Fletcher Building Limited · NZX:FBU
Fletcher Building — Investor Day (June 2019)
115 slides from Fletcher Building's investor day presentation, Jun 26, 2019
Slide 1: Fletcher Building Investor Day Presentation
Fletcher Building Limited Private Bag 92114 Auckland 1142 810 Great South Road Penrose Auckland 1061 New Zealand fletcherbuilding.com +64 9 525 9000 26 June 2019 Fletcher Building Investor Day Presentation Fletcher Building will hold an investor day in Sydney today. Fletcher Building management led
Slide 2: Fletcher Building Investor Day June 2019
FOCUS Fletcher Building Investor Day June 2019 ROSS TAYLOR — Chief Executive Officer DEAN FRADGLEY — Chief Executive Australia BEVAN MCKENZIE — Chief Financial Officer 26 June 2019 Note: All financials in this presentation are in NZ Dollars, unless otherwise stated.
Slide 3: Agenda
Agenda Time (AEST) Topic Presenter Introduction Ross Taylor, CEO 10:00 - 10:30 AM • Welcome, outline for the day • Group update Australia division 10:30 – 11:15 AM • Australia Strategy Dean Fradgley, CE Australia 11:15 – 13:45 PM • Business unit booth rotation (x5) Australia BU General Managers Lunc
Slide 4: Content
FOCUS Content 1. Group Update 2. Australia Division 3. Capital Structure & Management 4. Outlook 5. Appendix Fletcher Building Investor Day Presentation 2019
Slide 5: Our strategy
Our strategy 12 months ago we laid out a more focused strategy for Fletcher Building Vision To be the undisputed leader in NZ and AU building solutions – with Products and Distribution at our core Focus Areas 1. Refocus on the NZ 2. Stabilise 3. Strengthen Australia 4. Exit non-core core Constructio
Slide 6: Confident this positions us well to drive shareholder returns
We remain confident that this positions us well to drive shareholder returns into the future Focus • Focused on a more manageable footprint Strength • Materially strengthened balance sheet Consistency • Similar businesses in NZ and Australia, allows leverage of skills and IP • Drive and grow our str
Slide 7: Our five year timeline
Our five year timeline We recognised this would take time and laid out a plan over three broad stages FY2019 FY2020 FY2021–23 REFOCUS AND STABILISE PERFORMANCE GROWTH 1. Refocus on NZ businesses strong and growing the NZ core 2. Stabilise Complete B+I projects Construction turnaround complete Constr
Slide 8: Our five year timeline
Our five year timeline We recognised this would take time and laid out a plan over three broad stages FY2019 FY2020 FY2021–23 REFOCUS AND STABILISE PERFORMANCE GROWTH 1. Refocus on the NZ core ✓ NZ businesses strong and growing 2. Stabilise Construction ✓ Construction turnaround complete 3. Strength
Slide 9: 1. Refocus on the NZ core
1. Refocus on the NZ core >$4bn revenue delivering margins of average c 11%, solid NZ market backdrop, revenue and competitive position maintained, team and organisation evolved, and now positioned to respond to margin pressure Through FY19 it was important to stay focused on the core while we dealt
Slide 10: 2. Stabilise Construction
2. Stabilise Construction Our focus pivots to securing the division’s future, winning profitable contracts and creating a balanced portfolio Key Strategic Priorities Remain the Same What’s Different / Changed Skills Close out legacy Win profitable • Experienced project teams fit for purpose B+I proj
Slide 11: 2. Stabilise Construction
2. Stabilise Construction Remaining B+I projects stable and within provisions – will resume focused bidding in vertical B+I Project Status Resume focused bidding in vertical Feb-18 Now • Market conditions (contract terms, margins) have • Commercial Bay improved • NZICC • Strong industry / government
Slide 12: 3. Strengthen Australia
3. Strengthen Australia The upside opportunity for Fletcher Building in Australia remains, but the starting point for the turnaround is worse than anticipated, with FY19 EBIT of c $55m Australia Residential Approvals Current Position • $3bn revenue • FY19 EBIT (excluding significant items) forecast
Slide 13: 4. Exit non-core businesses
4. Exit non-core businesses RTG sold, Formica sale completed ahead of schedule and at the top end of valuation expectations Formica and RTG Divested • Outstanding outcome on exiting of International businesses • In FY19, successfully sold Roof Tile Group and Formica • Roof Tile Group • Sold on 1 Nov
Slide 14: Key enablers
Key enablers We are making good progress on our strategic enablers • Ensure we learn from the fatalities in FY19 Strong safety culture • Reset safety – culture and practice driving to an injury free environment • Continue to build off our industry leading TRIFR rates x Engaged and • Transitioned wel
