Ellies is dead

Ellies Holdings is being liquidated, the company has informed shareholders.

“The business rescue practitioner has concluded that there is no reasonable prospect of the company being rescued,” Ellies said.

Per the Companies Act, a court application will be made to end business rescue proceedings and place the company into liquidation.

“Further updates in this regard will be provided in due course,” said Ellies.

Following the announcement, Ellies’ business rescue practitioner, Johh Evans, clarified that subsidiary Ellies Electronics continues to trade.

“Ellies Holdings Limited is the JSE-listed holding company of the Ellies Group of operating entities,” he said.

“Its only assets are shares in its operating subsidiary companies.”

Evans is the business rescue practitioner for both entities.

He assured that he is on track to publish a proposed business rescue plan by 10 May 2024.

Ellies entered voluntary business rescue on 31 January 2024 after its proposed acquisition of alternative energy company Bundu Power fell through.

Founded in 2005, Bundu Power is comprised of two companies — Magetz Electrical (Pty) Ltd and Power on Wheels (Pty) Ltd.

It specialises in alternative energy products for residential, commercial, industrial, agricultural, and recreational applications.

Ellies first announced the deal on 1 February 2023, with the initial plan of raising the necessary capital from shareholders through a rights offer.

At the time of the rights offer, Ellies’ shares were trading at 11 cents.

Ellies said it would allow shareholders to buy 2.13 additional shares for every share they owned for 7 cents. It aimed to secure R120 million.

However, its share price subsequently collapsed to less than the rights offer price.

With the proposal losing its appeal, Ellies cancelled the rights offer in December and said it would instead finance the deal with debt.

However, the debt would be over five times its market capitalisation and more than its net debt of about R183 million at the end of its last financial year.

Ellies had also been struggling financially, posting a comprehensive loss of R85 million during the year, which it partly blamed on waning demand for its satellite dishes.

In January, Ellies announced that the banks would not loan it the money, stopping its Hail Mary deal dead in its tracks.

Once a darling of the JSE, Ellies was founded in 1979 by Ellie Salkow in Johannesburg. He and five employees began by selling only television aerials.

The company expanded rapidly and opened branches in Cape Town, Durban, Port Elizabeth, Windhoek, Polokwane, Gaborone, Nelspruit, East London, and Bloemfontein.

Ellies broadened its product range in the 1990s to include remote controls and various other accessories.

In 1995, the company founded Elsat with the advent of satellite TV in the South African market. It soon became a household name.

The next decade saw it adding renewable energy products, backup power, and other products to its portfolio.

Ellies was listed on the JSE’s Alternative Exchange in 2007. It issued its maiden dividend in 2010 and moved to the JSE’s main board in 2010.

The company became a firm favourite among investors and had an all-time high price of over R9.50 per share in May 2013.

There was tremendous excitement about its involvement in providing set-top boxes in partnership with Altech EUC as part of the digital terrestrial television roll-out.

However, as the government started to fumble the DTT migration, so did the interest in Ellies and its prospects.

The share price declined by 80% between 2013 and 2014, and the company continued to lose value as it searched for new revenue streams.

The once proud electronics brand was destroyed by poor management decisions and a lack of proper execution.

By 2019, it was trading at 10c per share.

Ellies made the decision to focus on alternative energy solutions. As load-shedding intensified in 2021, it became clear that this was an inspired strategy.

Unfortunately, it fell completely flat in execution.

To those in the know, none of it is a surprise. Ellies’ financial results revealed a company that loved making excuses more than hard work and making money.

Instead of improving its operations and building a sustainable business, Ellies management wanted Bundu Power to solve its financial problems.

Negotiating a multi-million rand deal is much easier and more pleasant than the hard work involved in fixing and running a business.

Ellies had a wide range of backup power products – including solar solutions and inverters — to serve residential and commercial clients.

The high price of petrol and diesel has also played into Ellies’ hands, making its battery backup and inverter trollies attractive alternatives to generators.

With near-perfect conditions for Ellies’ alternative energy products, it raises the question of why the company has failed to excel.

The reason is simple — poor management. While its competitors made millions, Ellies sat back and happily handed the market to them.

Instead of taking responsibility for the poor performance and making plans to fix it, Ellies’ management used every excuse in the book to try to explain it away.

The excuses ranged from Covid-19, the July 2021 riots, and South Africa’s weak economy to unemployment and even the petrol price.

Ellies could have been a thriving alternative energy company capitalising on Eskom’s deterioration and the move towards green energy.

Instead, it faces liquidation. It was not a victim of the South African economy. It was a disaster of its own making.

The once proud Ellies, which reached a share price of R9.50 with a market cap of over R3 billion, is dead.