ELLIES HOLDINGS: Solar Strategy Supports Sustainable Success

An insurmountable task was what faced Ellies Holdings CEO Shaun Prithivirajh when he joined the business in August 2018. Turning around and reshaping a long-standing brand, and reinvigorating a business that has so much to offer South Africans seemed liked an attractive prospect, but the numbers were uninspiring. Ellies is a holdings company involved in trading and distribution of a diverse range of products and services, including Digital Terrestrial Television (DTT), satellite products and related accessories, electrical, signal distribution, residential and commercial LED lighting solutions, solar PV, sound and AV equipment distribution and installation.

Established in 1979, listed on the JSE main board in 2010, and restructured in 2015, Ellies was in need of modernisation. Quickly, Prithivirajh went about refocussing and repositioning the brand, while strengthening partnerships with retailers around the country.

But the unpredictable South African economy and the onset of the Covid pandemic dashed hopes of a quick turnaround. Today, Prithivirajh is busy with a new growth strategy – one which will see Ellies transform and serve new markets using its extensive knowledge and experience of the South African landscape.

“In 2019, when we took over the business, it made a R56 million loss,” Prithivirajh begins. “We cleaned it up and part of that clean up meant a write off of a large amount of stock. We had to restructure, unfortunately let some people go, and in 2020 we made a R132 million loss. In 2021, in the middle of the pandemic and in some of the toughest economic conditions South Africa has ever faced, we have posted a R57 million profit.”

Quite remarkably, this shift in fortunes came while many others have suffered. Prithivirajh puts the success down to three things: Brand recognition, reach, and culture.

“The brand is recognised and trusted by both the consumer as well as businesses. Ellies has a tremendous relationship in the retail sector, with independents as well as all the major retailers – that is something which very few other businesses have. Over 40 years, Ellies has been innovative and delivered on its promises. We also have a network of branches across the country and that makes the brand and its products accessible to consumers.

“The business has gone through tremendous change and the culture change has been very positive. Employees know where the business is going and there is a new way of thinking, putting the customer at the centre,” he says.

ELECTRICITY IN THE AIR

Ellies Holdings is home to Ellies Electronics, Ellies Commercial Solutions, Elsat Rentals and Ellies Renewable Energy. “It’s a very complex business that cannot be placed in a single silo,” admits Prithivirajh. The focus of the group is shifting to accommodate human necessities in the product range. Previously, part of the range fell into the category of ‘wants’ rather than ‘needs’, and – particularly around renewable energy – Prithivirajh is keen to change this.

“A large part of what Ellies was about was providing the equipment for the installation and carrying out the actual installation at individual homes to allow them to receive broadcasts from Multichoice and DStv. That still remains a large part of our revenue today. However, with the introduction of things like streaming, satellite television is on the wane. We have started diversifying our revenue streams and a big focus for us is alternative energy – solar is a big part of that.”

Currently, Ellies imports solar panels and inverters as well as batteries and accessories. These products have become essential household items for those looking to power electronics during periods of load shedding.

“Solar energy in South Africa is a necessity because of the numerous challenges faced by Eskom over many years. It’s a constant problem and load-shedding continues to blight the country,” details Prithivirajh. “We developed an inverter trolley and you charge it while the lights are on and then it kicks in when the lights go off. It’s like a generator but without the noise and fuel. You could plug in and use for around two hours without power and we realised that the demand for this type of product is growing. People are looking for a more permanent solution as it was two large batteries encased in a metal covering with wheels. But you still have to charge it through Eskom and solutions must be more long-term. There is also the movement towards solutions that lower the carbon footprint. We are a coal economy and we have to move away from that.”

The network that Ellies has built, going from house to house in South Africa installing television aerials and other equipment, has helped develop trust in the market. This provides a robust platform for the company to grow its solar installations business.

“Because we are calling into people’s homes through our installers, it is a natural fit for us to go out and say ‘we have developed our skillset and we can come to your home with an alternative – solar installations’. Our unique selling position is the relationship we have with individual homeowners who trust the Ellies brand. South Africa has major security concerns but for more than 40 years, people from Ellies have been entering homes around the country and there is a level of trust,” explains Prithivirajh.

Thanks to the nature of the Ellies Holdings business, being exposed to many complementary industries, solar energy was an obvious choice for expansion.

“It was natural progression for us to move into alternative energy. It’s still early days and it is a difficult market – the SA Rand does not help us as we have limited production of the raw material required – it is expensive for homeowners, but the trend is catching on,” says Prithivirajh.

REPOSITIONING DURING COVID

For all businesses, the news that South Africa would enter lockdown in March, and the general public would be confined to homes, was unwelcome. The need to control the spread of the virus had to be balanced with the ability for people to earn and live. Unfortunately, this balance was never truly found, anywhere around the world. But, for some companies, registered as essential service providers, work continued during lockdown.

