EOH Holdings shares climbed 9.4% in Johannesburg on Thursday after the IT services group provided an upbeat assessment of its turnaround plan and pointed to improved financial results.
Headline earnings per share (Heps) for the six months to 31 January 2022 are likely to be between 38c and 44c, up from a restated 36c headline loss in the same period last year, the group said in a trading statement ahead of the publication of its interim results, expected on 13 April.
“EOH’s operating environment continued to improve, resulting in operating profit covering all interest, tax, once-off items and legacy payments, [and it] achieved a positive total earnings per share and total Heps – reflecting a major milestone in the successful execution of the turnaround strategy,” it said.
The group will report it generated interim operating profit of between R150-million and R180-million from continuing and discontinued operations, compared to R76-million a year ago.
Gross profit margin improved to between 28% and 30%, from 27.6%. Ebitda margin – a measure of operating performance – is likely to be between 8% and 10%, from 7.9% previously.
EOH had a cash balance on 31 January of R625-million, including foreign (R85-million) and restricted cash in entities held for sale (R116-million). It had undrawn overdraft facilities of R250-million. With the imminent disposal of Sybrin – as part of its advanced process to reducing its legacy gearing issues – EOH will have repaid R360-million in debt since the end of January.
“The group continues to closely manage its working capital and … cash generated from operating activities was positive for the period,” it said, adding that it has access to a R500-million, three-year “bullet” facility, a R1.5-billion bridge facility (repayable in October 2022) and overdraft facilities of R250-million (which remain undrawn).
Leverage
“Following the receipt of the proceeds from the Sybrin disposal, the bridge facility balance is currently R1.2-billion (including the capitalisation of fees). The sale of the last remaining asset out of the targeted group of IP (intellectual property) companies earmarked for disposal as part of the group’s deleveraging processes, Information Services, was announced on 11 March. The sale, which is conditional upon shareholder approval, is expected to be concluded in May 2022 and will further reduce leverage by R417-million (less transaction fees),” the group said.
Earlier this month, EOH began engagements with shareholders and the investment community to assess its strategic options around the remaining R750-million. This included the possibility of a rights offer, though no decisions have been made. “These engagements have been positive and are ongoing. EOH will communicate further details on the way forward in due course.” — © 2022 NewsCentral Media
