Wrap Text
Reviewed Condensed Consolidated Results for the Year Ended 31 July 2014
EOH Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1998/014669/06
Share code: EOH
ISIN: ZAE000071072
EOH
REVIEWED CONDENSED
CONSOLIDATED RESULTS
FOR THE YEAR ENDED 31 JULY 2014
Increased
Revenue 42% to R7 220 million
Increased
PAT 49% to R492 million
Increased
EPS 30% to 447,0 cents
Increased
HEPS 32% to 446,6 cents
Increased
Cash 63% to R1 065 million
Condensed Consolidated Statement of Comprehensive Income
for the year ended 31 July 2014
Reviewed Audited
2014 2013
R'000 % change R'000
Revenue 7 220 372 42,0 5 085 979
Cost of sales (4 631 650) (3 075 359)
Gross profit 2 588 722 2 010 620
Operating profit before interest and impairments 719 514 495 723
Investment income 29 676 18 483
Finance costs (80 434) (47 502)
Impairment of assets - (6)
Share of profit of equity accounted investments 337 -
Profit before taxation 669 093 43,4 466 698
Taxation (176 930) (135 339)
Profit for the year 492 163 48,5 331 359
Other comprehensive income:
Item that may be classified subsequently to profit or loss
Exchange differences on translating foreign operations 12 636 1 500
Comprehensive income for the year 504 799 51,7 332 859
Profit attributable to:
Owners of the parent 487 608 331 509
Non-controlling interest 4 555 (150)
Profit for the year 492 163 331 359
Comprehensive income attributable to:
Owners of the parent 500 244 333 009
Non-controlling interest 4 555 (150)
Comprehensive income for the year 504 799 332 859
Earnings per share
Earnings per share (cents) 447,0 30,1 343,7
Diluted earnings per share (cents) 418,2 35,0 309,8
Headline earnings reconciliation
Profit after taxation attributable to:
Ordinary shareholders 487 608 331 509
Profit on disposal of assets (532) (129)
Gain on bargain purchase (no tax effect) - (4 387)
Net impairment of assets - 6
Total tax effect of adjustments 149 36
487 225 327 035
Headline earnings per share
Headline earnings per share (cents) 446,6 31,7 339,1
Diluted headline earnings per share (cents) 417,9 36,7 305,6
Total number of shares in issue (000s) 118 654 110 848
Weighted average number of shares in issue (000s) 109 086 96 453
Weighted average diluted number of shares (000s) 116 587 107 007
Condensed Consolidated Statement of Financial Position
as at 31 July 2014 Reviewed Audited
2014 2013
R'000 R'000
ASSETS
Non-current assets
Investment property - 2 872
Property, plant and equipment 404 572 226 324
Goodwill and intangible assets 2 001 181 1 031 945
Equity accounted investments 2 090 -
Finance lease receivables 114 462 74 894
Other financial assets 3 676 26 551
Deferred tax assets 212 021 103 544
Current assets
Inventory 142 221 66 479
Finance lease receivables 66 136 46 595
Other financial assets 61 017 12 401
Current tax receivable 26 031 27 265
Trade and other receivables 1 588 132 1 185 075
Cash and cash equivalents 1 064 522 653 007
Total assets 5 686 061 3 456 952
EQUITY AND LIABILITIES
Equity attributable to owners of the parent 2 618 163 1 620 324
Non-controlling interest 10 647 403
2 628 810 1 620 727
Non-current liabilities
Finance lease obligations 40 820 1 793
Other financial liabilities 730 007 351 416
Deferred tax liabilities 169 249 53 398
Current liabilities
Trade and other liabilities 1 694 752 1 239 570
Deferred revenue 372 958 159 868
Current tax payable 49 465 30 180
Total equity and liabilities 5 686 061 3 456 952
Net asset value per share (cents) 2 206,6 1 461,8
Net tangible asset value per share (cents) 520,0 530,8
Condensed Consolidated Statement of Cash Flows
for the year ended 31 July 2014 Reviewed Audited
2014 2013
R'000 R'000
Cash generated by operating activities 718 891 532 912
Investment income 29 676 18 483
Finance costs (80 434) (47 502)
Taxation paid (260 695) (154 688)
Net cash inflow from operating activities 407 438 349 205
Net cash outflow from investing activities (343 322) (113 057)
Net cash inflow/(outflow) from financing activities 347 301 (35 640)
Net movement in cash and cash equivalents 411 417 200 508
Cash and cash equivalents at beginning of the year 653 007 451 867
Effects of exchange rate fluctuations 98 632
Cash and cash equivalents at end of the year 1 064 522 653 007
Condensed Consolidated Statement of Changes in Equity
for the year ended 31 July 2014 Total equity
Shares to attributable to
Stated be issued Retained shareholders Non-controlling Total
for the year ended 31 July 2014 capital to vendors Reserves earnings of the Group interest equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Audited balance at
1 August 2012 285 553 112 933 111 390 618 562 1 128 438 1 400 1 129 838
Total comprehensive income - - 1 500 331 509 333 009 (150) 332 859
Dividends - - - (66 901) (66 901) - (66 901)
Share-based payments - - 16 134 - 16 134 - 16 134
Non-controlling interest acquired - - 47 - 47 (847) (800)
Shares to be issued - 54 594 - - 54 594 - 54 594
Issue of shares 194 455 - - - 194 455 - 194 455
Treasury shares (66 440) - 41 647 - (24 793) - (24 793)
The effect of consolidating the Mthombo Trust (14 659) - - - (14 659) - (14 659)
Audited balance at
31 July 2013 398 909 167 527 170 718 883 170 1 620 324 403 1 620 727
Total comprehensive income - - 12 636 487 608 500 244 4 555 504 799
