Tenon announces first dividend in 17 years after trebling annual profit

Monday 31st August 2015

Tenon, whose locally produced wood mouldings are sold in the US, announced its first dividend in 17 years after it trebled annual profit as a rebound in the US housing market and a decline in the kiwi dollar against the greenback boosted earnings.

The Taupo based firm will pay a 5 cents per share final dividend on Nov. 6, with an Oct. 30 record date, the first dividend the company has paid since April 1998. Tenon flagged in February it would return to paying dividends in 2016, but in today's announcement said the board would start the payments immediately and intends to make two per year.

Profit rose to US$6 million in the year ended June 30, from US$2 million a year earlier, the company said in a statement. Sales rose 2.5 percent to US$406 million. Earnings before interest, tax, depreciation and amortisation rose 18 percent to US$13 million. The company expects 2016 Ebitda, excluding foreign exchange gains or losses, to exceed US$20 million.

After a decade of losses, Tenon last year returned to profitability, as the US housing market, where it gets 90 percent of revenue, began to recover after being hit by the US sub-prime mortgage crisis and subsequent global financial crisis. In the 2015 year, the rebound in the US housing market, where a builder's confidence index is at a nine year high and new home permits are at an eight-year high, and the depreciation in the New Zealand dollar against the US currency boosted Tenon's income.

"Tenon is leveraged to recovery in both the new home construction (ie pro-dealer) and do-it-yourself (ie retail) markets in the US," chairman Luke Moriarty said. "These markets share some common drivers - job security and job growth, real wage growth, credit availability, home prices, affordability, homes available for sale, and existing house sales levels, are all key to both markets. Almost all of these drivers are now supportive of a continued recovery in new home construction and in improved retail activity."

Looking ahead, the company saw the broader risk that the US Federal Reserve may move to life interest rates, but expected recovery in the housing market to continue. The continuation of a more favourable exchange rate, the benefit of restructuring its North American unit, the completion of Taupo manufacturing plant upgrades and with refurbished store costs behind it should see a boost to earnings.

At balance date, debt had risen to US$58 million, from US$50 million a year earlier.

The company has hired Deutsche Craigs and Deutsche Bank to conduct a strategic review with the goal to come up with a "risk-adjusted path most likely to close the share price value gap". Tenon shares last traded at $2 and have more than doubled over the past two years, having dropped as low as 50 cents during the sub-prime mortgage crisis and subsequent global financial crisis.

A Tenon commissioned report by Edison Research valued the shares at between $3.75 and $4.99.

BusinessDesk.co.nz

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