Regarding the ongoing Perth plumbing issues, our testing
and expert reports on causation continue to show that
the leaks are caused by installation failures and that there
is no manufacturing defect. We remain committed to
developing and implementing a workable and appropriate
industry solution. As per our detailed disclosure notes,
risks remain on this matter.
Fletcher Building Limited 2024 Interim Financial Results
3
Chair and CEO's Review (cont.)
Construction cost provisions on
legacy projects
On the final Construction legacy projects, we were
disappointed to announce further cost provisions as we
near completion of these projects. A provision of $165
million was made on the New Zealand International
Convention Centre and Hobson Street Hotel project
(“NZICC”). On the significantly complex and challenging
post-fire rebuild project, actual and expected costs to
complete have increased, principally in the areas of
steel remediation, internal fit-out and to accommodate
the higher levels of specialist subcontractor resource
required. The project remains on track for completion
by the end of the calendar year, and significant
milestones have been met including: the completion
of the carparks and the Horizon Street Hotel is set for
handover this month. On the Wellington International
Airport Limited carpark, we consider that we have an
appropriate technical solution that can be implemented
to remediate quality issues. The $15 million provision
reflects these expected remediation costs.
Managing through the cycle
Given the current market conditions, the expected legacy
construction cash outflows and in line with the Company’s
dividend policy, the Board has made the decision to not
declare and pay an interim dividend. To further support our
balance sheet settings, we are also prudently managing
our capital expenditure, and have taken the decision to
rephase some of our future growth investments.
As we look ahead to the remainder of the year, we expect
FY24 Group EBIT before significant items to be in a
range of $540 million to $640 million, with the mid-point
assuming a continuation of current market conditions for
the balance of FY24.
We are well positioned to perform through the cycle and
then drive both further performance improvements and
upside volumes when the cycle turns.
We wish to express our appreciation to our dedicated team
for their hard work and commitment, to our customers
for their trust and loyalty, and to our shareholders for their
ongoing support. We look forward to the second half of the
year and to sharing the full year results in August.
Bruce Hassall Ross Taylor
Chair CEO
Fletcher Building Limited 2024 Interim Financial Results
4
Group Performance
NZ$M
Six months ended
31 December 2023
Six months ended
31 December 2022
Revenue 4,248 4,284
EBIT before significant items
(1)
264 360
Significant items
(2)
(308) (154)
EBIT
(44)
206
Lease interest expense (32) (30)
Funding costs (62) (39)
Earnings/(loss) before tax
(138)
137
Tax benefit/(expense) 21 (34)
Earnings/(loss) after tax
(117)
103
Non-controlling interests (3) (11)
Net earnings/(loss)
(120)
92
Net earnings/(loss) before significant items
117
203
Basic earnings per share (cents)(15.3) 11.7
Basic earnings per share before significant items (cents) 14.9 25.9
Dividends declared per share (cents) 18.0
Cash flows from operating activities (126) (203)
Capital expenditure 188 247
Investments 7 66
Revenue (NZ$M)
Six months ended
31 December 2023
Restated
(3)
Six months ended
31 December 2022
Building Products 703 768
Distribution 836 965
Concrete 567 554
Australia 1,444 1,534
Materials and distribution 3,550 3,821
Residential and Development 351 219
Construction 699 650
Other 6 5
Gross revenue 4,6064,695
Less: intercompany revenue (358) (411)
External revenue 4,248 4,284
(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 interim financial statements for the period ended 31 December 2023. Further details of Significant items can be found in note 2.1 of the
consolidated interim financial statements.
(2) Further details of significant items can be found in note 2.1 of the consolidated interim financial statements.
(3) 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 under the Concrete division. This results in an increase to the Concrete division and decrease in Building Products division of the
comparative Gross Revenue (December 2022: $67 million), External Revenue (December 2022: $65 million), EBIT before significant items (December 2022: $7 million),
Funds base (December 2022: $141 million), Depreciation, depletion and amortisation expense (December 2022: $3 million) and Capital expenditure (December 2022:
$1 million) recognised.
Note: External revenue includes income from the Group's Vertical Buildings Business (December 2023: $51 million; December 2022: $52 million; June 2023: $104 million),
which the Group is in the process of exiting. The New Zealand International Convention Centre and Hobson Street Hotel (NZICC) represents the largest project to
complete in this sector. EBIT before significant items, however, excludes any earnings from these projects.
Fletcher Building Limited 2024 Interim Financial Results
5
Group Performance (cont.)
EBITEBIT before significant items
(1)
NZ$M
Six months ended
31 December 2023
Restated
(2)
Six months ended
31 December 2022
Six months ended
31 December 2023
Restated
(2)
Six months ended
31 December 2022
Building Products 72 106 78 111
Distribution 35 65 35 65
Concrete 72 82 70 81
Australia(47) 82 78 82
Materials and distribution132 335 261 339
Residential and Development 41 49 41 49
Construction(180) (145) (1) 5
Corporate and other (37) (33) (37) (33)
Total EBIT(44) 206 264 360
Lease interest expense (32) (30) (32) (30)
Funding costs (62) (39) (62) (39)
Earnings/(loss) before tax(138) 137 170 291
Tax benefit/(expense) 21 (34) (50) (77)
Earnings/(loss) after tax (117) 103 120 214
Non-controlling interests (3) (11) (3) (11)
Net earnings/(loss)
(120)
92
117
203
(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 interim financial statements for the period ended 31 December 2023. Further details of Significant items can be found in note 2.1 of the
consolidated interim financial statements.
(2) 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 under the Concrete division. This results in an increase to the Concrete division and decrease in Building Products division of the
comparative Gross Revenue (December 2022: $67 million), External Revenue (December 2022: $65 million), EBIT before significant items (December 2022: $7 million),
Funds base (December 2022: $141 million), Depreciation, depletion and amortisation expense (December 2022: $3 million) and Capital expenditure (December 2022:
$1 million) recognised.
Fletcher Building Limited 2024 Interim Financial Results
6
Group Overview
Trading conditions in HY24 were materially weaker. In New
Zealand, market volumes for the materials and distribution
divisions (Building Products, Concrete and Distribution)
were 15% lower compared to HY23. This was mainly due to
a decline in the residential sector, where market volumes
reduced by c. 20%. The New Zealand commercial and
infrastructure sectors were relatively solid, however the
rural market was notably weaker due to reduced agricultural
expenditure. For the Residential and Development division,
the house sales market was a relative bright spot in New
Zealand, with improved buyer activity (especially first-home
buyers) and a stabilising of house prices after 18 months of
decline. In Australia, market volumes were 8% lower overall,
with residential finishing trades being the most robust
sector. Across New Zealand and Australia, the weaker trading
conditions led to an intensification of price competition, while
cost inflation remained above long-run averages.
In a more challenging trading environment, the New Zealand
materials and distribution divisions performed solidly. Gross
revenues were 8% (or $181 million) lower than the prior period,
which compared to a market volume decline of 15%. The
key driver of the lower revenues was the weaker residential
sector, to which the divisions have a 60% exposure. Their
gross margin remained robust at 29.3% (HY23: 30.3%),
with the reduction versus HY23 primarily due to a shift in
revenue mix towards the lower-margin commercial and
infrastructure sectors. The divisions proactively managed
price and cost (fixed and variable) to help offset increased
competitive intensity and ongoing inflation of c. +5% p.a.
Overhead costs across the divisions were 1% lower than HY23,
notwithstanding the inflationary pressure and the addition
of the Tumu, Waipapa and The Urban Quarry® businesses.
EBIT before significant items for the three divisions was $183
million (HY23: $257 million) and EBIT margin was 8.7% (HY23:
11.2%). These reductions were primarily due to the impact
of lower revenues in a weaker market environment (c. $90
million EBIT impact across the three divisions).
The Australia division performed well, delivering EBIT and EBIT
margin broadly in line with HY23 despite a softer market. EBIT
before significant items was $78 million compared to $82
million in the prior period. Effective price governance and a
shift toward higher-margin products saw gross margin lift to
33.1% (HY23: 31.9%) and overhead costs were 3% lower than
the prior period. Disappointingly, poor results in the Tradelink®
business led to a $122 million non-cash impairment and write-
down in its carrying value, classified as a Significant item.
The Residential and Development division delivered EBIT
of $41 million, compared to $49 million in the prior period.
Fletcher Residential increased EBIT to $41 million (HY23: $33
million), with 419 units taken to profit compared to 189 in
HY23. HY23 EBIT included a one-off gain of $9 million from
investment property revaluations. Excluding this gain in the
prior period, EBIT margin for Fletcher Residential was relatively
stable between the periods: 11.4% in HY24 compared to 12.8%
in HY23. Industrial Development reported nil EBIT for HY24
compared to $16 million in the prior period, with some small
sales expected in this business in the second half of FY24.
The Construction division reported an EBIT loss before
significant items of $1 million, compared to $9 million in
the prior period (prior to elimination of intra-Group margin
in relation to Winstone Wallboards® Tauriko plant). The
HY24 results were particularly impacted by rework costs
in the Higgins® roading business. The orderbook position
at HY24 remained solid at $2.5 billion, compared to $2.8
billion at 30 June 2023 and is expected to support improved
work volumes over the next 24 months. Disappointingly, a
further provision of $165 million was required on the New
Zealand International Convention Centre and Hobson Street
Hotel (NZICC) project and $15 million on the Wellington
International Airport Limited (WIAL) carpark. The division
remains on track to complete the NZICC project by the
end of calendar year 2024. Cost and revenue risk of
legacy projects will remain until completion and claims for
recoveries are likely to take until FY25-26 to settle.
