Tough conditions weigh on Ellies

2010-07-20 09:52

Johannesburg - Electronic products company Ellies Holdings [JSE:ELI] on Tuesday reported diluted headline earnings per share of 23.18 cents for the year ended April 2010, from 24.08 cents a year ago. A cash dividend of five cents per share was declared.

The company said although recessionary conditions continued throughout the year, profitability improved dramatically in the second six month period and overall the results for the year are "satisfactory".

Headline earnings grew by 8% to R70.3m, after dropping by 10.1% in the first half of the year. Headline earnings per share compared to the prior year dropped by 1.7% due to the additional issue of 24.3 million shares relating to the Megatron overachievement of warranted profits in June 2009.

Revenue was up 18% to R1.156bn, reflecting growth in market share which has been achieved against a 2.8% sacrifice in margin. The group's liquidity is much improved with cash flows from operations of R63.3m for the year.
The wholesale distribution of consumer goods and services, including the satellite television division performed above expectations with steady demand through the furniture stores, independent and national retail outlets.

The "infrastructural electrification" division's management is optimistic regarding prospects in the current year and attributes the disappointing contribution during the year under review to delays in capital expenditure in the residential building and mining sectors.

Looking ahead management said it is confident that the group is positioned to capitalise on growth opportunities and increased trading as economic conditions recover.

Ellies' diversity of products and customer base limits the impact of the current adverse economic climate, but management expects conditions to remain testing in the short term.

The High Definition and Digital Product advances, the Corporate and Ellies Power divisions, and growth in exports to neighbouring countries offset some weakness in local demand. Ellies has established a branch in Swaziland and representative offices in Zambia and Zimbabwe to foster exports to these regions.

While recessionary conditions have impacted the group, they have also eliminated some price cutting competitors and regulatory changes have created barriers to entry for these competitors in the future.  

The Ellies Appliances division has made pleasing inroads in a relatively short time and is expected to be a substantial contributor to earnings in the future.   Ellies has also entered the renewable energy sector including solar power, solar heating and energy efficient lighting, a sector which has great potential.

Ellies is establishing a "Green office" environment to showcase its service and product offerings.

Although there has been a delay in the rollout of Digital migration, the group will benefit and participate in the ultimate conversion of all terrestrial households to digital reception.

 - I-Net Bridge