JOHANNESBURG - ELLIES has decided to liquidate its embattled manufacturing segment, Ellies Industries, with 148 jobs lost in another blow to South Africa’s shrinking manufacturing sector, as it continues to turn around the group’s fortunes.
Ellies said the major lines produced by Industries, and which are largely sold to Electronics, consist of products related to satellite connectivity and associated electrical products, which Electronics is now in a position to procure externally at a lower cost than if manufactured by Industries.
Shaun Prithivirajh, the chief executive of Ellies, said in an interview at the weekend: “It had been a very painful decision which affected 148 jobs. However, they could no longer carry the loss making unit.
“The company will be in a stronger position. No one knows the full impact of Covid-19 and we are swinging from one lockdown to the next. Now there is talk of a third wave.”
Prithivirajh said the manufacturing unit had battled on despite being loss-making waiting for the government’s switch migration from analogue to digital terrestrial television to materialise, which would have made the difference. However, that had not happened.
Ellies makes and installs DStv satellite dishes.
Ellies Holdings said on Friday that it had been monitoring the trading operations of Industries and made every effort to contain costs and restore a level of profitably to Industries.
“Of particular concern is the fact that trading volumes have not been adequate to cover much of the fixed cost or to generate sufficient profit to sustain the business,” the group said.
It said it had tried to return the manufacturing segment into profitability in the past five years by providing financial assistance and partially subordinated its loan account to enable Industries to continue operating through its wholly-owned subsidiary Electronics.
However, after considerable discussion and thought by the board, it had determined that with effect from last Friday, the group through Electronics would no longer provide financial assistance to Industries.
“This has resulted in the Electronics board resolving to commence with an application for the liquidation of Industries,” the group said.
During the course of 2020, Ellies Holdings engaged the services of an external consultant to assess the operations of Industries with the objective of identifying both inefficiencies and efficiencies in order to assist in improving Industries’ viability.
However, Ellies said this exercise did not find sufficient positives to persuade it that its continued financial support of Industries was justifiable or in the best interests of the company and its shareholders.
The group also attempted to dispose of Industries as a going concern but one potential buyer completed a comprehensive due diligence and declined to make a binding offer.
“The other potential buyer required significantly more security and vendor funding than was currently being provided and thus that potential transaction also fell through,” the group said.
The group said it intended to provide more details to its shareholders when it became available.
Looking ahead, Prithivirajh said the group was focusing on renewable energy and uninterrupted power supply solutions as more people were working from home and did online schooling.
Last year Ellies restructured its logistics business by centralising its operations and paring off its warehousing and logistics operations to a third-party provider. The group said in a trading update in December for the six months to end-October, it expected headline earnings a share of 2.37c to end-October, from a loss of 2.91c previously.
Ellies’ share price closed unchanged at 10c on the JSE on Friday.
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