private and confidential 12 · listing roadshow presentation private and confidential 12 – 16...

Listing Roadshow Presentation PRIVATE AND CONFIDENTIAL

12 – 16 October 2015

Offer summary Listing Listing on Main Board of JSE

Offer size 53.2m shares representing 49% of Trellidor’s shares in issue –

combination of sale and fresh issue R319m – R373m placement (R50m fresh issue)

Indicative price range R6.00 R7.00

Indicative div yield – based on 2015 normalised AFS

4,1% 3,5% Envisaged dividend policy - 50% of PAT

Estimated market cap R648m R756m

R6.00 R7.00 R6.00 R7.00

P/E

’15 Historic 13.2 15.4

EV/EBITDA

’15 Historic 9.1 10.5

’15 Normalised 12.2 14.3 ’15 Normalised 8.6 9.9

Growth scenario 11.2 13.1 Growth scenario 7.8 9.1

Slide 2

Anticipated listing timetable

Formal roadshow Monday, 12 October – Friday, 16 October 2015

Opening date of the Private Placement at 09h00 on Monday, 19 October 2015 Closing date of the Private Placement at 17h00 on Wednesday, 21 October 2015

Anticipated listing date on JSE and commencement of trade on Wednesday, 28 October 2015

Note The times and dates as indicated above are subject to change

Slide 3

Competent management and staff

Value proposition

WELL POSITIONED AND MANAGED BUSINESS WITH A STRONG BRAND, NATIONAL DISTRIBUTION, QUALITY EARNINGS AND PROVEN TRACK RECORD READY TO ACCELERATE ITS LOW RISK GROWTH STRATEGY

Slide 4

Valuable brand - market leader

Growth opportunity in Africa

Dominant market position

TRELLIDOR

Highly cash generative and profitable business

National franchise network

Low risk growth strategy

Growth achieved through product innovation

Defensive and resilient business – security a non

discretionary spend

Business overview

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

2007 2008 2009 2010 2011 2012 2013 2014 2015

Mill

ion

s

Trellidor Factory View

Net Sales Trading Profit

Expansion of Factory capacity

Introduction of clearguard & rollerstyle

Branch closure and increase number of franchisees

Overview

• Founded in 1976

• The trusted brand and market leader in barrier security

• Custom designed products – not in mass produced “DIY” sector

• Management team with over 70 years combined experience

• Growth platform recently established:

• investment in manufacturing (2008 and 2010)

• Branch closure and expanded distribution (2009 to 2012)

• launch of new products (2012)

Slide 6

Business model Route to market

70+ franchise outlets

throughout SA

17 African franchise outlets in

17 African countries

Franchise model most effective

to install custom made

products

No royalties paid

Marketing & Sales

Continuous marketing & advertising

campaigns – all media, shows etc.

Franchisees obliged to contribute to

marketing investment

Majority of leads through customer base

Leads conversion rate of 63%

24 hour turnaround for quotes

All products designed to specification

Detailed management of franchisee

performance stats

Manufacturing

Modern plant in Durban, assembly

plants in strategic African countries

Comprehensive IT system –

franchisee tracking of order

Roll forming, fabricating, painting,

assembly and packaging

Order despatched 7 – 15 days from

receipt of order

Overnight delivery to franchisee in

SA via road transport – outsourced

Installation and after sales service

Franchisee conducts installations

3 – 5 year warranty

Franchisee follow up any service

calls – warranty or repair

Warranty claims < 0.5% of turnover

Price & demand drivers

Product custom designed

Price not easily comparable

Trellidor dominant player – price setter

Price increases in line with input price

increases achieved – maintaining &

improving margins

Demand driven by need to be safe from

crime

Of late large growth in rural areas – non-

title homes

Input cost drivers

Steel, aluminium, fasteners, paint

No material stockholding – JIT

system

Major input prices fixed till Feb ‘16

Significant value-add to materials

Imports form significant input

Labour (manage disruption risk)

Load shedding – not affected

Durban property owned

Slide 7

Management

Terry Dennison (47) CEO

Craig Cunningham

(40) Finance and

admin

Peter Rawson

(58) Sales and Marketing

Chris Wright (55)

Production and Engineering

Colin Heads (51) HR

Craig Meekers (44)

Projects and Technology

• Combined executive management experience with Trellidor – 70 years • Total workforce (excluding franchisee network) - 363 • Blue collar workforce – 284

Slide 9

Loyal and highly competent management and staff

Management team

Board of directors Terry Dennison – CEO (47)

Joined as FD in 1999 and appointed as CEO in 2001. Former deputy general manager of an agricultural company owned by the Commonwealth

Development Corporation. Terry qualified with KPMG as a chartered accountant in 1992.

