Good morning, ladies and gentlemen. My name is Peter Crowley. I am the Chair of Fletcher Building. Before we begin, there is a little bit of housekeeping. First, the fire evacuation procedure. In the event of an emergency during the function, an alarm will be sounded, and the duty manager or supervisor will announce over the PA that all guests should leave through the marked exits. Wait and bar staff will evacuate guests from the main entrance, while kitchen staff will evacuate through the rear of the venue. The evacuation points are the front entrance over there. Alternatively, through the loading bay at the rear. The assembly point is outside Wildfire Restaurant or below Saint Alice or the viaduct car park. Toilets are located at the front of the building by the main entrance. Vaping is permitted. There you go, huh? On the balcony.
But please smoke outside the main entrance down the stairs. I prefer you didn't vape either, frankly. But on that note, [Non-English content] , and good morning, everyone. On behalf of the board, it is my pleasure to welcome you all to Fletcher Building's 2026 annual shareholder meeting. Today's meeting is being held both in person and online via the Computershare online meeting platform. We therefore welcome our shareholders, proxies, and guests, both those here in the room and those joining us online. Before we start the formal business of the meeting, I would like to ask people in the room to ensure their mobile phones are on silent mode. Ladies and gentlemen, as a quorum is present and due notice of this meeting has been given, the meeting is duly constituted, and I declare it open. I will now introduce my fellow directors on the stage with me.
James Miller, our Deputy Chair. Andrew Reding, our Managing Director and Group Chief Executive Officer. Sandra Dodds, Cathy Quinn, Tony Dragicevich, and Jacqui Coombes. Finally, our Company Secretary, Haydn Wong. Setting the agenda for the day, I will begin with an overview of the year and the progress we have made. I will then hand over to Andrew, who will provide an update of the turnaround plan and the group's operating performance. We will then take any questions on those presentations. After that, we will move to the resolutions of the meeting, and I will ask Sandra to speak to her re-election and Jacqui to speak to the remuneration report. The resolutions will be decided by poll. Questions on a resolution will be dealt with before the resolutions are voted upon.
At the conclusion of the formal business, we will take the opportunity for any final general questions or other business from the floor and online. Please note the questions will be moderated to avoid repetition and to summarize lengthy questions. I might add, but the intent of the question will remain unchanged, won't be modified in that respect. We won't address questions that are considered not reasonable in the context of the meeting, that repeat questions or otherwise may restrict all shareholders having a fair chance to have their questions heard. For those attending online, you can start submitting your questions now. Thank you also to the shareholders who have submitted their questions in advance. Andrew and I will speak to a number of these in our addresses.
Finally, if for some reason we don't have the opportunity to answer your question, we'll look to answer it in due course via email. At the conclusion of the meeting, we invite those in the room to stay and join us for some light refreshments. Let me start the board update. The board's composition remains stable in financial year 2026, with a capable and diverse group of directors contributing a broad range of experience and expertise to Fletcher Building. Our directors bring a strong mix of skills to their role. Around the board table, we have deep experience in building materials, manufacturing, distribution, combined with expertise in the capital markets, legal, finance, and audit. We have large-scale transformation and governance of listed companies on both sides of the Tasman as part of their skills as well.
That blend of sector knowledge and broader commercial experience mean the board can challenge and support management in equal measure, from operational performance through to capital allocation and portfolio decisions. In December 2025, James Miller was appointed to the newly created role of Deputy Chair. Having a New Zealand-based Deputy Chair further strengthens the board connection to our New Zealand operations and allows for more on-the-ground engagement with our people, customers, government, and local stakeholders. Looking back on financial year 2026, the board's assessment is that Fletcher Building made tangible progress in stabilizing and reshaping the Group. There's more work to do, but the foundations are now much stronger than they were a year ago. I would like to highlight five key outcomes for the year. First, we achieved steady financial and operating performance in a tough macro environment.
Activity across our residential and commercial markets remain relatively subdued on both sides of the Tasman. Despite that, our businesses held their ground, managed costs tightly, and continued to serve their customers well. Second, we progressed the execution of our strategy. Management has delivered on the priorities set out at our Investor Day, simplifying the portfolio and sharpening our focus as a building products, manufacturing, and distribution company. Third, we've built a more resilient balance sheet with net debt now in our target range. This gives us greater financial flexibility and the capacity to manage through the cycle with confidence. Fourth, the group return on investment improved in financial year 2026. Returns are moving in the right direction, but they are not yet where the board expects them to be. Lifting returns remains a priority for the board and the Group.
