Ellies, the JSE-listed electronics distributor, reported a big drop in earnings for the year ended April 2014, citing poor uptake of free-to-air satellite service, OpenView HD.
OpenView HD was launched in October by E-tv sister company, Platco Digital.
Ellies won the rights to supply decoders for OpenView HD (OVHD) in the second half of 2013.
The group said that revenue for the year climbed 5.5% to R2.1 billion; however, headline earnings per share, of 23,46 cents, was 68,3% lower than in 2013.
Profit before interest, taxation, depreciation and amortisation (EBITDA) dropped 51.9% to R167.5 million, from R348 million before.
Ellies lamented the costs of funding relating to opportunities that did not materialise during the year.
“The long-awaited launch of Digital Terrestrial Television (DTT) has been even further delayed and the uptake of OpenView HD (OVHD) has been substantially slower than the group expected,” Ellies said.
The group said its net working capital declined by R236 million. “The board, together with Ellies’ financiers and advisors, are actively engaged with the group’s challenges in funding its working capital requirements,” it said.
“With the anticipated prospects of OVHD, this stock is considered by management to be slow moving but with no financial risk,” Ellies said
Meanwhile, the group said its investment in local DTT aerial manufacturing capacity, continues to remains grossly underutilised, pending the eventual SA governmental finalisation, together with greater export opportunities still to be realised.
A further R150 million two year facility was raised during the course of the year to fund the OVHD project, Ellies said.
The DTT migration rollout in South Africa is still keenly anticipated in the short term. New production machinery has been installed for increased local production and employment. In the interim the group continues to export DTT products into Africa.
Sales of MultiChoice DStv remain constant and it is anticipated that its market share will be maintained with their new product initiatives and innovations.
Looking ahead, Ellies said that while OVHD launched in October 2013, it “has been slow to take off”.
“However, optimism remains for the future growth both in South Africa and Southern Africa in the short to medium term. Management does not believe that the current stock holding presents any major risks.”
Last month, BusinessTech enquired about the uptake of OpenView HD.
Platco Digital MD, Maxwell Nonge, told BusinessTech:
“Platco Digital is pleased with the growth of OpenView HD, the uptake has been steady and encouraging. The platform is a FTA digital satellite model aimed at the majority of South Africans who seek quality entertainment without having to pay monthly subscription costs.
“We are confident and focused on ensuring that we can expand the platform as broadly as possible across the country”
Nonge said there are no plans to offer pay TV satellite.