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Ellies to expand into appliances

Johannesburg - Electronics retailer Ellies Holdings [JSE:ELI] on Monday reported first half diluted earnings per share of 14.47 cents, which is 18% lower than the 17.72 cents posted for the first half the year before.

The company - one of the largest manufacturer, importer, wholesaler and distributor in Southern Africa of television reception-related products as well as domestic electronic and audio products - posted a net profit of R39.2m for the six months to end October 2009.

This is 10% lower than the R43.6m net profit posted for the six months to end October 2008 despite an 8.5% climb in revenue to R590.2m from R544.1m the year before.

Ebitda was down 10.34% to R73.9m from R82.5m for the same period the year before, largely due to pressures on margins and a comparative prior period that included the revenue benefits of unusual volumes of generator sales resulting from power outages.

Comprehensive income was down by 10.44% to R39m from R43.6m in 2008.

No interim dividend was declared but the company said its board would consider a dividend at year-end.

"While recessionary conditions during these six months made for a challenging trading period, with the group's margins coming under pressure, the group has held and increased market share in its key divisions," the company said.

"In addition, Ellies has bedded down its first major acquisition (of the Megatron business) and is well positioned to capitalise on growth opportunities and increased trading as economic conditions recover," it added.

In terms of the acquisition agreement, a further amount of R65m will become payable by Ellies to the vendor of the Megatron business.

The board has agreed with the Megatron vendor that it will partially underwrite a rights offer by Ellies at 200 cents per share.

It is anticipated that the effect of this underwriting commitment will be that the full amount due to the vendor will be discharged in Ellies shares.

"The rights offer will strengthen the already sound balance sheet and provide capital for current expansion programmes, including the Digital Terrestrial migration, expansion into domestic appliances, growth of electrical ranges, and satellite-related business expected in 2010," Ellies said.

While Ellies said it would continue its focus in the electrical sector with the expansion of product offerings including light commercial products, the group intends expanding into the appliance sector, thus enhancing the offerings to its existing customer base.

During the six months, the company said its newly established Ellies Power division has established a national presence and won a number of tenders across South Africa and beyond while its Elsat satellite division continued its significant contribution to the group's revenue and earnings.

It said the Digital migration remains imminent, with some delay by government in its implementation that will see all terrestrial households convert to digital reception.

Ellies has secured the distribution rights to the Altech UEC digital terrestrial decoders for the retail sector.

"This together with increased aerial sales should assure Ellies of continued growth beyond 2014," the company said.

- I-Net Bridge

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