Australian newcomer brings fresh eye to construction giant’s troubles.

Ross Taylor has been in the top job at Fletcher Building for just four weeks and touts himself as a "circuit breaker".

"You have to create an environment where we think through where we want to go and we've got to make sure we're engaged around that, and then you've got to deliver against it. And the beauty of me coming in as an external is you're a circuit breaker", Taylor said in an interview at the company's Penrose HQ this week.

"I haven't been steeped in the last two years of that journey and I'm not carrying all of that baggage."

The wiry Australian plans to set an agenda to make the company an internationally fit player in the cut-throat construction and infrastructure business.


"My view is the world's globally competitive, and my reaction is if Fletcher Building can't compete outside of New Zealand, what makes it think it can compete here," Taylor said.

"I'd personally rather have the fight outside of New Zealand. Because I think that forces you to be fighting fit. If you start getting defensive, you just get chipped away."

It may seem counter-intuitive to be talking up an internationally competitive game after Fletcher Building's awful year, but the confident 55-year-old Australian, who owns up to the kind of battle scars you earn through experiences similar to those that have recently afflicted two of Fletcher's flagship construction projects, is obviously gearing up to move the company on to an exciting growth phase by embracing concepts such as modularisation.

Taylor's appointment was announced at Fletcher's AGM on October 25, when the board led by chairman Sir Ralph Norris apologised for a woeful performance and took a 20 per cent haircut on directors' fees.

Fletcher Building shares plunged by 5.3 per cent to $7.55 as new guidance for the 2018 financial year revealed its building and interiors unit would take a $160 million hit. Some 80 per cent of the unit's loss was due to cost overruns on SkyCity's New Zealand International Convention Centre (ICC) and the Christchurch justice and emergency services precinct.

Getting to grips with the construction arm's problem children is a priority along with some aspects of Fletcher's Australian business.

"There's some very strong positions and well-performing businesses here," Taylor said. "But the construction piece needs some work and obviously some of the Australian businesses have languished for a number of years."

With less than 10 working weeks until Fletcher Building reports its interim result on February 21, Taylor has to be in the position to front up to the market, talk to the provisions and give credible guidance to shareholders, who will be nervous about whether more writeoffs are in store.


An experienced chief executive with successful stints at Australia's UGL and Tenix under his belt, Taylor has learned the most important thing is "never come in with assumptions or hypotheses".

"The best thing you can do is just to get in and work in the business for two or three months — that gives you a feel for the business."

By early June, Taylor wants to be able to talk to the market about his strategy and vision, any portfolio decisions that will be made, and "how we're going to go forward in the business".

"So, the whole idea is: whatever you're going to do to yourself, get it done so when you get into FY19, it's a clear year without a lot of abnormals or different bits and bobs."

Taylor said the company had clearly been under a bit of stress.

"You can't go through progressive writedowns and you can't have [that] sort of the press commentary and analyst commentary without an organisation feeling that."

Taylor was shoulder-tapped by then Fletcher Building director Kate Spargo, his former chairwoman at UGL where he distinguished himself as a focused chief executive.

"Obviously I knew Kate from a former life and as the board was looking for candidates she proffered my name forward and so I was put into a process."

It was an exciting opportunity for Taylor and his wife, Kathy, who have four children — Jessica, 27, Lachlan, 26, Rachel, 23, and Callum, 21.

"Kathy and I were sitting on the veranda and we had no kids at home," Taylor recounts.

"We've sort of been empty-nesters the last six months and the kids', I think, vision is — 'we just age in place'.

"And we've moved a lot around the world over the years with them, and we thought, 'Why not?' It's not a risk. It was just more 'wow, that'll be exciting'.

"The only big risk in the whole thing is we've got the two youngest at uni and we'll probably leave the house in Australia in their charge."

Kathy Taylor will join him in Auckland in February.

In his downtime, Taylor enjoys walking, skiing and surfing.

"Kathy doesn't like surfing. I like golfing and she can't stand golfing, she doesn't get it at all. Which is a pity," he laughs.

"A lot of what we do together is walk. And she's better at it than me. She does Base Camp at Everest. We did the Kilimanjaro walk many years ago and I was very ill and she has no impact at all and she just leaves me behind when she does those high elevation walks."

When it comes to surfing, Taylor's favourite beach is Nihiwatu in Sumba, Indonesia, which is host to one of the world's most coveted private waves known as "God's Left" or "Occy's Left". He rides a short board — "not as much as I'd like".

