Key financial features for the six months ended 31 January 2024

  • Group revenue of R3.1 billion for the six months ended 31 January 2024 ended lower
    than the R3.2 billion recorded for HY2023
  • Adjusted EBITDA of R97 million from R171m for HY2023
  • Group operating profit came in at R9 million down from R142 million in HY2023
  • Headline Loss Per Share of 11 cents improving from 17 cents HY2023.
  • Loss Per Share of 15 cents down from 3 cents in HY2023

The challenges experienced by EOH in the second half of FY2023 continued into the first three months of HY2024.  As a result, despite an improvement in trading activity in the second three-months of HY2024, the group experienced a marginal reduction in revenue for the six month period. However, there was a 6% increase in revenue from the second half of FY2023. The Operational Technologies division had a particularly challenging six months impacted by delays in closing Public Sector contracts as well as contracting delays with large mining customers. Pleasingly, however, the core Digital Enablement business, the International business and the revectored Infrastructure as a service business, delivered solid  revenue growth.

Most notably, after four years at the negotiating table, EOH recently announced an agreement with SARS on the last remaining legacy issue that has been holding the company back from finalising the restructure and getting back to business-as-usual. The closure of this matter allows for further corporate structure rationalisation of the EasyHQ business and the further normalisation of the tax rate. The final settlement was materially in line with provisions held on the balance sheet.

One of the major challenges facing the South African IT industry is finding and retaining appropriately skilled talent. Accordingly, despite the impact on gross margins and overall profitability, EOH took the decision to retain highly skilled staff that were not fully productive, in anticipation of improved trading.  Management believes this is the correct medium-term approach in order to resource an anticipated increase in activity appropriately but will continue to monitor the economic environment closely.

Operating costs continue to be a core focus, and EOH is on track to eliminate at least R50 million from the FY2023 cost base, on an annualised basis, as part of the efficiency strategy.

Working capital remains tightly managed with debtors’ days remaining constant positive cash generation from operating activities. EOH had a net cash balance of R300 million at 31 January 2024, with unutilised short-term facilities of R133 million.

The Group’s interest charge decreased to R68 million from R102 million, as a result of the R600 million capital raise and the refinancing of consortium facilities with a single bank at improved interest rates during FY2023. This improvement has been ameliorated by an additional interest charge provided on legacy debts of R14 million.

Outgoing EOH CEO Stephen Van Coller who retires this month after agreeing to extend his initial five year contact for another six months until the end of March 2024 said: “As my journey with EOH draws to a close I am extremely relieved that we have managed to close the final outstanding legacy issue. The negotiation with SARS will certainly go down as one of the toughest negotiations of my corporate career. I would like to take this opportunity to thank the Board, executive team, staff and customers of EOH for the privilege of leading the company over this time. I know that the business will go from strength to strength as our 3 business unit CEOs, Marius De La Rey, Fatima Newman and Brian Harding, bring continuity of leadership as they further execute on the operational strategies they have been leading for the past 12 months. A special thank you to Chairman Andrew Mthembu whose advice and guidance has been invaluable to me throughout my time at EOH and who will continue to walk the journey with Marialet, Marius, Fatima and Brian.”

Andrew Mthembu the Group’s Chairman said: “This has been a tough six month period for EOH but the lead indicators are moving in the right direction, and thanks to Stephen and the team we now have a clean slate from which we can move forward. Stephen’s time at EOH has been nothing short of remarkable and  when I look back at what he and his team have achieved it is hard to believe that they have reduced an R5 billion legacy debt burden to R700m while navigating COVID19, the KZN riots and floods, geo political turmoil as well as  challenging economic conditions. Perhaps even more importantly I celebrate the fact that under Stephen’s leadership we are well on our journey to creating a fit for purpose business with depth and breadth of leadership to ensure it delivers into the future. I look forward to continuing the journey with Marialet, Marius, Fatima and Brian as we execute on their already deeply entrenched operational strategies.”

The presentation of the Group’s interim results hosted by the Group Chief Executive Officer, Stephen van Coller, and Group Chief Financial Officer, Marialet Greeff, may be viewed via a webinar at 11h00 on
26 March 2024 by clicking the following link: https://bit.ly/3v9QF1m

The full SENS announcement can be read here.

For media enquiries please contact:

Janine Gertzen:  Janine@thenielsennetwork.com / +27829238054