Mark Olivier – Independent non-executive chairman (46)

Mark has over 20 years' experience in managing debt, property and private equity assets and providing corporate finance and strategic advice,

predominantly in the UK. Mark is a non-executive director of a $1 billion Chinese real estate fund managed by Blackstone Inc and Macquarie and is

the chairman of Rockcastle, a $2 billion public company investing in retail properties in Africa and in Eastern Europe.

Craig Cunningham – FD (40)

Craig is a chartered accountant with experience post-articles with Ernst and Young in the UK, Citigroup and, more recently, financial management

posts at Unitrans and Manline (both logistics companies).

John Winship – Independent non-executive director (61)

John was key to the development of BOE Asset Management, served on the board of BOE Limited and went on to establish Abvest, an institutional

asset manager subsequently bought by ABSA.

Slide 10

Ralph Patmore – Independent non-executive director (63)

Ralph co-founded and was instrumental in the listing of Iliad Africa Limited, a building supply company, which he led as CEO until retirement in 2008.

Prior to that Ralph held numerous executive positions including MD of Group Five Limited manufacturing division.

Industry and positioning

The industry

Partly counter cyclical and defensive

Crime rate and perceptions of crime

Growth in housing stock – middle to upper LSM and non-title deed homelands housing

Change in ownership and value of homes

Increase in middle class - SA and Africa

Disposable income

MACRO DRIVERS

SA market growth - increasing crime, growing middle class, ineffective policing and power outages

African market growth – urbanisation and increasing asset ownership

Margins stable - above inflation sales price increases and flat commodity prices offset by higher energy and labour costs

No new entrants in custom sector, churn in DIY market

Change in the nature of crime – electronic circumvention, house raids etc

KEY TRENDS

Slide 12

“During periods of growing crime people buy the best……Trellidor performs relatively well during these times”

“According to our online survey, 38% of respondents have been a victim (or someone close to them has been a victim) of crime in the last 6 months” Source: Crime stats SA

Number of people murdered and victims of attempted murder annually in South Africa……

28000

29000

30000

31000

32000

33000

34000

35000

36000

2012 2013 2014 2015

Market focus

95% of sales are retrofit into existing homes

95% of customers are end users (not construction, etc)

New builds generally become an opportunity after few years

Focus on non-commodity custom designed & installed

No retail off shelf “DIY” sales

Avoid construction sector – low margin and bad payers

Market leader

Slide 13

DEFINING THE MARKET

• Residential • Office and professional services property • Light retail (a small part of the business) • Focus on South Africa and Africa

CUSTOMER PROFILE

• Domestic LSM 6 and up • Strong growing rural (former homelands) demand

Trellidor – not a construction play

Slide 14

Results uncorrelated to construction index

Material growth achieved by Trellidor in a depressed construction environment

40%

90%

140%

190%

240%

290%

340%

390%

440%

01 July 2011 01 January 2012 01 July 2012 01 January 2013 01 July 2013 01 January 2014 01 July 2014 01 January 2015 01 July 2015

Growth in construction Index vs Trellidor EBITDA

JSE Construction & Materials EBITDA

Results uncorrelated to construction index

Defensive and resilient business

MARKET SHARE ESTIMATES

Brand awareness and market share

MARKET SIZE

BRAND AWARENESS

Very high in South Africa - generic for sliding door security Growing in Africa

No formal statistics – estimated size of market (custom made barrier security) – approximately 300,000 units and R900m annually in SA

