Fletcher Building Limited · NZX:FBU
Fletcher Building — Investor Presentation (September 2024)
41 slides from Fletcher Building's investor presentation, Sep 23, 2024
Slide 1: Equity Raising Investor Presentation
Equity Raising Investor Presentation 23 September 2024
Slide 2: Important Notice & Disclaimer (1 of 7)
Important Notice & Disclaimer (1 of 7) This presentation has been prepared by Fletcher Building Limited (the Company, the Group, or Fletcher Building) in relation to an offer of new shares in the Company (New Shares) by way of a placement to eligible institutional and other selected investors (Place
Slide 3: Important Notice & Disclaimer (2 of 7)
Important Notice & Disclaimer (2 of 7) NOT AN OFFER This presentation is not a prospectus or product disclosure statement or other offering document under New Zealand or Australian law or any other law (and will not be filed with or approved by any regulatory authority in New Zealand, Australia or a
Slide 4: Important Notice & Disclaimer (3 of 7)
Important Notice & Disclaimer (3 of 7) DISCLAIMER (cont.) None of the Arranger, nor its respective affiliates, related bodies corporate, directors, officers, partners, employees, agents or advisers (Advisers) have independently verified or will verify any of the content of this presentation and none
Slide 5: Important Notice & Disclaimer (4 of 7)
Important Notice & Disclaimer (4 of 7) FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company, including the FY25 Outlook on slide 13. Forward-looking statements can generally
Slide 6: Important Notice & Disclaimer (5 of 7)
Important Notice & Disclaimer (5 of 7) GENERAL For the purposes of this Disclaimer and Important Notice, "presentation" means these slides, any oral presentation of these slides by the Company, any question-and-answer session that follows that oral presentation, hard copies of this presentation and
Slide 7: Important Notice & Disclaimer (6 of 7)
Important Notice & Disclaimer (6 of 7) NON-GAAP FINANCIAL INFORMATION This presentation includes certain financial measures that are "non-GAAP (generally accepted accounting practice) financial information" under Guidance Note 2017: 'Disclosing non-GAAP financial information' published by the New Ze
Slide 8: Important Notice & Disclaimer (7 of 7)
Important Notice & Disclaimer (7 of 7) KEY ASSUMPTIONS The pro forma financial information presents the assumed impact of the proposed equity raising as if it had occurred on 30 June 2024. It has been assumed that proceeds from the equity raising of NZ$700m is applied to repay existing debt of NZ$67
Slide 9: Taking decisive and pre-emptive action
Taking decisive and pre-emptive action Equity raising to strengthen the balance sheet, and improve financial stability and resilience …AND IMPROVE SEEKING TO RAISE …TO STRENGTHEN THE FINANCIAL STABILITY $700M OF EQUITY… BALANCE SHEET… AND RESILIENCE Capital structure post raising expected to Fletche
Slide 10: Strong investment thesis
Strong investment thesis Focused on markets that have attractive long-term opportunities WE OPERATE IN ATTRACTIVE …WHERE WE HAVE WELL …HISTORICALLY ENABLING MARKETS… POSITIONED BUSINESSES… ATTRACTIVE RETURNS GROUP ROFE BEFORE SIGNIFICANT ITEMS (%)1 Median: 14.5% Population dynamics & Median: 17.1% (
Slide 11: Key recent developments
Key recent developments Fletcher Building has continued to execute on operational and strategic initiatives DELIVERY IN 2024 NEW LEADERSHIP TEAM FAST-TRACKED BALANCE SHEET JOINT INDUSTRY RESPONSE ARRANGED COVENANT MEMBERS appointed with IMPROVEMENTS with 50% sale of IN RELATION TO WA AMENDMENTS1 in
Slide 12: Update on material matters
Update on material matters Significant progress made on WA plumbing and legacy construction projects ➔ A Joint Industry Response (JIR) to the WA plumbing failures has been agreed in principle ➔ Iplex® AU and the WA Government have committed to cover direct costs of repairs by participating builders
Slide 13: Recent trading and FY25 outlook
Recent trading and FY25 outlook Market headwinds have weighed on recent performance and near-term outlook; management have targeted c.$180m of cost savings to be delivered in FY25 to partially offset the impact of inflation and continuing market weakness ➔ Materials & Distribution: market volumes do
Slide 14: Contextualising the market backdrop
