Ellies is profitable again

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Ellies is profitable again

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Published Date: 2021-07-30 | Source: INCE|Community | Author: The Finance Ghost

Ellies is profitable again

For several hours yesterday, Ellies was trading 33% higher. It eventually closed 11% up as investors took profit towards the end of the day.

The catalyst for the share price action was the release of a positive trading statement that marks a strong return to profitability for the company. Headline earning per share (HEPS) for the year ended April 2021 has come in at 9.19 cents per share vs. a loss of 18.66 cents per share in the comparable period.

The benefits didn't come from top-line growth, with only a "marginal increase in revenue" reported by the company. Gross margin increased thanks to the disposal of slow moving and obsolete inventory. There were also savings in operating costs due to the migration of transport, logistics and warehousing to Value logistics.

Investors should also note that some of the earnings growth was thanks to deferred tax assets being raised. This means that the company recognised the benefit of assessed tax losses, as a return to profitability shows that the losses may be useful to the company.

Full financials are expected to be released this week and possibly even today. The point of a trading statement is that it should come out long before the full results, not one day before. Ellies is a small cap and things don't always work out quite the way they should with financial reporting timelines.

Nevertheless, this is an exciting result for shareholders. I was also very impressed with Ellies' B-BBEE deal recently, which I wrote about here.





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