EOH Holdings expects to reduce its headline loss per share by at least 47% in its latest reporting period, the JSE-listed IT services group said on Thursday.

In the six months to end-January 2020, the total loss per share will improve by at least 64%, it said in a trading update ahead of the publication of its interim results next month.

Total cash balances remain consistent with prior comparative periods as liquidity remains stable, while the core iOCO business “performed well” with gross profit margins above 20%.

“The group is approximately 12 months into a turnaround plan that is expected to take at least two years,” it told shareholders. “Good progress on key strategic initiatives in respect of the evolving business model, cost savings and capital structure initiatives has continued over the past six months.”

It said it continues to work through the remaining “inherited legacy issues”, including the “limited group of identified public-sector contracts together with non-core, under-performing Nextec businesses and the interest burden associated with the inherited debt”.

“The group has further identified a need for a cost-optimisation programme, which has resulted in 21 rental properties being exited in the last six months as well as reduction of more than a thousand people through business-as-usual efficiency measures.”

Asset disposals

It said it will continue to dispose of assets to reduce debt after exceeding a previous target of selling R1-billion of assets within 12 months.

“The iOCO business has performed well, evidenced by a stabilisation of the core business and the contracting sales pipeline, with gross profit margins above 20% for the period under review, before taking account of the public-sector contracts mentioned above.

“The public sector remains important for the group. However, eight of the public-sector projects remain problematic out of the 54 originally identified as requiring attention. Management is actively working with these customers to remedy the pertinent issues.”

The intellectual property businesses “performed well”, recording “sound revenue growth as well as retaining gross profit margins above 30%”.

“As has been previously communicated to the market, the majority of these businesses are being disposed of in order to normalise the capital structure and are classified as discontinued. Significant progress in this regard has been made. Non-binding offers have been received and the process is ongoing.”

The Nextec business “remains challenging, with the majority of these businesses unlikely to form part of the group going forward”.

More than 40 businesses have been sold or closed since 31 January 2019.