3.3% aggregate shorted sales of FBU according to shortman.com.au as at the 8th feb. Will recheck for an update.
Printable View
3.3% aggregate shorted sales of FBU according to shortman.com.au as at the 8th feb. Will recheck for an update.
Ralph Norris sacked himself but had no choice at the end of the day
But Tony Carter and Alan Jackson have been collecting huge Director fees while as this has been going on. They don’t seem to be showing much remorse. Disappointed in both.
Especially disappointed in Carter. He at least had some industry experience from his early days. He’s gone down many notches in my estimation ....not quite on the stay away from list but getting close to it.
Not a very diverse Board is it
Senior Management not much better. The notional HR person and poor old Michele who was handed the Building Division last year as a bit of a hospital pass (no other takers)
Need to update Michele’s profile though
https://fletcherbuilding.com/about-u...nd-management/
First NZ Capital new price target of $8.40 (down from $8.50) with Outperform rating. Clearly they think that the latest news is already priced in.
Well if you put rose glasses on then there is little change to forecast profitability from this. B&I wasn't making money and when it's closed down it won't make money but the risk of signing up new big unprofitable deals is gone. Take other business units guidance as advised by fbu and there a profitability stream to support the share price. B&I is only one part of the construction division so the revenue loss is not -25%. There remains a chance of future rightbacks if they overprovisioned. A sensible new CEO would max out the provision to minimise any chance of understatement and max the chance of having a slush fund to boost future profits.
But this announcement confirms the rot is deep in b&I what is the chance it's spread either within the wider construction division or into the other divisions? Only time will tell on that one.
Very bad call on approving AIR exec's to sell shares immediately before a so called investor day a couple of years ago that included an express downgrade. Wonder if John Key will soon be Chairman of AIR...should we be worried by this ?
They had a $9+ target price on this before that. Absolutely ludicrous that this complete unmitigated fiasco of breathtaking proportions would only impact their valuation by 10 cps. I think whatever assumptions they've put into their creatively constructed discounted cash flow analysis are fundamentally flawed, (a DCF valuation is only as good as a whole lot of assumptions made supporting it, garbage assumptions go in - garbage valuation comes out)
I put their valuation in the same category as the scandal when they had AIR valued at $2.10 when the market was pricing it close to $3.
FCNZ love FBU but I think what's really going on here is they want the underwriting and investment banking work that could be forthcoming with a capital raise and or debt issuance. Fact of the matter is, FCNZ have been consistently wrong with FBU and FBU have been recidivist destroyers of shareholder wealth.
Cannot understand the valuation vs NTA. People are paying a huge premium for future cash flows with a bad margin of safety.
I have been watching this fiasco with interest as someone involved in the construction industry (don't work for Fletchers). Their QSs have obviously made some huge mistakes, but I also have some sympathy with the company noting it's become incredibly tough in commercial construction and they're now willing to leave it to others.
I saw someone joking previously in this thread about sub-contractors holidaying in Saint Moritz - this isn't too far off reality. Subcontractors have been enjoying the windfall of a boom more than head contractors and there are several factors that have played into this.
There has been a big shift among large developers and government projects from NZS3910 contracts (construct only) to NZS3916 (design and build) or NEC contracts, with the latter two placing a disproportionate amount of risk on contractors, and many not yet fully understanding the amount of risk they're taking on.
Subcontractors prices have been heading up while maintaining a flat level of risk, but head contractors margins have been getting squeezed while also taking on greater risk. So Fletchers are probably right in saying it's better for walk away from future projects in this current climate (and made some terrible decisions in what they've signed up to previously).
I was involved in a government tender under a NZS 3916 contract where we had to declare our margin and basically open the book while also assuming all the design risk for a fixed price lump sum. We tendered a 10% margin and the client (govt) said commercial margins are presently 4-7%. We held firm. If you're accepting a 4-7% margin with that level of risk, you're likely expecting a 2-3% final margin in a best case scenario.
Many companies have been accepting this, essentially expecting a break-even or low single figure margin in the hope of building a moat for future work. A very dicey game to play, and as Fletchers have found out - the house always wins.
Not all advisors in FNZC agree
I am loathe to use that old saying " a fish rots from the head" but. B&I a complete failure. Fletcher EQR a total failure for a company supposedly "customer first" and Fletcher Living One Central (east Frame) numbers not appearing to stack up. Time for a fine tooth comb to be taken to the whole business.