Dividends - - - (99 793) (99 793) - (99 793)
Share-based payments - - 24 470 - 24 470 - 24 470
Non-controlling interest acquired - - - - - 5 689 5 689
Shares to be issued - 203 539 - - 203 539 - 203 539
Issue of shares 237 413 - - - 237 413 - 237 413
Movement in treasury shares (9 316) - 141 282 - 131 966 - 131 966
Reviewed balance at
31 July 2014 627 006 371 066 349 106 1 270 985 2 618 163 10 647 2 628 810
About EOH
The future is looking bright . . .
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 8 000 people providing end-to-end solutions
for over 2 000 enterprise clients in all major industries.
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 its approach to business relationships and technology partners is
firmly embedded in its philosophy of 'Partner for Life'.
Our solutions draw from a comprehensive portfolio of Applications, IT Management, 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 First 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 First 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
EOH's operating model is a two dimensional approach concentrated around lines of business and industry
verticals.
EOH's footprint
EOH has a presence in 134 locations in South Africa, 29 African countries and the UK. Most of EOH's revenue
is currently derived from South Africa. In the short to medium term, EOH intends to gradually increase the
revenue from other African countries outside of South Africa.
Basis of preparation
The reviewed condensed consolidated results for the year ended 31 July 2014 have been prepared by the Group
Financial Director, John King, CA (SA), in accordance with the framework concepts, containing the
information required by IAS 34 - Interim Financial Reporting, the Financial Reporting Guidelines as issued
by the Accounting Practices Committee of the South African Institute of Chartered Accountants, the South
African Companies Act and the JSE Listings Requirements.
Accounting policies
The accounting policies and methods of computation applied in the preparation of these reviewed condensed
consolidated results for the year under review, which are based on reasonable judgements and estimates, are
in accordance with International Financial Reporting Standards 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, which became effective in the current financial year, have been adopted but there has been
no material impact on the Group's financial results.
Review opinion
The condensed consolidated results for the year ended 31 July 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.
The auditor's report does not necessarily report on all of the information contained in these financial
results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of
the auditor's engagement they should obtain a copy of the auditor's report together with the accompanying
financial information from EOH's registered office.
Financial results
The board of directors of EOH ('the board') is pleased with the performance for the year under review. The
statement of financial position is strong with sufficient cash resources to ensure sustainable future
growth. Revenue increased by 42,0% to R7 220 million and profit after tax is up by 48,5% to R492 million.
The growth is attributable to a combination of strong organic growth and recent acquisitions. Organic
growth accounted for 54,4% of the year-on-year growth and contributed 49,3% of the growth in profit before
tax. Earnings per share ('EPS') and headline earnings per share ('HEPS') have grown by 30,1% and 31,7%,
respectively, with cash increasing to R1 065 million.
Business combinations Sybrin Other 2014
R'000 R'000 R'000
Fair value of assets and liabilities acquired
Property, plant and equipment 14 763 58 334 73 097
Intangible assets 94 716 141 844 236 560
Equity accounted investments - 1 751 1 751
Net deferred tax liabilities (20 361) (23 601) (43 962)
Inventory 9 417 37 875 47 292
Other financial assets 4 183 12 529 16 712
Trade and other receivables 17 291 219 394 236 685
Cash and cash equivalents 59 956 160 919 220 875
Non-controlling interests (917) (4 772) (5 689)
Finance lease obligations - (35 981) (35 981)
Trade and other payables (13 875) (143 943) (157 818)
Other financial liabilities (28 863) (57 785) (86 648)
Deferred income (23 947) (59 738) (83 685)
Current tax payable (7 649) (29 142) (36 791)
Goodwill 178 253 600 319 778 572
282 967 878 003 1 160 970
Net cash (outflow)/inflow on acquisition
Cash consideration paid (118 200) (246 270) (364 470)
Cash acquired 59 956 160 919 220 875
(58 244) (85 351) (143 595)
Consideration
Cash paid (118 200) (246 270) (364 470)
Shares issued (27 614) (87 782) (115 396)
Cash to be paid (68 119) (266 215) (334 334)
Shares to be issued (69 034) (277 736) (346 770)
Total consideration (282 967) (878 003) (1 160 970)
During the year, EOH continued with its strategy to consolidate and complement its existing service
offerings in its Information Technology, Outsourcing and Industrial Technologies businesses. EOH focused on
enhancing its service offering in the financial services, telecommunications, energy and local government
sectors and growing its activities in Africa.
