Property editor of the NZ Herald

Engineer in for better year

Fulton Hogan's $3.7b forward order book cheering after profit dip and deaths in 2012.

Fulton Hogan staff work on one of the jobs that have helped the firm amass $3.7 billion of forward orders. Photo / APN
Fulton Hogan staff work on one of the jobs that have helped the firm amass $3.7 billion of forward orders. Photo / APN

New Zealand's biggest civil engineering and resource business, Fulton Hogan, has a $3.7 billion forward order book, nearly four times the size of Fletcher's Construction's $1.1 billion.

This month, the Christchurch-headquartered Dunedin-registered Australasian business posted its June 2012 annual report on the Companies Office website, spelling out a disastrous last year, although managing director Nick Miller signalled a much better current performance.

"The business has made a strong start to the 2012-13 financial year and as of October 1, 2012, we have secured $3.7 billion work-in-hand which is significant given the current economic outlook. Additionally, we have outperformed our first quarter budget and I am confident that the changes implemented have stabilised the company and will strengthen our financial performance," Miller said.

Fletcher Building chief executive Mark Adamson said Fletcher's order book stood at about $1.1 billion at December 31, including the country's largest infrastructure job, the Transport Agency's $2 billion Waterview Connection.

Fulton Hogan's poor performance in Australia was responsible for 2011's $73.9 million profit being sliced back to $7.9 million. Retired chairman Ed Johnson said the 2012 result was "a disappointing and totally unacceptable group performance".

Four staff members were killed that year: Walter Cross by a reversing grader at the Port of Tauranga, Jeff Kunst in a Queensland tractor collision, Kerry Ferris crushed by a roller in Nelson and Richard McGavin run over by a truck in Tasmania.

Miller said 2012 was the toughest and most challenging in his eight years as a senior executive and Johnson said the tragic loss of four valued staff members in separate workplace accidents affected the company to its core.

Johnson said Fulton Hogan's New Zealand businesses continued their long history of sustained growth but the Australian business "simply performed poorly", particularly the construction business.

Miller blamed wet weather on the Pacific Motorway Sapphire-to-Woolgoola joint venture in New South Wales, growing pains from the acquisition of Pioneer Road Services, underperforming projects, high levels of employee turnover, leadership challenges, increased overheads and risk profiles.

He said 57 Australian staff were retrenched, growth aspirations were slowed and a back-to-basics approach was being taken.

The group's $2.73 billion revenue came from $2.7 billion construction contract services, $27 million from the sale of land and the rest from the sale of carbon credits and forestry income.

Fulton Hogan is still partially owned by global giant Shell, which it is gradually buying out, but Johnson said an agreement had been reached to partially defer the next two Shell buyback instalments so the company could consider potential acquisitions.

Fulton Hogan had 1217 employees in 2011 but 1582 last year, the highest-paid receiving $920,000 to $930,000.

Miller said the joint venture with John Holland continued to play a key role in the company's New Zealand diversification strategy, winning the Ohai rail upgrade, Auckland's Hunua 4 water pipeline project and chasing hydro-electricity projects and the Christchurch rebuild.

Fulton Hogan was a key member of the Stronger Christchurch Infrastructure Rebuild Team, Miller said, and the company's land development business in Christchurch had prepared and sold 200 lots.

"Demand post-earthquake for residential sections in the west of Christchurch remains high as the population transitions out of the red zone. Millwater in Auckland continues to be in strong demand with over 200 lots developed and sold in the year.

"This demand is expected to continue on the back of population growth, low interest rates and rental demand exceeding supply," Miller said.

- NZ Herald

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