EOH’s share price rose as much as 5.1% on Tuesday morning after the JSE-listed technology services group reported a 16% improvement in headline earnings per share for the year ended 31 July 2017. The share price later tumbled by 5.4% to R98.15 at the close as investors digested the numbers.

The group said it would hike its gross dividend by 16%, too, to R2.15/share after operating profit climbed by 29% to R1.8bn on the back of a 21% improvement in revenue to R15.5bn. EOH’s cash reserves rose to R2.5bn, up 29% on the 2016 result.

The group, which has 12 500 employees across Africa and the Middle East, was reporting its first results under new CEO Zunaid Mayet, who took the reins earlier this year from Asher Bohbot. It said that in the 2017 financial year, it “undoubtedly” took market share from rivals.

“Revenue has increased in all areas of the business as a result of strong organic growth, complemented by strategic acquisitions,” it said in notes accompanying the financial results. “Organic growth accounted for 63% of the increase in consolidated revenue, contributing 68% of the profit before tax.”

The group has long had a strategy of buying companies and amalgamating them quickly to accelerate growth. Recent acquisitions include the Cornastone group of companies, PIA Solar and the Syntell group of companies.

Revenue from services accounted for about 77% of total revenue, a significant portion of which is annuity revenue, EOH said. About 90% of revenue came from South Africa.

Margins

Operating margins increased from 10.8% to 11.5% as a result of increased software sales, efficiencies and ongoing cost containment, the group said. The effective tax rate decreased from 29.7% to 28.3% as a result of tax deductions associated with learnership and internship programmes.

It said the technology sector “remains resilient in a very tough economic environment and EOH sees continued growth for the foreseeable future in South Africa, the rest of Africa and the Middle East”. — (c) 2017 NewsCentral Media