News delivered through television was a key information source in the early stages of lockdown as the government had to distribute timely updates to a worried public. Ellies was a key enabler in this process, responsible for many of the installations of aerials and satellites around the country.

“We have been rather opportunistic during Covid because we were well-placed to do so. With the announcement of our first restrictions in March 2020, there was insufficient information around what this entails. This was global and people really didn’t understand about how long this would last. The panic buying began and people were staying at home at all times. In our industry, we are entertainment enablers, we have to keep people occupied. It worked to our advantage,” says Prithivirajh.

“At the same time, Eskom decided to carry out maintenance and that impacted people at home. Our invertor trolleys became a huge seller and demand outstripped supply. The first half of 2020 was incredible for us. We were also one of the few businesses in South Africa that had an essential services provider license so we could operate while others were closed because we enable people to receive the news.”

This fortuitous position allowed the company to thrive, but it was short-lived as the company began to witness the economy crumble. “We began to see the effects of companies closing down. Cracks in the South African economy were there long before Covid and companies were already struggling. Covid just highlighted the problems,” confirms Prithivirajh.

“There was initial panic buying and then there was a lag with people being laid off work and we began to see that around August and September. This was made worse with us entering the second wave during our biggest trading months around the festive season. There were no trading volumes during that period and that trend has continued. There hasn’t been any substantial uptake through this year that I can see.”

In July, political unrest and lawlessness resulted in R20-25 billion being looted and GDP being impacted. Ellies is a distributor, supplying to a number of retailers, many of which were affected with stores plundered and infrastructure destroyed. The effects of this major setback are not seen immediately and confidence in the economy is eroded over a long period. People’s buying ability is affected, companies struggle to justify investment, and international investors hold off while they feel nervous. This was a driver of the strategy adjustment at Ellies.

“The unemployment rate is at 34.4% and that doesn’t take into account those that are under-employed. We have an unemployment problem, the market fundamentals are not that great – it’s a difficult space,” admits Prithivirajh.

“Consumers are looking for value and necessities. Those things that are nice to have are now being avoided. Large ticket spends on things like DStv are now being weighed against buying food. The choice is obvious,” he adds. “This is a long-term issue and, fortunately, we are in the market of necessity. We are migrating away from solely Multichoice and DStv towards things you need like energy. Many schools are now teaching virtually – we are playing in these spaces.”

LONG-TERM VISION

After doing well to return the business to profit in a demanding time, Prithivirajh has one eye on the future, and accepts that the longer-term vision for Ellies may now take longer to achieve. However, there is confidence in the company – especially around the switch to renewable energy.

“We continue to focus on what adds value,” he says. “We are optimistic. We are nimble – when we see things in the market, we are quick to act. We will drive solar as we believe it is a very important requirement for businesses and homes.

“Solar has many avenues – it isn’t just a straight sale to an individual. There could be a rental model or a rent-to-own model, we could create a second billing system – there are many alternatives, and we see it is a large area for us to play in. It does take time and we cannot move with the economy going backwards.” 

He is also buoyant about solar being a relatively fresh industry in South Africa, without a clear industry leader.

“We hope, in the next two to three years, to become synonymous with solar. There are small players and they are all internet/ecommerce-based – we are the only ones with brick and mortar stores around the country. We are not going to close or disappear. We need to leverage that trust and take a leadership position in solar.”

By expanding its retail footprint, especially into more rural and underserviced areas of the country, Ellies is also looking to take share in regions that other retailers have neglected. At the same time, Prithivirajh is also looking to leverage technology to a far greater extent across internal operations of the business. This will drive cost savings, efficiencies and productivity.

“That is our growth plan, and if the horizon is stretched out over five years so be it, but we believe that is the space we absolutely have to be in,” he says.

Ellies directly employs around 500 people and relies heavily on a team of more than 3000 installers present around the country who are not directly employed but their income is derived solely from working with Ellies. There are plans in the pipeline to grow this reach as the company sees opportunities in neighbouring nations, but this expansion will remain on hold while the South African economy stabilises.

“It was on the cards, especially in the markets we are already in outside of South Africa. But Covid has forced us to refocus on our home market, which is our biggest market,” says Prithivirajh. “This is where our energy, focus and resources are being spent. We will revisit larger sub-Saharan Africa strategies at a later point when profitability returns to the market. Right now, it is challenging enough dealing with our home market so heading for the continent to explore – the timing is not right. We have done a lot of things right, but like everyone, we are at the mercy of the larger economy. When confidence and growth returns to the markets, we will start exploring the ‘nice to haves’.”

Having achieved positive results and continuing to execute on its strategy, Ellies is moving into 2022 in a strong position. Shaun Prithivirajh is confident despite the obvious challenges and will continue to implement positive change to keep Ellies on the right track.

“One of the things we have done well is take a company that done things in a set way for 39 years and, in a short period, migrated to a new way of doing business. Of everything we have done, that is the most critical that has contributed to business success. Changing the way we operate and a change in our culture to become inclusive has been very important,” he concludes.