Ellies Holdings releases interim results
Ellies Holdings Limited released its unaudited interim results for the six months ended 31 October 2018.
Highlights - Revenue (continuing operations) decreased (2,7%) - Profit for the period increased 288,8% - EPS (cents) 11,57 increased 250,6% - HEPS (cents) 0,24 decreased (92,1%) - NAV (cents) 63,22 increased 31,0%
Nature of Business Ellies is an investment holding company for businesses involved in the manufacture, trading and distribution of a diverse range of products and services, inclusive of Digital Terrestrial Television (DTT), satellite products and related accessories, electrical, signal distribution, residential and commercial LED lighting solutions, solar PV, sound and AV equipment distribution and installation. Ellies Electronics (Pty) Ltd, the Trading and Distribution segment, which is the heartbeat of our organisation, operates out of 13 branches and trade counters in South Africa, with a presence in all nine provinces and wholly-owned branches in Namibia, Botswana and Swaziland. Ellies Industries (Pty) Ltd, the Manufacturing segment, manufactures, sells and distributes various products related to markets we serve, including satellite dishes, terrestrial aerials, TV brackets, mounts and shelving solutions, whilst offering bespoke industry solutions and custom-made products. The Group changed its operating segments during the period under review and restated the comparative figures. It now reports on two segments, namely Trading and Distribution and Manufacturing. These segments leverage off common pools of expertise, allowing each segment to focus on its core competencies. The Trading and Distribution segment markets a comprehensive range of products, sourced from the Group's manufacturing segment as well as other manufacturers both, locally and internationally. The Manufacturing segment manufactures primarily for the Trading and Distribution segment. Financial review The Group experienced a challenging six months to 31 October 2018 and reported earnings per share of 11,57 cents for the period under review (H1 F2018: earnings of 3,30 cents) and headline earnings per share of 0,24 cents (H1 F2018: headline earnings of 3,05 cents). Growth in the economy remained subdued in the reporting period against a back drop of a difficult global economic environment. Statement of comprehensive income EBITDA of R17,1 million ( HI F2018: R45,2 million) was as a result of a 2,7% decrease in revenue and a 9,8% increase in operating expenses. Gross margin was maintained at similar percentage as in the comparable period. The main drivers of operating expenses (employment costs, delivery expenses and store occupancy costs) remained under pressure. Operational difficulties at In-toto Solutions (Pty) Ltd, an associate, led to the impairment of the R4,8 million loan to them. As a result of lower average borrowings, net finance charges amounted to R6,5 million, compared to R8,8 million in the H1 F2018. A profit on the deconsolidation of Botijheng Water (Pty) Ltd of R75 million was realised on the finalisation of the dispute with Cooperative Muratori Cementisi Ravenna ("CMC"). Legal fees and other expenses were set off against this profit. The statement of profit and loss and other comprehensive income and statement of cash flows were restated in terms of IFRS 5 to account for the deconsolidation of African Solar Power (Pty) Ltd. Statement of financial position The statement of financial position remained strong, ending the half year with capital and reserves of R378,9 million compared to R289,4 million at 31 October 2017. The main contributor to this increase was the profit on deconsolidation. Net asset value per share was 63,2 cents (H1 F2018: 48,3 cents). Inventory in monetary terms and days showed a significant increase compared to the year-end, owing to the contraction in revenue and the delay in the roll-out of DTT. South African television is currently broadcast in an analogue format, with the country in the process of switching over to DTT. Accounts receivable days showed a pleasing improvement over that of the previous year owing to much improved collections. Creditor funding decreased in monetary terms, also reducing creditors' days, owing to creditors paid on time to take full advantage of settlement discounts. The guarantee issued to Standard Bank in respect of Megatron (Pty) Ltd , previously a subsidiary of the Group, included in provisions in the comparative periods' reporting, was replaced with an interest-bearing liability of R87,7 million at 31 October 2018. Refer to notes 20 and 39 in the 2018 Integrated Report. Prospects Ellies is in the process of adjusting to difficult trading conditions in a very competitive environment and various key strategic initiatives have been implemented to ensure that the Group is well positioned to capitalise on opportunities when growth returns to the market. These initiatives include enablement of live streaming devices and associated technologies, which will usher in new products and services as part of the Ellies offering. The Group will continue to drive operational efficiencies within the existing business and adopt digitisation of processes by leveraging technology. The overall focus remains on returning the Group to sustainable profitability, but this is hampered by the deteriorating economy and the severely affected consumer sector, which has a direct impact on the activities of the Group. Changes to the Board of Directors of Ellies ("Board") During the period under review, Shaun Prithivirajh was appointed as CEO on 1 August 2018, Reshoketswe Veronica Ralebepa ("Shoki") was appointed as non-executive director on 1 September 2018 and Ian Russell was appointed as a non-executive director on 1 October 2018. Adrian Bock (CFO) resigned effective 28 September 2018, Stephen Goldberg (non- executive director) resigned effective 13 August 2018 and Oliver Fortuin (non-executive director) resigned effective 30 June 2018. Changes to the board after the period under review Elliot Salkow retired as executive chairman of the Board with effect from 15 November 2018 and remains as an executive director until 30 April 2019. Fikile Mkhize was appointed as acting chairperson on 15 November 2018. At the annual general meeting held on 7 December 2018, the shareholders voted against the appointment of Shaun Prithivirajh as an executive director and CEO of the Company. Shaun remains the CEO of the Company by virtue of his employment contract with the Company. The Board and Shaun are currently in discussions pertaining to his continued employment as CEO. On 14 January 2019, Shoki Ralebepa resigned as a director and on 18 January 2019 Ian Russell and Fikile Mkhize resigned as directors. On 11 December 2018, Andrew Hannington was appointed as an alternate director to Elliot Salkow. The Board extended the contract with the interim CFO, Chris Booyens, to 30 April 2019, while the board finalises the appointment of an executive financial director.