EOH expects improved second-quarter results
Technology group EOH says it expects an improved performance in its second quarter while it navigates a challenging economic environment that has affected IT budgets and investment planning.
In a trading update for the six months to end-January, the group said it expects “the muted GDP growth forecasts and high unemployment rate will continue to make for a challenging trading environment for the foreseeable future”.
It said this operating environment negatively affected performance in the first quarter of this financial year. “SA continues to be challenging. This environment continued in the first quarter, but EOH experienced a better second quarter as inflation abated and interest rates stabilised,” the company said.
This led to a resurgence in IT investment among corporates. EOH’s local digital enablement business unit and international business continue to grow, while divisions reliant on the public sector and large corporates are experiencing contracting delays.
Despite these challenges, EOH says it has maintained stable gross margins and a net cash balance of R232m at the end of the period. The company is on track to deliver administration cost savings of more than R50m during the year.
The group’s interest charge will decrease due to its recent R600m capital raise and the refinancing of consortium facilities at improved interest rates, despite an additional interest charge on legacy debts.
In earlier 2023, EOH generated R500m via a rights offer and another R100m from private equity firm Lebashe Investment Group (which owns Business Day via Arena Holdings), of which the proceeds were used to cut its debt levels by R678m and its spending on interest.
EOH’s management has been salvaging the company’s reputation after allegations of malpractice and tender irregularities under the previous leadership while also dealing with a mountain of debt accumulated during that period, when it focused on acquisitions to expand the business, especially in the public sector.
With much of the turnaround in place, EOH is hunting for a new CEO to replace Stephen van Coller, who has extended his five-year contract by six months, while an interim CFO was appointed to take over from November.
Van Coller, who took the helm in September 2018, is set to leave the company at the end of March and retire from the board, while Megan Pydigadu resigned as CFO and was replaced by Marialet Greeff, the group’s executive for treasury, tax and regulatory finance, on an interim basis.
As part of the cleanup effort, the group said it had entered into a settlement offer with the liquidators of Mehleketo, which closes out another of its legacy matters.
However, the company is still dealing with an unresolved PAYE dispute with the SA Revenue Service about EOH Abantu. EOH is still pursuing a high court application to resolve the matter in the absence of an official response from the revenue service to the latest settlement offer.
THE COMPANY IS ON TRACK TO DELIVER ADMINISTRATION COST SAVINGS OF MORE THAN R50M DURING THE YEAR