Trading halt extended to wednesday
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Trading halt extended to wednesday
cant even keep to their own self imposed timetable. <shudder>
must still be working with the banks - must be big loss?
A good one foe one at five dollars should get the banks back onside.
That really is pathetic. Capital raise coming ?
http://www.nzherald.co.nz/business/n...ectid=11992576
Ex banker Ralph Norris will not enjoy being on the other side of the table,talking to the present day bankers.
Good article
https://www.stuff.co.nz/business/101...in-wealth-loss
Not many analysts / investors worry about measuring profits over the cost of capital leaving it to academics and real finance analysts
EVA (economic Value Added) is worthwhile understanding even if it leads to knowing that MVA is the NPV of future Economic Profit. MVA being Market Value Added and is the difference between a company’s Market Cap and Shareholder Equity. Cool eh
Great article and some very interesting comments from readers below it. My favourite
Quote:
It boils down to a sick company culture of arrogance and fear. I'm sure there are people who know what going on but you simply don't disagree with your bosses. Sadly this filters down to the mid managers who don't heed good advice they receive from suppliers. It needs a total wipe-out of the top management.
Quite interesting as one person wrote.
“I worked for Fletchers three times for the total of 25 years .And I never thought the day would come that Fletchers would end up in a mess that it is wright now . One board member said to me once that? To many Suites have got control of Fletchers ( meaning accountants) And he could see the downward slide of the company coming soon. He said that 20 years back .Sir James won't be turning he will be spinning.”
The accountants I have met or invested in have been great at keeping the books in check, but could not run a business to save themselves only the ones I’ve met
I have a good friend who works for Fletcher Building and he describes it a little differently but it boils down to the same thing - a sick culture but of relentless positivity rather than arrogance, where everyone is busy saying everything is great and wonderful and if you point out something is a bad idea or won't work or is flawed then you're "negative" and your career is all but over if you get the "negative" label applied so you just sit through bad decisions and bad ideas going - great!!
Only a few months ago -
Auckland, 08 September 2017 – Fletcher Building announces that it has arranged additional debt facilities of NZ$345 million with three banks from its existing Syndicate; ANZ, HSBC and Westpac Bank.
The debt facilities have been put in place in line with Fletcher Building’s scheduled refinancing program, and will allow the company to work with its lenders to access longer term funding solutions.
“We are very pleased to have put these facilities in place, which show the continued support we have from our lenders", commented Fletcher Building's Chief Financial Officer Bevan McKenzie, "Fletcher Building has a strong funding profile and will continue to work with our lenders to maintain our diverse sources of debt funding."
Ends
Wonder how the continued support is going
I've worked for large corporates, NZ and global. There are always disaffected individuals who say much the same thing. The corporate environment just is not a good fit for some people, and they either move on or turn into the bad apple in the barrel if no other employer wants them.
Not saying there are not poor, bad or toxic managers - God knows - but if I heard employees saying stuff like that I would expect to find a very average employee with no future advancement on the horizon.
Some bosses can't cope with disagreements or criticisms, but most can if they already trust the criticiser. It's about managing upwards. And not whinging.
That bit would be a bit concerning to me if I was a shareholder. Obviously they've been working on finding longer term debt facilities when times were better. How are they going to get on now bearing in mind they hired outside consultants for a so called rigorous evaluation of the degree of problems late last year ?
If I was a banker I'd be most underwhelmed with this ongoing fiasco, now into its second year and third so called thorough evaluation. As a banker making a decision on this I don't think its unreasonable to expect an even more rigorous forensic audit of these problematic projects by a different major accounting firm than the one used last year. That sort of forensic analysis thing doesn't happen overnight. Another trading halt extension coming ? My mind wanders and wonders about the veracity of their internal accounting systems. Very weak internal controls ?
You're either a career person or not within big companies, you either "buy" the company line, hook, line and sinker, or you'll get nowhere. I agree there's no in between's if you want to climb the corporate ladder. I suspect that's the real nub of the issue with Fletcher's. Too many career climbers looking to get to comfortable over $500K salaried positions of which there are several dozen within the group.
Relentless positivity...hmmm wasn't a certain politician elected recently on that mantra ! No doubt many of us will get sick of her telling us how well N.Z. Inc is doing in the not to distant future !
If FBU collapses in a heap could be good for other stocks
FBU weighting in indices falls ...index trackers need to buy more of the other stocks as their weighting adjusted up
Is this how it works?
Incredible ...another 1/2 billion bites the dust ...betcha this just ain’t happened
Words fail me
Normalized Profit will be pretty good though ...previous guidance confirmed
No capital raise mentioned so I reckon share price down about 10% today
Maybe $7 will be good buying ... but $6.50 would be even better
Excuse my ignorance, but why is trading halted in these circumstances? Who makes that decision?
Mind boggling. How one can losses be almost tripled from their last comprehensive review?!
Breathtaking!
http://nzx-prod-s7fsd7f98s.s3-websit...124/274373.pdf
Looks like Sky City has got the bargain of the century - getting a $887m convention centre for $470m?
