What recession? JSE-listed IT services company EOH is growing as if it were the late 1990s again. The company’s revenues have jumped an extraordinary 32% in the worst recession in a generation.
In a sign that SA companies are not cutting back on their spending on technology services — at least not the way they did at the start of the decade when the dot-com bubble burst — EOH has lifted its revenue in the year to 31 July 2009 to nearly R1,3bn. At the same time, it has grown headline earnings per share by 25,9% to R121,9m.
The business has proved highly cash-generative during the year, and at the end of July had R207m in cash in the bank, up from R119m a year earlier.
More than two-thirds of the growth at the top line was organic, with gross margins expanding from 34% to 36%. Operating margins declined slightly, to 9,3%, mainly as a result of what the company describes as “tough economic conditions in the infrastructure industry”.
Key to EOH’s performance is its exposure to IT services, says CEO Asher Bohbot (pictured). More than half its revenues are from services, and only 18% from hardware sales. Software makes up 30% of turnover.
Bohbot says the IT industry is growing faster than the rest of the economy and will continue to do so “for years to come”.
He says smaller IT companies are finding the going more difficult, but the larger players are benefiting as companies seek to mitigate risk in the downturn. “High-end service providers like EOH are still finding the going to be strong, though on the infrastructure and hardware side, margins and volumes are down.”
He also says companies are scaling down their IT investments, preferring to go for smaller, more bite-sized projects. However, says Bohbot, “the general health of the IT industry is good. We don’t see too many of our competitors in pain.” — Duncan McLeod, TechCentral