Finally, the group's operating cash flows were strong in financial year 2026, as our core businesses performed relatively well. However, they continued to be impacted by costs associated with legacy projects as we look to manage those matters to resolution. We're pleased with the progress made during financial year 2026. Taken together, these outcomes show a business that is more focused, more disciplined, and better positioned to benefit when our markets recover. However, we remain ambitious for further progress to be made as quickly as we can. Turning to our financial results for financial year 2026. Group revenue for the year was NZD 6 billion from continuing operations, and that's 7.3% higher than the prior year. Earnings before interest and tax, before significant items, was NZD 414 million, NZD 85 million higher than the financial year 2025. Property sales contributed NZD 49 million of that increase.
Our EBIT margin grew to 6.9%, up from 5.9%, and we reported net earnings of NZD 228 million compared to a net loss of NZD 419 million in financial year 2025. This return to positive net earnings was very important and reflects the benefit of tighter execution and the actions taken to reset the cost base. Even more significant, though, was the substantial progress the Group made in strengthening the balance sheet, with reduction in net debt from NZD 1 billion at the 30th of June 2025 balance date, down to NZD 637 million at the end of financial year 2026. Together with operating cash flow of NZD 715 million, this greatly improves our financial position and also creates greater financial flexibility going forward.
Capital expenditure totaled NZD 288 million, up NZD 146 million of which relates to the new Laminex oriented strand board plant at Taupō, and was managed with a sharper focus on returns and within disciplined capital allocation framework. Return on invested capital or ROIC improved to 5.3% from 4.1%. That is progress, but is not yet an acceptable endpoint. The board expects capital discipline and improved returns to remain central to decision-making and assessments of our performance going forward. Taking into account the progress made to date and the work still to do, the board has determined not to declare a dividend for financial year 2026. As previously advised, the Group's dividend policy will be reset and communicated to shareholders once the Group is both operating at the lower half of our net debt target range and generating sustainable positive free cash flow.
The board acknowledges the importance of dividend to shareholders, and we are determined to return to being a dividend-paying company. However, the return to dividends must be prudent, sustainable, and capable of being maintained through the cycle. Overall, Fletcher Building end of the year is a simpler and financially stronger group, better able to navigate current conditions, and also better placed to benefit when the market activity levels recover. During the Investor Day in June 2025, we outlined four key priorities which the Group has been executing on. The first was urgent action. The Group has taken decisive action after a portfolio review, leading to the divestment of the Construction division, as well as our Reinforcing and Wire business. The property portfolio was also optimized during the year with some significant sales of surplus land. Andrew will expand on some of these actions shortly. Second, delivering high performance.
As mentioned before, return on invested capital, or ROIC, is now the key measure at group divisional and business unit levels, and we have set targets across each of these in the company. Expectations are also reflected in our remuneration framework so that our incentives are aligned to performance expectations. Third, we set out to empower our leaders and decentralize the structure. I am happy to say the senior leaders are engaged exceptionally well with employee net promoter scores improving by 21 points since October 2025 to +59. Finally, a more resilient capital structure. With net debt in the middle of our net debt target range, our focus is now on delivery of sustainable free cash flows. Alongside the material progress we have made during financial year 2026 on our strategic goals, we continue to work on improving our operational performance, and I will turn to that now.
Improvements to our operations strengthen the Group's strategic position and its pathway to higher and more sustainable returns. I will highlight four examples from FY 2026 that are particularly relevant to sustainable shareholder value. The first is Cavendish Drive. This is our new Frame & Truss plant in Auckland, and it is now operational. It gives us technology no one else in the New Zealand market has. We have been selling Frame & Truss to meet the market, but the margins were not acceptable. The Cavendish Drive plant will enable us to do this in more efficient and economically sustainable ways. The second is the opening of Firth's new batching plant in Penrose. This represents a significant investment in ready-mix concrete capacity in Auckland and positions the business well for future growth. The third is the Urban Quarry, our network of metro collection sites for dealing with demolition waste.
We opened a new site at Tamahere during the year, and our overall tonnage of 938,000 tons relating to waste and aggregates is up 28% on financial year 2025. This is the start of a real position for us in the circular economy and it springboards off the capability that Golden Bay Cement already has in using alternative fuels, including waste products, in its Portland cement manufacturing plant. Finally, in recent news, the Hunua Quarry application has been approved, securing the long-term position of the quarry within the Auckland market. Andrew will talk to you more about that in detail. There are other examples on the screen of operating highlights from financial year 2026, but they are amongst many great things that happen across our business. I am now going to pass over to Andrew to discuss the Group's financial year 2026 operating performance in more detail.
