Fletcher Building: $180m extra for NZ International Convention Centre, car parks

Fletcher says the convention centre project remains on track for completion in late calendar 2024. Photo / Michael Craig

Fletcher Building has delivered grim news today on two big projects, taking a $180 million hit to accounts.

The company’s costs are up at the New Zealand International Convention Centre [NZICC] to cost a further $165 million and a Wellington car park to cost an extra $15m.

Based on the latest cost and revenue forecasts, the company will make an additional provision of $165m on the NZICC classified as a significant item in its half-year 2024 financial statements due out next week, it said.

Fletcher continues to pursue recoveries under the NZICC third-party liability insurance policy of more than $100 million, it said.

“While the company considers it has good grounds for its claims, no third-party liability revenue is included in the current project forecast, in line with accounting standards,” it said.

The convention centre project remains on track for completion in late calendar 2024, it said.

Progress to date has included:

• Car parks are now complete;
• The Horizon Hotel is scheduled to be handed over to client SkyCity Entertainment Group this month;
• Steel remediation throughout the international convention centre is 98 per cent complete.

“Despite this progress, actual and expected costs to complete the project have increased, principally in the areas of steel remediation, internal fit-out, and installation of operating systems,” Fletcher said.

The increased costs are primarily due to higher levels of subcontractor resources required to deliver the final stage of the project.

In addition, a portion of the company’s claims against the project contract works insurance may not be recoverable.

The Wellington International Airport [WIAL] car park job will cost an extra $15m.

“The company continues to work with the client to agree a remediation solution to quality issues and to settle claims. Based on its latest assessment of the cost of the remediation, the company has determined that it will make a provision on WIAL Carpark of $15 million, classified as a significant Item in its half year 2024 financial statements,” it said.

Ross Taylor, chief executive, said: “The NZICC rebuild is a significantly complex and challenging project. It is disappointing we require further provisions on this project and the WIAL car park.

“We remain on track to complete construction of all legacy projects by the end of calendar 2024, however, cost and revenue risk will remain until we have done so. We will vigorously pursue our claims for recoveries on the legacy projects, which are likely to take until FY25-26 to settle.”

Last August, Fletcher maintained its earnings guidance for the 2023 year but said it would make an additional provision of $105 million in its annual accounts for costs associated with the NZICC.

The company said its audit and risk committee reviewed key accounting judgments on the NZICC, which is being built for SkyCity.

The site was damaged by a fire in 2019.

The company’s guidance, issued in June, was for earnings before interest and tax (Ebit) of about $800m and Ebit margins before significant items to be greater than 9 per cent.

The company’s half-year result is due out next Wednesday.

Fletcher has been trading on the NZX around $4.54, giving a market cap of $3.5b.

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.