Fletcher Building Limited · NZX:FBU
Fletcher Building — FY2019 Earnings Presentation
46 slides from Fletcher Building's earnings presentation, Aug 21, 2019
Slide 1: Fletcher Building Full Year Results to 30 June 2019
FOCUS Fletcher Building Full Year Results to 30 June 2019 ROSS TAYLOR — Chief Executive Officer BEVAN MCKENZIE — Chief Financial Officer 21 August 2019
Slide 2: Agenda
FOCUS Agenda 1. Results Overview Ross Taylor 2. Divisional Performance Ross Taylor 3. Financial Results Bevan McKenzie 4. Outlook Ross Taylor Fletcher Building Full Year Results Presentation 2019
Slide 3: FY19 refocus and stabilise transition year successfully delivered
FY19 refocus and stabilise transition year successfully delivered 1. Refocus on ✓ On track, revenue in line with competitive market the NZ core 2. Stabilise ✓ Returned to profits, no change to B+I provisions Construction 3. Strengthen Australia ✓ Intervened and set up for turnaround 4. Exit non-core
Slide 4: Earnings within guidance, strong balance sheet and dividend
Earnings within guidance, strong balance sheet and dividend EBIT before sig EPS before sig Revenue Net earnings items1 items $9,307m $631m $164m 43.0c FY18: $9,471m FY18: $(190)m FY18: $50m FY18: (8.1)c Cash flow from Return on Funds operating Net debt Dividends Employed before activities $325m 23c
Slide 5: Improved balanced scorecard across most metrics
Improved balanced scorecard across most metrics Safety Engagement Total Recordable Injury • Deeply saddened by recent Employee Engagement Rating • Drive employee engagement Frequency Rate 1 fatalities >80% (top quartile) with no 70% 71% business lower than 70% • Group wide ‘Protect’ 66% 67% 6.7 6.9
Slide 6: Well positioned to drive shareholder returns into the future
Well positioned to drive shareholder returns into the future Focus • Manageable footprint Consistency • Leverage of skills and IP Leveraged to • Drive and grow our strong and well positioned NZ businesses upside • Trap the upside potential in our underperforming Australian businesses • Strong balanc
Slide 7: Agenda
FOCUS Agenda 1. Results Overview Ross Taylor 2. Divisional Performance Ross Taylor 3. Financial Results Bevan McKenzie 4. Outlook Ross Taylor Fletcher Building Full Year Results Presentation 2019
Slide 8: FY19 vs FY18 EBIT earnings bridge
8 FY18 Actual 50 FY18 B+I 660 FY18 Actual ex B+I 710 1 Before significant items, including discontinued operations Divested in FY18 only (13) Building Products (5) Fletcher Building Full Year Results Presentation | © August 2019 0 Distribution Steel (16) FY19 vs FY18 EBIT earnings bridge Concrete (6
Slide 9: Industry context New Zealand: Elevated activity in all sectors
Industry context New Zealand Elevated activity in all sectors Residential NZ Historical • Residential activity remains elevated, c35k consents in FY19, highest Residential Consents (#) levels since mid 1970’s 35k 33k • Supported by ongoing population growth of c2%: c50k net migration 30k 29k to Jun’
Slide 10: Building Products
Divisional Exposure Building Products Resi, 52% Com, 17% Infra, 31% June 2018 June 2019 Building Products performance NZ$m 12 months 12 months Change • Increased revenue in WWB, TINZ and Laminex benefiting from Gross Revenue 764 759 (1)% strong consents and strong market positions, offset by lower E
Slide 11: Distribution
Divisional Exposure Distribution Infra, 8% Resi, 71% Com, 21% June 2018 June 2019 Distribution performance NZ$m 12 months 12 months Change Gross Revenue 1,530 1,596 4% • Growing revenue, benefiting from elevated market backdrop particularly in Auckland EBITDA1 113 114 1% • Solid EBIT from PlaceMaker
Slide 12: Steel
