Fletcher Building Limited · NZX:FBU
Fletcher Building — FY2020 Earnings Presentation
43 slides from Fletcher Building's earnings presentation, Aug 19, 2020
Slide 1: Full Year Results to 30 June 2020
Fletcher Building Full Year Results to 30 June 2020 ROSS TAYLOR — Chief Executive Officer BEVAN MCKENZIE — Chief Financial Officer 19 August 2020
Slide 2: Important Information
Important Information This presentation has been prepared by Fletcher Building Limited and its group of companies (“Fletcher Building”) for informational purposes. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This presentation provides addi
Slide 3: Agenda
Agenda 1. Results Overview Ross Taylor 2. Positioning for FY21 Ross Taylor 3. Financial Results Bevan McKenzie 4. Strategy and Outlook Ross Taylor Fletcher Building Full Year Results Presentation 2020
Slide 4: Navigated COVID-19 impacts, business set up for FY21, maintained momentum
Navigated COVID-19 impacts, business set up for FY21, and maintained momentum on key strategies and focus areas FY20 FY21 set-up FY21 and beyond • Responded quickly to • Positioned the • Strategy and growth COVID-19 impacts business cost base for ambitions remain • Focus on health and reduced activi
Slide 5: COVID-19 response focused on health and safety, customer service, costs and cash
COVID-19 response to NZ lockdown and Australia restrictions focused on health and safety, customer service, costs and cash Actions FY20 Results • Safely shut down and restarted NZ businesses and dealt with Australia restrictions • Maintained customer service and performance • COVID-19 Support Hub Ap
Slide 6: Construction division provision envelope has increased
While the Construction division continued to progress and finish historical projects, the provision envelope has increased • Well through the historical Construction work book • Additional $150m provisions in Buildings and Infrastructure businesses due to: > COVID-19 disruptions and productivity imp
Slide 7: Permanent reductions to cost base and workforce
Setting up for likely lower market activity in FY21 required permanent reductions to our cost base and workforce Actions Impact • Reductions to operating footprint, supply chain costs and general costs • Actions expected to achieve a permanent reduction in cost base in FY21 of c$300m p.a. • Workforc
Slide 8: FY20 - Financial results
FY20 - Financial results Revenue EBIT1 Net Earnings/(Loss) EPS $7,309m $160m ($196m) (23.5c ) FY2019 $8,308m FY2019 $549m FY2019 $246m FY2019 28.8c Cash flows from Leverage ratio EBIT margin Dividend operating activities $410m 0.9x 2.2% nil Target range: 1.0-2.0x FY2019: 6.6% FY2019: 23cps FY2019 $1
Slide 9: FY20 - Division performance summary
FY20 - Division performance summary Gross Revenue EBIT1 • Good performance in finishing trades, early Building $1,173m $87m stage civil and infrastructure softer Products FY19: $1,314m FY19: $167m • Steel market remained challenging Distribution $1,471m $85m • Growth in line with market FY19: $1,596
Slide 10: Balanced scorecard metrics: safety and sustainability
FY20 - Balanced scorecard metrics: safety and sustainability Safety Safety Total Recordable Injury Serious injuries2 • Group-wide ‘Protect’ programme reset well underway, Frequency Rate1 Protect now one of our core values 6.9 33 • Our aim is to have zero injuries every day 5.1 5.0 5.7 21 20 • Signif
Slide 11: Balanced scorecard metrics: engagement and customer
FY20 - Balanced scorecard metrics: engagement and customer Engagement Engagement Employee Engagement Rating1 • Significant engagement through COVID-19 Support Hub App 70% 71% 66% 67% • Group values refreshed: Protect, Be Bold, Customer Leading, Better Together • Continue to drive employee engagement
Slide 12: Agenda
Agenda 1. Results Overview Ross Taylor 2. Positioning for FY21 Ross Taylor 3. Financial Results Bevan McKenzie 4. Strategy and Outlook Ross Taylor Fletcher Building Full Year Results Presentation 2020
Slide 13: FY21 - Positioned for reduced activity
FY21 - Positioned for reduced activity Focus on preserving profitability and balance sheet position • Business reset for market downturn of c25% in NZ and c20% in Australia Market • Expect stronger first half compared to second half as economies slow, unemployment rises • Remains very uncertain – we
Slide 14: Market outlook: NZ businesses positioned for downturn of c25%
Market outlook Positioning NZ businesses for overall market downturn of c25% NZ Historical and Forecast Overall Residential Consents (#) • Outlook is uncertain, influenced by unemployment, 35k 37k -32% govt. spending, inward migration and COVID-19 33k clusters 25k 23k Residential • 46% of NZ revenue
