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TRELLIDOR HOLDINGS LIMITED - Unaudited Condensed Consolidated Interim Financial Results for the Six Months Ended 31 December 2018

Release Date: 27/03/2019 10:00
Code(s): TRL     PDF:  
 
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Unaudited Condensed Consolidated Interim Financial Results for the Six Months Ended 31 December 2018

TRELLIDOR HOLDINGS LIMITED
(Registration number 1970/015401/06)
Share Code: TRL
ISIN: ZAE000209342
("the Company" or "Group")

UNAUDITED CONDENSED CONSOLIDATED
INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

SALIENT POINTS

29.8c     Headline earnings per share
          (2018: 35.2 cents)

9.1c      Interim dividend declared per share
          (2018: 11.0 cents)

R56m      EBITDA for the six months
          (2018: R65 million)

R25m      Cash from operations for the six months 
          (2018: R24 million)

20%       Return on invested capital
          (2018: 25%)

COMMENTARY


Introduction
Trellidor Holdings Limited ("Group") comprises the Trellidor business ("Trellidor") and the Taylor Group businesses ("Taylor").

Trellidor is the market leading manufacturer of custom-made barrier security products, distributed via a dedicated and
skilled franchise network situated throughout South Africa, Africa and the UK.

The Taylor Group business incorporates Taylor, a major manufacturer and distributor of custom-made blinds, decorative
and security shutters and NMC, an importer and distributor of cornicing and skirting products. The Taylor Group has a
strong presence in the Western and Southern Cape.

Overview
The Trellidor business produced a solid performance despite the tough economic conditions that prevailed and continue
to negatively impact consumer spending throughout South Africa and Africa, particularly in the middle-income market.
The Taylor Group was fully exposed to the decline in consumer disposable income, particularly in the Western Cape.

Group Revenue for the six months decreased by 4% to R286 million (2018: R297 million). The Group's gross profit margin
of 45% (2018: 46%) was down primarily due to: increased material costs, under recovery of semi variable expenses and
above inflation wage increases. Operating expenses were well managed, increasing by only 3% over the prior year period.
Profit after tax of R33 million and earnings per share of 29.8 cents declined by 17% and 15% respectively.

Net cash from operating activities of R25 million grew by 3%.

In line with the special resolutions passed at the 2017 AGM, the Group repurchased a further 642 705 Group shares during
the period. These were purchased out of available cash resources at an aggregate value of R3.0 million.

Segments
Trellidor
A solid performance given the tough economic conditions, with strategies to protect and improve margins implemented,
and tight overhead expenditure management. Revenue declined by 2%. International sales grew by 9% underpinned by a
strong performance in the UK where two major projects commenced including the installation of the newly developed and
certified product for stations in the London Underground. This was partially offset by a weaker performance in southern
Africa. The efficiency enhancement project was implemented in August 2018, and has yielded better than expected
results, helping to improve gross margin to 47.8% (2018: 47.7%) despite a reduction in revenue. Recurring overheads
remain well managed growing by 2% over the comparative period. Operating profit before interest decreased by less than
1%.

Taylor
Revenue declined by 7%. The continued weak economic conditions, particularly in the Western Cape impacted negatively
on the business. Despite measures being implemented to mitigate the impact on gross margins, margins dropped to
40.8% (2018: 43.9%). These measures are however expected to benefit the business over time. Recurring overheads
were well managed growing by 5%. The combined effect of the reduced revenue, weaker margins and inflation caused
operating profit before interest to decrease by 39%. Net working capital absorbed cash of R11 million in the six-month
period. The reduced sales volumes led to the business being overstocked at the close of the period. This yields an
opportunity in the following six months, to recover the cash absorbed in the first six.

Prospects
Although the weak economic environment is anticipated to continue, some upside from improved market conditions in
West and East Africa and further traction from projects in the UK is expected.

The successful strategies to improve margin and control overheads will continue. Projects focused on material supply and
efficiency enhancement are expected to gather momentum and yield further savings. The Group is more streamlined and
has the capacity to significantly outperform in a more supportive economy.

At the same time strategies to grow sales are in progress. The geographic expansion of the Taylor business is progressing
well with sales through the Trellidor franchise base growing 158% over the corresponding FY18 period. Efforts to accelerate
geographic growth through investment in Taylor's sales capacity in South Africa and opening new Trellidor distributorships
in Africa continue. Taylor launched a new external blind during March 2019, which is expected to further enhance growth
opportunities.

Several synergistic acquisition opportunities are being considered to advance the distribution growth and product
development strategies of the Group. The Group is conservatively financed (Debt/EBITDA ratio of 0.9) and will utilize debt
capacity to finance smaller add on acquisitions.

Given the performance and prospects of the Group, the Board believes the current share price undervalues the business
and so will continue to buy-back shares to deliver shareholder value.