Over to you, sir.
Thank you, Peter, and good morning, shareholders. Peter has spoken about progress against some of our key strategic goals. We have broken out those goals into a turnaround plan that includes a range of important tasks and actions ahead. As we discussed at our Investor Day in June last year, they are outlined again on this slide, and as you can see, we have ticked a number of them off during FY 2026. I want to touch on a few key items from our turnaround plan. As we previously mentioned, the portfolio work is well in train, with the Construction Division divestment completing sooner than our own expectations alongside the sales of our Reinforcing and Wire businesses and our interests in NX2 and CSP.
The New Zealand International Convention Center has been handed over and the 15 or so remaining legacy projects are provisioned for and we are working methodically through them with the goal of closing them out. Clearly, the major initiative for the year was the Construction Division divestment, and no one should underestimate what coming out of that business does for our ability to perform as a group. Beyond the financial drain, Construction was consuming a great deal of the organization's time and attention. Monitoring its risk profile, managing the projects, and resolving disputes were significant distractions from our core business. That focus is now back where it belongs. I know you will be interested in the strategic review of our Residential and Development division that we previously announced.
All I can say is that we are working through the options to get the best outcome for shareholders, and we will update you when we have news to share. One more thing in the future column. It says further decentralize corporate functions. There is still more to do, but we are getting closer to an optimal balance. The reality is that whilst our preference is to have businesses choosing and owning their functionality, some centralized corporate functions do carry real economies of scale, which we may not want to forgo. I can assure you, we are running the ruler over everything. Overall, I am proud of what the team has achieved. There is no single item on this list that has got us here. Rather, it is the combined progress against all of them.
Turning to the divisions, the important message is that whilst there was some uneven performance, fundamentally, the core manufacturing businesses delivered a creditable and resilient outcome in what was still a challenging market. The priority now is to convert operational improvement into consistently stronger returns across the full portfolio. On ROIC, Light Building Products is strongest at 7.2%, and Heavy Building Materials is at 5.1%. Distribution at 1.4% has the furthest to go. Starting at the left of the table, Light Building Products earnings grew 22%. Additions and alterations volume and activity in the rural sector offset weaker residential construction activity in the North Island, while the South Island and Australia performed relatively well. Winstone Wallboards grew volumes by 4% and again delivered double-digit returns, while Insulation also performed well, including double-digit ROIC in Australia.
We also saw continued volume recovery through the second half across many of the Light Building Products businesses, a result of improving activity in some of our end markets. In Heavy Building Materials, earnings grew 8% versus the prior year. Winstone Aggregates improved materially in the second half, delivering double-digit ROIC through stronger project activity and Urban Quarry share growth. Firth benefited from lower energy costs and stronger late year volume momentum. However, we know that the concrete piling market, where we have a large share in Auckland, has seen delays in project commencement. In Distribution, full-year earnings were lower at NZD 12 million, down from NZD 19 million. However, performance improved materially in the second half of the year with the division returning to profitability.
Going forwards, the structural cost of the division will benefit from both labor productivity improvement from the new Cavendish Drive plant, helping us gain greater share of wallet in further sales, as well as a flatter organizational structure. A further lever for growth is our regional joint venture branch model, which we have re-established this year, commencing with four branches in Southland. In Residential and Development, the Auckland market remains subdued, with elevated inventories and pricing pressure, while Canterbury remained resilient. The charts show volumes for our main businesses indexed to 100 at the end of FY 2019, with Light Building Products on the left and Heavy Building Materials and Frame & Truss on the right. Each line is a rolling 12-month average. The Group has made a better start to FY 2027 with quarter one sales volumes ahead of the same period last year in most business units.
Growth was broad-based across Light Building Products, Heavy Building Materials, and Distribution, supported by residential, infrastructure and commercial activity, and market share gains. Compared with quarter four FY 2026, volumes largely followed normal seasonal patterns. The exception was pipelines, as customers worked through stock bought ahead of our quarter four FY 2026 price increases. Residential and Development remain challenging, particularly in Auckland. Let me update you on how market conditions have developed since the full-year results and what that means for the year ahead. I will start with New Zealand. First, the residential market. Building consents are back above 40,000 for the first time since 2023, and our volumes have lifted a bit through the second half of FY 2026 and into quarter one FY 2027. What is interesting is that those consents are not converting into activity as quickly as they normally would.
