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. |