Fletcher Building Limited (FBU) Earnings Call Transcript & Summary

[Foreign Language] And good morning. I'm Peter Crowley, an Independent Non-Executive Director of your company, and I will be chairing today's meeting. It wasn't my intention to be running proceedings today. However, Acting Chair Barbara Chapman has contracted COVID and is unable to join us today. Just before I proceed with any more of my speeches, I want to welcome you to Ellerslie racetrack today. And out over to the -- to my right, we have a major development being undertaken by Fletcher Living, which is The Hill property development, the housing development. So it's an important part of our business. Because Barbara is not attending today, we have prerecorded her address. However, she is still joining us online today and will be available to answer questions where required. On behalf of the Board, it is my pleasure to welcome you all to Fletcher Building's 2024 Annual Shareholders' Meeting. Today's meeting is being held both in person and online via the Computershare online meeting platform. We therefore welcome our shareholders, proxies and guests, both here -- both those here in the room and those joining us online. Before we start the formal business of the meeting, I'd like to ask people in the room to ensure their mobile phones are silent. In the unlikely event of an emergency, please leave the building by the nearest fire exit. Please look for Ellerslie Events staff members wearing a hi-vis vest who will direct you safely from the building and to the nearest fire assembly point. The fire assembly points are located on the grass areas in front of the main entrance to the Ellerslie Stand and on the outdoor parade ring opposite the Ascot Stand entrance. As a quorum is present and due notice of this meeting has been given, the meeting is duly constituted, and I declare it open. I will now introduce my fellow directors. On my right, your left, we have Sandra Dodds; on my left at the far end, we have Cathy Quinn; and your group CEO and Managing Director, Andrew Reding; Company Secretary Haydn Wong is seated to my right. Unfortunately, Director Tony Dragicevich had a long-standing commitment today to be in Sydney, which could not be changed. Tony has prerecorded a presentation to shareholders, which we will show when we ask you to consider his election resolution. As I mentioned, Acting Chair Barbara Chapman is joining us online. We also have in attendance members of our leadership team and our auditors, EY. Moving on to the agenda for today's meeting. We will commence with addresses from Barbara Chapman as Acting Chair and from Andrew Reding, our new CEO and Managing Director. We will then have a question-and-answer session on those presentations. After that, we will move on to the resolutions of the meeting. The resolutions will be decided by poll. Questions on a resolution will be dealt with before the resolution is voted on. At the conclusion of the formal business, we will then take the opportunity for any further general questions from the floor and online. For those attending online, you can start submitting questions now. Please note that questions will be moderated to avoid repetition and to summarize lengthy questions. We won't address questions that I consider not reasonable in the context of this meeting, that repeat questions or otherwise may restrict all shareholders having a fair chance to have their questions heard. Thank you also to the shareholders who have submitted their questions in advance. Barbara and Andrew will speak to a number of these in their addresses. Finally, if for some reason we don't have the opportunity to answer your question, we will look to answer them in due course via e-mail. At the conclusion of the meeting, for those of us in the room, we invite you to stay and enjoy some light refreshments. We now have Barbara Chapman's address.

Thanks very much, Peter. [Foreign Language] I'm Barbara Chapman, Acting Chair of your company. My apologies for not being with you today. As Peter said, I have COVID. So this presentation has been prerecorded. I shall attend online later in the meeting to answer your questions. But in the meantime, I'd very much like to thank Peter for stepping in for me with only a couple of days' notice. As we reflect on the past financial year, I want to acknowledge that this has been a frustrating and challenging period for our shareholders. The performance of company, as reflected in its share price and dividend payout, is not where any of us want it to be. And shareholders rightly expressed their concerns and disappointments. We share that concern and disappointment. We are currently experiencing one of the deepest and most prolonged market downturns in recent history and one that is affecting all of our businesses and industries. Although we had expected a pullback from the FY '23 and FY '24 activity levels, it is fair to say that the market turned down more quickly and more deeply than we, our customers and our external economic advisers had anticipated, and the impact on our financial performance has been significant. Fletcher Building is clearly not alone in facing a difficult macro environment. However, we are particularly exposed to residential construction activity levels in our markets, as noted at the bottom of this slide, with more than 50% of our revenue weighted to residential construction across New Zealand and Australia. These charts show the material decline of between 30% to 40% in Australia and New Zealand residential sector activity from their respective market peaks to June 2024. To give you a sense of the scale, this decline is greater than we experienced in the GFC. In addition to the volume decline in the residential sector, we're also seeing a marked slowdown in commercial and infrastructure construction in New Zealand. Based on past building cycles, we might have expected those markets to continue to provide some support at this stage in the cycle. So this is not typical. Other market factors that we're having to manage include a tough housing market in New Zealand and ongoing cost inflation. All of these factors weighed on our financial performance in FY '24 and are continuing to put pressure on the business in the first quarter of this financial year. Against this backdrop, earnings before interest and tax for continuing operations and before significant items for FY '24 was $509 million, down 35% from $785 million in FY '23. The group EBIT margin before significant items from continuing operations softened in FY '24 to 6.6% from 10.2% in FY '23. During the year, we made the decision to divest our Tradelink operations in Australia, and in August 2024, we were pleased to enter into a sale agreement with Metal Manufacturers Pty Limited. The transaction completed on 30 September. After factoring in Tradelink's discontinued operations, we recorded a net loss after tax of $227 million compared to net earnings of $235 million in FY '23. The loss is largely attributed to the Higgins noncash impairment and write-down, the legacy provisions and the loss from discontinued operations with Tradelink. Our return on funds employed before significant items was 10% compared to 17.1% in FY '23. Given these market conditions, strong cash flow performance and tight control of working capital have been key priorities for us over the past year. Trading cash flows from continuing operations, excluding legacy and significant items, were $784 million compared to $537 million in FY '23. Overall cash flows from operational activities were $398 million compared to $388 million in FY '23. Given the current market conditions and in line with our dividend policy and the covenant amendment arrangements agreed with our banks in June, the Board did not declare a final dividend. Many of you will be interested about our intent around returning to dividend payments. The Board is not in a position to provide any guidance around this today other than to say that this is a decision that the Board will make as soon as appropriate. Turning now to our nonfinancial performance metrics. Importantly, we continue to drive a strong health and safety culture and risk controls in order to keep our people safe. Our injury rates are at the top quartile industry levels, and 89% of our sites were injury-free in FY '24. We are working hard on this and remain determined to keep improving. On sustainability, we continue to make good progress with 22% intensity and 19% absolute CO2 reductions compared to our baseline 2018 level, indicating that we're on track for 30% lower absolute carbon emissions by 2030. Meanwhile, we diverted 87% of waste from landfill while exceeding our 70% by FY '26 target ahead of time. For customers, we're delighted to see continuous improvement in our service performance with our Net Promoter Score increasing to 48. NPS can be a challenging measure to improve as it takes time, resources and continuous effort across the entire customer journey. So this is a particularly positive result. Our focus on servicing our customers continues to be critically important as we navigate the difficult environment. Finally, we also saw our overall employee engagement improve to an employee Net Promoter Score of 35. Throughout the year, we've been engaging more with our frontline staff to drive ownership and achievement in business plans as well as driving recognition programs. We are pleased to see our efforts in this area bearing fruit. And overall, we're tracking well to achieving our targets across all these metrics. In addition to these tough markets, there is no doubt that legacy issues have weighed heavily on the company's financial performance. These issues are complex and have consumed a great deal of our time and resources. However, we have made meaningful progress over the course of the year in relation to the 2 most significant legacy issues facing the company. First, we achieved a major milestone in relation to the Western Australia plumbing failure issue with the announcement in August of an in-principle agreement with the Western Australian government and homebuilders known as the Joint Industry Response. From the outset, Iplex took a leadership role in bringing stakeholders together to address the issue. Our goal has been to understand the issue, try to prevent further leaks and achieve a timely and pragmatic outcome for affected homeowners. We believe that the Joint Industry Response, including the Western Australian government's $30 million contribution, achieves those outcomes. All parties are working hard to reach final agreement. We will not be distracted from that goal by stakeholders with their own agendas. The agreements Iplex is making in the JIR involve cash payments over many years, which are within its capacity to pay. In addition, they will be guaranteed by the Fletcher Building Australian group. Importantly, the Joint Industry Response avoids a product recall, which would have been far more costly and disruptive to home owners, the Western Australian home building industry and our own business. Meanwhile, our last remaining legacy construction projects remain on track for completion in line with the update we provided at our FY '24 results. We achieved full works completion on the Puhoi to Warkworth motorway, one of New Zealand's largest infrastructure projects. We've also made real progress on the New Zealand International Convention Centre project. Through the year, the construction team completed and handed over the Convention Centre carparks and the Horizon Hotel, and the completion of the Convention Centre is still on track for this financial year. The additional provisions required to complete this project have been very disappointing but reflect the incredibly complex and costly process of remediating the site after the fire. We're looking forward to handing over a truly world-class facility and moving on from the considerable pain and distraction this has caused the organization and our shareholders over the past few years. There has been a fair amount of commentary about our capital raise. So I want to give you the view from the Board on the need for the capital and the process we went through to execute it. A lot of good work had gone into negotiating covenant relief with our lenders, reducing costs, conserving cash, tightly managing CapEx and divesting half of Higgins in Fiji and Tradelink. But we could see that the market conditions ahead were very tough, and those steps weren't going to be enough to reduce debt and leverage in line with our target credit metrics. So we made the call to shore up the balance sheet with an equity raise. We then had 3 decisions to make: how much, which structure and with which lead manager. Firstly, how much to raise? $700 million was chosen after a detailed efficiency analysis as the right amount to give us sufficient confidence around the balance sheet but not too much to be lazy. It still requires the company to perform in a difficult market and focus on costs, cash and CapEx. Secondly, which structure? We discussed several different options with our advisers and the pros and cons of the different structures. An accelerated nonrenounceable entitlement offer, which is a pro rata rights offer to all eligible existing institutions and retail shareholders, and the placement structure was chosen as the best option to give us certainty that the target amount could be raised effectively in a difficult market context, looking after our existing shareholders and providing the tightest pricing for a fully underwritten offer. Our objective was to optimize value for all shareholders, including those who weren't able to or chose not to participate. There are many ways to cut the data to see how the ANREO and placement structure performed versus a theoretical accelerated renounceable entitlement offer. But even those shareholders who didn't participate in the ANREO have benefited from the uplift in the share price, which has occurred post the raise. Based on the modeling we've done, that benefit to shareholders who didn't participate is well in excess of the value they may have received from the estimated price of their rights. And the final question, which lead manager? We chose Jarden as our lead manager for the raise. Jarden had been involved supporting the business on a number of fronts, including our considerations as to the best future structure for our resi business. They know us well, and we're not starting from scratch. We purposefully chose just one lead manager. We took the view that a leak about a capital raise would be very detrimental to the share price. So we wanted to keep it tight. I've been asked about the costs of the capital raise. Shareholders should rightly challenge such costs as they are large. In this case, our total costs, including advisers and other expenses, amounted to $22 million. All capital raises are not equal. Raising capital in a stressed balance sheet context such as ours is invariably more expensive to execute than raising capital for capital expansion or growth purposes because of the different risks involved. In this case, we have good information on pricing precedents and also had our own prior experience to draw on. The result was we were able to secure an arrangement that was actually $2 million cheaper than when Fletchers raised capital in 2018. It's disappointing to me that we haven't found a new Chair yet. The delay weighs on the share price in finding a permanent share as a priority for the Board. I can assure you that we are working hard to find the best person for the job. We expect to be able to finalize this process by the first quarter of next calendar year at the latest, following which it is my intention to step down from the Board to allow for further Board renewal. There have been a number of disappointments and some highlights during my time on the Board and a number of very challenging decisions to make since I became Acting Chair. The fire at the Convention Centre and the plumbing failures in Western Australia have been major disappointments along with the need to write down Higgins last year. These issues have been complex for the team to manage and weighed heavily on the share price to the detriment of our very loyal shareholders. In addition, our heavy exposure to the residential building sectors in both Australia and New Zealand has weighed on the share price in more recent times. That sector has been in the doldrums on both sides of the Tasman for a while, and the team are very much focused on cutting our cloth to meet these market conditions through cost cutting, cash generation and CapEx conservation initiatives. The cycle will improve, and we will be ready for it. Needing a capital raise to shore up the balance sheet was also disappointing. But in the circumstances, it was the right thing to do, and it was executed well. The share price performance post the raise has been pleasing. It's my own view that our legacy issues are now largely behind us, and the company now has the opportunity to build on our current momentum. In that regard, since March, we have found an excellent CEO and refreshed the leadership team; undertaken a refresh of the Board, which with my departure will be ongoing; derisked our exposure in Western Australia; shored up the balance sheet with a successful capital raise; exited Tradelink; embarked on a strong cost-out program, taken a laser approach to CapEx allocation, conserved cash and commenced a portfolio review to make sure we are in businesses which add real value; and of course, we've largely completed the build of the Convention Centre. It's exciting to see this momentum, and all these things will enable our permanent Chair to be in the best possible position to take the company forward. Thank you. And I'd now like to hand over to Andrew.

