Fletchers eye Christchurch CBD projects

Last updated 08:22 20/07/2013
Mark Adamson

Fletcher Buildings new chief executive officer Mark Adamson.

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The head honcho of New Zealand's biggest construction company was pressing the flesh in Christchurch this week, sizing the opportunities and scoping the empty space of the CBD. MARTA STEEMAN caught up.

Christchurch's anchor projects are Fletcher Building's bread and butter.

Newly-minted chief executive Mark Adamson may be investigating developing a large-scale home building operation, but the anchor projects in the central business district (CBD) are also firmly in his sights.

"There are probably five or six biggies that are on the radar," Adamson says. "We've got our engineers and our draughtsmen and qss (quantity surveyors) waiting for the detailed plans and tenders to go out and we'll jump on them and put our best foot forward.

"We'll tend them all but we're not expecting to get them all. We could build them all. That's what we do."

Fletchers is comfortable with alliances and partnerships. It has recently formed a relationship with a company overseas which has a skill set useful in Christchurch, but Adamson is not saying who.

Fletchers is one of five groups shortlisted for the Convention Centre after expressions of interest were sought eight months ago. "We're the biggest building company in New Zealand. To be one of the five is no great shakes."

Fletchers is also interested in the $600 million redevelopment of Christchurch hospital, the kind of project which uses all its skills.

It has also tendered for the contract to repair 5000 Housing New Zealand earthquake-damaged homes.

Fletchers says some projects are pretty close to going out to tender though nothing of scale has been awarded yet.

Fletchers is one of the five companies in the Stronger Christchurch Rebuild Team (Scirt) alliance repairing Christchurch's sewers, stormwater, water and roading networks at an estimated cost of $2.2 billion.

Adamson says Fletchers gets about 20 per cent of that. Each company can earn more work for a better performance but not that much more - maybe 22 per cent but not 50 per cent.

The big new string to its bow may be large-scale manufacture of housing and Christchurch may be its first target market because the city has the money, the need and importantly the available land. While in Christchurch he has been talking to Ngai Tahu Property chief executive Tony Sewell.

"I come to run New Zealand's biggest construction company home-builder and discover we make 300 houses [a year].

"My first question is why aren't we making more? And we're a New Zealand company; why aren't we building more throughout the country and not just Auckland?

"So what I've instigated is a wholesale review as to how we can be far, far bigger, orders of magnitude, not 300 becomes 400 but hundreds become thousands over a period of time.

"I think there is a market for multi-family dwellings, low rise apartments. I think there is some social housing angle that we have been talking to Housing New Zealand about, I think there is an affordable homes angle."

A team at Fletchers would report back to him on a clear direction by Christmas.

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However, it required a culture change in New Zealand. He had seen quality mass produced housing in Europe and the United States which did not look like East Germany. Basically, the houses had the same floor plan and a number of other features that could be factory-made but architects did clever things to "dress up" the exteriors.

Adamson is also selling a company revamp story. The message is that Fletchers has missed the boat and its performance is mediocre at best.

He is implementing a new programme called FBUnite to get up to $100m of savings a year out of the building giant. That's a 20 per cent lift in profitability, irrespective of how the economy performs. "If the economy booms it will be bigger than that".

His background is private equity in the United States, but he is a "Geordie" from northeast England and humble beginnings.

These operations have a reputation for stripping companies of assets, flicking them off, slashing staff numbers and plundering the pension schemes.

"There are bottom feeders within the industry," he admits "but the big ones now are massive corporations with similar sets of ethics and rules and regs that big public companies have.

"They are tough, they do not suffer fools gladly. They reward you very handsomely for good performance and you don't survive very long for bad performance.That's not a bad thing. What they look to do is grow value, they don't slash and burn in my experience."

So the slow moving and conservative giant of the New Zealand building industry is in for an intense ride with Adamson.

He says Fletchers has a great bunch of assets but the operation is fragmented with 63 business units working independently, seldom talking to each other and not centrally co-ordinated. "The scale that most outsiders think Fletchers have, they do in aggregate, but it wasn't being used."

The FBUnite programme includes centralising a lot of functions and services, such as telephony and transport, some information technology, human resources, accounts payable and payroll, to name a few. He gives an example of one town where Fletcher branded products from Placemakers, Mico, and Laminex are stored in separate warehouses.

"Why can't we have one warehouse and stock all of that stuff in one warehouse; one fleet of forklift trucks, one management team to manage the warehouse. The savings from that are huge."

The trick is to try to not lose the local touchpoint and closeness to the customer of decentralisation.

Another pillar to his programme is manufacturing excellence at Fletchers "hundreds" of factories.

While Fletcher is called a construction company the bulk of its revenues come from the manufacture and sale of building products.

"And we are going to bring their standards up to the best of the best globally. That is the ticket to the game. We should have been there already. This is 2013. We are retrospectively catching up, if you like, to how I think Fletchers should have operated."

The centralisation of many functions in Auckland would create a lot of jobs, he says. He could have gone to Asia and India for that but chose New Zealand over Australia. New Zealanders were hard working, smart and willing - and cheaper than Australians.

"I actually value that local touch and understanding, the cultural nuances of a country and I don't necessarily need that extra dollar. It's just not worth it for me."

Asked about redundancies, Adamson dodges and says, "This isn't about head count reduction." He has been criticised by the investment community for not setting out the redundancies clearly.

If Christchurch booms, New Zealand recovers, Fletchers wins more market share and advances into new territory like scale manufacturing of housing it will need more staff not less, he says.

"An organisation like Fletchers, people come and people go. The overall aggregate number of the people on the payroll should increase because I want to grow the business."

This is Adamson, hard-nosed private equity practitioner speaking.

 

IN CHRISTCHURCH

 

  • Has tendered for 5000 repairs to Housing New Zealand homes in Christchurch.
  • Likely to tender for the $600m Christchurch hospital project.
  • One of five in the running for the Convention Centre anchor project.
  • Will tender for all anchor projects.
  • One of five in the Scirt alliance repairing infrastructure.

 

FLETCHERS

 

  • 19,000 staff globally
  • $8.8 billion revenues
  • $3.6b from NZ

- The Press

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