Picture: ISTOCK
Picture: ISTOCK

Equipment manufacturer Ellies on Monday reported a dismal set of financial results for the year ended April 2019. 

Earnings per share dropped 152.3% to a loss of 3.58c. The group reported a headline loss per share of 3.26c, from headline earnings per share of 7.89c.

“A lack of strategic attention on the product range in recent years has resulted in Ellies losing market share on its core product lines upon which its success and reputation were historically built,” said Ellies, the maker of TV aerials, satellite dishes and lighting products.

Revenue decreased by only 1% to R1.357bn compared with R1.372bn in 2018.

Ellies CEO Shaun Prithivirajh speaks to Business Day TV about the company's year-end results.

Ellies said “a deterioration in the control environment, degradation of processes and procedures, a lack of investment in technology and infrastructure, and a decaying culture of accountability have resulted in unacceptably high stock losses, incorrect stock mix and poor customer service levels, which impacted sales and led to disappointing financial results”.

Independent analyst at Small Talk Daily Anthony Clark said “the turnaround work undertaken by the previous management seems to have been undone with a very chaotic managerial process during the course of the 2019 financial year, led by shareholder infighting [and] managerial conflict, which only became resolved earlier this year”.

He said a element of the results that is concerning is a significant loss in the manufacturing operation, which lost R35m in the period, more than offsetting some of the good profits that were made in the trading division, excluding discontinued operations. 

Despite cash in the bank of R42m, debt remains high at R148m, which is concerning given the low market valuation of the company,” said Clark. 

Ellies shares are down 39% so far this year at 11c, giving the technology company a market capitalisation of R68.2m. 

With the share price trading at between 10c and 11c, an inability to raise any new equity going forward, and the banks being highly reluctant to possibly extend more credit, I actually fear for the company’s future going forward,” Clark said. 

Despite new management now being in place and much of the managerial dysfunction now behind the company, a very challenging consumer and economic environment does not bode well for the future of Ellies, Clark said.

One would have to fear that should the company go into another period of losses, would the banks pull the plug? And is it not better for the company to either be a takeover target, be broken up or perhaps be taken private?” he asked. 

gavazam@businesslive.co.za