Reported results | Year ended 30 June | ||||
NZ$m (except where noted) | 2018 | 2017 | Change % | ||
Total revenue | 9,471 | 9,399 | 1% | ||
Operating earnings before significant items1 | 50 | 525 | (90)% | ||
Significant items2 | (168) | (252) | (33)% | ||
Operating earnings (EBIT) | (118) | 273 | NM | ||
Funding costs | (157) | (111) | 41% | ||
Earnings/(loss) before taxTax benefit/(expense) | (275) 96 | 162(57) | NMNM | ||
Earnings/(loss) after taxNon-controlling interestsNet earnings/(loss) | (179) (11) (190) | 105(11) 94 | NM 0% NM NM | ||
Net earnings/(loss) before significant items | (60) | 321 | |||
Basic earnings per share (cents) | (25.5) | 13.5 | NM | ||
Dividends declared per share (cents) | 0.0 | 39.0 | NM | ||
Cash flows from operating activities | 396 | 243 | 63% | ||
Capital expenditure | 304 | 319 | (5)% | ||
Operating earnings before significant items1 | 50 | 525 | (90)% | ||
Building + Interiors (B+I) | (660) | (292) | NM | ||
Operating earnings (excluding B+I) before significant items3 | 710 | 817 | (13)% |
1Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the businessand has been derived from Fletcher Building Limited's financial statements for theyear ended 30 June 2018.
2Details of significant items can be found in note 4 of the financial statements.
3Measure excludes the impact of the Building + Interiors (B+I) business unit
Revenue for the period of $9,471 million was $72 million, or 1%, higher when compared with the prior year;
Operating earnings before significant items were $50 million, which included the impact of losses in the Building +Interiors ("B+I") businessof $660 million as announced in February 2018;
Operating earnings (excluding B+I) before significant items of $710 million were within earnings guidance, and were $107 million, or 13%, lower than the prior year;
A charge of $168 million was recognised in significant items (2017: a charge of $252 million) relating to group restructuring charges, gains on divestments, and certain asset impairments;
A cash inflow from operations of $396 million was $153 million, or 63%, higher than the prior year.
Net earnings were a loss of $190 million, down from a profit of $94 million in the prior year;
In line with the Company's Dividend Policy, the Board has determined that it will not declare a final dividend.
Financial Results
Year ended 30 June | ||||||
Revenue | ||||||
NZ$m | 2018 | 2017 | Change | |||
Building Products | 764 | 745 | 3% | |||
Distribution | 1,530 | 1,519 | 1% | |||
Steel | 532 | 491 | 8% | |||
Concrete | 812 | 781 | 4% | |||
Residential and Development | 575 | 420 | 37% | |||
Construction | 1,685 | 2,246 | (25%) | |||
Australia | 3,076 | 2,858 | 8% | |||
Formica and Roof Tile Group | 1,177 | 1,120 | 5% | |||
Divested businesses | 108 | 78 | 38% | |||
Other | 8 | 9 | (11%) | |||
Gross revenue | 10,267 | 10,267 | 0% | |||
less intercompany sales | (796) | (868) | (8%) | |||
Group external revenue | 9,471 | 9,399 | 1% | |||
Year ended 30 June | ||||||
Reported operating earnings | Operating earnings before significant items and B+I1 | |||||
NZ$m | 2018 | 2017 | Change | 2018 | 2017 | Change |
Building Products | 132 | 152 | (13%) | 132 | 152 | (13%) |
Distribution | 101 | 104 | (3%) | 104 | 104 | 0% |
Steel | 41 | 54 | (24%) | 49 | 54 | (9%) |
Concrete | 73 | 113 | (35%) | 90 | 113 | (20%) |
Residential and Development | 136 | 130 | 5% | 136 | 130 | 5% |
Construction | (613) | (204) | NM | 52 | 88 | (41%) |
Australia | 65 | (132) | NM | 114 | 119 | (4%) |
Formica and Roof Tile Group | 8 | 79 | (90%) | 65 | 79 | (18%) |
Corporate | (111) | (31) | NM | (45) | (30) | (50%) |
Divested businesses | 50 | 8 | NM | 13 | 8 | 63% |
Total | (118) | 273 | NM | 710 | 817 | (13%) |
