Fletcher Building Limited · NZX:FBU
Fletcher Building — Investor Day (December 2015)
40 slides from Fletcher Building's investor day presentation, Dec 2, 2015
Slide 1: Fletcher Building Residential Investor Day
For personal use only Fletcher Building Ltd Residential Investor Day 2 December 2015
Slide 2: Agenda
Agenda For personal use only 8:15-8:45am Coffee/Registration Mark Adamson – Chief Executive Officer 8:45am-9:30am Business Update Gerry Bollman – Chief Financial Officer Overview of 9:30am-10:30am Steve Evans – Chief Operating Officer, Housing Residential Business 10:30-10:45am Morning tea 11:00am D
Slide 3: Disclaimer
Disclaimer For personal use only This presentation contains not only a review of operations, but also some forward looking statements about Fletcher Building and the environment in which the company operates. Because these statements are forward looking, Fletcher Building’s actual results could diff
Slide 4: Business Update
Fletcher Building Residential Investor Presentation | © December 2015 For personal use only Business Update Mark Adamson – Chief Executive Officer Gerry Bollman – Chief Financial Officer
Slide 5: We have a clear strategy
We have a clear strategy For personal use only People • Safety Create a great place to work • Leadership, Capability and Change Agility • High-Performance Culture Customers • Digital Leadership Deliver what they value • Pricing & Cost-to-serve • Innovation and Solutions Efficiency • Operations Excel
Slide 6: Our strategy is deployed at three levels
Our strategy is deployed at three levels For personal use only • Clarity on sources of sustainable competitive 1 Group Portfolio advantage Management • Focus on the greatest value-creating opportunities • Clear view on where to invest, hold and divest • Leveraging scale and skill to create a whole t
Slide 7: FBUnite has established core capabilities
FBUnite has established core capabilities For personal use only CUSTOMER Business Units: Customer-Leading Performance Central Functions Centres Of Excellence Finance HR Manufacturing Legal Supply Chain ICT Sales and Marketing Procurement Strategy Property Health & Safety Shared Services Leverage Sca
Slide 8: Bottom-up and top-down assessments of our future potential
We have undertaken bottom-up and top- For personal use only down assessments of our future potential Art of the External Possible Diagnostic Today Bottom-up Top-Down 8 Fletcher Building Residential Investor Presentation | © December 2015
Slide 9: What did we learn from Art of the Possible?
What did we learn from Art of the Possible? For personal use only • We see further opportunity to improve our performance • Most business’ see the potential to grow beyond historical peak earnings • We have confidence that we can deliver this improvement and growth • Growth to be driven by market sh
Slide 10: Outside-in view: What did the diagnostic say we could achieve?
Fletcher Building Residential Investor Presentation | © December 2015 For personal use only Outside-in view: What did the diagnostic say we could achieve? Mark Adamson – Chief Executive Officer Gerry Bollman – Chief Financial Officer
Slide 11: Top-down review: external teams looked across Fletcher Building
Top-down review: 3 external teams looked For personal use only across Fletcher Building Commercial Operations Cost Scope • All commercial • Manufacturing and • Procurement, levers across the operational capex, working business performance capital and overhead cost Approach • Determine value • Focus
Slide 12: Investing in centralised capability to drive margin expansion
We are investing in centralised capability to For personal use only further drive margin expansion and reduce cost Opportunity Levers Investment • Price dispersion and • Sales and Marketing leakage capability 1 Commercial • Mix • Volume • Cost-to-serve • Manufacturing labour • Operations excellence
Slide 13: Investing in centralised capability to drive margin expansion
We are investing in centralised capability to For personal use only further drive margin expansion and reduce cost Opportunity Levers Investment • Top-down processes • Expanding procurement • Pricing and activities, and low cost 4 Procurement specifications country sourcing office • Central function
Slide 14: Senior programme management capability
We have senior programme management For personal use only capability to coordinate and drive activities People • We’re building an agile Transformation Office that will drive, govern and support the Accelerate programme – it will be self–funding Systems • We’ve launched an online tool for capturing
Slide 15: Overview of Residential Business
Fletcher Building Residential Investor Presentation | © December 2015 For personal use only Overview of Residential Business Steve Evans – Chief Operating Officer, Housing
Slide 16: Group Strategy: growth investment in construction and distribution
Group Strategy: Our growth investment is For personal use only focused on construction and distribution • New Zealand construction - leverage capability in the Invest for core Growth • Australasian distribution - growth through omni-channel • L&P - unlock earnings potential of leading global busines
Slide 17: Fletcher Living Business Model Overview
Fletcher Living Business Model Overview For personal use only Development Sourcing Model Lot Development Land Development Partnerships • Purchase of finished lots • Acquiring or using existing FB • Relationships with public and ready for building from land / buildings to provide private land owners
Slide 18: The Economics of Residential Development
The Economics of Residential Development For personal use only Raw land $80-200 per Subdivided sections $50k - $100k+ build sqm $600 - $800 per sqm margin Plus product pull through = ~30% of the construction cost of each dwelling 18 Fletcher Building Residential Investor Presentation | © December 20
Slide 19: The Economics of Residential Development: Example
The Economics of Residential Development: For personal use only Example Land Sourcing Land Development Deal origination, Development Model Infrastructure Build Sell deal negotiation development and consenting Conventional design How others do it & Build - retail Fletcher Living Lots FRL’s Influence
