Electronic products manufacturer Ellies expects an up to 500% crash in earnings for the year ended April 30, informing the market on Wednesday that it was likely to swing to a loss a share of between 88c and 93c from the prior year’s earnings a share of 24.66c.

Similarly, the company was currently bracing for a headline loss a share for the 12 months of between 80c and 85c – an up to 462% contraction on the headline earnings a share of 23.46c it posted in the prior financial year.

The company reiterated in a trading update on Wednesday that its financial performance remained negatively affected by difficult trading conditions, severe liquidity constraints and higher interest charges.

Moreover, the current year’s financial results include several items that were not part of the results “from normal business operations”.

In its infrastructure division, these included the impairment of goodwill and intangibles of some R28.8-million relating to water and wastewater bulk infrastructure construction company Botjheng Water, the reversal of prior year deferred tax assets of R9.1-million, the group’s inability to raise current-year deferred tax assets of R27.5-million, as well as losses – including retrenchment costs of R3.1-million – from scaled-down South African operations, of R25- million.

Ellies’ infrastructure business had been further hurt by impairments to accounts and construction receivables of R60.6-million, including an onerous provision of R4.1-million, as well as retrenchment costs of R1.2-million.

The group’s consumer division was, meanwhile, hit with inventory impairments resulting mainly from cancelled projects of R48.1-million, the impairment of intangibles of R2.6-million relating to the carbon credit programme and the reversal of prior year deferred tax assets of R400 000.       

“Were it not for these items, the [earnings a share and headline earnings a share] for the current financial period would both be expected to be between 32% and 34% lower than the comparative period,” the company noted.  

Ellies added that it had, meanwhile, completed its debt and corporate restructure, and the board of directors was in the process of implementing several initiatives, which, if successful, were expected to improve the manufacturer’s financial position.

This included the company having resolved to dispose of its property portfolio.

“The company has received various expressions of interest to acquire the company’s property portfolio. These expressions of interest are being considered by the company and, once terms have been agreed, the details thereof will be communicated to shareholders,” it held.

With various capital raisings undertaken in the past six months, Ellies expected the group’s term debt to be reduced by around R250-million, resulting in a reduction of interest paid of about R16.7-million.

Moreover, the infrastructure division had scaled down its South African operations significantly to concentrate on higher-margin African projects.

Overheads had also been reduced for the business going forward, with emphasis on improving operating margin in the future.

“The Democratic Republic of the Congo, Nigeria and Côte d'Ivoire will continue to be significant revenue drivers in the next period as the order book remains intact,” it stated.

While the consumer market remained under pressure, the consumer division had experienced positive trading in the first two months of the new financial year, boosted by growth in standby power products.

“Management is positive that the prospects laid out in the previous announcement will materialise in the near future,” the statement read.

Ellies expected to release its results on or about July 28.