Across the Group, significant item charges in HY24
totalled $308 million, mainly comprising the additional
legacy construction provisions and Tradelink® business
asset impairment and write-down.
Net interest expense for the Group was $94 million in the
period, of which $62 million related to funding costs and $32
million related to lease expenses. Tax benefit was $21 million
in the period compared to an expense of $34 million in the
prior period, and the effective tax rate (excluding significant
items) in HY24 was 29.4%.
Basic earnings per share were (15.3) cents for the period,
compared to 11.7 cents in the prior period. Excluding the
impact of significant items, earnings per share were 14.9
cents, compared with 25.9 cents reported in the prior period.
External revenue of $4,248 million was broadly in line with the prior period’s $4,284 million. EBIT before
significant items was $264 million, compared to $360 million in the prior period. Group net earnings
were a loss of $120 million, compared to a profit of $92 million reported in the prior period. Cash flows
from operating activities were an outflow of $126 million, compared to a $203 million outflow in the prior
period. Return on Funds Employed (ROFE) was 13.8%, compared to 17.8% in the prior period.
Note: EBIT, EBIT margin and Trading Cash Flow are before significant items.
Fletcher Building Limited 2024 Interim Financial Results
7
Group cash flows
Cash flows from operating activities for the Group were
an outflow of $126 million, compared to an outflow of
$203 million in the prior period. Pleasingly, trading cash
flows excluding significant items and legacy projects
were materially higher: an inflow of $176 million in HY24
compared to an outflow of $63 million in HY23.
The materials and distribution divisions reported strong
trading cash flows before significant items of $253
million, compared to $206 million in the prior period.
The improved cash flow – despite lower earnings and
deteriorating customer liquidity – was a result of tight
management of inventories and trade receivables.
Creditor terms remained consistent with the prior period.
The Residential and Development division reported a
material improvement in trading cash outflows of $31
million, compared to $229 million in the prior period.
Working capital outflows of $72 million during the period
were driven by the settlement of c. $110 million of land
purchases (historic agreements brought on balance
sheet), largely offset by receipts from unit sales during the
period, with housing work-in-progress actively controlled
until better market conditions are prevalent. The division
made limited new land commitments in HY24, remaining
well-positioned to support its future sales pipeline
through a total of c. 4,500 sections under its control. For
the c. 3,200 sections and two rural properties on balance
sheet at the end of December 2023, the assessed market
valuation was c. $300 million higher than the book value.
The Construction division recorded an underlying trading
cash outflow of $18 million, with good cash generation by
Brian Perry Civil®, offset by a temporary increase in bitumen
purchases in Higgins® (c. $20 million impact) as its supply
model transitions from local to offshore sourcing. Legacy
cash flows were an outflow of $295 million, almost entirely
on the NZICC and Pūhoi to Warkworth projects as they track
to full completion in calendar 2024.
Significant items cash outflows in HY24 (excluding legacy
construction projects) were $29 million, primarily related
to the Iplex® Australia Pro-fit matters, Cyclone Gabrielle
remediation costs, and Winstone Wallboards® Tauriko plant
transition costs.
Net capital expenditure and investments for the Group
were $199 million in HY24. This included investment in key
strategic and growth areas: Winstone Wallboards® plant
($31 million); Laminex® Taupo wood panels plant ($23
million); PlaceMakers® frame and truss plant ($8 million);
Steel Hunua site consolidation ($10 million); and the
Group’s ERP system project ($24 million).
Group cash flows in HY24 are also inclusive of $21 million
of income tax payments in New Zealand and a $124 million
payment for the FY23 final dividend. Funding costs paid
were $57 million, up from $39 million in the prior period,
driven by higher interest rates and drawn debt in the period.
Group Overview (cont.)
Cash flow (NZ$M)
Six months ended
31 December 2023
Six months ended
31 December 2022
EBIT before significant items
(1)
264360
Depreciation and amortisation191180
Lease principal payments and lease interest paid(132)(127)
Provisions and other1(19)
Trading cash flow before working capital movements
324394
Working capital movements(148)(457)
Trading cash flow excluding significant items and legacy projects
176(63)
Legacy projects cash flow(295)(28)
Significant items cash flow(29)(16)
Trading cash flow(148)(107)
Add: lease principal repayments 10097
Less: cash tax paid(21)(154)
Less: funding costs paid(57)(39)
Cash flows from operating activities
(126)(203)
(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 interim financial statements for the period ended 31 December 2023. Further details of Significant items can be found in note 2.1 of the
consolidated interim financial statements.
Fletcher Building Limited 2024 Interim Financial Results
8
Balance Sheet, Returns and Funding
ROFE before significant items for the year to 31 December
2023 was 13.8%. Funds employed increased to $5.1 billion
compared to $4.8 billion at 30 June 2023, resulting
from: an unwind of onerous contract provisions on the
legacy construction projects; and the Group’s continued
investment in attractive growth opportunities to deliver at
least 15.0% ROFE when mature.
The Group’s leverage ratio (net debt / EBITDA before
significant items) at 31 December 2023 was 1.8 times,
compared to 1.2 times at 30 June 2023, which principally
reflects debt drawdowns associated with legacy cash
outflows. Looking ahead, the Group expects to remain at the
higher end of its target 1x-2x leverage range through FY24.
The Group’s gearing at 31 December 2023 was 36.4%
compared with 27.8% at 30 June 2023.
Total funding available to the Group at 31 December 2023
was $2,873 million, of which $709 million was undrawn and
there was an additional $215 million of cash on hand. This
provided liquidity to the Group at 31 December 2023 of
$0.9 billion. In HY24, the Group executed a New Zealand
dollar denominated loan facility with a three-bank syndicate
of $400 million, which replaces the $300 million revolving
credit facility which was due to mature in October 2024. The
Group also announced in HY24 its first investment grade
credit rating of Baa2 assigned by Moody’s Investors Service.
The average maturity of the Group’s debt at 31 December
2023 was 2.8 years, with the currency split being 15%
Australian dollar; 84% New Zealand dollar; and 1% spread
over various other currencies.
The Group currently has 50% of all borrowings with fixed
interest rates with an average duration of 2.2 years. Inclusive
of floating rate borrowings, the average interest rate on the
debt (based on period-end borrowings) was 6.0%.
Dividend
Given the current market conditions, the expected legacy
construction cash outflows and in line with the Company’s
dividend policy, the Board has resolved not to declare an
interim dividend.
Group Overview (cont.)
Fletcher Building Limited 2024 Interim Financial Results
9
Building Products
The Building Products division reported gross revenue of $703 million, 8% lower than the prior
period. EBIT before significant items was $78 million and EBIT margin was 11.1%, compared to the
$111 million and 14.5% reported in the prior period. Trading cash flow of $95 million was $15 million
higher than the prior period.
The division's trading performance in HY24 reflected the
weaker market environment compared to HY23. A revenue
decline of 8% or $65 million was driven by a market volume
decline of 13% (weighted for the division’s sector exposure),
partly offset by price gains. Ongoing post-COVID destocking
in the pipes and Steel networks contributed to this decline,
while the division’s new Waipapa Pine Wood Products
business was also impacted by lower volumes and timber
pricing. The expected higher volume from the H1 building
code change is yet to substantially contribute to the trading
volume of Comfortech®, although the new range has been
gaining industry support. Positively, Winstone Wallboards®
and Laminex® continued to gain market share, and Laminex®
online sales grew to c. 50% of their total revenue.
Inflationary pressures persisted for the division in the areas
of raw materials (especially gypsum and paper), electricity,
partially offset by lower resin costs. Winstone Wallboards®
incurred $5 million increased depreciation in the period
resulting from the commissioning of the new Tauriko plant.
In Steel, falling prices resulted in an inventory devaluation
impact of $4 million in the period. The division managed to
offset some of the market volume and inflationary pressures
through pricing strategies and cost-cutting measures. These
included reducing production shifts and warehouse space,
and optimising freight services. Overall gross margin of
33.1% were 120 basis points lower than HY23, though were
in line with the prior period when adjusted for the additional
Winstone Wallboards® depreciation and Steel devaluation.
Overhead costs across the division remained well
controlled, being 1% lower than HY23 despite the
addition of the Waipapa business.
EBIT before significant items of $78 million was $33 million
below the prior period. The two key drivers of the decline
were: c. $35 million EBIT impact from reduced revenue in a
softer market; c. $9 million of cost from additional Winstone
Wallboards® depreciation and Steel devaluation; partly
offset by cost reductions.
Trading cash flow in HY24 was $95 million, a $15 million
increase from the prior period. This was driven by both
strong collections and the reduced activity, as well as the
ongoing reduction of post-COVID excess stock in Iplex®.
Capital expenditure was $75 million, comprising:
completion of the Winstone Wallboards® plasterboard
plant ($31 million), the ongoing construction of the
Laminex® Taupō wood panels plant ($23 million) and
Steel Hunua site consolidation ($10 million).
Key highlights for the period were: the seamless transition
from Auckland to Tauriko of our North Island plasterboard
manufacturing plant and distribution centre; successful ERP
go-live in Iplex® and investment in digital tools to improve
customer service; and good progress on the integration of
Waipapa Pine within the division.
