Ellies profits tank – as it blames ‘manageable’ load shedding

 ·29 Feb 2024

After warning shareholders that it would be posting dismal results for the six months ended 31 October 2023 earlier this week, electronics group Ellies revealed on Thursday (29 February) that it extended losses by a massive 205%.

Ellies entered voluntary business rescue on 31 January 2024 after its plan to acquire Magetz Electrical Proprietary Limited and Power on Wheels Proprietary Limited (collectively, Bundu Power) fell through.

Given the business’ circumstances, the group’s financial performance over the six month period reflected its struggles.

Revenue decreased 30.6% to R353 million; the group’s Ebitda loss increased by 72.7% to R51.8 million; and its loss after tax tripled – extending 205% to R106.5 million.

The group’s loss per share increased by 205% to 13.23 cents, with the headline loss per share increasing 190% to 13.3 cents.

Reflecting on the results, Ellies lamented the failure of the Bundu Power deal and placed the blame for its performance on the adverse trading environment – which includes lower levels of load shedding, in its view.

Despite having an early advantage in the alternative energy space, the group said that its trading environment was constrained with continued pressure on consumers.

It pointed to everything from the challenging global economy, high interest rates, declining real income and high levels of unemployment for its woes. Notably, it also added that “manageable levels” of load shedding worked against it.

“The continued and increased load shedding, whilst negatively affecting the economy and which had historically benefitted the group, decreased significantly from May 2023 as Eskom’s planned maintenance was postponed and the use of diesel for Open Cycle Gas Turbines kept load shedding at manageable levels,” it said.

“This resulted in a significant decrease in demand for inverter trolleys and solar products and, together with an oversupply in the market, has negatively affected Ellies’ revenues for the period under review.”

It is worth noting that South Africa has experienced – and continues to experience – a solar boom, having imported billions of rands’ worth of components in 2023.

Ellies said it had invested significantly in alternative energy inventory for the Retail Distribution segment but, due to the downturn, “retailer forecasts did not materialise into confirmed orders and competitors have significantly discounted on the selling price”.

“Ellies’ working capital position has, therefore, worsened due to the decreased revenue generation. This continued downward trend continued into the second half of the financial year and contributed significantly to the decision to commence business rescue on 31 January 2024.”

Read: Ellies sinks even further

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