Slide 15: Building Products
Building Products Focus on margins, product innovation and sustainable manufacturing • Ongoing focus on pricing disciplines and holding margins • c$400m new WWB Tauranga, commence 6 months later Finishing Products • Driving growth through new products e.g. GIB products, TINZ building (WWB, TINZ, wra
Slide 16: Concrete
Concrete Focus on margins, sustainability and operational footprint • Ongoing momentum in pricing disciplines and market share gains achieved in FY20 • Firth new ready-mix concrete plant in Mt Maunganui driving efficiencies Operating • Acquisitions delivering - Tamahere quarry efficiency and acquire
Slide 17: Distribution
Distribution Focus on network efficiency and digital offer to customers • Ongoing focus on pricing disciplines Network • Regional hub structures introduced in Auckland and Christchurch, closed efficiency underperforming stores • Workforce optimisation programme • Distribution digital transformation
Slide 18: Residential and Development
Residential and Development Strongly positioned to expand, leveraging off-site manufacturing Residential and Development Fortnightly House Sales, strong sales post lockdown • #2 house builder in New Zealand # Conditional Agreements 80 Christmas Level 4 Lockdown • New home sales mainly priced $600-90
Slide 19: Construction
Construction Strengthened future order book Significant progress made on two fronts since HY18 Strong future pipeline Work to Complete ($b) • Winning the right work with the right customers eg Watercare, AIA runway, strong pipeline of 0.7 pavement and maintenance • Securing new work in line with tar
Slide 20: Market outlook: Australia businesses positioned for downturn of c20%
Market outlook Positioning Australia businesses for market downturn of c20% AU Historical and Forecast Overall Residential Approvals (#) • Outlook is uncertain, influenced by unemployment, 232k govt. spending, inward migration and COVID-19 188k clusters 169k -24% 129k 129k Residential • 57% of AU re
Slide 21: Australia
Australia Laminex, Fletcher Insulation turnaround momentum; margin focus • Continue momentum in Laminex through customer traction on refreshed product range, Compact decorative surface launched Laminex and • Well-positioned for online trading amid pandemic with Laminex digital delivering online volu
Slide 22: Agenda
Agenda 1. Results Overview Ross Taylor 2. Positioning for FY21 Ross Taylor 3. Financial Results Bevan McKenzie 4. Strategy and Outlook Ross Taylor Fletcher Building Full Year Results Presentation 2020
Slide 23: Income statement
Income statement Profit impacted by COVID-19, provisions and restructuring costs Reported results Jun 2019 Jun 2020 Change NZ$m 12 months 12 months $m Revenue 8,308 7,309 (999) EBITDA 723 530 (193) EBIT before significant items from continuing operations 549 160 (389) Significant items (94) (276) (3
Slide 24: Significant items
Significant items Major restructuring programme to respond to market slowdown FY20-21 restructuring programme Key Focus Areas Significant items • Right-sizing cost base: NZ$m FY20 FY21F Total > 1,500 redundancies Right-sizing cost base 187 90 277 > Operational footprint and office space rationalised
Slide 25: Cash flow
Cash flow Strong cash flows delivered despite challenging trading conditions Jun 2019 Jun 2020 Change NZ$m 12 months 12 months $m EBIT from continuing operations before significant items 549 160 (389) Depreciation and amortisation 174 370 196 Lease principal and interest payments - (240) (240) Provi
Slide 26: Working capital
Working capital Cash flow supported by close management of working capital Cash Flow Working Capital Movements (NZ$m) Cash flow working capital movements continuing ops excl. legacy Construction and significant items Jun 2019 Jun 2020 Change NZ$m 12 months 12 months $m Residential and Development (2
Slide 27: Capex
Capex Reduced spend but ongoing focus on key areas of strategy Capex by Markets (NZ$m) FY20 Capex • FY20 capex spend reduced by $70m as a cash 8 preservation measure through COVID-19 • Capex programme focused on enabling investments for strategy, especially digital, manufacturing 65 efficiency and o
Slide 28: Net debt
Net debt Strong trading cash flows supporting net debt position Net Debt: Jun-19 to Jun-20 (NZ$m) 47 565 77 240 186 63 147 128 44 497 218 Net Debt Reclassification FY19 final Repurchase of Legacy projects Capex Funding costs Other 2 Trading cash Significant items Net Debt 1 Jun-19 to lease liabiliti
Slide 29: Leverage
