Fund managers wary of Fletcher board
‘‘It’s very much a board that’s dominated by folk that have come from other industries.’’
Shane Solly, Harbour Asset Management
Fletcher Building has overhauled its board, but fund managers are concerned it still lacks people with construction experience.
The construction giant, which has posted massive losses on key building projects, has appointed former PwC chief executive Bruce Hassall as chairman, along with four new directors.
There was a cautious welcome to the appointments, but a continued feeling among fund managers that the company’s board was stacked with bankers, lawyers and accountants, and lacked people with building materials and construction experience.
Frances Sweetman, a senior analyst at Milford Asset Management, said the people appointed were of ‘‘high calibre’’, but added that there was ‘‘a lack of construction experience and building materials experience’’ on the board.
Hassall, who was already an independent director with the company, will take up the role on September 1, along with four new directors: former head of ASB Barbara Chapman; former Air New Zealand chief financial officer Robert McDonald; former Lion Nathan and Auckland Council chief executive Douglas McKay; and top commercial lawyer Cathy Quinn.
On Thursday Fletcher’s share price rose when chief executive Ross Taylor outlined his strategy to get the company back on track.
The NZX opened yesterday with Fletcher Building shares trading at $6.88. After the announcement of the board appointments, the share price dropped to $6.73 at 1.30pm.
New Zealand Shareholders Association chief executive Michael Midgley said the market reponse to the board appointments was ‘‘timid’’.
He called the appointments ‘‘a missed opportunity’’.
Hassall joined the Fletcher Building board in March 2017, and takes the helm from Sir Ralph Norris, who announced earlier this year he was stepping down after a string of losses at the company.
Fletcher suffered a half-year loss of $332 million for the second half of 2017, deepening previous losses in its buildings and interiors division.
In February, the company revealed 16 large construction projects had incurred total losses of $660m and announced it was pulling out of ‘‘vertical’’ construction in New Zealand, a market in which it was the biggest player.
Sweetman said the argument in favour of the appointments was that Fletcher had exited the vertical construction market, and the experience of Taylor, and his divisional chief executives, was sufficient to carry through the company’s ambitious turnaround strategy.
The execution of that strategy was now the company’s biggest risk, especially as it relied heavily on lifting the performance of its Australian businesses, which had seriously underperformed Fletcher Building’s New Zealand businesses.
Shane Solly, a fund manager at Harbour Asset Management, said the board changes were an important step in re-engineering Fletcher Building.
But he said: ‘‘It’s very much a board that’s dominated by folk that have come from other industries.’’
Former chief executive Mark Adamson left mid-last year.
Fletcher’s share price, which topped more than $12 in 2008, fell $7.77 in February.
Norris said Taylor had developed ‘‘a focused strategy’’, the balance sheet had been strengthened and the company was on track to deliver its year’s forecast.
He said Hassall would bring ‘‘strong and steady leadership’’ to Fletcher Building and would complete a board refresh, ‘‘with the appointment of an Australian director in the coming months.’’