Rod Oram goes under the covers of Fletcher Building's results for Newsroom and finds the source of its financial problems with project cost blowouts: corporate governance.

The table below from Fletcher Building’s results presentation on Wednesday clearly shows the company’s incompetent corporate governance.

Five years into the biggest, longest construction boom this country has ever seen our largest construction company has lost almost $300m on its $2.65bn order book for commercial buildings.

Two big projects – the Justice Precinct in Christchurch and the Sky City convention centre in Auckland totalling $737m of work -- account for the bulk of the losses.

This, though, is not a simple story of two bad projects.

Fletcher has written down the value of the rest of the order book of Building + Interiors, the commercial building business in its construction division. Breakeven is the best it hopes for on this $1.49bn of business, it announced at its results briefing.

Nor is this bad news a bolt out of the blue. B+I eked out EBIT of only $16m a year over the 12 years to fiscal 2016. Add in the infrastructure business, the other main part of the construction division, and Fletcher’s EBIT on all construction averaged only $32m a year over the 12 years.

That insight is on slide 30 of Fletcher’s results’ presentation to analysts. Anyone wondering how Fletcher could achieve only a 6.76% total return to shareholders over the past six years of booming construction and stock markets will find the 1hour 24 minutes’ briefing revealing.

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| A Newsroom release by Rod Oram  ||  August 20,  2017   |||