Monday 20 March 2017 04:53 PM
NZ Shareholders Assn seeks answers on Fletcher downgrade, questions CEO's ability
By Jonathan Underhill
March 20 (BusinessDesk) - The New Zealand Shareholders Association says Fletcher Building's announcement of a $110 million downgrade to full-year earnings guidance leaves investors with a lack of detailed answers and raises questions about chief executive Mark Adamson's performance.
On a conference call today, Adamson said he "took full responsibility for the current situation" which led to the downgrade just four weeks after the company affirmed its full-year forecast at the release of its interim results. Today's announcement, which wiped more than $650 million off its market value, mainly related to two major contracts in Fletcher Construction's buildings and interiors unit, which the company has declined to identify.
NZSA CEO Michael Midgley said the announcement failed to explain how such a massive change has come about.
The "lack of information in the announcement including whether the contracts concerned are ongoing or completed gives them no comfort about the future," he said in a statement. "The absence of any specific details on the reversal of fortunes and the tone of the announcement to the market also suggests that the problems may be systemic."
"In any event, the second downgrade in short order raises clear questions around the ability of the chief executive to remain in the role," Midgley said. "The NZSA will ask the company for an early meeting for a clearer explanation of the issues and will be seeking to ensure that accountability rests where it should.”
Fletcher has cut its full-year operating earnings forecast by $110 million to a range of $610 million to $650 million, saying the revised guidance "is due to the identification of additional estimated losses and downside risk in the buildings and interiors (B&I) business unit of the construction division."
Fletcher Construction's major projects include the $300 million Justice and Emergency Services precinct in Christchurch, which was due to be handed over at the end of this month, but according to a Ministry of Justice spokesman quoted by The Press is now not expected to open until the third quarter of 2017 after the company put the hand-over date back to June 30.
Other projects include Auckland's convention centre and Hobson Street hotel, a $700 million contract, the $425 million Commercial Bay development in Auckland for Precinct Properties, and roading work including the Waterview Connection, and Puhoi to Warkworth.
Fletcher shares were recently down about 10 percent at $8.28.