For golf it is Elenora near where he used to live on the Northern Beaches of Sydney. His handicap is 11 and he nominates his grandfather as the most interesting person he has played against — "the only opponent I've had who can hit the ball 20m into the bush and always find it on the fairway".

Taylor has a strong commercial track record as a chief executive in Australia serving as CEO at the publicly listed UGL and before that at privately held Tenix.

He had earlier risen to be chief operating officer at Lend Lease after a lengthy career there, before bowing out when he did not make the cut for CEO.

Taylor's stint at UGL was just two years and nine months. But it was sufficiently focused that he could note on LinkedIn that his accomplishments included a 50 per cent plus improvement in safety performance, a share price increase from A$1.60 to A$3.15, a return of the business to operating profits and appropriate margins, and a strong increase in the order book to around A$5.5 billion.

His stint at UGL was not without controversy.

When CIMIC launched an A$524m hostile takeover in 2016, Taylor stood to receive a A$7.6m payout on its success. This sparked shareholder complaints he should not vote on the deal.

Counters Taylor: "Imagine a situation where the CEO didn't comment? So, my reaction to that is that provided your remuneration and your outcome is transparent, then you are not hiding that. And how would a shareholder not want a commentary from the CEO?

"There was noise around what I got, but 'gee, the share price doubled'."

The upshot was the takeover went ahead and Taylor went on six months' gardening leave. "You know, it's not often in your career you get some time so that was quite joyous," he says.

Taylor focused on a charity he chairs in Timor Leste and then started "engaging around various opportunities".

During his gardening leave Taylor also worked with a ptBlink — a start-up focused on modularisation.

"I just helped someone I know quite well get that moving and I think some of their IP could be quite applicable to here."

Embracing modularisation is key to Taylor's ambition for Fletcher Building.

He believes Fletcher has a very good position in what he calls the broad construction value chain: "From digging it up, to products, to distributing it, and then building and developing — that's pretty unique.

"More and more people are manufacturing buildings ... you can still get bespoke outcomes for buildings but you're using more components. And as I've sat at the development or construction end of these things, you've actually got to organise your supply chain to do that and it's harder.

"You've got a very, very compelling footprint here [in NZ] and an enormous opportunity in the future ... as to where you can take that," he explains.

"The beauty of it is that as you modularise and panelise you're better able to compete because it becomes more manufactured and more automated... therefore the more you take labour out of it, the more efficient it gets."

Modularisation runs the gamut from vertical construction, through to bathrooms and componentry and structural solutions.

"The ones we need to develop are the ones that suit our product set. And I think they are out there. And it's just a matter of us now working through how we take what is broadly an underperforming vertical construction business and to get it predictably performing and to then think about how we take advantage of it relative to what Fletcher is.

"But if we really crack modularisation at some point in the future then that gets very interesting for us as to how we take that forward."

Taylor understands how Fletcher got itself into a pickle with its two construction projects, saying it is not unique to New Zealand.

"My view is you should only contract risk you can manage. And as markets wax and wane, counterparties private or public quite often will try to offload risk to you, which is inappropriate simply because it's not in your room to manage and you shouldn't therefore take it. So that's one piece of the puzzle.

"You've got to have skills to manage design to the estimate you've bid on and you've got to make sure if you're going to take those positions you actually need to have those skills and that awareness.

"Thirdly, as projects get bigger ... you've got to make sure you've got the levels of sophistication and teams that can handle that bigger-style project because when clients do bigger projects they tend to put more professionals around them. So, it's less of what I call a collegial relationship, and you've got to manage it effectively through the contract.

"I think there's been a combination of those sort of three elements that have sort of caught Fletchers a little bit, but it's not unique to Fletchers."

Asked if he had personal experience, Taylor said: "Absolutely, yeah, and I've made that mistake in my own career, in Lend Lease particularly. As you know, you sort of focus on where you think the issues are, the minute you leave a bit of the business alone, quite often it can surprise you.

Already Taylor has met key clients, looked over the convention centre business and spent time in Australia at the Laminex operation.

His contract is open ended but he expects to be at Fletcher at least five years.

"There's no term on my contract," he said. "I'm moving here to run this business.

"I'm not here to fail, I mean, you know, your reputation goes with these jobs so that's as important."