Financial Summary
Six months ended 31 December
2023
NZ$M
Restated
(1)
2022
NZ$M
Gross revenue703768
External revenue570619
Gross margin33.1%34.3%
EBIT before significant items
(2)
78111
EBIT margin before significant items
(2)
11.1%14.5%
Significant items
(3)
(6)(5)
Funds1,2561,039
Trading cash flow9580
Capital expenditure75125
EBIT before significant items
(2)
Six months ended 31 December
2023
NZ$M
Restated
(1)
2022
NZ$M
Light Building Products6784
Metals1432
Wood Products2
Divisional costs(5)(5)
Total78111
Light Building Products
Winstone Wallboards®
Laminex® New Zealand
Comfortech®
Iplex® New Zealand
Metals
Fletcher Steel®
Altus® JV
Wood Products
Waipapa
(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 under the Concrete division. Further details of the change can be found in note 4 of the consolidated interim 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 interim financial statements for the period ended 31 December 2023.
(3) Details of Significant items can be found in note 2.1 of the consolidated interim financial statements.
Fletcher Building Limited 2024 Interim Financial Results
10
Distribution
The Distribution division reported gross revenue of $836 million, which was 13% lower than the
prior period. EBIT was $35 million, compared to $65 million in the prior period. EBIT margin was
4.2%, compared to 6.7% in the prior period. The division generated trading cash flow of $42 million,
compared to $98 million in the prior period.
The division is primarily (c. 80%) exposed to the residential
construction sector. Relative to the prior period, market
activity was subdued across the country, albeit more robust
in the Auckland region. In the Hawke’s Bay region, where
Tumu is located, cyclone-related insurance claims have
taken longer to come through than anticipated, and the
region is yet to see any significantly elevated post-cyclone
residential construction activity. Overall, the division
reported revenue 13% (or $129 million) below HY23, which
compared to a market volume decline of 17% (weighted for
the division’s sector exposure).
Inflationary pressures continued to be felt during HY24,
particularly across employee and lease costs. The division
also experienced competitive market pricing pressure
particularly in the timber and frame and truss categories
in PlaceMakers® and Tumu, as well as across Mico®’s key
lines such as PVC pipe and fittings. These cost and pricing
pressures were partly offset by the division’s focus on
optimising delivery fleet (including a reduction in the use
of third-party freight), reducing variable costs in line with
reduced sales activity, and lower discretionary spend. These
actions enabled gross margin in HY24 of 26.8%, which was
within 70 basis points of the prior period (HY23: 27.5%).
Overhead costs were 5% (or $10 million) lower than in HY23,
notwithstanding inflationary pressure and a full period of
ownership of Tumu.
EBIT before significant items of $35 million was $30 million
below the prior period. This was primarily due to the impact
of a weaker market on sales revenue (c. $40 million EBIT
impact) and a slight reduction in gross margin, partly offset
by an improved overhead position.
Trading cash flow for the division was solid at $42 million.
Cash collections remained robust, with debtor days
reducing to 38 days (HY23: 39 days), despite pressure on
customer liquidity.
Capital expenditure for the period was $10 million,
which was focused on PlaceMakers®’ new frame and
truss manufacturing plant in Auckland, intended to drive
increased operational efficiency and enable greater market
share growth for the business.
During the half year, PlaceMakers® opened a new branch in
Rolleston and completed a refurbishment of the New Lynn
branch, while Mico® opened a new Rolleston branch. The
division has also continued to mature its digital programme
with an ongoing focus on providing customers with a
seamless omnichannel experience.
Financial Summary
Six months ended 31 December
2023
NZ$M
2022
NZ$M
Gross revenue836965
External revenue817948
Gross margin26.8%2 7. 5%
EBIT3565
EBIT margin4.2%6.7%
Funds308299
Trading cash flow4298
Capital expenditure1043
Investments60
Divisional Overview
PlaceMakers®
Mico®
Tumu
Fletcher Building Limited 2024 Interim Financial Results
11
Concrete
(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 interim 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 interim financial statements for the period
ended 31 December 2023.
(3) Details of Significant items can be found in note 2.1 of the consolidated
interim financial statements.
The Concrete division reported gross revenue of $567 million, which was $13 million or 2% higher than
the prior period. EBIT before significant items was $70 million, compared to $81 million in the prior
period. EBIT margin was 12.3%, compared to 14.6% in the prior period. Trading cash flow of $87 million
was a strong increase on the $55 million in the prior period.
The division delivered robust top-line results. A revenue
increase of 2% versus HY23 compared to a market
volume decline of 13% (weighted for the division’s sector
exposure) and was partly offset by price and share gains.
This performance has resulted from the division pushing
harder into the more resilient commercial and infrastructure
segments, while also maximising the internal usage of
Golden Bay® cement supply. Winstone Aggregates®
increased revenue by 23% compared to the prior period,
which included higher transport revenues, while other
business units delivered revenues broadly in line with HY23.
A key focus for the period has been aligning the division’s
fixed and variable cost base to the current market
environment. In Firth®, this has involved closure or
repurposing of six regional concrete plants and reallocation
of trucks to maximise utilisation. In Golden Bay® and Humes®,
the focus has been on production efficiency and delivering
benefits from recent investments in debottlenecking and
operational improvements. Winstone Aggregates® was
impacted by temporary increases in operational maintenance
costs at its largest quarry early in HY24.
The division’s gross margin of 28.3% was 140 basis points
lower than prior period (HY23: 29.7%), mainly reflecting
the higher mix of revenue from the commercial and
infrastructure segments. Pricing to recover input cost
inflation (particularly in areas such as energy and domestic
freight) was otherwise solid. Divisional overhead costs
increased by c. 6% against the prior year, due to the addition
of The Urban Quarry® business. Excluding this acquisition,
overhead costs were 1% lower compared to HY23.
EBIT before significant items of $70 million was $11 million
below the prior period. The key driver was a softer market (c.
$15 million EBIT impact), and lower gross margin levels from a
higher mix of commercial and infrastructure revenues.
Trading cash flow for the division was strong at $87 million,
significantly up on prior period driven by disciplined working
capital management. Stock management has been a key
highlight, particularly in Humes® which has delivered a
material reduction from the prior period. Divisional debtor
days remained in line with the prior period.
Capital expenditure in the period of $34 million was focused
on asset renewals, fast-payback efficiency improvements,
and aggregate resource.
A key highlight for the period was the successful
integration of The Urban Quarry® business into Winstone
Aggregates®. This provides a platform to fast-track recycling
of construction and demolition waste, increasing the
division’s circular offering to customers. In the second half,
a significant focus will be the development of Firth’s® new
flagship ready mix concrete plant in Auckland.
Divisional Review
Firth® Industries
Golden Bay®
Winstone Aggregates®
Humes®
Financial Summary
Six months ended 31 December
2023
NZ$M
Restated
(1)
2022
NZ$M
Gross revenue567554
External revenue412409
Gross margin28.3%29.7%
EBIT before significant items
(2)
7081
EBIT margin before significant items
(2)
12.3%14.6%
Significant items
(3)
21
Funds810772
Trading cash flow8755
Capital expenditure3422
Investments7
Fletcher Building Limited 2024 Interim Financial Results
12
Australia
(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 interim financial statements for the period ended 31 December 2023.
(2) Details of Significant items can be found in note 2.1 of the consolidated interim financial statements.
The Australia division reported gross revenue of $1,444 million, 6% lower than the prior period. EBIT
before significant items was $78 million, compared with $82 million in the prior period. EBIT margin
increased to 5.4% compared to 5.3% in the prior period. Trading cash flow was an inflow of $11 million
compared to a $40 million outflow in the prior period.
The Australia Division saw a c. 8% decline in overall market
activity compared to the prior period. Residential finishing
trades were the most robust sector, leading to solid top-line
performances in Laminex® and Fletcher Insulation®. Iplex®
was impacted by reduced levels of civil project activity,
while Stramit® faced softer demand in the shed and
distributor market.
Elevated input cost inflation remained a feature of the trading
environment. While pressure eased on raw materials, costs
remained elevated in property, utilities, and labour. Despite
this, continued strong pricing governance and new products
brought to market delivered a gross margin improvement of
120 basis points compared to the prior period. The division
also pre-emptively restructured certain business lines in
anticipation of lower trading volumes.
EBIT before significant items of $78 million and EBIT margin
of 5.4% were both broadly in line with the prior period.
The building products businesses materially improved
EBIT compared with HY23, while Stramit® reported a slight
decline in the softening market. Tradelink®’s performance
was disappointing, delivering lower EBIT from a reduction
in market volumes but also market share loss. A $122 million
non-cash impairment and write-down of the business’s
carrying value was recorded as a result, classified as a
Significant item.
Trading cash flow for the division was an $11 million inflow
compared with a $40 million outflow in the prior period.
The improvement reflected an unwind of working capital
as market activity slowed towards the end of the half year.
The heightened credit risk with increases in construction
insolvencies is being well managed with builder payments
closely monitored and no material impacts during the period.
Capital expenditure in the period was $27 million,
with ongoing investments in the areas of new product
development, manufacturing automation technologies, and
digital omni-channel programmes.
