Ellies lost almost a fifth of its value on Monday as the electronics company announced probable job cuts to save money after reporting a loss in its 2022 financial year.
The electronics group, which imports, makes and sells electronic equipment such as aerials and power trolleys, as well as undertaking solar installations, will start consultations in line with SA’s labour laws, it said in a statement.
“The company and affected stakeholders will together consider appropriate measures to minimise possible retrenchments and seek viable alternatives which will assist the group in returning to profitability and ensure the continued operation of Ellies,” it said.
A thinly traded stock, Ellies shares fell sharply on Monday to close 17.65% weaker at 14c.
Ellies has struggled to maintain profitability in recent years and lost money in its manufacturing business. But it is now betting on solar power equipment and generator sales to turn its fortunes around as load-shedding has led to growth in demand for inverter and solar products, it said.
The challenging economic environment in SA, “coupled with global supply chain pressures that have directly curtailed Ellies’ ability to deliver its products to retailers, as well the reduced demand for services related to the installation of satellite products, has put significant additional pressure on our business.
“In view of this, it has become abundantly clear that Ellies cannot move forward with its current structure and must enter consultations with those potentially affected by the process in order to safeguard the long-term sustainability of the business.”
Ellies was one of the beneficiaries in the early days of the Covid-19 pandemic because MultiChoice was classified as an essential service, and partnered with Ellies to continue delivering entertainment services to people in lockdown.
But it has fallen on hard times recently, reporting a headline loss in its year ended April 30, partly because of a decline in the number of satellite dishes installed and as more people started streaming television as fibre connectivity increased.
The Covid-19 lockdowns in China hit Ellies’ satellite installations business as the disruption of global supply chains led to a shortage of microchips worldwide, affecting the group’s production of decoders.
With scant detail about the types of jobs affected by the retrenchments, how many and in which divisions, market players were left to speculate.
“It’s very difficult to understand what Ellies is up to because the Sens statement was very generic,” said Anthony Clark, an analyst at Small Talk Daily Research.
“Ellies don’t actually manufacture anything. They basically import and redistribute. They do have a number of branches around the country. If I was a company which had a very high regional and localised cost base, I would centralise all the costs into large regional distribution centres.
“From memory, I think they had little operations all over the country. So I’m wondering if this section 189 pertains to them just streamlining and rationalising the underlying division.”
Clark also pointed to the possibility of reducing head office costs at Ellies and a weaker rand making imports more costly as other factors to consider.
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