It’s over for Ellies Electronics

Ellies is dead. After 45 years, the electronics company founded by Ellie Salkow in 1979 effectively stopped operating on Friday, 12 July 2024, MyBroadband has learned.

A well-placed source who spoke on condition of anonymity said all staff were offered voluntary retrenchment packages on 5 July, with severance capped at eight weeks’ pay.

This is the minimum applicable for eight years of service.

Staff would not be paid for leave not taken, and those who had served the company for decades would receive the same as someone who joined the company in 2016.

Ellies also only offered voluntary retrenchment when the unions put up a fight. According to our source, the company initially wanted staff to sign mutual separation agreements.

Adding insult to injury, the source said that 2–3 weeks before the voluntary retrenchment notices went out, some staff had received retrenchment packages recognising their full 20+ years of service.

While the severance offers are being called voluntary retrenchment, our source said they are anything but.

“Staff had no choice. They’ve all been coerced and put under duress to sign voluntary retrenchment,” the source said.

“They essentially said, ‘This is the best deal you’re going to be offered. You better take it.’”

Then, this past Friday, the roughly 140 remaining staff were told to pack their things and not return to work.

That was the same day SMD Technologies revealed that it had concluded a deal to acquire the Ellies brand and intellectual property.

By Monday, everyone was locked out of the system.

Ellies went into voluntary business rescue on 31 January 2024. Three months ago, business rescue practitioner John Evans announced that there was no reasonable prospect of saving Ellies Holdings and that it was being liquidated.

Evans later clarified that subsidiary Ellies Electronics continued to trade. He also said several suitors had already approached them to acquire Ellies’ operating divisions.

Our source said that one of those suitors was a proposed management buyout.

However, they said it eventually became clear that the management buyout was stringing the business rescue process along.

At the last minute, the management buyout couldn’t produce the necessary funding, and it fell through.

Shaun Prithivirajh, the last Ellies CEO

Ellies Electronics CEO Shaun Prithivirajh told MyBroadband in May that the company and its staff would be saved if creditors approved the business rescue plan.

“The published business rescue plan contemplates the sale of the Ellies retail import and distribution business,” Prithivirajh said.

“If the business rescue plan is adopted and the sale finalised, many jobs will be saved and Ellies branded products will continue to be sold in retailers across the country.”

However, according to the source, not a single job was saved — barring perhaps the Ellies sales representatives that went over to SMD Technologies before the retrenchment notices started going out.

MyBroadband asked SMD about this detail.

“Post the acquisition of the brand, SMD has not employed any Ellies sales staff,” SMD Technologies general manager Michelle Wynne said.

Addressing rumours that Ellies’ chief sales officer had gone to work for SMD, Wynne said that they were still in discussions with him about coming on board as a consultant.

The shuttering of Ellies Electronics through a failed business rescue is an ignominious end for a once vibrant company.

Initially a simple Johannesburg business of five employees that only sold television aerials, Ellies expanded rapidly.

It soon opened branches in Cape Town, Durban, Port Elizabeth, Windhoek, Polokwane, Gaborone, Nelspruit, East London, and Bloemfontein.

The company broadened its product range in the nineties to include remote controls and other accessories.

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

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

The company became a firm favourite among investors who were excited about its involvement in providing set-top boxes in partnership with Altech UEC as part of the digital terrestrial television (DTT) roll-out.

On the back of the hype, Ellies’ share price peaked at an all-time high of over R9.50 per share in May 2013.

However, as the government fumbled the DTT migration, interest in Ellies and its prospects faltered.

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

A few years later, DStv’s subscriber numbers stagnated and began to decline in South Africa, and that part of Ellies’ business also suffered.

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

With changing market conditions, Ellies decided to focus on alternative energy solutions. This was not a hard pivot for the company, as its name was already associated with electricity accessories like multiplugs and surge protectors.

Considering that South Africa was about to be plunged into a period of near-constant load-shedding, this would’ve been an excellent strategy.

Unfortunately, it fell completely flat in execution.

Ellies’ financial results quickly revealed a company that loved making excuses more than hard work and making money.

Instead of improving its operations and building a sustainable business, the Ellies management tried to acquire themselves out of financial failure.

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

They made a deal to buy Bundu Power, a company specialising in alternative energy products for residential, commercial, industrial, agricultural, and recreational applications.

Ellies announced the Bundu Power 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 soon 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.

Although it went through the motions of business rescue, one can’t help but wonder whether there was ever any hope of saving the company.

“Ellies was a family,” our source said. “It’s cruel, what the business rescue process did to staff.”

MyBroadband asked Prithivirajh and Evans for comment, but they did not respond by publication.