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Company announcement raises doubts

Paul Keane
Boardroom

There were two announcements this past week that are worthy of contemplating. Both Fletcher Building and ANZ chairs made announcements relative to their respective results.

In respect of Fletchers, the chairman gave a heart rendering speech to shareholders apologising for its result and declaring the negative result would never happen again and blamed the result on mismanagement. He also announced a Directors fee cut of 20%. Really!!

I raised this subject a few weeks ago, but I have real difficulty in understanding the reason how the board of a major company can excuse themselves from a dramatic decline in profit whilst laying the blame for the result at the foot of its management whilst the board continue to remain in place. Two projects effectively caused the result. These were I understand the Convention Centre in Auckland and the Justice Precinct in Christchurch. Both were worth millions of dollars in terms of the respective contract values and as a result profit is derived.

"Make no mistake; the achievement of obtaining both contracts would have been applauded in the boardroom of Fletchers with probably a bottle of champagne or two."

Senior management would not have entered into the two contracts without a sign off from the board, the contracts were simply too large to be ignored. Consequently there would have been a joint sharing of the accolades internally. When the contracts turned sour, it seems the only people to suffer were the staff who were on the front line. It’s a bit like the troops taking responsibility for losing a war when the generals make the decisions for sending them into a negative battle.

"Construction contracts are a risky business particularly when you are forecasting on a future result and not knowing what the economics for the future are likely to be."

Conversely, there was a great deal of back slapping from the board of ANZ when they posted a record result. It was all put down to how “good we are” but no recognition of the “troops” at the front line who contributed to the result. Nor for that matter the energies and the risks undertaken by clients who borrowed money and risked financial outcomes.

These were two very contrasting results. It is inevitable both company boards will have different agendas over the coming months. Whilst both will contemplate their outcomes, both will view the future from similar perspectives.

The goal for each will be to improve the previous annual result. Ironically, it may be harder for ANZ than Fletchers to maintain shareholder satisfaction. Fletchers will launch into a period of cost cutting and a very careful and prudent approach to future projects. Shareholders in a year’s time will judge the results by comparing the past year with the present. Memories will however dim, and as long as a decent dividend emerges, past sins will be forgotten. ANZ will find it tougher to achieve a significant improvement due to changing economic conditions and probably a harder approach to risk.

Ironical isn’t it that two totally different companies will have similar agendas!

RCG in the news - Lynmore Rise Retirement Village

We have recently been working in conjunction with Owhatiura South 5 Inc and Classic Developments NZ Limited on the development of the $20 million Lymore Rise Retirement Village in Rotorua.

3 years in the making, RCG has provided critical input to the development design and research, as well as ensuring the financial feasibility of the project is robust.

Located on a 2.2ha site fronting Te Ngae Road and close to Rotorua amenities, the retirement village is much needed for the growing numbers of people reaching retirement age.

It also brings huge benefits to the local economy and there are further developments planned for the near future.

The first stage of the project is expected to open in 2019 and will incorporate 64 villas and a community facility.

For further information click on the link below:

http://bit.ly/2zR9QL2

 

Lynmore

Lynmore Rise Retirement Village

In the Press

Local Media Highlights Monday 23 October - Monday 30 October 2017

 

Retail Armageddon? Not in NZ

Global headlines are purporting the end of bricks and mortar retail. US commentators are leading the charge, plagued in their own country by mall over-development. In fact, America's mall space has become so overdeveloped that Credit Suisse forecasts up to 25 per cent of American malls will close by 2022.

(Source: NZ Herald)

Lack of industrial space in Wellington forces development in de-centralised areas

Demand for industrial properties in Wellington driven by a strong economy, infrastructure projects and the ICT and film sectors, is pushing rental prices up and vacancy rates down, new research shows. The latest industrial report by international real estate firm JLL shows vacancy rates in the capital now sit at 3.4 per cent, as last year's 7.8 magnitude earthquake heightened leasing demand in all sectors.

(Source: Stuff)

Youth fashion stores follow major brands into Christchurch's retail precinct

Boutique-type stores aimed at younger shoppers are following the big fashion brands into Christchurch's new retail precinct. Several retailers selling youth-oriented and street-style fashion and sports goods are have leased space within the four blocks of the precinct and are likely to open by the end of the year, with more likely to follow.

(Source:Stuff)

The Auckland suburban apartment a nod to growing 'urban lifestyle'

Apartments in Auckland suburbs are attractively more affordable options, yet the price per square metre has been on a steep rise, industry research shows. New research from Colliers International found that the average median house price was 27 per cent higher than new apartments in "sought-after growth areas" Albany, Onehunga and Hobsonville.

(Source: Stuff)

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