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EOH HOLDINGS LIMITED - Reviewed condensed consolidated results for the six months ended 31 January 2013

Release Date: 12/03/2013 07:10
Code(s): EOH     PDF:  
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Reviewed condensed consolidated results for the six months ended 31 January 2013

EOH Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1998/014669/06
Share code: EOH
ISIN: ZAE000071072

Reviewed Condensed
Consolidated Results
for the six months ended 31 January 2013

Revenue UP 45,5%
PAT UP 53,5%
EPS UP 38,7%
HEPS UP 35,2%
Cash UP 37,0%

Condensed Consolidated Statements of
Comprehensive Income for the six months ended 31 January 2013

                                                   Reviewed                   Reviewed       Audited
                                                 six months                 six months     12 months
                                               January 2013               January 2012     July 2012
                                                      R'000    % change          R'000         R'000
Revenue                                           2 389 185        45,5      1 642 339     3 642 915
Cost of sales                                   (1 392 060)                  (925 598)   (2 086 082)
Gross margin                                        997 125                    716 741     1 556 833
Results from operating activities                   247 733                    175 478       356 622
 Investment income                                    9 479                      7 313        12 676
 Finance costs                                     (20 209)                   (11 777)      (27 429)
 Profit/(loss) of equity accounted investees              -                         46          (43)
 Impairment of assets                                     -                    (1 907)       (1 907)
Profit before taxation                              237 003                    169 153       339 919
Taxation                                           (73 476)                   (62 636)     (116 831)
Profit for the period                               163 527        53,5        106 517       223 088
Other comprehensive income:
Foreign currency translation differences
 for foreign operations                               1 150                        638         1 206
Total comprehensive income
 for the period                                     164 677        53,7        107 155       224 294
Profit attributable to:
 Owners of the parent                               163 496                    106 466       222 577
 Non-controlling interest                                31                         51           511
Profit for the period                               163 527                    106 517       223 088
Total comprehensive income
 attributable to:
 Owners of the parent                               164 646                    107 104       223 783
 Non-controlling interest                                31                         51           511
Total comprehensive income
 for the period                                     164 677                    107 155       224 294
Total number of shares in issue (000's)             106 045                     96 610       100 866
Weighted average number of shares
 in issue (000's)                                    92 684                     83 708        87 312
Diluted number of shares (000's)                    102 338                     95 216        98 416
Earnings per share (cents)                            176,4        38,7          127,2         254,9
Diluted earnings per share (cents)                    159,8        42,9          111,8         226,2
Headline earnings reconciliation
Profit for the period attributable to:
 Owners of the parent                               163 496                    106 466       222 577
 Profit on disposal of assets                         (194)                    (2 162)       (4 414)
 Gain on bargain purchase                           (4 394)                          -             -
 Net impairment of assets                                 -                      1 907         1 907
 Total tax effect of adjustments                         54                          -           940
Headline earnings                                   158 962                    106 211       221 010
Headline earnings per share (cents)                   171,5        35,2          126,9         253,1
Diluted headline earnings per share (cents)           155,3        39,3          111,5         224,6

Condensed Consolidated Statements of
Financial Position as at 31 January 2013

                                                  Reviewed        Reviewed      Audited
                                                six months      six months    12 months
                                              January 2013    January 2012    July 2012
                                                     R'000           R'000        R'000
ASSETS
Non-current assets
 Investment properties                               2 872               -        2 872
 Property, plant and equipment                     209 258          99 985      183 856
 Goodwill and intangible assets                    950 695         610 004      801 497
 Investment in associate companies                       -           1 048            -
 Finance lease receivables                          49 336          33 947       36 447
 Other financial assets                             14 550          15 267       16 203
 Deferred taxation assets                           92 008          37 000       90 008
Current assets
 Inventory                                          55 315          28 540       39 401
 Finance lease receivables                          36 971          21 748       26 360
 Other financial assets                             24 260           9 476       15 625
 Current tax receivable                             68 473          44 799       37 493
 Trade and other receivables                     1 003 557         660 272      809 429
  Trade receivables                                931 521         640 695      783 468
  Other receivables                                 72 036          19 577       25 961
 Cash and cash equivalents                         532 513         388 754      451 867
Total assets                                     3 039 808       1 950 840    2 511 058
EQUITY AND LIABILITIES
Equity attributable to owners of the parent      1 301 806         921 256    1 128 438
Non-controlling interest                             1 431              51        1 400
Total equity                                     1 303 237         921 307    1 129 838
Non-current liabilities
 Finance lease obligation                            2 361             631        2 748
 Other financial liabilities                       311 835         239 161      271 768
 Deferred taxation liabilities                      53 698           7 244       50 786
Current liabilities
 Trade and other liabilities                     1 130 728         653 691      906 750
 Deferred revenue                                  172 473          88 536      107 565
 Taxation payable                                   65 476          40 270       41 603
Total equity and liabilities                     3 039 808       1 950 840    2 511 058
Net asset value per share (cents)                  1 227,6           953,6      1 118,7
Net tangible asset value per share (cents)           331,1           322,2        324,1

