EOH losses skyrocket

 ·26 Mar 2024

EOH has seen a dramatic increase in its overall headline loss amid a challenging economic environment, shooting from a loss of R46 million in H1 2023 to a loss of over R70 million in H1 2024.

“For many years, we have been battling the effects of the corruption scandals, unprofitable legacy contracts, inefficient corporate structures, huge debt burdens and a highly inefficient capital structure,” said outgoing CEO Stephen van Coller.

“Following our successful R600 million capital raise last year and the recent closure of our last major legacy issue, EOH can now get back to business and focus on our Growth-Efficiency-Talent strategy.”

In its interim results for the six months ended 31 January 2024 (H1 2024), the group said that South Africa continued to be a challenging environment, characterised by low growth, high unemployment, a weak currency and the greylisting by the FATF.

Although the group said that the IT sector shields EOH from some of the negative effects of the above-mentioned factors, the 2023 calendar year was an especially difficult year as the corporate and public sectors looked to re-consider expenditure to improve efficiencies in a difficult economy.

At a group level, EOH saw its continuing revenue decrease by 2% from H1 2023, with revenue growth again held back by the Operational Technologies business, where the delays in other large revenue contracts resulted in a 19% reduction in revenue.

Operating profit from continuing operations dropped from R110 million in H1 2023 to R9 million in H1 2024.

“This period includes an impairment of goodwill of R20 million, of which R16 million relates to the Operational Technology business, due to the aforementioned delay in contract revenues and stagnant growth,” the group said.

“The finance cost for H1-2024 of R68 million is significantly lower than H1-2023 of R102 million, which is due to the rights issue which closed on 10 February 2023, with a net R555 million being applied against the bridge facility.”

“The Group further concluded a term sheet with The Standard Bank of South Africa Limited to refinance the remaining debt on 31 March 2023, which resulted in improved interest rates on its facilities.”

“Our finance cost for H1-2024, further includes a once off legacy charge of R14 million, related to the Department of Water and Sanitation settlement.”

The group’s tax charge for H1 2024 also includes a once-off charge of R7 million related to a compromise agreement reached with SARS over a PAYE dispute.

After tax, the group incurred a loss from continuing operations of R91 million.

When considering the group’s continuing and discounted operations, its headline loss increased from R46.1 million in H1 2023 to R70.8 million in H1 2024.

The group’s total loss per share did, nevertheless, decline from 3 cents in H1 2023 to 15 cents in H1 2024 when considering continuing and discounted operations.

FinancialsH1 2023H1 2024Change
Revenue (Rm)3 2153 146-2%
Operating profit from continuing operations (Rm)1429-94%
Loss after tax from continuing operations (Rm)(5)(91)+1720%
Headline Loss from continuing and discontinued operations (Rm)(46)(70)+52%
Total loss per share (cents)(3)(15)+400%
Total headline loss per share (Cents)(17)(11)-35%

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