Calls for Fletcher Building board shake-up

"Fletcher has done considerably worse than the average company on the stock exchange," said Simplicity managing director Sam Stubbs. Photo / Natalie Slade

Calls have been repeated for changes to Fletcher Building’s board after yesterday’s trading halt before tomorrow’s half-year result.

Oliver Mander, Shareholders Association chief executive, and Sam Stubbs, managing director of KiwiSaver provider Simplicity NZ, reiterated previous statements that new directors are needed at the board chaired by Bruce Hassall.

Mander said the crucial factor was risk and what steps the board had taken to mitigate that “because issues keep arising”.

A Fletcher spokesman said today he “would not be responding” to calls for board changes.

Hassall’s fellow directors are Martin Brydon, Barbara Chapman, Peter Crowley, Sandra Dodds, Rob McDonald, Doug McKay and Cathy Quinn.

Mander was referring partly to last Monday’s announcement of an extra $180 million provisioning for losses from the New Zealand International Convention Centre [$165m] and structural problems with Wellington International Airport’s new car park [$15m].

The association was concerned about the board’s ability to shed risk “but very clearly with the latest provision, and the potential for how the Iplex situation is unfolding in Australia, that seems a very valid concern”, he said.

NZ Shareholders chief executive Oliver Mander wants a board shake-up at Fletcher Building. Photo / Michael Craig

The performance culture of the company, number of provisions made in the last few years and lack of underlying performance were other issues.

“There’s no doubt that the chief executive inherited things which are very difficult to manage in terms of legacy projects and the flow-on impacts. What it highlights is the long-term impacts of governance and decisions made years ago,” Mander said. It shows the long-term impacts of governance and how the composition of the board and the decisions they make are so important.

“We think there does need to be some change in the board at this point. We said the same two years ago,” but he would not name individuals but questioned board members’ skills if they could get Fletcher back on track.

As for what happened between last Monday and yesterday to cause the trading halt, Mander said he didn’t know for sure.

“What it may be is that the analysts forecast around expectations. It may be there’s a significant variance between the result and what the analysts are saying. So they have to declare that. It might not be more bad news but the difference in market expectations and the result,” Mander said.

Simplicity co-founder Sam Stubbs: "I personally think it's crazy that we don't have basic financial literacy as a core school subject." Photo / Doug Sherring

Stubbs has complained about Fletcher’s continually declining share price.

The board of directors had been entrusted with shareholder and KiwiSaver money with the aim of increasing the share value.

Yet every two to three years, something went wrong and they said they would change their ways but then there was a series of disasters continually, Stubbs said.

“They say sorry every time. We need less excuses and more excellence,” Stubbs said.

“It’s time for the board to have a serious think about ‘are they actually the people who should be governing the company and basically looking after KiwiSaver investments’?” Stubbs said.

Fletcher chairman Bruce Hassall.

The board was put on notice two years ago by the Shareholders Association and Simplicity asking for resignations, “but they said no no no, we’ll change our ways and do better. They’ve done considerably worse than the average company on the stock exchange. They’re below average. It’s time for a change”, Stubbs said.

Craigs’ Geoff Zame asked in a note out today: “Fletcher Building - where does one start? Extraordinary developments yesterday for this beleaguered company that went into a trading halt yesterday.”

The NZX press release noted the halt was to “finalise earnings guidance... that is likely to materially vary from current analyst forecasts” - the consensus EBIT for FY24 is $675m.

Ross Taylor, chief executive of Fletcher Building. Photo / Michael Craig

Fletcher reports tomorrow and the halt will be lifted by midday at the latest.

“Weirdly, there was a separate detailed release to the ASX (why two different releases?) that contained the following highly unusual statement: ‘In addition, it is possible that, given the matters to be considered at the board meeting, the CEO of Fletcher will consider his position with Fletcher with this to be announced when his decision is made’,” Zame noted.

Media commentary this morning had picked up on the lack of synchronisation with the timing of the NZX/ASX trading halts and disparate exchange releases, he said.

“We now await tomorrow’s result with interest as the release including a potential CEO exit suggests this may not be a borderline (8-12 per cent) continuous disclosure issue but rather something more malign,” Zame wrote.

The Australian was now questioning the future of the CEO, CFO and chairman after a long litany of largely legacy issues continued to haunt the company.

Any material fall in underlying operating earnings will naturally put credit metrics under pressure and could lead to yet another balance sheet reset and dilutive capital raise, Zame wrote.

The Sunday Times in Western Australia published an article on the weekend about the Iplex pipe issue which referred it to it as a catastrophe of A$1b-plus ($1.068b), particularly for builder BGC, which built 65 per cent of the homes with leaky pipes.

The focus of investigations so far had been the 17,500 West Australian homes that had the Iplex pipes installed during a five-year window from mid-2017 to mid-2022, it said.

But there are thousands more homeowners, who had the pipes go into their homes before 2017, screaming theirs are failing as well.

Fletcher shares were trading around $6.79 two years ago but at $4.16 yesterday.

Anne Gibson has been the Herald’s property editor for 24 years, has won many awards, written books and covered property extensively here and overseas.