EOH Holdings shares climbed more than 5% in Johannesburg on Wednesday morning after the IT services firm released its first financial results following its recent rights issuance.
The business, which has been through the ringer in recent years after investigations revealed it was a key player in public sector corruption, claimed it earned an operational profit of R110 million for the six months ending 31 January 2023. This is more than twice the full-year operating profit recorded until the end of July 2022, indicating that the company is currently moving in the right direction.
Despite a “challenging local operating environment,” revenue from ongoing operations increased by 8%, while gross profit margins were “stable” at 29%. It recorded a cash balance of R234 million at the end of January.
The financial results come on the heels of EOH’s recent recapitalisation, which saw R600 million in additional capital received from shareholders, including R100 million from Lebashe Investment Group, reducing the group’s interest-bearing debt to more manageable levels. EOH has now structured the remaining loan with Standard Bank into a single facility.
“With the improved operating performance and outlook in the 2022 financial year, the board was able to approve an R80-million strategic investment into the business, of which R48-million has been invested in the first six months [of FY2023],” it said. “Additionally, the recent successful capital raise significantly reduces interest charges. Going forward, EOH will further accelerate its organic growth strategy, especially on the back of the pleasing results being seen on the initial investments.”
EOH’s Digital Enablement segment fared well in the most recent intermediate reporting period, with a 20% rise in revenue and a 24% increase in profits before interest, tax, depreciation, and amortisation (Ebitda), driving greater margins. Foreign diversification also aided, with “excellent growth” in the Middle East, Europe, and the United Kingdom. Offshore revenue now accounts for one-third of total Digital Enablement revenue.
“The IT Infrastructure Services, Enterprise Apps & Software and Infrastructure Solutions divisions all saw pleasing revenue growth over 10%,” the group said. “The Operational Technologies business had a challenging trading period primarily due to delays and the inability to close contracts with state-owned enterprises, resulting in a 10% reduction in revenue. This business is reliant on SOEs and mining in South Africa, but diversification initiatives have started with investments into West and East Africa.”
In a media statement issued with its interim results, EOH said its executive management team and board are “excited” about the “momentum that has built over the past six months”.
“Compared to the previous six-month period (the second half of the 2022 financial year) all key metrics have improved, with revenue increasing 5%, gross profit 13%, adjusted Ebitda 112% and profit after tax 82%.
“Furthermore, with the completion of the asset disposal process to deleverage the company, EOH now has a stable portfolio of businesses with a coherent go-to-market strategy,” it added.
CEO Stephen van Coller said: “Our initial growth investments are showing great results and we will continue to build on this momentum while maintaining our focus on cost efficiencies and making EOH the employer of choice in the IT industry.”
