Segment results

for the six months ended 31 January 2020

The reportable segments of the Group have been identified based on the nature of the business activities. A significant amount of time has been spent refining and revising the strategy of EOH. A major focus included the critical analysis of the portfolio; both in terms of refining the Group's focus and clarifying drivers of value over the longer term. This resulted in a more streamlined business, comprising three major segments with clearer alignment of focus and groupings of value. This basis is representative of the internal structure of the Group for management purposes. The Chief Operating Decision Maker ('CODM') is EXCO.

iOCO consists of the Information and Communications Technology ('ICT') operations in South Africa and internationally.

The iOCO business has performed well evidenced by a stabilisation of the core business and the contracting sales pipeline with gross profit margins above 20% for the period under review, before taking account of the public sector contracts mentioned above. The public sector remains important for the Group, however, eight of the public sector projects remain problematic out of the 54 originally identified as requiring attention. Management is actively working with these customers to remedy the pertinent issues.

NEXTEC consists of Industrial Technologies.

NEXTEC remains challenging, with the majority of these businesses unlikely to form part of the Group going forward. More than 40 businesses have been sold or closed since 31 January 2019.

IP comprises businesses which have developed proprietary software and solutions for customers.

The IP businesses also performed well over the period, recording sound revenue growth as well as retaining gross profit margins above 30%. As has been previously communicated to the market, the majority of these businesses are being disposed of in order to normalise the capital structure and are classified as discontinued. Significant progress in this regard has been made. Non-binding offers have been received and the process is ongoing.

The CODM is not presented with secondary information in the form of geographic information and as a result, it 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 report.

Revenue and normalised EBITDA from continuing operations:

  Unaudited for the six months ended 31 January 2020  
Figures in Rand thousand iOCO  NEXTEC  IP  Recon-  
ciliation^		 Total   
Revenue             
External  3 575 754  1 980 993  796 831  –   6 353 578   
Intersegment  100 351  135 999  789  (237 139)  –   
Discontinued operations  342 059  933 251  534 095  –   1 809 405   
Continuing revenue  3 334 046  1 183 741  263 525  (237 139)  4 544 173   
Gross profit             
Gross profit  922 534  274 012  322 485  (21 397)  1 497 634   
Discontinued operations  128 649  55 630  246 476  –   430 755   
Continuing gross profit  793 885  218 382  76 009  (21 397)  1 066 879   
Continuing gross profit (%)  23,8%  18,4%  28,8%    23,5%   
Normalised EBITDA**  212 823  (32 978) 14 761  (124 669)  69 937   
Non-core business lines to be closed~  187 744  22 754  –  –   210 498   
Normalised EBITDA  400 567  (10 224) 14 761  (124 669)  280 435   
Normalised EBITDA (%) 12,0%  (0,9%) 5,6%    6,2%   

 

  Unaudited restated* for the six months ended 31 January 2019  
Figures in Rand thousand iOCO  NEXTEC  IP  Recon-  
ciliation^		 Total   
Revenue             
External  4 693 444  2 547 438  887 104  –   8 127 986   
Intersegment  84 301  134 630  23 551  (242 482)  –   
Discontinued operations  628 151  1 225 750  772 005  –   2 625 906   
Continuing revenue  4 149 594  1 456 318  138 650  (242 482)  5 502 080   
Gross profit             
Gross profit  848 856  375 920  381 932  (16 145)  1 590 563   
Discontinued operations  226 122  178 545  318 089  –   722 756   
Continuing gross profit  622 734  197 375  63 843  (16 145)  867 807   
Continuing gross profit (%)  15,0%  13,6%  46,0%    15,8%   
Normalised EBITDA**  123 530  (143 672) 47 836  (177 664)  (149 970)  
Non-core business lines to be closed~  370 142  214 582  –  –   584 724   
Normalised EBITDA  493 672  70 910  47 836  (177 664)  434 754   
Normalised EBITDA (%) 11,9%  4,9%  34,5%    7,9%   
Figures in Rand thousand   31 January 
2020 		     Restated*
31 January  
2019  		    
EBITDA reconciliation             
Operating loss before interest and equity-accounted losses from continuing operations  (728 216)    (2 408 373)    
Depreciation  118 025     100 713     
Amortisation  57 402     134 953     
Impairment losses  152 452     1 334 569     
Loss on disposal of assets  93 948     156 686     
Share-based payments  16 807     200 825     
VFA re-estimation  11 260     (20 715)    
Income from joint venture  2 178     –     
EBITDA  (276 144)    (501 342)    
Impairment of inventory  14 090     43 996     
Specific IFRS 9 impairments and provisions  149 245     199 300     
Advisory and other  90 619     108 076     
IFRS 15 adjustments  6 729     –     
Retrenchment and settlement costs  36 260     –     
Onerous contracts and other provisions  49 138     –     
Normalised EBITDA**  69 937     (149 970)    
Non-core business lines to be closed~  210 498     584 724     
Normalised EBITDA from continuing operations  280 435     434 754     
* Comparative figures previously reported have been amended to reflect continuing operations and segments prevailing for six months to 31 January 2020, as well as correction of prior period errors.
** Normalised EBITDA is defined as continuing losses before interest income and expense, tax, depreciation, amortisation, impairments, gains or losses on disposal of businesses and equity-accounted investments. Normalised EBITDA excludes once-off cash and non-cash items.
^ 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 in that year and preceding years.