Slide 15: Focus on key enablers will drive improvements across balanced scorecard
Focus on key enablers will drive improvements across our balanced scorecard Safety Engagement Total Recordable Injury • Deeply saddened by recent Employee Engagement Rating • Drive employee engagement Frequency Rate 1 fatalities 70% 71% >80% (top quartile) with no • Reinforced our focus on 66% 67% b
Slide 16: FY19 guidance
FY19 guidance Major drivers of FY19 results New Zealand core – solid performance: • Strong market positions maintained • Earnings slightly down YOY due to Steel competitive pressures and cement mill failure • Land Development ahead of expectations at c $55m through good progress on Wiri North Develo
Slide 17: Capital management
Capital management • FBU is continuously assessing its balance sheet position and investment opportunities to drive shareholder returns • Key considerations in assessing capital structure post the sale of Formica: • Net Debt / EBITDA projected to be below the target range of 1.5x-2.5x and ahead of f
Slide 18: We achieved what we said we would in FY19
We achieved what we said we would in FY19 Through FY19 we stabilised and focused Fletcher Building and positioned ourselves well to drive performance through FY20 Through FY19 we achieved the following ➢ Landed a leaner organisation through a restructure and attracted top talent ➢ Strengthened gover
Slide 19: Q+A
Q+A
Slide 20: Content
FOCUS Content 1. Group Update 2. Australia Division 3. Capital Structure & Management 4. Outlook 5. Appendix Fletcher Building Investor Day Presentation 2019
Slide 21: Team and market positions
Team and market positions Dean Fradgley Matt Brodie Justin Burgess Tim Broxham Nicole Sumich Paul Lavelle Alastair Wilson Chief Executive, FB CFO, FB Australia GM, Laminex GM, Tradelink and GM, Iplex and Rocla GM, Fletcher Acting GM, Stramit Australia Oliveri Insulation Market segments Market Market
Slide 22: Australian market size and share
Australian market size and share The Australia division comprises a portfolio of manufacturing and distributing building products businesses that have strong market positions Market Size (NZ$bn) and Share (%) $1.6bn $4.4bn $1.6bn $1.2bn $0.5bn $2.8bn 100% Market share % Laminex Tradelink & Oliveri I
Slide 23: Australian market sector exposure and outlook
Australian market sector exposure and outlook The Australian businesses are most exposed to the residential building sector which is currently in decline and expected to come off 30% from FY18 to FY20, before returning to growth in FY21 AU Historical and Forecast Market Outlook FY19 Revenue Weighted
Slide 24: Australia starting point worse than expected with FY19 EBIT of c $55m
Australia starting point worse than expected with FY19 EBIT of c $55m The combination of the falling residential market and poor discipline in certain areas has led to a worse than anticipated starting point for the Australia turnaround Australia EBIT 1 (NZ$m) Key Impacting Factors • Sharp decline i
Slide 25: AU turnaround – what are we doing?
AU turnaround – what are we doing? We have undertaken a divisional operational review and business unit deep dives and as a result we are now executing: (1) clear BU priorities, (2) cost-out programme, (3) targeted growth investment and (4) strengthening talent New divisional structure facilitates p
Slide 26: AU turnaround – what are we doing?
AU turnaround – what are we doing? 1. Each BU is executing against a clear set of focus areas, which will support improvement in gross margin realisation across the division Key Areas of Focus Lowest Targeted Pricing Strategy New Product Customer Operational Manufacturing Segment and Discipline Deve
Slide 27: AU turnaround – what are we doing?
AU turnaround – what are we doing? 2. Cost-out programme is already well advanced, including leveraging divisional scale 200 roles have been disestablished, 18 properties have been exited, property co-location programme commenced BU Key Business Milestone ✓ Network optimisation of sites commenced ✓
Slide 28: Expect gross annual benefits of $100m in FY21
Expect gross annual benefits of $100m in FY21, of which c $50m flows to EBIT Benefits flow from cost-out programme and fast-payback efficiency capex; all initiatives planned for execution in FY19 have been delivered; all future initiatives remain on track to deliver targeted benefits in FY20-FY21 Ta
Slide 29: AU turnaround – what are we doing?
