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Flecther Building’s sweeping restructuring plans have been welcomed as a "believable strategy" as the construction giant prepares to claw its way back to profitability.
Over two years its Building + Interiors (B+I) division racked up $952 million in actual and estimated losses, prompting Fletcher to raise $750 million in new capital and implement restructuring plans, announced this week.
Fletcher’s outgoing chairman, Ralph Norris, yesterday announced the board’s audit and risk committee chairman, Bruce Hassall, would succeed him when he stepped down from the troubled company in September.
Four new independent directors have also been appointed to the board from September, a new Australian director is expected to join the group in the coming months and two current directors will also leave the board, BusinessDesk reported.
Fletcher this week reaffirmed its full-year expectations of delivering earnings before interest and tax of between $680 million and $720 million, and has ring-fenced the B+I losses this financial year, estimated at $660 million.
Craigs Investment Partners broker Peter McIntyre said Fletcher management’s full year 2019 growth strategy was "soft", but otherwise in line with expectations.
He said Fletcher’s capital expenditure was expected to be around $300 million a year, of which 35%-40% was designated for growth, a total of about $105 million to $120 million.
"It’s a believable strategy and combined with a simplified [divisional] model which gives some optimism for success," he said.
While there will be abnormal costs associated with the restructure, estimated at $85 million to $90 million, Mr McIntyre said those were expected to deliver annual costs savings of $30 million. Fletcher’s new chief executive, Ross Taylor, had delivered growth expectations through to 2023, which implied a compound annual growth rate of 5%-7%, he said.
Mr McIntyre noted Fletcher’s operations in Australia, which had been combined into one operating division, were forecast to double earnings before interest and tax by 2023, through new strategies and using New Zealand-proven formulas over there.
Mr Hassall has extensive experience across the public and private sector, including as the former CEO and senior partner of PwC New Zealand.
He was appointed as an independent director of Fletcher in March last year and would relinquish his role as head of the audit and risk committee upon appointment, BusinessDesk reported.
"Bruce Hassall will bring strong and steady leadership as Fletcher Building’s new chairman, and will complete the board refresh with the appointment of an Australian director in the coming months," Mr Norris said.