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The addressable pipeline for both South Pacific and Infrastructure is robust. For Infrastructure, work underway through FY21 includes the Pūhoi to Warkworth motorway, the Hamilton section of the Waikato expressway and Peka Peka to Ōtaki expressway. Risks and forecast cost increases have been identified on Pūhoi to Warkworth, associated principally with earthworks and aggregate supply. The project is a joint venture between Fletcher Construction and Acciona, and the partners are working on a range of options to mitigate the risks. The division is reporting a nil margin for the project currently as these options are worked through. B+I, including Forman Commercial Interiors, has had a primary focus on project delivery and completion since February 2018 when the business unit ceased bidding for new projects due to unfavourable market conditions in the sector. The key to achieving any strategy starts and ends with people. We need to continue to recruit and retain the best talent and create an environment where they can achieve and thrive. Gross Revenue (including B+I) $1,685m 2017 $2,246m ▼ 25% EBIT before significant items $(608)m 2017 $(204)m EBIT (excluding B+I) before significant items $52m 2017 $88m ▼ 41% Michele Kernahan Chief Executive Construction
Construction 3,500+ 5
DIVISIONAL PERFORMANCE OVERVIEW The division reported gross revenue of $1,685 million, down 25% on the previous year. FY18 has followed a year of high activity in which a number of major projects have come to completion. Operating earnings before significant items were a loss of $608 million, compared with a loss of $204 million in FY17. This includes a loss in B+I of $660 million, which reflects provisions taken on a number of major projects during the year, offset by the earnings for the rest of the division. Excluding B+I, operating earnings before significant items were $52 million, down 41% from FY17 largely reflecting the timing of major contracts completed in the prior year and the early stage of current multi-year contracts. A strong performer has been Higgins with operating earnings increasing 8% from FY17. During the year Higgins was awarded several new maintenance contracts including its first in the South Island with the Christchurch City Council, a maintenance contract for the Kapiti District Council and another covering 530 kilometres of highways in the Hauraki Plains and Coromandel Peninsula. Higgins also benefits from participation in the North Canterbury Transport Infrastructure Recovery Alliance and the ongoing response to the Kaikōura earthquakes. In Fiji, Higgins successfully completed the Nadi2 capital roading project. South Pacific and Infrastructure reported reduced earnings from FY17 as a number of major projects had completed in the prior period including the Waterview Connection in Auckland; the Mackays to Peka Peka expressway and significant projects in Fiji and Papua New Guinea.
The Construction division is a leading general contractor
operating throughout New Zealand and the South Pacific. Every day thousands of New Zealanders use roads and infrastructure the division has built, and live or work in buildings it has constructed. The division comprises five business units: • Fletcher Infrastructure delivers transport and infrastructure projects within New Zealand including regional and national roads, bridges, wharves, railway and bus connection stations, water and wastewater services plants, industrial plants and upgrades. • Higgins designs, builds and maintains roads and manufactures roading products with a team of more than 1,600 people across New Zealand and Fiji. As a specialist roading company Higgins has the expertise and resources to deliver a fully integrated range of services. • South Pacific is a full service contractor providing vertical and horizontal infrastructure, with bases in seven island nations and its head office in Auckland. • Brian Perry Civil (BPC) is a specialist contractor in foundation and groundworks, complex civil, three waters and marine projects. The business includes Piletech, PipeWorks and Seovic. • Building and Interiors (B+I) remains a national contractor completing commercial, retail, health, education and other buildings.
32 Fletcher Building Limited Annual Report 2018
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