Fletcher staff ‘did lose their jobs’

Nelson Mail - - BUSINESS - HAMISH MCNICOL, CATHER­INE HARRIS AND ELLEN READ

Work­ers at Fletcher Build­ing have lost their jobs over the pos­si­ble $150 mil­lion profit hit caused by cost blowouts on two ma­jor projects.

Fletcher Build­ing re­fused to say which two projects were be­hind the com­pany’s large profit down­grade, but chief ex­ec­u­tive Mark Adam­son said yes­ter­day that ‘‘peo­ple did lose their jobs’’.

‘‘It’s in­ap­pro­pri­ate to men­tion names,’’ he said.

Adam­son said yes­ter­day that the com­pany started a re­view of its build­ing and in­te­ri­ors (B&I) busi­ness, which was re­spon­si­ble for the losses, late last year.

‘‘We brought the new peo­ple and pro­cesses in be­cause we felt this busi­ness was off track and we needed to bring it back on. I’ll be hon­est, not in our wildest dreams back when we did this did we ex­pect to find what we have found.’’

Shares in the coun­try’s largest con­struc­tion firm fell 10 per cent yes­ter­day after it warned prof­its would be up to $150m lower than the guid­ance it gave last month.

Adam­son re­fused to name the projects, cit­ing client con­fi­den­tial­ity, but said one would be com­pleted in a cou­ple of months, while the other was due for com­ple­tion in 2019.

He in­di­cated the com­pany would seek com­pen­sa­tion for the pro­grammes com­ing off track, but the fo­cus at present was on get­ting the jobs fin­ished in bet­ter shape than they were now.

‘‘But there is no doubt the board and I and oth­ers who are in the busi­ness are pre­par­ing for com­pen­sa­tion,’’ Adam­son said.

‘‘Let’s just leave it at that. We’re not tak­ing this lightly.’’

It was un­der­stood the two projects could be the Jus­tice and Emer­gency Precinct in Christchurch and Auck­land’s SkyCity In­ter­na­tional Con­ven­tion Cen­tre.

SkyCity En­ter­tain­ment Group spokesman Colin Espiner said the casino com­pany had a mostly fixed-price con­tract with Fletch­ers and that the project was ‘‘on time and on bud­get’’ to open in the first three months of 2019.

‘‘We’re not privy to the in­ter­nal work­ings of Fletcher Build­ing,’’ Espiner added.

Both the Min­is­ter of Jus­tice’s of­fice and the Jus­tice Min­istry de­clined to com­ment on the Christchurch project, say­ing it was Fletcher Build­ing’s place to talk about its fi­nan­cial sit­u­a­tion.

It was un­der­stood in­cor­rect cost­ings may have been car­ried out on that project to the tune of $40m.

Fletcher was also build­ing the Com­mer­cial Bay project in down­town Auck­land, which was due to be com­pleted in 2019 for Precinct Prop­er­ties.

Precinct chief ex­ec­u­tive Scott Pritchard said the project was all on track with no de­lays, and was go­ing ‘‘very, very well’’.

Fletcher Build­ing, which is listed on the New Zealand and Aus­tralian stock ex­changes, went into a trad­ing halt on Fri­day, say­ing it was re­view­ing the fi­nan­cial per­for­mance of its con­struc­tion di­vi­sion.

Last month it flagged losses on a ma­jor project but yes­ter­day the com­pany re­vealed those losses had widened.

It also sig­nalled losses on a sec­ond big con­struc­tion project, as well as not­ing some ‘‘down­side risks’’ in smaller jobs.

Fletcher Build­ing’s profit be­fore in­ter­est, tax and sig­nif­i­cant items was now likely to be be­tween $610m and $650m for the 2017 year, down from pre­vi­ous guid­ance of be­tween $720m and $760m, a pos­si­ble drop of up to $150m.

After lift­ing the trad­ing halt, the com­pany’s shares fell in mid-morn­ing trad­ing by $1.13 or 12 per cent to $8.09.

On a con­fer­ence call with an­a­lysts yes­ter­day morn­ing, Adam­son said the prob­lem con­tracts were two of its three largest projects in its B&I unit. The third project was run­ning prof­itably.

The B&I di­vi­sion con­trols up to $1.5 bil­lion of Fletcher’s $2.7 bil­lion or­der book.

One an­a­lyst said that while the news was ‘‘dis­ap­point­ing’’, con­struc­tion was ‘‘a tough game’’.

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