No dividend for HY2018. Oh dear me. That might kick the share price down another 20c or so.
Wonder if Ralph choked up like Bill did when he wrote this -
Fletcher Building remains a great and solid business. I have every confidence it will weather this storm, and once again deliver our shareholders the value they expect and deserve.
Time to look at KPMG. How do they have a $160m loss in October and they now have a $660m los. Thats a lot of numbers they couldn't find a few months ago.
https://www.nzx.com/announcements/314161
Ralph Norris falling on his sword.
Bring Ralph Waters back!
there revenue in construction is over 2 billion , there stopping all bidding for further work on vertical construction , significant hit to revenue going forward i reckon , hence earnings will be less going forward and potentially lower divs , even at 6 i reckon your paying nearly 20x earnings for future yrs
Disclosure imo not adequate. Blaming sub trades is laughable. Must be a lot of gibbers plumbers and sparkies holidaying in St Moritz and on their superyachts. Reality is they gave fixed price contracts on stuff that wasnt designed. Also any bunny knows digging underground is fraught with danger. Board signed off on a totally crazy strategy. 540 staff on over 500g a year. Take the knife to board and staff and bs costs.
"While the B+I market sector remains characterised by high contract risk and low margins we will no longer participate. If these market dynamics change in the future we would reconsider our position." - well, at least they've agreed with me and have finally seen the light........ hopefully as an industry 'leader' (and I use that term lightly) they can perhaps help force some positive change.
filthy
PS the banks havent waived. They have stayed requiring new terms. If i was the notes guys i would totally screw them on the negotiations. Also my bet is the banks will require an amort of debt going forward. A bitter pill for shareholders
https://s3-ap-southeast-2.amazonaws....n___secure.pdf
The full answer is above, section 5.4
The short answer (for voluntary halts) is that the company requests it and the exchange decides if it should be granted and under what conditions.
Here’s hoping the sp gets absolutely smashed today.
Anyone willing to buy at this time? I’m guessing it will drop to the high $5 mark
Surely this is enough to send the SP below $7 but I wouldn't be surprised to see it hold up OK today and finish around 7.10
The loss on the Sky City Convention center simply beggars belief.
How on earth does a company bid $410m on a project that ends up costing $887m to build ?
Matchprice starting at $6.00 - so far I am only $0.10 out.
im sure there be plenty of falling knife catchers lol might be the day they get hammered?
Haha yeah, tongue in cheek. :)
I agree, cutting the dividend will have a significicant impact. So much uncertainty ahead in the coming weeks, let alone years, open price could be the highest of the day.
Match price leading into the open went from $6.50 to $6.75 in the last couple of minutes. Volumes matching went from under 300K to over 600K. A lot of last minute jockeying!
A lot of trades to process - at open the message on ANZ said:
... until things settled down.Quote:
We were unable to obtain the market data required to serve your request in the expected time. Please try again or wait a couple of minutes. If the problem persists, please contact us.
Now down 13.2% (103c).
Totally agree that blaming sub trades just doesn't cut it. If you are pricing fixed price contracts and understand the design is not complete, you factor this in as a risk. Its clear that they didn't understand the projects well enough to be able to price this risk in / they signed up to contractural arrangements that weren't favorable to them.
if this happened in australia shareholders would be launching a class action suit , in nz you just walk away lol
cant believe they only dropped a dollar. (less already)
FOMO settling in now, but who cares IMHO Im betting there will be more to come !!
I think having such a significant portion of the NZX 50 does FBU a lot of favours.
Agreed, the degree of incompetence shown from management in that division is absolutely breathtaking. To me this announcement does absolutely nothing to address key management failings within the company. Its almost like, oh my goodness we put $500m on black on the roulette wheel and it came up red, sorry about that folks. Not nearly enough contrition shown and not enough of a thorough cleansing of the dead and rotten wood within the company. Every single staff member within that B&I division should be made to reapply for their job and make their case for being retained and an independent expert construction panel appointed to make decisions on a case by case basis. In my opinion this company is uninvest able until that happens.
At a personal level, I cant see anyway the Christchurch Metro Sports facility and rugby stadium will ever be built now.
- Ralph NorrisQuote:
A boom is worse than a bust (in may respects)
They'll be hoping for a bust I presume.
Happy to be proved wrong, did not expect such a small impact.
I guess word had already been out there for months that the rot was deep set with these projects and the market had already priced this in.
Only two real options, a certain level of current management have no idea and/or the internal cultural pressure to get the deal done, distorted incentives, combined to caused a dysfunctional process, if the management closely involved had a clue bet they are onto their next gig well before now...
Share price is only back to where we were in November, considering the market, not a bad result!
The Capital notes have now traded. the FBI140 is up from 4% before announcement to 5.5% , with only a couple of years left on its duration.
I think it has to go lower than $6.70 which was the December low. Todays price is possibly being held up because the insto's can't offload fast enough.
