EOH Commentary
"Three years ago we embarked on a challenging turnaround strategy for the EOH Group and it has been a tough but truly rewarding journey. Today we stand together as an agile and focused organisation proudly celebrating the fact that we are able to report positive earnings per share. This important milestone is clear evidence of our collective success.
EOH's full stack of technology offerings, its 5000 strong diversified client base as well as its global footprint, ensure the Group is well positioned for the future. Our clients strong demand for full digital transformation and EOH's ability to deliver on all their needs across infrastructure, software and services puts the group in an attractive position with the ability to increase its market share.
Our collective confidence is underpinned by the business' ever improving cashflow generation and positive momentum towards achieving the optimal sustainable capital structure. I am hugely grateful to our staff, shareholders and clients for their unwavering support over the last three years and look forward to our next chapter which will be underpinned by exponential growth."
Stephen van Coller, CEO
Key highlights for the six months
(includes both continuing and discontinued operations)
Total Group revenue of R3 511 million
Gross profit margin increased by 2.3% to 29.9%
Improvement in adjusted EBITDA margin by 1.8% to 9.7%
Generated an operating profit of R167 million for the half year following an operating profit of R76 million for H1 2021
Cash on hand at the end of the period of R625 million
An improvement of 116% in total earnings per share to 13 cents for the period following a total loss per share of (83 cents) for H1 2021
OPERATIONAL REVIEW
The EOH Board and management team are pleased to report that, despite the ongoing challenging operating environment, this six-month period marks the successful completion of EOH's targeted turnaround strategy, with the Group reporting its first positive earnings per share in three years to 13 cents – a 116% improvement on the prior period (H1 2021: 83 cents loss per share) – and headline earnings per share of 41 cents (H1 2021: 36 cents loss per share).
The continued acceleration of digitisation across the business landscape has seen EOH entrenching its status as one of Africa's largest technology service providers by enabling its clients to rapidly pursue secure digital transformation and automation strategies as they adopt new hybrid operating models necessitating seamless connectivity between their virtual and physical environments.
The six-month period also sees the successful close out of the first phase of the EOH Board and management team's deleveraging strategy with the successful sale of a number of businesses previously identified for disposal in order to urgently pay down material tranches of the Group's onerous legacy debt. The IP assets are the last assets to be sold as part of this deleveraging process. The Sybrin sale was announced on 8 June 2021, with the proceeds from the disposal received on 31 March 2022 and the sale of the Information Services ("InfoSys) companies, announced on 11 March 2022, is expected to conclude in May 2022.
As part of this process EOH has also concluded its debt restructure with lenders whereby the Group has access to a R500 million three-year bullet facility; a R1.2 billion bridge facility repayable 1 April 2023 and overdraft facilities of R250 million (which were undrawn as at 12 April 2022).
As previously communicated, with the disposal strategy now complete and with the business optimally structured, from both an operational and commercial perspective, to offer its clients holistic technology solutions, EOH now requires the right capital structure for the business to pursue a growth-led strategy. To this end, management commenced engagements with shareholders and the investment community at the beginning of March 2022 in order to evaluate the various options available as the Group seeks to bed down a sustainable capital structure. Discussions to date have focused primarily on raising capital through a rights issue or having a strategic investor take a significant stake in the business. The long-term debt to equity target is 30:70 or less and one times EBITDA cover or less. Given the supportive investor engagements and insights received to date, the EOH Board and management team have every confidence that an optimal solution will be found and that this process will be concluded over the next few months.
EOH delivers profit following the successful completion of the turnaround strategy