EOH, Africa’s leading technology service provider, announced its interim results today, posting a 19% growth in revenue amidst challenging conditions in which it operated during the period under review that ended on 31 January 2018. The Group’s overall resilience during this period is attributable to its broad solutions offering, collaborative business model, skilled people and diverse customer base.
EOH’s revenue from continuing operations grew to R8 354 million (2017: R7 025 million). Revenue from services accounts for 84%, a significant portion of which is annuity revenue, based on multi-year contracts. Operating profit from continuing operations amounted to R784 million (2017: R838 million). EBITDA for the period amounted to R1 004 million (2017: R1 090 million).
Headline earnings per share (HEPS) and Earnings per share (EPS) from continuing operations was 314cents (2017: 415 cents) and 320 cents (2017: 416 cents) respectively.
Commenting on the interim results, EOH Group CEO Zunaid Mayet says, “Our deliberate customer retention strategy has yielded good results as the Group has retained all major customers and customer contracts, gaining market-share in the process.
However, the public sector business did have a particularly difficult time due to the political uncertainty during the period, the squeeze on public sector funding, implementation and payment delays.
The last two months have shown significant improvement in collections and there are strong indications that margins will normalise in the second half of the year as stability returns and business confidence grows”.
Acquisitions as a new strategy
EOH recently announced its new business strategy aimed at simplifying the Group’s business model, enhancing effectiveness, improving commercial agility and driving optimal business performance well into the future. Through this, EOH will establish dual growth platforms by forming two independent businesses, each with its own distinct identity and brand; growth strategy, go-to-market approach, business model and culture.
The first business will trade under the EOH brand and focus on ICT services and solutions. It is a highly efficient integrated business with cross-industry IP; has an integrated go-to-market strategy focused on organic growth driven by new generation digital technologies.
The second business (Newco – to be named and launched in April 2018) is characterised by a high degree of specialisation in each business area; it has domain specific IP; each business area is less integrated, operates relatively autonomously, operates in high growth industries and is differentiated by its domain specific offerings. Growth will be driven by both acquisitions and organically.
Growth will be driven by both acquisitions and organically. The benefit of having two different businesses will enable each business to realise its full potential with clarity of brand and identity; a simplified business model, reduced complexity and cost; greater oversight and stronger governance; increased agility and the reversal of dis-economies of scale.
EOH also recently announced a strategic partnership with Lebashe Investment Holdings which will further enhance the group’s empowerment credentials and increase the group’s black ownership.
The strategic alignment of Lebashe and EOH’s interests through an equity transaction presents an opportunity for both parties to jointly pursue growth opportunities to the benefit of both. The transaction will result in an equity investment by Lebashe of R250 million and the provision of a funding facility of R3 billion allowing EOH access to such facility for growth opportunities.
Mayet noted that the recent political leadership change in South Africa has seen the country enter a phase filled with a renewed sense of hope and optimism. EOH welcomes the “dawn of a new era” and enters the next period with confidence.
He said, “The two significant developments at EOH serve to energise the people across the business, providing clarity and direction for the future. This, coupled with a stable economic and political environment, provides the platform for continued growth, a more efficient and cost-effective organisation, increased profitability and improved margins”.