Navigating Losses and Embracing Growth

Harris Marley
Harris Marley

Global Courant
Picture: CEO Business Africa

Ellies, a well-known electronics group that imports and distributes electronic products, has recently faced significant challenges, resulting in a loss that far exceeds its market value of R56 million. The company is undoubtedly facing a difficult period, with an additional burden of R183 million in net debt. Nonetheless, Ellies is optimistic about its future prospects and is actively considering a large new acquisition as part of its recovery strategy.

The company, which was founded in 1979, specialises in aerial and satellite equipment, accessories, and hardware. However, it has been working hard to diversify away from its traditional satellite business and has gone through a restructuring process to become a “smart home infrastructure” company. Despite making significant progress in this transformation, the company incurred R18 million in restructuring costs during the fiscal year 2023, which contributed to the growing loss.

Ellies faced additional challenges in the second half of the year, as consumer pressure and a decline in DStv installations, influenced in part by the SABC’s broadcast of the FIFA World Cup, put additional strain on the business. As a result, the company’s loss increased by 95%, totaling R85 million in the fiscal year ending June. Furthermore, Ellies was unable to fully capitalise on the surge in demand for solar, generators, and backup power during times of unprecedented load shedding due to a lack of working capital.

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Despite the dire financial situation, Ellies remains confident that it is a going concern and anticipates a sustained return to profitability. In order to strengthen its financial position, the company secured a new working capital facility with lenders, which will go into effect in August and will aid in the execution of its strategic plans.

Ellies intends to raise R120 million from shareholders to acquire Bundu Power in order to strengthen its position and diversify its portfolio. Bundu Power, a manufacturer of generators, solar panels, and related products, had a remarkable year, with revenue increasing by more than 60% and profits nearly tripling through the end of February. This acquisition is consistent with Ellies’ strategy to increase its presence in the alternative energy market.

Ellies is preparing a circular to launch this capital raise, which is expected to be released by the end of August. The share offer price is set at 7c, which corresponds to the current share price. Despite the fact that the company’s share price has fallen significantly in 2023, trading unchanged on Wednesday, Ellies remains committed to pursuing its growth plans.

Finally, Ellies has suffered significant financial setbacks, resulting in a loss that far exceeds its market value and significant net debt. Nonetheless, the company remains optimistic about its future and is actively pursuing a strategy to transition into a “smart home infrastructure” business. Ellies is determined to overcome its current challenges and emerge stronger in the competitive electronics market, having secured a new working capital facility and plans to acquire Bundu Power. The support of shareholders and the successful execution of these plans will be critical in the company’s journey to long-term profitability and growth.

Navigating Losses and Embracing Growth

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