Fletcher Building Ltd’s annual meeting at Eden Park today was a good one, for many reasons.
It was also a bad one, for a couple of very important reasons.
It had some stage-managing, but it also had some frank views from the new helmsmen, clear statements of ambition & about the expertise to carry that ambition through from 5 new directors & one up for re-election, and Ihumatao protesters politely asking questions (and asking more questions than the rest of the shareholders there).
The losses the company has incurred ($191 million net for the last financial year) wounded a company that has a long history of strutting.
Sometimes in that situation, companies say they are changing – but don’t. Much has been made (including on this website) of the lack of construction nous on the board, but today there was evidence of new attitudes.
Bruce Hassall, former senior partner & chief executive at accountancy firm PwC NZ, took over the chair at Fletcher on 1 September from Sir Ralph Norris, who resigned from both chair & board. The one other director not up for election or re-election was Tony Carter. Mr Hassall – not culpable for the disastrous downturn – ran a smooth meeting, didn’t dodge questions, and asked staff to add to answers.
In the presentations from Mr Hassall & chief executive Ross Taylor, and the brief speeches from the 6 directors facing election – and even just from the fact that the company has 5 brand-new directors out of a total 8 – you could see a new determination to run Fletcher’s affairs far better. Albeit the newbies toed the party line.
Shareholders leave scrutiny to Ihumatao protesters
That point about protesters asking over half the questions is a funny one. They were naturally single-minded, but also apologetic about dominating the meeting.
Longtime sniper Coralie van Camp, second on the roster for questioning directors, wanted all directors standing for election to give their opinion on the Ihumatao subdivision, and all 5 duly said they supported it.
Although new company chair Bruce Hassall initially tried to close Mrs van Camp down, saying this wasn’t the time for general business questions, she stood her ground and made it clear her request was for each of these 6 directors to state their position. They did so, some in detail, all in support of the subdivision proceeding.
9 Protect Ihumatao campaigners & supporters asked questions of the board, and got most of their answers from residential & development chief executive Steve Evans. The answers weren’t what the Ihumatao group wanted to hear, but they were straight & unequivocal responses.
As happened at the Fletcher annual meeting last year, Protect Ihumatao’s practice of popping up with new questioners eventually brought groans from other shareholders.
But what were those other shareholders at Eden Park for? The food trolley, for one thing, and to hear the top table’s view on the year gone & the outlook. But until the final questioner took the microphone, this was not a lossmaking company under deep scrutiny. And the harrumph at the prodding over Ihumatao was a signal to leave it alone, as if to say: ‘We’re investors, here to see our investment is moving forward, even if our directors now want to have a social conscience.’
Top table responds to all protest questions
Listed company boards are encouraged nowadays to act in more socially sympathetic ways, so hearing out the Ihumatao crowd was a proper response. The subdivision land is in an area a short distance from Auckland International Airport which was occupied for hundreds of years before colonisation in the 19th century. Families were driven out, some have returned to push historic claims, but Fletcher Building has won the right to develop through hearings & court proceedings.
Chief executive Ross Taylor offered what he said were a few salient comments: “We’re not touching the stonefields site. As we’ve worked in partnership with iwi that have mana whenua for the site, we’ve developed our plans with their consultation. We’ve actually taken part of the site we’re developing and left that undeveloped next to the stonefields site to enhance the entryway.
“We’re actually developing 480 houses on only 25ha. We’ve been through many forums now, both national & international, reviews & both legal processes with the most recent one being the Environment Court. We’ve respected those processes and we’ve actually engaged in those processes over many years, and quite legitimately engaged in them, and effectively all those independent reviews have supported the approach we’ve taken and the way forward on this project.
“So I look at all that – and then you could say does the project make sense for shareholders in an economic sense, and that’s where you finally get to after doing all the other stuff first, and it does. “So, as I look at all that, I think we’re behaving appropriately, we’ve been respectful, we’ve respected both the community angst as well as the legal processes and we get to the position that we should move forward with the project, and that’s the position we’re taking.”
To another shareholder, Mr Taylor said he couldn’t give the company’s holding costs on the project, but that the project was still appropriate measured against the weighted average cost of capital.
A questioner said that, 20 years on, Fletcher could be pressured to develop the buffer zone it was leaving. Mr Taylor commented: “The buffer is enshrined in our development approval. We can’t ever touch it.”
Mr Evans added that the company was in discussions on who to hand the buffer zone over to, iwi or Auckland Council.
The Steel & Tube non-deal
Answering an online questioner, who’d asked about Fletcher’s takeover offer for Steel & Tube Holdings Ltd, and had suggested: “Wouldn’t it be wise to get your own house in order before seeking to acquire other companies?” Mr Hassall expanded on the response at the time (5 weeks ago), in which Fletcher questioned the Steel & Tube board’s lack of support to “progress the proposal in a timely manner” and announced that Fletcher was pulling its offer.
