JOHANNESBURG – Ellies, the JSE listed South African manufacturer, importer, wholesaler and distributor of lighting, electrical and solar products sunk deep into the red during the year ended April 2020 as losses widened by 709percent.
The group blamed challenges imposed by the Covid-19 pandemic coupled with the stagnant economy for its fortunes.
Ellies reported a loss per share of 28.97cents compared with a loss per share of 3.58c a year earlier.
It said headline losses per share also widened 472percent to 18.66c from 3.26c in 2019.
The group’s total comprehensive loss was R196.1million, 538percent higher than the R30.7m loss a year earlier.
Ellies said that major contributions to the loss were a R97.7m decline in revenue between March and April due to the national lockdown imposed to contain the spread of Covid-19 in South Africa, with associated gross profit falling R26.4m.
The group impaired goodwill of R51.4m, incurred R20.6m in restructuring costs as a result of the migration of the Joburg warehouse to a third-party logistics supplier, including retrenchment costs of R18.3m.
Ellies also wrote off R49m in obsolete inventory, impaired R12.3m in investment properties as well as a write-off of previously recognised deferred tax assets of R16.3m.
Chairperson Timothy Fearnhead said next year would be a challenging one. He doubted that there would be a rapid return to business as usual “post-Covid-19” unless some serious structural changes were made to the economy.
“I regret that although last year we believed we had done the major clean-up, this has not proved to have been a correct assumption and this year we’ve seen further significant write-offs and impairments on inventory, properties and goodwill,” Fearnhead said.
He said while the results were a disappointment to the management team, he believed that the actual operating results were starting to show green shoots from the actions taken.
Among the steps taken during the year to return to sustainable profitability was the disposal of the group’s warehouse and industrial property in East London.
Ellies said its directors believed that the group was a going concern, however, Covid-19 created a material uncertainty.
“The effect of slow economic recovery or a further deterioration in the economic outlook of South Africa post the Covid-19 pandemic and its potential impact were considered as an uncertainty. If the economy and as a result, the performance of Ellies, deteriorate and management is unable to stem the losses incurred in a major subsidiary, these present a material uncertainty to Ellies remaining as a going concern,” said the group.
Ellies said these matters indicated that there was a material uncertainty related to events or conditions that may cast significant doubt about the group’s ability to continue as a going concern and therefore it may not be able to realise its assets and discharge its liabilities in the normal course of business.
Ellies shares declined 16.67 percent on the JSE yesterday to close at R0.05.