Thank you, Barbara. [Foreign Language] I would also like to add my welcome to those joining the meeting today, both here in the room and online. For those of you who don't know me, this isn't, in fact, my first Fletcher Building Annual Shareholder Meeting. I spent much of the late '90s and early 2000s in senior leadership roles at Fletcher Building, including Chief Executive of Building Products and Steel and Managing Director of Fletcher Wood Panels, before departing to lead organizations in the Rank Group, including Carter Holt Harvey Pulp and Paper. I've been described in the media perhaps somewhat unkindly as an industry veteran. But this is a label I'm very proud because it's an industry I've loved and worked in for more than 40 years. I'm passionate about Fletcher Building, its unique heritage, its people and its businesses. Fletcher Building is a company with enormous potential and opportunities. It is staffed by excellent people, and I'm thrilled and humbled by the opportunity to lead them. My job will be to translate our shared vision, strong operating businesses and committed people into high performance at a group level. Since being appointed as a director in August this year, I have been spending time reacquainting myself with business in the lead-up to formally taking over as CEO last month. In the process, I've enjoyed visiting a wide range of Fletcher Building companies and sites and meeting people from around the business. These visits included Waipapa Pine, Golden Bay Cement, Diamond Roofing and the Firth block plant in Northland along with Easysteel, Pacific Coil Coaters and our amazing new Winstone Wallboards manufacturing facility in Tauranga. And just to keep busy, I've also met all of our major shareholders at least once over the capital raise. One thing I've been particularly impressed with is the focus on safety everywhere I have visited. Everyone I asked about whether we paid enough attention to safety confirmed we do. And when further asked if they felt able to stop production on seeing an unsafe situation, everybody un-haltingly answered yes. Another thing I've observed is the commitment and dedication of our frontline people and teams, particularly their focus on delivering exceptional service to our customers. As I mentioned, I've also been out and about talking with investors where, to be frank, the messages and feedback I've been hearing have been less positive. As shareholders, you have every right to expect high expectations around our performance. And I want to assure you that we have a clear focus on managing through the current cycle and delivering value for our investors. Turning now to recent trading. For our materials and distribution businesses, market volumes for the first quarter this financial year declined 10% to 15% versus the comparative period. In September, revenues declined 12% year-on-year. This compares to a 7% decline in July and August. So pressure on gross margins continues in the current highly competitive environment, especially in New Zealand. Meanwhile, in our Residential and Development division, house sales have averaged 17 a week in the first quarter this final year compared to 23 a week in the comparative period. Although we saw an improvement in house sales to 21 a week in September compared to 14 a week in July and August, margins were lower on year-on-year due to the decline in New Zealand house prices in the past 6 months. Pleasingly, the Construction division has performed strongly with first quarter earnings and margins improved year-on-year. Now to the outlook for the remainder of the year ahead. We continue to expect FY '25 market volumes in our materials and distribution businesses to be around 10% to 15% lower than FY '24. We also expect FY '25 EBIT before significant items to be around 60% weighted to the second half, mainly owing to 3 factors. Firstly, cost savings of at least $180 million are expected to be around 60% weighted to the second half. Secondly, we expect seasonally higher second half house sales in the Residential and Development division with approximately 170 to 180 more settlements expected when compared to the first half. And thirdly, we incurred some $20 million of one-off costs in the first half, which relate to the outage of Golden Bay's cement transport ship, the MVAC, New Zealand electricity prices and restructuring initiatives, which are not expected to reoccur in the second half. The key downside risks to the outlook are further deterioration in the materials and distribution market and/or lower-than-targeted house sales. I'll now provide an update on our near-term priorities. Our key priority is costs. We are continuing to aggressively take these out, targeting at least $180 million in total gross cost out in FY '25, including both overheads and operational efficiencies. This excludes inflation and not all will flow through the bottom line. As we've already said, we also have a key focus on working capital and CapEx, making sure these are managed tightly to respond to current market conditions. And completing the remaining legacy issues that have been overshadowing our performance for the past few years will remove distractions and give us the clear air and confidence we need to grow this business and build value for our shareholders. Having established a good sense of the business and the opportunities ahead and with a strong team in place, our focus now is completing a strategic review over the coming months, which will provide a clear pathway for the organization. We'll have more to say on this in 2025 at our next Investor Day. Finally, despite all the noise and distractions, the fundamentals of the business remain sound, and we are well positioned to deliver through the cycle. Starting on the left-hand side of this slide and working our way across, the company operates in attractive markets with favorable long-term dynamics and demand tailwinds. And our ability to capitalize on these opportunities can be driven by a leading portfolio of high-quality businesses. We have well-positioned quality businesses that operate in appealing markets, and we have strengthened our balance sheet, which allows us to focus on executing operational and strategic initiatives. I'd like to wrap up by reiterating my fundamental belief in the strength and resilience of our businesses and the capability of our people and teams. Fletcher Building is a company with enormous potential and opportunities, managed and operated by people who are passionate about what they do. Our goal is to fulfill our potential and to build a company that our people, customers, communities and you, our shareholders, can be proud of. [Foreign Language]

Thank you, Andrew. I'd now like to give any shareholders, both present here and online, the opportunity to ask questions based on what you've heard so far on this section of the presentation. While we wait for your questions first in the room, we will address the pre-submitted questions received ahead of the meeting which haven't been specifically answered through Barbara or Andrew's addresses already.

