EOH has issued a trading statement, alerting shareholders to a pending improvement in its earnings losses.
EOH expects an improvement of between 83% and 86% to the loss per share (LPS) and an improvement of between 83% and 86% to the headline loss per share (HLPS) for the group for the six months ended 31 January 2021, compared to the previous corresponding period.
The LPS for the first half of 2021 is expected to be between 96 cents and 118 cents, compared to a loss last year of 687 cents per share.
The HLPS for the group will be between 54 cents per share and 66 cents per share, rather than 396 cents per share last year.
Against the backdrop of Covid-19, EOH states that it has seen progress in its key strategic initiatives including optimising the cost structure and capital structure as well as focusing on quality of earnings as it has evolved the business model.
Deleveraging and proactively engaging with lenders remains a strategic priority for EOH. Year-to-date, the group has repaid the lenders a further R409 million principally from disposal proceeds. This brings the total legacy debt repayment since July 2018, including vendors for acquisition liabilities (VFAs), to R2-billion leaving current debt levels at about R2-billion.
Progress has been made in settling and closing out the previously disclosed legacy contracts. At the date of publishing this trading statement, five of the eight problematic public sector contracts have been settled, one is currently in arbitration, one is concluding at the end of April 2021 and one is in the process of being terminated with handover discussions now underway.
The public sector remains a valuable segment for the group and now forms part of its centres of excellence. Following our settlement with the SIU on the Department of Defence contracts, it is in final negotiations with the SIU on the Department of Water and Sanitation contracts and anticipate this to be settled in H2 2021.
The overall iOCO business has benefitted from customers’ increased cloud take-up, spend on automation and app development, as well as the focus on operational technology as digital industries continues to yield significant growth.
Hardware revenue was muted, falling short of prior year as a result of customers delaying spend on hardware or considering cloud alternatives. Gross profit margins for iOCO remained in the mid-20% range.
Nextex has experienced improved operating performance year-on-year with a strong result from the digital infrastructure cluster off the back of customer investment in digital technologies, particularly in the mining industry.
While a smaller contributor to the overall result, the people businesses have also performed well against expectations. The positive performance from Nextec is as a result of the sale or closure of underperforming businesses over the past 12 months and the strategic interventions put in place by the new management teams.
The IP cluster also performed well over the period and has recovered from the low levels seen over April and May 2020 where the negative impact of the national lockdown was most severe. Following the sale of Syntell post-year-end, the disposal processes of the two remaining IP assets, namely: Sybrin and Information System have advanced post their Covid-19 recovery.