(Disc: I've been Fletechered so have little sympathy for the state this company finds itself in)
MorningStar have just put a valuation of $7.50 and a hold rec..Two things of interest that they mention...
"..Negotiations are still ongoing with the holders of the NZD 1.14 billion in U.S. private placement notes, which still poses a risk..." and "..we anticipate the divestiture of assets, especially those earning low returns with no synergies across the rest of the business. These should be the focus as long as they can be realised at attractive prices. In our opinion, Formica fits the bill on both these criteria...."
Unfortunately I seem to own quite a few FBU... not directly but through Smartshares... and with FBU accounting for almost 10% of NZDividend (DIV) I guess we'll see an almost 10% reduction in this years dividend.
Holders of these private placement notes have never been known to spit the dummy and demand their money back early...oh wait they certainly have !!!
I see the potential for a very large capital raise and FCNZ are setting themselves up to be the lead broker / arranger.
Barge pole material. Front row seats to watching the biggest construction cost overrun fiasco of your lifetime are available at the Fortuna Buffet restaurant daily with a requested window seat....its a fascinating watch while enjoying a very nice meal at reasonable cost...I know, I am a recidivist offender and can't help watching train crashes unfold. This morbid fascination has proved unhelpful to the hounds waistline though lol.
This convention center is only 22% complete and is already looking like destroying ~ $500m in shareholder value. With only just one fifth of that project complete and the fiasco of such gargantuan proportions why would anyone trust their latest "guess" at the total project overrun ?
I'm with Beagle on this. Love a good train wreck me, when it is from the sidelines and have no vested interest (phew).
Struggle to see why the share price isn't lower. But if I was the recently appointed CEO, I'd be trying to throw everything into it so have the potential to come out looking good out the other side. I'd also be taking a large broom through the division.
It will either be a Cut In the dividend, or a Cut OF the dividend
most likely the latter
I guess we'll never know how much consultants have/will be paid to advise FBU to do the blooming obvious and quit the "big construction project" business. Hidden in Restucturing Costs or something similar?
Perhaps they'll reappear some time down the track as a junior JV partner in some big project - as in the days of JV's for big jobs such as Kawerau, Kinleith, Tongariro Power etc.
From Shortman today for FBU on ASX
Gross shorts 1 Issued capital % Capital shorted 2 Trade volume 3 Shorts as % of volume Wed 14th Feb, 2018 1,608,631 697,040,440 0.23% 5,476,389 29.37%
Maybe Jascinda gets her 10,000 houses per annum after all ?
https://www.msn.com/en-nz/money/news...cid=spartandhp
Ron Angel -Union Guy. Yes I would be worried for the workers. But don't worry the key people will get to stay.
Retirement funds. small investors still held FBU - the writing has been on the wall. Why were you still holding for petes sake!
Housing Market. Hicky - What are you thinking. FBU cant manage vertical infrastructure. Just wait for One Central to blow out. And you reckon they should be part of kiwibuild. There's a govt subsidy / bailout if ever I saw one. EQR is an excellent reason why FBU should stay clear
don't worry I'm gonna rescue Fletchers
sent this to their HR
Its a part piss take kicking them when they are down, but part serious
Hi,
As a shareholder in Flecthers I am a bit worried at the incompetency displayed by your senior management, so would like to offer up my services to help turn around your company.
My CV is attached, I have a pretty standard working career in analyst roles - mostly finance related - across 15 years in many different corporate both here and overseas.
However my value add, is I walk the walk: I have built a multimillionaire dollar property and equity investment empire over the last 15 years, by following a defined investment strategy.
I bring an executive level skill set and outside the box thinking which I think could greatly assist you in your time of need. I have built an empire on limited capital and I have done so through sound investment decision making, management and execution. I create and deliver value.
The definition of insanity is to do the same thing again and expect a different result - if you want to turn Fletchers around you need fresh thinking and ideas, backed up by sound real world experience.
It is in your best interest to contact me, look forward to hearing from you soon
Thanks
Reading it again now could have done a better job on spelling and gammar haha
I think all FBU s hers should read the book written about Fletchers, "The Clash of the Titans " in the 1980-90's, talk about wealth distruction something like $2,000,000,000 gone yes BILLION !!, leopards done change their spots, culture of bad decisions, compulsory reading of how not to run a company headed by a MBA to boot !!!