The first question is from [ Thomas Leyland ], a shareholder. The question is, when can we expect company recovery? The challenging market has had a negative impact on our financial performance, and we're working hard to navigate a sustainable path forward. It is difficult to say exactly when our markets will return to growth. However, we can see that long-term trends around population growth, housing shortages and the infrastructure deficits will mean good future demand in the sectors where we operate. The Board also maintains a strong belief that the fundamentals of our businesses are solid and well positioned to perform when the markets recover. Next question. We received a lengthy statement from [ John Lewison ], a shareholder, noting his disappointment in the company performance. And [ John ] asks the following question. Does your company need to split up into more profitable profit centers where greater attention can be given to work in hand? Our answer is, in responding to your statement, as you will have seen through the presentations this morning, we share your disappointment on the company performance. And in answer to your question, as Andrew has noted, we have a strategic review underway, which will provide a clear pathway for the organization. The third question is from [ Andrew Patterson ], a shareholder. Why has Fletcher Building destroyed more than $2 billion in capital in the last decade? The Board continues to govern with a relentless focus on driving performance improvement on the base business while dealing with significant legacy construction issues, competition pressures and macroeconomic headwinds and inflation causing slowing demand. We acknowledge that the historical issues and a challenging market have had a negative impact on our financial performance and reputation. As I've already said, the work currently being undertaken to rightsize the business and to ensure it operates prudently and resiliently will provide the foundation for delivering sustainable growth for our businesses and our shareholders. The next question, the fourth question is from [ Stephen Bell ]. The question is, how are you going to increase shareholder value without a decrease in head count across the portfolio of companies? And the answer to [ Stephen's ] question is, like many companies, we're having to rightsize our businesses to the current market conditions. As Andrew and Barbara have mentioned, it is very tough and volatile at the moment. This -- our response includes reducing our staff numbers across the business, which is something we have been doing since the activity in our markets started declining about 2 years ago. This is one of the measures we have taken to support the business' operating margins and to preserve cash flows for our shareholders. The fifth pre-submitted question is from [ Dirk Hadik. Dirk's ] question is, given the review instigated in 2018, the value of the Tradelink business has been compromised for some time before the $120 million write-down taken in the 2024 accounts. What is the policy on asset values? Will goodwill, obsolete stock, IP assessment values be adjusted annually for reasonable market value to give a fair reflection of the company position? And if not, why not? In answer to [ Dirk's ] question, we are required to do an annual impairment test of goodwill and brand balances held in our businesses. And we also review these when there are other indicators of impairment. As part of the assessment of asset values, management reviews the business unit's initiatives, for example, sales growth assumptions, operating costs and margins to determine cash flow projections for the future in determining whether any impairment of the -- or write-down is required. In our 2018 review of the Australian divisional businesses, which included Tradelink, we identified a number of strategic initiatives to improve operating performance. While we achieved many of these, for Tradelink, it has been more challenging to deliver in the current market environment. And while management continued to identify opportunities to improve Tradelink performance, they acknowledge the significant time expected for these strategic initiatives to reach full potential given our historical experience. So in answer, it was just going to take too long. The next question, the final pre-submitted question is from [ Tony Flatt ], who had 3 questions. Firstly, is there a concern that the stalling of the Digital@Fletchers program is leading to reduced operational efficiencies and potential for data and cyber breaches to occur? In response to that question, we remain committed to the program. The digital transformation of our businesses by modernizing our core ERP platforms is a strategic priority for the group. And we will be looking to restart Digital@Fletchers as and when conditions improve. On cyber, we have a dedicated team within FletcherTech to address the constantly evolving cyber security threats that the group faces. We use international experts and partners to enhance our cyber resiliency. This is a challenge and risk for every business out there. So I'm very confident that we have the systems, the people in place to protect our data. [ Tony's ] second question is, there are a number of significant matters currently outstanding, including the BGC-Iplex claim, and that's the West Australian pipes issue, just to be clear; the Iplex class action; a potential SkyCity claim against Fletcher FCC; and matters concerning the Puhoi to Warkworth and Winstone Wallboards. Considering the recent capital raising, is management confident that sufficient capital resources are now in place should one or more of these matters result in negative outcomes? So quite a broad question about risks -- legal risks in front of the company. As we noted in Barbara's address, we carried out a detailed sufficiency analysis to give us confidence around the balance sheet. [ Tony's ] final question is, documentation for the joint industry response -- again, this relates to the Iplex pipes issue in Western Australia -- was planned. The response was planned to be completed by September 2024. Can you comment on the delay? Assuming the Joint Industry Response proceeds, what process is the company employing to ensure its implementation costs and progress -- is progress being tightly managed? We are pleased with the cooperation and constructive approach of all the parties who have chosen to work with us on this matter, including the West Australian government. We're building consensus with a host of builders, and the government is building that consensus with a lot of builders, small builders, and the government is -- it is a complicated task. So while it might look like it's been slow to get finalized than we'd hoped, we still expect it will be done by the end of this calendar year. We'll now answer questions starting from those in the room. Please raise your hands if you have a question and wait for a microphone to be -- to come to you.

My name is Oliver Mander from New Zealand Shareholders' Association. Just in terms of the one-offs and all the significant items that seem to have occurred with regularity over the past 12 years or so, how -- I mean you do have a collection of businesses, and it can be expected that each of those will face different nonrecurring events each year. To what extent should shareholders place reliance on your EBITDA before significant items measure? Or alternatively, how can the company think about its financial disclosures and reporting in a way that incorporates a focus or creates a focus on actual earnings rather than so-called underlying earnings?

That's a fair question. Look, the fact of the matter is we actually have incurred some serious significant items, one-off things like, for example, the long-term legacy projects that have been in place for quite some time as we've wrapped up a whole pile of projects that go back years that have been infected by -- influenced by things like the COVID shutdowns where the whole Puhoi to Warkworth project was just stopped on 6 months. We had to stop. We have to go away. We had to come back to that job, reenergize, get everyone back in. That takes time and it will cost money. I am -- maybe I'm a bit of a Jonah here, but my first day on the job at Fletchers, I'm sitting in Penrose, and everyone comes running and said the New Zealand International Convention Centre is on fire. My first day. Now that was -- it was a terrible, terrible event for everyone. But it was a hugely complicated thing to recover based on what -- working with insurance, working with SkyCity, working to basically pull the whole place of apart, put it back together again. They are genuine significant events, if you ask me. I would look at a thing like the West Australian pipe thing. I think that's a genuine significant item. I totally get it that we seem to have a raft of significant items that we report a number, which is a correct number. Then we adjust out significant items, but it's there to be seen. There's a net profit number, which is the number reported at the end. But I think my frustration -- I think every shareholder's frustration is that we keep getting hit by things. So I can't predict what's out there. What I can tell you is that we are very conscious of significant items, if a significant item -- we're not creating significant items to give management an easy mark. If they're genuine sig items, they're genuine. But I think as a number of the speakers have addressed today, the legacy issues in front of this company which go back years and years and years are significant. We're working our way through them, and we get it, okay? We understand that it is important, but we are committed to work getting these things behind us and coming out with cleaner accounts as we go forward.

Thank you, Peter. So just as a follow-up to that in terms then of the significant items, what steps has the Board taken more recently then to ensure how -- its identification of potential risks and risk management culture associated with the organization? How has that flowed through into the Board? What changes have been made?

Well, it's really interesting. I don't think I've got COVID. Thank God. But I'm getting a bit of talking. Look, Oliver, I think there is a much more heightened approach to risk -- understanding risk. Now one of the ones that we've called out that we consider is things like installation risk, where we make products that are perfectly good. We've got laboratories. We test them. We've got -- they are fit for purpose. They're well-made products. They go out and then someone misuses them or does something wrong with how they install a product. It's a real risk. These are broad industry risk for just about anyone in construction materials, building products. Okay. I've come from other businesses where we made toilets and plumbing products and the like, and the risks were there, too. I think they've got a much more elevated focus in our business. But I think what I would say is when we address risks with management through the Audit Committee -- Audit and Risk Committees, we're taking a pretty broad view about what risks are. These are not just pro forma risks. They're not just some very -- the same list you would see year in, year out. They are very, very detailed risks, which we try and understand what the risks are. And we're very clear on how we can mitigate risks. So look, a very -- one, I'll just give you a really pertinent one that is very recent. The MVAC, which is the motor vessel Aotearoa Chief. That's the 9,000 tonne ship that comes from Portland down to -- I think it's Eastport. I think this is to the terminal and does a bit of a milk run around. That ship had an engine. The cylinder head went out. We worked -- it's a [ Wartsila ] big diesel. I'm in shipping. Okay. That's my background. So big [ Wartsila ] diesel. We were able to get spare part very fast to get that thing back up and running. We had spares, but we'd also have to find some more spares. That was done. That is a risk that is identified, and we had a plan in place to mitigate that risk, which is not as bad as we thought it would be. So I think it's a classic example of the sort of things we've got to come to grips with and we manage.

New Zealand Shareholders' Association as well. You've had a tough year. I think everybody recognizes that. And as part of that tough year, there's been some exits. There's been exits in senior management. There's been exits in the Board. And the Acting Chair in her address earlier talked to the appointment of a new Chair, which I think we'd all as shareholders welcome, but also that she was going to then look to step off the Board once that process had concluded. So I've got a broader question, which is about the renewal of the Board full stop in the sense that there's obviously a renewal process occurring. There's a reduced number of directors on the Board at this point in time. And obviously, when you have a reduced number of directors on a Board, you have potentially a reduced level of skills and experience capability because you need a broad level like you've just mentioned, your experience in -- both in the sort of the building products business but also shipping. So my question is really around Board composition. What are the Board looking to fill out in terms of the skills and experience that they're looking to achieve in the Board going forward so that shareholders in the room and online can get some more confidence in the governance layer having had a new MD and a new CFO put in place?

