Page 8 - HW March 2021

hard news
A game of two halves
BOTH FLETCHER BUILDING and Wesfarmers revealed their first half numbers mid last month and as you
can see below it was a tale of two quite different halves for Fletcher’s Distribution businesses and Bunnings.
Pleased to announce a significant lift in performance compared to FY2020, on 17 February Fletcher Building released its first half (H1) numbers for FY2021 covering the six months ending 31 December 2020.
Although overall group revenue at almost $4 billion was just +1% on the previous year’s H1, group EBIT before significant items was +47% at $323 million and EBIT margins improved to 8.1% from 5.5%, with “improvement across all operating divisions”.
Fletcher Building Chief Executive, Ross Taylor, says of the half: “Our strong HY21 results reflect good progress
made on our strategy to drive consistent performance and growth.
“The improved earnings and profitability are the outcome of initiatives undertaken over the past three years
to improve operating disciplines and efficiencies across the Group.”
Indeed, he says, the latter initiatives were by far the most influential on the first half result; ”Overall, market factors
– volume, share and price – contributed 15% of the Group’s increased EBIT while around 85% was the result of strategic improvements in operating efficiency.”
The last six months have been busy but fruitful for the Distribution division, comprising PlaceMakers, Mico and Forman Building Systems:
• Gross revenue: $852 million (+3% on
H1 FY2020)
• EBIT:$60million(+20%)
Demand has been strong across all regions, except for parts of the lower South Island, with growth in trade and consumer segments, alongside some slowing in the commercial sector.
Despite continued pressure on GP margins, Distribution’s H1 EBIT margin increased to 7.0% from 6.1% “as a result of cost and efficiency initiatives delivered over the past two years”.
These initiatives have more than
offset competitive pressure on prices, says Fletcher Building, and include ongoing digitisation (eg the SAP Hybris e-commerce platform, the PlaceMakers Trade Portal, consumer omni-channel click & collect sites and the PlaceMakers transport management system), workforce optimisation, the in-sourcing of freight management and implementing
Hub structures in Christchurch and Auckland.
Unsurprisingly, supply chain management has been a key focus, with an increase in inventory days noted as a result of ensuring the availability of key stock lines “in a market constrained for a number of locally and internationally sourced product lines”.
Although reduced investment in property is noted for the first half, network openings in the half included Mico Matamata and PlaceMakers Warkworth, with a made-over PlaceMakers Levin and new Mico Upper Hutt site both slated to open in the second half.
In terms of other key divisions, Building Products’ revenue was +6%
and EBIT +53% (due to a 460bps margin improvement), thanks to operating efficiency, better contribution from Steel & Pipes, “good demand” from residential finishing trades and subdivision work, share gains and improved pricing disciplines.
Australia’s H1 was “steady”, with an EBIT +46%, although revenue was down 4% with the Pipes businesses down 25% in a “subdued” civil market.
In terms of an outlook, with the riders that COVID-19 and supply chain
6 NZHJ | MARCH 2021
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