Fletcher Building chief Ross Taylor: Why convention centre cost him his job

“I’ve never seen anything like it my 40 years in this industry, all that complexity,” he said after announcing the $120 million loss for the half-year to December 31, 2023 which included $165m provisioning for the NZICC.

The Australian engineer who worked for giant Lend Lease for 20 years explained a series of surprises and unexpected events starting with the October 2019 fire, Covid-19, rising steel prices, removing cars covered in mould, replacing steel in-situ then dealing with subcontractor failures and replacement, all leading to rising costs - $165m announced last Monday but a job that some say cost the company $1 billion-plus.

“When the fire occurred on the convention centre - the first 18 months there was mould everywhere. Once we got through that, the steel remediation became apparent. We had to get in and remove the damaged steel.

“A lot of it was the fire protective paint had to be scraped off. The scope of how you did that became apparent. There’s no way sitting back in 2019 that you could see Covid coming. There was no methodology that existed on the mould, for example. We had to invent that and get it approved.

“How do you then get the rubbish out and look at the steel? How is the steel going to be remediated? Then you have another look at the forecasts and then we have Covid.

“As we got into the project, you understand more but unfortunately the nature of the complexity and total lack of norms in the industry on how to do this stuff ... the quality of what we’re doing is good and we’ll get the project finished but understanding the costs and forecasts has been very difficult due to the progressive nature.”

Even though Taylor plans to leave by around August, he still hopes to attend the subsequent NZICC opening, with Fletcher due to finish work this year.

“I might see if I can wrangle to get back. I feel I deserve to at least be at the opening,” he said.

Asked if other board members would consider following him out the door, Taylor said it was not for him to talk about, “certainly not that I’m aware of”.

Asked about his biggest legacy, Taylor said health and safety stood out and he hopes for a resolution to the Iplex house pipe issues in Perth.

“We’re a big business with lots of people and the safety culture in the organisation is really genuine. Safety performance is critical for a business like ours to have that culture and approach. It is a great company and we’re almost clear of the legacy issues and if we can get a resolution in Perth, it will be a delight watching the business achieve that.”

Asked what it might take to fix Fletcher, he indicated it was time.

“If you think of what’s hurting it, the journey on clearing legacy construction has been huge and getting the convention centre finished and opened means an enormous benefit for the organisation. Then you have clear air to get on with running the business.”

In the middle of yesterday’s conference call to investors, Taylor cited an article in the Australian which incorrectly claimed: “The downgrade relates to a greater deteriorating economic outlook in New Zealand, and greater provisions surrounding its Iplex pipes in Western Australia. Fletcher Building says Iplex is now for sale.”

Taylor said it was Tradelink - not Iplex - that Fletcher would sell, so the ASX and NZX were asking for Fletcher to correct that.

Fletcher will hand SkyCity the new Horizon Hotel in the next week and the final convention centre fit-out was underway “so end of this year we’re finished. That gives us more confidence of what is in front of us and where we’re going.”

Grant Swanepoel, Jarden’s equity research director, asked about a continuous series of provisions or write-downs and about communication to leaders within the business.

Taylor said the NZICC had been “a perennial bugbear” and cited mould, suppliers and installers going broke and needing to be replaced, and the steel being replaced.

Bruce Hassall, outgoing Fletcher Building chairman.

“We’ve only been able to get our arms around that as we understood the scope. That’s just the reality. The team did a good job of keeping the job on schedule but until we tried things like the steel remediation - we’re doing things that just don’t normally get done. You don’t normally remediate steel in-situ,” Taylor said.

The risks, unfortunately, had caught the company on the downside.

Asked about the Perth Iplex pipe problems, Taylor said final submissions for an inquiry were due in on March 8 but he had no more information about timing.

Asked about the potential for the company to be devoid of senior leadership from August to October, Taylor has said he could stay longer than six months if needed and the business did plan an orderly change.

Analysts asked about shortcomings in internal communications but chairman Bruce Hassall said openness, transparency and accountability were important.

Stephen Hudson of Macquarie asked Taylor and Hassall about $1.1b provisioning or losses.

“Clearing the construction legacy has been diabolical,” Taylor said, but the company expected to be through the bulk of legacy projects towards the end of this year.

Hassall added: “We have to finish the lovely legacy projects and the convention centre and that’s what we’re doing”.

Asked by Swanepoel about dividends, Hassall referred to the company policy, based on earnings and said future calls about dividends would be made “at the appropriate time”.

Fletcher chief financial officer Bevan McKenzie said it was regrettable a dividend was not paid in 1H24 but it might be resumed in 2H24.

Shares were yesterday afternoon trading down 15 per cent to around $3.52, giving a market cap of $2.7b.

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.