Distribution.

Fletcher Building's distribution business, PlaceMakers, is the premier supplier of building materials to New Zealand's commercial and residential construction markets. There are 63 PlaceMakers branches and depots, most of which are operated in joint venture partnership with local owners/operators.

Performance overview

PlaceMakers sales declined by three percent over the prior year as residential and commercial activity declined in the second half. Despite very tough second half conditions, operating earnings rose by three percent driven by planned cost reductions and a focus on margin protection. A 12 percent decline in residential consents resulted in the worst trading conditions since the beginning of the global financial crisis. While this second dip was unexpected, the business was in good shape to weather the conditions. Improvements in operational controls initiated in the prior year resulted in inventory reducing by eight percent. This helped PlaceMakers achieve an annualised return of 27 percent, in line with the previous year. Capital expenditure was restrained and focused on improving resilience and operational performance. More focus on growth is planned in next year's budgets.

The Canterbury earthquakes placed substantial pressures on the 340 staff in the Christchurch network of four facilities. Most importantly, no staff or customers were injured. The branches suffered minor damage and only modest trading impediments. PlaceMakers' teams worked hard to ensure each facility was able to pick itself up quickly and resume trading. Much work has gone into strengthening the Christchurch network in readiness for the rebuilding programme.

While the trade segment endured tough conditions, the DIY segment came under even more pressure as consumer confidence weakened, demand tapered off following the GST increase in October 2010, and big box retail competition intensified. PlaceMakers' response was to remain focused on a quality trade offering, and its "Know How, Can Do" brand position. Continued enhancements to the network were undertaken with new trade-focused branches opening in Hawera, Albany, and Pukekohe. Further new branches and refurbishments are planned. The purpose of these is to strengthen PlaceMakers' trade offering, rather than increasing activity in the more expensive retail market. The planned consolidation of the frame and truss plants continues, and this will enable the business to maximise its scale and product quality to customers through larger, safer, and more productive plants.

Employee engagement lifted in the annual survey. This was a result of a continuing focus on health and safety, communication, learning and development, and internal talent development. Six branch operator appointments were made internally during the year. The new PlaceMakers' leadership team was completed with the appointments of Commercial, Marketing, and Merchandise General Managers.

Back to topLooking ahead

PlaceMakers will remain focused on shaping the distribution business to withstand on-going tough trading conditions. Challenging retail conditions will see a reduction in the cost of marketing to retail customers by moving investment into more direct marketing to "Know How" cardholders. Improving the trade offer will remain a priority to grow share of builder wallet and consent value. Leveraging the Frame and Truss estimating and detailing capability will help PlaceMakers extend into offerings in roofing, windows, and doors. The trade system platform will be further developed to allow for full project management capability. Higher branch performance standards and customer survey results indicate a lift in overall customer satisfaction. PlaceMakers intends to hold market share against continuing efforts by retail competitors to enter the trade market.