Divisional Exposure Steel Resi, 25% Com, 36% Infra, 39% June 2018 June 2019 Steel performance NZ$m 12 months 12 months Change Gross Revenue 555 • Revenue growth from: 532 4% – Roofing volume growth driven by strong residential EBITDA1 54 38 (30)% market EBIT1 33 – Market share gains on strong custom
Slide 13: Concrete
Divisional Exposure Concrete Resi, 43% Com, 30% Infra, 27% June 2018 June 2019 Concrete performance NZ$m 12 months 12 months Change • Solid overall business unit revenue contribution: Gross Revenue 812 802 (1)% – Strong aggregates revenue growth through improved pricing EBITDA1 135 134 (1)% and volu
Slide 14: Residential and Development
Residential and Development June 2018 June 2019 Residential and Development performance NZ$m 12 months 12 months Change Gross Revenue 575 639 11% • Excellent revenue growth with Residential revenue up 13% to $526m, Land Development up 5% to $113m EBITDA 136 137 1% • Increased units sold to 755 (735
Slide 15: Construction
Construction June 2018 June 2019 Construction performance NZ$m 12 months 12 months Change • Increase in revenue reflects strong growth in Major Projects and Gross Revenue 1,685 1,702 1% BPC offset by lower B+I revenues EBITDA1 (588) 68 NM • Return to operating profitability but lower Higgins EBIT du
Slide 16: Industry context Australia: Sharp declines in residential sector
Industry context Australia Sharp declines in residential sector AU Historical Residential Residential Approvals (#) • Division mainly exposed to new detached/semi-detached housing, plus additions and alterations; accounts for c90% of AU residential 239k 232k exposure 231k 222k • Material contraction
Slide 17: Australia
Divisional Exposure Australia Resi, 54% Com, 27% Infra, 19% June 2018 June 2019 Australia performance NZ$m 12 months 12 months Change • EBIT impacted by significant residential market decline and Gross Revenue 3,076 3,024 (2)% competitive activity EBITDA1 176 119 (32)% – Higher input costs from resi
Slide 18: Formica and Roof Tile Group
Formica and Roof Tile Group Financial results June 2018 June 2019 Successful divestments ahead of schedule NZ$m 12 months 12 months Change Gross Revenue 1,177 1,019 (13)% • Roof Tile Group External Revenue 1,153 999 (13)% − Sold on 1 November 2018 EBITDA¹ 106 106 - − Final net sale price of NZ$59m t
Slide 19: Agenda
FOCUS Agenda 1. Results Overview Ross Taylor 2. Divisional Performance Ross Taylor 3. Financial Results Bevan McKenzie 4. Outlook Ross Taylor Fletcher Building Full Year Results Presentation 2019
Slide 20: Income statement: Return to group profitability following B+I losses
Income statement Return to group profitability following B+I losses All metrics include discontinued operations June 2018 June 2019 Change NZ$m 12 months 12 months $m Revenue 9,471 9,307 (164) EBITDA 264 830 566 EBIT before significant items 50 631 581 EBIT margin (%) 1% 7% 6%pt Significant items (1
Slide 21: Operating cash flow: Cash flows mainly affected by creditor timing
Operating cash flow Cash flows mainly affected by creditor timing June 2018 June 2019 Change NZ$m 12 months 12 months $m EBIT before significant items from continuing operations 631 549 (82) Depreciation and amortisation 170 174 4 Provisions, cash impact of significant items and other (47) (65) (18)
Slide 22: Operating cash flow: Second half working capital returned to normal
Operating cash flow Second half working capital returned to normal as anticipated June 2018 June 2019 Change NZ$m 6 months (H2) 6 months (H2) $m EBIT before significant items from continuing operations 356 301 (55) Depreciation and amortisation 83 86 3 Provisions, cash impact of significant items an
Slide 23: Working capital metrics
Working capital metrics Sustained improvement in working capital cycle, especially debtors Key working capital metrics Debtor Days Inventory Days Payables Days As at As at As at As at As at As at June June Change June June Change June June Change 2018 2019 (days) 20181 2019 (days) 2018 2019 (days) B
