EOH swings from R1.3bn operating loss to a R147m operating profit

Technology services group EOH has swung from a R1.3 billion operating loss in FY2020 to a R147 million profit for the year ending July 31, 2021, according to its latest financial results published on Thursday.

It said the performance is evidence of “the success of a massive turnaround strategy” that started two-and-a-half years ago.

Read: Former EOH finance chief John King dies amid R1.7bn damages claim

EOH’s gross profit margin improved to 28% from 22% in FY2020, while operating margins increased to 2% from a negative 12% in FY2020. Its adjusted Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin improved to 9% from 0% in FY2020.

The group is still in a headline loss per share position, which meant it could not declare any dividends again this year.

However, its improving performance, saw EOH’s headline loss per share being slashed 96%, from 534 cents in FY2020 to a headline loss per share of 22 cents for FY2021.

Other features of the turnaround strategy paying off, which the group highlighted in its latest results, include:

• EOH’s work to close out legacy contracts and make targeted disposals over the past two years resulted in more profit from a smaller revenue base of R7.9 billion.
• Significant progress made in simplifying the business by bundling complementary offerings to better serve customers with its end-to-end capability and creating sustainable cost savings.
• Reducing its property portfolio from 56 to 33 and legal entities reduced to around 145 from 272 thus far.
• A “Common Terms Agreement” signed with lender group on October 20, 2021. It noted that the refinancing of existing debt provides EOH with greater certainty with respect to the overall debt outstanding and provides a more stable platform for the optimisation of the capital structure.

“I am really proud of the fact that we have rebuilt EOH in such a short time frame,” EOH CEO Stephen van Coller said with regard to the group’s 2021 financial performance.

“Just two and a half years ago the new EOH management team initiated a massive turnaround strategy for the group. For the first time since I arrived our current assets exceed our current liabilities,” he pointed out.

“We are well-positioned to progress the transformed EOH … Today EOH is streamlined, profitable and is winning new public and private sector contracts across multiple geographies,” said van Coller.

The group also highlighted its recent appointment of Ziaad Suleman as chief commercial officer.

EOH said Suleman is “an excellent addition to an already strong management team”, noting that he spent 13 years at IBM in various roles including that of COO for Africa, SA Chair of the 4IR Digital economy committee at Brics (Brazil, Russia, India, China and SA economic bloc) and the Digital Economy Chair of the PPGI Presidential Initiative (Public Private Growth Initiative).

“Ziaad is driving a visionary yet pragmatic commercial go-to-market strategy which sees the group expanding its footprint in Southern Africa, Europe and the Middle East with its operations in Egypt well-positioned to develop into a centre of excellence serving both the Middle East and Europe,” the group noted.

Meanwhile, Van Coller said that the group remains “cautiously optimistic around the recovery of the economy” over the next few months and how emerging economic trends may impact its business.