Fair question. I'll take this one, but if Barbara -- I think she's online -- wants to chip in, but I'll have a crack at it first, if that's all right. One of the clear feedback -- areas of feedback we've received as a Board is that there was a view that there was insufficient expertise -- or industry experience on the Board. And we've been very alert to that as we've -- the Board has changes. Four directors have gone. Two new ones have come on. The most recent was Andrew and Tony Dragicevich. So Andrew, he's introduced himself. You know he knows the industries in which we operate. Tony Dragicevich, I know well from the Australian context. He has a great expertise in building products, supplying the construction market, the housing market, actually, through different channels and once upon a time through the likes of the PlaceMakers, those types of business in paint. He worked with me at GWA many, many years ago and was very, very good. More recently, he was at -- he is at Capral Aluminium, which is actually a really great turnaround story that Tony has led. So he understands the type of markets where we -- as I said, Andrew, he knows it well. One of the other more recent people who joined our Board about 12 months ago, Sandra Dodds here. now Sandra worked at -- she's a chartered accountant, but she worked at Fulton Hogan. So she understands the sort of the quarrying-type businesses, the roading businesses, I think Downer and a variety of other businesses. She's on also Snowy Hydro Board, which is a major Australian construction project. So she understands construction, accounting, these sorts of things. So what I want to, I guess, give you the feel is that we're bringing on people with the right backgrounds -- I believe are the right backgrounds and the right skills onto our Board as we go forward. So we are from the industry, and we are from both sides of the Tasman. I've operated over here as well a variety of businesses. We get it. I don't know if Barbara would like to add something.

Thanks very much, Peter. And again, apologies that I'm not there with everybody. I think the only thing I would add, Peter, is that some of this will need to shake out as we understand the skills of the new Chair and what they bring and therefore what the gap is. When we are looking for our new Chair, we did a preliminary piece of work going around our shareholders and asking them what do they see as important for a new Chair. And that came down to key buckets or 4 key criteria. So one of those was good governance experience, like really senior-level governance experience. One of them was building products experience. Another was portfolio experience. And by that, I mean someone who's worked in a business like ours that has like 28 different companies in it that are all reasonably different. And then the final criteria was trans-Tasman experience. Now we know that we're not going to get all of those 4 things in one Chair, but we're going to continue to try and kind of get that kind of capability. And then what that will shake out is the requirement for what's missing and the gap. And with my intended departure, the remaining directors and the new Chair can kind of figure out what that gap is and who's the best person to fill it. Thanks. Back to you, Peter.

My name is [ Shabir ], a shareholder. Now I need to ask you certain questions about this legacy issue. Now you are telling -- I have been a shareholder for the couple of years now, at least 4, 5 years. This loss from that NZ Convention Centre. Every year, you are providing $200 million, $100 million -- minimum $100 million to $200 million for that. In the last month, you are providing $165 million for this. And you have promised in the annual report that this will be the last one. You are ending this legacy in the -- by the end of this year. Now we are already in October. So I would like to pass a resolution saying that you commit that this will be the final thing and there will not be any further loss in the next year because I have seen one thing. I have also read a report, and you have indicated that there are possibilities that for the delay and all that, you will be again charged for something. So this legacy will be continued in '25 also. So can we pass a resolution like you people and the Board who pass the resolution? Like the shareholder, can we pass resolution that we want some finality to this? There should be an end to this. And another point. Another point is you have provided only -- you are claiming only $100 million for this from your insurers, whereas you spent already almost more than $500 million to $600 million. So why this -- why only claim for $100 million from insurers? Why not more?

Okay. Thank you. Look, I think the question is, are we confident that there will be no more -- the first question is, are we confident that there will be no more provisions raised against this project? I think we've got a fair degree of confidence on that one. Now why I can say that is that project was 3 elements. It was a carpark. It was a hotel. And then there's the big Convention Centre building. The carparks have been given back. So they've done. They're operating. The hotel, Horizon just seems to have -- Horizon Hotel, it's available. You can check in and stay there. The big Convention Center building, which I went through quite recently, which is gigantic, and that was where the fire was, it is a very advanced stage of work. So am I confident that we're racing to a completion on that project? Yes, I am. Could I get a surprise? Yes. But I don't think it's going to be a very big surprise. Okay? So I think we are across this thing. We've got people all over it. There was a second question. Sorry. What was the second part of your question? Insurance. Sorry. Very, very complicated. There's third-party liability insurance, contract work insurance. There are claims against third -- contractors. Really complicated. What was the insurance we collected in the -- as the -- we've got to pay -- we've got some insurance. What was the insurance payment we got earlier this year? Which contract works insurance? And what was it?

That's not the amount we got back. No. But I think he was referring to the settlement proceeds, the number...

What was the settlement we got? So that's $100 million we got in June, but there's hundreds and hundreds of millions of dollars still to go through to be claimed. So there will be a legal process. There'll be lawyers and barristers fighting for that. But we believe we have strong insurance claims for a lot more money. But we got $100 million in, in June, I think it was. Okay. Yes, Madam?

I'm Coralie van Camp, shareholder. I've been coming to Fletcher meetings since I think the first Chairman I attended was Sir Ron Trotter, and I think Hugh Fletcher was the CEO. And since that time, I've seen shamble after shamble after shamble. But I would like to pay you one compliment today. The arrogance is missing from this Board, which has been right through the years up until now. So I hope that will continue as you become more pragmatic and look for solutions and realize the mistakes that were made, including the design floor of the Convention Centre with the roofing materials. A lot of the questions I wanted answered have been answered. But what I would like to raise is going forward with your risks and trying to get back into the black. How exposed are you to cheap Chinese components coming in, not necessarily the actual finished product, but something that makes up a component of your building materials? For example, the water pipes, they were manufactured in Australia? Were they?

The pipes, yes, they're manufactured at Albury in Victoria. They were locally made.

And the material used for that was that, was that -- now that you've tested it all, was that suitable? And where did it come from?

The resin came from Korea. All our testing indicated that it was perfectly, perfectly suitable for making the product.

Because I've heard all kinds of things about Chinese steel and concrete failures. And unless you can really make sure that these things do not occur in the future, you will keep getting surprises.

Well, I think -- first of all, I want to thank you for being understanding. And believe me, we as directors and management are very, very alert to the unfortunate time everyone's had as shareholders. I just want to be really, really clear on that. If we come then though to -- part of your question is about imports, the quality of imports. It is a risk. It's less a risk for us. We make a lot of stuff, but there are always components and things, as you say -- you mentioned about the resin that went into the parts in -- at the Iplex factory in Albury. We're quite actually confident that it's okay. One of the big risks of imported product is actually it competes with our well-made, properly tested product. There's always a lot of pressure to deregulate markets, and people talk about there's pressure -- talk about deregulating plasterboard and things like that. I don't think that's a place anyone in construction wants to go. And so there are about the quality of components and products that are bought in if markets are fully deregulated. It looks like -- it might sound like it's going to be cheap, but it isn't.

I'd just like to say as a shareholder, I would like to see you consolidate and make good things well and perhaps fewer of them rather than trying to be everything to everyone.

I agree. Thanks Coralie.

[ John McArthur ], shareholder and previous employee. As a quality assurance manager in Fletcher Wood Panels, the thing that strikes me about the West Australian pipes is that Iplex make the same pipe in the East Coast, in New Zealand and elsewhere. And the same pipe has the same quality parameters and the same quality output, and yet it is just Western Australia where it failed. And it may sound like a simple question, and I expect it has a very complex answer. But can you explain to me why we -- it may be a concession to the West Australian situation or not financial concession. But it strikes me from a quality angle that there's something wrong with the use over in the Western Australian province.

Thanks, [ John ]. What -- that's quite an informed question. I -- look, I think it's a very, very, very rich question. The pipes that are in question in Australia are all made in the same factory with the same materials. It's different for -- we have different factories here, different pipes. But in Australia, the pipes were all made in the one factory, and they went either to the West or they went to the East. Albury, which is the border of Victoria and New South Wales. I'm giving some statistics that I'm pretty sure are right. But if not, they're within a small, small error. We believe there were 15,000 dwellings in West Australia built with the pipes. Interestingly, there were 15,000 dwellings built in the East with the pipes. The leak rate in Western Australia was something like 18%. The leak rate in the East is 0.5%. As part of our program of investigating houses and going through and helping to understand what the problem is and remediate the problem, we've got a really rich sample. So if you're talking statistics, it's a big sample of what work has been done and what the quality of the work is. And it is very, very clear. It is a local West Australian issue. It's an installation issue in our view. It is not a product quality issue because we know that the causation is not product quality. But there is installation. I won't go into the differences of what -- why building in -- well, just briefly, in West Australia, the houses are all double bricks. So there's a narrow void between bricks on the outside and bricks on the inside. It's hard to move the pipe around when you're building a solid skin on the outside with the plasterboard. It's a lot easier to move products -- to bend product. So the product has been overbent. It's under pressure, hot and cold pressure, which is a pulse. There's a pressure change, and when they bend, it leaks. So you could say, well, it's not your problem. But the fact of the matter is it is our problem. So we're confident the product is fine. The issue is that there was -- we had concerns, and it was a very real risk that a product recall would be instituted by the West Australian government. Now product recall does not just affect West Australia. It affects the whole of Australia and every building with our product. Even if it wasn't leaking, it would have to be pulled out, replaced, and we have to pay. So I was talking all of us asking the question about significant items and the like. $155 million is what we're putting aside to address a problem that the risk, if we hadn't mitigated -- again, this is a risk question. If we hadn't mitigated the risk, it could be an altogether much, much bigger number. So the government wants to work with us. The builders want to work with. One builder who's half of all the buildings in Western Australia is holding out because they want to cut a better deal. That's a negotiation we've just got to have. But that's what's holding up the Joint Industry Response. But that's why we're doing what we're doing. It's -- I don't love the thought that we're going to stump up $155 million, but it's better than the alternative. Yes?

