Ellies has signed a deal with lenders to fund an expansion into alternative energy products as it works to reduce its reliance on satellite business, the decline of which is behind job cuts and losses announced this week.
Ellies, which imports, makes and sells electronic equipment such as aerials and power trolleys, has struggled to maintain profitability in recent years as consumers cancel their cable and satellite television subscriptions and shift to online video streaming.
In response, it is branching into alternative power, selling solar power equipment and generators in a country that can go for up to eight hours a day without electricity as Eskom’s creaking coal power stations buckle.
But even that solution is some way off. “The revenues we have generated from alternative energy is not sufficient to cover the losses that we have incurred from the satellite division,” CEO Shaun Prithivirajh said.
The company, valued at R120m, recently stuck a deal with lenders that will increase its ability to have stock on hand to meet demand from load-shedding.
Prithivirajh said Ellies’ strategy is to continue to service the satellite business as long as it is viable. “But our energy, focus and resources will now be on alternative energy and uninterrupted power supply because we will have the capital and we have reduced our costs.”
The electronics group, which also installs satellite dishes for the likes of MultiChoice, has fallen on hard times, swinging into a R43.7m after-tax annual loss and prompting it to start consultations with unions about jobs cuts.
This is the latest in a series of attempts to reorganise the business. In 2020, Ellies migrated its Johannesburg warehouse and distribution function to Value Logistics, an Isando-based supply chain specialist, to cut costs.
“That worked extremely well for us. What we have decided is to extend that across the country,” Prithivirajh said. “It’s essentially a cost issue.
“The satellite part of our business has eroded significantly. And these independent warehouses and distribution [centres] that we had around the country made sense when the satellite business was fine. That’s no longer the case. In fact, that is what has contributed to our negative performance.”
With 113 jobs on the line, three areas of Ellies’ operations will be affected: warehouses, distribution and logistics; value-added services, which are mostly packaging and returns; and sales and merchandising, for which the company also expects to hire a third-party service provider.
“A large part of our packaging plant was for MultiChoice. We can find a third party to do the same at lower cost. Add to that: our equipment and machinery is at the end of its [useful] life. To recapitalise a part of the business that service satellite mainly would not be prudent,” said Prithivirajh.
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