Maybe they would offer Alistar Mid a job. They can't spell profit. They don't even know the meaning of the word.:t_up:
http://www.nzherald.co.nz/business/n...ectid=11995190
One view as to why FBU does not need to raise new capital.
There is a change in contract being alluded to here, from a contract with an assignment, to a contract with novation. In contract law, the assignment model is where a contract is drawn up between the client and the contractor (Fletcher's) and they complete the assignment. In this model, they claim to have lost hundreds of millions of dollars, and their CEO notes that level of risk is too large a burden to bear. They blame the cost of what has been designed for the assignment as too difficult to determine. For example, there has been a great deal of effort in building technology to streamline and make the process of building more efficient, which impacts on flexibility of design. Fletcher's have been an active player to develop that technology, that limits (out of concern for efficiency) the options for design. Such is the streamlining effect of the building process.
A novation contract takes care of that problem, but comes with deeper concerns. These types of contract are more common in Australia and the UK, but not New Zealand. Arrow International are an early adopter of this type of contract in New Zealand, and applied it throughout the Christchurch rebuild. It works by transferring the obligation under the old contract with another obligation, either an extra one, or a replacement. What happens in effect is that a contract between the client and Fletcher's is drawn up (by Arrow Int) and then it is "designed" or worked out as it unfolds. Project managers such as Arrow Intl take a more prominent role in making design decisions. Decisions before the contract, that sets up the conditions for the building process to unfold, are set aside. True, with an assignment contract, you can simply agree to change the terms. But in complicated building processes, those luxuries are difficult to identify. What is being contested is that building processes are better at design than designers. Architects for instance are to compete alongside other sub-contractors to play their part in the process. Should their design decisions not fit with the efficiency of building technology, their decisions are set aside.
Novation is commonly used in futures and options markets, especially with OTC derivatives. In summary, what was a mechanism for more freedom between parties is in effect a reduction of thought. This is a return to classic neoliberalism, which is still being worked out in New Zealand.
I do hold some FBU. It is likely to take a few years at least to sort their mess out, so is it a sell at today' price or I am selling at the bottom?
I have sold mine. a while ago. Will consider repurchasing at $5.50 or less. And maybe not even then. Personally I would let them go. But I am probably wrong as I thought the sky was falling on retail and do not own Briscoes or Hallinsteins. (or the Warehouse)
Good luck.
Cheers
RTM
You’ll all laugh with derision with this .....but she has a strong point
https://www.stuff.co.nz/business/101...man-at-the-top
Telecom was in a no win storm and under constant pressure to split.Gattung held the regulators off for as long as possible. You guys just sound like old school women in power haters;)
lmao
and the reason they got pressured to split? monopolistic practices driving out all competition and stalling broadband growth in NZ as long as possible to keep customers on higher margin plans.
I was working there at the time
oh at least not forget this gem "confusion is our chief marketing tool"
You are confusing her intended message of the value of diversification, with her poor delivery of the message (off the cuff imo), against her own personal track record of destroying shareholder value, while responsible and accountable to shareholders.
I get the diversification message, it is just that she chose an ill-considered (and disrespectful imo) context of assigning blame to FBU leadership (Sir Ralph to be precise, who is accountable but not directly responsible) for having a man in the Chair (how could she possibly make that connection ... choose man = failure), and by extension caused the debacle at FBU, but the gall to suggest that a woman in the Chair would have had an alternate outcome!
What a twat she is, gender aside. Gattung had responsibility for one of the worst shareholder outcomes on record of any CEO of a listed company in New Zealand, full stop. She appears to be thoroughly conceited about that and no credibility whatsoever imho.
Attachment 9506
I’m just going to wait till the next downgrade for this share (beauty...... cough cough)
Theresa says she (or a woman) would not have left Fletcher’s get into the state it has
Gaynor says Norris hadn’t made any mistakes in his career so had not had the opportunity to learn from mistakes
http://www.nzherald.co.nz/business/n...ectid=11996036
Putting the two together maybe Theresa is right ....a failed woman leader such as Theresa (Sharetrader popular view) would have been good for Fletcher’s
This is what the Fletcher Building Board and Senior Management look like
Besides diversity not looking too good don’t really look like they have ever been been builders or construction workers
Mind you the first time I met Tony Carter was when he was working in a Mitre 10 store ...and he was out with the tradies.