Eden Bradfield, BlackBull Research. Return on funds employed is a metric that goes throughout all of your documentation. And I agree it's a great metric. And this sort of goes back to Oliver's question. The problem with returns on funds employed is that it excludes significant items and discontinued operations. And I just took some back of the envelope math. It brings it down from 10% to around 2.6%, which is fairly significant. So I was just wondering, Peter, if you could speak to, I guess, the use of returns of fund employed without including significant items or discontinued operations, especially when Fletchers has a hell of a lot of significant items.

Well, sorry, you're asking me why we would normally focus on using ROFE as indicator...

It's an indicator that you use a lot, but the way you calculate it excludes significant items and discontinued operation.

Yes. Yes. So -- well, I hear you. Why we use ROFE, it gives an indication of the capital efficiency. And in my view, if you're allocating capital, you're looking to see, are we getting a return on the cost of capital. So that's the value of it, that either we're getting very high margins through EBIT or we're getting it off a low capital base. It's a numerator/denominator driven calculation. So that's the ideal world. I think as you get into having significant items and adjustments all around it, it's less reliable. So I don't know if I can answer much more than that on the question other than I hear you and I get it.

I guess the thing is if you have significant items every year, surely, the calculation should be ROFE plus significant margins plus discontinued operations.

Sure. Yes, sure. But one of the things ROFE is if you're putting -- if you're saying, right, we've had this -- we've had all these problems. Going forward, how do I allocate capital? How do we monitor the performance of the business? That's what we're trying to cut through the noise to the right -- at a bottom, bottom line level. You're right. All right. Christian, are there any questions?

Three questions online. First question. The Board state that they believe it's not appropriate to provide shareholders with any update on the return of dividend payments, suggesting that they've forgotten who they report to. There must be something to say on this, even if it's not good news.

I'm a shareholder, too. I like dividends very much. The issue with dividends, I think it has been covered in -- either by Barbara or Andrew. We've got covenant relief. As the market has been falling, which I think the statistics show it's off 30% in Australia in terms of residential, it's off nearly 40% in New Zealand -- and that's more than half of our business. It's the high margin half of our business, I might add. As the market has been falling, we have had to go out and we got covenant relief while we got our house in order. That covenant relief is still in place. At some point, we can say we don't need that covenant relief anymore and we can start paying dividend. But I'll tell you what, I think we would be unwise at the moment until we see where the bottom of this market is going to make any commitment to that fact other than -- believe me, I've got 72,000 shares. I'm pretty keen to see a dividend come through as well.

Next question from Stephen Mayne. When it comes to plumbing supplies, the contrast between the performance of Tradelink and Reece has been stark indeed. What is it about the Reece business model that was so much superior to Tradelink?

I'm out of the plumbing Australian plumbing industry. 25 years. The Reece model was an altogether different model. So they are unparalleled returns anywhere in the world. This is a question -- it's a long -- it's a good question, actually, but it's a complicated question. So it's a question about market segmentation and where high-margin markets are and what markets you can play in. And Reece were always about not the new build market but the renovation and replacement market, so the nondiscretionary spend. So you have a toilet. It's leaking. You just fix it. It's not about what the interest rates are doing. You've got a hot water system. It's the middle of winter and it won't work. You don't have a very long discussion. Let's get someone. Replace it. We move on. So it's not about the renovation -- it is not about new build or renovations. It's just replacement. And I make the point of talking about renovation and replacement because it's not alterations and additions. That implies discretionary spend. So Reece owned the white van small plumber market. That is a high -- it's a high service cost market, but if you got the volumes, it is a high-margin market. Once they had that business down pat, they then expanded into more of the commercial market, the larger residential projects. And I can remember when it happened. It was probably in about 2005, 2006. I remember when they did it. And because they had all their fixed costs and all their costs covered over with the small builders on the margin, they came over to the others and killed it. And that is -- they are unique. Tradelink was always much more focused on projects which go up and go down in lower margin. And that goes back 25 years. So it was a fundamental difference. Tradelink will try to come back and pursue the small to medium enterprise plumbers, too late and too high cost for them to them to go for it. So in the middle of all, 2 Bunnings turns up with -- again, with a different model, which is actually all about builders, not DIY at all, and they then took more of the market. So it's a market dynamic thing. It was a business that was doing it tough many years ago. And it was just hard. So I think the right call was made. We can do -- it was going to take us, I think, something like 5 to 8 years to turn it around. It was going to need tens and tens of millions of dollars of capital for new stores, fit-outs. I think we'd rather have the cash. It comes back to Coralie's point about where do you want to play, what's the business you want to have. I think it was not the business we wanted to have.

We have another question from Stephen Mayne. It's a lengthy question in several parts on the capital raise. The $700 million capital raising was a shocker in so many respects. The pricing was too cheap, the $282 million placement component too large and the underwriting fees for Jarden too rich. Why did you cap the [ overs ] component for your 34,000 retail shareholders at 100% of entitlement, which contributed to the 27% retail shortfall and saw big end of town underwriters arranged by Jarden pick up the $13 million in money shortfall retail shares? When you add in the retail dilution from the oversized institutional placement, you clearly owe us, retail shareholders, a $100 million-plus share purchase plan to offset this needless dilution. Will the Board undertake to give us a serious consideration before the next year's AGM?

Well, I understand the question. I think we've answered it in some -- in a number of presentations already. We did an exercise based on how we saw the markets, how we saw various risks in the market. That said, we needed $700 million. We did sufficiency tests. So we really pressure-tested whether we needed the money, the quantum, and $700 million was the number. The question then is how do you get $700 million in the door. It's a combination of institutional placement, and it's a combination of the entitlement offers to our shareholders. I think we can debate about ANREOs, accelerated nonrenounceable entitlement offers, or accelerated -- I forget. AREO -- too many acronyms. But the question is, do we believe as a Board we acted in the right interest of our shareholders and of the company? And my answer is correct -- my answer is yes. Everyone who wanted to participate could participate. We can debate endlessly about ANREOs, AREOs. I just don't think there's any point. We wanted the money in the door. We wanted it fast. And Jarden's delivered. And we can go around and around and around this one all day long. But I think we've answered it. I think we've given our position on why we've done what we've done, and I'd like to move on if that's possible.

There are no further questions relating to the presentation.

[ Brian Ward ], shareholder. Could you explain why you had such a hefty write-down of the Higgins asset? And secondly, what was wrong with the airport parking building considering that a building like a parking building is a fairly simple structure?

If I answer it in reverse order, the airport parking is with the Wellington International Airport, the parking building there, where there's a debate about whether there is sufficient or insufficient concrete cover over steel on the building. There's -- I guess the battle that's been forward was about is there a design fault or not and what then the fix is. Is it -- do you have to go and put -- I'm exaggerating, but do you have to go and put 1 inch or 2 inches of concrete over it? Or are there seals that you can put over that protect the steel or the concrete going forward? That's, in essence, what it's about. We believe that there are simple practical ways that, that can be protected. So the building has a long life. The concrete is durable. The steel isn't going to spoil and deteriorate. So we believe we've got a solution. The people involved in the airport believe they prefer another solution. We're basically sorting out what that solution is. But my view is there's probably a design issue there. In terms of -- sorry, what was the other part of the question? Higgins. Higgins. Sorry. Higgins, we're having some terrific debates here about Higgins as to what -- how -- what it should be and how it should operate. But I think the big thing with Higgins is they've expanded into other areas that I think are probably noncore to what they do and what they should do. And we have not performed in those areas. So the underlying performance of Higgins -- we bought the business, I think, in 2016. The performance, we're talking about impairments and carrying values. We've done any number of exercises on that business as to what it could be, how we can improve it. We just could never get it to justify the carrying value based on the purchase price of the business. So the performance was not there. Now one of Andrew's tasks is they're thinking about Higgins and how we operate that in the future. I think it's a good business, but I think the type of contracting business we were running there is probably the wrong business model. So we've adjusted the carrying value.

Okay. Now to the -- here we're going -- now to the business at hand. I'll now move on to the -- I want to move on to the formal business of the meeting, which is a vote on the resolutions outlined in the notice of meeting sent to all shareholders in September. All resolutions are ordinary resolutions. To be passed, they require the approval of a simple majority of the votes of those shareholders entitled to vote and who vote on the resolution. I advise at the beginning of the meeting that we will vote on the resolutions by way of a poll. Any undirected proxy votes given to the Chair of the meeting or any director will be voted in favor of the resolutions. Any directed proxies given by the shareholder will automatically be cast as directed. For eligible online attendees, voting on the resolutions is now open, and you can vote at any time until I declare the voting closed. For shareholders and proxies in attendance in the room, I'll invite you to place your completed and signed voting or proxy form in one of the ballot boxes, which will be passed around the room after all resolutions have been introduced to the meeting. If anyone is unsure how to complete the voting form, please go to the registration desk where someone will be able to help you. I will now turn to the resolutions. Turning to the first resolution. It's now my pleasure to move that Cathy Quinn be reelected as a director of the company. Cathy was appointed to the Board on the 1st of September 2018. She is considered by the Board to be an independent director, and her credentials are outlined in the explanatory notes to the notice of meeting. The Board unanimously -- it's a big word -- unanimously recommends that shareholders vote in favor of the reelection of Cathy Quinn. I now ask Cathy to speak about her reelection before we proceed to a discussion on the resolution.

