Play­ing it safe

Finweek English Edition - - MARKETPLACE SIMON SAYS -

EOH an­nounced the pur­chase of Ap­tron­ics for R194m to be paid half in cash and half in shares. The deal is very small con­sid­er­ing EOH has a mar­ket cap of al­most R20bn and rev­enue in the last six-month re­port­ing pe­riod of just over R6bn. Ap­tron­ics was do­ing R500m rev­enue per year so it adds some R250m for each six-month pe­riod. The profit war­ranty is only R65m af­ter tax over two years, adding some 3.5% to profit. This is the chal­lenge fac­ing EOH – ac­qui­si­tions of this size don’t move the nee­dle and it is much harder to make large deals that will sig­nif­i­cantly boost prof­its. So growth be­comes more or­ganic and as such will slow down. EOH is still a great com­pany, but the new ex­cit­ing growth op­tion in this space is now Adapt IT, which, be­ing much smaller (less than a tenth of the size of EOH), can still make deals that se­ri­ously move the nee­dle, hence grow­ing by ac­qui­si­tion and in an or­ganic way.

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