Today, Mr Hassall said “there was a window of opportunity” and the offer “was on strategy. We talked around our New Zealand businesses, and growing those and refocusing on the core.
“The second thing. We have a highly performing steel business and we saw an opportunity where we could put those 2 businesses together. They had many complementary product offerings, and also locations, so putting those 2 businesses together created an opportunity to deliver an enhanced customer service & experience right across the whole range of product suites, and also deliver positive return to our shareholders.”
On the question of timing, Mr Hassall said Steel & Tube had just run a formal due diligence process before its capital-raising in September, so Fletcher didn’t have to rerun that process: “There was a window and we took it.”
A boys’ club? We’re getting better at inclusion, says chair
A shareholder asked about “the poor performance of the company over time” and the role of women at Fletcher Building, questioning the claim in the annual report (page 40) that “facilitating an inclusive & motivating working environment for women is important to us. Ultimately, we want to create a culture in which gender diversity in management & our industry is the norm. For this reason we provide targeted development for women within the business…”
In contrast to that statement, the shareholder said, if he looked around the room, “it looks like a boys’ club, and it’s not good enough”. There was no information in the report to support the claim of facilitating a changed environment, pay rates or pay equity: “For a company this size & importance in New Zealand, it’s not good enough. And particularly when you have a large retail company, PlaceMakers, which doesn’t perform that well in my view… where you must have a number of female employees – and if you don’t you should have.”
Mr Hassall countered: “At a board level & as a company we are very focused on the importance of gender, and we’re also focused more generally around the importance of diversity, because it’s important as an organisation that we reflect New Zealand, and particularly that we reflect the customers that we’ve got.
“I think your comment’s a little bit harsh. We’re also an industry that’s heavily dominated historically by males. Now that is changing. But… Fletcher Building has done a lot of really good things in recent years around diversity & women. For example, Global Women, formed a number of years ago, Fletcher Building was one of the principal partners involved in there and it’s still actively involved.
“Around broader diversity, I think we were the first corporate in New Zealand to get the diversity tick. Have we got some more work to do? Of course we do. Do we need to address gender mix across our executive teams, middle-senior management? Yes. Can’t solve it overnight. We have a number of programmes and a number of them are spelled out in the annual report.”
Mr Hassall said Fletcher had a programme on pay equity and would report back on that in the annual report next year: “We are focused on it. In our remuneration of employees, that was one of the things that was taken into consideration, but more work to be done.”
As for PlaceMakers, Mr Hassall told the shareholder: “I do need to pull you up on that. PlaceMakers is one of our best performing businesses, and it’s the star performer in the Fletcher Building group, has been for a number of years and I’m sure will continue to be so… It is an outstanding business.”
After 105 minutes, a modestly probing question
And at the end of it all, longtime listed company investor Robert Gray closed questiontime with a curly one about future liability for late completion of the SkyCity International Convention Centre & Precinct Properties Ltd’s Commercial Bay redevelopment of the downtown block at the foot of Albert & Queen Sts.
Mr Hassall said Fletcher had completed “7, nearly 8” of the 16 building & interiors division projects which had come under the spotlight 2 years ago, resulting in closure of the company’s vertical construction business. “We remain confident with the provisions we’ve established [but] can’t comment on specific projects.”
Mr Gray asked: “Can the company speed up delivery – [for instance] by working longer hours?” Mr Hassall said nothing. Mr Taylor responded: “You & I both wish that.”
And in those 2 questions about construction liability, Mr Gray laid bare the default by the body of shareholders: ‘The leaders had spoken, no further inquiry needed. We made a loss last year, no dividend, all happy.’ That’s how the meeting was, sadly, a bad one.
Fletcher Building annual meeting, 20 November 2018, webcast
Annual meeting documents & guidance
Chair’s written address
21 June 2018, Fletcher Building strategy presentation slides
16 October 2018: Fletcher gets miffy over Steel & Tube time to get advice, pulls what was only ever a “non-binding & indicative offer”
5 October 2018: The price was moving, the confidentiality remains, and still-weak Fletcher insinuates Steel & Tube takeover “compelling”
22 August 2018: Updated: A loss, but flow of red ink stops at Fletcher Building
2 March 2018: Fletcher gets US waiver, still negotiating funding terms
21 February 2018: Fletcher half-year loss $322 million
14 February 2018: Another $486 million of losses for Fletcher Building, and Norris resigns
27 October 2017: Sheppard turns Fletcher meeting into “absolution or exorcism” exercise
21 September 2017: A year on, Fletcher board still has ‘construction nous vacancy’ pencilled in
20 March 2017: Fletcher Building cuts earnings guidance by $110 million
Attribution: Annual meeting.