Business Maverick

BUSINESS MAVERICK

Ellies pulls the plug on its manufacturing unit

Ellies pulls the plug on its manufacturing unit

Government dithering and inaction over policy has contributed to the decline of Ellies’ manufacturing business, which will be placed in liquidation as the company fights for survival.

Hurray: The government is at last pushing ahead with the final switchover from analogue to digital terrestrial television (DTT) — almost six years after missing the June 2015 deadline. It’s too late for JSE-listed Ellies Holdings though, which had been counting on DTT and the aerials it could provide and is now cutting off financial assistance to its ailing manufacturing division. That’s a precursor to liquidation after it failed to find a buyer for the business.

After shifting deadlines for a number of years, President Cyril Ramaphosa said in last week’s State of the Nation Address that the government would begin the phased switch-off of analogue transmitters from next month, province by province, with the process expected to be completed by the end of March 2022.

You would think that Ellies, which has been around since 1979, could have held on a little longer. However, in October it said its ability to continue as a going concern was at risk unless the economy recovered and it stemmed losses at the manufacturing division. That was after reporting a significantly bigger loss for the year to end-April as Covid-19 aggravated an already poor environment. 

More than eight years ago, the group bulked up its manufacturing capacity and invested more than R50-million into DTT products in anticipation of the switchover.

That is not its only product line; it makes other items that are sold through trading and distribution operation Ellies Electronics. Chances are you have at least one of its plugs, aerials or satellite dishes in your house. Unsurprisingly, as South Africans try to buy a little extra time on the grid during load shedding, it’s also been doing a great trade in inverters.

However, it has blamed the lack of traction on the DTT migration for a consistently poor performance. The problems run deeper though; it can buy most of the major lines sold through Ellies Electronics, including products used for satellite connectivity and associated electrical goods, cheaper than it can make them – perhaps another indictment on the uncompetitive nature of manufacturing in South Africa.

Ellies says it has been shoring up the unit’s finances for the past five years and manufacturing has been a drain on its resources. Last year, it hired an external consultant to help improve the viability of the business, but didn’t find sufficient positives to persuade it that its continued financial support was justifiable or in the best interests of the company or its shareholders. 

After trying to sell the business as a going concern, one potential buyer declined to make a binding offer after completing a comprehensive due diligence while a second buyer couldn’t raise enough security and vendor funding.

Ellies says the resolution of the ongoing losses in Ellies Industries is expected to have a positive effect on its financial position. The market may want to see evidence of that first. DM/BM

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options

Daily Maverick Elections Toolbox

Feeling powerless in politics?

Equip yourself with the tools you need for an informed decision this election. Get the Elections Toolbox with shareable party manifesto guide.