Ellies was perfectly positioned to capitalise on load-shedding with its alternative energy products, but poor management crushed its chances of success, and it now has to retrench staff.
On 26 September, Ellies notified staff that it would proceed with a retrenchment process per Section 189 of the Labour Relations Act.
Ellies said the challenging economic environment in South Africa and global supply chain pressures had curtailed its ability to deliver its products to retailers.
It also blamed the reduced demand for services related to the installation of satellite products for putting pressure on our business.
“In view of this, it has become abundantly clear that Ellies cannot move forward with its current structure,” it said.
The retrenchment plans follow disappointing financial results, with revenue declining 10.8% and EBITDA decreasing 149%. It turned from a profit of R76 million to a loss of R37 million.
Ellies CEO Shaun Prithivirajh blamed the Covid-19 pandemic, July 2021 riots, the local economic downturn, and micro-chip shortages for the poor results.
The reality is that the blame lies much closer to home. In short, Ellies messed up.
In 2020, Prithivirajh told investors they had cleaned up the business and were ready for future growth opportunities.
As part of the turnaround, Ellies focussed on alternative energy solutions and moving from DStv satellite dish installation to fibre-to-the-home (FTTH) as new revenue streams.
It was an excellent strategy. The energy crisis presented Ellies with a brilliant opportunity to rapidly increase sales through its alternative energy products.
Ellies has 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.
Considering the exceptional demand for alternative energy solutions and fibre since 2020, when Prithivirajh unveiled its new strategy, it raises the question of why Ellies is facing financial hardship.
While other solar PV, battery backup, and fibre players are showing exceptional growth, Ellies is struggling.
The answer lies in poor operations. Ellies were often out of stock during the height of load-shedding and did not do proper marketing to capitalise on the demand for its products.
Ellies blamed global supply chain pressures, but its competitors were able to overcome these challenges.
It is also not a new problem. Long before Covid-19 pandemic and supply chain problems, Ellies power trolleys were in short supply during load-shedding.
Ellies should have learned from these experiences and managed its stock levels better to grow the business.
However, when excuses are accepted in a business, things go south very quickly.
The result is that Ellies employees are now facing retrenchments when the company should be one of the best performers on the JSE thanks to extended load-shedding.
There are even accusations that Ellies dismissed employees for not complying with the company’s Covid–19 vaccine mandate as a way to bypass a formal retrenchment process.
Ellies would not answer questions on why it continues to blame reduced demand for satellite products when it knew about this problem in 2020.
It would also not comment on why it is firing staff when other energy solution providers are experiencing booming trade.
It also avoided answering questions about using a Covid–19 vaccine mandate as a way to dismiss employees and bypass a formal retrenchment process.
Ellies share price
Ellies’ share price plummeted 98% from a high of R9.39 in May 2013 to its current price of R0.15.
Ellies’ revenue is on a downward trend, showing the company’s turnaround and growth strategy is not working or is implemented poorly.