I commented last year as to the surprise that permeated the commercial market place over the decline in the profit announcement by Fletchers. At the time, the announcement suggested that a profit decline of some $125 million, more recently the loss has jumped to over $600 million. I commented at the time the board were to blame it was that simple. It still is.
"This is not the end of Fletchers, the company has a strong heart and it will recover."
However, the healing will be painful for many people, and probably the board will continue to draw down their fees regardless. I do however feel for the other people who are affected by this latest announcement, all of whom would be dire supporters of the group over many years, and most of whom have been forgotten by the various commentators.
Last Saturdays Auckland Herald had an interesting half a page commentary by Brian Gaynor that focussed on the chairman, and his record of success. Ironically, there was a full page advertisement on the opposite page by one of Fletchers competitors Naylor Love, calling for staff applications across the construction industry. I ponder whether that was planned or good luck? The Sunday Star Times also devoted considerable coverage to the chairman, and another article by Ellen Read, closed off by rendering the chairman's story of a free dinner given to him by a restaurant in Auckland, due to the hard day he had had on Valentine’s Day! Really?
"So back to my point, the impact of this decline in profit hardly affects the chairman and his board but to shareholders, particularly those that rely on dividends it will come as a very great disappointment and potentially will affect the incomes of many, particularly the retirees."
Then there are the Fletcher employees. They will be seriously considering their positions and may be enticed to Naylor Love or others. The likelihood of Fletcher employees getting wage increases will be minimal, so confidence and satisfaction from their employment will be at ankle level.
Then there are clients with whom Fletchers have been negotiating new projects. These could be kicked to touch due to the Fletcher management drawing a line in the sand over new projects. The negative impact on staff who would have worked hard to get these potential projects to the table will be horrendous. Again, a reason to move to another company. From a prospective clients point of view "once bitten twice shy", and they will all think twice about engaging with Fletchers in the future.
"So, if Fletchers are just focussed on completing projects that have cost them money, the need to get new work will flounder and as a consequence they will wake up one day and have limited forward work."
It’s all very well to focus on "why did this happen", we all know how that happened, and it wasn't just the Fletchers quantity surveyors getting it wrong it was a whole chain of board and management that failed to see the implications of securing forward work with no escape clause if costs should rise in the future. This is a fundamental management focus!!
Going forward, the company will have a major job to do in restoring confidence in a range of people from investors, to suppliers, to clients and to its own staff. Frankly, the time is not for retreating, but rather to advance under a new management regime that exudes confidence and commercial acumen, and not necessarily led by accountants!!
Many Kiwis won’t have heard of Mantra Group, but they’re the second-largest hotel operator in Australia. Here in New Zealand, they manage nine South Island hotels: five under the Peppers brand, two under Mantra and two under Breakfree.
Mantra listed on the ASX in 2014, although they might not be there much longer: Accor (the largest hotel operator in both Australia and New Zealand) has made a takeover bid, which is currently being scrutinised by the Australian commerce commission.
Like other tourism businesses, Mantra in New Zealand has been making hay from the tourism boom. Their annual reports are skinny on NZ detail, because it’s such a small part of their business, but for the 2017 financial year occupancy hit 85.5% in their New Zealand hotels – a very high level, and following on from a similar result in 2016. Revpar or revenue per available room night, a common hotel metric, rose 15.2%, and the average daily rate for a room rose $23.
The tourism boom is still going strong – for the half year to December 2017, NZ revpar rose again, by 10.6% versus 2016. The business “continued to see strong growth in domestic and international travel”. Mantra has two new hotels planned in the South Island, but it’s been slow going: they were announced a couple of years ago, but still aren’t expected to open until 2020/2021.
In the Press
Local Media Highlights Monday 12 February to Monday 19 February 2018
Govt attack on property speculators tipped to hit ordinary Kiwis
The Government has gone too far with its attempt to dampen property speculation through an extension to the bright-line test, says Dunedin tax expert Scott Mason. The proposed changes would have unintended consequences if the circumstances of owners changed and had overreaching characteristics, Mason said.
Botany Town Centre starting its $78m expansion
Construction will begin this week on a $78 million expansion of one of Auckland's largest shopping centres. Botany Town Centre will expand its floor area from just over 58,000 square metres to more than 62,700sqm.
Help at hand for overwhelmed home buyers and sellers
If you believe everything you see in advertisements, buying a house is a blissfully easy process done by attractive couples who are moving into picture-perfect properties. There will be moments of joy and laughter, and the only thing missing will be a unicorn grazing in the neatly manicured garden.
Zara hints at upcoming New Zealand ecommerce store
Spanish-owned fast fashion giant Zara sent waves through New Zealand retail when its first Kiwi store opened at Auckland’s Sylvia Park shopping centre in October 2016. Now, it’s about to introduce online shopping to its New Zealand offering.