I find it is "skin on the line" rather than male/female/it, or what ever,that matters.!
RYM,MFT,FRE,EBO,HLG,HBL,BGP.
Bryan Gaynor gives his opinion on FBU's governance and the unfolding of this fiasco.
http://www.nzherald.co.nz/business/n...ectid=11996036
My thoughts :- I find it frankly quite remarkable that as recently as October 2016 the then CEO was saying the outlook looked great.
Five subsequent downgrades show anything but a great outcome.
I agree that there needs to be a thorough board refresh.
Angry and hurt: Fletcher Building chairman Ralph Norris speaks out in his own defence
https://www.stuff.co.nz/business/ind...is-own-defence
Fletcher Building's Sir Ralph Norris - master or martyr?
https://www.stuff.co.nz/business/101...ster-or-martyr
poor board governance is really endemic in nz i reckon , no accountabilty really.
need the aussie class action firms to set up in nz , that make some useless directors more accountable and make a lot of them take there jobs more seriously instead of in nz directorship is considered a cushy gig with great pay.
Restaurant probably gets plenty of business from Ralphy & his old boys' club - shrewd PR on their part?
Must say that I have held Ralph in high regards for the job he did at ASB, CBA and then, stepping up to sort out Air NZ. This third massive profit downgrade of FBU and his attempts to deflect accountability and blame to others have wiped out most of the respect I had for him.
He has been a director since April 2014 (3.75 years ago) and Chairman since October 2014 (3.25 years ago) - long enough on the Board to have an impact.
Fact is that the worse of the project (NZCCC) was awarded in October 2015 - one year after he was made Chairman. Certainly not a contract he can say happened under someone else's watch.
Anyway, he has earned the better part of over $1.6m in fees to console his pride.
Shareholders should have taken heed of the fact that he owns less than 30,000 shares in FBU?
lol trying to blame auditors. seriously !
I agree that's absolutely laughable and another nail in the coffin for his reputation. Auditors are there, (I have done some auditing in my career) to check the veracity of the financial assertions in the financial statements and the underlying reasonableness of the basis of their preparation and have nothing whatsoever to do with the abysmal performance of any particular division and nor are they engaged to recommend business strategies to help turn and business division around. Good that he's standing down.
Do you think the government would bail them out?
Read any audit report of a listed company and you'll get the gist of what an auditors role is. Pages 97-100 contains EY's audit report which I'm not going to comment on as that would be unprofessional to comment on another firms work without a mandate to thoroughly investigate their processes.
https://fletcherbuilding.com/assets/...ual-report.pdf
I remain of the view that to imply somehow the auditors weren't doing their job was a very cheap shot by Ralph Norris. Any audit report outlines the auditors responsibilities and the Directors responsibilities. Bryan Gaynor outlined deep concerns over governance standards at FBU over recent years. I share his view and concerns and the buck stops with all the directors, (including among others Tony Cater), not just Ralph Norris. The bottom line is he was in the chair when they signed off on arguably the greatest construction cost overruns fiasco N.Z. has ever seen. Why anyone would want to remain as a shareholder until there's a comprehensive board and middle management refresh is a mystery to me.
SKC will be the beneficiary of a $400m wealth transfer from FBU - though their SP hasn't moved to reflect this yet.
I wonder when/how they will account for this free money - having FBU build your new convention centre has to be better than running a casino!
FB summarised KPMG's findings following the review of the Convention Centre in Oct 2017 stating... "Significant ongoing judgment required to account for unknown and unquantifiable risk"...and ..."Forecast outcome materially worse than previously expected" .
Probably enough clues in there!
Hard to criticise KPMG as their report was never made public (unless I have missed it)?
Interesting that there has been no comment today on FBU with their announcement of the HY results. Also the SP has plummeted by another 7%. Feeling a lot better about my exit at 6.89 the other day after the Norris fiasco.
No comments because a/ it's all been said and b/ there wern't any surprises.
What explains the 7% fall in SP today then do you think? (if all had been explained and no surprises). Not being facetious here, just naturally curious. Glad I sold out when I did but would not have thought the market would want to see the result to drop it another 7%.