AU turnaround – what are we doing? 3. Targeted growth investment: mainly customer-facing initiatives such as network densification, range refresh, new product development, and e-commerce; also includes fast payback efficiency projects Average Capital Expenditure of $80m - 100m p.a. to FY22 Strong ca
Slide 30: We continue to target c 7% EBIT margins, but now by FY24
We continue to target c 7% EBIT margins, but now by FY24 We have scale positions generating around $3bn revenue with the ability to both improve performance as well as leverage operational efficiency to deliver better returns Summary of Key Actions Outlook 1. BU delivery against clear areas of focus
Slide 31: Our people are committed and our employee engagement has held
Our people are committed and our employee engagement has held Our organisational health is demonstrated by improving TRIFR by 40% on last year and employee engagement holding while restructuring businesses is completed Australia Division Total Recordable Injury Frequency Rate 1 Employee Engagement 1
Slide 32: We are contributing to our communities
We are contributing to our communities Contributing to our communities and reducing our impact on the environment Community Sustainability • Tradelink Legacy Backyard Assist programme providing • LED lighting services to Australian Defence Force veterans • Hybrid vehicles • Iplex drought support • R
Slide 33: Australian summary
Australian summary One division has been established and we are focused on driving performance improvement which sets the business up for growth in FY20 and beyond $3bn Revenue Targeting c 7% EBIT Margins Market Differentiated Operational Excellence Customer Value Propositions Profit Improving Prote
Slide 34: Australia Division Business Unit Overviews
FOCUS Australia Division Business Unit Overviews Fletcher Building Investor Day Presentation | © June 2019
Slide 35: Laminex
Laminex With over 85 years in the industry, Laminex is Australia’s leading surface brand Company Overview What is Going Well • $807m FY18 revenue, with ~42% market share 1. Sales force optimisation completed • 5 distribution centres, 29 regional distribution 2. Network optimisation of sites commence
Slide 36: Laminex
Laminex Our 4 key areas of focus shape where and how we play 1 Targeted segment growth • Win through specification • Branded solutions offer New product development 2 • Launching new decorative ranges • Utilise innovative technology for new product developments, driving growth Customer excellence 3
Slide 37: Tradelink
Tradelink Tradelink is the 2nd largest plumbing supplier in Australia Company Overview What is Going Well • $844m FY18 revenue with ~19% market share 1. Small medium enterprise (SME) share increasing • 237 branches and 1,600 staff 2. Branch densification • Customers: 3. Organisational restructure •
Slide 38: Tradelink
Tradelink Our 4 key strategic priorities that shape our plan will help drive where and how we play Targeted SME plumber growth 1 • Branch network densification • Showroom refurbishments and upgrades • Focus on customer service promise FBU brand development and showroom expansion 2 • Continue launch
Slide 39: Iplex and Rocla
Iplex and Rocla Well set-up to continue the trajectory of competitive advantages, but is facing some structural market challenges and increased competition Iplex Overview Rocla Overview Key Areas of Focus • $480m FY18 revenue, with • $265m FY18 revenue, with 1. Continued integration of Iplex and Roc
Slide 40: Iplex and Rocla
Iplex and Rocla Our 5 key strategic priorities that shape our plan will help drive where and how we play 1 Iplex and Rocla merger • Grow through continued execution of direct-to-site strategy and leverage share of wallet opportunities with shared customers • Implement cost out initiatives to leverag
Slide 41: Fletcher Insulation
Fletcher Insulation Fletcher Insulation has a strong market position and customer relationships Company Overview What is Going Well • $172m FY18 revenue, with ~34% market share 1. Solid traction on resetting the cost base, with closure of Rooty • 14 sites, including 2 factories, 5 distribution centr
Slide 42: Fletcher Insulation
Fletcher Insulation Our 4 key areas of focus shape where and how we play Lower manufacturing costs 1 • Improve operations at Dandenong glass wool factory by investing in plant improvements and automation • Reduce costs and deliver product improvements Targeted segment growth 2 • Innovative new produ
Slide 43: Stramit
Stramit Differentiated on service in a price driven market • ~19% market shareCompany Overview What is Going Well • $506m FY18 revenue, with ~19% market share • 19 sites, including 4 factories and 14 branches 1. Investment and innovation driving lower cost to serve and • Customers: simplified transa
