Fletcher Building Limited

Thank you for standing by and welcome to the Fletcher Building FY26 four-year results briefing. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. We ask that you please limit yourself to two questions. I would now like to hand the conference over to Mr. Andrew Redding, Managing Director and Group Chief Executive Officer. Please go ahead.

Good morning, and welcome to the presentation of our full year results for the 12 months ended 13th of June, 2026. Setting the agenda for today, I'll cover off the 2026 financial year and the progress we've made against our strategy. I'll then talk to the divisions and our stakeholders. Will Wright, our group CFO, will then take you through our financial results in more detail. And finally, I'll return for our outlook, after which we will take questions. Before we get into the detail, let me give you a quick overview of the year as I see it. The end of financial year 26 signifies the end of the first stage of our turnaround. The first stage was the initial hard work to turn around this group, and we've now completed that. We've progressed with the portfolio simplification. We've made Roic a discipline in our business. We've put the focus on performance, and we've taken out a major first-transport cost. We have moved quickly and decisively, and we now have a fitter, leaner organization. The next stage is going to be about finding and proving up where growth comes from inside the core and continuing to pursue portfolio simplification opportunities. Turning to slide five, there are five points I want to make sure I get across today. We have delivered a steady performance in a tough macro environment. We have executed well and progressed the strategy consistent with what we set out at our investor day last June. We've continued to strengthen the balance sheet and net debt is now inside our target range. Group Rowit has improved, although there is still more work to do on this. And operating cash flows were strong, albeit with some offsetting the legacy project costs. Moving to slide six. There is no getting away from the fact this has been a challenging economic environment. Back at the start of this calendar year, we saw signs of the start of a recovery. but events in the Middle East have since caused a drop in economic momentum for both New Zealand and Australia. In the context of this backdrop, we've developed a respectable performance. Will is going to talk to the financials later, so I'll just focus on three measures for now. Firstly, net earnings were $228 million against a loss of $419 million last year. This is our first positive earnings result since financial year 23, the lack of impairments being the main driver. Secondly, net debt was $637 million, down from $999 million, which puts us inside the $400 to $900 million range we set at the investor day. That came mostly from improved operating cash flows, property sales, and most importantly, divestments. Thirdly, ROIC, our core strategic measure, was 5.3% at the group level, 4.7% if you exclude land sales. We're just starting to head in that direction, but there is more to be done, and we have very clear plans to improve ROIC at each of our business units. Slide 7. In yesterday, last June, we set out what we were going to do, and I won't go through every item on the page. The portfolio work is well in train, with the construction divestment completing sooner than our own expectations. The cost and structure work is well advanced. NZICC is handed over, and the roughly 15 remaining legacy projects are now provisioned. Delivering an asset to the NJICC's quality, despite the setbacks and challenges along the way, while also getting our arms around the remaining retained legacy construction projects, has been a substantial undertaking. I am proud of what the team has achieved. No single item on this list has got this here. It's the aggregate of all of them. Clearly, the major initiative of the year was construction, and I don't think anyone should underestimate what coming out of that does for our ability to perform as a group. As well as the financial drain, construction was costing the whole organization a lot in time and attention. Monitoring its risk profile, managing their legacy projects, and negotiating settlements was to give significant distractions from our core divisions. I know you'll have questions on residential and development, and what I can say is that we're working through the options to get the best outcome for shareholders. One more thing from the future column. It says further decentralized corporate functions. There is still more to do, but we're getting closer to an optimal balance. The reality is that some centralized corporate functions do carry real economies of scale, but I can assure you we are still running the ruler over everything. With respect to dividends, We will look to reset the dividend policy once we begin generating positive, sustainable free cash flow and balance sheet targets are met. Moving to slide eight with financial year 26 operational highlights. It's been a busy year with many highlights, so I'm just going to pick out three. The first is Cavendish Drive. Our new frame and truss plant in Auckland is now operational and it gives us technology no one else has in the New Zealand market. We had been selling frame and truss below cost, so every extra unit we sold made the problem worse. The Cavendish Drive plant changes that. The second is the Urban Quarry, our network of metro collection sites for dealing with demolition waste. We opened a new site at Tamahiri during the year, with tonnage up 28% and clean fill up 35%. This is the start of a real position in the circular economy, and it sprinkles off the capabilities that Golden Basement already has in firing alternative fuels. Third is Lawinex Australia, where disciplined structural cost-doubt and site rationalisation have improved earnings quality and positioned the business to margin and rowing uplift. Slide 10 – Divisional Performance Given the challenging macro environment, this was a robust performance by our manufacturing divisions. Whilst these divisions perform well, the amount of red arrows highlight that more work needs to be done across the wider portfolio, especially