Profit warranties allow for a defined adjusted value to the consideration payable in the event that the
full profit after tax ('PAT') warranted is not achieved and a sharing of the surplus should the profit
warranted be exceeded. Where contingent consideration is applicable, the fair value of the contingent
arrangement was estimated by applying the income approach assuming that 100% of the contingent
consideration will be paid. The consideration is expected to be paid within a 24 month period from
acquisition date. As of 31 July 2014, amounts previously recognised for 'contingent consideration' payable
changed resulting in a net decrease of R5 million. Revised contingent consideration payable is based on the
latest approved budgeted results and reasonable growth rates for the remainder of the relevant warranty
periods.
The cumulative assets acquired were R833 million, including trade and other receivables with a gross
contractual value of R241 million (fair value of R237 million). The cumulative liabilities acquired were
R451 million. The noncontrolling interest acquired of R6 million is measured at the proportionate share of
net assets. The aggregated revenue of businesses acquired included in these results is R974 million,
netting a profit before tax of R102 million. Had these businesses been acquired with effect from 1 August
2013, the aggregated revenue would have been R1 308 million and PBT R139 million. The goodwill associated
with these acquisitions is R779 million. This goodwill relates mainly to future profits of these businesses
and the anticipated synergies to be derived as a result of joining EOH.
Sybrin group
EOH acquired 100% of the share capital of Sybrin Ltd and Sybrin Systems (Pty) Ltd, hereinafter collectively
referred to as 'Sybrin', with effect from 1 August 2013 for an amount of R283 million of which R186 million
is payable in cash and the balance through the issue of EOH shares. Sybrin is a specialised developer of
software products for the financial services industry, including software for workflow, payments, imaging
and document management solutions. EOH acquired the shares in Sybrin to strengthen its financial services
industry vertical and its expansion into Africa.
The assets acquired were R200 million, including trade and other receivables with a gross contractual value
of R17 million (which approximated fair value). The liabilities acquired were R96 million, including non-
controlling interests of R1 million. The goodwill of R178 million that was raised relates to expected
profits to be generated as a result of being part of EOH. Sybrin's revenue and profit before tax for the
current year amounted to R147 million and R26 million respectively.
Segmental reporting
EOH's revenue is derived from the provision of services (systems integration, outsourcing and industrial
technology), software (software sales and maintenance revenue) and infrastructure products.
Profit before
Revenue tax
Segment R'000 R'000 Margin
2014 2013 2014 2013 2014
Services 5 501 221 3 627 362 522 455 346 873 9,5%
- Systems Integration 2 588 898 217 502 8,4%
- Outsourcing 2 201 505 219 618 10,0%
- Industrial Technologies 710 818 85 335 12,0%
Software 737 219 686 817 92 435 72 950 12,5%
Infrastructure products 981 932 771 800 67 790 55 505 6,9%
Not specifically allocated - - (13 587) (8 630) -
Total 7 220 372 5 085 979 669 093 466 698 9,3%
All businesses grew with revenue from services increasing by 51,7% to R5,5 billion.
The revenue derived from services is primarily from three sources: Systems Integration, Outsourcing and
Industrial Technologies. Systems Integration services include all services relating to our applications,
technology solutions, information management, security, digital and knowledge consulting businesses and are
the primary revenue generators accounting for 47,1% of services revenue (margin of 8,4%). Outsourcing
services include infrastructure and application managed services and Business Process Outsourcing and
account for 40,0% of services (margin 10,0%). Industrial Technologies services include energy management,
automation controls, connectivity infrastructure services and engineering and mining technical services and
account for 12,9% of services revenue (margin 12,0%). We have recently revised our project based reporting
modules which will enable us to report comparative figures in these three main service categories in the
future.
The revenue derived from software, which increased by 7,3%, comprises the sale of software licences and the
annual maintenance fees in respect of such software and accounts for 10,2% of total revenue yielding a
margin of 12,5%.
The revenue from infrastructure products increased by 27,2% and includes traditional IT hardware, network
infrastructure, telecommunications infrastructure and hardware associated with security solutions. The
revenue from infrastructure products accounts for 13,6% of total revenue (margin 6,9%).
