EOH results – Revenue down, and profit plummets

Stephen van Coller

EOH released its results for the interim period ending 31 January 2023 which revealed a decline in revenue and a huge decline in net profit.

It was the first set of results since the company finalised its rights offer, and investors were keen to see what the company has achieved over the last few months.

EOH’s management talked up the results, saying they are very pleased to report an improvement in operating results because of its turnaround and restructuring initiatives.

“We completed a very successful R600 million capital raise which further improves our financial position and ability to invest in our people, products, and services,” EOH said.

The rights issue was used to decrease a bridge loan from R728 million to R173 million and, therefore, improve the balance sheet.

EOH said it now has a stable portfolio of businesses with a coherent go-to-market strategy which bodes well for the future.

EOH CEO Stephen Van Coller said it is the first time since 2019 that he is able to address EOH’s stakeholders in the context of being a normal business.

“For many years, we have been battling corruption scandals, unprofitable legacy contracts, inefficient corporate structures, huge debt burdens and a highly inefficient capital structure,” he said.

“Today, following our successful R600 million capital raise, EOH can now truly get back to business and focus on our growth-efficiency-talent strategy.”

The EOH CEO focussed on the company’s growth, efficiency, and talent and its strong international growth and performance.

Turning to its financial performance, EOH said it saw an 8% increase in continuing revenue compared to H1 2022.

This was primarily driven by the double-digit growth in its IT infrastructure services, enterprise apps and software reseller businesses, and the 20% growth in its digital business.

At a continuing gross profit level, EOH maintained margins for continuing operations at 29%, with the long-term target being 30%.

EOH achieved R181 million adjusted EBITDA from continuing operations for H1 2023 compared to R278 million in H1 2022.

Van Coller and EOH CFO Megan Pydigadu punted the positives in the results, but delving deeper revealed big challenges.

When you look at the core figures – and not the numbers adjusted for whatever reason – EOH’s results are full of red.

Revenue is down 8%, operating profit is down 32%, and net profit plummeted by 183%.

The table below provides an overview of EOH’s financial results for the six months ending 31 January 2023.

EOH resultsHY 2022 (R’000)HY 2023 (R’000)Change
Total revenueR3,511,475.00R3,243,818.00-7.62%
Gross profitR861,007.00R933,907.00+8.47%
Operating profitR162,386.00R110,356.00-32.04%
Net profitR35,210.00-R29,338.00-183.32%
Total assetsR3,752,257.00R3,601,210.00-4.03%
Total liabilitiesR3,692,203.00R3,580,310.00-3.03%
Total equityR60,054.00R20,900.00-65.20%