Fletcher Building Limited · NZX:FBU
Fletcher Building — Corporate Update (February 2018)
20 slides from Fletcher Building's corporate update, Feb 14, 2018
Slide 1: Trading Update
Building communities, building lives. Trading Update ROSS TAYLOR — Chief Executive Officer BEVAN MCKENZIE —Chief Financial Officer 14 February 2018 Fletcher Building Trading Update Presentation Feb 2018
Slide 2: Agenda
Agenda What we will cover today 1. Construction provision update 2. The future of B+I 3. Fletcher Building FY18 earnings guidance and interim dividend 4. Financial detail and debt outlook 5. Next steps 2 Fletcher Building Trading Update | © 14 February 2018
Slide 3: Construction Business unit summary
Construction Business unit summary Top 5 Average Typical Current projects as annual Focus range of Contracts backlog¹ % of total EBIT project size backlog¹ FY05-16 Building horizontal Fixed price Infrastructure structures (roads, $1m - (c60%) and including Brian $682m 84% $16m bridges, transport $35
Slide 4: B+I Overall portfolio
B+I Overall portfolio Loss making/on watch: • 14 key projects • $2.3bn contract value Total portfolio: • 59% complete • 73 projects • $2.8bn contract value Other projects: • 65% complete • 59 projects • $0.5bn contract value • 67% complete B+I fixed overhead costs ~$40m pa 4 Fletcher Building Tradin
Slide 5: B+I Review process since October 2017
B+I Review process since October 2017 • CEO project reviews on sites • Instigated a full review of 16 B+I projects, accounting for over 90% of the construction backlog • Augmented this internal review process with external, independent construction experts • Re-engaged KPMG with an expanded remit an
Slide 6: B+I Why provisioning has increased
B+I Why provisioning has increased Projects have continued to progress: • Better visibility and certainty of cost forecasts • Significantly further advanced on procurement of important trade packages • Incorporated material price increases across trade finishing costs Provisioning more pragmatic: •
Slide 7: B+I Detail on key projects
B+I Detail on key projects TARGET COMPLETION DATE MARGIN 2018 2019 ESTIMATE $m May‐18 May‐19 Nov‐17 Mar‐18 Nov‐18 Mar‐19 Nov‐19 Aug‐18 Aug‐19 Dec‐17 Feb‐18 Sep‐18 Dec‐18 Feb‐19 Sep‐19 Dec‐19 Apr‐18 Apr‐19 Jun‐18 Oct‐18 Jun‐19 Oct‐19 Jan‐18 Jan‐19 Jul‐18 Jul‐19 APPROX % COSTS OCT FEB FY18 CONTRACT CO
Slide 8: B+I Key Project Profile: NZICC
B+I Key Project Profile New Zealand International Convention Centre (NZICC) Key Data At 31 December 2017 Client: Sky City Entertainment Targeted completion date: July 2019 Cost to complete: $887m Expected profit/loss: $(410)m1 Cost completion: 23% Value of trades to let: $181m Project update: • Proj
Slide 9: B+I The future
B+I The future Immediate • B+I teams will focus solely on completing existing projects • We will not be bidding for any further vertical construction work in NZ, allowing key resources to be redeployed to project completion • Appropriate actions to retain and motivate key staff • Absolute focus on d
Slide 10: B+I Summary of forecasts
B+I Summary of forecasts New provisioning and other costs have increased the B+I EBIT loss for FY18 • Now expecting B+I EBIT in FY18 to be $(660)m Overhead and Project losses EBIT other costs 25 Oct 2017 $(125)m $(35)m $(160)m ASM 14 Feb 2018 $(467)m $(33)m $(500)m (incremental) Total FY18 $(592)m $
Slide 11: B+I Confidence in reforecasting
B+I Confidence in reforecasting What has informed reforecasting since October: • Comprehensive and externally supported review process, building on October reviews • New project teams introduced across multiple projects last year on the job for longer and stabilising • While agreed project completio
Slide 12: Guidance and dividend
Fletcher Building Guidance and dividend B+I • Following today’s update FY18 EBIT for B+I is expected to be $(660)m Fletcher Building Group excluding B+I • Continues to expect FY18 EBIT to be in the range of $680m – $720m Dividend • In line with dividend policy no interim dividend will be declared fo
Slide 13: Cash impact of B+I losses
Fletcher Building Cash impact of B+I losses Cash flow impact of FY17 and FY18 B+I forecast losses Cash outflow EBIT loss FY17 FY18F FY19F FY20F 0 -107 -100 -168 -299 -200 -378 $m -300 -292 -400 -500 -600 -700 -660 c60% of cash impact c40% of cash impact 13 Fletcher Building Trading Update | © 14 Feb
Slide 14: Cash flows remain strong across group
Fletcher Building Cash flows remain strong across group • Strong and improving trading cash flows in remainder of Group ex B+I o FY18 EBIT guidance of $680m - $720m reconfirmed o Improvement in working capital movements Trading Cashflows1 ($m) FY17 FY18F B+I $(168)m $(378)m Group Excl. B+I $635m App
Slide 15: Debt profile as at January 2018
Fletcher Building Debt profile as at 31 January 2018 (prior to covenant breaches) Debt update: Drawn at Facilities 31 Jan 18 • Headroom at 31 January 2018 Tranche $m $m of $1bn1 Banking 1,270 435 syndicate • Net debt forecast to increase by c.$250m in calendar 2018 USPP2 1,136 1,136 Capital Notes 62
Slide 16: Banking covenants breach
Fletcher Building Banking covenants breach Increase in non-cash B+I forecast losses has led to a breach of key banking covenants • Breach does not trigger automatic repayment default of loan agreements • If the non-cash portion of the losses are excluded, then the Company would have remained within
Slide 17: Update on discussions with lenders
Fletcher Building Update on discussions with lenders Commercial Banking Syndicate • Waiver of breach received • Commitment to provide continued access to funding facilities • New covenant terms targeted to be agreed by end of March 2018 USPP • Discussions underway with USPP holders • New covenant te
Slide 18: Capital management implications
Fletcher Building Capital management implications • Additional forecast losses announced today are non-cash • Cash flows from B+I losses crystallise over the next three years – not all immediate • Group cash flows remain strong and predictable • No interim dividend • Waiver of current breach achieve
Slide 19: Next steps and HY18 results
Fletcher Building Next steps and HY18 results 1. Half Year Results 2. Divisional performance 3. Market outlook 4. More detail on strategic review through to June 19 Fletcher Building Trading Update | © 14 February 2018
Slide 20: Disclaimer
Disclaimer This presentation dated 14 February 2018 provides additional comment on the media release and documents filed with the NZX of the same date. As such, it should be read in conjunction with, and subject to, the explanations and views of future outlook on market conditions, earnings and acti