Condensed Consolidated Statements of
Cash Flows for the six months ended 31 January 2013
                                                          Reviewed        Reviewed       Audited
                                                        six months      six months     12 months
                                                      January 2013    January 2012     July 2012
                                                             R'000           R'000         R'000
Cash generated by operating activities                     285 076         166 570       442 538
 Investment income                                           9 479           7 313        12 676
 Finance costs                                            (20 209)        (11 777)      (27 429)
 Taxation paid                                            (77 803)        (78 626)     (141 478)
Net cash inflow from operating activities                  196 543          83 480       286 307
Net cash outflow from investing activities                (22 375)       (101 603)     (163 808)
Net cash (outflow)/inflow from financing activities       (93 522)          85 370         7 861
Net movement in cash and cash equivalents                   80 646          67 247       130 360
Cash and cash equivalents at beginning of period           451 867         321 507       321 507
Cash and cash equivalents at end of period                 532 513         388 754       451 867

Condensed Consolidated Statements of
Changes in Equity for the six months ended 31 January 2013

                                                    Shares
                                                     to be                                Non-
                                       Stated    issued to                Retained controlling        Total
                                      capital      vendors    Reserves    earnings    interest       Equity
                                        R'000        R'000       R'000       R'000       R'000        R'000
Audited balance at 1 August 2011      277 190       24 412    (28 800)     437 124       1 131      711 057
Total comprehensive income                  -            -         638     106 466          51      107 155
Dividends paid                              -            -           -    (41 064)           -     (41 064)
Share-based payment                         -            -       8 952           -           -        8 952
Issue of share capital                  3 850            -           -           -           -        3 850
Movement in treasury shares             4 310            -     107 395           -           -      111 705
Consolidating Mthombo Trust               (1)            -       1 268           -           -        1 267
Non-controlling interest acquired           -            -         887           -     (1 131)        (244)
Shares to be issued                         -       18 629           -           -           -       18 629
Reviewed balance at 31 January 2012   285 349       43 041      90 340     502 526          51      921 307
Total comprehensive income                  -            -         568     116 111         460      117 139
Dividends paid                              -            -           -        (75)           -         (75)
Share-based payment                         -            -       6 940           -           -        6 940
Issue of share capital                 61 558            -           -           -           -       61 558
Movement in treasury shares          (50 225)            -    (21 210)           -           -     (71 435)
Consolidating Mthombo Trust          (11 129)            -      34 752           -           -       23 623
Non-controlling interest acquired           -            -           -           -         889          889
Shares to be issued                         -       69 892           -           -           -       69 892
Audited balance at 31 July 2012       285 553      112 933     111 390     618 562       1 400    1 129 838
Total comprehensive income                  -            -       1 150     163 496          31      164 677
Dividends paid                              -            -           -    (66 002)           -     (66 002)
Share-based payment                         -            -       9 000           -           -        9 000
Issue of share capital                 76 561            -           -           -           -       76 561
Movement in treasury shares         (100 201)            -       1 274           -           -     (98 927)
Shares to be issued                         -       88 090           -           -           -       88 090
Reviewed balance at 31 January 2013   261 913      201 023     122 814     716 056       1 431    1 303 237

Commentary

About EOH
EOH is the largest provider of enterprise applications, technology, outsourcing, cloud and
managed service solutions. EOH has a strong black economic empowerment profile and is a Level 2 contributor. 
EOH has grown to over 6 000 people and has 3 500 clients across all major industries.

