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Ellies sees short-term tests

Johannesburg - South African electronics products company Ellies Holdings (ELI) on Wednesday reported diluted headline earnings per share of 24.18c for the 12 months ended April from 30.45c a year ago.

All earnings generated by the group are to be utilised to fund future growth in the business and accordingly, no dividend has been declared.

In future years, the dividend policy will be reviewed taking into account prevailing circumstances and future cash requirements, it said.

With a restructure before listing, Ellies changed its year end from February to April, which resulted in a 14-month financial year ended April 2008. As a result, the prior year numbers represent a 14-month period, which only incorporate 12 months of trading results.

The company said the acquisition of Megatron has driven growth in revenue to R976.8m from 2008's R701.9m. Profit after tax rose to R65.169m from R58.29m.

Sales of electrical and consumable products offered by Ellies remained buoyant despite the consumer sales pressures in the current economic slowdown, it said.

Demand for satellite television continues unabated, with ongoing demand from both the lower LSM population, through the furniture stores, and national retail outlets. Ellies experienced severe shortages of available satellite decoder stock during a four-month period in the latter half of the year. This impacted materially on both revenue and profits of the group during that period.

With stock availability resuming late April 2009, it is expected that all lost unit sales will be recovered in the post April months, the company said.

Looking ahead, the group said the Megatron division exceeded expectations. In line with the declared strategy of taking the Megatron offerings national through the Ellies existing branch network, a new division called "Ellies Power" has been established.

The Ellies Power division is already proving the viability and benefits of this concept and is expected, together with Megatron, to deliver organic growth in the year ahead, the company said.

Ellies will continue to expand its presence in the electrical sector with expansion of product offerings including light commercial products.

Although the board expects the current adverse economic climate to test the group in the short term, Ellies' diversity of products and customer base, should hedge against much of this impact. With the establishment of representation in Zambia and Zimbabwe, export growth helps to limit Ellies' exposure to current local conditions, as does the High Definition and Digital Product advances and the Corporate and Ellies Power divisions.

Ellies, by the very nature of its customer bases, must remain well stocked, which affords some hedging against erratic movements in the exchange rates.

With a digital migration imminent which will see all terrestrial households convert to digital reception, Ellies has entered into a strategic alliance with Altech UEC securing distribution rights of their digital terrestrial decoders for retail sector.

This together with increased aerial sales should assure Ellies of continued growth beyond 2014.

The board remains optimistic with regard to the group's continued organic growth and opportunities, with clear benefits from improved capacity utilisation, it concluded.

- I-Net Bridge

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