Fletcher Building Limited · NZX:FBU
Fletcher Building — HY21 Earnings Presentation
39 slides from Fletcher Building's earnings presentation, Feb 17, 2021
Slide 1: Half Year Results to 31 December 2020
Fletcher Building Half Year Results to 31 December 2020 ROSS TAYLOR — Chief Executive Officer BEVAN MCKENZIE — Chief Financial Officer 17 February 2021 Fletcher Building Limited
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. New Zealand Operations Ross Taylor 3. Australia Operations Ross Taylor 4. Financial Results Bevan McKenzie 5. Outlook Ross Taylor Fletcher Building Limited
Slide 4: Strong HY21 performance
Strong HY21 performance 2.5 years into strategy - delivering performance and earnings growth HY21 ➢ Strong earnings growth delivered, efficiency programme embedded and sustainable ➢ Market environment broadly stable ➢ Revenue solid overall: growth in NZ Core and Residential housing FY2021 ➢ Earnings
Slide 5: HY21 results at a glance: strong earnings growth
HY21 results at a glance Strong earnings growth, improved profitability and margins Revenue ($m) EBIT (before sig items) ($m) HY21 trading highlights 3,961 +1% 3,987 +47% 323 ➢ Revenue stable overall: growth in businesses exposed to residential, offset by softer Commercial and AU civil markets and r
Slide 6: HY21 results at a glance: strong cash flows, net debt reduced
HY21 results at a glance Strong cash flows, net debt reduced Free Cash Flow1 ($m) Trading Cash Flow2 ($m) HY21 trading highlights 516 ➢ Strong cash flows and net debt reduction: driven by earnings 416 growth and tight management of working capital and capex ➢ Gross debt further reduced by $714 milli
Slide 7: Interim dividend of 12.0 cents per share declared
HY21 results at a glance Interim dividend of 12.0 cents per share declared EPS (before sig items) (cps) Interim dividend 23.7 ➢ Policy to pay dividends in the range of 50% +85% to 75% of net earnings before significant 12.0cps items and having regard to available cash 12.8 flow1 ➢ Interim Dividend o
Slide 8: Continued resolute focus on safety
Continued resolute focus on safety Safety Total Recordable Injury ➢ ‘Protect’ safety programme to realise a Serious Injuries 2 Frequency Rate 1 future where zero injuries everyday is 33 possible 10.7 ➢ Current focus is on critical risks, high potentials and resetting culture and 8.5 21 20 behaviours
Slide 9: Sustainability
Sustainability Progress made and improved recognition Carbon (CO2) Emissions (thousand Tonnes)1 ➢ Current year emissions reflect return to normal activity, follows COVID shutdowns in FY20 and GBC outage in FY19 ➢ Verified Science Based Target to reduce Carbon Emissions by 30% 1,238 by 2030 1,147 1,1
Slide 10: Agenda
Agenda 1. Results Overview Ross Taylor 2. New Zealand Operations Ross Taylor 3. Australia Operations Ross Taylor 4. Financial Results Bevan McKenzie 5. Outlook Ross Taylor Fletcher Building Limited
Slide 11: New Zealand Market
New Zealand Market Residential supportive, solid Infrastructure pipeline, Commercial softer NZ Residential Work Put in Place ($b) Floor Area Consented (Mm2) • NZ Residential is 53% of NZ FB revenue 8.3 8.5 • HY21 saw solid residential building activity, 3% increase in work put +3% 3.3 in place and 8
Slide 12: Building Products HY21 results overview
Building Products HY21 results overview Gross Revenue ($m) EBIT ($m) Trading performance and operating highlights 645 683 101 ➢ Revenue up 6%: good demand from residential finishing trades and subdivision work, plus share gains and improved pricing disciplines 66 ➢ EBIT up 53% due to margin improvem
Slide 13: Distribution HY21 results overview
Distribution HY21 results overview Gross Revenue ($m) EBIT ($m) Trading performance and operating highlights 824 852 60 ➢ Revenue up 3%: good demand from residential trades and 50 consumer segments, partly offset by softer commercial sector ➢ EBIT up 20% with margin improvement of 90bps: efficiency
Slide 14: Concrete HY21 results overview
