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Ellies to raise capital

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 31 Oct 2014
Ellies is taking steps to return its two entities to operating efficiency, says CEO Wayne Samson.
Ellies is taking steps to return its two entities to operating efficiency, says CEO Wayne Samson.

Ellies is set to restructure its debt through the issue of 45 000 shares, and reschedule its obligations with Standard Bank as it seeks to get rid of non-core entities.

The listed company, which had a challenging period in the year to April, is also set to borrow around R45 million from two of its executives.

Ellies will issue 45 million shares at 110c a share from next Thursday to Mazi Capital, to raise R49.5 million, while chairman Ellie Salkow will lend the group R45 million to fund its consumer business. He has also guaranteed Standard Bank an amount capped at R45 million.

Executive director, Ryan Otto - who is also CEO of Megatron - has committed R20 million. Ellies also aims to raise a total of R115 million through a rights offer at 110c a share, which has been fully underwritten.

Ellies' shares lost 3.85% yesterday, to close at 125c, 5c lower than the stock's opening price.

Salkow and Otto have underwritten some of the rights offer, offering to convert their loan into Ellies stock. The rest of the shares will be underwritten by Mazi Capital. The proceeds of the rights offer will go into trimming debt and fund working capital requirements.

At the same time, Ellies is restructuring to form two separate units, with its consumer business and its Megatron entity to be held by separate wholly-owned subsidiaries. This is in preparation for a further restructuring that will see each business fund its own capital requirements.

CEO Wayne Samson says these steps "are testament to management's commitment to restoring shareholder value, returning both businesses to operating efficiencies through the respective recapitalisation and cash injections".

In the year to April, Ellies grew revenue marginally, by 5.5%, to R2.1 billion, but experienced substantially lower margins, especially in its consumer division - which produces television products - where the margin lost 14%.

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