Slide 44: Stramit
Stramit Our 4 key areas of focus shape where and how we play 1 Operational efficiency • Continue manufacturing efficiency programme • Automation 2 Targeted customer segment growth • Distributors • Sheds and Doors 3 New product development • Launch updated rainwater and walling designs Customer excel
Slide 45: Q+A
Q+A
Slide 46: Australia Division Business Unit Booths Rotation and Lunch
FOCUS Australia Division Business Unit Booths Rotation and Lunch For those joining via webinar, the presentation will resume at 13:45 AEST / 15:45 NZST Fletcher Building Investor Day Presentation | © June 2019
Slide 47: Australia Business Unit booths rotation
Australia Business Unit booths rotation Rotation 1 Rotation 2 Rotation 3 Rotation 4 Rotation 5 Business 11:20-11:45am 11:50-12:15pm 12:20-12:45pm 12:50-1:15pm 1:20-1:45pm Unit GM Host 1 Rocla/Iplex Nicole Sumich Group 1 Group 3 Group 2 2 Stramit Alastair Wilson Group 2 Group 3 Group 1 12:15-12:20pm
Slide 48: Laminex – Justin Burgess, GM of Laminex
Laminex Justin Burgess, GM of Laminex • In role 2 years • Experience includes: • James Hardie (13 years) • GWA • Boral 47 Fletcher Building Investor Day Presentation | © June 2019
Slide 49: Laminex
Laminex With over 85 years in the industry, Laminex is Australia’s leading surface brand Company Overview What is Going Well • $807m FY18 revenue, with ~42% market share 1. Sales force optimisation completed • 5 distribution centres, 29 regional distribution 2. Network optimisation of sites commence
Slide 50: Key focus area: Targeted segment growth
Key focus area: Targeted segment growth Win through specification • Higher margin decorative products Decorative Revenue Sales • Sales teams focus on +26% key strategic customer segments • New showroom formats in higher foot traffic areas in Tradelink stores • Sales excellence and pricing optimisati
Slide 51: Key focus area: New product development
Key focus area: New product development Win through product leadership • Major new colour range Product Vitality1 launch • Adjacencies to drive share of wallet • A strong new product 10% development pipeline 5% • Leveraging manufacturing 4% investments and technology Former Product Vitality Current
Slide 52: Key focus area: Customer excellence
Key focus area: Customer excellence Customer experience initiatives Net Promoter Score (NPS) • Launch online selection service and offline design and selection service • DIFOT1 benefit from distribution network 60 • Activate digital channel with online 53 ordering 46 Former NPS Score Current NPS Sco
Slide 53: Key focus area: Operating efficiency
Key focus area: Operating efficiency Manufacturing investment Supply chain optimisation Fast Payback Investments (EBIT A$m) • Better service delivery with a lower cost model • Branch warehouse sites converted to service hubs • Distribution centres and showrooms that 6 align with major population gro
Slide 54: Closing Summary
Closing Summary The Laminex renewal programme is well advanced • Fix – Lower SG&A and COGS through streamlined business model • Grow – Product leadership and supply chain excellence • Accelerate – Adjacencies and new digital routes to market 53 Fletcher Building Investor Day Presentation | © June 20
Slide 55: Tradelink – Tim Broxham, GM Tradelink
Tradelink Tim Broxham, GM Tradelink • In GM role 3 years. Previously GM Ops for one year • Roles include: • 20 years in big box retail / wholesale / hardware • National , General Manager, Regional roles in UK with Marks and Spencer, Aldi, Makro Wholesale and B&Q • 6 years in property including major
Slide 56: Tradelink
Tradelink Tradelink is the 2nd largest plumbing supplier in Australia Company Overview What is Going Well • $844m FY18 revenue with ~19% market share 1. Small medium enterprise (SME) plumber share increasing • 237 branches and 1,600 staff 2. Branch densification • Customers: 3. Organisational restru
Slide 57: Key focus area: Small medium enterprise (SME) plumber growth
Key focus area: Small medium enterprise (SME) plumber growth SME ongoing focus SME Plumber Sales • SME resilience in current market continues. Less impacted to housing trends and heavily driven by maintenance • Tradelink sales growth outperforming market +30% +17% trends. 34 months of YOY monthly sa
Slide 58: Key focus area: Customer excellence
Key focus area: Customer excellence Focus on service to build on resilient SME customer base • Net promoter score 37% for Q1 2019, up 240bps improvement vs. Q2 18 • DIFOT1 at 92%, an improvement of 10% since 2017 • 95% of all branch phone calls answered within 5 rings • Core range availability at 99
