DIVERSIFIED electronics group Ellies Holdings has reported a 40.9% decline in its interim headline earnings per share (HEPS), which it ascribed to the end of an Eskom contract that had boosted its results in the prior period.

HEPS for the six months ended October 2013 were 25.09c, compared with 42.46c in the year-earlier period, when HEPS more than doubled. The latest HEPS are still ahead of the 21c reported two years ago, before the Eskom contract.

Ellies’ renewable energy unit was one of Eskom’s partners in its mass residential roll-out programme, which entailed helping households to cut electricity consumption by offering them free LED lights, water- and energy-efficient shower heads and geyser blankets.

Revenue declined 3.8% to R1.083bn from R1.126bn previously, while net profit after tax fell 40.9% to R76.12m from R128.79m. Operating profit decreased by 38.6% to R116.4m.

Ellies is a manufacturer, wholesaler, importer and distributor of electronic products in diversified sectors in the local and African markets. Its operations include digital terrestrial television, the roll-out of which has faced long delays in South Africa, and Ellies recently launched a satellite TV service.

Ellies said on Tuesday that the period under review was a "challenging" one. "Although the results are disappointing, we look forward to the next six months and further growth in the business," said CEO Wayne Samson.

"The core business of the group, excluding the Eskom impact, achieved satisfactory growth in revenue, albeit at a 3% drop in gross margin," it said.

Higher inventories arising from the digital TV delay and the late launch of the OpenView HD satellite TV service — in October 2013, which meant it failed to make the most of the festive trading period — were other negative factors in Ellies’ interim results.

The group noted that the consumer goods and services division’s revenue fell 9.7% to R677.4m.

The acquisition of Botjheng Water helped the infrastructure division grow revenue by 10.1% to R406m, though a R1m loss at the new acquisition was partly responsible for a 21.6% drop in operating profit to R47.2m, with costs associated with other projects also to blame.

Ellies is looking to its diversification into new products and ventures to mitigate the tough trading conditions that it expects to continue. Mr Samson said the focus would be on "increased local production and research and development projects".

Ellies shares fell more than 2% in the opening minutes of trading on the JSE, but had retraced their losses to trade just over 1% higher at R6.02 by 9.20am.