Perennial underperformer Ellies Holdings will splash more red ink over its income statement when it reports full-year results next week.
In a trading update on Tuesday, JSE-listed Ellies said it expects to report a loss per share of between 10.07c and 11.26c for the year ended 30 April 2023. A year ago, the group reported a LPS of 5.96c, meaning there has been a deterioration of between 69% and 89%.
Ellies will also report an expanded headline loss per share of between 10.2c and 11.62c, from 7.13c a year ago.
Not helping matters is a restructuring of the business in the first half of the financial year that had a direct R18-million impact on headline earnings. That works out to a 2.24c hit to both the LPS and the headline LPS.
Ellies has blamed a range of factors for its continued poor performance, among them the poor state of the South African economy, inflation, higher fuel costs and rising interest rates.
“The group had a disappointing second half of the financial year, with reduced revenue when compared with the first half. The continued decline in the satellite installation business especially due to the Fifa World Cup also being broadcast on the SABC, as well as the impact of the restructure, put revenue under pressure in the second half,” it said.
Ellies ‘constrained’
“While the group saw increased demand for Ellies’ products in solar, generator, backup power and surge protection due to the impact of increased load shedding, the group was not able to maximise the opportunity due to constrained working capital and therefore was unable to leverage scale for better competitive pricing and additional inventory.”
On the restructuring of Ellies, it said the process is “substantially complete”, with the group starting to see the “benefits of the reduced operating cost base, being one of the objectives of the restructure”.
“The second objective of the operational restructure was to provide the foundation for the group’s strategy of diversifying away from the purely traditional satellite business towards a smart home infrastructure business, including comprehensive solutions for alternative energy, water storage, connectivity and the connected home.”
Ellies said it is finalising a working capital facility with its bankers, which will give it the balance sheet needed to executive on the smart home strategy.
Last month, Ellies announced it was embarking on a rights offer with shareholders to raise R120-million at an issue price per share of 7c. The fully underwritten offer will raise R120-million to fund the acquisition of a company called Bundu Power.
“Bundu Power had an exceptional year with revenue growth of over 60% and growth in after-tax profits from R11.2 million for the year ended 28 February 2022 to R32.4-million for the year to 28 February 2023,” Ellies said.
“The acquisition is a key part of the strategy to expand the group’s footprint into alternative power. Additionally, it strengthens the group’s balance sheet and earnings and provides a platform asset in the strategy pivot toward the smart home infrastructure business.” — © 2023 NewsCentral Media