on returns. I'll be covering the divisions individually over the next few slides. Moving to slide 11. In our Light Building Products division, earnings grew 22%. Additions and alterations volume and activity in the rural sector offset weaker residential construction activity in the North Island, while the South Island and Australia performed relatively well. The wallboards grew volumes 4% on strong South Island demand, again delivering double-digit returns. While we generally had continued volume recovery across multiple businesses in the second half of the year, I wanted to call out wider part-time volumes. Please refer to the chart on the right and the line in light green. This is an example of a business that's benefited from our wider portfolio leverage. Placemakers has been able to take in a greater volume of product, which illustrates the type of synergies we can create internally and to our critical map in the markets in which we operate. Our insulation distances have performed well, with flexural insulation in Australia reaching a double-digit ROIC. Slide 12, heavy building materials. Heavy building materials also experienced earning growth of 8% versus the prior year. Winston Aggregates had a material improvement in the second half, generating a double-digit ROIC, driven by increased project activity and market share growth at the urban quarry, which I mentioned before. first continued to concentrate on long-term customer relationships. Lower input energy costs improved earnings, while a 12-month volume average, shown in a solid grey line, grew in the last quarter. The in-quarter growth on a long-trailing average basis was comparable to the wider reported market stats by Stats Museum. However, we know that the concrete tiling market, which we take a large share in Auckland, has seen delays. Moving to slide 13 on distribution. Distribution performance improved materially in the second half of the year, returning to profitability with place-native regaining lost share. In the first half of the year, we spoke about needing to improve our operational efficiency and capability in our frame and truss operations. And we now have it with our new operation at Cavendish Drive. The new plant will help serve the Auckland market, possessing technology uniquely available to such a building in New Zealand. With a list in frame and truss volumes, it is estimated that every dollar of frame and truss sales will be converted on average into $4.20 of higher margin balance of house sales. Going forward, the structural cost of the division will benefit from both labour productivity improvement for the new plant, as well as a flatter organisational structure. A further lever for growth is our regional joint venture branch model, which we re-established this year, commencing with four branches in Southland. Slide 14, Resi and Development. Turning our attention to the Development Division, the market in Auckland remains subdued, with elevated inventories and pricing pressures, while Canterbury remained resilient, which is all in line with what we're seeing with the rest of the portfolios. Development Mix transitioned during the year, influencing volume and margin. I will note there were no new land commitments entered into during the year, and all land payments related to prior commitments. Next, let me talk about our stakeholders. Our success depends on our people, our customers, our communities, and our shareholders. Moving to slide 16. Before discussing anything else, I want to acknowledge the tragic loss of Max, a team member who passed away following a crane incident in Vanuatu last July. Although our TRIPRA of 3.7 is very credible, the loss of Max is totally unacceptable. and reinforcing the scale of commitment to safety required across the entire organization. Reviewing all 339 of our locations across Australia and New Zealand as part of our ongoing focus on improving our safety performance and moving forwards, we're conducting a further safety system review and refreshing our protect framework for leaders in the business. Slide 17. No doubt the most important part of our organization is our people. You cannot operate a decentralized structure without a capable leadership team and general manager cohort. We have spent a lot of time and focus on our leaders and their ENPS score is a world-leading 59. I also wanted to mention the secret weapon that is our Employee Education Fund, which, due to its external funding, enables us to invest in training and performance of our colleagues, independent of the organisation's financial performance. And thirdly, I want to acknowledge just how much positive change I've seen coming back to the organisation after my years away. We are now more diverse than ever with active support for pride, reconciliation in Australia and women making up around 24% of all leadership roles in the company. Slide 18. Our people also reflect the communities we operate in. We have a role to play in both New Zealand and Australian societies and we try to do our bit to make a positive impact. On the page you will see just a small example of the good work our team is doing across our many locations. From supporting children living with critical illnesses, to helping sports clubs raise roofs, to providing support to communities experiencing food insecurity. Slide 19, our customers. On top of our community work, we are proud of the relationships we forge with our customers and the products we bring to help build the future in New Zealand and Australia. Again, this is just a small example of our latest projects spanning a huge range of work, from pouring concrete for renewable wind farms to laying down the building blocks critical to water infrastructure. Moving to slide 20. continues to be committed to our environmental targets, it's just good business, and 76% of our revenue comes from sustainably certified products. Golden Bay Cement is among the top quartile of low-carbon cement producers globally and received the Carbon Reduction Award from the Concrete New Zealand Conference Awards in 2025. As previously mentioned, other initiatives such as the Urban Quarry are great examples of our circular economy ambitions. I will now pass on to Will Wright, who will cover our financial performance.