Slide 59: Key focus area: FBU brand development and showroom expansion
Key focus area: FBU brand development and showroom expansion Own product participation growth • Continue to drive participation of FBU brand products in front & back of wall areas increasing profitability. (Stramit, Iplex, Fletcher Insulation, Oliveri) • Introduce Oliveri bathroom range and drive ma
Slide 60: Key focus area: Oliveri own brand growth
Key focus area: Oliveri own brand growth Transitioning from manufacturer to master distributor • Maintain kitchen sink and tapware range and build on own brand offer • Launched bathroom range in April • 250 SKUs • Brought to market in 9 months • In 50 Tradelink showrooms • Launched service promise i
Slide 61: Key focus area: Civil expansion
3 Civil Expansion Key focus area: Civil expansion • Expansion plans aligned to growing opportunity in non-residential projects market Realise mega trend opportunity Civil Network Expansion Plans • Growth segment within Commercial forecast unlike housing • Current support structures established acros
Slide 62: Key focus area: Operational efficiency
4 Operational Efficiency Key focus area: Operational efficiency • P100 savings initiatives, organisational restructure and rightsizing delivering savings of $14m in FY20 Acceleration of actions achieving operational efficiency Organisational restructure (ramp up) Property right sizing (continuation)
Slide 63: Closing summary
Closing summary Tradelink on track for the 30:25:5 model • Continuing volume & share growth against a declining market. Tradelink market share ~19% vs 17.2% FY18 • Continuing success delivering consistent year on year network plumber sales growth through service, product and availability • Organisat
Slide 64: Iplex and Rocla – Nicole Sumich, GM
Iplex and Rocla Nicole Sumich, GM of Iplex and Rocla • 1 year Iplex Australia and Rocla Pipelines • 4 years Iplex Australia • Experience includes: • 10 years Rank Group • CHH Packaging • CHH Building Products • Goodman Fielder • 5 years Deloitte • 5 years Caltex 63 Fletcher Building Investor Day Pre
Slide 65: Iplex and Rocla
Iplex and Rocla Well set-up to continue the trajectory of competitive advantages, but is facing some structural market challenges and increased competition Iplex Overview Rocla Overview Key Areas of Focus • $480m FY18 revenue, with • $265m FY18 revenue, with ~20% 1. Continued integration of Iplex an
Slide 66: Key focus area: Iplex and Rocla merger
Key focus area: Iplex and Rocla merger One company, one culture • $220m of combined revenue Primarily Plastic End Primarily Concrete from shared customers Shared End Markets Markets End Markets Irrigation, Electrical, • Single management team Civil and Water Rail, Utilities, Roads Plumbing, Telecoms
Slide 67: Key focus area: Operational excellence
Key focus area: Operational excellence Culture of performance improvement Iplex Manufacturing Cost Index (Foam Core Pipe) • Organic self help step change complete • Selective investment is being made to further reduce manufacturing cost 100 • Latest example as depicted shows cost of 90 76 manufactur
Slide 68: Key focus area: Targeted segment growth
Key focus area: Targeted segment growth Focus on Civil and water quality sales Iplex Civil Revenue (A$m) • #1 market share 207 164 • Civil Direct To Site strategy will continue in Sept- 140 19 with 3rd site going live • Dedicated Civil sites, extended hours • Flexible delivery options • Fast custome
Slide 69: Key focus area: Customer experience cultural change
Key focus area: Customer experience cultural change Targeted programmes are resulting in improved customer experience Iplex Order DIFOT1 87% 71% Mar-17 Mar-18 Mar-19 Sep-17 Sep-18 Iplex Net Promoter Score (NPS) 25 22 -2 FY17 FY18 FY19 1 DIFOT = Delivered In Full On Time 68 Fletcher Building Investor
Slide 70: Key focus area: “4 waters” strategy
Key focus area: “4 waters” strategy Focus on solutions for all reusable water sources 1) Drinking Water 1 2) Sewer Water 2 3 3) Recycled 4 Water 4) Storm Water 69 Fletcher Building Investor Day Presentation | © June 2019
Slide 71: Closing summary
Closing summary Leverage Iplex experience to accelerate the recovery of Rocla, whilst leveraging our credibility and key capabilities to create a unique, market leading solutions provider • Lowest cost sourcing and manufacturing model supports a targeted focus on customer experience and superior ser
Slide 72: Fletcher Insulation – Paul Lavelle, GM
Fletcher Insulation Paul Lavelle, GM of Fletcher Insulation • 1.5 years - Fletcher Insulation • 4 years - Laminex Australia • 20 years experience in: • General Management, Sales & Marketing in Australia & Asia • Fonterra Brands • Johnson & Johnson • Unilever 71 Fletcher Building Investor Day Present