The division’s ongoing focus on customers is producing
positive outcomes, with an improvement in customer
satisfaction to 43 from 20 in the prior period. This
improvement is largely attributed to the division's success
in achieving higher rates of DIFOT (Delivery in Full On Time)
and introducing new products such as Laminex® Surround
and silica-free engineered stone alternatives. Additionally,
the division has seen substantial growth in digital sales and
has gained market share in higher-margin segments, which
include Stramit® sheds and doors, Laminex® decorative
products, and the Oliveri® bathroom category.
Financial Summary
Six months ended 31 December
2023
NZ$M
2022
NZ$M
Gross revenue1,4441,534
External revenue1,4141,500
Gross margin33.1%31.9%
EBIT before significant items
(1)
7882
EBIT margin before significant items
(1)
5.4%5.3%
Significant items
(2)
(125)
Funds1,3311,448
Trading cash flow11(40)
Capital expenditure2716
Investments6
EBIT before significant items
(1)
Six months ended 31 December
2023
NZ$M
2022
NZ$M
Building Products Australia7264
Distribution Australia110
Steel Australia912
Divisional costs(4)(4)
Total7882
Distribution Australia:
Tradelink®
Oliveri® Solutions
Steel Australia:
Stramit®
Building Products
Australia:
Laminex® Australia
Iplex® Australia
Fletcher Insulation®
Fletcher Building Limited 2024 Interim Financial Results
13
Divisional Review
Residential and
Development
(1) The EBIT result includes a $1 million gain on revaluation of Vivid Living® investment property (2022: nil). There were no transfers of land from Fletcher Living® to
Vivid Living® in the current period (2022: $9 million).
(2) Capital expenditure includes investment property development.
The Residential and Development division reported gross revenue of $351 million, a 60% increase on
the prior period. EBIT for the division of $41 million was $8 million lower than the $49 million reported
in the prior period. EBIT margin decreased to 11.7% from 22.4%. Trading cash flow was an outflow of
$31 million compared to an outflow of $229 million in the prior period.
Following a challenging period from late 2021 to
early-2023, New Zealand housing market conditions
showed improvement through HY24. While elevated
interest rates continued to impact some customers’
ability to secure mortgage financing, overall activity
trended up especially in the first-home buyer / lower
price category. Pricing also began to stabilise in HY24
after 18 months of sharp contraction.
In Fletcher Residential, 419 units (including 47 apartments)
were taken to profit compared to 189 units (including 6
apartments) in the prior period. Clever Core®, the division’s
panelisation business, delivered 90 units in the period
(HY23: 59 units), and Vivid Living® opened its first retirement
development at Red Beach, completing 11 settlements in the
period.
Fletcher Residential EBIT of $41 million was ahead of the
prior period’s $33 million. The HY23 result included a
revaluation gain of $9 million from the transfer of land
from Fletcher Living® to Vivid Living®. Normalised for this,
Fletcher Residential EBIT in HY24 was $16 million ahead
of the prior period, and EBIT margin in HY24 of 11.4% was
broadly in line (HY23: 12.8%).
In Industrial Development, there were no sales in the period,
compared to three disposals in HY23 which delivered $16
million EBIT. This Industrial Development gain was the key
driver of higher EBIT margin in HY23.
Trading cash flow in HY24 was an outflow of $31 million
compared to an outflow of $229 million in the prior period.
An outflow in the first half of the year is normal as the
business builds homes for second half settlement. Divisional
funds employed at 31 December 2023 were $985 million,
compared to $915 million at 30 June 2023. This increase
was driven by the settlement of c. $110 million of land
purchases, including the first payment for The Hill at Ellerslie
Racecourse, partly offset by a reduction in housing work-
in-progress due to strong sales. Additionally, the division
paused a number of apartment projects until better market
conditions prevail.
At 31 December 2023, the division had a total of c. 4,500
sections under control. For the c. 3,200 sections and two
rural properties on balance sheet at December 2023, the
assessed market valuation updated during the half was
approximately $300 million higher than the book value,
providing a degree of margin resilience in future periods.
Key highlights for the period were the improved Fletcher
Residential sales run rate, averaging 19 units per week
(HY23: 12 units per week) and with 180 contracts already
executed to settle in second half of FY24. In Vivid Living®,
following the welcoming of its first residents at Red Beach,
the business has now commenced work on a second
offering in Karaka, South Auckland.
Financial Summary
Six months ended 31 December
2023
NZ$M
2022
NZ$M
Gross revenue351219
External revenue340214
EBIT
(1)
4149
EBIT margin
(1)
11.7%22.4%
Funds985914
Trading cash flow(31)(229)
Capital expenditure
(2)
129
EBIT
(1)
Six months ended 31 December
2023
NZ$M
2022
NZ$M
Fletcher Residential
(1)
4133
Industrial Development16
Total4149
Fletcher Living®
Vivid Living®
Fletcher Apartments
Clever Core®
Fletcher Building Limited 2024 Interim Financial Results
14
Construction
Financial Summary
Six months ended 31 December
2023
NZ$M
2022
NZ$M
Gross revenue
(1)
699650
External revenue695594
EBIT before significant items
(1, 2)
(1)9
EBIT margin before significant items
(1, 2)
(0.1%)1.4%
Significant items
(3)
(179)(150)
Funds216164
Trading cash flow
(1)
(313)(28)
Capital expenditure49
The Construction division reported gross revenue of $699 million, which was $49 million or 8%
higher than the prior period. Prior to elimination of intra-Group margin on the Winstone Wallboards®
plant, EBIT before significant items was a loss of $1 million, compared to a profit of $9 million in the
prior period. Trading cash flow was an outflow of $313 million compared to a $28 million outflow in
the prior period. Excluding legacy projects, trading cash flow resulted in an outflow of $18 million.
The increase in top-line performance compared to the
prior period was driven by higher work volumes in both
the Higgins® and Brian Perry Civil® businesses. Higgins®
benefited as reconstruction works commenced following
the destructive weather events in FY23, and Brian Perry
Civil® from significant programmes of work across the water,
airports and marine sectors. A key highlight for the period
in Brian Perry Civil® was the successful commencement of
work on the Auckland Airport Taxiway Mike project.
Gross margin in HY24 was 7.1%, compared to 8.9% in
the prior period. Weaker gross margin was due to a
combination of remedial costs on historical Higgins®
projects, and slippage of margin recognition on some
larger Brian Perry Civil® projects to second half of FY24.
Divisional cost controls remained tight, with overheads
at 7.6% of gross revenue (HY23: 7.8%).
Significant items for the period were $179 million, which
included the additional $165 million provisions for increased
costs and lower expected Contract Works Insurance (CWI)
recoveries on the NZICC project, and $15 million of expected
remedial works costs for the Wellington International
Airport Limited (WIAL), both projects are part of the legacy
vertical building operations being wound down. This was
partially offset from income recognised on recovery of
Cyclone Gabrielle and North Island Floods insurance claims
receipted in the period.
Trading cash flow for the division was an outflow of
$313 million. This was driven by outflows of $295 million
associated with legacy projects. Excluding legacy impacts,
trading cash flow as an outflow of $18 million, principally
driven by increased bitumen inventory levels held by
Higgins® arising from changes in the New Zealand bitumen
supply chain, as well as one-off buildings and other asset
reparation costs caused by Cyclone Gabrielle in the Hawke's
Bay region last year.
The orderbook at 31 December 2023 was $2.5 billion, in line
with $2.8 billion at 30 June 2023. It continues to constitute
mainly lower risk, smaller self-perform work; national and
local road maintenance contracts; and alliance infrastructure
projects. The division’s share of the Transport Rebuild East
Coast (TREC) project was also recognised in the period,
and is expected to support strong work volumes over the
forward 24 months.
(1) Prior to elimination of intra-Group margin in relation to Winstone
Wallboards® Tauriko 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 interim financial
statements for the period ended 31 December 2023.
(3) Details of Significant items can be found in note 2.1 of the consolidated
interim financial statements.
Note: External revenue includes income from the Group's Vertical Buildings
Business (December 2023: $51 million; December 2022: $52 million; June
2023: $104 million), which the Group is in the process of exiting. The New
Zealand International Convention Centre and Hobson Street Hotel (NZICC)
represents the largest project to complete in this sector. EBIT before
significant items, however, excludes any earnings from these projects.
Divisional Review
Major Projects
Brian Perry Civil®
Higgins®
Buildings
South Pacific
Fletcher Building Limited 2024 Interim Financial Results
15
Consolidated Income Statement
For the six months ended 31 December 2023
Note
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Revenue
4,248
4,284 8,469
Cost of goods sold
(3,024)
(2,975)(5,838)
Gross margin
1,224
1,309 2,631
Selling, general and administration expenses
(966)
(975)(1,883)
Share of profits of associates and joint ventures
5
16 34
Revaluation gain on investment property
1
10 16
Significant items2.1
(308)
(154)(301)
Earnings/(loss) before interest and taxation (EBIT)
(44)
206 497
Lease interest expense
(32)
(30)(60)
Funding costs
(62)
(39)(94)
Earnings/(loss) before taxation
(138)
137 343
Taxation benefit/(expense)5
21
(34)(89)
Earnings/(loss) after taxation
(117)
103 254
Earnings attributable to non-controlling interests
(3)
(11)(19)
Net earnings/(loss) attributable to the shareholders(120)
92 235
Net earnings per share (cents)
Basic
(15.3)
11.7 30.0
Diluted
(15.3)
11.3 28.4
Weighted average number of shares outstanding (millions of shares)
Basic
783
783 783
Diluted
783
861 848
Dividends declared per share (cents) 18.0 34.0
The accompanying notes form part of and are to be read in conjunction with these consolidated interim financial statements.
