EOH Holdings has established itself as a consistent performer in the IT services sector. The group's share price has doubled in the past year as EOH has shown the ability to grow both organically and through acquisitions even in difficult market conditions.
EOH released interim results for the six months to 31 January 2010 today, revealing a 40,6% increase in revenue and a 29,2% growth in headline earnings per share over the comparable period in the previous year. Its services, infrastructure and software divisions all delivered strong performances. The group's balance sheet also looks healthy, with cash reserves of R213-million and no debt.
"EOH has seen good growth in managed services in particular," says Frost & Sullivan ICT analyst Silvia Hirano Venter. "Companies are slowly opening up to a business model that involves outsourcing different aspects of their IT operations, and EOH is well positioned to deliver on their needs."
Venter believes that more work could however still be done on providing transparency to the market on how cost-effective outsourcing IT services is. The culture of outsourcing is not very strong in most sub-Saharan African countries yet, despite the opportunities that exist.
She does, however, note that the success of EOH's training centre, in which its in-house skills are upgraded, has been paying dividends. The company also recruits final year graduates and provides them with intensive training.
"This is very important to develop their skills from the onset of their careers and to prepare them for the challenges found in the business world," Venter notes. "This gives EOH a distinct advantage in this sector where the competition is tight and technology is changing all the time."
Venter expects that managed services will continue to be a strong driver of revenue growth for EOH. This is currently one of the most exciting and growing segments in the IT industry.
"Every company wants to save money without jeopardising quality," she explains. "IT is a crucial part of any company's operations. It stands to reason then that companies like EOH, which are able to offer customised solutions and operate them efficiently, will have everything a client seeks in an IT services provider."
EOH reported revenue growth of 40,6% (R787,3-million), an increase in profit before tax of 37,7% (R73-million), an earnings per share increase of 30,4% (70,3 cents), and an increase in headline earnings per share of 29,2% (70 cents).
“These are strong results and we are understandably satisfied with our performance. We have a solid balance sheet and substantial cash to support future growth and sustainability. Our brand is getting stronger and EOH’s impact in the IT industry is gaining momentum,” says EOH CEO Asher Bohbot.
Bohbot says that EOH has seen growth across all areas of its business including services, software and infrastructure: “While all divisions performed well, the services business generated the highest revenue with R400 million, which accounts for just over 50% of EOH’s revenue.”
There has also been significant growth in the infrastructure business following the recent acquisition of Glacier Consulting.
EOH’s focus on its four primary objectives has also contributed significantly to the company’s continued success: to attract, develop and retain the best people; to partner for life with both technology partners and clients; to implement a right 1st time philosophy and to achieve profitable growth.
Bohbot says that commitment to these objectives has enabled EOH to build strong partnerships with large international technology organisations as the sole representative or the largest local partner. The implementation of EOH’s ‘Right 1st Time’ philosophy has contributed to the company achieving some of the highest margins in the industry: “We ensure that we do it right first time and in doing this, the customer gets good value, we make better margins and are able to build a solid reputation.”
EOH plans to grow organically and through strategic acquisitions, which complement its business. The company will continue to focus on increasing the size of its managed service business in both infrastructure and application. These will be provided onsite, as well as remotely through EOH hosting and networking. EOH will also be expanding its Business Process Outsourcing suite of offerings and IT security services and solutions.
EOH currently has 34,8% black shareholding and has 60% black representation on its board of directors. 44,6% of its employees are black. The company is rated as a level 3 contributor and as result; customers are eligible to claim 138% of any spend with EOH.
The company has earmarked education as its key CSI initiative with specific focus on promotion of maths and science, which are critical to South Africa’s growth. Bohbot says that enterprise and skills development through the EOH Academy are also key to the business future growth.
“EOH is gaining traction and has a solid and widespread offering to over 2 500 customers. We have a strong annuity base and a healthy balance sheet. EOH has the best people, an impressive track record, entrepreneurial spirit and the resources to compete effectively in the marketplace,” says Bohbot.