Ellies Holdings Faces Tough Times: Higher Losses Forecast

  • Ellies Holdings Limited expects increased losses for the fiscal year ending 30th April 2023, with LPS projected to be between 10.07 cents and 11.26 cents per share (69% to 89% higher than the previous year).
  • Challenging economic conditions, including rising inflation and escalating fuel costs, impacted consumer spending and confidence, affecting Ellies' revenue, particularly in the satellite installation business.
  • The company's ongoing restructuring efforts, coupled with the acquisition of Bundu Power, aim to reposition Ellies as a smart home infrastructure business, offering comprehensive solutions for alternative energy, water storage, connectivity, and connected homes.

Ellies Holdings Limited recently made a significant announcement regarding its financial performance for the fiscal year ending 30th April 2023. The company is bracing itself for higher losses, attributing the downturn to a series of economic challenges and ongoing restructuring efforts.

Key Financial Figures30th April 2023 Forecast30th April 2022
Loss per Share (LPS)10.07 cents to 11.26 cents5.96 cents
Headline Loss per Share (HLPS)10.20 cents to 11.62 cents7.13 cents

In the trading statement released in compliance with the JSE Listings Requirements, Ellies Holdings disclosed that the anticipated Loss per Share (LPS) for the fiscal year 2023 is expected to be in the range of 10.07 cents to 11.26 cents. This marks a notable increase of 69% to 89% when compared to the LPS of 5.96 cents reported for the previous corresponding period.

Similarly, the company forecasts a Headline Loss per Share (HLPS) between 10.20 cents and 11.62 cents, signifying a rise of 43% to 63% from the HLPS of 7.13 cents recorded for the year ended 30th April 2022. The restructure process undertaken by the company had a substantial impact on the results, with R 18 million in retrenchment costs affecting both LPS and HLPS in the current year, amounting to 2.24 cents per share.

These projected losses come amidst a challenging economic environment in South Africa. Over the course of Ellies Holdings’ financial year, spanning from 1st May 2022 to 30th April 2023, the South African economy experienced deteriorating economic indicators, a rise in inflation, and escalating fuel costs due to the conflict in Ukraine. These factors, coupled with increasing interest rates, placed significant strain on consumer spending and confidence, leading to a tough year for the retail sector. Consumer spending shifted towards essential items, while discretionary spending faced pressure.

As a result of these economic headwinds, the Group faced a challenging second half of the financial year, witnessing reduced revenue compared to the first half. The satellite installation business, in particular, suffered due to the broadcast of the FIFA World Cup on the SABC network, impacting revenue in the second half. However, there was increased demand for Ellies’ products in solar, generator, backup power, and surge protection due to loadshedding challenges. Unfortunately, constrained working capital hindered the Group from fully capitalizing on these opportunities, affecting competitive pricing and inventory management.

Despite these challenges, Ellies Holdings reported significant progress with its ongoing restructuring efforts. The restructure aimed to reposition the business and reduce operating costs. The Group has successfully completed a substantial portion of the restructure, which led to a reduction in operating costs and laid the foundation for the company’s strategic pivot towards becoming a smart home infrastructure business. This strategic shift entails offering comprehensive solutions for alternative energy, water storage, connectivity, and connected homes.

Furthermore, Ellies Holdings announced its intentions to acquire 100% of the members’ interest in Magetz Electrical cc and Power On Wheels cc, collectively known as “Bundu Power.” The acquisition is an essential component of the Group’s strategy to expand its presence in the alternative power sector and strengthen its balance sheet and earnings.

To fund the initial payment for the acquisition, Ellies undertook a fully underwritten rights offer of R120 million, with the support of its two largest shareholders. The acquisition of Bundu Power is expected to provide the Group with significant opportunities to capitalize on the growing demand for alternative energy solutions and bolster its position in the smart home infrastructure market.

Looking ahead, the management of Ellies Holdings remains optimistic about the future, believing that the combination of the Bundu Power acquisition, increased working capital facilities, and the benefits of the restructuring will position the company for improved performance in the next financial year.

The financial results for the year ending 30th April 2023 are scheduled to be released on or about 31st July 2023. It’s important to note that the forecast financial information provided in this trading statement has not been reviewed or reported on by the Company’s external auditors.

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