I wonder where the 10,000 people who wanted Bob Jones to loose his knighthood after writing a satirical article are?
I would tend to think the huge size of the provisions will be including lots of spare giving Taylor room to move - as a new CEO he will want to totally ensure he doesn't get blamed for any of this later under his tenure.
BUT, I wouldn't make investment decisions on that basis either. For anyone obeying any of the masters rules, eg Benjamin Graham this company is a no go zone for a good few years now. I doubt it has ever qualified for The Zulu Principle.
This is holding up remarkably well at $6.90.
"Fletcher Building announces further provisions for expected losses in its Buildings + Interiors business of $486 million, leading to a total projected B+I EBIT loss of $660 million in FY18"
"Expected FY18 EBIT for the Fletcher Building Group excluding B+I remains $680 million to $720 million "
They really like mentioning what their EBIT is without B+I losses.
If we include B+I losses to group EBIT, would that imply it would be $20 million to $60 million?
My guess is Fletcher building profits excluding B&I are a sham and not sustainable.
I'm guessing B&I have losses as they are forced to buy materials internally at overinflated prices to market. This makes B&I loss making and the rest of Fletcher Building profitable. Without B&I what prices will Fletcher Building materials get? will there be new material entrants?
I still think the price is high for now and a price around $5.60-$5.90 is something I would be semi comfortable with the news given. Who knows in 6 months maybe lower maybe higher. But I don’t see it rising in a hurry
One thing occupying Mr Market
FBU value so far today: $87,487,212
Total NZX value today so far: $135,820,254
i must say I start to look a bit sideways at their debt issues now. FBI170 5 year notes being rolled over at coupon of 5% - with 5 year swap rate at 2.7% , that is a reasonable corporate premium , much more than some recent ones that were lower than Term Deposits.
But is it enough to compensate for that increased uncertainty - the feeling that surely must lurk now in all prudent investors - is this the beginning of some slope into worse and worse troubles and eventually the unthinkable.
Other notes are now at yield premium to issue (meaning a capital loss for holders)
I dont think I'd be game to lend to them for 5 years now - even with liquidity allowing an early sale.
I'd agree, peat. The March '21 notes might be a better bet but even so, there must be better bets to be had on the market!
Agree 100%. Just because other issuance by other companies on similar terms has been even lower than 5% doesn't make these notes attractive at that rate. I would go further. They have at this point no confirmed long term debt arrangements in place and this therefore constitutes a material risk at present. I would think one or two trades today in their capital notes at about 7% are where these should be at but quite frankly even at that yield I see better opportunities with far more stable and vastly better managed companies elsewhere, albeit not in the bond market.
Indeed Beagle
This article outlines the risk well
https://www.interest.co.nz/opinion/9...tcher-building
"I'm now more certain than ever that Fletcher WILL have to go to shareholders for more capital - and possibly quite a chunky amount.....
I, for one, am not prepared to say this couldn't get worse yet."
Perhaps there others who are somewhat confounded by the relatively modest market reaction to a horror story in FBU? I suppose tomorrow's another day and this could come home to roost over a few more days or weeks, but a modest 9% mark down or so on the day is almost as pathetic as the circumstances that got them into such a pickle. Clearly the force is strong amongst FBU diehard shareholders.
Buyers for $102 mill of shares today. OK fess up who's been buying, its great being a contrarian buyer but do you really think its overshot and the mkt's got it wrong, i dont, rotten for a long,long, looonnnggg time and an embarrassment to this country. Its been the automatic selection by brokers for their clients portfolios right up until now regardless of performance; and beyond?
Maybe its the spanish construction company building a stake or another co or shorter borrowing stock at mkt rates. And chairman ralph why hang around and collect more gravy until october? Not a good look.
Whenever i take the lid of my compost bin i think of FBU.
Lest see if I have this right. Company announces.
- it takes 3 goes to get its books roughly right
- its about to loose approx. 25% of its total revenues.
- 25% of its business is about to write off about 100% of the profit of the other parts of the business
- employees responsible for this get to keep jobs in the company
- shareholders get to share zero % of the 75% of the business profit.
And this is worth a 9.3% discount on shareprice (which includes say 3% to cover the "Great Feb 2018 Share Market Crash")
Those kind of shareholders are not a bunch I would want to be part of.
feels like the posse are getting ready for a collective short (kinda like a class action),
I know I'm a bit tempted - my thinking is like - what could possibly go right at this point, and even if it did they have to make half a billion dollars to be back in the same position they were for a $8 share (and that surely isnt going to happen overnite). So to short would be risking a dollar a share max, and to compare that with say making 3 dollars max on the downside - almost starting to feel like a good risk/reward ratio. And thats without even factoring in a bear market.
:cool:
I'm just baffled that people are still putting money into this, because in recent memory I haven't seen a company in NZ as high profile as this fold so many times..
I still think that this the estimates they've made are on a best case scenario that they will only make these losses. Anything else happens between now and these projects finishing, which is years from now and the costs get blown out even more.
This really should be trading lower than it is. Beware the bull.