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Privately held construction company Fulton Hogan has slowed its growth aspirations across the Tasman after problems with a joint venture in New South Wales eroded earnings, leading to an 89% drop in annual profit.
Net profit sank to just $7.9 million in the 12 months ended June 30, from $73.9 million a year earlier, which departing chairman Ed Johnson describes as a "disappointing and totally unacceptable group performance" in the company's annual review, mailed to shareholders.
Revenue grew 12% to $2.73 billion, in line with budget.
"Absolutely, we've had a tough year, but we are very confident between the board and myself we have the business back on track, back to a stable position, and our performance in the first quarter would underpin that," managing director Nick Miller told BusinessDesk.
"We've had a very strong performance out of the business across the first quarter."
The Christchurch-based company's earnings plunged after it took a $27.4 million charge on associate companies and jointly controlled entities, including its Pacific Highway joint venture in NSW, which has been beset with wet weather.
Fulton Hogan has taken a $55.6 million provision for future losses in its current liabilities on its joint venture.
The construction firm delayed its annual meeting until mid-December as it negotiated the details of the problematic Australian project, having already revoked a planned share buyback in October. It expanded its footprint across the Tasman last year, buying out its partner in Victoria-based Pioneer Road Services.
Including a revaluation of land and losses on cashflow hedge reserves and foreign exchange, Fulton Hogan posted a loss of $7.1 million, compared to a comprehensive profit of $99.7 million in 2011.
Mr Miller says the company is slowing its growth aspirations in Australia after building its presence across all states and territories in the world's 12th biggest economy, which was "critical to our strategy".
The company rejigged its Australian operations to attract more specialists in its two work streams – industries and construction.
"Part of it has been around reducing overhead structure, but also focusing on what's important. We're confident we now have that under control and the business is running well," he says.
The board declared a final dividend of 5 cents per share, taking the annual payout to 11.5 cents, down from 20 cents paid in 2011.
Fulton Hogan delayed the next two buyback instalments for Shell NZ to let it consider a potential acquisition of some resource-based assets in New Zealand.
Mr Miller says the company is focusing on strengthening its balance sheet, through increasing its retained earnings and selling some non-core assets such as forestry and land. Those funds will be put towards repaying debt.
Fulton Hogan had current liabilities of $532.3 million as at June 30 and non-current liabilities of $772.9 million.
Mr Miller is upbeat about the coming year, with a forward-order book of $3.7 billion, saying "the underlying business is still very solid and is well-positioned for the future".
Fulton Hogan will continue to pursue a "zero harm" health and safety policy after four workers died in the financial year in four separate incidents, and has introduced a number of new initiatives to improve the culture and behaviour around safety, Mr Miller says.
"That rocked us to the core – Fulton Hogan has always had health and safety as a No 1 priority."