Thank you, Peter. [Foreign Language] Good morning, everyone. I'd like to start by acknowledging the underwhelming performance of the business over the past few years. As a group, we have not met the expectations of shareholders for a variety of reasons. Responsibility for that ultimately sits with the Board and senior management. I appreciate that over the past 6 years while I have been on the Board, the turnaround we all wanted to achieve has not happened, and shareholders have had a poor experience. Undoubtedly, the company and the Board's ability to effect the desired turnaround has been significantly impacted by the long tail of legacy construction contracts entered into prior to my joining the Board: the fire at the International Convention Centre; COVID; the distraction and uncertainty of the Western Australia pipes matter; and in the last 12 months, a sharp downturn in the economy, particularly in New Zealand. While I was not directly involved in decisions relating to many of the legacy matters that have created shareholder dissatisfaction, as a current Board member, I take my share of accountability. Rather than make excuses and point the finger at others, my response has been to take those hard learned lessons and work incredibly hard to help reset this organization so that it can recover and meet the expectations of shareholders. I have continued to serve on the Audit and Risk Committee; taken over as Chair of the Safety, Health, Environment and Sustainability Committee; become the Chair of the Disclosure Committee; continued to serve on the Western Australia Pipes Committee; continued to serve on the Construction Major Bids Committee; attended the monthly project review meetings at the International Convention Centre; and led the Due Diligence Committee on the capital raising. There has also been some good progress: the investment in the new plant at Winstone Wallboards in Tauriko; the focus on health and safety to the point that Fletcher Building is market leading, and we are freely sharing those lessons across other businesses in New Zealand and Australia; refocusing the construction business to less risky projects; the completion of a number of legacy projects; a focus on seeing sustainability as an opportunity, including sourcing low emissions products such as EcoSure concrete and using waste to substitute coal at Golden Bay Cement; an improvement in the performance of a number of our businesses such as Laminex and Fletcher Insulation in Australia, which allows us to control our portfolio options; and improving our digital experience for customers and our ICT security posture while controlling our IT expenditure. In my view, sufficient accountability has been taken through Board and management changes on the historical issues. Fletcher Building now needs stability, including at Board level. Andrew needs support from the current Board, which includes fresh faces as well as those with history, to get on and deal urgently with the matters in front of us. He needs our support to take $180 million out of the business fast, to deliver an acceptable return to -- result to shareholders in the tough environment we're in, to manage the growth projects we have within the envelope we have and to deal with the litigation issues we face. I believe it is in shareholders' best interest to vote in favor of my reelection. You will retain someone who has deep knowledge of many of the issues, is clear eyed and forthright about the need to deliver to shareholders. I humbly ask for your support to serve for another term to support Andrew and my colleagues actually deliver the results you deserve. We can return Fletcher Building to be a company we should all be proud of and want to hold in our portfolio. Thank you.

Thanks, Cathy. I now invite discussion on the resolution. Are there any questions that shareholders would like to ask Cathy Quinn? While we wait for your questions, first in the room, we will address pre-submitted questions received ahead of the meeting.

The question is from [ Andrew Erickson ], shareholder. And the question is, why is Ms. Quinn, who oversaw numerous poor decisions and the less incompetent CEOs, still a director? In answering the question -- in answering Mr. [ Erickson's ] question, Ms. Quinn's institutional knowledge and skills are critical for the future success of the company in a number of areas currently affecting Fletcher Building. Further, there's been significant accountability to date, the refreshed Board with 4 recent departures and 2 important and meaningful new appointments is well functioning and very focused on the turnaround. The Board unanimously support Cathy's reelection and believe it would be distracting and unhelpful to the company to lose Cathy Quinn now. If you're in the room, I invite you to please raise your hand, and a microphone will be handed to you before you ask your question. Please state your name. Oliver?

Oliver Mander again from NZSA. It is a question for Cathy. It's just simply in terms -- and as you -- as you were talking, you were describing various committees and so on that you sat on. What -- should shareholders be worried by that workload, not just within Fletcher Building, but also then the work that you have outside of the company on other company Boards? How do you self-manage around that workload? Would you consider reducing the number of internal committees that you're sitting on within Fletcher Building?

Thanks, Oliver. Thanks for the question. I guess on times of challenge, shareholders expect directors to lean in, and that's exactly what I've done. I certainly look forward to the ability to lean back, but that isn't just now. We do need to resolve these many issues. Oliver, I've never had anyone complain about my work effort and ability for hard work. And I guess my way just keep saying is try to go for the odd walk and be supported by fantastic colleagues. The fact we've now got Andrew joining the Board as the CEO and Managing Director certainly does take the pressure off to some degree. But as you'd expect, shareholders do expect us to continue to work hard to resolve the issues in front of us, and I will play my part on that. But when I can reduce my workload at Fletcher Building for many -- most of those committees when I was asked to do those, we originally were told we would be paid for it. It hasn't been appropriate to be paid for those things. So I'm looking forward to the opportunity to do less when the opportunity arises.

Look, I don't think anyone's questioning your work ethic. The question of -- next question I've got really comes down to and indicate perhaps some of that in your answer. But what is your motivation for serving another 3 years on the Board?

Thanks, Oliver. I mean I do think I've got relevant skills and experience, particularly around all the legal issues we face. I joined Fletcher Building to be part of a turnaround team, and we haven't achieved that yet. So I want to finish the job that I joined the Board to achieve, which is turnaround Fletcher Building and to see it become the company that we should all be proud of. That job isn't finished. And so I'd like to do that. And I'm not a quitter.

I was at Eden Park in 2018 when you were elected along with Barbara and Doug McKay. And I walked out the door that day saying, well, we've got 3 people, all ex corporate types, no industry background. I wonder how this is going to go. We're sitting here today. We know how it went. Very poor. So to be honest, I'm really astonished that you're standing again. Isn't it time for Board renewal, which we talked about?

Thanks for the question. The answer is you always need a mix of skills and experience on the Board. So you've seen through the recent Board refresh, we brought on people with deep industry experience, which is incredibly helpful and very useful. But actually, you do need a range of skills. And the company does have a lot of litigation issues in front of it. And I do believe my legal skills and historical knowledge are relevant to that. So in my view, it's not in the best interest of shareholders not to support my reelection. But you have your opportunity to cast your vote.

If I may, I think it's relevant. Your question is, I think, very, very, very reasonable question. As I was trying to indicate earlier, we have tried to put on industry experience, whether it be construction, infrastructure, project-type experience, building products, broader manufacturing across both sides of the Tasman. And my background particularly is concrete -- cement actually, cement, concrete and quarries. So we are bringing those skills. But with the universe of kind of risks out there, whether it be West Australian litigation, class action from someone in West Australia, government, comm inquiries about Winstone Wallboards, just to name a few. I think we really do need someone with commercial legal [ knowledge ], but it also is across all the facts. So I think it's really important at this time that Cathy is around. She knows what we're trying to achieve. Is there anyone online?

One question relating to all the resolutions from Stephen Mayne. Did any of the 5 main proxy advisers recommend a vote against any of today's resolutions? If so, what reasons did they give? And will you disclose the proxy votes before the debate on each resolution so shareholders can ask questions about the reasons if there have been any protest votes?

No, we don't disclose proxy votes. So that's the end of that one. Any more questions or I'll move on to next resolution?

Okay. It's now my pleasure to move that Tony Dragicevich be elected as a director of the company. Tony was appointed to the Board on the 1st of August 2024. He is a member of the Safety, Health, Environment and Sustainability Committee. The Board has agreed that he is an independent director. His credentials are outlined in the explanatory notes to the notice of meeting. And the Board unanimously recommends that shareholders vote in favor of his election. As indicated earlier, due to a prior long-standing commitment, Tony is unable to join us in person today. Instead, we have a prerecorded address in support of his election.