Market penetration – substantial DIY product replacement & new builds

Trellidor = +/-35%

Main centres in SA

Trellidor = +/- 50%

Outlying areas

Slide 15

Dominant market position in South Africa but particularly outside the main centers

Brand awareness

Slide 16


Major competitors National Competitors

Xpanda – Durban based 44 outlets – mostly very small part

of the distributors business 3 main branches Big focus on DIY products and

welded

Regional Competitors

Sequre – Pretoria – 22 outlets Magnador – Cape Town –12 outlets – focus on low-end

welded in recent years Trax Doors – FS King Trellis Other smaller players

Other Barrier Security Competitors

Taylor Blinds – security shutter (plantation) AC Screens – security roller shutters American Shutters – security shutter (plantation) Plantation Shutter Company

Maxidor - Gauteng based 43 outlets (4 main branches) Strong in Gauteng, but weaker in

other main centres Weak in outlying areas

Slide 17

Trellidor is the only truly national participant in the market

Distribution & Products

Footprint – RSA

• National distribution network vs. regional

focused competitors in main centres

The franchise network is well-established,

loyal and extremely effective

Not a royalty based model, franchisees

contribute to marketing spend

Opportunity to grow Gauteng presence

Establish new franchisees where demand

supports

72 Franchisees

• 65 Franchise owners • 103 Sales consultants • 98 Installers • 88 Administration staff

Slide 19

Unique capacity of franchise network to design, measure to fit and install

Footprint – Africa

Select assembly shops – shorten

lead times, reduce duties and

transport costs. Owned and

operated by the franchisees

Drive to increase African

representation

Low capex, low risk expansion –

partnering with select distributors

Limited international, non-African

exposure

African distributors

• 17 distributors in 17 African countries

• Company owned assembly plant in Ghana – services West Africa

Slide 20

Distributor footprint

Slide 21

National franchise network with an unique capacity to design, measure and install

Typical franchisee: Owner operator Sales team Admin staff Installers

Products Broad range of security products High quality and custom made – “non commodity” products Leaders in R&D (over 35 years of experience) Unique roll-formed steel design - increased strength and corrosion resistance Several patented locking devices Trademark registrations International certification on select products – competitors not certified

RETRACTABLE DOORS AND WINDOWS

• Wide range

• Traditional products

FIXED BARRIERS

• Primarily window solutions

• Various applications and aesthetics

ROLLERSTYLE (intro 2011)

• Residential, office and light commercial

• Emphasis on strength, aesthetics and automation

Slide 22

Products CLEAR GUARD (intro 2011) POLYCARBONATE BAR (intro 2015)

• Unique to Trellidor in Africa

• Strong “lifestyle” security barrier made from aluminium and stainless steel mesh

• “Open” when closed

• Uninterrupted views

• Newly developed for windows

• Provides an unobtrusive security barrier for windows

• Targeting gated estates

UNDER DEVELOPMENT (intro 2016)

“Without continual growth and progress, such words as improvement,

achievement, and success have no meaning.”

Benjamin Franklin

• A further substantive “lifestyle” security barrier is under development for release in mid 2016

• Targeting gated estates and suburban properties

Slide 23

Adding products

Slide 24

Growth achieved in stagnant market driven by product innovation

Financial information

Sales analysis

New products: Rollerstyle, Clear Guard and Polycarbonate Bar

2%

11%

41%

46%

Geographical presence

International (UK, Isreal)

Africa

Main centres (DBN, CPT, Gauteng)

Outlying regions (RSA)

2%

12%

6%

23% 58%

Product type

Poly Bar

Clear Guard

Rollerstyle

Windows

Doors

Slide 26

Opportunity to grow into Africa and broaden product range

Profit and loss Audited Audited Audited Audited Normalised 3 CAGR Growth scenario 4