EOH's purpose
- To provide technology, knowledge, skills and organisational ability critical to Africa's
  development and growth.  
- To be an ethical and relevant force for good and to play a positive role in society,
  beyond normal business.

EOH's business philosophy
EOH is about people and its business philosophy is driven through five areas:

  
- Best people                   To attract, develop and retain the best people. 
- Partner for life              To develop life-long, mutually beneficial partnerships
                                with customers and partners.
- Right 1st time                To ensure professional planning and execution and
                                to have pride in all we do.
- Sustainable transformation    To constantly and sustainably transform ourselves
                                and to manage diversity.
- Profitable growth             To grow the top and bottom lines proportionately,
                                while remaining entrepreneurial.

Operating model
The EOH operating model is based on a two-dimensional approach: lines of business and
industry verticals. The lines of business are clustered around knowledge and industry-based
services, information technology, technology outsourcing, business process outsourcing and
industrial technologies.

Knowledge and industry-based services
These services include knowledge and industry based services, operational improvement,
IT strategy, IT architecture, project management and change management.

Information Technology

- Enterprise applications
- Information risk management
- Enterprise content management
- IT management and optimisation
- Software development and integration
- Digital solutions

Outsourcing
EOH operates in both the public and private sector and provides the following services to its
customers:

- Transformational outsourcing
- Managed services
- Cloud services
- Hosting and networking
- Business process outsourcing
- Human capital solutions

Industrial Technologies
These include services and solutions both of a technology and industrial nature that focus
on the mining, manufacturing, energy and utility sectors.

Industries
EOH operates in all industries with a focus on the following:

- Financial services
- Telecommunications
- Public sector
- State-owned entities
- Mining and Manufacturing.

Basis of preparation
The reviewed condensed consolidated results for the six months ended 31 January 2013
('period under review') have been prepared by the Financial Director, John King, CA (SA),
in accordance with International Financial Reporting Standards ('IFRS'), IAS 34 - Interim
Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, the South African Companies Act, 2008 (Act 71 of 2008), and
the JSE Limited Listings Requirements.

Accounting policies
The accounting policies and methods of computation applied in the preparation of these
reviewed condensed consolidated results for the period under review, which are based
on reasonable judgements and estimates, are in accordance with IFRS and are consistent
with those applied in the preparation of the group's annual financial statements for the
year ended 31 July 2012.

Review opinion
The condensed consolidated results for the six months ended 31 January 2013 have been
reviewed by the group auditors, PKF (Gauteng) Inc., Registered Auditors and Chartered
Accountants (SA), and their unmodified review report is available for inspection at the
registered office of EOH.

Financial results
The board of directors of EOH ('the board') is satisfied with the performance for the six months
under review. The statement of financial position is strong with substantial cash resources
to ensure sustainability and to support future growth. Revenue increased by 45,5% to
R2 389,2 million and profit after tax is up by 53,5% to R163,5 million. The growth
is attributable to a combination of both organic growth and recent acquisitions.
Earnings per share ('EPS') and headline earnings per share ('HEPS') have grown
by 38,7% and 35,2%, respectively, with cash increasing to R532,5 million.

Business combinations
During the six months under review, EOH's acquisitive strategy was to consolidate and
complement its existing service offerings in its consulting, managed services, human capital
and industrial technology businesses and grow its public sector business. Accordingly,
the group made several acquisitions totalling R224,6 million (less than 5% of EOH's market
cap) of which R124,9 million is payable in cash and the balance through the issue of equity
instruments. The goodwill associated therewith is R179,3 million.

The cumulative assets acquired were R406,5 million. The cumulative liabilities acquired were
R357,8 million. The aggregated revenue of these businesses included in these results was 
R184,0 million, netting a profit before tax of R29,9 million.

Included in the above acquisitions was the purchase of 100% of the issued share capital
of Siemens IT Solutions and Services South Africa Proprietary Limited, a company
offering IT services primarily to the Public Sector. EOH acquired the shares with effect
from 1 October 2012. The assets acquired were R312,8 million. The liabilities acquired
were R308,4 million.

