Trellidor Holdings Limited ($TRL)

Good morning, everyone, and a very warm welcome to the Trellidor Holdings Limited results presentation for the 6-month period ended 31 December 2025. We're joined this morning by Terry Dennison, the Trellidor Group CEO; and Damian Judge, the Group CFO. Terry will start today's presentation with an operational review of the group's business and performance for the period, followed by Damian providing an overview of the interim financial results as published on SENS this morning. After the presentation, there will be a Q&A session during which Terry and Damian will be available to answer your questions and participants can submit questions via the Zoom Q&A function at any time during the presentation. As always, a recording of this webinar will be made available on Trellidor's website in due course. And with that, I will now hand over to the Trellidor team.

Good morning all, and welcome. Thank you for joining us today. Thanks to you, Vera, and your team from PSG Capital for setting up this webinar. As previously reported, the group successfully completed the disposal of Taylor and NMC during the period. This was effective from 1 July 2025. Term debt was reduced by a further ZAR 19.8 million in September with a commensurate 48.1% drop in the interest charge for the period. Debt facilities now comprise of overdraft facilities and property finance secured by the factory premises, which includes the head office in Durban and our Cape Town property housing the Trellidor Cape Town branch. The Trellidor business now comprises the factory in Durban, franchise outlets in South Africa serving the market regionally, 3 corporate-owned branches in Johannesburg, Cape Town and Durban. A nonresidential division serving the corporate large developer, contractor and professional markets, an export division focusing mainly on Africa, supported by franchise network in country, a corporate-owned branch in Ghana with basic manufacturing capacity and the corporate-owned branch in the U.K. with basic manufacturing capacity focused on growing Trellidor's market in the U.K. Looking at the challenges faced in the period. As anticipated, revenue declined by 21.3% on the restated comparative following the disposal of Taylor and NMC, primarily due to the completion of the significant nonrecurring project in the U.K. in February 2025. The comparative period included ZAR 38 million in revenue from this project and its commensurate contribution to gross profit. Revenue from South Africa and Africa performed below expectation, albeit with a solid forward order book carried into half 2. Looking at our opportunities. Following the disposal of Taylor and NMC, cost-saving opportunities have been identified and a program to reduce fixed overheads by ZAR 13.9 million has commenced and will be completed in half 2 with the full benefit of these savings being realized for the financial year ending 30 June 2027. Expansion of the revenue base in the U.K., excluding the project, is showing good progress with incremental growth on last year. These efforts continue. Progress in the nonresidential division is encouraging with strong growth, albeit off a small base. Incremental growth in the local market is supported by our growing distribution base with several new distributors being trained and onboarded through half 1, and we anticipate an increasing uptake from this channel. Looking at the salient features for the period. Revenue declined to ZAR 161.1 million from a comparative ZAR 204.8 million due to the reasons already mentioned. Operating profit margin of 2.2% compares to 16.5% in the prior period, primarily due to reduced revenue. As mentioned, the cost reduction program to rightsize fixed costs has been implemented early in H2 and will be completed before year end. Headline earnings per share of ZAR 0.06 per share compares to ZAR 0.214 in the prior period, which included a sizable contribution from the nonrecurring project in the U.K. Net debt at 31 December 2025 was ZAR 46.7 million after a further paydown of ZAR 19.8 million during the period. Looking to our strategic outlook. Addressing the erosion in shareholder value remains the foremost strategic objective for the group. The first phase, which dealt with capital reallocation to reduce gearing and enhance operational focus has been completed. The next phase is currently in progress, dealing with reducing the fixed cost base. Growing our revenue base remains key and encouraging results have been seen in the underlying revenue base in the U.K. as well as in the nonresidential division in South Africa and Southern Africa. In addition, growing the distributor base in South Africa and Africa is gathering momentum, improving geographic presence and increasing our selling capacity in support of the traditional franchise base that has been facing headwinds in recent years. I will now hand over to Damian to take us through the numbers.