2012 2013 2014 2015 2015 ’12 – ’15

Net Sales (R’m) 217.8 266.3 295.5 293.7 308.8 12.3% 336.7

Gross profit(R’m) 100.9 128.5 145.9 148.9 156.5 15.7% 170.1

EBITDA (R’m) 31.4 60.0 68.3 72.8 77.8 35.3% 85.3

PAT (R’m) 11.7 36.5 42.2 45.5 49.1 61.3% 53.4

Dividend (R’m) 29.8 20.0 40.8 43.5

EPS (cents/share) 11.2 36.5 42.2 45.5 49.1 53.4

Gross Margin 46.3% 48.3% 49.4% 50.7% 50.7% 50.7%

EBITDA Margin 14.4% 22.5% 23.1% 24.8% 25.2% 25.3%

Shares in Issue (millions - adjusted for share split) 104.9 100.0 100.0 100.0 100.0 100.0

1) Historic sales growth is a factor of several successful strategies including; the increase in number of franchises from 37 to 72 since 2010, the franchising of the Gauteng region in 2011 and 2012 (previously operated as a branch), the broadening of the product range and the opening of new territories in Africa. Historic results showed for continuing operations.

2) Earnings growth has been driven by a focus on improving margins through better material utilisation, improved labour productivity, a reduction in salaried headcount (2011:94 vs 2015:81) including two senior executives. Increases in power and labour costs in excess of inflation have muted the gains in margin.

3) National protected strike action in 2015 resulted in a loss of sales of approximately R15m which in turn reduced earnings by approximately R5m. The 2015 audited AFS have not been adjusted for the affects of the strike whilst the normalised results have been adjusted to exclude same.

4) Growth scenario assumes revenue growth of 14.6% on the 2015 audited results, whilst margins are assumed to remain constant.

Slide 27

30.6% 29.7%

11.0%9.5%

10.0%

7.1%

2.1%

3.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2012 2015

Materials Wages Operations Maintenance

Trading margin

Slide 28

• Earnings growth has been driven by a focus on improving margins through:

• better material utilisation • improved labour productivity

• Increases in power and labour rates in excess of inflation have muted the gains in margin

• Significant flexibility in cost base – 34% of costs are variable or semi variable

• Overhead cost contained – CAGR of 2% since 2012

Trading margin - costs as % of net sales

Highly profitable sustainable trading margin

53.7%

49.3%

Material price analysis

Slide 29

75.00%

85.00%

95.00%

105.00%

115.00%

125.00%

135.00%

Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

USD steel price vs ZAR steel price

Steel Base (US$) Steel Base Conv ZAR USD/ZAR

75.00%

85.00%

95.00%

105.00%

115.00%

125.00%

135.00%

Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

USD aluminium ("LME") price vs. ZAR LME price

LME $ LME Conv ZAR USD/ZAR

Trellidor achieved strong margins despite no real assistance from input prices

Cash conversion and ROIC

Slide 30

• Targeted ROIC > 50% and cash conversion rate of 90%

• Cash generating capacity driven by profitability and working capital management

• Low credit risk - customers pay franchises 50%

deposit on order to the factory, franchisees pay Trellidor in the month following installation

• Despatch of order 7 – 15 days from receipt of order

• Major machinery has 20 to 30 year lifespan, thus

no major machinery related capex forecasted

0%

40%

80%

120%

160%

200%

0%

10%

20%

30%

40%

50%

60%

2012 2013 2014 2015

FCF/PAT ROIC - (LHS)

Cash conversion analysis

Slide 31

Note: ^ – Before interest expense

Highly cash generative

11.7

36.5 42.2 45.5

23.1

47.5 43.5

56.9

20.8

43.6 38.8

53.7

-

10.0

20.0

30.0

40.0

50.0

60.0

Jun12A Jun13A Jun14A Jun15A

Cash conversion ratio

Profit after tax Free cash flow from operations ^ Free cash flow - net of PPE investment

Balance sheet

Slide 32

• Low financial risk • interest cover 25x • FCF/debt = 2.3x

• Excellent working capital management

• Limited growth in invested capital over 2 years

Invested capital and interest cover

Low financial risk and frugal management of capital

27.4 25.822.5

62.4

65.368.3

-

5.0

10.0

15.0

20.0

25.0

30.0

0

15

30

45

60

75

90

105

2013 2014 2015

Debt Equity interest cover

Growth strategy and new capital allocation

Key growth strategies

LOW RISK STRATEGY – BUILDING ON AN EXISTING GROWTH PLATFORM – ACQUISITIONS TO ACCELERATE STRATEGY

Slide 34

Continue process to improve margins

Utilize manufacturing capacity

TRELLIDOR Grow and broaden the

African distribution network

Grow recently launched products and broaden range: in-house development and

acquisitions

Organic growth - product innovation

In-house design engineering team – continues innovation and improvement of existing products

