Ellies puts unit into business rescue
Ellies says it has put its struggling Megatron unit into business rescue.
|||Johannesburg - Ellies says it has put its struggling Megatron unit into business rescue.
In an announcement to shareholders on Friday, the electronics company said it has decided it is in the best interests of Megatron to put it into business rescue.
The company did not provide an update on its financial status.
However, in the year to April, it noted that Megatron continued to suffer difficult contracting conditions due to the legacy of onerous billing milestones, which resulted in deferred billings and increased contract debtors, which in turn caused ongoing challenges for the group in funding working capital.
It had a loss before interest and tax of R481 million, a 65 percent increase, mostly due to impairments. Ellies wrote its investment in the entity down to zero.
Read also: Ellies shares fall 8.75%
At the time of publishing its results, it said it was looking into how best to ensure shareholders and other vested parties value is maintained/enhanced and protected. It had retained consultants to look into its options, which could include winding it down, liquidation, or business rescue.
Megatron came into being when Ellies restructured into two units: a consumer entity and Megatron.
A year ago, it said it had set up a ‘separation committee’ to test the viability of hiving off and listing its consumer business and the Megatron infrastructure business separately.
Ellies and the Ellies Electronics division - its consumer arm - have guaranteed Megatron’s obligations over a term loan facility owing to Standard Bank. It did not indicate what its exposure was, but previously has referred to an amount of R100 million.
“Ellies and Standard Bank are engaged in an ongoing co-operative process aimed at an orderly settlement of any remaining indebtedness arising from the Megatron facility by restructuring the debt in a manner that the guarantors are confident can be accommodated from their ordinary cash flows and without interruption to the businesses as going concerns.”
Ellies says it will update shareholders as further material information becomes available.
IOL