Page 8 - HW September 2019

hard news
Fletcher’s: “solid”, but not standing still...
FLETCHER BUILDING RELEASED its year end result on 21 August, pretty much as previously billed.
FY2019 was “a solid NZ performance, a return to profitability, and successful execution of the first year of its five-year strategy aimed to refocus and grow the business” – as promised just a couple of months ago.
Fletcher Building Chief Executive, Ross Taylor, describes FY2019 as
“an important transition year for the company” and that Fletcher’s has made “significant progress” on its five-year strategy.
“In New Zealand our core Building Products and Distribution businesses delivered good results, maintaining strong market positions and revenues despite operating in a highly competitive environment.
“The Construction division stabilised which led to a return to profitability,
and we are on track to complete the remaining legacy B+I projects within the provisions we set in February 2018.”
No getting away from the fact that the company’s Australian performance (top line –2% and EBIT cut in half ) was this year’s key pain point, reflecting “tough market conditions, rising input costs and poor operating disciplines in some areas,” but, adds the CEO: “Turnaround plans are well underway to reset these businesses and deliver growth in FY20.”
In conclusion, says Ross Taylor: “FY19 was a year of solid execution against the company’s strategy. We have landed a leaner organisation and end the year with a more manageable footprint and a strong balance sheet. Looking ahead, we will drive performance across the business in FY20.”
Drilling down now into Distribution’s FY2019 performance:
Bruce McEwen, Fletcher Building’s
CE of Distribution, says of his division’s numbers: “I think that we got the growth that we wanted to get.
“I think there’s always more growth
available, but it’s a question of how hollow it is – we’re really looking for quality of growth, not growth for growth’s sake.”
Overall, he says: “It was a good, balanced, reasonable year and, in a very intensely competitive market, our numbers were pretty good.”
In terms of Distribution’s flat bottom line, the official word is that “solid” EBITs from PlaceMakers and Mico (whose earnings “grew strongly”), were offset by Snappy, which hasn’t been capitalised.
Says Bruce McEwen: “You could argue that we could capitalise [Snappy] and that would increase earnings in the short term, but I think we’ve got to remember that Snappy is a trial into a bit of white space, servicing the DIY part of the market.
“It’s interesting that it is a business in itself but it’s small and will it be one that we keep going with? Maybe, maybe not. So I think if you were to capitalise it, then some poor bugger’s going to have to write off one day if you don’t decide to go ahead and that’s never a smart thing to do.”
We move on to talk about some of the key strategies which were raised
in the FY2019 annual report and at PlaceMakers’ conference last month, namely investment in digital and mobile systems and a new transportation management system.
In terms of digital innovation, benefits are already being seen in PlaceMakers’ yards with the handheld units handling hundreds of thousands of paperless
customer interactions.
But there’s also a longer game afoot:
“We talk about physical proximity to our customers. Ultimately we need to have real proximity to customers. We should do business in their world ... ultimately on their mobile when they’re at the kitchen table on a Sunday night doing their accounts or whatever,” says Bruce McEwen.
“We’ve got to start living in their world. My vision is that we operate 7 by 24,” he says, with a reminder that just a handful of years back you couldn’t do much with your bank outside of office hours.
“Now, the bank does business with you when you want to do business. And that’s ultimately where our industry needs to get to.”
Easy to draw one’s own conclusions about what’s coming next, then...
On to transport. Bruce McEwen says getting the in-house delivery-to- site programme fully in place will be “game-changing”.
“Think of what Uber has done to taxis – that’s what we need to do to transform our industry and that’s what we’re setting out to do.”
About a third of the way now through the national transport roll-out, Christchurch and the Waikato are now fully enabled while Auckland is being enabled progressively.
Related to PlaceMakers’ freight capability, conference 2019 also involved hints around the possible decentralisation of DCs, a long term
Gross Revenue
$1.6 billion (+4%)
EBIT
$104 million (+0%)
PlaceMakers revenue
+4% (FY2018 +0.1%)
Mico revenue
+4% (FY2018 +4.5%)
6 NZHJ | SEPTEMBER 2019
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