On behalf of the Board, 14 February 2024.
Bruce Hassall Robert McDonald
Chair Director
Fletcher Building Limited 2024 Interim Financial Results
16
Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2023
Note
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Net earnings/(loss) attributable to shareholders
(120)
92 235
Net earnings attributable to non-controlling interests
3
11 19
Net earnings/(loss) after tax
(117)
103 254
Items that may be reclassified subsequently to Consolidated Income
Statement in the future:
Movement in cash flow hedge reserve
(17)
(4)2
Movement in currency translation reserve
(17)
(53)(23)
(34)
(57)(21)
Other comprehensive income(34)
(57)(21)
Total comprehensive income/(loss) for the period(151)
46 233
The accompanying notes form part of and are to be read in conjunction with these consolidated interim financial statements.
Fletcher Building Limited 2024 Interim Financial Results
17
Consolidated Statement of Movements in Equity
For the six months ended 31 December 2023
NZ$MShare capitalRetained earningsShare-based payments reserveCash flow hedge reserveCurrency translation reservePension reserveTotalNon-controlling interestsTotal equity
Total equity at 30 June 2022 (audited)3,003 705 26 8 (55)63 3,750 15 3,765
Total comprehensive income for the period92 (4)(53)35 11 46
Movement in non-controlling interests (8)(8)
Dividends paid to shareholders of the parent(172)(172)(172)
Movement in share-based payment reserve1 5 6 6
Movement in treasury stock(13)(13)(13)
Total equity at 31 December 2022 (unaudited)2,991 630 26 4 (108)63 3,606 18 3,624
Total comprehensive income for the period143 6 30 179 8 187
Movement in non-controlling interests 1 1
Dividends paid to shareholders of the parent(139)(139)(139)
Movement in share-based payment reserve2 2 4 4
Movement in treasury stock
Total equity at 30 June 2023 (audited)2,993 634 28 10 (78)63 3,650 27 3,677
Total comprehensive income/(loss) for the period (120) (17)(17)(154) 3 (151)
Movement in non-controlling interests (7)(7)
Dividends paid to shareholders of the parent (124)(124)(124)
Movement in share-based payment reserve 4 2 6 6
Total equity at 31 December 2023 (unaudited)2,993 394 30 (7)(95)63 3,378 23 3,401
The accompanying notes form part of and are to be read in conjunction with these consolidated interim financial statements.
Fletcher Building Limited 2024 Interim Financial Results
18
AssetsNote
Unaudited
Dec 2023
NZ$M
Unaudited
Dec 2022
NZ$M
Audited
June 2023
NZ$M
Current assets:
Cash and cash equivalents
215
272 365
Current tax assets
11
6
Contract assets3
178
110 141
Derivatives
7
6 18
Debtors
978
1,229 1,176
Inventories
1,7 72
1,695 1,624
Total current assets 3,1 6 1
3,312 3,330
Non-current assets:
Property, plant and equipment
2,122
1,919 2,072
Investment property
71
43 58
Intangible assets
1,170
1,156 1,253
Right-of-use assets
1,322
1,344 1,324
Investments in associates and joint ventures
222
208 225
Inventories
467
447 456
Retirement plan assets
126
123 126
Derivatives
28
14 44
Deferred tax assets
236
226 193
Total non-current assets 5,764
5,480 5,751
Total assets8,925
8,792 9,081
Liabilities
Current liabilities:
Creditors, accruals and other liabilities
1,166
1,335 1,416
Provisions
340
302 403
Lease liabilities
190
185 192
Current tax liabilities6
Derivatives
23
7 20
Contract liabilities3
71
110 82
Borrowings6
84
70 88
Total current liabilities 1,874
2,015 2,201
Non-current liabilities:
Creditors, accruals and other liabilities
102
29 52
Provisions
39
30 31
Lease liabilities
1,401
1,451 1,404
Derivatives
8
5 1
Borrowings6
2,100
1,638 1,715
Total non-current liabilities 3,650
3,153 3,203
Total liabilities 5,524
5,168 5,404
Equity
Share capital
2,993
2,991 2,993
Reserves
385
615 657
Shareholders' funds
3,378
3,606 3,650
Non-controlling interests
23
18 27
Total equity 3,401
3,624 3,677
Total liabilities and equity8,925
8,792 9,081
The accompanying notes form part of and are to be read in conjunction with these consolidated interim financial statements.
Consolidated Balance Sheet
As at 31 December 2023
Fletcher Building Limited 2024 Interim Financial Results
19
Consolidated Statement of Cash Flows
For the six months ended 31 December 2023
Note
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Cash flow from operating activities
Receipts from customers
4,406
4,344 8,496
Dividends received
5
1 4
Payments to suppliers, employees and other
(4,427)
(4,326)( 7,7 6 9 )
Interest paid
(89)
(68)(152)
Income tax paid
(21)
(154)(191)
Net cash from operating activities
10
(126)
(203)388
Cash flow from investing activities
Sale of property, plant and equipment
3
5 6
Purchase of subsidiaries
(7)
(57)(183)
Purchase of property, plant and equipment and intangible assets
(183)
(240)(445)
Payments for investment property and investment property under
development
(12)
(9)(19)
Net cash from investing activities(199)
(301)(641)
Cash flow from financing activities
Issue of capital notes10 50
Repurchase of capital notes(56)
Repurchase of shares - transferred to treasury stock(13)(13)
Drawdown of borrowings
700
692 774
Repayment of borrowings
(301)
(7)(3)
Principal elements of lease payments
(100)
(97)(196)
Contributions from non-controlling interests
11
23 37
Distribution to non-controlling interests
(7)
(8)(13)
Dividends paid to shareholders of the parent
(124)
(172)(311)
Net cash from financing activities179
428 269
Net movement in cash held
(146)
(76)16
Add: opening cash and cash equivalents
365
351 351
Effect of exchange rate changes on net cash
(4)
(3)(2)
Closing cash and cash equivalents215
272 365
The accompanying notes form part of and are to be read in conjunction with these consolidated interim financial statements.
Fletcher Building Limited 2024 Interim Financial Results
20
Fletcher Building Financial Statements
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 of $165 million and a provision to remediate the Wellington International Airport Limited carpark of $15 million.
These provisions have been recognised as Significant items in the Consolidated Income Statement. Refer to note 2.1.
–The Group recognised a non-cash impairment and write-down of $122 million in relation to the Tradelink® cash generating unit
(CGU) which includes impairment and write-down of Tradelink®'s remaining goodwill and brand balances. Refer to note 2.2.
–On 3 October 2023, the Group announced that it has been assigned a credit rating from an accredited rating agency. Refer to note 6.
–On 18 December 2023, the Group executed a new loan facility with a three-bank syndicate expiring on 30 November 2026. Refer to note 6.
Notes to the Consolidated Financial Statements
Statement of accounting policies
1. GENERAL INFORMATION
The consolidated interim financial statements presented are those of Fletcher Building Limited (the Company) and its subsidiaries (the
Group). The Group is primarily involved in the manufacturing and distribution of building materials and residential, commercial and
infrastructure construction. Fletcher Building Limited is domiciled in New Zealand. The registered office of the Company is 810 Great
South Road, Penrose, Auckland.
The Company is registered under the Companies Act 1993 and is a Financial Markets Conduct Act (FMCA) 2013 reporting entity in terms
of the Financial Reporting Act 2013. The Group is a for-profit entity.
Basis of presentation
These consolidated interim financial statements have been prepared in accordance with Generally Accepted Accounting Practice in
New Zealand and the requirements of the Financial Markets Conduct Act 2013. Generally Accepted Accounting Practice is the New
Zealand equivalent to International Financial Reporting Standards (NZ IFRS).
These financial statements are presented in New Zealand dollars ($), which is the Group’s presentation currency, and rounded to the
nearest million unless otherwise stated.
The consolidated interim financial statements comply with NZ IAS 34 Interim Financial Reporting and do not include all the information
and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group’s annual
consolidated financial statements as at 30 June 2023. In complying with NZ IAS 34, these financial statements comply with International
Accounting Standard 34 Interim Financial Reporting.
Accounting policies are disclosed within each of the applicable notes to the consolidated interim financial statements and are marked with
this colour.
The estimates and judgements that are critical to the determination of the amounts reported in the consolidated interim financial statements
have been disclosed with the relevant notes in the consolidated interim financial statements and are marked with this colour.
The following key exchanges rates were applied in the preparation of the consolidated interim financial statements:
NZD/AUD
Unaudited
Six months
Dec 2023
Unaudited
Six months
Dec 2022
Audited
Year ended
June 2023
Average rates0.92310.90690.9142
Closing rates0.92640.93630.9173
Fletcher Building Limited 2024 Interim Financial Results
21
2. KEY ESTIMATES, JUDGEMENTS AND OTHER FINANCIAL INFORMATION
2.1 SIGNIFICANT ITEMS
In reporting financial information, the Group presents non-GAAP performance measures, which are not defined or specified under the
requirements of NZ IFRS.