The Group remains focused on its core growth strategies of brand leadership; diversifying its product range; distribution
growth in South Africa and Africa; and acquisitions, which will position it well to benefit from improving economic conditions.
The recent addition of our new CFO to the executive team coupled with internal staff restructuring, will provide additional
capacity to drive strategy implementation and increase focus on efficiency in the operating segments.

Dividend
The board of directors approved an interim gross dividend of 9.1 cents (2018: 11.0 cents) per ordinary share in respect of
the six months ended 31 December 2018.

TM Dennison
Chief Executive Officer

27 March 2019

CASH DIVIDEND DECLARATION


Notice is hereby given that the Directors have approved and declared an interim gross dividend of 9.1 cents per ordinary
share for the six months ended 31 December 2018.

The dividend has been declared from income reserves. A South African dividend withholding tax of 20% will be applicable
to all shareholders who are not exempt or entitled to a reduced rate in terms of the applicable double-tax agreement.
The interim net ordinary dividend is 7.28 cents per share for ordinary shareholders.

The issued share capital at the declaration date is 107,250,878 ordinary shares.

The income tax number of the company is 9419378840.

The salient dates for the dividend will be as follows:
Last day of trade to receive a dividend                                                            Monday, 15 April 2019
Shares commence trading "ex" dividend                                                             Tuesday, 16 April 2019
Record date                                                                                      Thursday, 18 April 2019
Payment date                                                                                      Tuesday, 23 April 2019

Share certificates may not be dematerialised or rematerialised between Tuesday, 16 April 2019 and Thursday, 18 April 2019,
both days inclusive.

STATEMENT OF FINANCIAL POSITION
at 31 December 2018

                                                                             Unaudited at   Unaudited at
                                                                              31 December    31 December      Audited at
                                                                                     2018           2017    30 June 2018
                                                                        Note        R'000          R'000           R'000

Assets
Non-current assets
Property, plant and equipment                                                      66 144         54 558          61 175
Goodwill                                                                           74 797         74 401          74 401
Intangible assets                                                                  41 610         44 359          42 363
Other financial assets                                                                  -            945             693
Deferred tax assets                                                                 2 643          2 816           3 443
                                                                                  185 194        177 079         182 075
Current assets
Inventories                                                                       110 587         95 706         106 374
Trade and other receivables                                                        62 140         60 764          61 377
Other financial assets                                                              2 264          1 173           1 565
Current tax receivable                                                                386             27           2 202
Cash and cash equivalents                                                          18 130         10 394          27 128
                                                                                  193 507        168 064         198 646
Total assets                                                                      378 701        345 143         380 721

Equity and liabilities
Equity
Stated capital                                                                     40 152         43 189          43 188
Other reserves                                                                      5 440          2 931           4 253
Retained earnings                                                                 179 749        156 309         165 107
Equity attributable to owners of the Company                                      225 341        202 429         212 548
Non-controlling interests                                                           6 115          5 816           5 626
Total equity                                                                      231 456        208 245         218 174

Liabilities
Non-current liabilities
Other financial liabilities                                                        66 440         77 694          71 364
Deferred tax liabilities                                                            2 398          4 142           2 610
                                                                                   68 838         81 836          73 974
Current liabilities
Trade and other payables                                                           54 705         33 728          65 681
Other financial liabilities                                                        23 391         20 852          21 687
Current tax payables                                                                    -              -             894
Provisions                                                                            311            482             311
                                                                                   78 407         55 062          88 573
Total liabilities                                                                 147 245        136 898         162 547
Total equity and liabilities                                                      378 701        345 143         380 721

STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the six months ended 31 December 2018
                                                                              Unaudited        Unaudited
                                                                             Six months       Six months
                                                                                  ended            ended        Audited
                                                                            31 December      31 December     Year ended
                                                                                   2018            2017    30 June 2018
                                                                  Note            R'000           R'000           R'000

Revenue                                                                         286 249         297 358         538 984
Cost of sales                                                                 (157 366)       (160 187)       (293 070)
Gross profit                                                                    128 883         137 171         245 914
Other income                                                                      4 799           3 475           7 395
Operating expenses                                                             (83 900)        (81 801)       (161 409)
Operating profit                                                                 49 782          58 845          91 900
Investment revenue                                                                  595             879           1 302
Finance costs                                                                   (4 655)         (5 034)         (9 595)
Profit before tax                                                                45 722          54 690          83 607
Taxation                                                                       (13 162)        (15 580)        (24 029)
Profit for the period                                                            32 560          39 110          59 578
Other comprehensive income:
Items that may be reclassified to profit or loss
Exchange differences on translating foreign operations                              106           (165)           (108)
Income tax related to items that may be reclassified                                  -               -               -
Other comprehensive income for the period, net
of taxation                                                                         106           (165)           (108)
Total comprehensive income for the period                                        32 666          38 945          59 470
Profit attributable to:
Owners of the Company                                                            32 087          38 096          58 763
Non-controlling interests                                                           473           1 013             815
                                                                                 32 560          39 110          59 578
Total comprehensive income attributable to:
Owners of the Company                                                            32 177          37 956          58 671
Non-controlling interests                                                           489             989             799
                                                                                 32 666          38 945          59 470
Earnings per share for profit for the period
attributable to the owners of the Company during
the period
Earnings and diluted earnings per share (cents)                      3             29.8            35.2            54.4

STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2018

                                                                                     Total
                                                                              attributable          Non-
                                             Stated       Total   Retained    to owners of   controlling      Total
                                            capital    reserves     income     the company     interests     equity
                                              R'000       R'000      R'000           R'000         R'000      R'000

Balance at 1 July 2017                       45 759       2 031    139 273         187 063         4 827    191 890   
Total comprehensive income for                                                                                        
the period                                        -       (140)     38 096          37 956           989     38 945   
Own shares acquired                         (2 571)           -          -         (2 571)             -    (2 571)   
Employee share option                             -       1 040          -           1 040             -      1 040   
Dividends                                         -           -   (21 060)        (21 060)             -   (21 060)   
Balance at 31 December 2017                  43 188       2 931    156 309         202 428         5 816    208 244   
Total comprehensive income for                                                                                        
the period                                        -          48     20 667          20 715         (190)     20 525   
Employee share option                             -       1 274          -           1 274             -      1 274   
Dividends                                         -           -   (11 869)        (11 869)             -   (11 869)   
Balance at 30 June 2018                      43 188       4 253    165 107         212 548         5 626    218 174   
Total comprehensive income for
the period                                        -          90     32 087          32 177           489     32 666   
Own shares acquired                         (3 036)           -          -         (3 036)             -    (3 036)   
Employee share option                             -       1 097          -           1 097             -      1 097   
Dividends                                         -           -   (17 445)        (17 445)             -   (17 445)   
Balance at 31 December 2018                  40 152       5 440    179 749         225 341         6 115    231 456   


STATEMENT OF CASH FLOWS
for the six months ended 31 December 2018

                                                         Unaudited       Unaudited
                                                        Six months      Six months         Audited
                                                             ended           ended      Year ended
                                                       31 December     31 December         30 June 
                                                              2018            2017            2018
                                                             R'000           R'000           R'000

Cash generated from operations                              40 668          47 108         106 947
Interest revenue                                               595             879           1 302
Finance costs                                              (4 655)         (5 034)         (9 537)
Tax paid                                                  (11 652)        (18 679)        (30 569)
Net cash from operating activities                          24 956          24 274          68 143

Cash flows from investing activities
Purchase of property, plant and equipment                  (8 286)         (6 654)        (16 416)
Business combinations                                            -        (30 000)               -
Other investing activities                                 (2 194)         (1 207)         (1 504)
Net cash used in investing activities                     (10 480)        (37 861)        (17 920)
Cash flows from financing activities
Purchase of own shares                                     (3 037)         (2 570)         (2 571)
Net proceeds from other financial liabilities              (3 220)         (7 430)        (42 983)
Dividends paid                                            (17 445)        (21 060)        (32 929)
Net cash from financing activities                        (23 702)        (31 060)        (78 483)
Net (decrease)/increase in cash and cash equivalents       (9 226)        (44 647)        (28 260)
Cash and cash equivalents at the beginning of the period    27 128          55 103          55 103
Exchange (loss)/gains on cash and cash equivalents             228            (62)             285
Cash and cash equivalents at the end of the period          18 130          10 394          27 128

NOTES TO THE FINANCIAL RESULTS
for the six months ended 31 December 2018


1. Basis of preparation
   The unaudited condensed consolidated interim financial information for the six months ended 31 December 2018 has
   been prepared and presented in accordance with the Financial Reporting Pronouncements as issued by the Financial
   Reporting Standards Council, the Listings Requirements of the JSE Limited, the information as required by IAS 34
   - Interim Financial Reporting and the Companies Act, No 71 of 2008, under the supervision of the Chief Financial
   Officer, Mr DJR Judge CA (SA). The accounting policies applied, and methods of computation used in preparation of
   the condensed consolidated interim financial information are in terms of IFRS and consistent with those applied in the
   annual financial statements for the year ended 30 June 2018, apart from the effect of IFRS 9 Financial instruments and
   IFRS 15 Revenue from contracts with customers which were adopted during the year under review.

   The results have not been reviewed or audited by the Group's Auditors. The results were approved by the Board of
   Directors on 25 March 2019.