Our read is that uncertainty is causing people to hold off already consented projects, especially given high inventory levels. That said, additions and alterations activity is providing a welcome offset and remains strong. Commercial construction remains weak. We are not seeing much improvement there. There are strong indications that uncertainty driven by a mix of geopolitics, interest rate hikes, and local election sentiment are causing projects to be delayed. However, infrastructure is the offset with activity just starting to bubble. Major roading and social infrastructure work is commencing. For example, the second Ashburton Bridge, the Hawke's Bay Bridge programmeme, Northern Corridor, RiverLink, Ōtaki to North of Levin, hospitals at Whangārei, Nelson and Dunedin, a Christchurch prison, and a programmeme of school classrooms around the country. Now for Australia. Population growth and underlying housing demand are supportive of our markets. Interest rates and affordability are not.
Also, the picture varies more than usual by state. Renovation activity, however, appears more robust, similar to what we are seeing in New Zealand. Meanwhile, commercial construction is being supported by health, education, and data center demand concentrated in New South Wales. This is partly offset by a contraction in office, retail, and industrial projects. In terms of infrastructure, there is a strong pipeline, including the 2032 Brisbane Olympics.
Growth is expected to be concentrated in energy transmission, water, and social infrastructure. On infrastructure in both countries, it is worth noting that our exposure to this sector is smaller than our exposure to residential and commercial. So while it is encouraging, it will not move the dial for the group all on its own. The reason the last few years have been so hard is that residential, commercial, and infrastructure construction activity all came down at the same time in both countries.
They are now moving again, albeit at different speeds. We do not need all three sectors to turn at once for us to make progress from here. We are not waiting for the markets to turn around to improve our performance. We are proactively continuing with our strategic plan and programmeme of self-improvement to deliver in any environment. Before discussing anything else on safety, I want to acknowledge the tragic loss of Max, our team member who passed away following a crane incident in Vanuatu in July last year. The loss of Max is totally unacceptable and reinforces the scale of commitment to safety required across the entire organization. Whilst overall, our Protect programmeme has delivered real improvements in our safety outcomes over the last seven years, these serious and tragic events remind us that we must remain vigilant and continue to improve.
We have reviewed all 339 of our locations across Australia and New Zealand as part of our ongoing focus on improving our safety performance. Moving forwards, we are conducting a further safety system review and refreshing our Protect framework for leaders in the business. Our customers remain at the heart of everything we do. We are proud of the role we play in enabling infrastructure, housing, and community development across New Zealand and Australia.
The projects highlighted on this slide are just examples of our latest projects spanning a huge range of work, from pouring concrete for wind farms and laying pipe for our urban infrastructure, to fitting out a flagship clinic and rewarding trade customers through PlaceMakers Plus. We are proud of our community partnerships. We have a role to play in both New Zealand and Australian societies, and we try to do our bit to make a positive impact.
On this slide, you will see just a small subset of examples of the good work our teams are doing across our many locations, from supporting children living with critical illnesses, to helping sports clubs raise roofs, to providing support to communities experiencing food insecurity. Moving to the environment. We remain committed to our environmental targets because it is simply good business, and 76% of our revenue currently comes from sustainably certified products. Scope one and two carbon emissions are 21% below our FY 2018 baseline, and 86% of our waste is diverted from landfill. Golden Bay Cement is among the top quartile of low carbon cement producers globally and received the Carbon Reduction Award at the 2025 Concrete New Zealand Conference Awards. Initiatives such as the Urban Quarry are further examples of our circular economy ambition. Turning now to further good news for Winstone Aggregates and for Auckland.
On the 15th of October, the expert panel approved the development of our Hunua Quarry under the Fast Track Approvals Act, granting the main consents we need to expand and deepen the existing quarry. Hunua is one of Auckland's largest quarries, producing around 3 million tons of aggregates a year, roughly 20%-25% of the region's supply. This approval lifts our reserve to around 40 million tons, roughly 10 to 15 years of supply, to around 225 million tons of high-quality greywacke. That supports more than 50 years of quarrying, with output able to rise to around 5 million tons a year as demand requires. Aggregate underpins New Zealand's roads, housing, and commercial building. A long-term source close to Auckland's main markets secures supply and keeps transport distances short, benefiting our customers in the region and giving us a long life asset with room to grow.
