Despite the challenges of Covid-19, the EOH Group has turned in resilient financial performance over the last quarter.
For the quarter ended 30 April 2020, revenue experienced some downward pressure as a result of the lockdown but the group delivered a positive EBITDA as a result of a focus on costs and the elimination of unnecessary spend.
The group also saw positive cash generation from operations for the quarter.
The group has continued to see good collections from its debtors book for the months of February, March, April as well as May with all months recording collections in excess of R1-billion. As at 3 June 2020, the group had cash balances of R893-million, while also deleveraging in line with its strategy.
As communicated to the market at the half year results presentation, the group has agreed to a R1,6-billion deleverage plan with its lenders.
On the back of improved financial performance for the quarter combined with the recent sale of the remaining 30% stake in
Construction Computer Software Company, the group has achieved its first capital repayment milestone, having repaid R540-million of the R1,6-billion.
This is in excess of the R500-million agreed with lenders and well ahead of the 31 August 2020 deadline. Since 1 August 2018, the Group has repaid R1,77-billion to its lenders – R1,14-billion in capital and R626-million in interest.
The group continues to service its interest obligations to the lenders and paid R75-million of interest during May. Going forward, the group will benefit from the drop in base interest rates of 2,5% with all the group’s interest costs being at floating rates linked to JIBAR.
As previously communicated to the market, the group has looked to deleverage its balance sheet primarily through the sale of non-core assets. Since 1 February 2019, the group has signed agreements for the disposal of non-core assets in excess of R1,4-billion (including extinguished liabilities), receiving a total of R865-million in cash to date.
The sale of Dental Information Systems Holdings, signed for R250-million, has been approved by the Competition Commission without any conditions and is now before the Competition Tribunal awaiting approval.
The sales processes for two of the IP assets are ongoing and are in the final stages with bidders. Additionally, the sales process for the third IP asset was launched in May 2020, with significant interest received from various bidders.
The group has also been able to reduce its liabilities for acquisitions from R204-million at the end of January 2020 (R634-million at 1 August 2018) to R114-million as at the end of May 2020.
The national lockdown has necessitated the review and assessment of ways of working differently and to adopt a cost-conscious mindset and focus on liquidity.
At the half year results presentation the target of removing R400-million of cash costs from the business for the four months to the end of July 2020 (R100-million a month) was stated.
The project has been very successful and is expected to surpass its target versus budget for the period to the end of July 2020 through various initiatives including:
* Salary adjustments;
* Rental holidays and extensions with landlords;
* Significant reduction in travel, entertainment and marketing spend;
* Continued removal of unnecessary costs; and
* Ensuring cost structures are as flexible as possible thereby reducing fixed costs.
The group recently completed a detailed strategic review of the iOCO businesses which has been co-created and built from the bottom up. EOH management remain invigorated and excited about the scale of the opportunity and the offering that EOH presents in the digitisation journey of customers and the country as a whole.
This scale has been evidenced in the more than 70 products that have been marketed to EOH customers to specifically assist them in solving their Covid-19 business challenges.