Technology services provider, EOH on Tuesday published its interim results for the six months ended January 2020 showing a 21.8% decline in total revenue to R6.354 billion, “mainly as a result of lower hardware and software sales as well as legacy public sector ERP implementation deals not repeated in the current period”.
The prior period comparative is also skewed by the inclusion of CCS and other businesses disposed of in discontinued revenue, the group said.
It said that the slowdown in the economy also contributed to the decline in revenue with EOH’s legacy issues only having a small impact.
Headline loss per share from continuing and discontinued operations was 395 cents (HY 2019: 827 cents) while headline loss per share from continuing operations alone was 381 cents (HY 2019: 840 cents).
Total operating expenses decreased 31.5% to R2.28 billion from R3.34 billion in the prior period, largely driven by lower provisions and write offs as well as cost efficiencies.
The group saw a significant decline in impairment losses from the continuing business from R1.33 billion in the prior year to R152 million in the current year. These had been necessary as part of the clean-up of the balance sheet in the prior year, it said.
Total normalised EBITDA for the period is R405 million (HY 2019: R675 million) and continuing EBITDA is R280 million (HY 2019: R435 million) as EBITDA losses from non-core business lines reduced to R270 million from R585 million in the prior comparative period largely as a result of improved management of the 8 poorly contracted legacy public sector contracts.
“Our key businesses have delivered sound performances demonstrated by improved gross margins over the reporting period. We have made good progress on cost management projects and achieved both our disposal and closure targets resulting in access to cash and a continued simplification of the business,” said chief executive officer, Stephen van Coller.
“Our focus remains on further reducing our debt burden and driving cost efficiencies notwithstanding the challenges brought by Covid-19.”
EOH said it is 12 months into a two-year turnaround plan which has already seen the following:
- Sold over 40 businesses – value of R1.17 billion;
- Paid lenders R1.5 billion in the last 19 months with clear path to further deleveraging of legacy debt;
- Collected R400 million in long outstanding debt;
- Real Estate programme on track to close a further 24 property leases by 2021, having closed 31 leases to date with savings in excess of R70 million pa;
- Reduced legal entities from 272 to 185 (reduction of 87 legal entities);
- Significant progress in group wide data cleansing initiative and implementation of transparent financial processes and systems
EOH noted that actions taken by South Africa’s president, Cyril Rampahosa in relation to the coronavirus pandemic, “are expected to have a financial impact on the group going forward”.
It said that its core ICT business is classified as an essential service and will continue operating during the lockdown period.
EOH has initiated a number of initiatives around the impact of the virus. These include:
- The CEO and executive committee taking a salary reduction of 25%;
- A proposed 20% reduction across the board in cash salaries, with the exception of those earning less than approximately R250,000 per annum (in consultation with clients and staff);
- Negotiating rent holidays;
- A review of all fixed-term and consultant contracts;
- Reassessing the retirement policy for those over 65 years of age;
- A review of variable pay elements including reimbursive travel and overtime; and
- A review of discretionary spend on travel, entertainment and events.
“We are part of the fabric of South African business and we are well positioned to play a pivotal role in the digital future of customers, both in South Africa and beyond.
“The management team, along with employees, have implemented and proposed a wide range of initiatives to reduce costs dramatically as part of our collective contribution to assisting corporate South Africa through the current crisis. We are in the process of consulting our customers and employees to finalise these initiatives,” EOH said.