TEN
31/08/2015 08:31
GENERAL
PRICE SENSITIVE
REL: 0831 HRS Tenon Limited
GENERAL: TEN: Tenon Announces Shareholder Initiatives
Strategic Review
Introduction of Dividend Payments
FY '16 Earnings Guidance
* * * * * *
There are forward-looking statements included in this document. As
forward-looking statements are predictive in nature, they are subject to a
number of risks and uncertainties relating to Tenon, its operations, the
markets in which it competes and other factors (some of which are beyond the
control of Tenon). As a result of the foregoing, actual results and
conditions may differ materially from those expressed or implied by such
statements. In particular Tenon's operations and results are significantly
influenced by the level of activity in the various sectors of the economies
in which it competes, particularly in North America. Fluctuations in
industrial output, commercial and residential construction activity, capital
availability, housing turnover and pricing, levels of repairs, remodelling
and additions to existing homes, new housing starts, relative exchange rates,
interest rates, and profitability of customers, can each have a substantial
impact on Tenon's results of operations and financial condition. Other risks
include competitor product development and demand and pricing and customer
concentration risk. As a result of the foregoing, actual results and
conclusions may differ materially from those expressed or implied by such
statements.
All references in this document to $ or "dollars" are references to United
States dollars unless otherwise stated.
Tenon's financial year end is 30 June.
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28 August 2015 - In addressing FY '15 year performance, Luke Moriarty,
Tenon's Chairman, said today "In the period under review, Tenon's share price
moved up strongly, rising 32%. This increase far exceeded the performance of
the NZX50, which returned 10%, and also that of the ASX50 and Dow Jones
indices which in comparison declined-3% and -2% respectively over this same
period5.
Although this relative share price performance is very positive, we are
obviously disappointed that in absolute terms the price is still well below
external views of value. In this respect Edison Research issued a report on
Tenon in March that, based on comparable equity market earnings multiples and
the NZ$:US$ cross rate at the time, valued Tenon at NZ$3.75 - NZ$4.99 per
share. The Board is very keen to quickly close this gap and today we are
announcing two initiatives aimed at increasing shareholder value -
1. Strategic Review - The Board has determined a Strategic Review will be
immediately undertaken. The underlying goal of the Review is to come up with
the risk-adjusted path most likely to close the share price value gap and
thereby achieve better value recognition for all shareholders. Deutsche
Craigs and Deutsche Bank have been appointed as Tenon's exclusive advisors
for the purpose of this Review.
2. Introduction of dividend payments - We had previously announced our
intention to begin making regular dividend payments to shareholders in fiscal
'16. Based on our current earnings performance and our confidence in the year
ahead, the Board has now determined that the Company will immediately follow
through on that intention, by declaring a final dividend payment in respect
of Tenon's fiscal '15 year just completed. The dividend is NZ5.0 cps4, and
payment will be made on 6 November to shareholders on the Tenon share
register as at 30 October. The Board has also determined that moving forward,
the intention1 is to make two dividend payments per year, following the
completion and announcement of each of the Company's interim and annual
results. The Board has not decided what the dividend rate1 will be for fiscal
'16, as that will be dependent upon and subject to financial performance,
competing needs for the Company's capital, broader macro market conditions,
and the outcome of the Strategic Review."
3. Earnings Guidance - In addition to these announcements, the Company also
gave insight on its internal forward earnings targets. Mr Moriarty said, "Net
earnings trebled in the FY '15 year just completed, and our expectation is
for materially higher earnings next year. In this respect we are internally
targeting EBITDA2 in excess of $20 million1,2 for fiscal '16 (excluding FX
gains / losses). We reiterate our mid-cycle3 EBITDA guidance of circa $50
million."
ENDS
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Footnotes
1 Eventual earnings, cash flow, net debt and dividend payment outcomes will
be dependent upon continued US housing market recovery, interest rates,
NZ$:US$ cross rate, and the Strategic Review (amongst other drivers, many of
which are beyond Tenon's control).
2 EBITDA (i.e. Earnings before Interest, Taxation, Depreciation and
Amortisations) is a non-GAAP earnings figure that equity analysts tend to
focus on for comparable company performance, because that number removes
distortions caused by differences in asset ages, depreciation policies, and
debt:equity structures. Refer also Note 1 to our 30 June 2015 Condensed
Financial Statements. Tenon's EBITDA for FY'15 of US$13 million is calculated
as Net Profit after Taxation of $6 million (2014 $2 million), plus Tax
Expense of $nil (2014 $1 million), plus Financing Costs of $4 million (2014
$4 million), plus depreciation and amortisations of $3 million (2014 $4
million).
3 Tenon defines mid-cycle as 1.6 million housing starts, a NZ$:US$0.6500
exchange rate , projected FY'16 gross margin % held flat, inclusion of the
benefit of current Taupo optimisation capex, and limited organic growth (i.e.
product programme expansion and pro-dealer territorial expansion). The new
housing starts assumption represents an average derived from information and
reports publicly released by Forest Economic Advisors, Forisk Consulting,
Joint Center for Housing Studies of Harvard University, Goldman Sachs,
Deutsche Bank, and from Tenon's own internal research.
4 Imputation credits will not be attached to the dividend due to Tenon's
current non-tax paying position.
5 For the period from 1 July '14 through to the time of writing this
report.
End CA:00269319 For:TEN Type:GENERAL Time:2015-08-31 08:31:05
