Adelaide Brighton issues profit warning a day before annual meeting

Adelaide Brighton shares have slumped after the company downgraded its profit expectations for the calendar year by 10-15 per cent.

Adelaide Brighton shares have slumped after the company downgraded its profit expectations for the calendar year by 10-15 per cent.

The stock fell 6.8 per cent to $3.90 in early trade on the news. AdBri stock is now down more than 43 per cent from its 12-mnth high of $6.96, reached on July 10 last year.

The company said it expected a 10-15 per cent slump from last year result of $190.1 million.

The downgrade excludes any impact from property sales, if they occur.

“The primary drivers for the decline in expected earnings include further softening of demand for construction materials in the residential market, increased competition from cement imports, increased competition pressures in Queensland and higher costs of key raw materials compared to the prior year, the company told the ASX in a statement.

Chief executive Nick Miller said the company was still in a strong position.

“While market conditions are expected to impact current year earnings, our balance sheet is strong and provides us with flexibility to pursue new opportunities that arise in challenging market conditions.

“We will continue to focus on operational improvement and cost efficiency to mitigate the impact on earnings’’.

The company will hold its annual meeting in Adelaide tomorrow, with Mr Miller attending for the first time in his capacity as chief executive.

Former chief executive Martin Brydon left the company with a substantial windfall, with the AdBri board exercising its discretion to pay out his short term incentives despite the company missing its profit after tax targets.

Mr Brydon’s remuneration more than tripled to $5.8 million in his last year in the job, up from $1.875 million.

The figure jumped due to $1.467 million in cash short term incentives, almost an extra million dollars in long term incentives, and $1.467 million “in lieu of notice and severance payment’’.

He was also paid a $147,169 living away from home allowance.

His base salary was $1.44 million.

Last year the company delivered stable underlying profit of $190.1 million on record revenue of $1.63 billion.

AdBri said in its annual report that Mr Brydon was “leaving the company in excellent condition with total shareholder returns over the period from 2014 to 2018 of 48.2 per cent and the share price of the company having increased by 17.1 per cent’’.

Adelaide Brighton said it adjusted Mr Brydon’s short term incentive criteria because of his flexibility in allowing the board to find his replacement, after announcing on May 17 last year he would retire.

“Having regard to these factors, and particularly the Board’s request of Martin to delay his retirement (thereby precluding Martin the opportunity to give proper notice under his contract) the Board has resolved to provide payment in lieu of notice at the end of his employment in addition to his other contractual entitlements,’’ the remuneration report states.

“As part of these arrangements and noting that, as Mr Brydon had announced his intention to retire in May 2018, no long term incentive was made to him for 2018, the Board adjusted Mr Brydon’s short term incentive targets to focus on a smooth transition to a new chief executive.

“This included assisting with investor and employee engagement around the change of leadership.

“ … while the company did not satisfy its profit after tax targets for the purposes of the 2018 short term incentive plan, the Board has determined that Mr Brydon successfully delivered against the expectations set by the board during the CEO transition period, and was awarded his full (100%) 2018 short term incentive.’’

The incentive was paid in cash.

The company said it would also vest Mr Brydon’s 2016 and 2017 long term incentives in full, but details of those payments would be in next year’s remuneration report.

“The Board is grateful to Martin for his service and dedication for the majority of his professional life to the company and believes this discretion reflects the contribution and performance outcomes he has delivered to Adelaide Brighton and its shareholders,’’ the remuneration report states.

Mr Miller will be paid a base salary of $1.5 million, plus up to another $3 million in long and short term incentives.

He will also be paid $450,000 cash for foregone entitlements from his previous employer, paid in two tranches over six months.

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