Ellies Holdings has attributed the falling number of satellite dish installations as more people opt for internet streaming, as the main reason for expected losses.
News of the likely loss saw the share price slump a massive 20 percent to 20 cents on the JSE Friday afternoon.
The company said on Friday that it expected to report a loss of between 5.42-6.50 cents a share for the year to April 30, when compared to the earnings of 7.25 cents for 2021.
The wholesaler, importer and distributor of LED lighting, energy electrical and electronic products and solar solutions, also anticipates reporting a headline loss per share of between 6.49-7.77 cents for the year, compared to the headline profit of 9.19 cents a share for the previous year ended April 30, 2021.
The earnings and headline earnings per share loss forecasts were also based on an additional 185.2 million shares issued for a BBBEE transaction, which was announced on July 6, 2021.
“The trading environment remained constrained in the wake of the Covid-19 pandemic and the unrest and related looting in KZN (KwaZulu-Natal) and areas in Gauteng during July 2021. Covid-19 also had a material impact on global supply chains, as exports out of China remain constrained due to port congestion.”
Also, the weak local economy, unemployment and fuel price increases also reduced demand for the company’s products and the disposable incomes of consumers.
“Revenues fell 24.6 percent in the first half and recovered in the second half to a decline of 10.8 percent for the year,” the company said.
The main reason for the lower revenues and resultant losses was the decline in the satellite installations business together with the repeated disruptions in the global supply chain because of China's Covid lockdown policies.
“Satellite dish installations have continued to decline over the past reporting periods due to increased competition from streaming alternatives, which is gaining momentum in the local market and was exacerbated in this reporting period by an intermittent shortage of decoders for three months due to a global shortage of micro-chip sets,” the company said.
During the initial lockdown restrictions, MultiChoice was deemed an essential services provider and partnered with Ellies to continue delivering its services, which resulted in a surge in new subscriptions as people were home-bound.
However, subsequent to this, and as Covid-19 restrictions eased, demand for new subscriptions tapered off.
The load-shedding by Eskom late in the reporting period was too late to have a meaningful impact on these results in terms of inverter, energy and solar equipment sales.
“The group has decided to focus on repositioning…towards a product and service offering focusing on the smart home and Internet of Things (IOT)”
The refocused strategy would leverage the current Ellies offerings around alternative energy, connectivity, IOT and streaming products for the home and business.
This change in strategy necessitated a reorganisation of the business model and potential acquisitions were being considered to accelerate this growth, the company said.
BUSINESS REPORT