Friday 22nd June 2018
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Fletcher Building chief executive Ross Taylor says the company won't increase the provisions it announced in February against remaining Building + Interiors projects even though there's no completion date for the 200-room Novotel Christchurch Airport, an $80 million development that was meant to open last December.
"We do not have a confirmed construction completion date for the hotel," Yvonne Densem, a spokeswoman for Christchurch International Airport, said in an email. "The airport company is disappointed the project will be delivered late, but costs of delay and meeting quality standards are a matter for the contractor and its sub-contractors. We don’t expect a negative financial impact on the airport."
Taylor yesterday unveiled his five-year strategy for Fletcher, to focus on core Australia and New Zealand businesses and a new carve up into seven divisions with lower overheads. The shares rose after the company briefed the market amid relief the company didn't flag further B+I impairments. But Taylor was questioned by investors over the airport hotel project on a conference call yesterday, which according to a Stuff report had earned the name Fawlty Towers among hospitality staff who had thought they were getting work.
Fletcher shares rose yesterday but today fell 1.9 percent to $6.75 and are down 5.4 percent this year.
Ross said the company is "standing by our commitment to complete all our remaining Building + Interiors (B+I) projects to the highest quality, including the Novotel in Christchurch. But we are not going to discuss the specific details of the day-to-day progress or timeline of each project, or commercially sensitive information." There is no change to the provisions we announced on 14 February, he said in an email via a company spokeswoman.
On Feb. 14 Fletcher announced further provisions at B+I of $486 million, bringing the unit's projected loss to $660 million. At the time, Taylor said the extra provisioning was based on a review of 16 B+I projects including the Novotel Airport. The company had commissioned KPMG for the review.
Stuff reported last week that there were further delays to the hotel because bathroom pods had become weather damaged and had to be replaced. A previous delay had involved replacement steel after the wrong grade was delivered.
The Warren & Mahoney designed hotel is a franchise partnership agreement between AccorHotels and Christchurch Airport International, which in turn is 75 percent owned by Christchurch City Council and 25 percent owned by central government.
Taylor's strategy did include impairments but to other businesses. It will take restructuring charges of $85 million to $95 million in its 2018 results as it moves to a decentralised operating model with more divisions and will also write down the value of its Rocla and Roof Tile businesses.
Taylor plans to restructure the company into seven operating divisions from five currently, saying a move to a decentralised operating model will cut annual overheads by $30 million. The announcement is the result of a strategic review led by Taylor, who started last November. Under the new operating model, effective from July 1, all the Australian businesses will sit in their own division while in New Zealand, the concrete and steel operations will also be created as new divisions.
At an operating level, Taylor has kept Fletcher's 2018 forecasts unchanged. Group earnings before interest and tax, excluding B+I and significant items, was reiterated at $680 million to $720 million.
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