The approval comes with a comprehensive set of conditions, and we're committed to meeting them. We'll keep working constructively with Mana Whenua, our neighbors, and the local community as the project moves forwards. As I finish with the operational update, I want to leave you with this. We have delivered a robust performance in a tough operating environment and made good progress on our strategic plan. We have progressed with the portfolio simplification. We have put the focus on performance, made ROIC a discipline in our business, and we've moved quickly and decisively, and we now have a fitter, leaner organization. The next stage is in front of us, and the job now is proving out where the growth comes from inside the core and exploring opportunities to further simplify the portfolio.
I would like to say thank you to all of our teams for performing under both major organizational change and a challenging macro environment. I will now pass back to Peter with a conclusion.
Thank you, Andrew. To wrap up, let me return to the five takeaways for financial year 2026 that I set out at the start of my presentation. We delivered a steady performance in a tough macro environment. We executed against our strategy. We have strengthened the balance sheet with net debt in our target range. Group ROIC improved, but there's more to do. Operating cash flows were strong, albeit still impacted by some legacy project. That progress was achieved during a period of considerable organizational change and difficult trading conditions. Financial year 2026 was an important transition year for Fletcher Building. The task ahead is clear: to simplify our portfolio, stronger balance sheet and low cost base into sustainable improvement in returns and long-term value for our shareholders.
On behalf of the board, I thank our people for their commitment and professionalism, and I thank our shareholders for your continued support. Ladies and gentlemen, with that, we'll now take questions on my presentation and Andrew's, after which we will move to dealing with the resolutions for the meeting. If you're in the room, I invite you to please raise a hand and a microphone will be handed to you. Please, before you ask a question, could you state your name? Okay. Thanks, Phil.
Thanks, Mr. Chairman. My name's Alan Best and I'm the proxy holder for members of the New Zealand Shareholders' Association today. Also a shareholder from way back. So patient.
Yeah.
In last year's meeting, you suggested that you wouldn't be paying a dividend till we get down to the lower end of the target range.
Of the target range, yes.
I wondered if you could just update us on that. You ended the year at about NZD 637 million of net debt.
Yep.
How have you been going--
Well--
--against that?
Well, we ended up pretty much in the middle of that target net range, which is NZD 400 million- NZD 900 million. We are still about that. We think the year coming, we will probably be still about that, but we have got a couple of projects that we are working our way through at the moment. So I do not anticipate we are certainly going to not move in the wrong direction--
No.
--against that number.
Okay. Thanks for that. The second thing that you did suggest last year was that you could see NZD 130 million of reductions in cost. I would think from looking at the accounts, you managed that pretty well. So congratulations. How did it appear in the books this year against that?
We took out certainly in excess of NZD 30 million in costs. I am just trying to recall. I think it was about NZD 20 million in corporate.
NZD 30 million.
NZD 30 million corporate, yeah, and some more in the divisionals. But it was in excess of NZD 30 million.
Right. The last one actually is a question from way back. I remember asking Ralph Waters--
Oh, good.
--about R&D.
Yeah.
I got a most unsatisfactory answer. How does the board keep a track of this? Because actually, there is a lot of research to show that R&D input represents future dividends for shareholders. We want to make sure as long-term investors that our interests in R&D are there.
Well, I'm going to have a crack at that. Maybe I'll do the overview and I'll give the details with my colleague here. Product innovation is really where we're talking here. We are really, really active in this front. There are two guys sitting right here. Hamish McBeath has been driving the oriented strand board investment. Hamish leads our Light Building Products division. One of the big new product areas we're working in, and we're tipping in a lot of cash, a lot of investment into this, is oriented strand board. It is a new product. It will be a new product to the market. It's not a new product to the world. In fact, it's been strongly growing against plywood and things like this around the world. It's a proven product, but it's new to this market. I think it offers huge opportunities.
We talk about growth prospects in Fletcher Building. I think the oriented strand board plant in Taupō, which is new product, is a function of research development will drive a lot of upside going forward. It could be a replacement for plywood. It could even have structural applications. It could be a replacement for a Hardie Plank type product. Time will tell. It's new, but it's not so new to the world that everyone's going, "We don't know how to handle this product." I think there's a huge opportunity there. We talk about other new products. Golden Bay Cement has been continually introducing new products over time to decarbonize. We're still making clinker. Still got the big kiln running.