Funding costs | (157) | (111) | (41%) | (157) | (111) | (41%) |
Earnings/(loss) before tax | (275) | 162 | NM | 553 | 706 | (22%) |
Tax benefit/(expense) | 96 | (57) | NM | (127) | (164) | (23%) |
Earnings/(loss) after tax | (179) | 105 | NM | 426 | 542 | (21%) |
Non-controlling interests | (11) | (11) | 0% | (11) | (11) | 0% |
Net earnings/(loss) | (190) | 94 | NM | 415 | 531 | (22%) |
1Operating earnings before significant items and B+I is a non-GAAP measure used by management to assess the performance of the
business and has been derived from Fletcher Building Limited's financial statements for theyear ended 30 June 2018. Details of B+I and significant items can be found in notes 3 and 4 of the financial statements respectively.
2Financial results are presented under the new divisional structure, as announced on 21 June 2018.
Geographic segments
Year ended 30 June
Gross revenueNZ$m
Externalrevenue
New Zealand Australia2Rest of World
Total
2018 | 2017 | Change | 2018 | 2017 | Change |
5,867 | 6,126 | (4%) | 5,220 | 5,381 | (3%) |
3,120 | 2,853 | 9% | 3,018 | 2,766 | 9% |
1,280 | 1,288 | (1%) | 1,233 | 1,252 | (2%) |
10,267 | 10,267 | 0% | 9,471 | 9,399 | 1% |
Geographic segments
Year ended 30 June
Operating earnings before significant items1
NZ$m
New Zealand Australia2Rest of World
2018(172)
Total
123 9950
2017282 120 123525
Change
NM
3%
(20%)
(90%)
Geographic segments in local currency
Gross Revenue
Year ended 30 JuneExternal revenue
2018
2017
Change
2018
2017
Change
Australia (A$m)2Rest of World (US$m)
2,877 913
2,701 918
7% (1%)
2,783 879
2,619 892
6% (1%)
Geographic segments in local currency
Year ended 30 June
Operating earnings before significant items1
2018 | 2017 | Change | |
Australia (A$m)2 | 113 | 114 | (1%) |
Rest of World (US$m) | 70 | 88 | (20%) |
1Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the businessand has been derived from Fletcher Building Limited's financial statements for theyear ended 30 June 2018. Details of significant items can be found in note 4 of the financial statements.
2The Australia geographic segment includes corporate costs and Land Development operations in addition to that of the Australia division.
External revenue of $9,471 million was $72 million or 1% higher than the prior year. New Zealand revenue decreased by $161 million or 3%, but increased by $251 million or 7% excluding the Construction division. Australian revenue increased by $252 million or 9%, and in local currencies revenue increased by 6% in Australia and decreased by 1% in the Rest of World.
InNew Zealand,market conditions were robust with flat to low single digit growth compared to the prior year.
The distribution and materials divisions showed modest to strong revenue growth compared to the prior year, driven by both volume and pricing gains. However, this was offset by increases in input costs (especially energy), which could not be fully recovered through price increases; higher supply chain costs to alleviate capacity constraints; changes in product mix, and certain one-off costs.
The Residential and Development division performed strongly, with the Residential business benefiting from the number of units available to sell as subdivisions came to market as well as robust selling prices in Auckland, and the Land Development business recognising the sale of the first site at Wiri North.
The Construction division saw mixed results as the prior year included the finalisation of significant projects in the Infrastructure business. Higgins continued to perform strongly through participation in large scale roading projects. Revenue in B+I decreased from the prior year as projects were re-phased based on the additional provisions recognised during the year.
