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Every day 700 homes and 200 commercial properties in SA fall victim to burglaries. It’s a sorry reflection of the state of society, but for Trellidor it represents a big opportunity.
As the country’s largest producer of customised barrier-security products, Durban-based Trellidor has a firm grip on a market it estimates is worth R900m in annual sales.
"There is no exact data, but in our view we have a 35% market share in the main urban areas and a 50% share in outlying areas," says group CEO Terry Dennison.
Operating through 71 franchise outlets, Trellidor is the only player with a national footprint. But to stay ahead in a fragmented sector where barriers to entry are low, it must be on top of its game. "We invest heavily in [support of] brand awareness," says Dennison. "In-house research and development also allow us to offer unique products."
Three recent additions to Trellidor’s line-up are Rollerstyle roller shutters, Clear Guard, a see-through steel mesh product, and a transparent polycarbonate offering. New-generation products now account for 20% of group sales.
Supporting Dennison’s confidence in the company’s ability to remain ahead of the pack is a 24% operating margin in Trellidor’s year to June, a level that reflects a company far from pressured by cut-throat competition. The group has also won the trust of demanding foreign clients, including that of UK retailer Sainsbury’s.
"We have worked with Sainsbury’s on the development of security systems for over 10 years," says Dennison. "UK security standards are ahead of SA’s. It helps us with our research and development."
Dennison says the group is also working with the London Underground, which emphasises Trellidor’s credibility as a market leader.
Though First World involvement brings prestige, it plays a minor part in Trellidor’s fortunes, accounting for only 1.2% of sales.
Trellidor is looking to countries elsewhere in Africa, which already account for 15% of sales, to be a key growth driver beyond SA.
"Since 2008 there has been a big change in focus away from the UK and Europe, and towards Africa," says Dennison.
No stranger to the continent, Trellidor has been active in neighbouring countries for more than 15 years. More recently it has spread its wings to cover 17 countries, including Nigeria, Angola, Kenya, Tanzania, Egypt, Mauritius, the Seychelles, Madagascar and Réunion.
As in SA, Trellidor has a franchise model elsewhere in Africa. The exception is Ghana, where it has an 85% stake in a local operation, which includes an assembly facility. "Ghana is a very big market for us," says Dennison. "We are also doing very well in East Africa and the [Indian Ocean] islands."
When Trellidor listed in October 2015 it left no doubt that acquisitions were on its growth agenda. It made its first move in June this year, snapping up a 92.5% stake in Cape Town-based Taylor Blinds and its decorative mouldings unit, NMC, for R121m.
By far Trellidor’s largest acquisition ever, Taylor Blinds is a game changer and in the year to June 2017 is expected to lift group sales by about R230m to more than R540m. The acquisition has also given Trellidor what it sought: gearing. The Taylor Blinds deal absorbed the R50m cash raised in Trellidor’s listing and added debt of R70m, lifting gearing to 65% of equity.
"We have the ability to make more small acquisitions, but if another large one comes along we would consider raising more capital," says Dennison.
Trellidor’s share price has gone nowhere since its listing. There could be a kicker in the wings. Taylor Blinds will be "materially earnings enhancing", says Dennison.
By precisely how much is hard to say. But on 2016 results, Taylor Blinds could provide a boost of up to 40% to Trellidor’s headline EPS, with organic growth adding perhaps another 10%-12%.
Nothing is certain, but numbers like these would leave Trellidor trading on a humble p:e of 7.5 and a dividend yield of up to 7%.