UPDATE: Fletcher directors enjoy pay rise as earnings fall

By Jenny Ruth

Aug. 21 (BusinessDesk) - Fletcher Building’s managing director and other directors have all enjoyed pay increases despite the company’s earnings from core operations mostly falling and a precipitous drop in the share price.

Ross Taylor’s base pay went up $50,000 to $2.05 million and he was provided with $106,503 of other benefits including KiwiSaver and medical insurance premium payments.

Taylor was also granted $1.1 million as a short-term variable incentive which is payable in September and a long-term variable incentive of 196,495 shares, worth $2.05 million based on the weighted average share price on the five business days before July 1 last year of $6.99.

The shares are currently trading at $4.70, up 2.8 percent from yesterday but down from the $4.78 day’s high and down about 35 percent from a year ago.

Taylor was also awarded a one-off share-based payment of $1 million, subject to him remaining with the company until June 30, 2022.

“The board recognises the transition the company is going through and the important part the chief executive officer plays in the successful delivery of the strategy he set in 2018,” Fletcher’s annual report says.

At a media conference, Taylor was asked whether he had been head hunted while at Fletcher.

"No, I haven't and I'm very engaged in what we're doing here at Fletcher Building. That was the attraction for coming into this role," he replied.

Taylor joined the company in November 2017 and received total cash and benefits of $1.27 million through to June 30, 2018 plus a short-term incentive of $1.46 million in September last year. He was also awarded a long-term incentive of 182,561 shares worth $2 million based on a $7.34 share price.

Under the long-term incentive plan, executives purchase shares at the nominated price using an interest-free loan from the company and the shares are held by a trustee until they vest after three years, if performance criteria are met, including total shareholder returns. If performance targets aren’t met after three years, the period is extended another 12 months.

If the targets are met, the company pays a bonus equal to the interest-free loan and the executive takes possession of the shares.

If the targets aren’t met, the shares are forfeited with the proceeds used to repay the interest-free loan.

Fletcher’s chair, Bruce Hassall, who took over from Sept. 1 last year, will receive base remuneration of $367,200 in the year that began July 1, up from $360,000 between Oct. 25, 2018 and June 30 this year.

Hassall’s actual remuneration in the financial year just gone was $333,417.20.

Non-executive directors will also receive $142,800 this year, up from $140,000 between Oct. 25, 2018 and June 30 this year and up from $132,800 between Oct. 25, 2017 and Oct. 24, 2018.

These amounts don’t include additional payments for chairing and sitting on board subcommittees which remain unchanged from last year.

Fletcher posted a $164 million annual net profit, a turnaround from the previous year’s loss and the first year of a five-year refocusing strategy to grow the business, the company said.

Fletcher’s net profit for the year ended June compares with a net loss of $190 million the previous year.

Earnings before interest and tax came in at $631 million, within guidance of $620-650 million, compared with $50 million the previous year.

However, ebit from the building products division fell to $127 million from $132 million the previous year, ebit from the distribution division was unchanged at $104 million, steel division ebit fell to $33 million from $49 million and concrete division ebit fell to $84 million from $90 million.

The residential and development division was the lone bright spot, lifting ebit by $1 million to $137 million, while the construction division returned to profit with ebit of $47 million.

The last “normal” year for the construction division, before it began reporting massive losses totaling nearly $1 billion from its Building+Interiors high-rise unit, was in the year ended June, 2016 when ebit was $78 million.

Fletcher’s Australian business produced ebit of $57 million, down from $114 million the previous year.

The earnings declines in New Zealand occurred at a time when activity across Fletcher’s key residential, non-residential and infrastructure markets is at elevated levels.

The company expects residential consents to ease slightly from their peak but that Auckland will remain strong.

It expects commercial construction to remain at similar levels while infrastructure spending on major roading will ease but spending on road safety, water and rail will increase.

In Australia, it expects residential consents will fall to 150,000-160,000 in 2020 from an estimated 185,000 this year and 232,000 in 2018 but it says the market environment remains uncertain.

It expects Australia’s commercial market to remain broadly flat, as will East Coast infrastructure work-in-place.

Fletcher is expecting its turn-around strategy in Australia will extract about $100 million in gross annual costs with about $15 million to flow to ebit in the current financial year and $50 million in the year ending June 2021.

Fletcher will pay a per-share unimputed dividend of 15 cents, taking the annual payout to 23 cents. The record date is Aug. 29 and it will be paid on Sept. 19. Fletcher didn’t pay dividends the previous year.

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