Segmental reporting
EOH's revenue for the six months ended 31 January 2013 was derived from the provision of
services (consulting systems implementation and integration and managed services), software
(software sales and maintenance revenue) and infrastructure products.

                             Services             Software           Infrastructure            Total
R'000                    2013        2012      2013      2012        2013      2012        2013       2012
Revenue             1 660 241   1 026 919   350 603   264 172     378 341   351 248   2 389 185  1 642 339
Profit before tax     166 923     111 904    43 635    36 211      26 445    21 038     237 003    169 153

All areas of EOH's business operations have seen growth during the period under review with
the revenue from services being the most significant revenue generator. Services revenue
has increased to R1 660,2 million, a 61,7% increase over the previous period. Software sales
have increased to R350,6 million (increase of 32,7%). Infrastructure sales have also increased
by 7,7% to R378,3 million. The overall operating margin is 9,9%.

Subsequent events and capital commitments
There have been no significant events since the end of the period under review. There was no
significant capital expenditure authorised as at 31 January 2013.

Transformation
EOH is certified as a Large Enterprise Level 2 Contributor with BEE Procurement Recognition
of 156% as a Value Adding Vendor.

EOH's current black shareholding is 34,62%. 59% of EOH's staff and 55% of its board members
are black.

EOH's Corporate Social Investment initiatives are focused around education and wellness.
One of our community involvement projects is the Maths Centre Programme which has its
primary objective to equip teachers with skills to develop learner competency in maths.

We have also given our support to The Child and Youth Development Programme of
AfrikaTikkun. This programme provides support to youth during their school career and
assists them in finding employment in the workplace.

Our Enterprise Development initiatives are aimed at developing black-owned ICT companies
through financial and non-financial support which includes the transfer of business skills.

EOH has 620 trainees participating in a year-long graduate and school leavers' programme
and has spent R12,7 million on this programme during the six months under review.

Future plans
EOH will continue to expand its solutions and service offerings and strengthen its industry
verticals. This will be achieved through both organic and acquisitive growth. The main
areas of growth include managed services, cloud offerings, enterprise applications,
information management, Business Process Outsourcing, security solutions and industrial
and infrastructure solutions.

EOH has expanded its activities in the Public Sector and will continue to actively contribute
its knowledge, know-how and organisational ability to improve service delivery. There are
many opportunities in this sector and EOH is being recognised for its delivery capability
in this area.

EOH views Africa as a growth area and will continue to pursue opportunities in identified
countries.

EOH is well positioned to continue to grow aggressively. It has the people, financial resources,
agility and know-how to continue to grow all areas of its business and to expand
into new services and territories.

Job creation initiative
EOH has taken its job creation initiative to another level and is running workshops with its major
customers and vendors with the view to encouraging other businesses to follow EOH's example.
EOH employed 620 people to participate in its year-long learnership and trainee programmes
and another intake of young learners and graduates will join EOH later this year.

It is EOH's aim to encourage job creation by working with its customers, business partners and
government. EOH hopes to mobilise business to take advantage of the Government incentive
programmes, especially in the areas of internships and learnerships.

Directorate
During the period under review, Mathews Phosa (Chairman) resigned with effect from
30 November 2012. There have been no other changes to the board. At the AGM held on
12 February 2013, directors who were eligible for re-election, were re-elected. The board is in
the process of appointing a new non-executive chairman.

Asher Bohbot
Chief Executive Officer

12 March 2013

Registered office
Block D, EOH Business Park, Osborne Lane, Bedfordview, 2008
Tel: (011) 607 8100
Fax: (011) 616 9929
Website: www.eoh.co.za
Email: info@eoh.co.za

Directorate
Executive directors
Asher Bohbot (Chief Executive Officer)
Pumeza Bam
John King
Dion Ramoo
Jane Thomson

Non-executive directors
Lucky Khumalo
Prof Tshilidzi Marwala
Tebogo Skwambane
Rob Sporen (Dutch) - Lead Director

Company secretary
Adri Els

Sponsor
Merchantec Capital

Auditors
PKF (Gauteng) Inc.

Johannesburg: +27 11 607 8100
Cape Town: +21 21 525 7200
Durban: +27 86 183 5364
Port elizabeth: +27 41 393 0700
East London: +27 43 705 5500
UK: +44 12 4970 0551

www.eoh.co.za
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