EOH Holdings has renamed its ICT services business iOCO, the JSE-listed technology group said in an update to shareholders on Thursday.
The update comes ahead of EOH’s full-year results, which will be published in mid-October.
It described the creation of iOCO as “a key milestone in the internal reorganisation process, aimed at simplifying the ICT business, integrating client offerings under one brand, driving governance imperatives, and aligning the service delivery model and offerings for the cloud economy and fourth Industrial Revolution”.
In April, EOH outlined how it would focus the business on three key pillars, namely the ICT business, Nextec (which would focus on new growth opportunities) and intellectual property (IP).
“Work on the Nextec strategy continues, including how iOCO, Nextec and the IP businesses will work together to optimise value for EOH shareholders, with umbrella shared services being provided by EOH.”
The extensive restructuring comes as EOH continues to battle the fallout flowing from allegations of corruption involving some of its public sector dealings, including a dodgy Microsoft licensing contract with the department of defence. It said it has strengthened corporate governance significantly in recent months and continues to work through the findings of an ongoing investigation by law firm ENSafrica into malfeasance.
The group said trading conditions for the full-year period have remained “under pressure”. It blamed the weak economy as well as concerns around governance at the company.
“Some improvement has been noted following the release of the interim update on the forensic investigation being undertaken by ENSafrica on 16 July as clients resume business with the group. However, the benefits will not be realised until after year-end,” it said.
“This has resulted in revenue remaining under pressure, which has increased further in the second half of the year, in part due to one-off hardware sales not being repeated in the second half of the year.”
Full-year gross margin is expected to remain flat when compared to the first half of the year, before the impact of discontinued businesses.
Once-off advisory fees will negatively impact the results, it warned.
“The core challenge remains ensuring the cost base is appropriate for the business,” it said. “Work in this regard has started on larger line items such as facilities costs, where good progress has been made. However, more work will be required in the new year.”
It said it has made solid progress in the sale of non-core assets, which it described as “reasonably advanced” but which will continue into the new financial year. “The drag on Ebitda from some of these businesses undergoing closure has reduced meaningfully during the last six-month period when compared to the first six-month period,” it added. (Ebitda is a measure of operational profitability.)
“The ongoing scrutiny of the balance sheet by management, supported by a full audit, is in progress. While the majority of the write-downs were made at half-year, further write-downs are anticipated, although these are not expected to be of the magnitude of those made at the half year.
“Improved working capital management and the closure of loss-making entities are starting to show positive benefits.”
“It has been a challenging six-month period, but the group has made meaningful progress on a number of fronts,” said group CEO Stephen van Coller in the update. “I have every confidence that the fundamental strengths of the business and its people will prevail in the longer term notwithstanding the pressures the business is facing.” — © 2019 NewsCentral Media