Leverage Leverage of 0.9x is below bottom end of target range Leverage (Net Debt / EBITDA)1 • Good cash flow performance means leverage ratio (Net Debt / EBITDA) remains below target range of 1.0x-2.0x • Includes impact of construction provisions, which 2.0x increased Jun-20 leverage by 0.2x Target
Slide 30: Funding
Funding Strong maturity profile $1.3b liquidity after USPP payment Debt Maturity Profile at Jun-20 (NZ$m) Facilities Drawings NZ$m 30 Jun 20 30 Jun 20 14 Syndicate 925 400 USPP 809 809 Capital Notes 365 365 400 Other 27 27 525 459 Total 2,126 1,601 • Undrawn credit lines of $525m and cash of $1.1b a
Slide 31: Summary
Summary Strong balance sheet and cash flows, focused on margin Balance Sheet Cash Flow Margin • $1.3b liquidity • Operating cash flows strong, • At HY20, Concrete and core despite COVID-19 impact on Building Products delivering • 0.9x leverage ratio earnings year-on-year margin expansion • Gross deb
Slide 32: Agenda
Agenda 1. Results Overview Ross Taylor 2. Positioning for FY21 Ross Taylor 3. Financial Results Bevan McKenzie 4. Strategy and Outlook Ross Taylor Fletcher Building Full Year Results Presentation 2020
Slide 33: FY21 and beyond - strategy and focus remain unchanged
FY21 and beyond - strategy and focus remain unchanged Remain well positioned to execute strategy • Continued focus on operational excellence and driving profitability 1. Strengthen • Complete the fix of underperforming businesses and grow the NZ core • Market share growth through customer service pe
Slide 34: FY21 outlook
FY21 outlook • Business reset for market downturn of c25% in NZ and c20% in Australia • Expect stronger first half compared to second half as economies slow, unemployment rises • However, the year remains very uncertain • Sharpened focus and ready to act, vigilant to macro factors, market activity a
Slide 35: Appendix
Appendix Fletcher Building Full Year Results Presentation 2020
Slide 36: Industry context New Zealand and Australia
Industry context New Zealand and Australia NZ Historical AU Historical Residential Consents (#) Residential Approvals (#) 37k 239k 35k 232k 33k 222k 29k 30k 188k 169k FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 Retirement Key: Houses Apartments Townhouses Key: Houses Apartments Townhouses Unit
Slide 37: Group revenue by market
Group revenue by market FBU Revenue by Market (%) AU Infrastructure AU NZ Commercial Residential 5% 10% 30% AU Residential 20% 15% 20% NZ NZ Commercial Infrastructure 37 Fletcher Building Full Year Results Presentation | © August 2020
Slide 38: Building Products Results overview
Building Products Results overview Jun 2019 Jun 2019 12 months 12 months Jun 2020 NZ$m Reported pro forma1 12 months Gross Revenue 1,314 1,314 1,173 • Strong volumes and operating performance EBITDA2 177 214 140 in plasterboard, insulation and laminates outside of the NZ lockdown period EBIT2 160 16
Slide 39: Distribution Results overview
Distribution Results overview Jun 2019 Jun 2019 12 months 12 months Jun 2020 NZ$m Reported pro forma1 12 months Gross Revenue 1,596 1,596 1,471 • Revenue growth before and after NZ EBITDA2 114 161 132 lockdown, some key stores open during lockdown but minimal activity EBIT2 104 115 85 • Good growth
Slide 40: Concrete Results overview
Concrete Results overview Jun 2019 Jun 2019 12 months 12 months Jun 2020 NZ$m Reported pro forma1 12 months Gross Revenue 802 802 740 • Revenue growth across all business units EBITDA2 134 164 148 outside of NZ lockdown period with strong resurgence in volumes post lockdown EBIT2 84 89 74 • Price ga
Slide 41: Residential and Development Results overview
Residential and Development Results overview Jun 2019 Jun 2019 12 months 12 months Jun 2020 NZ$m Reported pro forma1 12 months Gross Revenue 639 639 466 • Market demand strong Oct-Mar and post NZ EBITDA2 137 139 68 lockdown, continued strength in key $600k- $900k pricing category EBIT2 137 137 65 •
Slide 42: Construction Results overview
Construction Results overview Jun 2019 Jun 2019 12 months 12 months Jun 2020 NZ$m Reported pro forma1 12 months Gross Revenue 1,702 1,702 1,318 • Paving, earthworks, civil works halted EBITDA2 68 89 (107) through Level 4 lockdown impacting revenues Underlying EBIT2 47 51 3 • EBIT also impacted by we
Slide 43: Australia Results overview
Australia Results overview Jun 2019 Jun 2019 12 months 12 months Jun 2020 NZ$m Reported pro forma1 12 months Gross Revenue 3,024 3,024 2,802 • Revenue held well relative to market decline, EBITDA2 119 208 168 increase in Steel revenue, better trading in May and June EBIT2 57 77 33 • Building Product