Segment results
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
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 period with some minor movements of businesses between the segments. Changes to the reportable segments in the prior 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. 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 VFA liability, investment income, finance costs and current and deferred tax.
Revenue, gross profit and core normalised EBITDA:
| Unaudited for the six months ended 31 January 2021 |
Restated* unaudited for the six months ended 31 January 2020 |
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|---|---|---|---|---|---|---|---|---|---|---|
| Figures in Rand thousand | iOCO | NEXTEC | IP | Recon- ciliation^ | Total | iOCO | NEXTEC | IP | Recon- ciliation^ | Total |
| Revenue | ||||||||||
| External | 2 737 400 | 1 028 440 | 610 038 | – | 4 375 878 | 3 378 171 | 2 021 743 | 794 533 | – | 6 194 447 |
| Intersegment | 244 985 | 25 025 | 928 | (270 938) | – | 226 590 | 111 062 | 8 956 | (346 608) | – |
| Gross revenue | 2 982 385 | 1 053 465 | 610 966 | (270 938) | 4 375 878 | 3 604 761 | 2 132 805 | 803 489 | (346 608) | 6 194 447 |
| Gross profit | 844 035 | 190 804 | 252 334 | (79 111) | 1 208 062 | 921 255 | 292 186 | 322 352 | (38 159) | 1 497 634 |
| Gross profit (%) | 28.3% | 18.1% | 41.3% | 27.6% | 25.6% | 13.7% | 40.1% | 24.2% | ||
| Adjusted EBITDA | 282 934 | (6 256) | 120 746 | (68 467) | 328 957 | 153 072 | (165 360) | 210 332 | (336 961) | (138 917) |
| Normalisation adjustments | 7 405 | 1 577 | 20 008 | (27 144) | 1 846 | 100 557 | 24 025 | 68 | 223 874 | 348 524 |
| Normalised EBITDA** | 290 339 | (4 679) | 140 754 | (95 611) | 330 803 | 253 629 | (141 335) | 210 400 | (113 087) | 209 607 |
| Non-core business lines to be closed~ | 6 573 | 25 582 | – | – | 32 155 | 187 744 | 83 057 | – | – | 270 801 |
| Core normalised EBITDA*** | 296 912 | 20 903 | 140 754 | (95 611) | 362 958 | 441 373 | (58 278) | 210 400 | (113 087) | 480 408 |
| Core normalised EBITDA (%) | 10.0% | 2.0% | 23.0% | 8.3% | 12.2% | (2.7%) | 26.2% | 7.8% | ||
| * | Comparative figures previously reported have been amended to reflect segment structure used for the 6 months to 31 January 2021, 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. |
| ^ | Reconciliation comprises elimination of intersegment transactions and includes head office expenses. |
Adjusted EBITDA reconciliation
| Figures in Rand thousand | Unaudited for the six months to 31 January 2021 |
Unaudited restated* for the six months to 31 January 2020 |
||
|---|---|---|---|---|
| Operating profit/(loss) | 58 664 | (915 410) | ||
| Operating profit/(loss) from continuing operations | 8 199 | (757 662) | ||
| Operating profit/(loss) from discontinued operations | 50 465 | (157 748) | ||
| Depreciation | 124 592 | 165 040 | ||
| Amortisation | 30 634 | 85 054 | ||
| Impairment losses on non-financial assets | 72 278 | 279 072 | ||
| Loss on disposal of assets | 2 950 | 6 591 | ||
| Share-based payments | 23 951 | 18 104 | ||
| Changes in fair value of vendors for acquisition | 10 864 | 11 292 | ||
| Loss from joint venture | – | 2 178 | ||
| Loss on disposal of subsidiaries and associates | 5 024 | 209 162 | ||
| Adjusted EBITDA | 328 957 | (138 917) | ||
| Normalisation adjustments | 1 846 | 348 524 | ||
| Write-off of inventories# | – | 14 090 | ||
| Other financial assets write-off and specific provisions | 45 963 | 149 245 | ||
| Advisory and other## | 14 262 | 97 438 | ||
| Retrenchment and settlement costs | 4 286 | 38 703 | ||
| Onerous contracts and other provisions | (62 665) | 49 138 | ||
| Normalised EBITDA** | 330 803 | 209 607 | ||
| Non-core business lines to be closed~ | 32 155 | 270 801 | ||
| Core normalised EBITDA*** | 362 958 | 480 408 | ||
| * | Comparative figures previously reported have been amended to reflect segment structure used for the six months to 31 January 2021, 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 ENSafrica investigation, costs related to internal restructuring of the businesses and adviser costs related to disposals of businesses. |