Green shoots at EOH as operating profit climbs

EOH Holdings said late on Tuesday that it expects to generate an operating profit from continuing operations of as much as R120-million in the six months ended 31 January 2023, up from R100-million for the full year to 31 July 2022.

Adjusted Ebitda – or earnings before interest, tax, depreciation and amortisation – from continuing operations is expected to be between R160-million and R190-million.

The IT services group, which has been through the wringer in recent years as it fought high debt levels and dealt with legacy corrupt public sector dealings, said its revenue in the latest interim reporting period will show revenue from continuing operations rising 5-10% compared to the same period a year ago.

Gross profit margins from continuing operations have been maintained and will be between 28% and 30% overall, EOH said.

The group will report a total loss per share from both continuing and discontinued operations of between 0c and -6c, compared to restated earnings per share (EPS) of 8c a year ago and a total loss per share for the 2022 financial year of -9c.

The total headline loss per share from continuing and discontinued operations for the latest six-month period will be between -15c and -20c, from headline EPS of 25c a year ago and a loss in the 2022 financial year (remeasured) of -11c. The loss per share from continuing operations will be between -12c and -16c, compared to 14c EPS a year ago and a loss of -62c for the 2022 financial year.

“Operating results for the first half of the 2023 financial year reflected improved trading compared to the previous six months ended 31 July 2022. However, they were down on the 2022 half year, which had benefited from significant once-off adjustments,” EOH said.

Rights offer

Following its recent rights offer, EOH said it has reduced its debt by R673-million to bring it down to a much more manageable figure of around half a billion rand.

“Subsequent to the completion of the deleveraging process and strengthening of the balance sheet, which included asset sales to pay down legacy debt, EOH has a stable portfolio of businesses focused on assisting clients with the digitisation of their businesses through a full stack of offerings covering all their technology needs.”

Read: Successful rights issue a ‘watershed moment’ for EOH: Van Coller

EOH said the net proceeds of the capital raise have been used to pay down most of a bridge loan of R728-million, reducing it to R173-million. It is now renegotiating its “onerous” debt facilities to a normalised structure with a single bank. “The benefits of the restructure will significantly lower the cost of debt as well as improve efficiency in decision making, eliminating the need for cumbersome authorisations from the lending consortium.

Watch: Stephen van Coller on what’s really happening at EOH

“With an efficient capital structure now in place EOH is finally in a position where it can invest into the growth of its businesses, which will ultimately result in improved earnings and value creation for its shareholders.”

EOH will publish its interim results on 5 April.  – © 2023 NewsCentral Media

Get TechCentral’s daily newsletter