Wrap Text
Reviewed condensed consolidated results for the six months ended 31 January 2014
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 2014
Revenue increased 38,4% to R3 308 million
PAT increased 49,4% to R244 million
EPS increased 30,3% to 229,8 cents
HEPS increased 33,9% to 229,6 cents
Cash increased 47,5% to R785 million
Condensed Consolidated Statements of Comprehensive Income
for the six months ended 31 January 2014
Reviewed Reviewed Audited
six months to six months to 12 months to
31 January 2014 31 January 2013 31 July 2013
R'000 % change R'000 R'000
Revenue 3 307 548 38,4 2 389 185 5 085 979
Cost of sales (2 035 606) (1 392 060) (3 075 359)
Gross profit 1 271 942 997 125 2 010 620
Operating profit before interest and impairments 353 565 247 733 495 723
Investment income 13 952 9 479 18 483
Finance costs (31 946) (20 209) (47 502)
Impairment of assets – – (6)
Profit before taxation 335 571 41,6 237 003 466 698
Taxation (88 581) (73 476) (135 339)
Profit for the period 246 990 51,0 163 527 331 359
Other comprehensive income:
Foreign currency translation differences for
foreign operations 4 805 1 150 1 500
Total comprehensive income for the period 251 795 52,9 164 677 332 859
Profit attributable to:
Owners of the parent 244 324 49,4 163 496 331 509
Non-controlling interest 2 666 31 (150)
Profit for the period 246 990 163 527 331 359
Total comprehensive income attributable to:
Owners of the parent 249 129 164 646 333 009
Non-controlling interest 2 666 31 (150)
Total comprehensive income for the period 251 795 164 677 332 859
Earnings per share (cents) 229,8 30,3 176,4 343,7
Diluted earnings per share (cents) 210,0 31,4 159,8 309,8
Total number of shares in issue (000's) 114 811 106 045 110 848
Weighted average number of shares
in issue (000's) 106 322 92 684 96 453
Diluted number of shares (000's) 116 333 102 338 107 007
Headline earnings reconciliation
Profit after taxation attributable to:
Ordinary shareholders 244 324 163 496 331 509
Profit on disposal of assets (259) (194) (129)
Gain on bargain purchase – (4 394) (4 387)
Impairment of assets – – 6
Total tax effect of adjustments 73 54 36
Headline earnings 244 138 158 962 327 035
Headline earnings per share (cents) 229,6 33,9 171,5 339,1
Diluted headline earnings per share (cents) 209,9 35,2 155,3 305,6
Condensed Consolidated Statements of Financial Position
as at 31 January 2014
Reviewed Reviewed Audited
six months to six months to 12 months to
31 January 2014 31 January 2013 31 July 2013
R'000 R'000 R'000
ASSETS
Non-current assets
Investment properties 3 490 2 872 2 872
Property, plant and equipment 277 825 209 258 226 324
Goodwill and intangible assets 1 684 948 950 695 1 031 945
Finance lease receivables 101 310 49 336 74 894
Other financial assets 5 847 14 550 26 551
Deferred taxation assets 146 677 92 008 103 544
2 220 097 1 318 719 1 466 130
Current assets
Inventory 87 215 55 315 66 479
Finance lease receivables 59 230 36 971 46 595
Other financial assets 41 093 24 260 12 401
Current tax receivable 24 617 68 473 27 265
Trade and other receivables 1 475 484 1 003 557 1 185 075
Cash and cash equivalents 785 351 532 513 653 007
2 472 990 1 721 089 1 990 822
Total assets 4 693 087 3 039 808 3 456 952
EQUITY AND LIABILITIES
Equity
Equity attributable to owners of the parent 2 216 879 1 301 806 1 620 324
Non-controlling interest 8 758 1 431 403
2 225 637 1 303 237 1 620 727
LIABILITIES
Non-current liabilities
Finance lease obligations 4 047 2 361 1 793
Other financial liabilities 603 639 311 835 351 416
Deferred taxation liabilities 118 968 53 698 53 398
726 654 367 894 406 607
Current liabilities
Trade and other liabilities 1 407 996 1 130 728 1 239 570
Deferred revenue 245 440 172 473 159 868
Current tax payable 87 360 65 476 30 180
1 740 796 1 368 677 1 429 618
Total equity and liabilities 4 693 087 3 039 808 3 456 952
Net asset value per share (cents) 1 930,9 1 227,6 1 461,8
Net tangible asset value per share (cents) 463,3 331,1 530,8
Condensed Consolidated Statements of Cash Flows
for the six months ended 31 January 2014
Reviewed Reviewed Audited
six months to six months to 12 months to
31 January 2014 31 January 2013 31 July 2013
R'000 R'000 R'000
Cash generated by operating activities 166 281 285 076 532 912
Investment income 13 952 9 479 18 483
Finance costs (31 946) (20 209) (47 502)
Taxation paid (98 863) (77 803) (154 688)
Net cash inflow from operating activities 49 424 196 543 349 205
Net cash outflow from investing activities (221 190) (22 375) (113 057)
Net cash inflow/(outflow) from financing activities 304 226 (93 522) (35 640)
Net movement in cash and cash equivalents 132 460 80 646 200 508
Cash and cash equivalents at beginning of period 653 007 451 867 451 867
Effects of exchange rate fluctuations (116) – 632
Cash and cash equivalents at end of period 785 351 532 513 653 007
Condensed Consolidated Statements of Changes in Equity
for the six months ended 31 January 2014
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 285 553 112 933 111 390 618 562 1 400 1 129 838
1 August 2012
Total comprehensive income – – 1 150 163 496 31 164 677
for the period
