EOH, an IT group that has required a turnaround plan, has flagged a decline in revenue and a sharp decrease in net profit for the six months to January 31, 2023.
EOH CEO Stephen van Coller said: “For the first time since 2019, I am able to address our stakeholders in the context of EOH being a normal business. For many years, we have been battling corruption scandals, unprofitable legacy contracts, inefficient corporate structures, huge debt burdens, and a highly inefficient capital structure.”
Its results released yesterday showed that operating profit from continuing operations decreased to R110 million in the six months to end-January, from R162m in the prior comparative period, but comparing favourably to the R100m operating profit for its full 2022 year.
Revenue rose 8% to about R3.2 billion, primarily driven by the double-digit growth in its IT infrastructure services, enterprise apps, and software reseller businesses, and the 20% growth in its digital business.
The group said the results in the second half of 2022 had been affected by a settlement, more than it provisioned for, with the Department of Defence, concerning a R120m contract dating back to 2016.
At a continuing gross profit level, EOH managed to maintain margins for continuing operations at 29%, with the long-term target being 30%.
Adjusted EBITDA from continuing operations came to R181m for the first half of 2023 compared to R278m in the 2022 first half.
The total loss per share (LPS) from continuing and discontinued operations amounted to 3 cents, while the half year of 2022 was restated to 8 cents earnings per share (EPS), compared to total LPS for the 2022 financial year remeasured of 9 cents.
These interim results were the first results after the company finalised its rights offer. The rights issue was used to decrease a bridge loan from R728m to R173m and, therefore, improve the balance sheet.
EOH has been battling debt and has implemented a turnaround strategy to save the firm.
“We completed a very successful R600m capital raise which further improves our financial position and ability to invest in our people, products, and services,” EOH said.
Van Coller said: “Today, following our successful R600m capital raise, EOH can now truly get back to business and focus on our Growth-Efficiency-Talent strategy”.
In November, EOH agreed to pay R177m in a final settlement after a Special Investigating Unit (SIU) investigation into allegations of corrupt dealings with the Department of Water and Sanitation over four IT contracts worth R474m.
Van Coller said the Digital Enablement businesses experienced strong growth in the reported period with a 20% increase in revenues over the comparable period, led by its International business, a 45% increase, which now contributes 33% of the business unit’s revenue.
The Digital business also performed well.
“The Operational Technologies business had a challenging six months due to the inability to close contracts with SOEs, which impacted revenues and EBITDA,” he said.
Van Coller said the NEXTEC Infrastructure Solutions business saw a pleasing 11% increase in revenues to R593m, driven predominantly by its mesh networks business over-performing.
“The NEXTEC People business revenue dropped 13% to R291m. A key client lost its contract with an SOE, which had a knock-on impact on our Impact HR business, as well as the termination of certain unprofitable contracts during the period,” he said.
Looking ahead, Van Coller said despite the economic headwinds faced in South Africa, EOH was well-placed for profitable growth with its full stack of technology offerings, diversified client base, as well as its strong international performance.
“With the capital raise now complete and a more appropriate capital structure in place with reduced interest payments, EOH is now well-positioned to execute its growth strategy and capitalise on the growing demand for digital transformation across its client base,” he said.
BUSINESS REPORT