Thank you, Andrew, and good morning, everyone. At a high level, FY26 was a year of meaningful progress for Fletcher Building. Market conditions across New Zealand and Australia remained challenging, but the group delivered a stable financial result, materially improved cash generation, and continued to simplify the portfolio. Turning to slide 22, the income statement. Revenue from continuing operations increased 7.3% to just under $6 billion, reflecting improved volumes across the core manufacturing and distribution divisions. EBIT before significant items increased by $85 million to $414 million, with the core manufacturing and distribution divisions contributing $46 million of earnings improvement year-on-year. Excluding pre-announced property sales, EBIT for the year was $362 million, an 11% improvement on FY25. Pleasingly, all continuing operations businesses were profitable on an EBIT basis in the second half. 13 of our 19 core business units improved ROIC compared with FY25 and Winstone Warboards, Fletcher Insulation, Winstone Aggregates and Colourcoat all achieved double digit ROIC. At a group level, however, returns remain below acceptable levels. Earnings per share were positive at 21.2 cents, the first positive ETS result since FY23. Now turning to slide 23, discontinued operations. These results primarily reflect the construction division, reinforcing and wire, and vivid living, all of which have been presented separately to provide a clearer view of the continuing group. The most significant event was the sale of the construction business which completed on the 29th of May. The digital legacy vertical construction liabilities remain within the dist's continued operations as we complete the wind down. The reinforcing and wire transaction is expected to complete within the first quarter of FY27 and the Vivid Living divestment process continues. Overall, these actions simplify Fletcher Building and improve the quality of future earnings and cash flows. Turning to slide 24, total group significant items were $40 million. These include IFLEX Western Australian pipe legal costs, the previously announced Cheltenham and Monkland property exits, silicosis-related claims, Calpo OSB transition costs, and the remaining Winston-Wallboards property rationalisation costs. Corporate significant items included divestment costs and residual surplus SAP licences. These costs are largely associated with legacy matters, portfolio actions or investments required to position the business for future performance. In FY27 it is proposed that the group moves towards an IFRS18 compliant P&L and therefore will no longer have significant items as a category of expense. Slide 25 shows the primary drivers of year-on-year movement in EBIT. Improved market volumes contributed $75 million and pricing added a further $13 million. These benefits reflect improved ANA volumes in our core and market share gains in select categories as well as continued commercial discipline. The gains were partially offset by lower residential earnings and the net overhead cost inflation. Land sales contributed an additional $49 million year-on-year, reflecting active management of the property portfolio and our focus on releasing capital where appropriate. Turning now to slide 26, the balance sheet. Investment capital reduced to $5.5 billion from $5.8 billion a year ago. This reflects continued portfolio simplification, lower leased assets and liabilities, and disciplined capital deployment. Inventory reduced by approximately $75 million and debtors were also lower, reflecting a strong focus on working capital management across the business. Residential and Development Investment invested capital increased as we settled previously committed land purchases and joint venture profit share arrangements. This was largely offset by lower build and land stock on hand. Previously contracted land settlement payments were $236 million in FY26. Going forward, settlements are expected to be $110 million in FY27, of which $75 million will be in the first half and $37 million in FY28. Turning to slide 27, cash flows. Net cash from operating activity increased to $715 million, up from $214 million in the prior year. This improvement reflected stronger earnings across the core manufacturing and distribution divisions increased proceeds from surplus land sales and materially lower cash outflows associated with legacy projects. Normalised operating cash flows were $707 million. This excludes $64 million of inflows from discontinued operations and $56 million of outflows relating to legacy matters. Funding costs were lower year on year, and net debt was reduced from $999 million to $637 million. We're converting earnings into cash more effectively, and the portfolio actions taken in FY26 have materially improved financial flexibility. Moving to slide 28 in central costs, reducing central costs has been a major focus over the last 18 months. Technology costs reduced by 20% on a continuing basis, driven by more efficient use of licenses, lower project spend, and the simplification of the technology operating model. Corporate costs before recharges reduced by 21% as we simplify the way we run the business and push greater accountability into the divisions. The objective is not simply to take cost out, but to make Fletcher Building faster, more accountable and simpler to manage. Moving to capital expenditure on slide 29. Capital expenditure came in below guidance at $288 million in FY26. Excluding OSB and divested operations, capital expenditure was $138 million. Investment in quarry consenting and stripping was $24 million. This was lower than previously indicated due to the timing of quarry land settlements. Looking forward to FY27, capital expenditure is expected to step down materially to approximately $170 million, including around $40 million for OSB, plus around $30 million of stripping and quarry land acquisitions. This reflects a shift towards a more disciplined, cash-focused business. Turning to funding and liquidity, we've made substantial progress simplifying the group's capital structure and improving financial flexibility. Whilst 28 maturities remain elevated, this reflects the transitional nature of the capital structure We're currently finalising a refinance and the post-refinance weighted average maturity will increase from 1.6 years to 2.6 years. Finally, turning to the net debt bridge. Net debt now sits in the middle of the target range at $637 million. Inflow from investments of construction division and property sales were partially offset by capital expenditure, lease payments, funding costs and working capital investment in Revan development. Importantly, the reduction in net debt was achieved while completing major capital projects. As these become operational and CapEx reduces, we expect stronger fee-free cash flows over time. In summary, FY26 delivered improved earnings stronger operating cash flow and lower net debt. We are not yet producing adequate returns, but the group is now in a stronger position with lower risk, better financial flexibility and clearer accountability for capital allocation. I'll now hand back to Andrew to discuss the outlook and priorities for 2017. Thank you.