JSE-listed Ellies Holdings experienced a “massive” margin squeeze in the six months ended October 31, 2013, with profit contracting 40.9% year-on-year to R76.8-million, as a weakened currency and lethargic retail sales dented the electronic products manufacturer and distributor’s half-year showing.

Speaking at the company’s interim results presentation on Wednesday, CEO Wayne Samson said the “harsh” six months were driven by tough trading conditions in which the company focused largely on maintaining and growing market share rather than upping prices in a bid to preserve profit margins.

He noted that, while the company had held off on passing on price increases to the retailer and, consequently, the consumer, Ellies had, in the last two weeks, increased prices as the rand continued to weaken further against the dollar.

“We bit the bullet for as long as possible, but we can’t do it anymore. We’ve had to push price increases through, some of which are quite significant,” Samson noted.

He added that it was only recently that retailers had recognised the extent of the depressed consumer market.

“The consumer has changed. They are more focused on the warranty of the product, and the value-add of the product. As a result, we are changing our point-of-sale approach and redesigning our packaging, because its important that a company’s retail approach is modified to respond to the changing consumer,” he commented.

Amid an unsteady trading environment, Samson emphasised that Ellies’ focus remained on its core competencies, rather than developing its pipeline of projects.

“Even when big projects come around, we don’t forget our core business,” he said, in reference to the group’s consumer good division, which contributed 62.5%, or R677-million, to overall revenue of R1.08-billion for the six months.

This was a contraction on the R749-million posted for the prior year’s comparable period.

Samson said the company expected to see continued growth for this business as Ellies advanced its ‘store within a store’ concept, with renewed focus on growing its commercial lighting division.

“We are also delighted that a decision has finally been made on set-top box controls, which are required for the transition from analogue broadcasting to digital terrestrial television (DTT). The next few months will be an interesting time and we expect to be very busy with this as the demand comes through,” he said in reference to Ellies’ locally manufactured DTT antenna kit.

The group’s infrastructure division, meanwhile, contributed R406-million or the remaining 37.5% of overall revenue.

Samson maintained that this business increased revenue by 10%, largely owing to the acquisition of water and wastewater bulk infrastructure company Botjheng Water, which did not achieve an operating profit during the period.

“The division, thus, reflected a decline in profit before interest and taxes of 22%, from R60.2-million to R47.2-million, after incorporating the R1-million loss from Botjheng. This, however, is an improvement on the division’s immediate preceding six months,” he said.

Meanwhile, basic earnings a share (EPS) decreased from 42.59c for the six months ended October 31, 2012, to 25.27c for the period under review.

Similarly, headline earnings a share (HEPS) dropped from 42.46c in the comparable prior year’s period to 25.09 for the six months ended October 31, 2013.

“During the prior period, we enjoyed the majority of the benefits derived from [State-owned power utility] Eskom’s consumer programme. This contributed substantially to the group’s prior period comparative growth in EPS and HEPS, and is now reflected in the comparatively negative moment in share earnings,” said Samson.