FUN­DA­MEN­TALS SOLID

Finweek English Edition - - Companies & Markets - BELINDA AN­DER­SON

TECH­NOL­OGY, CON­SULT­ING and out­sourc­ing group EOH Hold­ings is trad­ing on an un­de­mand­ing eight times earn­ings mul­ti­ple fol­low­ing its full-year re­sults to July. The group, which re­cently cel­e­brated its 10th an­niver­sary, re­ported 22,9% growth in head­line earn­ings per share to 96,8c on turnover growth of 35,1% to R950,9m. It had R119,1m in cash and cash equiv­a­lents at its year-end and could use some for more share buy backs at cur­rent lev­els. It also de­clared a div­i­dend of 25c/share, up 25% on the pre­vi­ous year.

Most of EOH’s growth has been or­ganic, sup­ple­mented by small, strate­gic ac­qui­si­tions. The re­cent pur­chase by man­aged ser­vices sub­sidiary Mthombo IT Ser­vices of 300-seat call cen­tre busi­ness called Mul­ti­Path is a good ex­am­ple.

CEO Asher Bo­hbot doesn’t be­lieve in bulk­ing up by ac­qui­si­tion but does want to add crit­i­cal mass by go­ing for big op­por­tu­ni­ties. He also wants to in­crease an­nu­ity in­come from 43% to 60%.

OP­POR­TU­NI­TIES

• • More co-or­di­nated cross-sell­ing through­out busi­ness units to the group’s broader client base. To play in the global out­sourc­ing game, us­ing offices in Bri­tain as a base to source clients. To ex­pand its fran­chise model in Africa. EOH only pro­vides con­sult­ing ser­vices to Gov­ern­ment. It will con­cen­trate on winning more State busi­ness in broader ar­eas.

RISKS

The gen­eral eco­nomic slow­down could ar­guably af­fect its clients, slow­ing EOH’s growth. But that hasn’t been the case to date. SA’s skills short­age re­mains a chal­lenge for the sec­tor. EOH looked at buy­ing a com­pany in ed­u­ca­tion and train­ing but chose to build its own to train pro­duc­tive, so­phis­ti­cated skills for use in­side the com­pany or the in­dus­try.

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