Ellies shares tumble on earnings loss
SHARES of struggling television aerials distribution group Ellies Holdings tumbled yesterday on news that it will report a full-year loss, cut down its local operations and expand its Africa operations.
Ellies shares on the JSE yesterday fell as much as 6.9 percent before paring losses to close down 2.3 percent at 85c.
Yesterday’s announcement of an earnings decline follows a similar statement in May, which saw Ellies’ shares tumble by about 20 percent.
Ellies said its infrastructure division was trimming its South African operations significantly to concentrate on higher margin African projects including in Nigeria.
“Overheads have been signif- icantly reduced for the business going forward with emphasis on improving operating margin in the future. The Democratic Republic of Congo, Nigeria and Ivory Coast will continue to be significant revenue drivers in the next period as the order book remains intact.”
It expects to post losses a share in the current financial year of between 88c and 93c a share, or between 457 percent and 502 percent lower than the earnings a share for the comparative period.
Headline losses per share for the current financial period are expected to be between 80c and 85c per share, or between 441 percent and 462 percent lower than the headline earnings a share for the previous comparative period.
Ellies was suffering the effects of its old business model, characterised by high customer concentration and high gearing, Phibion Makuwerere, an equities analyst at Intellidex, said yesterday.
Restructure
“The ongoing restructuring exercise is aimed at addressing exactly that. It has expanded operations into Africa where growth is still evident and it has restructured its debt as well as raising additional capital though rights issues. These moves are meant to reduce gearing levels and free more resources to fund high working capital requirements, specifically for its infrastructure division,” Makuwerere said.
The IT infrastructure group was considering the expres- sions of interest and would inform shareholders of the details once it agreed on the terms, it said yesterday.
It had previously announced it would separate its two operating units, which would be held in a wholly owned subsidiary.
It also said it would restructure its debt with Standard Bank and raise R200 million by selling stock at R1.10 each.
Yesterday it said following capital raisings over the past six months, it expected that the group’s term debt would be cut by around R250m, resulting in a reduction of interest paid of approximately R16.7m.
Ellies’ financial performance has been negatively affected by difficult trading conditions, severe liquidity constraints and higher interest charges.