Business rescue: Ellies shares crash
Electronics group Ellies lost almost two-thirds of its value on the JSE after announcing it had filed for business rescue in the wake of failed attempts to diversify into the lucrative renewable energy market.
The company has been under pressure since the downturn of its mainstay business, which was closely tied to the fortunes of DStv’s satellite service.
The group imports, manufactures and sells equipment such as aerials and power trolleys, and also undertakes solar installations.
On Wednesday, Ellies said a proposal to acquire Bundu Power for R203m was scrapped after it failed to secure backing from its lenders. The deal, first announced a year ago, was subject to debt funding by bankers, as well as its shareholders.
“Our bankers have advised that they will not fund the proposed transaction and thus the company advises that the conditions precedent will not be met, and therefore the agreement in this regard will lapse and be of no further force or effect,” the company said in a statement.
The group had been banking on loans to bolster its presence in the energy sector, where Eskom’s lack of capacity has led to persistent rolling national blackouts.
The group’s shares plummeted 60% on the news, taking the company’s market cap down to just R16.11m from R40.2m on Tuesday.
Ellies had pinned its hopes on acquiring Bundu Power, which specialises in distributing and leasing generators along with the distribution and installation of solar and related products for residential, commercial, industrial, hospitality, agricultural and recreational users.
SMART HOMES
Led by CEO Shaun Prithivirajh, Ellies was seeking to shift from a traditional satellite-based business towards smart home infrastructure, offering alternative energy solutions, water storage and connectivity.
It has been struggling for most of the past decade as evidenced by the performance of its shares. They closed at 2c on Wednesday after reaching highs around R9 in 2013.
In August 2023, Ellies reported that revenue for the year to end-April fell 7.7% to R993m, while the loss before interest, tax, depreciation and amortisation widened to R46.9m from R37.1m previously. The after-tax loss almost doubled to R85m.
The group, which made efforts to enter the fibre installation business in September 2022, started consulting unions about jobs cuts in a bid to rein in costs. The reported losses in the most recent financial year included one-off separation costs as a result of the restructuring, amounting to R18m.
At the time, the company expected to see the benefits in the form of reduced operating costs, estimated at R30m a year.
Ellies also announced a delay in publishing its results for the six months to end-October.
Business rescue protects distressed companies from creditors and offers the opportunity for rehabilitation under the supervision of business rescue practitioners approved by the Companies and Intellectual Property Commission.