We see opportunities to add what I would call cement extenders, but other people call them supplementary cementitious materials, to effectively increase our capacity while putting in less capital over time to get the capital increase. The real positive environmentally is less carbon dioxide is produced as we gain those extra tons. The market is certainly adopting it in concrete. Again, it's new product. There has been investment into it, and it's out there in the market, and it's a highly regarded and understood product. The other bit of research and development. The two examples I've given you are about new products, the sort of scientific stuff. The other one is the Urban Quarry, what we talked about. We handle nearly 1 million tons of demolition waste through that plant. That is a new business area for us.
We've got a plant at Onehunga, we've got a plant at Henderson, and we've just opened at Tamahere. I think that that provides us a great growth opportunity as we go forward. It certainly fits into the story that we're very passionate about telling about the fact that we are a contributor to a better environment through a circular economy. Alan, does that help?
Yeah, that's good.
Okay.
Thanks very much.
Okay, cheers.
Sorry.
Okay. No worries. There's a gentleman over here.
Thank you. Hello. Gordon, shareholder. Wow. Is that the two front rows are from Fletcher Building, are they?
Uh-
It is just we have not heard from them, that was all. I am just wondering how many shareholders are here, because the meetings have been the same time as SkyCity, and this has been really forthcoming. I am so pleased. Thank you for the board and Reding. Look, I cannot believe the change and, wow, the amazing, the amount of restructuring you have been doing is incredible. Because I still want to live another year and hopefully get a part of a dividend.
Me too.
I am not worried about you. But a couple of things was.
Yeah.
Of course, the election doesn't help, as we know.
Nope.
I know a few people in construction and a lot of these sites or government projects as well, they're just not signing off. I'm amazed how well you've done to hold on for these projects because all of a sudden there'll be a rush.
Yep.
Hopefully you've got staff or whatever that you've been able to hold on to that we can do this work. No, that's all really, was to thank you for such a turnaround, and let's hope we see you next year.
Thank you. The work that Andrew and his team have put in to position us, it's the usual thing. People don't see it, but the effort, the commitment is just fantastic. Just to your point, we mentioned earlier we built this big plant at Penrose, this big concrete plant. We've got quarries now, a newer quarry for the future. That in terms of an important thing is just incredible. We've got Golden Bay bedded down. So we've got the assets. They're there, they're ready to run. We've got the people to run them. When things pick up, we're not going to miss a beat. We'll be in there, and we'll be really getting our share. Any more? Any more in the room? Otherwise, I'll go to the - Okay, well, we'll just see if there's any online.
One question online, Chair. Are you considering selling any further business units?
Look, Andrew and the team, and I think we've all been pretty clear on the fact that we've been working our way through our portfolio, and there was certainly two assets. One was Construction, which we've sold, and I think we got a good price for that business. The other one which we've been reviewing, and we're continuing to review, is our Residential and Development business. That's the house and land business we run as to whether that fits with us in the long term. The outcome of that will be dependent on whether we think it's the right outcome for our shareholders. In terms of other business issues, over time, if we're not getting performance out of certain businesses, where we're not achieving growth targets, we will consider whether we keep them or whether we sell them. But again, it's contingent on are we getting the right price.
No further questions online.
Thank you. All right. Okay, ladies and gentlemen, we'll move to the resolutions. We'll go through each of the three resolutions in turn and address any specific questions against each one before moving on to the next. Voting on resolutions will occur at the end. We'll now move to the first resolution that Sandra Dodds be re-elected as a director of the company. I will ask Sandra, who chairs our Audit and Risk Committee, to speak to her re-election.
Thank you, Peter, and good morning, shareholders. It's good to be back in front of you asking for your support for my re-election to the Fletcher Building board. Since we last met, my own circumstances have changed. I recently moved back to Auckland after spending nearly 20 years in Melbourne. I'm really pleased to be back home in New Zealand as I continue serving on this board. As some of you will remember, I was born and went to school in Southland and attended university in Otago. I've always been a passionate Kiwi with a global outlook, and my time offshore has only sharpened that.
I bring to the board the benefit of my deep commercial and financial expertise gained both in New Zealand and offshore in industries like infrastructure, construction, energy, and mining. I joined the Fletcher Building board in October 2023 at what was undoubtedly one of the most difficult periods in the company's history. I came in with my eyes open. While the company was facing some very real challenges, and I want to speak about what that has meant. My fellow directors and I have rolled up our sleeves to face the issues front on. We've got close to the business and the management team, worked hard to understand the issues in depth, and helped chart a path forward. We're now starting to see the results of that work. I'm not saying we're where we need to be yet. There's still a lot to do.
