EOH prospects looking up, but debt still a concern

EOH Holdings said on Wednesday that it has completed its “targeted” turnaround strategy after reporting a big swing to profit. This as it reported a 20% plunge in revenue.

A potential rights issue is also still looming as the group continues to engage with investors about ways of resolving its legacy debt issues.

For the six months to 31 January 2022, EOH reported headline earnings per share of 41c – representing growth of 214%. The group generated an operating profit of R167-million from continuing and discontinued operations compared to R76-million a year ago.

However, revenue fell from R4.4-billion in 2021 (restated) to R3.5-billion for the latest six-month period. EOH said 74% of the decline is attributable for asset sales.

“While revenue has declined, the group’s focus on quality of earnings and sustainable business is evidenced in the total gross profit margin, which increased by 2.3 percentage points, from 27.6% to 29.9%,” it said.

EOH’s IT services business, iOCO, performed well, improving gross profit margin from 26.6% to 29%. Similar improvements were seen at its Nextec subsidiary – 22.9% to 28.9%.

EOH had a cash balance as of 31 January of R625-million. The balance sheet, however, remains a concern, despite asset sales in recent years aimed at a deleveraging. Debt at 31 January was still more than R2-billion.

EOH has repaid R360-million of debt since then, with most the proceeds coming from the sale of Sybrin. It expects to raise another R500-million of asset sales in the coming months, including through the sale of Information Services.

Rights issue

To address the remaining debt beyond the asset sales, EOH has been engaging with the investment community since early March about its options.

“Discussions to date have focused primarily on raising capital through a rights issue or having a strategic investor take a significant stake in the business… Given the supportive investor engagements and insights received to date, the EOH board and management team have every confidence that an optimal solution will be found and that this process will be concluded over the next few months.”

CEO Stephen van Coller said EOH is seeing “positive momentum towards achieving the optimal sustainable capital structure”.  – © 2022 NewsCentral Media