Day of misery at Fletcher Building
A horror day for Fletcher Building has seen a profit downgrade, the departure of chief executive Mark Adamson and confirmation of a delay to the $700 million International Convention Centre in Auckland.
The International Convention Centre will open later than expected because of problems Fletcher Building has had with the project, SkyCity has confirmed.
The convention centre had been expected to be completed early in 2019, but SkyCity said in a statement to the NZX that work on the centre and its associated hotel was not now expected to finish until ‘‘around the middle of 2019’’.
SkyCity said the delays would not affect any of the convention centre’s confirmed bookings.
Fletcher’s chairman Sir Ralph Norris said Adamson had apologised to the company’s construction division about comments that included criticism of the company’s auditor Deloitte.
Fletcher’s would not comment further publicly about what was said, but Stuff has confirmed Adamson sent an email that said Fletcher’s Business and Interiors (B&I) construction unit was ‘‘full of old farts’’.
‘‘Mark has expressed his deep regret to me personally and offered his sincere apologies to all construction division employees,’’ Norris said.
‘‘The board is incredibly disappointed by these comments about the business and our employees, which are clearly not consistent with Fletcher Building’s values.’’
Shares in Fletcher’s were punished after the company said its operating profit for the year to the end of last month would be $525m – about $100m below its previous guidance of $610m to $650m.
Fletcher’s problems stem from cost blow-outs on two construction projects which have pushed its B&I division further into the red.
Aside from the convention cen- tre, the other problem project is understood to be the Justice Ministry’s $300m Justice and Emergency Precinct in Christchurch which is expected to open later this year, after a delay of several months.
Norris said yesterday that Fletcher Building was having its ‘‘share of pain’’ but the industry as a whole was really struggling with ‘‘so much work on’’.
That was being reflected in subcontractors’ rates and ‘‘the availability of resources for jobs’’.
‘‘There is an unprecedented level of activity and if you don’t manage it carefully – as we can attest – it hurts you.’’
NZX market supervision head Joost van Amelsfort said the exchange would look into whether the company had met its continuous disclosure obligations.
The NZX is already investigating the reporting of an earnings downgrade by Fletchers in March.
Norris said the board believed it was ‘‘the right time’’ for Adamson to leave the company ‘‘to allow a new CEO to lead Fletcher Building through this period and into the next phase of its strategy’’.
Adamson would receive his ‘‘contractual entitlements’’ but all of his share options would lapse, he would forfeit all shares in the company’s long-term incentive scheme and no short-term bonus would be paid to him for the 2017 financial year, Norris said. His base salary is about $2m.
Adamson was on bereavement leave in the United Kingdom earlier this week.
He said in a statement that he was disappointed to finish his tenure on the back of ‘‘a challenging result’’ for Fletcher’s construction division.
‘‘However, I am proud of what has been achieved over the last five years – most notably the turnaround of Formica, double-digit earnings growth in distribution, our acquisition of Higgins and the significant progress in our residential development division,’’ he said.
Fletcher Building said it was likely to write down the value of its Iplex Australia and Tradelink businesses by $220m.
Its shares were down 4 per cent in lunchtime trading at $7.75.
The head of Fletcher’s international division, Francisco Irazusta, will take over as interim chief executive on Monday.