The Group believes that these non-GAAP measures, which are not considered to be a substitute for or superior to NZ IFRS measures, provide
stakeholders with additional useful information on the performance of the business. The non-GAAP measures are consistent with how the
business performance is planned and reported to the Board and Audit and Risk Committee.
The Group makes certain significant item adjustments to the statutory profit measures in order to derive non-GAAP measures. The Group
discloses certain non-operating items as significant items. The Group’s policy is to recognise significant items for transactions or events
outside of the Group's ongoing operations that have a significant impact on reported profit. This policy provides stakeholders with additional
useful information as a means to assess the year-on-year trading performance of the Group. On this basis, significant items include, but are
not limited to, the following:
–Gains and losses arising from mergers and acquisition (M&A) activity (i.e. business acquisitions and disposals) and associated costs.
–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.
As at 31 December 2023, significant items totalled $308 million (December 2022: $154 million), this amount captures both gains and
losses from transactions or events outside of the Group's ongoing operations that have had significant impact on the Group's reported
profit and loss in the period, including:
–$180 million relates to construction provisions recognised in the period, of which $165 million relates to increased costs and lower
expected Contract Works Insurance (CWI) recoveries on the NZICC project, and $15 million of costs for remedial works at Wellington
International Airport Limited, as the Group winds down its operations in the vertical building sector. Refer to note 3.
–$122 million relates to the non-cash impairment and write-down of Tradelink® assets which includes Tradelink®'s remaining goodwill
and brand balances. Refer to note 2.2.
–$6 million of costs to transition Winstone Wallboards® operations from Auckland to Tauriko (Bay of Plenty, New Zealand).
–$3 million of legal fees incurred by Iplex® Australia in relation to Pro-fit pipes matter. Refer to note 8.
–$3 million of gains were recognised by Concrete ($1 million) and Construction ($2 million) divisions following receipt of insurance
claims, all relating to property damage losses and costs of direct remedial works following Cyclone Gabrielle and North Island Floods.
–$1 million of gains were recognised following Fletcher Concrete and Infrastructure Limited (FCIL, a fully owned subsidiary of FBL)
acquisition of the remaining 50% interest in Cromwell Certified Concrete Limited (CCCL) on 25 July 2023 for a consideration of $6.5
million. The previously held equity interest is remeasured to its fair value at the acquisition date with the gain recognised in profit and
loss (NZ IFRS 3 Business Combinations).
2.2 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 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.
The Group performs a detailed impairment assessment annually and considers indicators of impairment at each reporting date. At
31 December 2023, the Group performed a review of indicators of impairment for all CGUs with significant balances of indefinite life
intangible assets. No indicators of impairment were identified for the carrying amounts of these CGUs' assets, with the exception of the
Tradelink® CGU.
Notes to the Consolidated Financial Statements (cont.)
Fletcher Building Limited 2024 Interim Financial Results
22
Notes to the Consolidated Financial Statements (cont.)
Tradelink®
In 2018, the Group and its Australia divisional management team initiated a comprehensive strategic review of the Tradelink® CGU
(Australia business segment). This process involved identifying and implementing several key initiatives aimed at boosting earnings
and increasing profit margins. Although these measures led to an improvement in business performance, profit margins continued
to lag expectations.
During the first half of FY24, a full business review was completed, with strategic initiatives identified to strengthen Tradelink®’s
market position. Despite this, trading performance in the first half has continued to lag expectations. Acknowledging the expected
short-to-medium-term economic forecasts and market environment, and the time for strategic initiatives to reach full potential,
management have recognised a $122 million non-cash impairment and write-down of Tradelink®’s assets, based on lower earnings
forecasts in line with the business’s recent performance. The non-cash impairment and write-down includes the impairment of the
remaining Goodwill (A$57 million) and Brand (A$48 million) assets. Consequently, the associated deferred tax liability on Brands
(A$15 million) recognised in Tradelink® was also released, as an adjustment to tax expense.
The recoverable value of the business CGU of A$152 million as at 31 December 2023 was assessed using a value-in-use discounted
cash flow method. This valuation is based on a five-year business plan, formulated with consideration of the company's historical
performance. The long-term growth rate applied to the forecast's fifth-year cash flows is 2.5% (June 2023: 2.5%), and a post-tax
discount rate of 8.1% (June 2023: 8.1%) has been used in the impairment model.
2.3 SUPPLEMENTARY DISCLOSURES: EARNINGS PER SHARE
The below disclosure has been included to provide additional useful information by removing the impact of significant items in the
current and prior year, and the resulting impact on the earnings per share measure.
The effect of significant items on earnings per share is as follows:
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Net earnings/(loss) after taxation (as per Consolidated Income Statement)
(120)
92 235
Add back: significant items before taxation
308
154 301
Less: tax benefit on signification items
(71)
(43)(84)
Net earnings before significant items
117
203 452
Net earnings per share before significant items (cents)
14.9
25.9 57.7
Net earnings per share - as reported per Consolidated Income Statement (cents)(15.3)
11.7 30.0
Fletcher Building Limited 2024 Interim Financial Results
23
3. 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 31 December 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
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.
Notes to the Consolidated Financial Statements (cont.)
Fletcher Building Limited 2024 Interim Financial Results
24
Notes to the Consolidated Financial Statements (cont.)
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, Contingent Liabilities and Contingent Assets; 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.
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 (> $200 million original contract value) as at 31 December 2023:
Business unit
Forecast
completion*
Percentage of
completion
(% cost)
New Zealand International Convention Centre and Hobson Street Hotel (NZICC)
- Fixed price contract and fire reinstatement
Buildings
2024
83%
Pūhoi to Warkworth - Fixed price contract (Public Private Partnership)Infrastructure
2024
97%
*Calendar year
Revenue backlog
Revenue backlog, as disclosed below, refers to the level of construction work the Group is contracted to but is not yet complete as at
period end. This represents the performance obligations that are yet to be completed for the construction contracts active as at 31
December 2023. The long-term nature of the contracts held by the Buildings, Infrastructure, Brian Perry Civil® and Higgins® businesses
will see these performance obligations completed over a period generally between one to five years, although some may extend longer.
Revenue Backlog by Business Units as at 31 December 2023:
Current Revenue
Backlog
NZ$M
Top 5 projects as
a % of Revenue
backlog
NZ$M
Buildings
196
100%
Infrastructure
322
98%
Brian Perry Civil®
520
72%
Higgins®
1,430
77%
South Pacific
57
96%
2,525
N/A
Contract assets
The gross amount of construction and maintenance work in progress consists of costs attributable to work performed and emerging profit
after providing for any foreseeable losses. In applying the accounting policies on providing for these losses, accounting judgement is required.
Construction contracts with cost and margin in advance of billings are presented as part of contract assets.
Contract liabilities
Construction contracts where the total progress billings issued to clients (together with foreseeable losses if applicable) on a project
exceed the costs incurred to date plus recognised profit on the contract are recognised as a liability.
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
Dec 2023
NZ$M
Construction contracts with cost and margin in advance of billings
178
110 141
Contract assets
178
110 141
Construction contracts with billings in advance of cost and margin
71
110 82
Contract liabilities
71
110 82
Fletcher Building Limited 2024 Interim Financial Results
25
Construction projects update
As announced on 5 February 2024, the Company’s latest assessment of forecast costs and revenue for the New Zealand International
Convention Centre and Hobson Street Hotel (NZICC) and expected cost of the remediation for the Wellington International Airport Limited
carpark (WIAL) projects, resulted in additional provisions of $165 million on NZICC and $15 million on WIAL carpark being recognised in the
interim financial statements as at 31 December 2023, both classified as Significant items.
The NZICC project remains on schedule for completion by late calendar year 2024. All carparks are now complete, the Hobson Street
Hotel is scheduled to be handed over to SkyCity in February 2024, and steel remediation throughout the International Convention Centre
is 98% complete. Despite this progress, actual and expected costs to complete the project have increased, principally in the areas of steel
remediation, internal fit-out, and installation of operating systems. The increased costs are primarily due to higher levels of subcontractor
resource required to deliver the final stage of the project. In addition, a portion of the Company’s claims against the project Contract Works
Insurance (CWI) may not be recoverable.
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 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 forecasted that FCC will secure revenues of circa $110 million in total across
remaining CWI claims and 'BAU' client revenues (i.e. for work that was still to complete at the 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.
The Group continues to pursue recoveries under the NZICC Third Party Liability (TPL) insurance policy of more than $100 million. 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.
On the WIAL carpark project, Fletcher Construction Company Limited (FCC) completed a multi-level carpark for Wellington International
Airport Limited (WIAL) in October 2018. The client 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.
Based on its latest assessment of the estimated remedial costs and expected recoveries, FCC has recognised a provision of $15 million in the
interim financial statements as at 31 December 2023, classified as a Significant item.
FCC continues to work with WIAL to agree a remediation solution to quality issues identified and to settle claims. These matters may take
some time to be resolved. It is possible that the final provision could be below or above the levels currently allowed for, and would ultimately
depend on the solution agreed and associated costs, and final claim settlements.
On Pūhoi to Warkworth, where FCC has a 50% share of the Construction JV, the Group has reassessed the facts and circumstances known
to it relating to: the estimated net cost to complete the programme of works; the merits of Construction JV’s claims and likelihood of receipt
of further relief under the Project Agreement and project insurance policies. Based on this assessment, the Group has concluded that
no additional provision is required to be recognised as at 31 December 2023. There remains a risk that, ultimately, the full amount of the
Construction JV’s claims will not be recovered.