Contextualising the market backdrop With >50% of revenue exposed to residential construction, the c.30 – 40% decline in A&NZ housing activity over the last 2 years has weighed on Fletcher Building’s earnings. Significant operating leverage expected once market volumes recover NZ RESIDENTIAL SQUARE M
Slide 15: Update on near-term priorities
Update on near-term priorities Fletcher Building remains focused on delivering on near-term milestones ONGOING COST REDUCTION INITIATIVES TO MANAGE Implementation of FOCUS ON EFFECTIVE EXECUTION OF IN- PROFITABILITY in the current operating environment, WESTERN AUSTRALIAN FLIGHT GROWTH INITIATIVES (
Slide 16: Putting this all together
Putting this all together Fletcher Building investment thesis remains in place; well-positioned once market volumes recover …HOWEVER, MARKET HEADWINDS HAVE WEIGHED ON 1 THE FLETCHER BUILDING INVESTMENT THESIS REMAINS… 2 RECENT PERFORMANCE AND THE NEAR-TERM OUTLOOK ▪ We operate in markets that have a
Slide 17: Sources & uses and pro forma Net Debt
Sources & uses and pro forma Net Debt The Offer reduces FY24 pro forma Net Debt from $1,766m to $1,088m SOURCES NZ$M USES NZ$M Placement proceeds 282 Repayment of existing indebtedness 678 Entitlement Offer proceeds 418 Estimated fees and expenses of the Offer 22 Total sources 700 Total uses 700 NET
Slide 18: Pro forma credit metrics
Pro forma credit metrics The Offer reduces FY24 pro forma leverage1 to 1.22x (within our 1.0 – 2.0x target range); supports our commitment to maintaining an investment grade credit rating and covenant headroom NET DEBT1 LEVERAGE1 GROSS LEVERAGE1 1,766 1.99x 4.15x 2.0x 3.38x Target 1,088 range 1.22x
Slide 19: Offer details
Offer details ➔ Fletcher Building is seeking to raise NZ$700 million (“Offer”) via a: OFFER SIZE AND ➔ ~NZ$282 million placement to eligible investors (“Placement”); and STRUCTURE ➔ 1 for 4.49 pro-rata accelerated non-renounceable entitlement offer to raise ~NZ$418 million (“Entitlement Offer”) ➔ Ap
Slide 20: Offer timetable
Offer timetable EVENT (DATES ARE SUBJECT TO CHANGE AND ARE INDICATIVE ONLY) DAY DATE Equity raising announcement & trading halt Monday 23 September 2024 Placement and Institutional Entitlement Offer opens Monday 23 September 2024 Placement and Institutional Entitlement Offer closes Tuesday 24 Septem
Slide 21: Appendix
A) RECONCILIATION OF NON-GAAP INFORMATION APPENDIX B) KEY RISKS C) INTERNATIONAL OFFER RESTRICTIONS Fletcher Building Limited
Slide 22: Reconciliation of Non-GAAP information
APPENDIX A | Reconciliation of Non-GAAP information Reconciliation to Gross Debt AS AT JUN-24 Reconciliation to EBIT from continuing operations AS AT JUN-24 Net Debt NZ$M 1,766 EBIT from continuing operations before significant items NZ$M 509 Add: Lease liabilities1 NZ$M 1,579 Significant items2 NZ$
Slide 23: Key Risks (1 of 15)
APPENDIX B | Key Risks (1 of 15) KEY RISKS – IMPORTANT: PLEASE READ This section summarises the key risks that Fletcher Building has identified in connection with the Offer and an investment in Fletcher Building shares. Investors should read this section carefully because these risks may materially
Slide 24: Key Risks (2 of 15)
APPENDIX B | Key Risks (2 of 15) COMPETITION Fletcher Building operates in competitive markets, involving both domestic suppliers and imported product suppliers. The competitive environment can be significantly affected by local market forces, such as new market entrants, production capacity utilisa
Slide 25: Key Risks (3 of 15)
APPENDIX B | Key Risks (3 of 15) COST REDUCTIONS Fletcher Building has actively sought to identify cost saving and cash preservation opportunities available to the Group in order to respond to the lower market volumes it is experiencing. It is possible that the assumptions made by Fletcher Building
Slide 26: Key Risks (4 of 15)
APPENDIX B | Key Risks (4 of 15) CREDIT RATING Fletcher Building has a current credit rating with Moody’s Investors Service of Baa3 on negative outlook. This credit rating, or any change to it, can influence Fletcher Buildings access to sources of funding through the public debt capital markets and
Slide 27: Key Risks (5 of 15)
APPENDIX B | Key Risks (5 of 15) PROPERTY SALES AND SITE ACQUISITIONS Fletcher Building’s Residential & Development division acquires sites and develops them into residential homes and apartment buildings. If residential property prices in New Zealand were to remain challenging for an extended perio
Slide 28: Key Risks (6 of 15)
