Fletcher Building Limited · NZX:FBU
Fletcher Building — Investor Day (May 2021)
19 slides from Fletcher Building's investor day presentation, May 26, 2021
Slide 1: Fletcher Building Investor Day May 2021
Fletcher Building Investor Day May 2021 Bevan McKenzie, CFO 26 May 2021
Slide 2: Agenda
Agenda 1. Introduction, Fletcher Building Overview Ross Taylor 2. Group Financials Bevan McKenzie 3. Safety Wendi Croft 4. Building Products Hamish McBeath 5. Concrete Nick Traber 6. Distribution Bruce McEwen 7. Residential and Development Steve Evans 8. Construction Peter Reidy 9. Australia Dean Fr
Slide 3: Overview
Overview Material progress on key financial targets, strong balance sheet, well-positioned for shareholder returns Focus Progress è +100bps margin FY19-21F Margins è EBIT margin1: target >10% è Path to c.10% in FY23 Investment è Base capex: sustainable average of $200-250m p.a. è Base capex down fro
Slide 4: Margins: path to c.10% in FY23
Margins 100bps improvement in EBIT margin since FY19, path to c.10% in FY23 EBIT Margin1 (%) Pathway to 10% in FY23 1. Australia margins lift from c.3.5% in FY21F to 5-7% on c.10% continued improvement in operating disciplines and growth c.8.2% initiatives 7.2% 2. Construction margins lift from c.2%
Slide 5: Margins: efficiency programs and overhead costs
Margins Efficiency programs have delivered material cost reductions, especially in Core Divisions; focused on driving additional operating leverage off this base Core Divisions: Overhead Costs % of Revenue1 è Efficiency programs commenced in FY18: focused initially on -100bps Australia, then on New
Slide 6: Investment: base capex
Investment Base capex expected to average $200-250m p.a. in FY22-FY24 Base Capex Average Spend p.a. Focus Areas è Maintenance investment compares to depreciation (excl. ROU1) of c.$180m p.a. Maintenance $150-200m è Includes ongoing investment to create fit-for-purpose systems environment, c.$25-40m
Slide 7: Investment: new WWB plant
Investment New WWB plant replaces end-of-life asset and provides growth capacity NZ Plasterboard Consumption (m2) vs. Population (m) WWB Investment Phasing ($m) 6,000 35,000 è New plant near Tauranga provides 30Mm2 c.220 North Island capacity (currently 20Mm2) 30,000 5,000 è Maintenance investment t
Slide 8: Investment: Residential & Development funds invested
Investment Residential & Development scaling to c.1,000 houses p.a. and proving out growth opportunities – expect funds invested to build from c.$560m currently to c.$750m in FY22 Residential and Development Funds Invested: FY21F-22F ($m) Key: FY21F c.750 è Base housing business – scale to c.1,000 u
Slide 9: Investment: targeted OPEX spend
Investment We are making targeted OPEX spend to support delivery of organic growth initiatives OPEX on Key Initiatives (incremental to FY21 base) Spend p.a. Timing Core Divisions1 – product adjacencies, c.$10-20m FY22-FY23 decarbonisation, customer ecosystems è Targeted investment of c.$30-40m p.a.
Slide 10: Return on investment
Return on investment Currently exceeding 15% ROFE target – expect to continue to do so as funds base lifts on investments in growth and WWB plant ROFE1 (%) and Closing Operating Funds ($b) è ROFE1 target of >15% through-the-cycle, also acts as hurdle for growth investments c.18% > 15% è FY21 ROFE we
Slide 11: Cash flow: working capital
Cash flow Working capital target of 5-day improvement in Core Divisions delivered ahead of plan Working Capital1 Receivables & Inventory – Core Divisions (days) è Target set in FY18 was to reduce Core working capital by 116 5-days by FY23, through improved stock & receivables c.110 management. Credi
Slide 12: Cash flow: underlying cash generation
Cash flow Underlying cash generation of the business has been strong Underlying Trading Cash-Flow1 ($m) è Group cash generation has been strong: total of c.$2.0b underlying trading cash-flow1 in FY19-FY21 850-900 è Strong underlying cash conversion2 of c.85% in FY19-FY21 – driven by working capital
Slide 13: Funding
Funding Drawn debt and funding costs have reduced materially, while maturity and liquidity profiles remain strong Debt drawings ($m) Debt maturity profile ($m) è Gross debt reduced by c.$1b since Jun-18 1,877 14 94 97 è Funding costs reduced from $155m in FY18 to c.$50m in FY21 è Robust maturity pro
Slide 14: Leverage
Leverage Strong balance sheet, well-positioned to support continued execution of strategy Leverage (Net Debt / EBITDA) è Cash generation has supported strong balance sheet position and a sustained reduction in leverage 2.0x è Investments in FY22-23 in the WWB plant, Core growth Target range capex, a
Slide 15: Capital return
Capital return With the balance sheet materially de-levered, FBU intends to conduct an on-market share buyback of up to NZ$300m over the next 12 months è Fletcher Building continuously assesses its balance sheet position and investment opportunities in order to drive shareholder returns è Where ther
Slide 16: Dividends
Dividends FY21 interim paid and final FY21 dividend expected, targeting a pay-out ratio of 50-75% of net earnings; imputation expected from FY22 è Policy to pay dividends in the range of 50-75% of net earnings before significant items and having regard to available cash flow è HY21 interim dividend
Slide 17: FY21 EBIT Guidance
FY21 EBIT Guidance Expected to be $650-665m, at top end of the prior guidance range Division FY21F EBIT1 è FY21 EBIT before significant items expected to be $650-665m (previously $610- Building Products $190-195m 660m). Updated guidance equates to c.49/51% H1/H2 split Distribution $125-130m è Tradin
Slide 18: Summary
Summary Material progress on key financial targets, strong balance sheet, well-positioned for shareholder returns è +100bps margin improvement since FY19, driven particularly by targeted efficiency programs Margins è Path to c.10% margin in FY23 Investment è Base capex $200-250m p.a., residential in
Slide 19: Questions
Questions 19 Fletcher Building Limited Investor Day Presentation | © May 2021