Directors must face a vote: NZSA

Mark Adamson.
Mark Adamson.
The New Zealand Shareholders Association wants every Fletcher Building director to stand for re-election in the wake of last week’s "construction division debacle".

Fletcher last week divulged a second earnings downgrade, topping more than $200million, because of mounting losses on two major projects and several other, smaller, jobs.

Fletcher’s chief executive of five years Mark Adamson quit last week, replaced immediately by an interim internal appointee.

New Zealand Shareholders Association (NZSA) chief executive Michael Midgley said "in light of the construction division debacle", Fletcher’s directors had no choice but to seek a new mandate at the upcoming annual meeting.

"[The] NZSA is asking every director to put themselves up for re-election at the next AGM," Mr Midgley said in a statement.

From a year high of $11 last September, Fletcher shares plunged to a year-low of $7.40 last week, but gained some ground to trade around $7.75 yesterday.

Fletcher’s Building + Interiors division has just under 50% of the construction division’s backlog of $2.8billion in work. Key projects at Christchurch’s justice precinct and Sky City convention centre accounted for most of the losses, although Fletcher has declined to name specific projects.

It is understood all but one of 20 Building + Interiors projects were fixed price.

Mr Midgley said the removal of many experienced senior managers during Mr Adamson’s tenure  and reliance on construction work being almost entirely subcontracted created "problems and imbalances that may take years to fully address".

"These were entirely foreseeable and NZSA raised cultural issues with the board in 2016," Mr Midgley said.

In March, following Fletcher’s first downgrade, Mr Midgley said the NZSA took "credible information" to Fletcher chairman Sir Ralph Norris, indicating the actual loss was "in the order of $230million".

"We also named some other projects that were in difficulty. Sadly, what we said to the company then, and since, has come to pass," Mr Midgley said.

He claimed former chief executive Mr Adamson’s response, that the problems preceded his appointment five years ago and that he had since put proper provisions and high-quality staff in place, were hard to accept, given Mr Adamson personally signed several of the larger contracts.

Mr Midgley said the construction division had created "an around $2billion hole" that affected not only  shareholders, but also KiwiSavers and many other managed funds investors.

"As the face of Fletchers, the construction division’s success or failure also colours the whole perception of Fletchers," Mr Midgley said.

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