Slide 24: Cash impact of B+I losses
Cash impact of B+I losses Forecast provisions unchanged Cash flow impact of B+I losses (NZ$m) Cash outflow EBIT loss Forecast cash outflow • FY19 cash outflows $257m FY17 FY18 FY19 FY20F • Total $257m forecast outflows remaining FY17 FY18 FY19 FY20F (168) (285) (257) (257) (292) (660) 24 Fletcher Bu
Slide 25: Capex and depreciation
Capex and depreciation Remain within guidance, focused investment in core business Capex by Markets (NZ$m) June 2018 June 2019 NZ$m 12 months 12 months Change 13 Stay-in-business 214 240 26 63 Growth 90 108 18 Total Capex 304 348 44 $348m Of which: continuing operations 241 285 44 181 Acquisitions -
Slide 26: Net debt and leverage
Net debt and leverage Formica proceeds strengthen leverage metrics Net debt (NZ$m) Leverage (Net Debt/EBITDA) Jun 2018 Jun 2019 26 Target range of 1.5x-2.5x 348 153 Group 4.8x 0.4x 1,288 Group ex B+I1 1.4x 0.4x 1,273 68 7 44 281 325 Capex Divestment Acquisitions Closing net debt Cash flow from opera
Slide 27: Debt maturity profile and funding costs
Debt maturity profile and funding costs Debt reduction process underway Debt Maturity Profile at Jun-19 (NZ$m) • Undrawn credit lines of $667m and cash of $1,372m as at 30 June 2019 • Average interest rate on debt is 5.0% (based on period end borrowings) 63 • Full year funding costs were $118m (comp
Slide 28: Dividend and share buyback
Dividend and share buyback Final dividend of 15cps, total FY19 dividend of 23cps Dividend Share buyback • Final dividend of 15.0 cents per share • With the balance sheet materially de-levered and with incremental capital available, the Board has resolved to • Payment date of Thursday 19 September 20
Slide 29: IFRS 16 Background and impact
IFRS 16 Background and impact • Effective for the group for period commencing 1 July 2019 • Total of c 4,800 operating leases across the Group Impact on • Recognises right-of-use asset of $1.4-$1.5b and lease liability of $1.7-$1.8b Balance Sheet • Difference of $0.3b taken as adjustment to retained
Slide 30: Agenda
FOCUS Agenda 1. Results Overview Ross Taylor 2. Divisional Performance Ross Taylor 3. Financial Results Bevan McKenzie 4. Outlook Ross Taylor Fletcher Building Full Year Results Presentation 2019
Slide 31: Our focus now moves to driving consistent performance
Our focus now moves to driving consistent performance FY2020 FY2021–23 PERFORMANCE GROWTH 1. Refocus on NZ businesses strong and growing the NZ core Complete B+I 2. Stabilise projects Construction Construction turnaround complete Maintain profits Set-up 3. Strengthen for Performance improvement Aust
Slide 32: Continued focus on our key enablers and future investment
Continued focus on our key enablers and future investment to drive performance Fit for purpose Engaged and capable systems, next Strong safety culture people, lean generation digital operating model capabilities Leading innovation High level of Disciplined and local adaptation customer intimacy perf
Slide 33: FY20 market outlook for NZ and Australia
In FY20 we expect ongoing healthy market conditions in NZ and Australia residential market contraction New Zealand Market • Expect Residential consents to ease slightly off peaks, Auckland to remain strong • Expect Commercial construction to remain at similar levels • Expect Infrastructure spend to
Slide 34: Appendix
FOCUS Appendix Fletcher Building Full Year Results Presentation 2019
Slide 35: Company overview
Appendix Company overview Revenue: $8.3 billion Strong New Zealand brands People: 16,825 Continuing External Revenue 12mth to Jun19 ($m) $5,220m $2,944m Australia scale in specific sectors $144m NewZealand New Zealand Australia North SouthAmerica Pacific 10,334 people 8,843 people 5,630 people 953 p