New products introduced accelerated growth and opened new markets

Cottage Guard Early 2000

R8m turnover

Burglar Guard 2009

R9m turnover

Rollerstyle Acquired 2012

R19m turnover

Clear Guard Launched 2012

R33m turnover

Polycarbonate Bar May 2015 Promising

Under development – target gated communities and upmarket homes Anticipated market penetration similar to Clear Guard within 3 years

Research into changing trends ongoing and necessary to stay ahead Overseas trends through digital research and international trade shows Analysis of burglaries – methods to gain entry, tools used etc

Slide 35

26

52

-

10

20

30

40

50

60

2012 2015

Rollerstyle & Clearguard - Revenue growth since lanuch

Replicate a proven strategy – low risk growth

23

35

1.7

5.8

-

5

10

15

20

25

30

35

40

45

2012 2015

Traditional Rollerstyle & Clearguard

Organic growth - Africa

Slide 36

• Grow & Broaden distribution in Africa • Growth to date achieved with limited

investment • Growth through existing network – training

and support – time in the market • Opening new distributorships in 2016 in

Nigeria, Angola, Uganda, DRC and northern Mozambique

• Increasing distributors in Ghana – platform to service neighbouring West Africa

• Roll out new products (Clear Guard,

Rollerstyle, Polycarbonate bar) into international territories – accelerate existing strategy

Sales growth in Africa by product

Acquisition growth strategy

• Targets identified – size up to R100m, P/E 5 – 8x

• Utilise existing distribution network

• Enhancement of product basket - SA & Africa

• Synergistic – significant excess manufacturing capacity leads to operational efficiencies

Slide 37

Case study – acquisition of Rollerstyle

• September 2010

• High-end security roller shutter

• CAGR of 23% in turnover since acquisition

• Manufacturing synergies – production

relocated to Durban factory

• < 3 year pay back

Group structure and reasons for listing

Indicative group structure on Listing

TRELLIDOR

HOLDINGS

TRELLICOR

(PTY) LTD

(Operating)

TRELLIDOR (PTY)

LTD

(Property)

TRELLIDOR

GHANA LTD

(Ghana)

NEW

INVESTORS

FOUNDERS

SAIOL

(MAURITIUS)

NEWGEN

TRUST (SOUTH

AFRICA)

100.0% 100.0%

85.0%

5.7% 27.9% 13.4% 3.8% 49.2%

Board & Management

Holding

Mark Olivier 2.2%

John Winship 0.7%

Terry Dennison 7.3%

Peter Rawson 2.8%

Chris Wright 0.4%

Total 13.4%

BOARD &

MANAGEMENT

In-specie distribution of Trellidor shares – 39 shareholders

Slide 39

Reasons for listing

The business is currently majority owned by private equity funders (since 2006) - provide fund shareholders with liquidity event in terms of the fund’s mandate – however, majority of investors in the fund will retain a substantial stake in Trellidor

Enhance the company’s profile Access to capital markets for growth (organic & acquisitive) Retention, attraction and incentivisation of key staff – SIT to be established

Provide franchisees and the general public an opportunity to share in the growth of the business

Acquisition opportunities (scrip or cash) – the economy is currently depressed and it is likely that good acquisition

opportunities will be available off a relatively weak base

Slide 40

Summary

Loyal and highly competent management and staff

Value proposition

WELL POSITIONED AND MANAGED BUSINESS WITH A STRONG BRAND, NATIONAL DISTRIBUTION, QUALITY EARNINGS AND PROVEN TRACK RECORD READY TO ACCELERATE ITS LOW RISK GROWTH STRATEGY

Slide 42


Growth opportunity in Africa underpinned by

growing levels of urbanisation and asset

ownership

Dominant market position in South Africa but

particularly outside the main centres

TRELLIDOR

Highly cash generative and profitable business

> 50% ROIC 4% dividend yield

National franchise network with an unique capacity to design, measure and install

