Media Statement 03 October 2018

 

A year of two halves as EOH sets the platform for renewed growth

Johannesburg, 3 October 2018 – EOH Holdings (“EOH” or “the Company”) today announced its annual Financial Results for the year ended 31 July 2018.

Highlights:

  • A year of two very different halves – a very difficult first half with the second half showing signs of a normalizing of business activities, with recent major deal wins on the increase
  • Strategic review sees focused growth platforms in two independent businesses– the ICT business, EOH and NEXTEC, the business delivering specialised solutions in high growth industries
  • Shareholders approve Lebashe transaction post year-end injecting R1bn of new capital, making EOH the largest technology company in Africa, now majority black-owned
  • Normalised revenue increasing for the year by 8% R16.27 billion
  • Normalised EBITDA of R1.77 billion
  • Cash generated from operations was R1.26 billion
  • Earnings impacted by once-off impairment of assets, unwinding of non-core businesses and discontinuing of selected activities in the public sector

Overview

A normalising second half with major restructuring and implementation of its new business model has set EOH solidly on a renewed growth path. Following the announcement of EOH’s new strategy in March 2018, the Group completed a reconfiguration into two distinct businesses in August this year. Each of these businesses operates with a unique brand and identity, business model, and go-to-market strategy. The ICT business now operates under the EOH brand with Rob Godlonton as CEO. The specialised solutions for high-growth industries businesses is now operating under the newly launched NEXTEC brand, with Zunaid Mayet as CEO. The EOH Holdings corporate structure is led by Stephen van Coller, who is responsible for corporate finance, corporate strategy, group reporting, investor relations, risk and compliance. EOH also reconfigured its board earlier this year, bringing with it greater levels of independence and oversight.

The financial year under review was impacted negatively by the first half, which was influenced by challenging market conditions, negative media attention, the unwinding of GCT – a major business unit that no longer fitted the EOH business model and robust customer retention negotiations, which led to margin squeeze in the business.

With these largely once-off items completed, while they have a negative impact on the overall financial results, EOH is pleased that the second half of the year saw a much different business environment, despite the South African macro economy still being under strain.

EOH was able to focus on once again winning major clients at more normalised margins and business contracts, stabilising the business and cementing the growth path under the two distinct businesses – EOH and NEXTEC.

With a combined addressable market in South Africa worth R230 billion, and EOH and NEXTEC collectively servicing less than 7% of the market, an unparalleled opportunity exists for the Company.

Major BEE Transaction

On 18 September 2018 EOH’s shareholders voted overwhelmingly in favour of the Lebashe BEE transaction, with Lebashe injecting R1 billion of equity, providing EOH with sufficient resources to continue to grow and develop its business into the future. The approval of the transaction sees EOH affirm its commitment to transformation. EOH will have an effective black shareholding above 50%, and making the largest technology company in Africa, now also majority black-owned, improving the Group’s attractiveness as an empowered supplier for customers in both the private and public sectors.

Financial Results

Normalised revenue grew by 8% to R16.27 billion compared to R15.12 billion in 2017, which when accounting for the business units of EOH and NEXTEC, saw a near 50-50 split in revenue, which EOH contributing slightly more at R8.2bn of the total.

Normalised EBITDA was down from R2.18 billion in 2017 to R1.77 billion in 2018.

Cash generated from operations was R1.26 billion. Whilst working capital was under strain throughout the year as a result of slow payments from the public sector and delays in long- term projects, there has been a positive shift in the second half of the year and the cash conversation ratio (based on EBITDA) has improved to 71% (2017: 58%).

Normalised headline earnings per share came in at 467 cents vs 797 cents per share in 2017.

Outlook

The EOH Group is committed to completing the reorganisation in a manner that creates best in class governance and transparency, while retaining the entrepreneurial and innovative spirit that has made the Group the most successful technology business in Africa.

The EOH Holding’s Company board has been reconfigured with the appointed of two independent non-executive directors to enhance the governance, the leadership team has been strengthened with CEO’s appointed for EOH Holdings, EOH and NEXTEC, while a R1bn BEE equity transaction by Lebashe earmarked for growth capital, also elevates EOH’s already strong empowerment credentials. Lastly EOH has de-risked the business with greater focus and operational efficiencies and a strong drive to improve working capital management.

Stephen van Coller, Group CEO of EOH Holdings, concluded “We, as EOH, occupy a critical position at the centre of the fourth industrial revolution with all the skills and capabilities to make a meaningful impact and, ultimately provide integrated services covering a broad spectrum of associated technology needs. I am excited to be leading this business into its next chapter and welcome the opportunity to ensure we remain the most trusted name in technology on the African continent.”

Ends.

About EOH

The EOH Group is the largest technology business in Africa, providing the technology, knowledge, skills and organisational ability critical to Africa’s development and growth. Following the Consulting, Technology and Outsourcing model, the EOH Group provides high- value, end-to-end solutions to its clients in all industry verticals.

We provide the technology, knowledge, skills and organisational ability critical to the development and growth of the companies we serve. We are an ethical and relevant force for good and strive to play a positive role in society, beyond normal business practice.

The Group employs more than 11 500 people, delivering technology solutions and knowledge services to over 5 000 large enterprise customers across all major industries. The EOH Group is present throughout South Africa, and has a growing international footprint with 2 500 skilled resources in 30 countries on five continents.

As a leader in driving and supporting digital innovation, the Group offers solutions along a simple Design- Build-Operate engagement model through its two independent businesses, EOH and NEXTEC.

For media queries on EOH contact Raksha Kassie

Head: EOH Group Marketing

Mobile: +2783 317 8623 or email: media@eoh.com