Land sale gains of $55m and $30m were above the prior guidance and corporate cost savings were $5-$10m lower on long-term incentives not being realised. That offset the impact of a weaker Australian performance, the analysts noted.
Looking at the June 30, 2020 year, Fletcher "painted a picture of a broadly stable New Zealand business - excluding land sales, construction and corporate costs - with Australia benefiting from cost savings. We view this as the best case scenario," the analysts said.
Fletcher trades at a discount compared to its Australian peers, they said, slapping a neutral rating on the company and listing risk factors as construction cycles, competitive pressures and construction losses.
Fletcher is New Zealand's largest building materials and construction company but the building cycle in New Zealand was "near peak". The company is facing numerous competitive and cost challenges and "we view the earnings risk as negative", they said.
Fletcher said yesterday that following the Formica sale for $1.2b, it considered what to do with those proceeds. The $300m buyback and dividend reinstatement were related to that sale.
Taylor said the company was "continuously assessing its balance sheet position and investment opportunities to drive shareholder returns."
Fletcher's presentation said: "The upside opportunity for Fletcher in Australia remains but the starting point for the turnaround is worse than anticipated with FY19 Ebit of about $55m."