Assets Liabilities
Segment R'000 R'000
2014 2013 2014 2013
Services 4 414 853 2 468 680 (2 457 152) (1 381 450)
- Systems Integration 2 233 771 (1 436 071)
- Outsourcing 972 004 (377 626)
- Industrial Technologies 1 209 078 (643 455)
Software 454 885 427 887 (303 919) (233 729)
Infrastructure products 465 299 527 851 (271 764) (216 874)
Not specifically allocated 351 024 32 534 (24 416) (4 172)
Total 5 686 061 3 456 952 (3 057 251) (1 836 225)
Subsequent events and capital commitments
There have been no significant events since the end of the year under review. There was no significant
capital expenditure authorised as at 31 July 2014.
Transformation and social responsibility
EOH's Employment Equity ('EE') initiatives are fully integrated into the business strategy and sustainable
transformation is a key business objective and part of EOH's philosophy. 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 36.1%. 54.9% of EOH's staff and 66% of its board members are black.
EOH has several Enterprise Development initiatives aimed at developing black-owned ICT companies by
providing both financial and non-financial support.
EOH has a comprehensive Corporate Social Investment programme which includes some of the initiatives below.
Maths Centre Programme
We have been involved in a multi-million Rand support programme with the Maths Centre which focuses on the
teaching of mathematics, science, technology and entrepreneurship. The centre's primary objective is to
equip teachers, learners and parents with learning materials and programmes to improve their competency in
these subjects.
SABCOHA
We have partnered with the South African Business Coalition on HIV and Aids ('SABCOHA') in a number of
initiatives aimed at mobilising and empowering businesses to take effective and meaningful action against
HIV and Aids.
Afrika Tikkun
We provide support to the Child and Youth Development Programmes of Afrika Tikkun with the objective of
providing a sustainable future for children in townships.
Tutudesk
We proudly support the Tutudesk Project which provides portable school desks to children in sub-Saharan
Africa, where over 95 million school children do not have the benefit of a classroom desk.
Job Creation Initiative
Business needs to skill people by placing school leavers and graduates on learnership and internship
programmes. In 2013, 620 young people participated in EOH's learnership and intern programmes, of which 450
were employed directly by EOH. In 2014, EOH took on another 600 interns to provide the opportunity for
young graduates to gain valuable experience in business. If every business in South Africa were to do the
same, it would mean the employment of hundreds of thousands of young South Africans.
Future plans
EOH will continue to grow aggressively through the development of new solutions, new lines of business and
the enhancement of industry specific businesses. The growth will be organic, complemented with strategic
acquisitions. Growth will be focused on Information Technology outsourcing and processes, Information
Management, Analytics and Digitalisation. Industry technology will be another major growth area for EOH.
EOH sees public sector involvement as both a responsibility and a business opportunity. With its wide range
of offerings, expertise and experience, EOH can help contribute to improved service delivery in this
important sector of the economy.
EOH has made good progress in its foray into Africa and now has activities in 29 countries. EOH plans to
increase its in-country presence by increasing its service offerings and through partnerships, joint
ventures and acquisitions.
EOH will begin distributing its own niche IP software products internationally. This growth area is
significant in both size and strategic importance to EOH's future.
EOH is recognised for the quality of its people and its strong delivery capabilities. EOH has the people,
the scale, the offerings, the financial resources, the agility and the know-how to continue to grow
aggressively.
Directorate
Sandile Zungu was appointed as 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 Tshilidza Marwala, Lucky
Khumalo and Tebogo Skwambane, were re-elected.
Dividends
Notice is hereby given that a gross dividend of 120 cents (2013: 95 cents) per ordinary share ('the
dividend') has been declared in respect of the year ended 31 July 2014 and is payable to shareholders
recorded in the books at the close of business on Friday, 31 October 2014. Shareholders are advised that
the last day of trade cum the dividend will be Friday, 24 October 2014.
The shares will trade ex the dividend as from Monday, 27 October 2014. Payment will be made on Monday,
3 November 2014. Share certificates may not be dematerialised or rematerialised during the period Monday,
27 October 2014 to Friday, 31 October 2014, both days inclusive.
-This is a dividend as defined by the Income Tax Act and is being paid out of income reserves.
-The local dividend tax rate is 15%.
-There are no Secondary Tax credits utilised against the dividend.
-The gross local dividend is 120 cents per share for shareholders exempt from paying Dividend Tax.
-The net local dividend amount is 102 cents per share for shareholders liable to pay Dividend Tax.
-EOH's tax reference number is 9248321847.
-There are 118 653 543 ordinary shares in issue.
Asher Bohbot
Chief Executive Officer
17 September 2014
Sponsor
Merchantec Capital
Registered office
Block D, EOH Business Park,
Osborne Lane, Bedfordview, 2007
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
Auditors
Mazars (Gauteng) Inc.
Email: info@eoh.co.za
Tel: (011) 607 8100
Website: www.eoh.co.za
Date: 17/09/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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