Slide 73: Fletcher Insulation
Fletcher Insulation Fletcher Insulation has a strong market position and customer relationships Company Overview What is Going Well • $172m FY18 revenue, with ~34% market share 1. Solid traction on resetting the cost base, with closure of Rooty • 14 sites, including 2 factories, 5 distribution centr
Slide 74: Key focus area: Lower manufacturing costs
Key focus area: Lower manufacturing costs Cost to Produce Lower manufacturing costs Glass Wool Manufacturing Cost Index • Closed inefficient glass wool factory in 20% cost reduction April 2019 in Rooty Hill (NSW) • Moved all glass wool production to the much larger facility in Dandenong (VIC) • Capi
Slide 75: Key focus area: Targeted segment growth
Key focus area: Targeted segment growth [KPI Relevant Graph] Targeted segment growth New Product Sales (% of Targeted • New product development has Revenue) segment activation been lacking in the past Increase new product • Major focus on accelerating new contribution to product launches, driven by
Slide 76: Key focus area: Operational efficiency
Key focus area: Operational efficiency Operational efficiency • Optimised supply chain footprint, including sharing Jandakot (WA) Operational Efficiency Gains property with other FBU Shared Facility with Tradelink (A$m, in year) businesses to reduce costs • Completed organisational restructure to op
Slide 77: Key focus area: Customer service excellence
Key focus area: Customer service excellence Customer service excellence Net Promoter Score (NPS) • Net Promoter Score (NPS) showing good upward trajectory, with a near term target of 25 25 • Customer service promise to be 21 16 launched in FY20, delivering a significantly improved customer experienc
Slide 78: Closing Summary
Closing Summary • Focused on being the leading provider of insulation product & service solutions in Australia • Lower manufacturing costs with focused investment in our largest facility and closed an inefficient factory • Targeted activities to drive share in key customer segments while acceleratin
Slide 79: Stramit – Alastair Wilson, Acting GM
Stramit Alastair Wilson, Acting GM • Four years with Stramit • Experience includes: • 10 years in senior leadership roles • Manufacturing and Distribution background in both Australia and UK 78 Fletcher Building Investor Day Presentation | © June 2019
Slide 80: Stramit
Stramit Differentiated on service in a price driven market • ~19% market shareCompany Overview What is Going Well • $506m FY18 revenue, with ~19% market share • 19 sites, including 4 factories and 14 branches 1. Investment and innovation driving lower cost to serve and • Customers: simplified transa
Slide 81: Key focus area: Lowest cost to manufacture
Key focus area: Lowest cost to manufacture Culture of continuous improvement FY17 vs FY19 Cost of Manufacture • Manufacturing costs held or reduced, (Index - FY17 cost) despite market driven decline in volumes • Property co-locations • Continuous improvement programme • Automation to improve safety
Slide 82: Key focus area: Targeted customer segment growth
Key focus area: Targeted customer segment growth Building partnerships Distributor (A$m) Sheds (A$m) Doors (A$m) + 6.6% + 5.2% + 16.8% FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19 Driving sales growth by building engagement, awareness and capability Leverage service excellence and mar
Slide 83: Key focus area: New product development
Key focus area: New product development Profitable product and service innovation 1st to react to building regulation changes +6.55% of Sales Stramit FarLap® Roof Lap Joint System 1% FY19F FY20F FY21F FY22F FY23F New products coming soon 82 Fletcher Building Investor Day Presentation | © June 2019
Slide 84: Key focus area: Customer excellence
Key focus area: Customer excellence Focus on service reflected in improving customer experience DIFOTIS (%)1 Net Promoter Score (NPS) 95.5 30.1 28.0 94.2 20.2 92.9 FY18 FY19 FY20 Target FY17 FY18 FY19 • Market leading service level maintained • ‘Think national and act local’ culture, revitalising th
Slide 85: Closing summary
Closing summary Leveraging the past to build a platform for profitable growth • Continue to invest and innovate to reduce the cost to serve • Maintain service levels plus focus on the customer experience • Launch 3 new products in the next 12 months • Extend the coverage of Taurean Doors and build o
Slide 86: Content
FOCUS Content 1. Group Update 2. Australia Division 3. Capital Structure & Management 4. Outlook 5. Appendix Fletcher Building Investor Day Presentation 2019
