Fulton Hogan's New Zealand projects, such as the Waikato
Expressway, (pictured) helped sustain what was otherwise
one of the company's toughest years in construction and
roading. Photo supplied.
A punishing 12 months in Australia undermined a record
$NZ2.73 billion turnover for construction company Fulton Hogan,
resulting in before-tax and after-tax bottom lines plunging and
the company's worst result for a decade.
A litany of problems in Australia, including major weather
events, acquisition bedding-in, lacklustre projects and the
costs of addressing issues, caused earnings before interest,
tax, depreciation and amortisation (ebitda) to plunge 47% to
$130.9 million. After-tax profit crashed almost 90%, from
$73.9 million a year ago to $7.9 million.
Further overshadowing a forgettable year were four unrelated
workplace employee deaths which rocked the company, prompting
a wide-ranging health and safety review.
Managing director Nick Miller said the privately held
company, with more than 2000 shareholders, was entering 2013
with a full order book at $3.7 billion, but it was facing up
to "the hard lessons from 2012" and was taking decisive
action to improve profitability and "correct its course".
"It [$7.9 million profit] was a very poor performance, but
we're very confident to be back on course," he said.
Management restructuring and cost-cutting had been put in
place, as had the sale of non-core assets, including land in
Queenstown and across the country and a near 3000ha forest
block in Otago, the latter under Overseas Investment Office
Mr Miller declined to reveal the individual proceeds of asset
sales, but they totalled more than $10 million.
All of these measures meant Fulton Hogan would "not be
undertaking any form of capital-raising [from shareholders or
elsewhere]," he said.
When asked to describe banking relationships and covenants,
he said they were "strong", with the five banks concerned,
some of which had been with the company for more than 50
years and were being supportive, given the order book stood
at $3.7 billion.
Revenue during the past year was $1 billion in New Zealand
and $1.7 billion in Australia.
"Our Australian construction business posted losses due to
management challenges, prolonged wet weather, growing pains
from an earlier acquisition, underperforming projects and
costs of changes to address these performance issues and
stabilise the company," Mr Miller said.
The Australian operations' poor performance was the major
factor behind the 47% decrease in ebitda to $130.95 million.
"The New Zealand businesses continued a long history of
sustained results, anchored by the company's vertically
integrated business model," he said.
"Rapid growth has come at a price," he said.
Asked about what drove the "price", Mr Miller said becoming
established in each of Australia's states and territories, at
52 locations, with the right staffing leadership was "a clear
strategy" to expand the company's footprint Australia-wide.
It was its Pacific Highway joint venture in New South Wales
that was hardest hit by wet weather and Fulton Hogan had made
provision for almost $56 million in future-losses liabilities
on the project.
Mr Miller said negotiations with partners concerning the
liabilities were ongoing. The $56 million provision was
behind postponement of the annual meeting.
"We have learnt some important lessons and taken a number of
decisive steps to get back on course, tackle profitability
and better protect the wellbeing of every one of our 5500
people," he said.
The four workplace deaths during the past year had "shocked"
the company, as even one death a year was considered a "rare
event". The deaths prompted the introduction of a system of
new rules, a renewed focus on five "critical risk areas" and
strengthening health and safety leadership.
"To me, personally, and the company as a whole, nothing is
more important than our renewed focus on health and safety
following the tragic deaths of four employees ... " he said.
A final dividend of 5c a share was posted, boosting the
annual dividend to 11.5c, from last year's 20c.
Fulton Hogan is holding informal meetings with shareholders
before its annual meeting, scheduled for December 19 in