Low risk growth strategy building on a recently

established proven growth platform

Growth achieved in stagnant economy driven by

product innovation

Defensive and resilient business – security a non discretionary spend – no

correlation with the construction sector

Annexures

Audited Audited Audited Audited 2012 2013 2014 2015

Non Current Assets PPE 48.8 46.2 44.7 41.5

Goodwill and other intangibles 3.3 3.2 3.2 3.1

Other 1.7 1.1 1.3 3.2 53.8 50.5 49.2 47.8

Current Assets Inventories 16.3 19.9 22.2 21.4 Trade Receivables 28.7 29.6 43.4 40.7

Cash 7.1 16.0 11.1 15.4

Other 1.8 1.0 0.4 1.1 53.9 66.5 77.1 78.6

Non Current Liabilities Debt 28.9 24.5 22.2 18.8

Provisions 2.3 2.9 3.4 5.6 31.2 27.4 25.6 24.4

Current Liabilities

Debt 15.9 2.9 3.6 3.7 Trade Payables 17.4 22.9 28.5 27.7

Other (Tax + other) 0.6 1.4 3.4 2.2 33.9 27.2 35.5 33.6

Equity 42.6 62.4 65.2 68.3

Profitability ROIC 19% 42% 48% 50%

Financial Risk Debt/Equity 105% 44% 40% 33% Debt/EBITDA 1.43 0.46 0.38 0.31 Interest Cover 5.67 17.23 21.38 23.71 Debt/FCF 2.15 0.63 0.66 0.42

Slide 44

Annexure A – Balance Sheet

Annexure B – Cash Flow

Audited Audited Audited Reviewed

2012 2013 2014 2015

Cash generated by operations (excluding finance costs) 23.1 47.5 43.5 56.9

Investment in PPE -2.3 -3.9 -4.7 -3.2

FCF 20.8 43.6 38.8 53.3

Net interest costs -4.3 -3.1 -2.9 -2.8

Repayment/raising of debt 4.2 -15.9 -0.8 -2.8

Investing and financing activities -0.1 -19.0 -3.7 -5.6

Purchase and sale of franchises / other 11.7 4.3 0.8 0

Cash available to shareholders 32.4 28.9 35.9 47.7

Dividend paid to shareholders -29.8 -20.0 -40.8 -43.5

Cash movement for the year 2.6 8.9 -4.9 4.2

Opening cash balance 4.5 7.1 16.0 11.1

Closing cash balance 7.1 16.0 11.1 15.3

Working Capital:

Trade receivable days 41 34 49 43

Inventory days 91 94 91 90

Trade payable days 55 58 70 65

Net working capital cycle 77 70 70 69

Slide 45

Annexure C - Industry structure & risk analysis

Medium risk

Integrated security and import substitution - risk

mitigated by the quality of the Trellidor product,

service and ability to customize

• Low to medium risk

Metal pricing highly visible - multiple sources of metal supply and buy forward

Well established supplier relationships with a high level of transparency to underlying commodity costs

Exposed to increases in power charges

Single supplier of clear guard mesh

Stable - highly competitive market in the main centres

Opportunity in Africa is significant - urbanisation and domestic housing growth – good margins

Shift to quality in periods of high crime

Periods of high demand produce “super” profits – operational leverage

High barriers to entry – for a national competitor

Dominant market position and high brand awareness

Capacity and extent of the distribution network is

unique

Lead time – order to installation is 10 working days

Low barriers to entry exist at the bottom end of the

market

Low to medium risk

Protection from crime is a non-discretionary

spend

Seen as highest quality product – only

manufacturer with an international rating

Trellidor is the only supplier with capacity to

deliver on larger projects nationally

Slide 46

SUPPLIER BARGAINING POWER

SUBSTITUTE PRODUCTS

CUSTOMER BARGAINING POWER INDUSTRY PROFIT POTENTIAL

ENTRY BARRIERS

private and confidential 12 · listing roadshow presentation private and confidential 12 – 16...

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