EOH Holdings has reported its last set of results under outgoing CEO Stephen van Coller, and they show a business under considerable pressure.
In the six months ended 31 January 2024, EOH – which has spent years under Van Coller’s leadership repairing and restructuring its business following a series of devastating corruption scandals involving public sector contracts – reported a total headline loss per share of 11c, a marginal improvement compared to the headline loss of 17c a year ago.
However, revenue fell to R3.1-billion, down from R3.2-billion in the same six-month period in 2023, while group operating profit came in at R9-million, down sharply from R142-million previously.
“EOH experienced a challenging second half of the 2023 financial year. This trend continued through the first three months of FY2024,” the group said on Tuesday in comments to the investment community. “Despite an improvement in trading and tendering activity in the second three-month period, the challenging environment has led to a reduction in revenue.”
The group’s interest charge decreased to R68-million from R102-million a year ago due to a recent R600-million capital raise, which included a rights issue, and the refinancing of consortium facilities with a single bank at improved interest rates. “This improvement has been ameliorated by an additional interest charge provided on legacy debts of R14-million,” it said.
Van Coller, who steps down from EOH effective 31 March, said in a statement: “For many years we have been battling the effects of the corruption scandals, unprofitable legacy contracts, inefficient corporate structures, huge debt burdens and a highly inefficient capital structure.
Capital raise
“Following our successful R600-million capital raise last year and the recent closure of our last major legacy issue, EOH can now get back to business and focus on our ‘growth-efficiency-talent’ strategy. I am confident that as I step down, the team taking up the baton – who have all been part of the senior leadership for the past five years – will ensure the transition is seamless.”
EOH announced in January that IT industry stalwart Andrew Mthembu would take the reins as executive chairman of EOH from 1 April pending the appointment of a full-time CEO to replace Van Coller, and would be in that role for up to six months. The move suggested EOH couldn’t identify an internal candidate suitable or willing to take the reins from Van Coller.
Read: EOH slapped with R112-million tax bill
Explaining the steep decline in operating profit in the first half, EOH said part of the reason was that despite the tough market conditions, the group decided to hold onto “scarce billable resources in anticipation of the turnaround, even though they were not 100% productive”.
“This has had an impact on gross margins, but positions EOH well for an anticipated improvement in trading in the second half 2024.”
It also invested R26-million in “growth initiatives” in the period, it said.
Looking at the outlook for the rest of the 2024 financial year, and beyond, EOH said that despite the tough economic environment, it is “well placed” with its “full stack of technology offerings, diversified client base and strong international performance, supported by our highly skilled employee base”.
Read: How did Stephen van Coller really do as EOH CEO?
“With the capital raise now complete and a more appropriate capital structure in place with reduced interest payments, as well as closing out the last of the significant legacy items, EOH is now well positioned to execute its growth strategy and execute its business consolidation in iOCO and EasyHQ, which will enable the business to right-size its cost structure and capitalise on the growing demand for digital transformation across its client base”. – © 2024 NewsCentral Media