Slide 87: Our key capital settings and targets are unchanged
Our key capital settings and targets are unchanged Leverage • Target range of 1.5x – 2.5x • Capex: Average of $275m - $325m p.a. Investment • Residential and Development: $750m total funds invested • Target ROFE 15% Returns & Cash • Target cash conversion 70% • Diversified funding sources, robust li
Slide 88: Target leverage range is 1.5x – 2.5x, consistent with peers
Target leverage range is 1.5x – 2.5x, consistent with peers Leverage: FBU vs Peers (Net Debt / EBITDA) • FBU targets strong BBB credit metrics • Leverage range set 2.5x based on “sum of the parts” by operating Target Band division 1.5x • Range is consistent with peers 2009 2010 2011 2012 2013 2014 2
Slide 89: June 2018 Investor Day leverage forecast
At the June 2018 Investor Day we forecasted that FBU’s leverage post the exit of International and completion of the legacy B+I projects would be c 1.0x Leverage: Forecast at Jun-18 Investor Day 2.5x Target Band 1.8x 1.5x 0.8x 1.0x FY18F International Exit and Legacy B+I Forecast Post-International
Slide 90: Legacy B+I projects: provisions unchanged, remaining cash outflows in FY20
Legacy B+I projects: provisions are unchanged, with remaining cash outflows in FY20 forecast to be c $250m Cash flow Impact of B+I Losses (NZ$m) Cash Outflow EBIT Loss Forecast Cash Outflow FY17A FY18A FY19F FY20F (168) (255) (250-260) (245) (240-250) (285) (292) (660) 89 Fletcher Building Investor
Slide 91: Exit of International: divestments delivered ahead of schedule
Exit of International: divestments delivered ahead of schedule, with proceeds at top end of valuation expectations Item RTG Formica Total Sale Price (USDm) 44 840 884 Deductions and Transaction Costs 5 (45) (40) (USDm) Net Proceeds (USDm) 39 795 834 Average FX (USD / NZD) 0.67 0.67 0.67 Net Proceeds
Slide 92: Formica sale proceeds have materially de-levered the balance sheet
Formica sale proceeds have materially de-levered the balance sheet: Jun-19 net debt of c $300m - $400m and leverage of c 0.5x, ahead of expectations Net Debt (NZ$m) Leverage: Post International Exit & Legacy B+I Projects 1,273 2.5x Target Band 1.5x 1.0x 0.8x 300-400 350 0.5x 0.3x Jun-18 Jun-19 Forec
Slide 93: Capital allocation framework
Capital allocation framework Capital Investment Additional Growth Investment Base Interest Delivering Business Incremental Debt shareholder Trading Cash flow Reduction value and Cash flow Tax returns Additional Capital Returns Dividend 50%-75% NPAT NB: Trading cash flow = EBITDA + change in Net Work
Slide 94: Investment: average capex of $275m - $325m p.a.
Investment: average capex of $275m - $325m p.a. FY19 – 23F Capex by Category Maintenance and IT / ERP Capex of $175m - $200m p.a. • Comprises mainly replacement of core Plant & Equipment, as well as c $30m p.a. EHS investment (risk- Strategic / based allocation methodology) Growth Maintenance 35-40%
Slide 95: Investment: Residential and Development funds invested
Investment: Residential and Development funds invested stand at c $640m currently against an envelope of $750m; strong pipeline of lots under control Residential and Development Funds Invested (NZ$m) • Progressive investment as we scale the business to c 1,000 units p.a. 640 • Close to $750m total i
Slide 96: Returns and cash generation: strong in NZ, improving AU is key
Returns and cash generation: strong in NZ, improving AU is key to achieving Group targets ROFE – FY19F (%) 1 Cash Conversion 22% 22% • Target 70% cash conversion (FCF / EBIT) over Group the medium term Target 15% 16% • NZ Core currently delivering 65% - 70% cash conversion (pre-tax) • Lower levels o
Slide 97: Funding: retiring debt where it makes sense
Funding: we are retiring debt where it makes sense, with an additional c $600m - $650m to be repaid through to Jun-20 Drawn Debt Jun-18 to Jun-20 (NZ$m) 1 1,877 136 150 200 c 250 c 1,100 -1,200 Jun-18 Long Term Note Institutional USPP 20071 Syndicate & Other Jun-20F Prepaid at Par Capital Note Tranc
Slide 98: Funding: sources will remain diversified
Funding: sources will remain diversified, with a rebalancing between local and offshore debt, and maintenance of a robust maturity profile Forecast Debt Facilities at Jun-20 (NZ$m) Forecasted Debt Maturity Profile at Jun-20 (NZ$m) 63 63 500 400 785 [XXX] Total 525 c $2,300m 469 166 150 925 100 100 6
Slide 99: Funding: robust liquidity position, average cost of funds c 5.2%
Funding: robust liquidity position, with average cost of funds of c 5.2% Forecast Facility Size Forecast Drawings Average Cost of Facility Jun-20 (NZ$m) Jun-20 (NZ$m) Funds FY20 (%) USPP 1 785 785 5.0% Bank Syndicate 925 - 3.5% - 3.75% Retail Capital 500 c 350 4.8% - 5.0% Notes Other 2 63 63 9.5% To