Concrete HY21 results overview Gross Revenue ($m) EBIT1 ($m) Trading performance and operating highlights 403 430 62 ➢ Revenue up 7%: robust demand across all key segments, share gains 49 in cement, improved pricing in ready-mix and aggregates ➢ EBIT up 27% through margin improvement of 220bps: manu
Slide 15: NZ Core: improvement driven by solid volumes, pricing, lower costs
NZ Core (Building Products, Distribution, Concrete) Improvement driven by solid volumes, pricing, lower costs NZ Core EBIT1: HY20 to HY21 ($m) NZ Core EBIT Margin1: HY18 to HY21 (%) +35% 11.3% 10.7% 35 (2) 223 10.1% 8.8% 25 165 HY20 EBIT Market Volume, Net Cost Other HY21 EBIT HY18 2 HY19 2 HY20 HY2
Slide 16: Residential and Development HY21 results overview
Residential and Development HY21 results overview Gross Revenue ($m) EBIT ($m) Trading performance and operating highlights 62 ➢ Revenue up 59%: unit sales increased to 515 (vs. 293 in HY20) on 356 strong demand in both Auckland and Christchurch; average price of units sold 5% higher 35 224 ➢ EBIT u
Slide 17: Residential and Development earnings weighting
Residential and Development Residential earnings weighted to first half, Land Dev’t mainly second half Residential & Development EBIT: HY20 to HY21 ($m) 37 (9) ➢ Residential: (1) ➢ Uplift in HY21 earnings driven by strong housing volumes, 62 including c100 in Q121 relating to sales made in FY20 ➢ Ta
Slide 18: Construction HY21 results overview
Construction HY21 results overview Gross Revenue ($m) EBIT1 ($m) Trading performance and focus areas 774 14 ➢ Revenue down 16%: solely due to reduced revenue on legacy 651 13 projects, remainder of division stable YOY ➢ EBIT steady: improved earnings and margins from Higgins and Brian Perry ➢ Cash f
Slide 19: Construction: continue to reshape order book
Construction Continue to reshape order book Work to Complete ($b) Profile of Forward Work ➢ c80% of forward order book (excl. legacy) is lower-risk forms of contract: alliances, national and local maintenance contracts, and 0.5 cost-plus / measure & value ➢ Projects under exclusive negotiation inclu
Slide 20: Agenda
Agenda 1. Results Overview Ross Taylor 2. New Zealand Operations Ross Taylor 3. Australia Operations Ross Taylor 4. Financial Results Bevan McKenzie 5. Outlook Ross Taylor Fletcher Building Limited
Slide 21: Market outlook: Australia
Market outlook Australia residential solid with softer commercial and infrastructure AU Residential Work Done (A$b) Approvals (#) • AU Residential is 60% of FB AU revenue 37.9 36.2 99k 87k • HY21 saw robust activity in detached housing and renovations, offset -5% by apartments sector +13% • Positive
Slide 22: Australia HY21 results overview
Australia HY21 results overview Gross Revenue ($m) EBIT1 ($m) Trading performance and operating highlights 1,453 1,390 51 ➢ Revenue down 4%: Pipes businesses down 25% in subdued civil market; remainder of division steady on balance of solid residential 35 demand and softer commercial ➢ EBIT up 46% w
Slide 23: Australia: material benefits from cost-out
Australia Material benefits from cost-out, partly offset by impact of pipes market Australia EBIT1: HY20 to HY21 ($m) AU EBIT Margin1: HY18 to HY21 (%) +46% 4.1% 42 4 3.7% 51 2.7% 35 22 2.4% Pipes (16) Other BU’s (6) HY20 EBIT Market Volume, Net Cost Other HY21 EBIT HY18 2 HY19 2 HY20 HY21 Share & P
Slide 24: Agenda
Agenda 1. Results Overview Ross Taylor 2. New Zealand Operations Ross Taylor 3. Australia Operations Ross Taylor 4. Financial Results Bevan McKenzie 5. Outlook Ross Taylor Fletcher Building Limited
Slide 25: Income statement
Income statement Strong result, first half EBIT before significant items ahead of guidance Dec 2019 Dec 2020 Change NZ$m 6 months 6 months % Revenue 3,961 3,987 1% EBITDA 402 503 25% EBIT before significant items 219 323 47% Significant items (35) (86) (146%) EBIT 184 237 29% Lease interest expense
Slide 26: HY21 EBIT improvement
HY21 EBIT Improvement underpinned by operating leverage on lower cost base EBIT1: HY20 to HY21 (NZ$m) 87 (6) 323 23 219 NZ Core +35 Australia +42 NZ Core +25 Resi, Dev’t, FCC, Corp +10 Australia (22) Residential +37 Dev’t, FCC (17) HY20 EBIT Market Volume, Share & Price Net Cost Benefit Other HY21 E
