The EOH strategic journey
Since embarking on its turnaround strategy, EOH has made great progress towards building a sustainable organisation while navigating the negative effects of the issues inherited from previous management as well as the impact of COVID-19.
The near-term priority of the current management team has been on improving EBITDA performance as well as the disposal of non-core units as part of a deleverage strategy while building a robust governance framework to enable the future growth of the business. Our business is now more focused and less complex, with our capital structure and cash generation improving. As we embark on the new phase in our evolution following a period of consolidation, our emphasis is now on enhancing our value proposition and growing our core business from a top-line and earnings perspective.
We are well positioned to take advantage of the exponential shifts in the world today, which create an opportunity to be the most attractive digital transformation enabler throughout Africa and beyond.
2018 – 2019:
WHERE WE STARTED
Deleveraging
- Gross debt of R4.5 billion
- Result of aggressive acquisition driven growth phase
Liquidity
- Disposal process initiated
- Unsustainable working capital levels
- Low cash conversion
One-off costs
- Significant one-off costs including impairment of assets, vendors for acquisitions liabilities and OEM one-off settlements
Business structure
- Complicated structure with 272 legal entities
- Tax inefficiencies
2020
WHERE WE ARE
Deleveraging
- Committed to R1.6 billion deleverage plan of which R950 million has been repaid to date(1)
- Sold 81 companies, investments in companies and business units yielding proceeds of R1.4 billion
- Gross debt of R2.0 billion(1)
Liquidity
- IP assets plan in place to accelerate deleveraging
- Ongoing closure and sale of high risk businesses
- Cash pooling and management implementation to remove inefficiencies
- Creditors and working capital focus
One-off costs
- Large legacy liabilities associated with vendors substantially complete
- Advisory costs peaked with completion of ENSafrica review and debt reorganisation due
Business structure
- Completion of first bottom up, zero-based strategy for iOCO
- Progress on NEXTEC business review and clean up of legacy public sector contracts in iOCO
- Formalising of corporate structure
- Implementation of sustainable cost cutting measures – reducing property portfolio, procurement processes
2021+
FUTURE VALUE PLAY
Deleveraging
- Gross debt target of
- Strong balance sheet to provide flexibility and optionality
Liquidity
- EBITDA cash conversion target of >80% for FY2021
- Neutral working capital for FY2021
- IP disposal and partnership deals completed
- Flexibility around capital allocation decisions
One-off costs
- Advisory costs vastly reduced
- OEM settlements minimised
- Reduced impairment losses
Business structure
- Return to positive profitability following execution on growth strategy
- NEXTEC value extracted
- EBITDA margin target >10% over medium term
(1) At 1 December 2020