Fletcher Building announces $95 million restructure plan, plans to cut overheads by $30 million per year

Fletcher Building is restructuring to cut costs of $30 million a year and has announced an executive shakeup as part of its new strategy.

The company is changing tack to a simpler business model after it revealed losses of nearly $1 billion on major construction contracts including the SkyCity International Convention Centre and Christchurch's Justice and Emergency Services Precinct.

The country's largest construction firm told investors this morning that it will "target investment behind its most strategically important and highest returning businesses; increase its focus on innovation, pursue improvements in procurement, operational efficiency and working capital, and introduce a simpler and leaner decentralised operating model."

Investors liked the news. Fletcher Building shares rose 10c in early trading on the NZX - to $6.70.

The new model will cut overheads by about $30m a year but will cost between $85m and $95m to introduce.

Josh Wilson, senior portfolio manager and NZ Funds, said there was potential for improved earnings arising from today's changes.

"A pared down and simplified company will allow management to focus on running Fletcher Building's market-leading businesses to their full potential, something that eluded previous management," he said.

"This offers the potential for meaningful earnings upside."

Fletcher Building's valuation sits 25 per cent below its Australasian peers, reflecting the turmoil at the company over the last year.

"With no further construction losses announced and a sensible strategy finally in place, we expect the market to take heart and this gap to close," Wilson said.

Chief executive Ross Taylor indicated earlier this year that job losses would be announced in June but there are no specifics revealed in announcements to the stock exchange this morning.

He told the Herald the business expected to announce lay-offs to trim overheads and said he was deeply disappointed about that prospect.

Taylor said he saw the strategy being delivered over three broad stages.

"In FY19 we will focus on stabilising and turning around our existing businesses, while divesting Formica and Roof Tile Group. By FY20 we should be well positioned to deliver solid performance across the portfolio, and from FY21 onwards we want to be achieving strong revenue and earnings growth year on year," he said.

"With successful implementation of the strategy, we aim to deliver above-market revenue growth and improved operating margins over the medium term."

Fletcher reaffirmed guidance for the current financial, putting earnings before interest and tax at $680m-$720m.

Following the woes at the company's building and interiors unit, chairman Ralph Norris resigned.

The firm will reveal changes to its board tomorrow.

It appointed a number of executives to new positions today, including revealing that Dean Fradgley in the new role of chief executive in Australia. All Fletcher's Australian businesses will now sit within his division.