INSIGHTS

In this short video, we speak with Ross Taylor, CEO of Fletcher Building, following his presentation at our Investor Day event. We discuss their competitive advantage, future opportunities and the key challenges as CEO. Questions covered include:

1. What does Fletcher Building do?
2. What are your key competitive advantages?
3. Are there market segments you see opportunities to invest in or acquire?
4. As CEO, what challenges have you faced and what are you most pleased with?
5. What advice do you wish you were given, when you first started investing?

FULL TRANSCRIPT:

Craigs: What does Fletcher Building do?

Ross: Simply, Fletchers is a business focused on building products and distribution of those products across Australia and New Zealand. And when you look at it, New Zealand’s about two thirds of our revenue at about 5 or 6 billion and Australia’s about 3 billion of those. And in New Zealand particularly, there will be many familiar brands – things like PlaceMakers, Mico. And many building products brands like Gib and Golden Bay Cement.

Craigs: What are your key competitive advantages?

Ross: One of Fletchers’ key competitive advantages, there’s a few of them when you look at those markets, is Australia and New Zealand are a long way from everywhere in the world. So if you can get scale positions in those countries and sectors, it makes you very competitive and hard for others to compete with. Then you look at the extent of our network across products and distribution. That distribution network is very powerful and if you can get a great service to customers, again it makes you hard to compete with. And we’ve got both of those which we really need to love and refine and improve as we go forward. And beyond that, there’s obviously manufacturing price points and the skill of our people and those sorts of things, which just bring all that together.

Craigs: Are there market segments you see opportunities to invest in or acquire?

Ross: Firstly, when we looked at the balance sheet and we’ve said we’ll sell Formica this financial year. That leaves us with a very strong balance sheet. And the first reason for that is, as we’re going through this transition and repositioning of Fletchers, we felt it very prudent to have a strong balance sheet as we work through it. It then obviously does give us fire power but we’ll be very prudent with that. If I look at New Zealand, because of the scale here we can never buy anything too big anyway, so they’ll be bolt-ons. When I look at Australia, we’re firstly looking at a turnaround. So we’re not going to go anywhere near major acquisitions in Australia until we get that business performing effectively. So, those sorts of activities are at least 12 months away until we see that performance. That said, around our total footprint at only 15% market share in New Zealand and 1% in Australia, there are opportunities that we would like to play in. So there is opportunity, we’ve just got to be patient with the timing.

Craigs: As CEO, what challenges have you faced and what are you most pleased with?

Ross: So as I look back on the last 18 months, I’ll start with the challenges. Look the intensity was a little bit more than I bargained for. I always knew there’d be things to do in Fletchers. The breadth and width and depth of those probably surprised me but I think we’ve got through that pretty well. The other thing which I hadn’t picked coming in to New Zealand was, you’re doing a public company turnaround which is always commented on, but Fletchers has a great history and brand here. So there is no end of commentary, both official and non-official. So everyone has a view on Fletchers, and that challenge manifests itself in staff and staff morale, and getting them to believe where you’re going and deal with all the barbeque anecdotes and everyone has an opinion. So that just makes I think, the belief in the company more important but harder to get. And when you get it, very powerful, because with 10,500 employees in New Zealand, they’re advocates for you. So I think that was a challenge. And then the misinformation out there – with Fletchers history here, it’s had so many different formations and sizes and different things, there’s a lot of misinformation around it. On the positives, we gave ourselves four things to do through FY19. Which was to focus on the core in New Zealand, stabilise construction and get it through that, intervene in Australia and get it turned around and sell Formica. And we’ve really done that well and we’ll exit FY19 having got ticks across that agenda which really does set us up for FY20 nicely.

Craigs: What advice do you wish you were given, when you first started investing?

Ross: When I look at my own investments, there’s probably two parts to the answer of the advice I’d have liked to have. When I first started, you tend to be relatively influenced by what you read in the papers. So first, I wish I’d been told ‘don’t believe everything you read in the papers’ because it might be thematically right at times, it’s not quite right. So don’t invest off the back of newspaper articles. And the other part of which is ‘get advice’. There’s so many good insights out there and they’re not hard to go and find. So going and finding good advice is really important. And the only thing I’d say at the end of that is, I generally don’t invest myself, I just give it to advisers I trust to do my investments. I’m too focused and I’m too busy on my day job. And if I get the day job right, I’m very aligned with wealth creation and that helps anyway.