Thank you, Terry, and thanks again to the team from PSG for hosting us today. Good morning, everyone, and thank you for joining us. Given the changes to the group's business units following the disposal of Taylor and NMC at the end of our previous financial year, the group's results have been presented to provide the detail regarding the performance of the continuing operations through the 6-month reporting period. In terms of the accounting standards, the prior year comparators on the income statement have therefore been represented to reflect this classification change. From a statement of financial position or balance sheet perspective, we are not required to represent the prior year. The company's financial performance for the 6 months is summarized here. The comparatives have been represented to reflect a like-for-like comparison, excluding the Taylor and NMC businesses. This is, therefore, the results of the company structure outlined earlier, being sales through our franchise network in RSA and abroad as well as our corporate-owned branches in RSA, Ghana and the U.K. As anticipated, revenue declined from the prior year as a result of the nonrecurring project in the U.K., which we completed in February 2025. As per the SENS announcement dated 10 February 2026, this project work contributed ZAR 38 million to turnover during the prior 6 months and ZAR 21.3 million in gross profit contribution. The correction was anticipated. However, the carried forward cost base has negatively impacted results through FY '26 and will be rightsized during the remainder of the financial period. It is very pleasing that the sustainable turnover base in the U.K. continues to show growth following the momentum we have been building since 2023. In RSA, performance has been lumpy following a very challenging start as we continue to grapple with constrained consumer spend. Product demand in KwaZulu-Natal, the Free State, Northern Cape and the Western Cape is positive with specific regional economic pressures in the Eastern Cape and Gauteng. The demand for our products in the nonresidential market is positive going forward. The rest of Africa is tracking below prior year but with a healthy order book, we do anticipate this gap to narrow. Operator costs, which include direct and indirect costs are being well managed. However, the cost structure is being rightsized in both the U.K., as I mentioned earlier, and in RSA. The annualized benefits of this program will flow through in FY '27. Finance costs from continuing operations have decreased by 29.7% over the period. In terms of total finance costs from discontinued and continued operations, we are reporting a 47.3% decrease driven by the significant reduction in debt. The cost management improved material utilization through the period and reduction in finance costs was unable to offset the under-recovery of fixed and semi-variable costs driven by the lower revenue number. And as a result, we're reporting a HEPS of ZAR 0.06 per share for the 6 months. Taking a look at our revenue segmental analysis by geographical source. The Rest of World contribution to revenue has declined from 30% to 16% in 2026 as expected given the decrease in sales from the U.K. However, as noted previously, the underlying sustainable revenue base in the U.K. showed strong growth as our focus on increasing our nonresidential customer base is showing early positive signs. RSA remains our key contributor to our top line, which historically has been very reliant on the residential market. Progress has been made in diversifying our route to market through the nonresidential sector in an effort to reduce this reliance. In addition, we are focused on expanding our geographical footprint of stores and selling capacity by expanding our distribution model in RSA, Africa and the U.K. Following a strong recovery in HEPS from the 2022 and 2023 financial periods, the results for this period highlight the challenge we have over the remaining 6 months of this financial year in building a sustainable profit base for FY '27 post the disposal of Taylor and NMC. Given the timing of the disposal of Taylor and NMC at the end of the prior financial period and given that, that process was only completed late into Q1 of this current period, it meant that we were unable to start work on the cost restructure any earlier. As highlighted, the plans are being implemented. And in terms of the cost base rightsizing, that is on track for completion before the end of FY '26. The reduced gross profit contribution from the U.K., coupled with the cost structures post the disposal of Taylor NMC and the completion of the U.K. project has put cash generation under pressure through the first 6 months of FY '26. In addition, working capital utilized cash during the period, driven by balancing inventory levels in support of growth strategies in the U.K. and Ghana and the settlement of payables brought forward from the historic company structure. For additional information and clarity on our cash generation, Note 7 has been provided in our results release. The transition was completed through FY '26 H1 with improved cash generation anticipated in the second half of the year. From a net debt perspective, year-on-year, we are reporting a 45.3% decrease in net debt. Given the overall financial performance over the period, we are not declaring an interim dividend. As per our SENS announcement dated 10th of February 2026, stabilizing the balance sheet through a significant reduction in debt was Phase 1 of our goal to restore shareholder value. At the peak of 2023, our debt level sat at ZAR 121 million, which has now declined to ZAR 46.5 million at the end of December 2025, indicating that we have largely achieved our goal of stabilizing the balance sheet. Post the disposal of Taylor and NMC, our long-term debt facilities comprise only of property secured debt being our factory facility in Durban and our showroom in Cape Town. As at the end of December 2025, the loan-to-value of our facility was at a 65% utilization. As mentioned earlier, we have seen an investment in working capital through the first 6 months of FY '26. From an inventory perspective, although we are showing a release at the end of the 6 months, there was an initial stock up specifically in Ghana and the U.K. to support growth strategies. The subsequent inventory release has not matched the short-term paydown of the payables which has resulted in the cash utilization through the period. The increase in debtors is seasonal when comparing June to December balances. Given the payables balance and stock levels have normalized, cash generation is anticipated through the second half of the year. Given the anticipated reduction in earnings and the utilization of cash through the 6 months, our cash metrics are not positive for this reporting period, unfortunately. We do, however, anticipate an improvement through the next 6 months, driven by stabilized inventory levels to support growth strategies and the normalized payable levels post the disposal of NMC and Taylor. Thank you again for joining us, and back to you, Vera and the PSG team.