Slide 100: Interest costs tracking down, forecast $80m – $90m in FY20
Interest: as a result of debt reduction and lower fees, interest costs are tracking down, forecast to be $80m – $90m in FY20 Interest Costs (NZ$m) 157 c 130 111 c 80-90 1 FY17 FY18 FY19F FY20F 1 Excludes lease interest costs under IFRS 16 99 Fletcher Building Investor Day Presentation | © June 2019
Slide 101: Tax: cash tax forecast c $60m - $70m in FY20
Tax: cash tax forecast to be c $60m - $70m in FY20, c 29% effective tax rate Cash Cash Tax Tax (NZ$m) (NZ$m) NZ Cash Tax Formica Australia / South Pacific • Cash tax payments in FY19 impacted by B+I losses 99 • Effective tax rate 85 normalises to c 29% following the divestment of 60-70 Formica and R
Slide 102: Dividend: target pay-out ratio remains 50% - 75% of NPAT
Dividend: target pay-out ratio remains 50% - 75% of NPAT; dividend reinstated in FY19 and will be weighted to the final payment Dividends (cps) FY17 FY18 FY19 • FBU targets a pay out of 50-75% of 20.0 NPAT before significant items to 19.0 shareholders as an annual dividend • Reference to available c
Slide 103: Capital returns: on-market share buyback of up to NZ$300m
Capital returns: with the Balance Sheet materially de-levered, FBU intends to commence an on-market share buyback following FY19 results of up to NZ$300m • Fletcher Building is continuously assessing its balance sheet position and investment opportunities in order to drive shareholder returns • Wher
Slide 104: Incremental cash flows summary: Formica sale proceeds allocation
Incremental cash flows summary: Formica sale proceeds will be allocated to debt reduction, completion of legacy B+I projects and share buyback Use of Incremental Cash flows from Formica Sale (NZ$) • Buyback of $300m adds c 0.4x to $1,185m leverage • Cash on hand at Jun-20 expected to be c $300m $600
Slide 105: Impact of adoption of IFRS 16 lease accounting standard
Impact of adoption of IFRS 16 lease accounting standard from 1-Jul-19 • Total of c 4,800 operating leases across the Group • Balance sheet: recognises right-of-use asset of c $1.4b - $1.5b and lease liability of c $1.7b - $1.8b • Difference of c $0.3b taken as adjustment to retained earnings, reflec
Slide 106: Q+A
Q+A
Slide 107: Content
FOCUS Content 1. Group Update 2. Australia Division 3. Capital Structure & Management 4. Outlook 5. Appendix Fletcher Building Investor Day Presentation 2019
Slide 108: We achieved what we said we would in FY19
We achieved what we said we would in FY19 Through FY19 we stabilised and focused Fletcher Building and positioned ourselves well to drive performance through FY20 Through FY19 we achieved the following ➢ Landed a leaner organisation restructure and attracted top talent ➢ Strengthened governance ➢ Ke
Slide 109: FY19 guidance
FY19 guidance Major drivers of FY19 results New Zealand core – solid performance: • Strong market positions maintained • Earnings slightly down YOY due to Steel competitive pressures and cement mill failure • Land Development ahead of expectations at c $55m through good progress on Wiri North develo
Slide 110: Outlook for FY20
Outlook for FY20 Through FY20 we expect slightly softer but still healthy market conditions in NZ, and ongoing contraction in the key residential market in Australia New Zealand Market • Expect Residential consents to ease slightly off peaks, Auckland to remain strong • Expect Non-Residential constr
Slide 111: Q+A
Q+A
Slide 112: Content
FOCUS Content 1. Group Update 2. Australia Division 3. Capital Structure & Management 4. Outlook 5. Appendix Fletcher Building Investor Day Presentation 2019
Slide 113: Glossary (1 of 2)
Glossary (1 of 2) Term Definition BUs Business units. This refers to all the different businesses that Fletcher Building owns across its portfolio. Each BU has a General Manager who reports into a Divisional Chief Executive. For example, Humes is a BU in the Building Products division Carbon Emissio
Slide 114: Glossary (2 of 2)
Glossary (2 of 2) Term Definition FY19, FY20 etc. Shorthand for Financial Year 2018 which is the 12 months ended 30 June 2018 NPS Net Promoter Score, % Promoters (9-10) minus % Detractors (0-6) ROFE EBIT / average funds employed RTG Roof Tile Group. A business which was part of the International div
Slide 115: Disclaimer
Disclaimer In certain sections of this presentation the Group has chosen to present certain financial information exclusive of the impact of Significant Items and/or the results of the Building + Interiors (B+I) business unit. Where such information is presented, it is clearly described and/or marke