EOH Holdings has reported revenue of R6,354-billion for the six months ended 31 January 2020, with a gross profit margin of 24% and normalised EBIDTA of R405-million.
“Our key businesses have delivered sound performances demonstrated by improved gross margins over the reporting period,” says Stephen van Coller, CEO of EOH Holdings.
“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.
“Our focus remains on further reducing our debt burden and driving cost efficiencies notwithstanding the challenges brought by Covid-19.”
The group is one year into a two-year turnaround plan and has, so far, sold more than 40 business with a value of R1,17-million. It has also paid lenders R1,5-billion to clear legacy debt and collect R400-million in outstanding debts.
The real estate programme is on track to close a further 24 property leases by 2021, having closed 31 leases to date with savings in excess of R70-million per year.
The group has reduced the number of leegal entities from 272 to 185.
It has completed in depth forensic investigation and managed a highly visible reputational crisis, while establishing robust corporate governance structures along with a group-wide data cleansing initiative and implementation of transparent financial processes and systems.
The group has stabilised its customer base and avoided government and BUSA blacklistings, while simultaneously retaining key talent and growing the talent pool.
During the six months, total revenue decreased 21,8% to R6,354-billion when compared to the prior comparative period, 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.
Managed services among core clients remained relatively flat.
Total gross profit margin improved to 23,6% from 19,6% in the previous comparable period, mainly due to a reduced contribution from hardware sales as well as improved efficiency in the iOCO businesses.
Total operating expenses decreased 31,5% to R2,284-billion from R3,335-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 R1,334-billion in the prior year to R152-million in the current year.
Total normalised EBITDA for the period is R405-million and continuing EBITDA is R280-million as EBITDA losses from non-core business lines reduced to R270-million from R58- million in the prior comparative period largely as a result of improved management of the eight poorly contracted legacy public sector contracts. The Nextec business normalised EBITDA was negative during the period.
Headline loss per share from continuing and discontinued operations was 395 cents while headline loss per share from continuing operations alone was 381 cents.
During the prior year more than R400-million was realised from the debtors book and balances at the half year continued to be well managed reducing to R2,994-billion from R4,125-billion at the prior comparative period and R3,145-billion at the full year. Trade payables decreased by R447-million over the six month period to R2,558-billion as the group did not actively stretch payables over the half year.
Cash generated from operations after changes in working capital was R31-million, which needs to be considered in light of the R227-million of one-off payments over the reporting period. Cash conversion of total normalised EBITDA, when removing these one off costs and the impact of non-core businesses, is approximately 65%.
As part of an evolving transition of the business to a sustainable future, the business was initially configured into three key pillars: iOCO, Nextec and IP. Further evolution will ultimately see the group integrated into a single ICT business under the iOCO umbrella.
Since 31 January 2019 more than 40 businesses have been sold for a value of R1,17-billion or closed across the group and there has been significant traction on the rationalisation of legal entities.
The future iOCO cluster is currently and will continue to be managed around five core business lines which will be able to execute end-to-end solutions for all clients across the IT spectrum. These core businesses, effectively make up approximately 56% of current total revenue and over 61% of total gross profit.
Nextec comprises a diverse set of businesses across consulting and engineering offerings. Significant progress has been made in differentiating between businesses which are believed to be a strategic fit for iOCO and those which will potentially be liquidated or sold. Once the review process is complete, the Nextec business, which makes up 31% of the group’s total revenues currently, will no longer form a significant part of the group. More than 47% of Nextec’s total revenue is currently classified as discontinued.
The IP grouping consists of businesses which have developed proprietary software and solutions for customers. These businesses, which contribute 13% of the group’s total revenues, have historically had higher growth rates and better gross profit margins than the other two groupings. A decision was taken to dispose of these assets as part of a strategy to deleverage the business and all but one, Sybrin, which didn’t qualify for the IFRS definition, are therefore classified as discontinued.