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- In a shock announcement CEO and Managing Director of Boral (BLD) Mike Kane will retire after delivering the company’s FY20 results
- The company also provided updates regarding its North American Windows business
- In December 2019 Boral advised it noticed financial irregularities in its North American Windows business
- An investigation determined that finance personnel within the Windows business manipulated accounts and financial statements to boost profitability
- As a result, the business has been subject to a restructure
- Boral’s net profit after tax of $156 million is 18 per cent below FY19s $192 million and the company expects its FY20 EBITDA to be down compared to that from FY19
- The market has responded negatively to this news with Boral’s share price 11.2 per cent in the red and trading for $4.58 apiece
In a shock announcement, CEO and Managing Director of Boral (BLD) Mike Kane intends to retire after delivering the company’s FY20 results.
After over seven years, Mike will leave behind his role as CEO and Managing Director.
With the support of a leading global executive recruitment firm, the Board is progressing with a comprehensive search to appoint a successor, covering candidates both in Australia and overseas.
“While the business has faced considerable challenges including lower than expected growth in North America it is important to acknowledge that since his appointment as CEO in 2012, Mike has set Boral on a path to deliver substantially improved performance for the long-term,” Chairman Kathryn Fagg commented.
“Under Mike’s leadership he has significantly improved Boral’s returns on funds employed and earnings per share, and Boral’s safety performance has dramatically strengthened to a level of industry best practice,” she added.
“It has been a privilege to serve as Boral’s CEO,” Mike said.
“It is the right time for me to hand over the leadership of the company during 2020. I expect that fresh leadership will build on what we have achieved so far as part of Boral’s transformation and see further opportunities to deliver shareholder value,” he added.
This announcement came simultaneously as Boral provided updates on its North American Windows business, 1H FY20 results and its FY20 outlook guidance.
On December 5 2019, Boral advised it had identified certain financial irregularities in its North American Windows business.
This involved the misreporting in relation to inventory levels and costs associated with raw materials and labour at its Windows plants between September 2018 and October 2019.
At the time it was reported the incident would result in a one-off impact on earnings before interest, taxes, depreciation and amortisation (EBITDA) by between US$20 – US$30 million (AUD$29 – AUD$44 million).
Boral announced today that the privileged and confidential investigation undertaken by lawyers has now been substantially completed.
The investigation found that finance personnel within the Windows business manipulated accounts and financial statements primarily to inflate the overall profitability of the business.
However, it found no evidence that the manipulations were to hide systematic theft of raw materials or inventory.
Boral can confirm the financial misreporting is limited to only the Windows business.
“The Board and management are deeply disappointed at the breach of trust that led to the accounts of the Windows business being misreported to inflate profitability,” Mike stated.
“Boral has moved quickly to put in place stronger and more transparent reporting and governance mechanisms in the Windows business, in line with the systems in place across Boral’s other businesses and divisions,” he said.
In light of these irregularities, Boral has made changes and realigned the structure of the business.
Both the Vice President Finance and the Financial Controller in Windows have been terminated and changes have been made to the remaining roles.
Boral has also issued an update in relation to its results and interim dividend for the six months ending December 31 2019 and its FY20 full year earnings guidance.
The company’s net profit after tax (NPAT) before significant items for the six months ending December 31 2019 is $156 million, subject to the completion of the auditor’s review.
If this figure stands, then it will be 18 per cent below the restated 1H FY19 NPAT of $192 million.
Taking into account the first half results, lower than expected earnings from the Windows business and project scheduling delays, Boral expects its FY20 EBITDA to be down compared to that from FY19.
This translates into an expected NPAT range of around $320 – $340 million which compares with a restated FY19 NPAT of $420 million.
The market has responded negatively to this news with Boral’s share price 11.2 per cent in the red and trading for $4.58 apiece at 3:12 pm AEDT.