Thanks, Terry and Damian. [Operator Instructions] At the moment, there are no questions yet. So we're just going to give it a couple of minutes, we'll be right back. First question from Craig. Do you anticipate paying an annual dividend at the end of the financial year? I will pass over to Damian and Terry.

Thanks, Craig, Terry here. We will be making an assessment as we get through the end of the year and provided we've got improved results and better cash flow, the Board will consider dividends again. It's premature to be making that call at this stage.

Thanks, Terry. We have an anonymous question from anonymous. Your stated Phase III strategy explicitly mentions that you need to introduce a shareholder of reference to support future development. Translating this for the market, is the Board currently in active discussions to sell the business or take it private? If a strategic buyout does not materialize in the next 12 to 18 months, what is the contingency plan for this listed entity given the current lack of scale? As the sponsor for Trellidor, obviously, from a price-sensitive perspective, I'll hand over to Terry and Damian, but with that caveat.

Yes. Thanks, Vera. We have stated the Chairman's report in the integrated report released late last year did indicate the need in phase -- in the third phase to introduce a shareholder of reference. And the context behind that is Trellidor is a small business in the public space and is vulnerable to movements in the market without a significant shareholder in the background, providing stability to the business. So that's the context of it. It's not referring to active discussions and not trying to indicate that there are any potential transactions in place. That said, the Board is open to approaches from potential investors and each approach will be assessed on its merits.

Thanks, Terry. We'll just give it a couple more minutes to see if there are any questions coming through. One more from [indiscernible]. Are you seeing revenue declines as a loss of market share? And if so, who are the primary competitors?

Thanks, [indiscernible]. Damian here. I think from a market share perspective, it's a very difficult one to measure in our space from a pure product perspective, given that our actual competitors range between hard product versus the sort of types of estates that are being bulit or living and residential sort of communities that are being built. So market share has always been a challenge for us to actively or accurately measure as we've communicated previously. But definitely, from a South African perspective, consumers are under pressure, and we have seen in the market a buy down or looking for cheaper product. So that will impact us as a premium seller, but we do have solutions that we've rolled out to combat that as well. In terms of major competitors, I think it's fairly well marketed. Those are Xpanda, Maxidor, Magnador from the retractable space. And then there's a number of key shutter manufacturers down in Western Cape. So unfortunately, for us, there's a mix of competition from national players in the game, but also very regionally based and provincial based. So it makes it very challenging from a competition perspective.

