Segment results

FOR THE YEAR ENDED 31 JULY 2020

The reportable segments of the Group have been identified based on the nature of the business activities. The business is managed in three major segments and this remains consistent with the prior year with some movements of businesses between the segments. Changes to the reportable segments in the current year included the moving of HQaaS and Digital Industries businesses out of NEXTEC to iOCO to streamline and consolidate similar business offerings in line with the revised strategy of EOH. This basis is representative of the internal structure of the Group for management purposes and the segment results for the comparative period has been restated accordingly. The Chief Operating Decision Maker (CODM) is the Group Executive Committee.

iOCO is the ICT business focused on traditional and cutting-edge technology system integration with a range of solutions, products and services across the ICT value chain.

NEXTEC consists of a variety of businesses focused on business process outsourcing and technology infrastructure at various stages of incubation for growth and scaling.

IP comprises a group of high potential intellectual property companies with scaled technology ready to take to market with partners.

The CODM is not presented with secondary information in the form of geographic information and as a result, geographic information is not disclosed in the segment results. Liabilities and assets are also not regularly provided to the CODM and are not disclosed in the segment results.

Adjusted EBITDA is defined as profit/(loss) before depreciation, amortisation, share-based payment expense, gain/loss on disposal of subsidiaries and equity-accounted investments, impairments of non-financial assets, share of profit/loss of equity-accounted investments, remeasurement gain/losses on vendors for acquisition liability, interest income, interest expense and current and deferred tax.

Revenue, gross profit and core normalised EBITDA:

   2020  Restated*
2019 
Figures in rand thousand  iOCO  NEXTEC  IP  Recon- 
ciliation^
Total  iOCO  NEXTEC  IP  Recon- 
ciliation^
Total 
Revenue                               
External  6 699 614  3 375 968  1 201 121  –  11 276 703  7 841 419  5 232 875  1 875 006  –  14 949 300 
Intersegment  222 948  154 442  11 180  (388 570)   121 195  289 412  30 835  (441 442)  
Gross revenue  6 922 562  3 530 410  1 212 301  (388 570) 11 276 703  7 962 614  5 522 287  1 905 841  (441 442) 14 949 300 
Gross profit  1 684 352  527 266  480 722  (223 441) 2 468 899  1 641 933  661 197  754 125  (125 857) 2 931 398 
Gross profit (%)   24.3%  14.9%  39.7%  –  21.9%  20.6%  12.0%  39.6%  –  19.6% 
Adjusted EBITDA  391 651   (111 128) 319 537  (528 480) 71 580  (711 069) (189 193) 439 051  (945 026) (1 406 237)
Normalisation adjustments  104 608  27 116  67  233 131  364 922  790 618  52 106  –  518 995  1 361 719 
Normalised EBITDA**  496 259   (84 012) 319 604  (295 349) 436 502  79 549  (137 087) 439 051  (426 031) (44 518)
Non-core business lines to be closed~  323 016  172 980  –  –  495 996  279 254  246 800  –  –  526 054 
Core normalised EBITDA***  819 275   (88 968)  319 604  (295 349) 932 498  358 803  109 713  439 051  (426 031) 481 536 
Core normalised EBITDA (%)  11.8%  (2.5%)  26.4%  –  8.3%  4.5%  2.0%  23.0%  –  3.2% 
* Comparative figures previously reported have been amended to reflect segment structure used for the 12 months to 31 July 2020, as well as correction of prior period errors as described in note 6.
** Normalised EBITDA is defined as Adjusted EBITDA adjusted for certain once-off for cash and non-cash items.
*** Core normalised EBITDA is defined as normalised EBITDA adjusted for non-core business lines to be closed.
^ Reconciliation comprises elimination of intersegment transactions and includes head office expenses.
~ Non-core business lines to be closed reflect businesses identified to be shut down.

Adjusted EBITDA reconciliation
Figures in Rand thousand  Notes     2020  Restated*
2019 
Operating loss before interest and equity-accounted losses        (1 266 720) (4 260 838)
   Operating loss from continuing operations        (941 894) (3 700 044)
   Operating loss from discontinued operations        (324 826) (560 794)
Depreciation        335 924  204 848 
Amortisation        162 079  230 968 
Impairment losses on non-financial assets        522 475  2 258 840 
Loss/(gain) on disposal of assets        263 675  (120 868)
Share-based payments        48 285  247 614 
Changes in fair value of vendors for acquisition  17     3 685  33 199 
Loss from joint venture  13     2 177  – 
Adjusted EBITDA        71 580  (1 406 237)
Normalisation adjustments        364 922  1 361 719 
   Write-off of inventories#        20 396  59 753 
   Other financial assets write-off and specific provisions        149 245  759 501 
   Advisory and other##        106 605  154 548 
   Retrenchment and settlement costs        49 744  115 138 
   Onerous contracts and other provisions        38 932  272 779 
Normalised EBITDA**        436 502  (44 518)
Non-core business lines to be closed~        495 996  526 054 
Core normalised EBITDA***        932 498  481 536 
* Comparative figures previously reported have been amended to reflect segment structure used for the 12 months to 31 July 2020, as well as correction of prior period errors as described in note 6.
** Normalised EBITDA is defined as Adjusted EBITDA adjusted for certain once-off cash and non-cash items.
*** Core normalised EBITDA is defined as normalised EBITDA adjusted for non-core business lines to be closed.
~ Non-core business lines to be closed reflect normalised EBITDA relating to businesses which management intends closing which have not yet met the IFRS 5 requirements to be classified as discontinued and
non-profitable business lines or arrangements that are not expected to continue going forward.
# Write-off of inventories relates to inventory licences that were previously purchased and capitalised as inventory and subsequently written off as there were no customers for such inventory licences.
## Advisory and other consists mainly of costs related to the ENS investigation, costs related to internal restructuring of the businesses, advisor costs related to disposals of businesses and also includes the JSE fine.