Slide 27: Significant items
Significant items Restructuring costs lower than prior forecast, Rocla impaired FY21 significant items (Profit and Loss Charges) FY21 FY21 ➢ HY21 charges mainly related to Iplex AU site closures NZ$m Prior forecast HY21 2H21 Updated Restructuring 90 35 c30 c65 ➢ 2H21 charges are final phase of restr
Slide 28: Cash flow
Cash flow Strong half year trading and controlled working capital Dec 2019 Dec 2020 Change NZ$m 6 months 6 months $m EBIT before significant items 219 323 104 Depreciation and amortisation 183 180 (3) Lease principal payments and lease interest paid (119) (124) (5) Provisions and other (5) 19 24 Tra
Slide 29: Working capital
Working capital Well positioned, some inventory rebuild expected in 2H21 Cash flow working capital movements Dec 2019 Dec 2020 Change NZ$m 6 months 6 months $m Residential and Development - 50 50 Construction excluding legacy projects (15) 6 21 Materials and Distribution Divisions: • Debtors 92 64 (
Slide 30: Capital expenditure
Capital expenditure Balanced between maintenance and strategic investment HY21 Capex (NZ$m) NZ$m ➢ Capex programme focused on maintenance as well as enabling investments for strategy, especially digital, manufacturing efficiency NZ Core (ex WWB) 26 and sustainability WWB 31 ➢ c70% maintenance / c30%
Slide 31: Net debt
Net debt Reduction through strong trading cash flows Net Debt: Jun-20 to Dec-20 (NZ$m) 44 516 33 68 109 497 34 269 Net Debt Legacy projects Capex Funding costs Other 1 Trading cash Significant items Net Debt Jun-20 trading cash Dec-20 1 Other is comprised of Minority distribution of $27m, Hedging/FX
Slide 32: Leverage
Leverage Targeting lower end of 1.0x-2.0x range Leverage (Net Debt / EBITDA) ➢ Leverage ratio (Net Debt / EBITDA) below target range of 1.0x-2.0x following strong cash flow performance 2.0x ➢ Expect to move to lower end of target range over FY22-FY23 with remaining investment of c$400m in WWB plant
Slide 33: Funding
Funding Strong funding profile and liquidity position Debt Maturity Profile at Dec-20 (NZ$m) Facilities Drawings NZ$m 31 Dec 20 31 Dec 20 14 Syndicate 925 - USPP 459 459 Capital Notes 406 406 400 Other 22 22 525 Total 1,812 887 459 ➢ Undrawn credit lines of $925m and cash on hand of $618m as at 31 D
Slide 34: Dividend
Dividend Interim dividend of 12.0 cents per share to be paid in March Interim dividend (cps) ➢ Interim Dividend of 12.0 cents per share, to be paid on 24 March 2021 ➢ 50% pay-out ratio1 12.0 ➢ In Jun-20, FB announced amendments to its banking agreements enabling the Company to rely on more favourabl
Slide 35: Summary
Summary 2.5 years into strategy – on track to deliver financial targets Cost Reset and Margin Cash Flow & Capex Capital Structure ➢ On track to deliver slightly ahead of ➢ Strong trading cash flows underpinned ➢ $1.5b liquidity targeted $150m gross fixed cost by margin performance and ongoing reduct
Slide 36: Agenda
Agenda 1. Results Overview Ross Taylor 2. New Zealand Operations Ross Taylor 3. Australia Operations Ross Taylor 4. Financial Results Bevan McKenzie 5. Outlook Ross Taylor Fletcher Building Limited
Slide 37: Second half FY21 outlook
Second half FY21 outlook ➢ Current indicators point to second half core volumes in NZ and Australia remaining at similar levels to those seen in the first half, with robust ongoing demand for residential housing in NZ Market ➢ January and early February trading has seen a slightly slower ramp-up pos
Slide 38: Appendix
Appendix Fletcher Building Limited
Slide 39: Divisional revenue exposure and FB revenue by market
Divisional revenue exposure and FB revenue by market Divisional Revenue Exposure by Sector Total FB Revenue by Market (%) AU Infrastructure Building Products Resi, 46% Com, 26% Infra, 28% AU NZ Commercial Residential 4% 9% Distribution Resi, 81% Com, 19% 36% AU 19% Residential Concrete Resi, 52% Com