Dividends paid – – – (66 002) – (66 002)
Share-based payments – – 9 000 – – 9 000
Shares to be issued – 88 090 – – – 88 090
Issue of shares 76 561 – – – – 76 561
Movement in treasury shares (82 528) – 1 274 – – (81 254)
The effect of consolidating
the Mthombo Trust (17 673) – – – – (17 673)
Reviewed balance at 261 913 201 023 122 814 716 056 1 431 1 303 237
31 January 2013
Total comprehensive income – – 350 168 013 (181) 168 182
for the period
Dividends paid – – – (899) – (899)
Share-based payments – – 7 134 – – 7 134
Minorities acquired – – 47 – (847) (800)
Shares to be issued – (33 496) – – – (33 496)
Issue of shares 117 894 – – – – 117 894
Movement in treasury shares 16 088 – 40 373 – – 56 461
The effect of consolidating
the Mthombo Trust 3 014 – – – – 3 014
Audited balance at 398 909 167 527 170 718 883 170 403 1 620 727
31 July 2013
Total comprehensive income – – 4 805 244 324 2 666 251 795
for the period
Dividends paid – – – (101 971) – (101 971)
Share based payments – – 11 731 – – 11 731
Minorities acquired – – – – 5 689 5 689
Shares to be issued – 154 043 – – – 154 043
Issue of shares 112 541 – – – – 112 541
Net sale of treasury shares 171 082 – – – – 171 082
Reviewed balance at 682 532 321 570 187 254 1 025 523 8 758 2 225 637
31 January 2014
About EOH
EOH is a leader in consulting, technology and outsourcing solutions. Listed
on the JSE in 1998, EOH operates in South Africa, Africa and the UK. EOH
employs over 7 000 people which confirms that technology is only as good
as the people behind it.
EOH purpose
To provide the 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.
Our value proposition
EOH is a client-centric organisation and our approach to business relationships and technology partners
is firmly embedded in our philosophy of 'Partner for Life'.
Our solutions draw from a comprehensive portfolio of Applications, IT Management, Managed Services,
Industrial Technologies and Business Process Outsourcing ('BPO'). Driven by our design, build and
operate approach, we are able to provide end-to-end solutions across all industry verticals.
Our reputation for consistently delivering value to our clients is due to our deep industry expertise, an
understanding of clients' businesses and a 'Right 1st Time' approach to service delivery.
EOH Philosophy
Best People
To attract, develop and retain the best people led by great leaders.
Partner for Life
To nurture lifelong partnerships with our customers and business partners.
Right 1st Time
To ensure professional planning and execution and have pride in all we do.
Sustainable Transformation
To transform and celebrate diversity.
Lead and Grow
Strive to be #1 in every domain in which we operate whilst remaining
entrepreneurial.
Business model
Technology is changing at a rapid pace and few organisations can keep up with what is needed and
what is available. Our specialists stay abreast of the latest developments, technologies and vendor
solutions across all disciplines and industries.
EOH's operating model is a two dimensional approach concentrated around key business areas and
industry verticals.
EOH footprint
EOH has a presence in over 120 locations in South Africa, 14 African countries and in the UK. Most of
EOH's revenue is derived from South Africa. In the short to medium term, EOH intends to increase its
revenue from other African countries outside of South Africa.
South Africa
120 points of presence
throughout South Africa
Commentary
Basis of preparation
The reviewed condensed consolidated results for the six months ended 31 January 2014 ('period
under review') have been prepared by the Group Financial Director, John King, CA (SA), in accordance
with IAS 34 – Interim Financial Reporting, the Financial Reporting Guides as issued by the Accounting
Practices Committee of the South African Institute of Chartered Accountants, the South African
Companies Act 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 six months 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 2013. New standards
and interpretations as disclosed in the most recent annual financial statements, which became effective
in the current financial year, have been adopted and there has not been any material impact on the
group's financial results.
Review opinion
The condensed consolidated results for the six months ended 31 January 2014 have been reviewed by
the Group auditors, Mazars (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 which ensures
sustainability future growth. Revenue increased by 38,4% to R3 308 million and profit after tax is up by
49,4% to R244 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 30,3%
and 33,9%, respectively, with cash increasing to R785 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 to grow in the public sector. EOH focused on strengthening its business in the financial
services sector and positioning itself to further grow in Africa. Accordingly, the Group made several
acquisitions (including Sybrin), totalling R756 million of which R468 million is payable in cash and the
balance through the issue of equity instruments. The goodwill associated therewith is R499 million.
