Ellies reports massive loss

3 years ago 1

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Ellies has reported a total comprehensive loss of R35.2 million for its half-year trading period ending 31 October 2022.

This represents a 74.3% higher loss than the same period last year.

Revenue was slightly higher at R508.9 million — a 5.6% increase compared to last year.

However, Ellies still reported an earnings before interest taxation, depreciation, and amortisation (EBITDA) loss of R30 million — 53.8% higher than the R19.5 million loss last year.

The company said this was due to once-off restructuring expenses.

“This contains a provision for restructuring costs of R18 million and, adjusting for this, shows that EBITDA would have improved over the comparative period by 38,6%,” it argued.

“Comparative operating expenses, excluding the provision for restructuring costs, were contained and increased by only 1,7% over the prior period.”

With the decline of its satellite TV and installation business, Ellies closed its manufacturing segment to focus on its trading and distribution divisions.

“The Group has reviewed the current operations against this backdrop and begun a process to right-size the satellite business,” Ellies stated.

It said trading and distribution are now the organisation’s heartbeat. It operates from 19 branches and trade counters in Southern Africa — with a presence in all nine provinces and wholly owned subsidiaries in Namibia, Botswana, and Eswatini.

“The Board can report that the section 189, the closure and migration of the warehouse and logistics functions in Cape Town, Polokwane and Nelspruit and, lastly, the outsourcing of the sales and merchandising function, have been completed,” said Ellies.

“The expectation is that these will start to deliver savings in the second half of the current financial year.”

Why Ellies struggled to sell backup power systems during load-shedding

Ellies said that load-shedding presented an opportunity for the company’s alternative energy products, offsetting some of the macroeconomic factors hurting the business.

However, it could not capitalise on the opportunity due to “working capital constraints.”

“Steps are being taken to finalise an increased working capital facility with the Group’s bankers in order to address these constraints,” Ellies said.

“The current year has seen continued pressure on consumers on multiple fronts, inflation has been increasing globally and consequently in South Africa,” Ellies said.

“A major driver of this is the war in Ukraine putting inflationary pressure on energy costs, which has hit the South African consumer at the petrol pumps, eating into the consumers’ already subdued spending.”

“Interest rates in turn have been increasing steadily during the reporting period, in response to inflation and the increase in interest rates around the world.

“The South African prime rate has moved from 7,75% in March of 2022 to the rate of 9,75% in September 2022, an increase of 30%.