EOH expects full-year headline loss to narrow

EOH Holdings expects to lose less money in the financial year ended 31 July 2020 compared to a year ago as the IT services group makes headway in cleaning up “legacy” issues.

The group will report a headline loss per share price from total operations of between R4.96 and R4.06. This compares to a headline loss a year ago of R16.81/share.

In a trading update issued after the market closed in Johannesburg on Thursday, EOH ascribed the “improved financial performance” to “positive progress made towards stabilising the business model while navigating the difficult economic environment brought about by the Covid-19 pandemic”.

It also credited “work done towards establishing a fit-for-purpose cost structure and significantly reduced once-off costs and legacy issues that were a substantial burden on the financial performance and cash flow of EOH during the previous corresponding period”.

All core lines of business at iOCO, its traditional IT services business, performed soundly despite Covid-19, with profit margins remaining north of 20%, it said.

“The primary contributing factor to the resilience of iOCO has been the low concentration in the higher-impacted industries such as retail, tourism and the SME segment. iOCO has not experienced any major client losses, nor had retention issues, and has continued to make progress on the remediation of the problematic legacy public-sector contracts,” EOH said. “In line with global trends across the technology sector, iOCO has seen increased engagement with clients since the onset of Covid-19 as they quickly transitioned to remote working and are embracing the acceleration of digital, automation and other cloud migration initiatives.”

Cash

Cash balances as of 19 October were “healthy at R943-million”, despite repayments to group lenders.

The group has repaid R580-million of the R1.6-billion target agreed with lenders to be settled by the end of February 2021. Disposal proceeds from Denis Information Systems and a 30% stake in CCS have not been included in the R580-million, which should add another R207-million to the kitty for debt repayment. The total outstanding debt is R2.4-billion as of 19 October and will decline to R2.2-billion after these receipts are applied.

“Trading conditions were impacted by the effects of Covid-19 in the second half of FY2020, which placed some EOH customers under pressure, and a slight softening of revenue was experienced as a result,” it said. “Progress was, however, made on key initiatives including optimising cost structures, dealing with legacy issues and delivering on the deleveraging strategy, which enabled the group to post a much stronger H2 2020 financial performance in comparison to H1 2020.”

EOH will publish its annual results on 17 November. – © 2020 NewsCentral Media