APPENDIX B | Key Risks (6 of 15) CONSTRUCTION RISK (cont.) More generally, the Group’s Construction division is engaged to construct and maintain a wide range of building and infrastructure projects across New Zealand and the South Pacific, including under long term construction contracts with fixed
Slide 29: Key Risks (7 of 15)
APPENDIX B | Key Risks (7 of 15) LITIGATION RISK - WA PLUMBING – JOINT INDUSTRY RESPONSE As announced on 30 August 2024, Iplex® Pipelines Australia Pty Limited (Iplex® AU), together with the Western Australian Government (WA Government) and key industry stakeholders, reached an in-principle agreemen
Slide 30: Key Risks (8 of 15)
APPENDIX B | Key Risks (8 of 15) LITIGATION RISK - WA PLUMBING – JOINT INDUSTRY RESPONSE (cont.) If the JIR is finalised consistent with the In Principle Terms, other risks will remain including: ▪ The class action described below will continue. It is being brought on behalf of all homeowners in Aus
Slide 31: Key Risks (9 of 15)
APPENDIX B | Key Risks (9 of 15) LITIGATION RISK - WA PLUMBING – BGC CLAIM As announced on 27 August 2024, WA home builder, BGC, has filed legal proceedings against Iplex® AU, in relation to the Iplex® Pro-fit Pipes issues. Iplex® AU intends to defend the proceedings. BGC is now raising allegations
Slide 32: Key Risks (10 of 15)
APPENDIX B | Key Risks (10 of 15) LITIGATION RISK - NZICC PROJECT – SKYCITY CLAIMS (cont.) SkyCity has, from time to time, alleged that it has claims against FCC under the building works contract for liquidated damages for delay in excess of the maximum liability cap for liquidated damages in the bu
Slide 33: Key Risks (11 of 15)
APPENDIX B | Key Risks (11 of 15) LITIGATION RISK - PŪHOI TO WARKWORTH (P2W) – COVID-19 CLAIM (cont.) These matters may take some time to be resolved and, while the dispute continues, there is no certainty on the outcome, amount or timing of any settlement discussions or formal dispute resolution, a
Slide 34: Key Risks (12 of 15)
APPENDIX B | Key Risks (12 of 15) LITIGATION RISK - NEW ZEALAND COMMERCE COMMISSION – WINSTONE WALLBOARDS REBATES As announced on 23 August 2024, the Commerce Commission advised Fletcher Building that it believes that Winstone Wallboards Limited’s use of retroactive tiered rebates between 1 January
Slide 35: Key Risks (13 of 15)
APPENDIX B | Key Risks (13 of 15) TECHNOLOGY RESILIENCE Like many businesses, Fletcher Building is dependent on information technology systems to maintain its operations. Failure to provide reliable, resilient, adaptable and efficient technology infrastructure may impact the operations of the busine
Slide 36: Key Risks (14 of 15)
APPENDIX B | Key Risks (14 of 15) GOVERNMENT REGULATIONS (cont.) One specific risk results from the changes to Emissions Trading Scheme (ETS) arising from the Climate Change Response (Late Payment Penalties and Industrial Allocation) Amendment Act, which was passed in August 2023. This change has th
Slide 37: Key Risks (15 of 15)
APPENDIX B | Key Risks (15 of 15) CLIMATE CHANGE Fletcher Building has substantial building products and concrete businesses in New Zealand and building products businesses in Australia, and as such it is exposed to risks emanating from changes in carbon related policies, both in New Zealand and Aus
Slide 38: International Offer Restrictions (1 of 4)
APPENDIX C | International Offer Restrictions (1 of 4) This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be o
Slide 39: International Offer Restrictions (2 of 4)
APPENDIX C | International Offer Restrictions (2 of 4) CANADA (BRITISH COLUMBIA, ONTARIO AND QUEBEC PROVINCES) (CONT.) Statutory rights of action for damages and rescission. Securities legislation in certain Provinces may provide a purchaser with remedies for rescission or damages if an offering mem
Slide 40: International Offer Restrictions (3 of 4)
APPENDIX C | International Offer Restrictions (3 of 4) JAPAN The New Shares have not been, and will not be, registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the "FIEL") pursuant to an exemption from the registration requ
Slide 41: International Offer Restrictions (4 of 4)
APPENDIX C | International Offer Restrictions (4 of 4) UNITED ARAB EMIRATES This document does not constitute a public offer of securities in the United Arab Emirates and the New Shares may not be offered or sold, directly or indirectly, to the public in the UAE. Neither this document nor the New Sh
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