The cumulative assets acquired were R502 million of which the gross contractual amount of trade
and other receivables was R101 million which approximated its fair value. The cumulative liabilities
acquired were R246 million. The aggregated revenue of these businesses included in these results was
R310 million, netting a profit before tax of R33 million.
Sybrin group
The Group acquired the share capital of the Sybrin group of companies, herein after referred to as
'Sybrin', with effect from 1 August 2013 for an amount of R296 million. Sybrin is a specialised developer
of software for the financial services and other industry sectors. Sybrin's products include workflow
software, payment, imaging and document management solutions.
The assets acquired were R200 million of which the gross contractual amount of trade and other
receivables was R17 million which approximated its fair value. The liabilities acquired were R94 million.
The revenue and profit before tax contributed by Sybrin for the current period was R99 million and
R14 million respectively. The goodwill associated herewith is R177 million, relating mainly to anticipated
synergies derived from EOH's acquisition strategy mentioned above.
Segmental reporting
EOH's revenue for the six months ended 31 January 2014 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 2014 2013 2014 2013 2014 2013 2014 2013
Revenue 2 357 123 1 660 241 423 571 350 603 526 854 378 341 3 307 548 2 389 185
Profit before tax 249 674 166 923 53 786 43 635 32 111 26 445 335 571 237 003
Assets 3 344 527 2 112 358 601 006 446 079 747 554 481 371 4 693 087 3 039 808
Liabilities (1 758 428) (1 206 740) (315 986) (254 835) (393 036) (274 996) (2 467 450) (1 736 571)
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
R2 357 million, a 42.0% increase over the previous comparative period. Software sales have increased
to R423 million (increase of 20.8%). Infrastructure sales have also increased by 39.3% to R527 million.
The overall operating margin is 10.1%.
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 2014.
Social responsibility and transformation
EOH understands that the inter-dependence of people, business and the community is inseparable and
that a company is fundamentally a social structure. We are committed to the principle of action speaks
louder than words and have therefore concentrated our efforts on ensuring that our social initiatives are
both sustainable and useful to society.
Our Corporate Social Investment initiatives are therefore focused around education, particularly in the
fields of maths and science and we have intensified our efforts around our job creating initiative.
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 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 36.2%. 53% of EOH's staff and 66.7% of its board members are
black.
Job creation initiative
EOH has continued and intensified its 'EOH Youth Job Creation Initiative'. We have invested in media
campaigns and interacted with customers and business partners with the aim of encouraging them to
recruit significant numbers of people on internship and learnership programmes. We have seen many
organisations participating in these programmes, making a difference in the lives of many young people.
Learnership and intern programme
Another 600 young people are participating in EOH's 2014 learnership and internship programme. Most
of the 620 trainees that completed EOH's 2013 programme were directly employed by EOH.
Future plans
EOH will expand its solutions and service offerings, strengthen its knowledge-based industry services
and grow all areas of its business. Major growth areas are expected to be in Managed Services
(including cloud, network solutions and mobility solutions), IT Management, Applications (including
enterprise applications, information analytics and digitalisation), Industrial Technologies and Business
Process Outsourcing. This will be achieved through organic growth, spearheaded by our strategic
account initiatives, and strategic acquisitions.
EOH will increase its revenue from all areas of the Public Sector – National, Provincial, Local Authorities
and State Owned Entities. EOH has the solutions, knowledge, skills and organisational ability to improve
service delivery in this sector.
EOH will continue its foray into Africa and plans to derive more revenue from countries outside of South
Africa by increasing its in-country presence and service offerings and through partnerships, joint ventures
and acquisitions.
EOH is recognised for the quality of its people and its delivery capability. EOH has the people, the scale,
the financial resources, the agility and the knowledge to continue to grow aggressively.
Directorate
During the period under review, Sandile Zungu was appointed as Independent Non-executive Chairman
on 1 October 2013. Danny Mackay was appointed as a non-executive director on 1 November 2013.
There have been no other changes to the board. At the AGM held on 11 February 2014, the directors
who were eligible for re-election, being Prof Tshilidza Marwala, Lucky Khumalo and Tebogo Skwambane,
were re-elected.
Asher Bohbot
Chief Executive Officer
12 March 2014
EOH Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1998/014669/06
Share code: EOH
ISIN: ZAE000071072
Registered office
Block D, EOH Business Park, Osborne Lane, Bedfordview, 2007
Website: www.eoh.co.za
Email: info@eoh.co.za
Tel: (011) 607 8100
Executive directors
Asher Bohbot (Chief Executive Officer)
John King (Group Financial Director)
Pumeza Bam
Dion Ramoo
Jane Thomson
Non-executive directors
Sandile Zungu – Chairman (appointed 1 October 2013)
Rob Sporen (Dutch)
Lucky Khumalo
Tshilidzi Marwala
Danny Mackay (appointed 1 November 2013)
Thoko Mnyango
Tebogo Skwambane
Company secretary
Adri Els
Sponsor
Merchantec Capital
Auditors
Mazars (Gauteng) Inc.
www.eoh.co.za
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