Slide 20: Lot development: Buying lots from developers
Lot development: Buying lots from For personal use only developers • Historic business based on bulk purchase of Number of Dwellings Sold sections from developers with staged delivery 1,200 • Attractive lot pricing achieved through: 1,000 800 – Scale of volume commitment we make 600 – Preparedness t
Slide 21: Land development: Raw land
Land development: Raw land For personal use only • FB re-entered land development with the purchase of the Manukau Golf Course in 2013 • Land developments are typically 8 – 10 year build outs over multiple stages • Acting as the developer of raw land allow FB to: – Capture both development and build
Slide 22: Partnerships
Partnerships For personal use only • The Partnerships’ business encompasses relationships with public and private land holders to facilitate development opportunities • Early successes include Awatea, Welles and Colombo in Christchurch • Acting in Partnership benefits us : – Access to land parcels t
Slide 23: Value add: Building communities enhances return
Value add: Building communities enhances For personal use only return The same terrace house sold for 17% more in May 2015 than Dec 20091 1 After reversing the market movement of 70.2% over the same period 23 Fletcher Building Residential Investor Presentation | © December 2015
Slide 24: Fletcher Residential's competitive advantage
Fletcher Residential’s competitive advantage: For personal use only Why we generate higher margin returns • Being vertically integrated enables us to take a holistic approach to yield management and master planning – We design a development to maximise the total IRR and trade-off development costs,
Slide 25: Orientation
Orientation For personal use only 25 Fletcher Building Residential Investor Presentation | © December 2015
Slide 26: Regional Update: Auckland
Regional Update: Auckland For personal use only Rodney Central • Peninsula Golf • Stonefields continuing development – with apartments and earthworks underway terrace homes • Three Kings SHA now building North Shore • Currently building in Greenhithe Mid-Auckland / Howick • Difficult contour in • Be
Slide 27: Regional update: Canterbury
Regional update: Canterbury For personal use only East Frame Welles • Partnership with • Partnership with CERA MBIE Awatea • Partnership with Colombo MBIE • Partnership with MBIE* • Construction started Rolleston • Under Halswell construction • Under construction 27 Fletcher Building Residential Inv
Slide 28: Some of our current developments
Some of our current developments For personal use only 28 Fletcher Building Residential Investor Presentation | © December 2015
Slide 29: Key projects update
Key projects update For personal use only Peninsula Golf Course Whenuapai Size 22 hectares; Stage 1 85 Size 31 hectares; 650 homes; Stage 2 164 homes homes What we brought $161m; 650 finished What we brought $24m; 22 hectares raw lots land (half of entire Timeframe 8 years course) Timeframe 3 years
Slide 30: Key projects update
Key projects update For personal use only Three Kings Manukau Golf Course Size 21.6 hectares; 1,200 to Size 47 hectares; 433 1,500 dwellings consented dwellings (potential to intensify) What we brought $44m; old quarry site and buildings What we brought $43m; 47 hectares of raw land Timeframe 10 yea
Slide 31: Key projects update
Key projects update For personal use only East Frame Size Area, Number of Homes What we brought $, undeveloped land Timeframe 10 years Risk Management • Land settlement contemporaneous with sale • No requirement to start subsequent lot until previous lot sold 31 Fletcher Building Residential Investo
Slide 32: For personal use only
For personal use only 32 Fletcher Building Residential Investor Presentation | © December 2015
Slide 33: The wider benefits for the group
The wider benefits for the group For personal use only 33 Fletcher Building Residential Investor Presentation | © December 2015
Slide 34: Managing risks
Managing risks For personal use only Fletcher Living Risk Management Framework Demand Side Supply Side Ongoing risk Risk management Risk management Ongoing risk management tools in the event of tools in the event of management market disruption market disruption • Presales of product • Change owners
Slide 35: Balance sheet impacts
Balance sheet impacts For personal use only Current State (Forecast YE 2016): • Land value (cost price plus land development costs) – $300m (FY15:$251m) • Work in Progress – $135m (FY15:$42m) • Land purchases on extended terms – $36m (FY15:$66m) Estimated Steady State (2019): • Land value (some of t
Slide 36: Appendix: Market Overview
Fletcher Building Residential Investor Presentation | © December 2015 For personal use only Appendix: Market Overview
Slide 37: Market Overview: Auckland
Market Overview: Auckland For personal use only There is a structural shortage of housing in Auckland… 1,600 35,000 30,000 1,500 25,000 Population (,000) 1,400 20,000 Dwellings 1,300 15,000 10,000 1,200 5,000 1,100 0 1,000 (5,000) 2000 2002 2004 2006 2008 2010 2012 2014 Dwellings needed to keep pace
Slide 38: Market Overview: Key drivers in the Auckland property market
Market Overview: Key drivers in the For personal use only Auckland property market • Auckland’s population grew by nearly 34,000 NZD Benchmark Interest Rates people in the year to June 2015 • Although consent issuance of new dwellings Population in Auckland has continued to increase this has been in
Slide 39: Market Overview: Key drivers in the Auckland property market
Market Overview: Key drivers in the For personal use only Auckland property market • Dwelling consents are above the historical average in Auckland Migration & Consent Issuance both Auckland and Canterbury but remain below the level required to meet demand • Since the Auckland Housing Accord took ef
Slide 40: Market Overview: What are the experts saying about Auckland
Market Overview: What are the experts For personal use only saying about Auckland “Residential construction will need to continue at a high “Extra housing supply should, in time, provide affordable pace for many years. At current rates of building, it accommodation options for Auckland’s burgeoning