Notes to the Consolidated Financial Statements (cont.)
Fletcher Building Limited 2024 Interim Financial Results
26
Notes to the Consolidated Financial Statements (cont.)
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
Gross Revenue
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
and restated
(1)
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Building Products
703
768 1,443
Distribution
836
965 1,824
Concrete
567
554 1,085
Australia
1,444
1,534 3,016
Materials and distribution
3,550
3,821 7,368
Residential and Development
351
219 607
Construction
699
650 1,319
Corporate and other
6
5 10
Group
4,606
4,695 9,304
Less: intercompany revenue
(358)
(411) (835)
External revenue
4,248
4,284 8,469
External Revenue
Building Products
570
619 1,154
Distribution
817
948 1,792
Concrete
412
409 800
Australia
1,414
1,500 2,953
Materials and distribution
3,213
3,476 6,699
Residential and Development
340
214 594
Construction
695
594 1,176
Group
4,248
4,284 8,469
Note: External revenue includes income from the Group's Vertical Buildings Business (December 2023: $51 million; December 2022: $52 million; June 2023: $104 million), which the
Group is in the process of exiting. The New Zealand International Convention Centre and Hobson Street Hotel (NZICC) represents the largest project to complete in this sector. EBIT
before significant items, however, excludes any earnings from these projects.
Fletcher Building Limited 2024 Interim Financial Results
27
Notes to the Consolidated Financial Statements (cont.)
EBIT before significant items
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
and restated
(1)
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Building Products
78
111 215
Distribution
35
65 141
Concrete
70
81 156
Australia
78
82 180
Materials and distribution
261
339 692
Residential and Development
41
49 147
Construction
(1)
5 26
Corporate and other
(37)
(33) (67)
Group
264
360 798
(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 under the Concrete division. This results in an increase to the Concrete division and decrease in Building Products division of the comparative Gross Revenue
(December 2022: $67 million), External Revenue (December 2022: $65 million), EBIT before significant items (December 2022: $7 million), Funds base (December 2022: $141
million), Depreciation, depletion and amortisation expense (December 2022: $3 million) and Capital expenditure (December 2022: $1 million) recognised.
Funds*
Building Products
1,256
1,039 1,210
Distribution
308
299 312
Concrete
810
772 789
Australia
1,331
1,448 1,368
Materials and distribution
3,705
3,558 3,679
Residential and Development
985
914 915
Construction
216
164 85
Corporate and other
160
115 158
Group funds employed
5,066
4,751 4,837
Net debt
(1,969)
(1,436) (1,438)
Deferred tax (excl. deferred tax liability on brands)
304
309 278
Group total equity
3,401
3,624 3,677
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes.
Depreciation, depletion and amortisation expense
Building Products
32
24 48
Distribution
27
27 53
Concrete
37
36 70
Australia
65
66 132
Materials and distribution
161
153 303
Residential and Development
2
1 3
Construction
20
20 39
Corporate and other
8
6 13
Group
191
180 358
Fletcher Building Limited 2024 Interim Financial Results
28
Notes to the Consolidated Financial Statements (cont.)
Capital expenditure
+
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
and restated
(1)
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Building Products
75
125 191
Distribution
10
43 62
Concrete
34
22 65
Australia
27
16 59
Materials and distribution
146
206 377
Residential and Development
12
9 23
Construction
4
9 19
Corporate and other
26
23 42
Group
188
247 461
+ 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
has 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 (December 2022: $67 million), External Revenue (December 2022: $65 million), EBIT before significant items (December 2022: $7 million), Funds base (December 2022:
$141 million), Depreciation, depletion and amortisation expense (December 2022: $3 million) and Capital expenditure (December 2022: $1 million) recognised.
Geographic segments
External revenue
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
New Zealand
2,7 76
2,705 5,353
Australia
1,414
1,507 2,959
Other jurisdictions
58
72 157
Group
4,248
4,284 8,469
EBIT before significant items
New Zealand
188
272 612
Australia
75
82 177
Other jurisdictions
1
6 9
Group
264
360 798
Funds*
New Zealand
3,654
3,196 3,403
Australia
1,344
1,497 1,381
Other jurisdictions
68
5853
Group
5,066
4,7514,837
Non-current assets
+
New Zealand
3,898
3,499 3,762
Australia
1,428
1,572 1,574
Other jurisdictions
48
46 52
Group
5,374
5,117 5,388
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes.
+ Non-current assets exclude deferred tax assets, retirement plan surplus and financial instruments.
Fletcher Building Limited 2024 Interim Financial Results
29
Notes to the Consolidated Financial Statements (cont.)
5. 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.
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Earnings/(loss) before taxation(138)
137343
Taxation at 28 cents per dollar
(39)
3896
Adjusted for:
Difference in tax rates
(2)
12
Non-assessable income
(2)
(9)(14)
Non-deductible expenses
21
24
Tax gains for which no deferred tax asset was recognised(1)
Utilisation of previous unrecognised tax losses
Tax in respect of prior years
1
31
Tax expense/(benefit) on earnings(21)
3489
Tax expense on earnings before significant items
50
77173
Tax benefit on significant items
(71)
(43)(84)
(21)
3489
Total current taxation expense
16
31130
Total deferred taxation expense/(benefit)
(37)
3(41)
(21)
3489
The net deferred tax asset balance of $236 million at 31 December 2023 largely comprises Construction provisions and tax losses
incurred in the current and prior periods. It is expected there will be sufficient future earnings in New Zealand and Australia to utilise the
deferred tax asset in each of these jurisdictions.
6. BORROWINGS
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Private placements
476
461 484
Bank loans
1,344
860 946
Capital notes
343
359 343
Other loans
21
28 30
Carrying value of borrowings (as per Consolidated Balance Sheet)2,184
1,708 1,803
Less: value of derivatives used to manage changes in hedged risks
on debt instruments
(20)
(5)(26)
Economic debt2,164
1,703 1,777
Less: Cash and cash equivalents
(215)
(272)(365)
Net debt1,949
1,431 1,412
Fletcher Building Limited 2024 Interim Financial Results
30
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Carrying value of borrowings included within the Consolidated Balance
Sheet as follows:
Current borrowings
84
70 88
Non-current borrowings
2,100
1,638 1,715
Carrying value of borrowings (as per Consolidated Balance Sheet)2,184 1,708 1,803
On 3 October 2023, the Group announced that it has been assigned an investment grade credit rating from an accredited rating
agency, Moody’s Investors Service, of Baa2 with a stable outlook.
On 18 December 2023, the Group executed a NZD400 million loan facility with a three-bank syndicate expiring on 30 November 2026.
The three banks are all New Zealand registered. The facility comprises a NZD310 million revolving credit tranche and a NZD90 million
term loan tranche. As at 31 December 2023 the facility was fully drawn. This facility replaces and extends a NZD300 million bi-lateral
bank revolving credit facility with expiry date 31 October 2024, which was repaid in full and cancelled on 18 December 2023.
7. 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.
Financial instruments are measured at fair value using the following fair value measurement hierarchy:
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).
The interest rates across all currencies used to discount future principal and interest cash flows are between 2.1% and 8.3% (December
2022: 2.3% and 6.8%; June 2023: 2.7% and 7.5%) including margins, for both accounting and disclosure purposes.
8. CONTINGENT LIABILITIES
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 of the
Group’s subsidiaries.
Notes to the Consolidated Financial Statements (cont.)
Fletcher Building Limited 2024 Interim Financial Results
31
Product claims
As noted in prior disclosures, including the 2023 Annual Financial Results and NZX announcements on 17 April 2023 and 13 October 2023,
issues have been raised in respect of the hot and cold water polybutylene pipe product Iplex® Australia previously manufactured (under the
name "Pro-fit").
The issues relate to water leaks in homes, primarily built by group home builders in Western Australia, which have required repair or
replacement of the Pro-fit pipes and, in some cases, repair to damage to the affected homes.
Iplex® Australia started manufacturing Pro-fit with Typlex resin from mid-2017 and those products represented the bulk of sales after that
time. Iplex® Australia ceased the sale of Pro-fit in mid-2022. The Pro-fit product was sold into other states of Australia but not New Zealand.
Iplex® Australia is dependent on builders for information about the failures. Reports to Iplex® Australia are that, to date, about 2200 of the
houses constructed in Western Australia and 37 of the houses constructed across the rest of Australia using Pro-fit with Typlex resin have
experienced leaks. In the Company’s October release, these numbers were 1908 and 28 respectively. Iplex® Australia now estimate that
about 15,000 homes were built with Pro-fit with Typlex resin in Western Australia and another 15,000 in other states.
The Western Australia building regulator investigated the matter and, as earlier advised to the market, informed Iplex® Australia in August
2023 that "concerns were identified" regarding the manufacturing process used for Pro-fit by Iplex® Australia. That regulator also said it had
ruled out plumbing installation practices as being the cause of the leaks.
WA Consumer Protection is investigating whether there is sufficient evidence to recommend that the WA Minister compulsorily recall Pro-fit
which was manufactured using the Typlex resin. Iplex® Australia has been responding to requests for information in respect of that inquiry,
which as at the time of preparation of these Statements, is on-going.
