Ellies is in talks on acquisitions in the alternative energy sector to meet surging local demand for power as consumers battle crippling nationwide blackouts and offset losses from its traditional business.
The electronics group is in negotiations “with third parties with a view to pursuing certain potential acquisitions in the solar, uninterrupted power supply and renewable energy sectors,” it said a cautionary statement to investors on Wednesday.
Non-binding term sheets had been signed for potential targets and due diligence has already started on one potential acquisition, Ellies said. “Further information will be announced in due course.”
Its shares, which are little traded, jumped 6.67% to 16c on the news — valuing the company at R128.86m — though the stock is down 50% so far in 2022.
The group imports, makes and sells electronic equipment such as aerials and power trolleys, but has struggled in recent years as consumers cancel their cable and satellite television subscriptions, in favour of cheaper streaming.
On Monday, it reported a R43.7m loss for the year to end-April and announced it had started consultations with unions about jobs cuts.
In response, it is branching into alternative energy, selling solar power equipment and generators as South Africans battle load-shedding as much as eight hours a day, thanks to Eskom’s buckling generation capacity.
CEO Shaun Prithivirajh on Tuesday said lenders have agreed to finance Ellies’ move to alternative energy products as it works to reduce its reliance on the satellite business.
“We are pursuing acquisition opportunities. It will significantly change the kind of areas in which Ellies operates,” Prithivirajh said.
Wednesday’s announcement is the latest in a series of attempts to reorganise the business. In 2020, Ellies outsourced its Johannesburg warehouse and distribution functions to Value Logistics, an Isando-based supply chain specialist, to cut costs.
It is shifting its network of satellite-dish and aerial installers to fibre solutions for homes and businesses to top into growing demand for high-speed internet connectivity.
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