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EOH HOLDINGS LIMITED - Reviewed condensed consolidated results for the six months ended 31 January 2014

Release Date: 12/03/2014 07:05
Code(s): EOH     PDF:  
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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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