EOH defies weak economy with 34% profit hike

TECHNOLOGY group EOH has recorded another strong fullyear performance, with the company’s net profit soaring to almost R1bn, despite the weak economic environment.

Revenue for the year through to July 31 rose 31% to R12.7bn and net profit grew 34% to R930m, lifted by acquisitions and organic growth.

But notwithstanding the effect of the 2016 acquisitions, EOH still grew its revenue from existing business by 18%, compared with an estimated 6% increase in the information technology industry’s spending in 2015 and 2016, said Mergence Investment Managers’ portfolio manager Peter Takaendesa.

“A very interesting observation is that the reported 31% growth in group revenue marks the 10th consecutive year of growing revenue by 30% or more,” he said.

EOH provides a wide range of technology products and services including software, consulting and outsourcing. It is active in more than 50 countries outside SA.

Headline earnings per share rose 25% to 719c. Cash increased by 17% to R1.9bn.

During the year to July 31, EOH acquired a number of businesses that expanded its footprint in the rest of Africa and in the Middle East.

In addition, the businesses enhanced EOH’s technology capabilities, augmented its outsourcing businesses and bolstered its technology services and infrastructure businesses.

CEO Asher Bohbot said EOH planned to add new products and services, continue its aggressive expansion into the Middle East and the rest of Africa, as well as to further grow the distribution of its own niche software products internationally.

The group will also increase its involvement in the public sector, which contributes 14% to total revenue.

Bohbot believes that EOH’s range of technology solutions could contribute to improving service delivery.

Takaendesa said the company’s management was continuing to execute “very well” on their strategy and growth was expected to remain strong as the group had a solid balance sheet to fund further growth in Africa and the Middle East.

“There is always a risk in boosting growth by acquiring other companies, but the EOH management team has executed very well in this regard for over a decade.”

Bohbot expects EOH’s growth momentum to continue from every business within the group. “Every business has its own responsibility and in that way, growth is spread across the organisation,” he said.

Kaplan Equity Analysts MD Irnest Kaplan expects growth to be above average for a while, considering its healthy balance sheet. He said EOH’s steady growth and good track record over the years had positioned it strongly in the market.

“About six years ago or more, nobody cared about EOH. But now people are starting to take notice,” Kaplan said.

“They (EOH) are becoming leaders and are now seen as to be setting the trend instead of following it.”