Trellidor acquires lagging franchises

By Sandile Mchunu Time of article published Mar 10, 2020

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DURBAN - Trellidor Holdings, a leading manufacturer of barrier security products, wants to continue deploying capital to acquire under-performing franchises going forward as it battles with adverse economic conditions which had a negative impact on its results.

The group felt the impact of a constrained economic environment by reporting a 4 percent decline in revenue to R275 million while headline earnings per share declined 13.9percent to 25.6cents a share in the six months to end December. However, the group said the Durbanville franchise, which was purchased last year, managed to grow its sales volumes 23.6percent during the period.

“Management is seeking to replicate this success in other areas,” Trellidor said. “Accordingly, three franchise areas have been purchased in the eThekwini metropolitan area and will be consolidated into a single branch during the second half of 2020. The execution of this strategy will have a limited impact on the earnings in the second half of 2020. The full economic benefit will come through in 2021.”

The group said that the strategic development of this branch would include the centralisation of administration functions and integration of the complimentary Taylor product set and brand in the region.

The group operates two segments, Trellidor and Taylor businesses, and said product innovation remains a key strategy for both Trellidor and Taylor.

“Both businesses are set to introduce new products, to meet changing customer needs, in the local and international market through the course of the second half in 2020 and going into the first half of 2021,” the group said.

Trellidor reported that its earnings per share fell by 15.6percent to 25.1c and profit after tax declined 17.6percent to R27m during the period under review. The group declared an interim dividend of 8c a share, which was down by 12.1percent compared to last year’s 9.1c.

Trellidor segment reported a 7.4percent decline in revenue and operating profit was down by 10.1percent. The segment’s international sales increased 5.6percent, underpinned by a strong performance on the African continent with African sales growing by 21.8percent. However, the group said this was offset by weaker performance in the UK which is coming off a strong 2019 base.

In the Taylor segment, the group said a slight recovery in the Western Cape economy resulted in revenue growth of 1.3percent, despite weaker sales in Gauteng. However, operating profit after tax improved 5.2percent as a result of the amortising effect of debt repayments reducing interest cost for the period. The group said a further strategy in Taylor has been to reduce its stock holding and as a result, inventory is down by 18.7percent compared to last year.

Trellidor closed 6.23percent lower at R2.86 on the JSE yesterday.

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