New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Fletcher Building (FBU) AGM Update</h2>
Fletcher Building (FBU) has provided updated outlook commentary at its Annual Shareholders Meeting (ASM) today. Whilst lockdowns on both sides of the Tasman impacted 1Q22, FBU has seen a strong recovery in activity as restrictions have eased. Management also indicated that if NZ remains at “present lockdown levels or better” (current settings Level 3 in Auckland/Waikato and Level 2 the rest of NZ), then trading for the remainder of the year is expected to be above that of FY21, a period with relatively few restrictions. FBU also highlighted 1) input cost inflation and supply chain disruptions continue to be managed “effectively”, 2) favourable market outlook and strong pipeline on both sides of the Tasman, and 3) its strong balance sheet. The resumption of FBU’s NZ$300m buyback (c.NZ$276m to complete) highlights management’s confidence in the operating outlook in our view.
The lack of more specific FY22 guidance suggests that management are broadly comfortable with current EBIT forecasts (Forsyth Barr NZ$687m, Visible Alpha consensus of NZ$694m) despite disruption created by lockdowns.
A further trading update and outlook will be provided with the 1H22 result in February.
Key points of interest
<ul>
<li>New Zealand – Apart from Alert Level 4 lockdown in August/September, trading has been above prior year, with a strong bounce back in activity under Alert Level 3.</li>
<li>Australia – Small negative impact from regional lockdowns. FBU expect activity to be above that of last year once restrictions are eased.</li>
<li>10% margin target – No change to FBU’s FY23 EBIT margin target of 10%. “We are confident that the second half margins will show good progress towards achieving our 10% FY23 target”.</li>
</ul>
Current consensus forecasts
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 54pt; height: 13pt;">
&nbsp;
</td>
<td style="width: 54pt; height: 13pt;">
FY22E
</td>
<td style="width: 54pt; height: 13pt;">
FY23E
</td>
<td style="width: 54pt; height: 13pt;">
FY24E
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
Revenue
</td>
<td style="width: 54pt; height: 13pt;">
8,384
</td>
<td style="width: 54pt; height: 13pt;">
8,613
</td>
<td style="width: 54pt; height: 13pt;">
8,653
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
EBITDA
</td>
<td style="width: 54pt; height: 13pt;">
1,081
</td>
<td style="width: 54pt; height: 13pt;">
1,140
</td>
<td style="width: 54pt; height: 13pt;">
1,138
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
EBIT
</td>
<td style="width: 54pt; height: 13pt;">
694
</td>
<td style="width: 54pt; height: 13pt;">
734
</td>
<td style="width: 54pt; height: 13pt;">
730
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
NPAT
</td>
<td style="width: 54pt; height: 13pt;">
424
</td>
<td style="width: 54pt; height: 13pt;">
452
</td>
<td style="width: 54pt; height: 13pt;">
448
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
&nbsp;
</td>
<td style="width: 54pt; height: 13pt;"></td>
<td style="width: 54pt; height: 13pt;"></td>
<td style="width: 54pt; height: 13pt;">
&nbsp;
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
NZ Core
</td>
<td style="width: 54pt; height: 13pt;"></td>
<td style="width: 54pt; height: 13pt;"></td>
<td style="width: 54pt; height: 13pt;">
&nbsp;
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
Revenue
</td>
<td style="width: 54pt; height: 13pt;">
4,116
</td>
<td style="width: 54pt; height: 13pt;">
4,093
</td>
<td style="width: 54pt; height: 13pt;">
4,049
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
EBITDA
</td>
<td style="width: 54pt; height: 13pt;">
643
</td>
<td style="width: 54pt; height: 13pt;">
653
</td>
<td style="width: 54pt; height: 13pt;">
633
</td>
</tr>
<tr>
<td style="width: 54pt; height: 13pt;">
EBIT
</td>
<td style="width: 54pt; height: 13pt;">
459
</td>
<td style="width: 54pt; height: 13pt;">
466
</td>
<td style="width: 54pt; height: 13pt;">
450
</td>
</tr>
</tbody>
</table>
Source: Visible Alpha, Forsyth Barr analysis

Fletcher Building (FBU) AGM Update
Fletcher Building (FBU) has provided updated outlook commentary at its Annual Shareholders Meeting (ASM) today. Whilst lockdowns on both sides of the Tasman impacted 1Q22, FBU has seen a strong recovery in activity as restrictions have eased. Management also indicated that if NZ remains at “present lockdown levels or better” (current settings Level 3 in Auckland/Waikato and Level 2 the rest of NZ), then trading for the remainder of the year is expected to be above that of FY21, a period with relatively few restrictions. FBU also highlighted 1) input cost inflation and supply chain disruptions continue to be managed “effectively”, 2) favourable market outlook and strong pipeline on both sides of the Tasman, and 3) its strong balance sheet. The resumption of FBU’s NZ$300m buyback (c.NZ$276m to complete) highlights management’s confidence in the operating outlook in our view.
The lack of more specific FY22 guidance suggests that management are broadly comfortable with current EBIT forecasts (Forsyth Barr NZ$687m, Visible Alpha consensus of NZ$694m) despite disruption created by lockdowns.
A further trading update and outlook will be provided with the 1H22 result in February.
Key points of interest

New Zealand – Apart from Alert Level 4 lockdown in August/September, trading has been above prior year, with a strong bounce back in activity under Alert Level 3.
Australia – Small negative impact from regional lockdowns. FBU expect activity to be above that of last year once restrictions are eased.
10% margin target – No change to FBU’s FY23 EBIT margin target of 10%. “We are confident that the second half margins will show good progress towards achieving our 10% FY23 target”.

Current consensus forecasts




&nbsp;


FY22E


FY23E


FY24E




Revenue


8,384


8,613


8,653




EBITDA


1,081


1,140


1,138




EBIT


694


734


730




NPAT


424


452


448




&nbsp;




&nbsp;




NZ Core




&nbsp;




Revenue


4,116


4,093


4,049




EBITDA


643


653


633




EBIT


459


466


450




Source: Visible Alpha, Forsyth Barr analysis

Fletcher Building

Fletcher Building (FBU): AGM Update