Ellies to liquidate its industrial side of the business!

Ellies Holdings plans to apply for the liquidation of its Industries business, which it says has been a drain on the resources of the rest of the group. It says there’s no hope that the division would be able to turn a profit for at least two years and it’s now cutting of financial assistance.

The consumer and commercial electronics manufacturer and distributor has two main segments including trading and distribution business Ellies Electronics and manufacturing business Ellies Industries, which makes, sells and distributes satellite dishes,TV aerials, brackets and mounts – mostly to Ellies Electronics.

Industries has continued to underperform, largely due to the lack of traction on the government’s digital terrestrial television (DTT) project and continued under-recovery of fixed costs. In October, Ellies 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’s after it reported a significantly bigger loss for the year to end-April as Covid-19 aggravated an already poor environment. However, at the time it said actual operating results were starting to show the green shoots of a restructuring and that the new board and executive directors appointed in April last year had made progress in addressing various legacy issue to ensure better governance and operational improvements.

The company hired an external consultant last year to assess the operations of the Industries unit to help identify ways improve its viability. However, it said the exercise didn’t find sufficient positives to persuade the company that its continued support of the business was justifiable or in the best interests of the company and its shareholders. It was also unlikely to return to profitability for at least two years. It said that it was cheaper to buy the products made by the manufacturing division from external sources. After trying to sell Industries as a going concern, one potential buyer completed a comprehensive due diligence but declined to make a binding offer while another transaction fell through after failing to raise the required security and vendor funding.The Company has, for a considerable period been monitoring the trading operations of Industries and has made every effort to contain costs and restore a level of profitably to Industries,” Ellies said. “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.”

Ellies said the resolution of the ongoing losses in Industries was expected to have a material positive effect on the group’s financial position going forward.

Its shares closed unchanged at 10c on Friday.

Main Image: Ellies Holdings