Slide 36: Summary of FY20 metrics already communicated
Summary of FY20 metrics already communicated • Residential and Development: Land development EBIT run rate of c$25m • Construction: Cash outflows of $257m on B+I • Australia: • Targeting $100m gross annual cost-out benefit by FY21; expect c$15m of this to flow to net EBIT benefit in FY20 and c$50m i
Slide 37: Industry context: Sectoral exposure, based on revenue
Industry context Sectoral exposure, based on revenue Residential Infrastructure / Revenue Exposure by Sector¹ (New + A&A)* Commercial Other TOTAL New Zealand 10% 6% 7% 23% Australia 13% 5% 7% 25% Total Manufacturing 23% 11% 14% 48% New Zealand 12% 4% 1% 17% Australia 5% 4% 0% 9% Total Distribution 1
Slide 38: Financial results: Local currency tables
Financial results Local currency tables Gross revenue External revenue June 2018 June 2019 June 2018 June 2019 Revenue 12 months 12 months Change % 12 months 12 months Change % Residential and Development New Zealand (NZ$m) 528 625 18% 528 625 18% Australia (A$m) 43 13 (70)% 43 13 (70)% Construction
Slide 39: Financial results: Local currency tables
Financial results Local currency tables June 2018 June 2019 EBIT before significant items 12 months 12 months Change % Residential and Development New Zealand (NZ$m) 121 131 8% Australia (A$m) 14 6 (57)% Construction New Zealand (NZ$m) (636) 20 NM Rest of World (US$m) 20 18 (10)% Australia New Zeala
Slide 40: New Zealand Residential performance and trends
New Zealand Residential performance and trends Residential units sold Funds employed $m Total1 800 658 755 195 Funds balance 900 104 20 includes: 700 800 138 149 • 3,687 residential 600 700 lots for further 600 500 development or 500 sale 400 400 300 586 • 1,735 lots under 300 604 651 unconditional
Slide 41: Group metrics illustrated for IFRS16: Income statement
Group metrics illustrated for IFRS16 Income statement June 2019 Pro forma June 2019 Continuing operations 12 months IFRS 12 months NZ$m (unaudited) Reported Adjustment Pro forma Revenue 8,308 - 8,308 EBITDA before significant items 723 234 957 Depreciation and amortisation (incl. lease depreciation
Slide 42: Group metrics illustrated for IFRS16: Cash flows
Group metrics illustrated for IFRS16 Cash flows June 2019 Pro forma June 2019 12 months IFRS 12 months NZ$m (unaudited) Reported Adjustment Pro forma EBITDA before significant items 723 234 957 Lease principal payments - (169) (169) Lease interest payments - (64) (64) Other movements (65) - (65) Wor
Slide 43: Group metrics illustrated for IFRS16: EBITDA by division
Group metrics illustrated for IFRS16 EBITDA by division June 2019 Pro forma June 2019 Continuing operations before significant items 12 months IFRS 12 months NZ$m (unaudited) Reported Adjustment Pro forma Building Products 139 24 163 Distribution 114 47 161 Steel 38 13 51 Concrete 134 30 164 Residen
Slide 44: Group metrics illustrated for IFRS16: EBIT by division
Group metrics illustrated for IFRS16 EBIT by division June 2019 Pro forma June 2019 Continuing operations before significant items 12 months IFRS 12 months NZ$m (unaudited) Reported Adjustment Pro forma Building Products 127 5 132 Distribution 104 11 115 Steel 33 2 35 Concrete 84 5 89 Residential an
Slide 45: Important Information
Important Information This Full Year Results presentation dated 21 August 2019 provides additional comment on the Annual Report 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 activities
Slide 46: Fletcher Building Full Year Results to 30 June 2019
FOCUS Fletcher Building Full Year Results to 30 June 2019 ROSS TAYLOR — Chief Executive Officer BEVAN MCKENZIE — Chief Financial Officer 21 August 2019