InAustralia, market conditions were mixed, with robust activity in Victoria and South Australia offset by continued challenging trading conditions in Western Australia. Victoria has overtaken New South Wales in the number of building consents issued. Most Australian businesses were impacted by increased input costs, particularly resin and energy, which could not be fully recovered through price increases. A contribution of $15 million from the Land Development business in Australia led to operating earnings increasing by 3% in New Zealand dollars overall compared to the prior year.
In theRest of World, earnings were mixed, with a strong performance from Formica in North America and Asia offset by earnings decreases in the Roof Tile Group and Construction South Pacific, due to difficult trading conditions in a number of export markets for the Roof Tile Group and a roll-off of major projects in South Pacific.
The significant items charge of $168 million for the year related to restructuring costs of $91 million and impairment charges of $114 million, offset by gains on business divestments of $37 million. The restructuring costs and business divestments were as a result of the implementation of the new Group strategy announced on 21 June 2018.
Funding costs of $157 million increased from $111 million in the prior year. This reflected a $16 million increase in the impact from derivative valuations compared to the prior year, an increase in interest costs from debt levels and mix, and penalty interest and fees paid on some tranches of debt following covenant breaches.
The tax benefit of $96 million reflects the loss for the year, with the B+I loss provisions expected to be deductible in future periods.
Earnings per share were (25.5) cents compared with 13.5 cents per share in the prior year.
A cash inflow from operations of $396 million compared with an inflow of $243 million in the prior year. The improvement was driven primarily by higher cash conversion in the Residential business and improvements in working capital management across the Group.
1
In certain sections of this commentary the Group has chosen to present certain financial information exclusive of the impact of Significant Items and / or the results of the Building + Interiors (B+I) business unit, consistent with previous market guidance. Where such information is presented, it is clearly described and marked with an appropriate footnote. This allows the readers of this commentary to better understand the underlying operations and performance of the Group.
Segmental Operational Review
The following sections provide commentary on individual division results for the year ended 30 June 2018 based on the new divisional structure announced on 21 June 2018.
Building Products
Winstone Wallboards; Laminex New Zealand; Tasman Insulation; Humes; Iplex New Zealand; CSP Pacific; Altus
Year ended 30 June | ||||
NZ$m | 2018 | 2017 | Change | Change % |
Gross revenue | 764 | 745 | 19 | 3% |
External revenue | 613 | 589 | 24 | 4% |
Operating earnings | 132 | 152 | (20) | (13%) |
Funds | 494 | 489 | 5 | 1% |
Trading cashflow | 142 | 143 | (1) | (1%) |
The Building Products division reported gross revenue of $764 million, an increase of 3% compared with $745 million in the prior year. The division's operating earnings were $132 million, compared with $152 millionin the prior year, a reduction of 13%.
The increase in Building Products revenues was driven by higher price and volumes in selected products offsettingweaker volumes of other products. Iplex NZ's sales volumes were up 15% year on year, the price of standard andperformance wallboards increased modestly and domestic glasswool selling prices were up 6%. However, domestic wall board sales volumes and glasswool tonnage sold were both down 1% and concrete pipe volumes were 9% lower than a year ago.
Demand was consistent across all sectors of the market, however, regional performance was mixed as the rate of growth in Auckland slowed and demand in Christchurch continues to rebase following higher activity levels during the earthquake rebuild period.
The contraction in operating earnings for the year is largely as a result of cost pressures, and in particular:
Higher energy, raw material, and supply chain costs, primarily in Iplex New Zealand and Winstone Wallboards, which could not be fully recovered through price increases.
One-off costs incurred due to storm damage in Winstone Wallboards, a fire event at the Humes Penrose site, and provisions made in the division for obsolete stock and historical claims.
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Fletcher Building Ltd. published this content on 22 August 2018 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 22 August 2018 06:46:02 UTC