Our Year in Review Strategy
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Strategy
FOCUS
1. Refocus on the core
To support the strategy we have also made changes to how we work and are now very clear on the enablers of successful execution. There are six key enablers of our strategy: 6 1. We will continue to increase the engagement and capability of our people to deliver results for our customers. 2. We have introduced a simpler and leaner decentralised operating model. 3. We will increase our focus on innovation, to achieve continuous improvement and take advantage of global trends. 4. We will seek disciplined performance improvements in safety, sustainability, procurement and our operations. 5. We will direct our capital into strategically important, high-returning businesses that align with our vision and what we’re trying to achieve. 6. We will fill gaps in our
Our new vision is to be the undisputed leader in New Zealand and Australian building solutions with products and distribution at our core. We will defend and grow our New Zealand building products and distribution businesses and leverage our positions in concrete and residential, which are complementary to our core and strong performers in their own right. With only a 15% share of the New Zealand market, 1 there is plenty of opportunity to deliver more from our existing operations, and grow into adjacent sectors. 2. Stabilise Construction We will stabilise the Construction division by closing out our remaining B+I projects within our provisions and then growing our infrastructure and roading businesses. We have already made progress here, with seven of our 16 key loss making B+I projects now completed. 3. Strengthen Australia In Australia, we are targeting a significant improvement in the operating and financial performance of our existing businesses. We have just a 1% share 1 of the Australian market and the majority of our businesses hold number one or two market positions – therefore we have a strong base to build from and we do not believe there are any structural reasons that will prevent us from getting our portfolio performing. In time, we will seek to expand our portfolio as we have done in New Zealand through targeted acquisitions. 4. Exit non-core businesses With a new vision and focus, we will exit non-core businesses and divest Formica and Roof Tile Group.
On 21 June 2018 we announced a new strategy and operating model to our shareholders. Fletcher Building is one of the most diversified building materials companies globally, with operations across multiple geographies, sectors, value chains and product lines. While our performance in New Zealand has been strong across our core building products and distribution businesses, this has been offset by recent losses in the B+I business unit of our Construction division. Improving the performance of Formica has been slow and capital intensive, while our performance in Australia and the progress of our turnaround strategies have been mixed. This has led to share price underperformance versus our peers, which is something other highly diversified companies around the world have experienced. It was clear that continuing to manage multiple platforms across multiple geographies from both a capital and capability perspective was unlikely to be successful. This is why we have introduced a more focussed strategy, which will help Fletcher Building reach its full potential. The first strategic decision we made was to refocus the business on our core markets of New Zealand and Australia and divest Formica and Roof Tile Group. With this decided, our strategy is then defined by four key principles:
portfolio or move into adjacent categories both organically and through acquisition.
1 Sources: FBU Management estimates, Infometrics WPIP, BIS Oxford Economics (Residential, Non- Residential Work Done), ABS (Value of Engineering Work Commenced).
10 Fletcher Building Limited Annual Report 2018
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