But I have a clear sense of this business's potential, where it can go, and how we can get there. Since 2024, I've had the privilege of chairing the Audit and Risk Committee. This has involved being close to the detail of our financial position, our risk profile, and the legacy issues we've worked through. To my mind, this has been some of the most important work of my time on this board, and it's helped shape how I think about where we go from here. One of the most significant developments over the last three years has been the strategic reshaping of the business. As Peter and Andrew have said today, Fletcher Building today is a fundamentally more focused organization as a manufacturer and distributor of building products across Australia and New Zealand.
As a board, we've shifted our posture to match, from more operational involvement early on to taking a more strategic lens on the future, on appropriate returns for shareholders, and on positioning the business for a macro and political environment that continues to shift. This is a board I'm proud to serve on. Together, we bring significant industry and business experience. We are directors who ask the hard questions and challenge management constructively, while also supporting management as we've pivoted towards this more strategic, forward-looking phase. You can expect me to remain plainspoken, have a no-nonsense approach to governance, and to be forthright with both management and my fellow directors. I don't shy away from the tough calls. On a personal note, over my time on this board, I've really enjoyed visiting a wide range of the Fletcher Building sites across the group in both New Zealand and Australia.
What has struck me without exception is the passion and commitment of the people and teams I have met. It is a reminder that behind the numbers and the strategy is a team genuinely invested in this company's success, and that gives me real confidence in where we are headed. I care deeply about this business. I have worked hard to be part of getting it to where it is today, and I remain committed to the important work still ahead of us. I would be honored to continue that support with your support today. Thank you.
Thanks, Sandra. I now invite discussion on the resolution. Are there any questions that shareholders would like to ask about the reelection of Sandra Dodds as a Director of the company? No one in the room. Christian?
No questions online, Chair.
Okay. Thank you. As a reminder, we will vote on all resolutions following the discussion at the end. Okay, now we are going to move to the second resolution, that the directors be authorized to fix the fees and expenses of the auditor. I now invite questions on the discussion on the resolution. Are there any questions the shareholders would like to ask about the fees and expenses of the company auditor? No one in the room. Okay. Christian?
No questions online.
Okay, thank you. We will now move to the third resolution, that the company's remuneration report for the year ended 30th of June, 2026 is adopted. I will ask Jacqui Coombes, who chairs our People and Remuneration Committee, to speak to this resolution.
Thank you, Peter, and good morning, shareholders. As in 2024 and 2025, we are presenting our remuneration report for a non-binding shareholder vote. This provides shareholders with an opportunity to give feedback on our remuneration policies and practices. Before the vote, I would like to outline our remuneration principles and framework, including key changes that we have made in the last year. To support the business strategy, the board uses four guiding principles to focus senior leader remuneration frameworks. Shareholder value creation. We want our senior leaders to have a true ownership mindset through a meaningful interest in the group's success and strong alignment to shareholder value creation over the short and the long term. Our people. Our remuneration framework is in place to attract, motivate, and retain high-caliber talent in a competitive talent market. Strategy.
We align remuneration outcomes to core operational performance, profitable growth, and sustainable long-term earnings, with our senior people rewarded for delivering these outcomes. Risk. Our executives are held accountable for outcomes and take ownership of the consequences, both positive and negative. Our remuneration framework supports our principles through three main remuneration components. Our fixed remuneration, short-term incentives, and long-term incentives. The fixed remuneration component is key to attracting and retaining high-caliber leader and skills in a competitive trans-Tasman market for talent. Our incentive schemes are both designed to focus on both in-year performance through the STI component and sustainable value creation through the LTI component. Short-term incentive or STI. With the STI, we carefully balanced financial and non-financial goals to reflect the areas that require our leaders' most critical focus.
From FY 2026, financial goals are weighted 80%, reinforcing accountability whilst preserving a focus on critical safety and non-financial priorities, which are weighted 10% each. In line with the STI design, as Andrew has discussed, during the year, we suffered a fatality. As a consequence of this, the safety component of the STI was forfeited by the Group CEO, all executives reporting to the Group CEO, and the relevant division and business unit leaders. The board applied discretion to exclude gains from divestments and property sales from the financial results. This resulted in STI outcomes for the Group CEO and Chief Executives ranging from 1%-62% of their maximum opportunity, with an average of 32%. These outcomes reflected the financial, safety, and business improvement performance of the Group's core operating businesses. Turning to the long-term incentive or LTI.
