Trellidor Holdings’ share price slumped up to 12.4% to R1.75 yesterday after reporting a weak financial performance for the year to June 30 and warning that it had potentially breached its debt covenants.
Its audit committee said in its report that a profit improvement strategy would also help ensure “the current breached covenants are regularised”.
This strategy included addressing factors that impacted the financial performance in the second half of its 2023 financial year, including product positioning and price reviews through the 2024 year, and the fulfilment of a significant manufacture and supply contract of roller shutters in the UK.
Other aspects of the strategy included containing overhead costs in line with inflation through 2024, after the investment in selling capacity in 2023, while the board had also mandated the executives to investigate opportunities to materially reduce debt by the end of the 2025 financial year.
In the past year, headline earnings a share had increased more than 100% to 4.2 cents a share from 0.4c per share at the same time a year before. Revenue fell by 2.1% to R502 million from R513m.
However, adjusting for a provision raised, for the costs of implementing a Labour Appeal Court judgment, in the financial year to June 30, 2022, earnings per share of 3.7c in the current year compared to an adjusted of 25c a share for the 2022 financial year.
The board opted not to declare a dividend due to the weak financial performance and current debt levels.
It said options such as share buybacks and dividends would be considered only once gearing stabilised, and after investment in growth opportunities that achieved the group’s targeted return, had been assessed. Interest bearing debt stood at R121.5m.
Directors said Trellidor’s market for its products in South Africa was constrained against a backdrop of elevated interest rates, the government’s failure to deliver services and a generally weak economy.
“Where physical security was previously a priority for households in South Africa, this is not necessarily the case in the current environment. Further, residential property sale volumes are subdued, most prominently in Gauteng, and the growing preference for estate living has also had a negative impact on sales of Trellidor’s traditional product range,” directors said.
In the UK, retail sector spend was focused on in-store shop fitting in response to proposed regulation changes and as a result project spend in security-related areas was lower, compared to prior years.
BUSINESS REPORT