Good morning, and thank you for your time today. Firstly, I'd like to apologize for not being able to attend the meeting in person. I had a long-standing prior commitment and unfortunately couldn't be changed. However, I want to assure you that this is not a reflection of my commitment to Fletcher Building. I've recorded this video so that I could share my credentials and thoughts with you and look forward to engaging in person at future opportunities. As a Kiwi born in Auckland, Fletcher Building holds a special place for me personally, and I'm excited by the opportunity to contribute to its future success. Over the past 30 years, I've had the privilege of leading a number of major building products and distribution businesses across both New Zealand and Australia. These roles include my current role as Managing Director and CEO at Capral, Australia's largest aluminum extrusion manufacturing and distribution business, as well as previous CEO leadership roles at Wattyl paint, GWA/Caroma and Carter Holt Harvey. Each of these companies is a significant player in the sector, and the experience gained in managing them provides me with deep insight into both the operational and strategic challenges that Fletcher Building faces. I've had first-hand experience navigating tough market conditions like we are in now, including fluctuating housing construction markets. I understand the need for strategic focus on cost management and capital prudency. While the current market conditions are tough, the group's recent performance undeniably make the situation more challenging. I'm confident that by using my experience to make prudent, well-considered decisions, I can help position Fletcher Building to take advantage of the cyclical upturn when it inevitably comes. Additionally, my current CEO role gives me direct insight into the challenges that management teams are facing on a day-to-day basis, and I will bring this understanding to my role as an independent director. In just a couple of months on the Board, I visited 6 Fletcher businesses and have been highly impressed with the strong safety culture. In fact, Fletcher's safety focus is among the best I have seen. As a member of the Safety, Health, Environment and Sustainability Committee, I'll continue this focus to ensure our people have a safe place to work. I'm based in Sydney, which I see as a positive. Fletcher Building is a trans-Tasman business with a sizable proportion of its operation and shareholders in Australia. Being based in Australia will allow me to stay connected with the business and investors in this key market while maintaining a deep understanding of Fletcher Building's legacy and its importance to New Zealand. My aim is to leverage my experience to help the company maintain the status as an iconic New Zealand business, one that is respected by investors and shareholders, valued by its employees and trusted by its customers. I've always run businesses with an ownership mindset. And although this is a nonexecutive role, I will approach it in the same manner. I'm confident that with a strong, engaged team and a clear focus on delivering value, Fletcher Building can grow its market presence and profitability. I believe in the overriding objective of driving shareholder value, and I'm committed to working closely with management and my fellow directors to help make this a reality. Thank you for your time today. I look forward to making a positive contribution to Fletcher Building's future.

I now invite discussion on the resolution. Given Tony Dragicevich is not with us today, we will take any specific questions shareholders have for him that we are not able to address without him on notice and provide a written response. If you're in the room, please raise your hand, and you'll be provided a microphone. Please state your name before you ask your question. Thank you. Anyone online?

No questions online.

Thank you. There -- so there appear to be -- it's now my pleasure to move that Andrew Reding be elected as a director of the company. Andrew was appointed Board on the 22nd of August 2024. The Board has agreed that he is an executive director. His credentials are outlined on the explanatory notes to the notice of meeting. The Board unanimously recommends that shareholders vote in favor of his election. I now ask Andrew to address the meeting in support of his election.

[Foreign Language] I'm delighted to have the opportunity to speak to you again today, this time in my capacity as a member of the refreshed Fletcher Building Board. Many people have asked me why I've taken on the role of both CEO and Managing Director, and that is a very fair question, especially since this dual role is more common in Australia than here in New Zealand. The answer is simple. I requested it because I believe it's most practical and effective way to ensure there is no gap between management and the Board. Going forward, it's critical that everyone, the Board, management and our people, are aligned and working towards the same goals to ensure we deliver the value Fletcher Building is capable of achieving. Fletcher Building, our people, customers and you, our shareholders, deserve unified leadership. And that brings me to addressing the elephant in the room. We cannot hide from the fact that Fletcher Building has underperformed for our shareholders. I recognize there have been several unexpected challenges that have impacted the business and our share price. And I don't want to dwell on the legacy issues or the Western Australian pipes again, especially as Barbara outlined earlier, I do believe these issues have been thoroughly worked through and are going to be behind us soon. And despite the economic headwinds we know we have to keep navigating, I'm confident about the future of Fletcher Building and its ability to be a business we can take a pride in. As I previously mentioned, before officially stepping into the CEO role, I took the opportunity to get out in the business and see what is happening on the shop floor across Fletcher's various businesses. What I saw on these various visits gives me a lot of confidence for the future of Fletcher Building. Our operational businesses are running well. They have strong capable leadership, and importantly, they are empowered to make decisions to deliver growth and drive good outcomes for customers. I was also extremely impressed with the phenomenal progress the business has made in fostering a genuine culture of safety. This shows me that when our teams are aligned and believe in a goal, they can achieve meaningful change. As you know, this is my second time returning to Fletcher Building. And some people have asked me why I chose to come back, and I want to share this with you, too. At its core, Fletcher Building is a company I'm passionate about, and I want to see it get back on track and succeed. It has been part of the fabric of New Zealand for well over 100 years. We've delivered infrastructure, housing, roads, tunnels and airports, and our products are probably found in every single home, and that is a lot to proud of. However, what really resonated with me when I first joined Fletcher Building, what is the first company I worked for that openly talked about culture and values and genuinely trying to live by them. That ethos remains today, which is important to me because I believe a company with strong values has a soul, which instills pride in its people and motivates them to do their best, which is how I know our teams are as passionate as I am to see Fletchers get back on track. To sum up, I want to assure you that creating long-term shareholder value will be my focus. And I plan to achieve this by, firstly, ensuring we complete and move past our legacy projects while learning from them; secondly, rightsizing our portfolio to set us up for sustained success; and thirdly, building a company that our people, our customers, the communities we live in and shareholders can be proud of. As a humble veteran of the industry, you can be assured I bring significant experience to the Board. And this, coupled with the insights and perspective I bring to the governance table, makes me confident I can lead Fletcher Building to reach its full potential. I'm looking forward to doing this alongside an extremely hard-working group of directors. And personally, I'm excited for the future of Fletcher Building, and thank you for your consideration.

Thanks, Andrew. Ladies and gentlemen, I now invite discussion on the resolution. Are there any questions that shareholders would like to ask Andrew Reding in relation to his election? If you are in the room, I invite you to please raise your hand, and a microphone will be handed to you. Before you ask your name, please state your -- before you ask a question, please state your name. Oliver? Is there a theme emerging?

Sorry about that. Oliver Mander, NZSA. It is a question for Andrew. And look, I noted your comments upfront around both the Board role and the CEO role in terms of enabling that connection between the underlying business and the Board. And certainly, at a time of transformation, there is a case for that, something that we certainly allow for at NZSA's own policies. My question is at what point will it become appropriate to separate those roles again in the interest of holding management to account, holding the executive to account and separating that from governance? Will there come a point in time in which that model will change over the next 3 to 5 years?

It's a good question. My response would be that if it becomes apparent that it is better for me to become CEO and not a director, then we will do that. But it's not for the foreseeable future as we have quite a lot of transformation we need to get through.

Any other questions from the floor? Yes, sir. Gentleman here.

[ Tim Hunter ], shareholder. Just a question for Andrew. You talked about learning from the mistakes in the past. What have you learned?

Don't do big construction projects that don't work. No. So it's interesting. Within Fletcher, there's actually been a set of a risk assessment group that will do audits around the various business units and so on. And what they look at is what risks that may be there that haven't been identified or addressed. So I think the learnings are actually quite deeply embedded in the organization. The controls we have over sizable bids, what the terms they're allowed to take them on, what conditions we're prepared to accept are -- we call them the golden rules. So there have been a lot of work done on that. So I think learnings are being done, and we will continue to make sure that we do understand what mistakes we've made and we don't make them again.

Christian, are there any questions online?

We have a follow-up question from Stephen Mayne from his earlier question, which reads as follows. I've asked questions at 860 AGMs since 1998, and that was the worst answer I had heard to a standard question inquiring about proxy adviser recommendations and proxy vote disclosure. Best practice is now to disclose the proxy position to the ASX, NZX, along with the formal addresses to offer more timely disclosure in the market. The likes of Origin Energy, NAB, Car Group, Viva Energy, Webjet, Xero, Myer, Brambles and JB Hi-Fi all do this. Will you adopt this practice at next year's AGM? And will you disclose the proxy votes on Andrew Reding's election now so we can have an informed debate about where investor sentiment is sitting at today's AGM. You've got the proxy voting data, stop hiding it from shareholders.

I appreciate Stephen's question. And the answer is no, if I may, ladies and gentlemen. So no further questions. Enough of the theater. We now move on to the fourth resolution. I now move that the Directors be authorized to fix the fees and expenses of the Auditor. EY is the company's Auditor and is automatically reappointed under the Companies Act 1993. This resolution authorizes the Board to fix the fees and expenses of the auditor. EY audit partners are present at the meeting should shareholders have any questions on -- of them concerning this resolution. I now invite discussion on the resolution. Are there any questions in the room? Are there any questions online?

There are no questions online.