The LTI was comprehensively redesigned to align with our revised strategy, decentralized operating model, and restoring performance to deliver sustainable shareholder value. This resulted in two key changes. Relative TSR was replaced with absolute TSR, or TSR, reflecting our immediate priority of creating direct value for shareholders through share price appreciation and dividends. Return on funds employed was replaced with return on invested capital, which is a more robust measure of capital efficiency. The ATSR and ROIC measures are included in the LTI offer made in FY 2026. I note that as the LTI offer made in September 2022 did not meet the required performance hurdle, there was no LTI vesting in FY 2026. Turning to the Managing Director and Group CEO. Andrew's remuneration package has a strong emphasis on a long-term performance, with a substantial portion delivered in equity to align his interests with shareholders.
As shown by the chart, Andrew's fixed remuneration is NZD 1.5 million, with approximately 3/4 of the total package at risk through performance-based short and long-term incentives. If Andrew performs strongly, just over half of the package would be paid in equity, which would vest over time. This creates tight alignment between the CEO and shareholders. Consistent with the STI and LTI treatment outlined on the previous slide, Andrew's FY 2026 remuneration outcome included an STI payment of 37.5% of the maximum opportunity and no LTI vesting. Thank you, and I will now pass back to Peter.
Thanks, Jacqui. Ladies and gentlemen, I now invite discussion on the resolution. Are there any questions the shareholders would like to ask about our remuneration report? In the room? Okay. Sorry? I was just going to go, not in the room, so we'll go over to the online.
We have one question online from Stephen Mayne. Well done for voluntarily putting up the rem report. Why does the Chair think that so few other dual-listed New Zealand companies do this? I've asked for it for more than 50 times in Kiwi AGMs, and you are the only company which has agreed to do it voluntarily. Well done, and please keep it up.
Thank you. Appreciate it. I think the question goes to the heart. We've got two jurisdictions here. We've got a New Zealand stock exchange jurisdiction, and there's an Australian stock exchange jurisdiction. In Australia, public companies are obliged to put their remuneration report up to shareholder votes, and if there's 25% or more vote against it on the day, they then have to go away, think about it again, come back, and have another vote. If that doesn't go through, the board spills. That's how it works in Aus. Over here, New Zealand stock exchange listings, it's not required of companies to do that. We choose to do it. I might add, ours is a non-binding vote.
It's a really good opportunity to, I guess, hear from our shareholders as to whether they think we're on the mark or off the mark in terms of our remuneration arrangement. I guess it gives everyone a say, but it's also valuable to us as a board to understand if we're on the mark.
No further questions online.
Okay. All right. Well, thanks for the question, Stephen. We will now vote on the resolutions. Ladies and gentlemen, I invite you to cast your votes on the three resolutions as displayed on the screen, and there they are. Yep. The voting on these three resolutions will close shortly. Please ensure that you have cast your vote on all resolutions. We will take a few minutes break now to allow you time to finalize your votes. For those in the room, please place your completed proxy forms in the ballot boxes that will be coming around. Thank you for voting on. Sorry. Carry on with your voting, please.
[Break]
So ladies and gentlemen, thank you for voting, and the voting on the resolutions are now closed. You will now see on the screen the results of the postal voting received ahead of the meeting for the resolutions.
These postal votes do not include discretionary proxies held. These will be voted on at the meeting. The company's auditor, EY, will act as a scrutineer for the polls. The final results of voting from the resolutions will be advised to the NZX and the ASX this afternoon, and which will obviously incorporate those that have voted just now. This is now the opportunity for any shareholder to ask any final questions or raise any other business for this meeting. I do ask that we do not return to any of the matters we have already addressed. So any questions from the floor? Okay. Thank you. Christian.
One final question online from Stephen Mayne.
Yep.
The SkyCity chair told their AGM this morning that the litigation with Fletcher Building is likely to last another two years. Is it really that entrenched? How much have we spent on the lawyers so far? And is the Audit and Risk Committee chair, who is up for reelection today, comfortable with the idea of running a multi-year case against another listed company?
I think I can handle it. I don't think I need to involve Sandra in that. I think a pretty important point here is they're suing us, we're not suing them. Okay. So in other words, we didn't start this. But we are defending our position. We think that is the right use of funds. We're actually comfortable in our position, but I'm not going to go into all the court details or all the background to it other than they're suing us, we are responding.
No further questions.
Okay. Thank you. Well, ladies and gentlemen, I now declare the meeting closed. Thank you for attendance and your participation today, and we'd be delighted if you'd want to join us for some light refreshments just through the curtains there. Thank you very much.