   IFRS 9 Financial instruments
   IFRS 9 Financial instruments introduces a new expected credit loss impairment model that replaces the incurred loss
   model in IAS 39. The Group has adjusted its impairment models using the simplified approach as envisaged by IFRS
   9 to incorporate forward looking information and the time value of money. The impact of the earlier recognition of credit
   losses under IFRS 9 is not material.

   IFRS 15 Revenue from contracts with customers
   The effect of IFRS 15 Revenue from contracts with customers has been considered and it has been concluded that
   it has no impact on the results of the Group.

2. Segmental information
                                                                    Unaudited           Unaudited
                                                                   Six months          Six months
                                                                        ended               ended         Audited
                                                                  31 December         31 December      Year ended
                                                                         2018                2017    30 June 2018
                                                                        R'000               R'000           R'000

Revenue
Trellidor                                                             172 339             176 101         331 576
Taylor                                                                113 921             122 359         208 820
Inter segment                                                            (11)             (1 102)         (1 412)
                                                                      286 249             297 358         538 984
Operating profit before interest and tax
Trellidor                                                              35 989              36 253          64 956
Taylor                                                                 16 239              25 038          31 835
                                                                       52 228              61 291          96 791
Reconciling items
Net finance costs                                                     (4 060)             (4 155)         (8 293)
Amortisation of the client database                                   (2 446)             (2 446)         (4 891)
                                                                       45 722              54 690          83 607

Total assets
Trellidor                                                             143 577             127 434         141 356
Taylor                                                                214 582             204 586         209 112
Inter-segment                                                           (231)                (87)           (318)
                                                                      357 928             331 933         350 150
Reconciling items
Cash and cash equivalents                                              18 130              10 394          27 128
Deferred tax                                                            2 643               2 816           3 443
Total as per statement of financial position                          378 701             345 143         380 721

3. Earnings per share
                                                                    Unaudited           Unaudited
                                                                   Six months          Six months
                                                                        ended               ended         Audited
                                                                  31 December         31 December      Year ended
                                                                         2018                2017    30 June 2018
                                                                        R'000               R'000           R'000

   Profit attributable to ordinary shareholders                        32 087              38 096          58 763
   Adjusted for:
   Profit on disposal of property, plant and equipment                                       (12)           (100)
   Gross amount                                                             -                (17)           (150)
   Non-controlling interest                                                 -                   -               8
   Tax effect                                                               -                   5              42

   Headline earnings                                                   32 087              38 084          58 663


                                                                       Number              Number          Number
                                                                        '000s               '000s           '000s
   Number of shares issued                                            107 251             108 340         108 340
   Weighted average number of ordinary shares in issue
   during the period                                                  107 569             108 146         108 021
   Diluted weighted average number of shares                          107 569             108 146         108 021

   Earnings and diluted earnings per share (cents)                       29.8                35.2            54.4
   Headline and diluted headline earnings per share (cents)              29.8                35.2            54.3

4. Changes to the board
   There were no changes to the board of directors during the period under review.

5. Events after reporting date
   Subsequent to the end of the period under review, Mr CG Cunningham stepped down as CFO of the company on
   1 March 2019 and Mr DJR Judge was appointed as CFO on 1 March 2019.

CORPORATE INFORMATION

Trellidor Holdings Limited
(Registration number 1970/015401/06)
20 Aberdare Drive, Phoenix Industrial Park
Durban,
(PO Box 20173, Durban North 4016)
Share Code: TRL
ISIN: ZAE000209342
("the Company" or "Group")

Directors of Trellidor
MC Olivier (Chairman)*#
TM Dennison (Chief Executive Officer) 
DJR Judge (Chief Financial Officer)+
JB Winship*#
RB Patmore*#

*Non-executive
#Independent
+Appointed 1 March 2019

Company Secretary
P Nel
(BComm FCIS)
71 Cotswold Drive
Westville, 3629

Registered office
20 Aberdare Drive
Phoenix Industrial Park
Durban, 4001
(PO Box 20173, Durban North, 4016)

Date of incorporation
23 November 1970

Place of incorporation
South Africa

Auditors and
Independent Reporting Accountants
Mazars
Mazars House
197 Peter Mokaba Road
Morningside
Durban, 4001
(PO Box 70584, Overport, 4067)

Corporate sponsor
PSG Capital (Pty) Ltd
(Registration Number 2006/015817/07)
1st Floor, Ou Kollege
35 Kerk Street
Stellenbosch, 7600
(PO Box 7403, Stellenbosch, 7599)

and

2nd Floor, Building 3
11 Alice Lane
Sandhurst
Sandton, 2196
(PO Box 650957, Benmore, 2010)

Transfer Secretaries
Computershare Investor Services (Pty) Ltd
(Registration Number 2004/003647/07)
Rosebank Towers, 15 Biermann Avenue
Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)

Announcement date
27 March 2019



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