Apologies and assurances by Fletcher Building's board to shareholders resounded at its annual meeting yesterday, as further losses of $160 million from its beleaguered Building + Interiors were disclosed.
The seriousness of the Building + Interiors' (B+I) problems, and its impact on full-year 2018 financial guidance, prompted Fletcher to place its shares on a trading halt the day before yesterday's annual meeting.
On reopening yesterday, Fletcher shares took a further 5.5% hit, plunging to $7.52; down almost 20% on a year ago, but later in the day reversed some losses to close at $7.67.
Analysts were more benign towards Fletcher's predicament.
For its year trading to June, the portfolio of B+I projects, most of which were on fixed price contracts, delivered a $292million loss, while guidance released yesterday for 2018 estimated a further $160 million B+I loss - $125 million in project losses and $35 million overhead costs.
Because of ongoing ''uncertainty'', Fletcher has separated B+I guidance from the rest of Fletcher group earnings.
Of last year's $292 million
loss, Auckland's international convention centre and
Christchurch's Justice Precinct represented about $195 million of the total, while of the estimated $125 million 2018 project losses, those two projects represent about $100 million.
Fletcher chairman Sir Ralph Norris said ''considerable remedial action'' had been taken by the board because of B+I issues, including improvement of governance, systems and processes and applying more ''commercial rigour'' to the construction bidding process.
''I want to offer my personal apology to our shareholders. Mistakes have been made and responsibility ultimately rests with the board ... we fully accept this responsibility,'' Sir Ralph said.
Craigs Investment Partners broker Peter McIntyre said while the news of a further $160million of B+I losses was ''overall disappointing'', there were expectations in some quarters ''that it could have been worse''.
Fletcher had separated out the B+I issues from the rest of the group to reassure the market about the reliability of its future forecasts, he said.
''We hope this is the last of it; it's the second time it has happened,'' he said of the two B+I loss disclosures.
''If Fletcher can get its pricing structures right, it could be doing well,'' Mr McIntyre said.
He said Fletcher's could yet be a ''beneficiary'' of the Labour-led coalition, given the number of residential homes the coalition wanted built.
Forsyth Barr broker Damian Foster said he had expected B+I 2018 guidance would be ''break-even''.
Mr Foster had forecast earnings before interest and tax (ebit) of $722 million for 2018, but Fletcher guidance yesterday was in a range of $680 million to $720 million; excluding the B+I losses.
''We expect modest downgrades to our underlying [2018] forecasts,'' he said.
Disclosure yesterday of the further $160 million B+I losses was despite Fletcher having asserted earlier it had been ''conservative'' in recognising the 2017 construction losses, Mr Foster said.
B+I aside, Mr Foster said Fletcher's outlook was ''broadly in line'' with expectations - low growth in New Zealand, a flat or slightly down Australian market and ''modest growth'' for its Formica division.
A KPMG review of four projects, which will not be made public in its entirety by Fletcher, found the Auckland Commercial Bay, and two infrastructure projects, Puhoi to Warkworth and Hamilton City Edge Expressway were well run and meeting expectations.
However, the fourth project; the Auckland convention centre and adjacent Hobson Street hotel was identified as a ''highly challenging project with significant remaining risks''.
High staff turnover had a major adverse impact, the forecast outcome was materially worse than previously expected and ''significant ongoing judgement'' was required to account for unknown and unquantifiable risk, KPMG said.
The review noted the new, stable leadership team at the convention centre-hotel was improving organisation and morale.