I don't know the answer,however I was speaking to a friend of mine today who sold his FBU at near$7. The amount he had invested was returning him approx. $4,000 pa.He has invested the funds into AIR and HLG.Will receive about $5,000 in divies and has about $4,000 cash left over.
The reality is no next dividend from FBU, and I would expect either following divies will be reduced,or should the US bond holders kick up a fuss,FBU will have to raise capital.Maybe no divies for a year or two?
So my friend looks to be at least $5,000 pa better off for some time?
What I think is the situation of high debt and low free cash flow for the next 2-3 years.
They need to sell something.
The B&I disaster all known but a bit of added detail today didn’t give punters much added comfort it’s all under ‘control’
The main factor behind the the fall today was that the outlook for the various divisions for the rest of the year was a bit muted. Go through the presentation and on the outlook tables there are many FLAT and LOW GROWTH views so it looks like H2 not going to be that strong.
Date Gross shorts 1 Issued capital % Capital shorted 2 Trade volume 3 Shorts as % of volume Tue 20th Feb, 2018 643,172 697,040,440 0.09% 1,449,658 44.37% Mon 19th Feb, 2018 651,761 697,040,440 0.09% 1,731,592 37.64% Fri 16th Feb, 2018 1,101,459 697,040,440 0.15% 1,486,885 74.08%
Back to the good old JV model?
http://www.nzherald.co.nz/business/n...008976&ref=rss
From our amazing national radio
EQC considering legal action against Fletcher Construction
"Fletcher and EQC bullied her throughout the whole process, which has made her lose trust and pride in New Zealand, she said."
Fletchers are liable say EQC yet both avoided inspecting under houses or in walls in fact they lied saying they had and when they did they didn't see any problems which were blatantly there, liquification,cracks, piles fallen over etc. This gets worse for Fletchers, they need to be made accountable for such shoddy practice and such poor quality work.
luckily im far away and ignorant of the local knowledge. People have been screwed badly there, i listened to some of their stories on campbell on RNZ this eve.
Interesting article ex NZHerald.....http://www.nzherald.co.nz/business/n...ectid=12007538
NZ was safe there for a while. All corporate bullies found a new home in Fletchers and EQC for quite a while. If the engineering shortcuts overseen by Fletchers in Christchurch is a reflection of their overall corporate culture I would stay well clear of any Fletcher building - and that includes the Convention Center.
Dropped to $6.21 today, this seems to be the lowest in about 5 years or so. Any thoughts on where this tumble will stop?
A selection of my thoughts expressed last month Jimmy.
This week we've had Nikko Fund management head of equities come out in the behind the paywall article on NBR saying their forward PE even at this low level is 16.5 and he thinks that's expensive and is probably wrong as they won't make their earnings forecast. He went on to say asset sales were required or a capital raise and noted that the U.S. private placement noteholders have yet to give their approval to a debt waiver and there can be no certainty they will.
Another analyst in the same article suggested that FBU in its current form is too big and diversified to be managed properly.
I think you'd be a VERY "brave" investor to continue to hold this stock even at the current price with the company facing so many challenges going ahead.
I think this could go quite significantly lower from here and would rate the chances of a material capital loss in the short term as VERY VERY high.
Does this not announce a waiver was achieved with only amendments to be agreed?
https://www.nzx.com/announcements/314981
Auckland, 1 March 2018: Fletcher Building today announced that it has received a waiver of the breach of covenants under its US Private Placement (USPP) funding arrangements,
Or is this not the same thing?
However, clearly we await the confirmation of agreement on the amendments in the next few days or otherwise further waivers will be necessary.
Fletcher Building will continue to target the end of March 2018 to complete the amendment process. If the Company does not agree on the amendments by 31 March, it will need to seek an extension of the waiver from the bank syndicate and the USPP noteholders.
Perhaps this is why the share price is quite soft right now until this uncertainty is resolved.
Chris Lee suggesting there are rumours AIR's Chris Luxon being touted as the next Chairman !!
Thanks Beagle, good insight. I will have to do a bit more digging. Intuitively I had always though they were just such a big company that they would always come back. BTW tried to send you a PM the other day, not sure if it got throu, thanks for kind words re that other matter (re SUM).
$6 bucks today , lowest S P in 5 years , what a bunch of muckin fuppets , are we heading for $5 bucks, no wonder the shorts are in place for a big clean up !!