Fletcher Building hit with class action over historical profit warnings

A shareholder class action has been lodged against Fletcher Building over profit warnings dating back six years.

The claim has been brought by people who acquired shares on the New Zealand Main Board and the Australian Stock Exchange in 2016 and 2017.

Fletcher Building, the building and construction materials company listed on the Australian and New Zealand stockmarkets, has been slapped by disgruntled shareholders with a shareholder class action flowing from its string of profit warnings in 2016 and 2017.

The company said on Monday in a statement to the market the claim was brought by people who acquired shares on the New Zealand Main Board and the Australian Stock Exchange between August 17, 2016 and October 23, 2017.

The shareholder class action relates to Fletcher Building’s disclosures regarding its building and Interiors business in that period and which was the source of hundreds of millions of dollars in impairments and losses.

In that time the Fletcher Building share price sank around 40 per cent and later the profit warnings and losses blowout saw the resignation of its then chief executive Mark Adamson who was then followed out the door by the company’s chairman Sir Ralph Norris.

Fletcher Building first issued a profit warning in March 2017 and later another profit warning in July, saying that it expected an impairment of up to $220m on a number of its business units.

In late 2017, after the release of its annual results, Sir Ralph wrote to Fletcher Building shareholders taking responsibility, along with the board and management, for the run of profit downgrades and operational issues.

“As I stated at the time, this was not the result we wanted, it was not the result our shareholders wanted, and the board and management team take absolute responsibility for this performance.”

A major project subject to previous writedowns, which required an increase in project resourcing and therefore cost as it nears completion also sank its profits. A second major project where construction timelines and the likely completion date had been extended and reduced profit expectations on a number of smaller projects in the remainder of the building and interiors portfolio also caused a puncture to its profits.

In February 2018 Fletcher Building announced further provisions for expected losses in its buildings and interiors business of $486m, leading to a total projected EBIT loss for the troubled division of $660m in fiscal 2018.