Trellidor’s debt covenant breach is condoned by lender

When Trellidor published its annual results on September 29, it reported the covenant breaches. File

When Trellidor published its annual results on September 29, it reported the covenant breaches. File

Published Nov 17, 2023


Trellidor Holdings said yesterday its primary lender had condoned covenant breaches that occurred primarily due to a decrease in the group’s financial performance for the year to June 30.

When Trellidor published its annual results on September 29, it reported the covenant breaches, and that its primary lender would complete an annual review and assess the significance of the covenant breaches, upon receipt of the results.

Trellidor’s board said yesterday it was pleased to announce that these covenants would be re-measured by the lender for the ensuing financial period ending June 30, 2024.

In allowing the breaches, the lender considered the financial and operating plans to rectify the breaches, that the group continued to be profit-making despite its underperformance, and that no legal proceedings had been instituted against the group by other funders.

The financial and operating plans prepared by Trellidor’s executive team had incorporated the existing strategy of improving profitability.

The breached covenants would be regularised by addressing the factors that impacted the financial performance in the second half of the 2023 financial year, including product positioning and price reviews being implemented through the second quarter of the 2024 financial year.

In addition, a significant manufacture and supply contract of roller shutters in the UK would be fulfilled – the project was expected to be completed during the third quarter of the 2024 financial year.

Overhead cost increases would be maintained in line with inflation throughout the 2024 financial year, after the investment in selling capacity which took place during the 2023 financial year.

The executive team were mandated to investigate opportunities to materially reduce the debt by the end of the 2025 financial year.

The possibility of concluding a “sale and leaseback” transaction of certain properties owned by the group was being considered.

Given that the primary lender had condoned the covenant breaches, the group would be able to defer settlement of the related loan liabilities for at least 12 months after the 2023 financial report, the group said in a statement.

Trellidor’s revenue decreased by 2.1% to R502 million in the year to June 30, 2023. Headline earnings per share increased by more than 100% to 4.2 cents per share, from 0.4 cents per share in the prior year.

The group had interest-bearing liabilities of R121.5 m (R96.4m) by the end of June 30. Some R21.4m of free cash flow was generated, which, with additional debt raised and increased use of the overdraft facility, was used to implement a Labour Court judgment, purchase the Hillcrest franchise and repay debt capital and interest of R28m.