As previously advised, third party plumbers and builders in Western Australia have asserted that the cause of the Pro-fit plumbing failures is a
manufacturing defect.
Iplex® Australia has undertaken or commissioned a substantial battery of tests to identify the cause of the plumbing failures. None has
identified a manufacturing defect. The information available to Iplex® Australia and the advice it has received from experts after completing
all the tests they require to opine on causation, clearly points to plumbing installation failures as the cause of the Pro-fit leaks.
Despite that conclusion and that Pro-fit pipes conform to Australian Standards, Iplex® Australia is conducting other tests with an international
laboratory to try to emulate the conditions and poor installation practices seen in Western Australian homes and so isolate the same mode of
failures and the same rate of failures as between resin types. To date, it has not been able to do so. The results of these tests, which will take
time to be obtained, may help design an appropriate solution for the industry and the homeowners.
Iplex® Australia continues to work on the design of an appropriate industry path forward to resolve these issues in a timely and efficient way.
However, this may be affected by the WA Government’s position on a recall. Under the relevant law, a recall is not dependant on whether the
Pro-fit product is defective but, instead, whether the WA Minister appropriately determines that it will or may injure a person and whether
the suppliers are doing enough to prevent that. Iplex® Australia believes a recall is not a supportable remedy in the circumstances and, in any
event, would be manifestly inappropriate.
As at the time of preparation of these Statements, Iplex® Australia is not aware of what the WA Consumer Protection’s recommendation will
be, when it will be made or how the WA Minister will respond to any such recommendation.
If there is a compulsory recall, the path forward and the implications for Iplex® Australia (and the Group) will be determined by the terms of
that recall, including geographic scope, timing and cost. A recall would also not preclude litigation or exposure to other legal risks.
If there is no compulsory recall, the path forward will be informed by the cause(s) identified, the design and nature of a response plan for
homeowners, whether those matters are agreed or contested, whether builders participate, 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 full or partial product replacement in the homes where Pro-fit was installed, including in homes that have not and may not experience
any leaks.
Legal claims against Iplex® Australia may arise, including via consumer class actions. No legal proceeding has been commenced against
Iplex® Australia. If that changes, final judgment may not be reached for some time.
After the balance date, the WA Minister wrote to Iplex® Australia to encourage it to review the quantum of its A$15m Interim Investigation
fund allocated to support Perth’s building industry and consider increasing it to permanently address the issues with the Pro-fit failures.
Iplex® Australia engaged with the WA Minister in response and to further discuss how an industry solution may evolve.
Iplex® Australia’s exposure to future costs, if any, will depend on the final determination of a number of matters, including:
–whether a recall order is issued and, if so, the geographic scope and nature of its terms;
–the determination as to cause(s) of the leaks and the allocation of responsibility between Iplex® Australia and other parties;
–whether Iplex® Australia is found to have liability on other grounds, such as under consumer protection laws;
–whether an industry solution to resolve the plumbing failures is implemented, which industry players participate, and how
costs are borne between the parties;
–the reason for, and the type and scale of, remediation required, including the cost of undertaking it;
–other losses suffered by third parties as a result of the failures;
–if and how any relevant insurance policies respond (although it is currently not expected that there will be a significant
contribution from the Group's insurers in respect of this matter); and
–the time frames over which remediation/payments may be required.
At balance date, given current facts and circumstances, Iplex® Australia has concluded it does not have a present obligation to any party
beyond the Investigation Fund it has put in place (refer to note 9). On that basis, no provision for any settlement relating to the matter is
made in these financial statements.
Ultimately, if Iplex® Australia is ordered to compulsorily recall the product or it is found or agrees to bear full or part responsibility for this
issue, the cost to it in performing the order or rectifying homes with Pro-fit installed, as well as to meet any damages claims, fines and other
costs, could have a significantly material impact on the Group’s financial position. Disclosure of any possible impact would be materially
prejudicial to the Group’s commercial interests.
Notes to the Consolidated Financial Statements (cont.)
Fletcher Building Limited 2024 Interim Financial Results
32
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 has filed its Defence, denying all claims. The next step is for the Court to issue directions as to how the matter will be conducted.
A hearing date for the substantive matter is not expected for some time.
9. PROVISIONS
Iplex® Australia provision for Investigation Fund
As previously advised, in the prior year Iplex® Australia had made a provision of A$15 million for certain costs associated with this matter,
which was classified 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 relates to costs expected to be incurred in investigating this matter, contributing to the cost of repairs and
replacement work by Western Australian builders who choose to do so in the interim (in return for the provision of data and access to homes
which have had plumbing failures) and fund the work to identify a solution for the industry, as described in the Company’s 17 April 2023 NZX
announcement. As at 31 December 2023, approximately A$6.4m of the Fund had been spent.
Fletcher Insulation® provision for product claims
Fletcher Insulation® Australia is the subject of a claims relating to installed glass wool insulation containing an imported foil. Fletcher Insulation®
Australia is investigating the complaints to ascertain the cause and extent of the issue. Fletcher Building’s New Zealand insulation business,
Comfortech®, did not use the same imported foil. The Group has considered the exposure Fletcher Insulation® Australia may have for the
existing and future claims, with a provision recognised based on the facts and circumstances known at balance date. Fletcher Insulation®
Australia is also assessing potential recoveries from its supplier of the product. There remains a risk that the Group’s full exposure will be greater
than the amount currently allowed.
10. RECONCILIATION OF NET EARNINGS TO NET CASH FROM OPERATING ACTIVITIES
Unaudited
Six months
Dec 2023
NZ$M
Unaudited
Six months
Dec 2022
NZ$M
Audited
Year ended
June 2023
NZ$M
Net earnings/(loss)
(120)
92 235
Earnings attributable to minority interest
3
11 19
(117)
103 254
Add/(less) non-cash items:
Depreciation, depletions and amortisation
191
180 358
Other non-cash items
282
120 211
Taxation
(42)
(120)(102)
Net loss/(gain) on disposal of businesses and property, plant and equipment
3
(1)
434
179 467
Net working capital movements
Residential and Development
(72)
(270)(240)
Construction
(313)
(38)(52)
Other divisions:
Debtors
150
75 34
Inventories
3
(58)21
Creditors
(211)
(194)(96)
(443)
(485)(333)
Net cash from operating activities(126)
(203)388
Notes to the Consolidated Financial Statements (cont.)
Fletcher Building Limited 2024 Interim Financial Results
33
Independent auditor’s review report to the
shareholders of Fletcher Building Limited
Conclusion
We have reviewed the interim financial statements of Fletcher Building Limited (“the Company”) and its subsidiaries (together “the
Group”) on pages 16 to 33 which comprise the consolidated balance sheet as at 31 December 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 six months ended on that date, and a summary of significant accounting policies and other explanatory
information. Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial
statements on pages 16 to 33 of the Group do not present fairly, in all material respects the consolidated financial position of the Group
as at 31 December 2023, and its consolidated financial performance and its consolidated cash flows for the six months ended on that
date, in accordance with New Zealand Equivalent to International Accounting Standard 34: Interim Financial Reporting and International
Accounting Standard 34: Interim Financial Reporting.
This report is made solely to the Company’s shareholders, as a body. Our review has been undertaken so that we might state to the
Company’s shareholders those matters we are required to state to them in a review 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 review procedures, for this report, or for the conclusion we have formed.
Basis for conclusion
We conducted our review in accordance with NZ SRE 2410 (Revised) Review of Financial Statements Performed by the Independent Auditor
of the Entity. Our responsibilities are further described in the Auditor’s responsibilities for the review of the financial statements section of our
report. We are independent of the Group in accordance with the relevant ethical requirements in New Zealand relating to the audit of the
annual financial statements, and we have fulfilled our other ethical responsibilities in accordance with these ethical requirements.
Ernst & Young provides agreed upon procedures, taxation compliance, financial statement compilation, pre-assurance over non-financial
metrics and other assurance related services to the Group. Partners and employees of our firm may deal with the Group on normal terms
within the ordinary course of trading activities of the business of the Group. We have no other relationship with, or interest in, the Group.
Directors’ responsibility for the interim financial statements
The directors are responsible, on behalf of the Entity, for the preparation and fair presentation of the interim financial statements
in accordance with New Zealand Equivalent to International Accounting Standard 34: Interim Financial Reporting and International
Accounting Standard 34: Interim Financial Reporting and for such internal control as the directors determine is necessary to enable the
preparation and fair presentation of the interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilities for the review of the interim financial statements
Our responsibility is to express a conclusion on the interim financial statements based on our review. NZ SRE 2410 (Revised) requires us
to conclude whether anything has come to our attention that causes us to believe that the interim financial statements, taken as a whole,
are not prepared in all material respects, in accordance with New Zealand Equivalent to International Accounting Standard 34: Interim
Financial Reporting and International Accounting Standard 34: Interim Financial Reporting.
A review of interim financial statements in accordance with NZ SRE 2410 (Revised) is a limited assurance engagement. We perform
procedures, consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. The procedures performed in a review are substantially less than those performed in an
audit conducted in accordance with International Standards on Auditing (New Zealand) and consequently do not enable us to obtain
assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an
audit opinion on those interim financial statements.
The engagement partner on the review resulting in this independent auditor’s review report Brent Penrose.
Chartered Accountants
Auckland
14 February 2024
Fletcher Building Limited 2024 Interim Financial Results
34
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