Delays in digital television hold back Ellies’ earning potential

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BR Ellies 190[1] Independent Newspapers Ellies Holdings increased turnover, but reduced profit for the latest year's results. Photo: Simphiwe Mbokazi

Nompumelelo Magwaza

The delays in the roll-out of the digital terrestrial television and the slow uptake of OpenView HD have put pressure on listed manufacturer and distributor of electric products Ellies Holdings.

The company said yesterday the year to April had been a tough period as it dealt with slow consumer spending, the slower-than-expected uptake of the digital terrestrial television programme and slow participation in the Eskom residential mass roll-out, which contributed substantially to the previous year’s earnings.

The company has been hoping for the past two years to increase business by installing set-top boxes in consumers’ homes in the migration from analogue decoders to digital terrestrial television. However, with many changes in the Communications Department, the project has been delayed.

“This has been a tough year for the group, with further delays in the expected roll-out of digital terrestrial television, slower-than-expected uptake on the OpenView HD sales and longer lead times due to larger projects in the infrastructure division,” said Ellies chief executive Wayne Samson.

The company was ready for digital television, having invested more than R35 million in preparation.

The group increased revenue by 5.5 percent to R2.1 billion. Operating profit declined by 68.2 percent to R72m. This was due to the company’s infrastructure division moving into higher-value and longer-term contracts which created onerous billing levels and caused the group’s contract debtors to increase to R420.5m from R158m in the previous period.

Ellies had a 68.3 percent drop in earnings a share with earnings falling 66.8 percent.

Its infrastructure division saw revenue rise by 5.5 percent to R726.8m, which was attributed to the acquisition of Botjheng Water, which contributed R72m to revenue but experienced an operating loss of R6.9m.

The consumer goods and services division rose revenue by 6 percent to R1.3bn, but due to weak demand and margin pressure its operating profit fell by 62.7 percent to R92.9m.

Samson said on the consumer side the company had taken some margin squeeze losing about 25 percent through the volatile exchange rate and rand weakness last year.

“Another thing that impacted on our margins was debt, whereby the interest increased by more than double what it was last year,” he said.

Ellies would benefit from signed contracts for infrastructure work worth R4.1bn, of which 75 percent was still work in progress.

These projects were stretched out across key markets such as Ghana and the Democratic Republic of Congo, while others were awarded in new markets such as Mozambique and Ivory Coast.

The group’s shares slid 6.98 percent to close at R2.93 on the JSE yesterday.


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