Thank you, Christian. We will now move to the fifth resolution that the company's remuneration report for the year ended 30th of June 2024 as set out in the 2024 annual report be adopted. Before the vote, I'd like to provide some further details around the remuneration principles and framework. We have decided this year to present our remuneration report for nonbinding shareholder vote. This is to provide shareholders with an opportunity to provide us with their feedback in relation to our remuneration policies and practices. By way of background, the Board believes that it is critical to align executive remuneration outcomes to driving performance and creating value for shareholders. Our executive remuneration framework is, therefore, focused on attracting, retaining the best people, building a strong culture of ownership and accountability within our executive team and driving them to deliver sustainable performance and growth. Our remuneration framework then takes these core principles and expresses them through the 3 main remuneration components, which are fixed remuneration, short-term incentives and long-term incentives. The fixed remuneration component is key to attracting and retaining high-caliber employees. We are in a highly competitive talent market, and we need to compete. Our incentive schemes are designed to focus on both in-year performance through the short-term incentive component and the long-term sustainable earnings through the long-term incentive component. For each of these components, we balance financial and nonfinancial goals. Having nonfinancial goals means we can set targets for our executives to continue to make progress on the most critical areas of the long-term health of the company. For the LTI component, we have looked to adopt performance measures that drive alignment with our shareholders. The shareholder return measure directly aligns with shareholders' financial outcomes and the return on funds measure drives executives to focus on profitable use of capital over the longer term, which will flow through to shareholder value. We have seen this alignment play out in practice in response to the unsatisfactory FY -- financial year '24 performance. There was no payout in respect of the LTI for FY '24 and the short-term incentive payments would have been below the potential maximums. In any event, the Board applied its discretion to determine that no STI payments will be made to executives in respect of financial year '24, reflecting the Board's disappointment with the outcomes. You can see in the table below how this remuneration framework operates in practice by looking at the last 6 years for the CEO. Financial year '20 was when the company was in the lockdown and no bonuses were paid. financial years '21 and '22 were very profitable years for the company, so the short-term incentives were paid. Financial year '23 was a softer market, so earnings were down and likewise bonuses. And given the poor performance of the share price over time, no long-term incentives have been paid over this period. This pattern is what you would expect to see with the incentives linked -- tightly linked to company performance. Turning to the new group CEO remuneration. The Board wanted the group CEO's remuneration package to have a stronger emphasis on long term and be more tightly tied to share price performance. We have, therefore, taken the opportunity to reset the remuneration package as part of the appointment of the new group CEO. As shown by the chart, the size of the overall package value is reduced. More of the package is by way of performance incentive rather than fixed remuneration. And if the CEO performs strongly, over half the package would be paid in equity, which would vest over time. This creates tight alignment between the CEO and the shareholders. With that background, I move Resolution 5 as set out in the Notice of the Meeting that the financial year '24 remuneration report is adopted. The Board unanimously recommends that shareholders vote in favor of this resolution. I now invite discussions on the resolution. Are there any questions that shareholders would like to ask about the remuneration report? If you're in the room, I invite you to please raise your hand and a microphone will be handed to you. Before you ask your question, again, please state your name.

Peter, Eden again. This relates to what I was talking about ROFE before because obviously, if you have a whole of significant items and so on and you're calculating your remuneration using ROFE as a metric, surely significant items and so should play a part. What do you think?

I agree. No, I think...

So my humble suggestion as a man from [ AMRO ] is that perhaps you could add in significant items and discontinued operations when you calculate ROFE, particularly for this resolution.

I take it on board.

And my second question relates to purpose. And I quote purpose of the remuneration framework is improving the world around us through smart thinking, simply delivered. I'm just wondering if you have any color on that. I think the purpose would be making a profit.

I think that's a reasonable point. I think what we're trying to capture is that Fletcher Building by being profitable, can actually improve the build environment, the markets in which we operate. And I just -- by way of just a brief example, I think that's really, really quite valuable. We've -- you've seen about our performance on various environmental targets and the fact that we've been able to reduce greenhouse gas production significantly. I think one of the great opportunities for the company is recycling and the circular economy through some of the businesses we've got, which I think are unique competitive positions. I think of cement, I think of quarries, I think of concrete. So I think there's -- the higher purpose is, we've got to be smart. We've got to be innovative. We've got to improve the world we operate in. But I absolutely take your point. We're going to make a quid. Thanks Peter.

We have one question online from Stephen Mayne. Here we go. I'm writing this from Australia, where remuneration report voting is compulsory under the law. It is staggering that successive New Zealand governments have failed to legislate mandatory remuneration reporting for NZX-listed companies and that most of your big cap companies refuse to put it up voluntarily. Well done for putting the remuneration report up for vote today. Did you have to do it? Why did you do it? And will you promise to keep doing it every year into the future whilst also lobbying the Luxon government to get with the program and legislate so that New Zealand will stop being regarded as a governance backwater by international investors?

How to win friends and influence people. Look, as we said, it is a nonbinding vote. But I think it is a really good barometer to get feedback, to get insights we talk about, targets and the like to get a sense of are our shareholders comfortable where we're trying to go with remuneration. So I hear what Stephen is saying, I'm not going down the political route. I think there is value in doing what we do, and we will continue to do it.

No further questions online. Oliver.

Sorry, Oliver.

Thank you, Peter. So look at the slide previously that showed the overall reduction in this total level of remuneration, that's noted and appreciated, certainly in terms of comparing the pay scales of the current CEO compared to the previous CEO. But one thing that does mask is the total incentives have actually increased as a percentage of the base salary to around 300% as opposed to the previous CEO who received about, I think, 250%, 260%. Both numbers are large in the New Zealand context. And I know notwithstanding Stephen Mayne's comments around New Zealand being governance backwater, I would argue that, in fact, there are some signs in Australia that, that is becoming a governance backwater. So we don't want really to see incentives that are paid at the level of what happens in Australia. Certainly, remuneration reporting has not stopped the excess that has occurred over there. What -- how do you view that total percentage level is increased -- total percentage of incentive in the context -- in the New Zealand context?

Yes, fair question. Look, we take advice. So we go out, we look at comparable roles. Within New Zealand and within Australia, we look at relative positioning, the midpoints, lower quartiles, upper quartiles, and we take advice. But I think, Oliver, I guess, what I think is really important, the difference between Andrew's arrangements and prior arrangements were that the -- it is weighted way, way more to long-term performance, okay? And share -- actually owning shares Andrew is going to -- will shoot the lights out. I've got no doubts, and that will benefit the company, and he'll get shares. I'm actually totally relaxed with that. I think the key point is just turning up the element of it is significantly reduced. And it's in the interest of Andrew to perform and it's the interest of the shareholders. And I'm comfortable with that alignment. But the numbers we arrived at, we took advice. We looked at all the numbers out there, both onshore here. So we didn't kind of arrive at these numbers or the structure [ in a vacuum ].

So when you look at the New Zealand comparators for Fletcher Building, it's very difficult to come up with the number comprising 300% incentives.

Well, as I said, I was comfortable with the advice we got I would say. Anyone online?

Just a question in relation to this remuneration report. I think it's a good thing that shareholders can get a chance to vote on this. I appreciate it's nonbinding, but I was wondering if you could give us an indication of how the Board is likely to respond depending on how the vote turns out. Would it be some sort of formal answer to shareholders about their concerns where will you be consulting with major shareholders about potential changes to the remuneration structure? Or will you just not say anything about it?

Well, I think, look, we'll see how the votes go. But look, we're having -- I think we're having a pretty good conversation here. I think the structure, we believe we've got plenty of advice, and it's good feedback. We can argue about the LTI component and things that is too high. But this is materially different to what it was, and this is materially aligned with doing a good job to grow the shareholders' wealth. So I think we are taking on board feedback. And I hear all of it on the NZSA's point. So we get it. But I believe and my colleagues, we believe this is an appropriate package for Andrew to drive the results our shareholders deserve. So -- and it will go to a vote, and we'll have visibility on how it's received. Sorry, I must have a blind spot in my eye.

Jim Taylor, shareholder. Is this just for the Chief Executive? Or getting down to other levels?

It is just for the Chief Executive.

is there an intention to have similar for next level?

The key executives -- in Australia, it's a broader vote. In New Zealand, we're not actually in a position to expose or disclose employees' salaries. So it's a consent. There's a consent given to disclose someone's salary. We have not asked other executives to disclose their payments. So we think the headline number is the CEOs and his targets kind of flow down back through the organization. So it is only Andrew. Okay. No more questions. Ladies and gentlemen, I think we're chugging along here, but we're coming to the back end of the meeting. I now invite you to cast your votes on the 5 resolutions as displayed on the screen. Please now cast your votes. The voting on the 5 resolutions will close shortly. Please ensure that you've cast your votes on all resolutions, and we will take a few moments now to allow you time to finalize those votes. For those of you in the room, please cast your completed voting and proxy form in the ballot boxes. So we'll just have a little break here while that formality is attended today. [Voting]

Just a few more moments while the boxes go around. Everyone voted. I think everyone's had access to the boxes the ladies have taken around. So voting on the resolutions is now closed. You'll now see on the screen the results of the postal voting received ahead of the meeting for the resolutions. These postal votes do not include discretionary proxies held, and these will be voted on at the meeting. The company's Auditor, EY, will act as a scrutineer for the polls. The final results of the voting on the resolutions will be advised to the NZX and the ASX this afternoon. We now turn to the last part of the meeting where shareholders have the opportunity to raise any final questions. I would now like to give any shareholders both present here and online, the opportunity to ask questions. Again, can I ask shareholders to avoid taking us back on matters that have been fully traversed already. We'll now answer any questions starting with the room. Coralie, if you have, you can.

Thank you. Mr. Crowley, are you domiciled in Australia?

Yes, I live in Brisbane.

Well, I think you'd be a great new Chair as from today.

You're very kind, Coralie. Any more questions? We have anything online?

There are no questions online.

Well, I think -- thank you very much for your questions. And, Coralie, thank you, you've been very kind of the checks in the mail. But ladies and gentlemen, that brings us to the end of the business for the company's 2024 Annual Shareholders' Meeting. Before we formally close the meeting, I want to reiterate the Board's confidence in the future of Fletcher Building. There is no doubt that we are navigating through turbulent times that have tested our resilience. But we are doing so with determination. We remain connected with our purpose of improving the world around us with smart thinking, simply delivered. And we're strong and profitable. And we are strongly focused on our people, our customers' safety and sustainability with a long-term pipeline of investments that will deliver when the market turns. In doing so, we are not just looking to weather the storm, but to emerge from it stronger and more capable of achieving our goals. As we look to the future, we remain optimistic about our long-term prospects. The foundation we have built is solid, and we are confident that the business is well positioned to deliver sustainable growth and create value for all stakeholders. Thank you again for your support, and I now declare the meeting closed. Thank you for your attendance and participation today. We'd be pleased if you'd like to join us for some light refreshments, which are served down the back end of the room. Thank you very much.