Fletcher cops to costly mistakes
Fletcher Building’s chairman has told shareholders that mistakes were made as its ‘‘project pipeline’’ grew in a short space of time.
Sir Ralph Norris apologised to them yesterday as he warned of another big hit for the troubled construction company.
Its buildings and interiors (B&I) business unit is now forecast to make additional losses of $160 million in the year to the end of June after a review by KPMG.
Norris said: ‘‘I want to offer my personal apology to our shareholders. Mistakes have been made and responsibility ultimately rests with the board.’’
Fletcher also named Ross Taylor as its new chief executive. He will step in from November 22.
Yesterday, Norris told shareholders at the company’s annual meeting in Auckland: ‘‘The board has resolved to reduce all directors’ fees by 20 per cent for the next 12 months, with immediate effect.’’
Directors had resolved to hold on to at least 20,000 of their shares while on the board.
News of the pay cut brought clapping from shareholders.
"The board has resolved to reduce all directors' fees by 20 per cent for the next 12 months, with immediate effect." Chairman Sir Ralph Norris
Ahead of its meeting, the company – whose shares were on a trading halt on Tuesday – said 80 per cent of the unit’s loss was due to cost overruns on SkyCity’s International Convention Centre (ICC), and the Christchurch justice and emergency services precinct.
The company said: ‘‘We have not named them previously because we have strict confidentiality clauses in our contracts, and we take our obligations to our clients very seriously.
‘‘However, in the face of these extenuating circumstances and shareholder demand, we have been able to gain agreement from our clients to make an exception in this instance.’’
Though the ICC now had a new project management team, there remained significant uncertainty about the result of the project.
Norris said the KPMG report would not be released to shareholders. Excluding the B&I division, Fletcher Building expects to make total earnings before interest and tax of $680m to $720m.
Norris told shareholders that as the company’s ‘‘project pipeline’’ grew in a short space of time, mistakes were made.
‘‘As the pipeline grew there were a number of failings within the core capabilities of the building and interiors business, across a range of projects … Our project management resources became stretched, impacted by the labour scarcity of the broader sector and our own rapid growth.’’
The projects were also complex, he said, but he admitted they were ‘‘not managed or priced effectively by stretched teams’’.
‘‘There is no silver bullet. Instead we have systematically reviewed the total performance of the business and strengthened our governance, processes, systems and talent across the board.’’
The company was also being more selective about the projects it bids for, he said.