Working with You and You
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Fletcher Building Annual Report 2016 Working with you and you and you and you and you and you and you and you and you and you and you and you There’s no better way to know our customers than to be our customers. Every day our people live in the houses and communities we create, frequent the iconic buildings we build, buy our products from the same places our customers shop at and use the roads and infrastructure we construct. This first hand understanding of the customer experience allows us to stay ahead of what customers and delivery partners really need. Working harder here to make life easier here. Contents Strategy 06 The directors are responsible for Business overview 08 preparing the annual report, including the financial statements, and ensuring that the financial statements comply Chairman and CEO's report 10 with generally accepted accounting practices. The directors believe that Business review 15 proper accounting records have been kept which allow for the determination of the group’s financial position with Building Products 16 reasonable accuracy and that the financial statements comply with International 18 the requirements of the Companies Act 1993 and the Financial Markets Distribution 20 Conduct Act 2013. When used in this annual report, Construction 22 references to the ‘company’ are references to Fletcher Building Residential and Land Development 24 Limited. References to ‘Fletcher Building’ or the ‘group’ are to Fletcher Building Limited, together Board and management 26 with its subsidiaries and its interests in associates. Focus areas 29 All references to financial years (e.g. FY15 and FY16) in this annual Customers 30 report are to the financial year ended 30 June. References to $ and NZ$ People 32 are to New Zealand dollars unless otherwise stated. Sustainability and environment 34 Any references to documents and information included on external Health and safety 36 websites, including Fletcher Building’s website, are provided for convenience alone and none of the Community 38 documents or other information on those websites is incorporated by reference in this annual report. Governance 40 You can obtain an electronic copy of this annual report at fbu.com/investor-centre/reports Financial review 44 The annual report is dated Trend statement 54 17 August 2016 and is signed on behalf of the board by: Independent auditor's report 55 Financial statements 56 Sir Ralph Norris Remuneration report 94 Chairman of Board of Directors Regulatory disclosures 99 Investor information 106 Directory 107 Mark Adamson Managing Director 06 Fletcher Building Annual Report 2016 Strategy How we are building a customer leading business Our organisation We manufacture, is made up of source and distribute 34 businesses that a wide range of building enable communities products and we build to grow, cities to all sorts of projects, prosper and countries big and small. to be more productive. 20,000+ People just like you 07 Fletcher Building Annual Report 2016 Strategy Fletcher Building’s aspiration is to run the best building products and construction businesses, taking a customer first approach to ensure our businesses are worth more together than they are apart. We are committed to creating sustainable value for our key stakeholders and delivering reliable earnings growth and top- quartile shareholder returns. We deliver value through our strategic priorities: We have a clear view of where we will invest in the coming years and how we will manage our portfolio of businesses to deliver our aspiration. Our businesses are supported by central functions and centres of excellence, including technology, people and communications, finance, strategy, property, People Customer marketing, procurement and operational excellence. Building a great place to work, Delivering what customers value recruiting and developing the best through market-leading solutions These central functions allow our talent and ensuring everyone goes and product innovation. businesses to leverage Fletcher home safe. Building's scale to make common practices more efficient and access specific capability to improve performance. Everything we do is underpinned by our Fletcher Building values – Be Bold, Play Fair, Better Every Day and Customer Leading. We are guided by our vision of Building Better, Together. Efficiency Profitable Growth Working better together to achieve Targeting growth investment in excellence in sales, marketing sectors with attractive long-term and operations. trends and where we have advantage through ownership of channels to market or customer relationships. 08 Fletcher Building Annual Report 2016 The customer's view of our business From the raw materials in the manufacturing process, to constructing houses and buildings and the amazing products that make them unique, right through to the largest infrastructure projects, our business starts and ends with the customer. This customer first approach means we help make, deliver and build the lives, communities and economies our customers need today and want tomorrow. BUILDING PRODUCTS INTERNATIONAL From our quarry operations Our family of internationally to manufacturing plants, recognised brands covers built we supply high-quality, environments from kitchens to reliable building products. commercial buildings, creating beauty inside and out. 09 Fletcher Building Annual Report 2016 RESIDENTIAL AND DISTRIBUTION CONSTRUCTION LAND DEVELOPMENT Our network delivers essential We have more than 100 years’ By developing and building building, plumbing and steel experience leading commercial housing and communities, products throughout Australia and infrastructure projects we are helping a growing and New Zealand. From single across New Zealand and the Auckland and creating a new nails to large scale reinforcing, South Pacific. Keeping people way of living in Christchurch. we deliver for our customers. moving, business thriving and cities and countries growing. 10 Fletcher Building Annual Report 2016 Chairman and chief executive officer’s report A People Employees and Business Customers First Sir Ralph Norris CHAIRMAN Mark Adamson CHIEF EXECUTIVE OFFICER 11 Fletcher Building Annual Report 2016 Dear shareholders, Operating earnings (earnings before Cash flow from operating activities $m interest and tax) were $719 million, We are pleased to present our report to compared with $503 million in the you for the 2016 financial year. The theme prior year. Operating earnings excluding of this year’s report is our customers and significant items were $682 million, up how we work with them. Increasingly, $660 4% on the prior year and in line with the our success is being derived from our : earnings guidance we provided at the 2015 575 ▲ 15% ability to provide our customers with annual shareholders’ meeting. end-to-end solutions. Our strategies are built around the manufacture and The increase in earnings was driven Net earnings $m distribution of not only high-quality by the 29% uplift in operating earnings building materials but also the delivery before significant items from our of outstanding service propositions and Australian businesses, coupled with whole-of-project building solutions. strong growth in operating earnings $462 When we achieve these, we become in New Zealand in the Distribution, 2015: 270 ▲ 71% a valued member of our customer’s Residential and Construction divisions. supply chain rather than simply a Operating earnings before significant product supplier or contractor. Revenue $m items from our businesses beyond In addition to this emphasis on building Australia and New Zealand were down customer solutions, we have also had a 11%, owing mainly to performance issues particular focus on the following areas with our Formica plant in the United $9,004 over the past year: Kingdom, which offset stronger reported earnings in North America and Asia. 2015: 8,661 ▲ 4% • Ensuring our New Zealand businesses With a refreshed management team and capture the growth in construction good progress achieved during the year activity Operating earnings $m in improving manufacturing operations, • Lifting the performance of our we are confident of a significant Australian businesses turnaround in performance in 2017. • Leveraging the capability we have A highlight of the result was the increase $719 built through FBUnite, augmented in cash flow from operations, which 2015: 503 ▲ 43% by additional capability, to deliver a was 15% higher at $660 million than the sustained uplift in performance over $575 million we achieved in the prior year. the medium term The increase was due to the growth in underlying operating earnings and • Continuing to build our people reductions in working capital. capability through ongoing recruitment and employee CAPTURING THE GROWTH IN THE development and through NEW ZEALAND CONSTRUCTION MARKET entrenching the vision and The past year has seen a continued values launched last year uplift in construction activity levels Total construction activity • Executing on our growth agenda in New Zealand, with all sectors – in New Zealand has now through expansion of activities in residential, commercial and infrastructure surpassed the previous our distribution, construction and construction – showing strong growth. residential development businesses Total construction activity in New Zealand peak level experienced has now surpassed the previous peak in the mid-2000s, and we • The business portfolio rationalisation level experienced in the mid-2000s, with non-core businesses divested or expect