Thanks, Damian. We have another question from an anonymous attendee who asks, do you have medium-term operating profit margin targets post the cost-cutting exercise?

Yes, we do internally, which we don't share publicly. But in essence, the Trellidor business is a manufacturing business with a fairly high cost base. The track record of the business is the contribution of -- to profitability after variable costs is a very high percentage, a very strong percentage. So the recovery of fixed costs is the first target. Thereafter, the drop down to contribution to profits is fairly significant in the business. And it's well presented and well reported on in previous periods. So it is our intention to return our profitability targets back to historic norms.

Thanks, Terry. We've got a question from Paul. You mentioned that the second half of the year is showing promising signs in terms of the order book. Can you elaborate on this and provide some detail on which segments or geographies you are seeing the growth come from?

Thanks, Paul. Damian here. It's actually quite nicely spread regionally. We've got opportunities in South Africa, Africa and into the U.K. And then from a segment perspective, what's quite healthy has been the sort of nonresidential market or your sort of B2B or commercial space, which is gaining the significant traction. So there are a number of individual sort of residential projects as well, but it really is in that B2B/nonresidential market and across from SA into Africa and the U.K.

Thanks, Damian. We've got another question from an anonymous attendee who asks if there is an offshore private equity player interested in the U.K. business. Question is whether the Trellidor Group would dispose of that division. I assume it would depend on many factors. But the next part is who are the U.K. competitors of the business?

Yes, thank you for that question. Again, as pretty much as answered in the previous series of questions, we would consider and be open to listening to any approach and consider it on its merits. We do see the U.K. as key to our growth. And the strategic advantage of growth in the U.K. is the vertical chain impact through the rest of the group as the majority of the products are manufactured either in part or in full in the manufacturing facility in Durban. So there's a contribution to the South African operation and a contribution from the U.K. operation. But as we have done in other markets, our preferred model is an owner-operated model in country. And if we were able to find the right partner who -- and we believe that they could do a better job than we can in the territory, we would always be open to consider an approach U.K. competitors are there are many. We have quite a wide range of product sets that we offer. And there are different competitors making up competing against the different product sets, a lot of smaller businesses and 1 or 2 national businesses.

Another question from Craig. Apart from the lack of revenue from the U.K. project, the commentary on the results and the presentation provides very little insight into the operating performance in South Africa, the U.K. and the Rest of Africa. Could you provide further insights into the revenue and cost performance and outlook for the full year and beyond?

Thanks, Craig. In terms of the regional performances, if you look into the booklets, we've got a detailed geographical breakdown of revenue for the period year-on-year. It's also been adjusted for the -- or represented for -- to exclude the disposal company. So it's a good reflection of the regional performance, both in South Africa, Africa and the Rest of World. Obviously, the Rest of World number is down quite significantly post the disposal -- the project being finished in the U.K. So in terms of the Africa performance, like we said, there has been a few projects that have been back ranked into the second half of the year. So we anticipate that returning. And then from the South African perspective, similarly, there were some project work that we're starting to see come through now in the second half. In terms of cost performance, that's getting back to -- so in the U.K., we have had that lag of that cost base that rolled over from the project work which we've taken, unfortunately, a little bit of time to normalize, which that process is underway. So that will come back. And in line with, like Terry says, we've got our historic measures within the business units that we're targeting to return to. And likewise, within the South African operating business, which is mainly at the factory level where those costs would be normalized during the second half of this year.

Thanks, Damian. While we wait and see if there's any further questions, maybe just to remind everyone that if you have any further queries or requests, please feel free to contact Trellidor directly or even through the -- through us, PSG Capital sponsors, and we will attend to any of those questions and make sure you get answers. See, there are no further questions at this point. So I just want to thank Terry and Damian for the presentation today and for everybody who attended as participants. Thank you very, very much. Have a lovely day.