Wrap Text
EOH Reviewed Condensed Consolidated Results
For the six months ended 31 January 2015
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 six months ended
31 January 2015
Revenue UP 39,4% to R4 610 million
PAT UP 37,7% to R340 million
EPS UP 26,3% to 290,3 cents
HEPS UP 26,4% to 290,1 cents
Cash UP 86,6% to R1 466 million
EOH's PURPOSE
To provide the technology, knowledge, skills and organisational ability critical to Africa's development and growth.
To be an ethical, relevant force for good and to play a positive role in our society, beyond normal business practice.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 31 January 2015
Reviewed % change Reviewed Audited
six months to six months to twelve months to
31 January 2015 31 January 2014 31 July 2014
R'000 R'000 R'000
Revenue 4 609 623 39,4 3 307 548 7 220 372
Cost of sales (2 996 858) (2 035 606) (4 631 650)
Gross profit 1 612 765 1 271 942 2 588 722
Operating profit before interest and impairments* 504 664 353 565 719 514
Investment income 22 683 13 952 29 676
Finance costs (60 059) (31 946) (80 434)
Share of profit of equity accounted investees 917 - 337
Profit before taxation 468 205 39,5 335 571 669 093
Taxation (127 991) (88 581) (176 930)
Profit for the period 340 214 37,7 246 990 492 163
Other comprehensive income:
Items that may be classified subsequently to profit or loss
Exchange differences on translating foreign operations 8 438 4 805 12 636
Total comprehensive income for the period 348 652 38,5 251 795 504 799
Profit attributable to:
Owners of the parent 339 165 244 324 487 608
Non-controlling interest 1 049 2 666 4 555
Profit for the period 340 214 246 990 492 163
Total comprehensive income attributable to:
Owners of the parent 347 603 249 129 500 244
Non-controlling interest 1 049 2 666 4 555
Total comprehensive income for the period 348 652 251 795 504 799
Earnings per share
Earnings per share (cents) 290,3 26,3 229,8 447,0
Diluted earnings per share (cents) 276,8 31,8 210,0 418,2
* Operating profit before interest and impairments includes:
- Depreciation 72 845 40 369 102 315
- Amortisation of intangibles 58 548 49 633 97 543
- IFRS 2 - Share based payments 17 261 11 731 24 470
- Other IFRS movements 20 593 12 250 21 390
HEADLINE EARNINGS AND NET ASSET VALUE PER SHARE
for the period ended 31 January 2015
Reviewed % change Reviewed Audited
six months to six months to twelve months to
31 January 2015 31 January 2014 31 July 2014
R'000 R'000 R'000
Headline earnings per share
Headline earnings per share (cents) 290,1 26,4 229,6 446,6
Diluted headline earnings per share (cents) 276,6 31,8 209,9 417,9
Headline earnings reconciliation
Profit after taxation attributable to
Ordinary shareholders 339 165 244 324 487 608
Gain on disposal of non-current assets (294) (259) (532)
Total tax effect of adjustments 55 73 149
338 926 244 138 487 225
Number of ordinary shares
Total number of shares in issue (000's) 130 837 114 811 118 654
Weighted average number of shares in issue (000's) 116 838 106 322 109 086
Weighted average diluted number of shares (000's) 122 534 116 333 116 587
Net asset value per share
Net asset value per share (cents) 2 967,2 1 930,9 2 206,6
Net tangible asset value per share (cents) 847,9 463,3 520,0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 January 2015
Reviewed Reviewed Audited
six months to six months to twelve months to
31 January 2015 31 January 2014 31 July 2014
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 430 373 281 315 404 572
Goodwill and intangible assets 2 772 813 1 684 948 2 001 181
Equity accounted investments 3 007 - 2 090
Finance lease receivables 133 779 101 310 114 462
Other financial assets 5 689 5 847 3 676
Deferred tax assets 109 205 146 677 212 021
Current assets
Inventory 157 476 87 215 142 221
Finance lease receivables 78 345 59 230 66 136
Other financial assets 75 713 41 093 61 017
Current tax receivable 29 297 24 617 26 031
Trade and other receivables 2 136 842 1 475 484 1 588 132
Cash and cash equivalents 1 465 601 785 351 1 064 522
Total assets 7 398 140 4 693 087 5 686 061
EQUITY AND LIABILITIES
Equity
Equity attributable to owners of the parent 3 882 226 2 216 879 2 618 163
Non-controlling interest 12 700 8 758 10 647
3 894 926 2 225 637 2 628 810
Non-current liabilities
Finance lease obligations 29 744 4 047 40 820
Other financial liabilities 1 004 102 603 639 730 007
Deferred tax liabilities 108 648 118 968 169 249
Current liabilities
Trade and other liabilities 1 878 986 1 407 996 1 694 752
Deferred revenue 412 588 245 440 372 958
Current tax payable 69 146 87 360 49 465
Total equity and liabilities 7 398 140 4 693 087 5 686 061
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 31 January 2015
Shares
to be Non-
Stated issued Retained controlling Total
capital to vendors Reserves earnings interest equity
R'000 R'000 R'000 R'000 R'000 R'000
Audited balance at 1 August 2013 398 909 167 527 170 718 883 170 403 1 620 727
Comprehensive income for the period - - 4 805 244 324 2 666 251 795
Dividends - - - (101 971) - (101 971)
Share-based payment - - 11 731 - - 11 731
Non-controlling interest acquired - - - - 5 689 5 689
Shares to be issued - 154 043 - - - 154 043
Issue of shares 112 541 - - - - 112 541
Movement in treasury shares 171 082 - - - - 171 082
Reviewed balance at 31 January 2014 682 532 321 570 187 254 1 025 523 8 758 2 225 637
Comprehensive income for the period - - 7 831 243 284 1 889 253 004
Dividends - - - 2 178 - 2 178
Share-based payment - - 12 739 - - 12 739
Shares to be issued - 49 496 - - - 49 496
Issue of shares 124 872 - - - - 124 872
Movement in treasury shares (180 398) - 141 282 - - (39 116)
Audited balance at 31 July 2014 627 006 371 066 349 106 1 270 985 10 647 2 628 810
Comprehensive income for the period - - 8 438 339 165 1 049 348 652
Dividends - - - (140 970) - (140 970)
Share-based payment - - 17 261 - - 17 261
Non-controlling interest acquired - - - - 1 004 1 004
Shares to be issued - 49 760 - - - 49 760
Issue of shares 914 774 - - - - 914 774
Movement in treasury shares 28 184 - 47 451 - - 75 635
Reviewed balance at 31 January 2015 1 569 964 420 826 422 256 1 469 180 12 700 3 894 926
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period ended 31 January 2015
Reviewed Reviewed Audited
six months to six months to twelve months to
31 January 2015 31 January 2014 31 July 2014
R'000 R'000 R'000
Cash generated by operating activities 336 882 166 281 718 891
Investment income 22 683 13 952 29 676
Finance costs (60 059) (31 946) (80 434)
Taxation paid (143 530) (98 863) (260 695)
Net cash inflow from operating activities 155 976 49 424 407 438
Net cash (outflow) from investing activities (117 989) (221 190) (343 322)
Net cash inflow from financing activities 364 954 304 226 347 301
Net movement in cash and cash equivalents 402 941 132 460 411 417
Cash and cash equivalents at beginning of period 1 064 522 653 007 653 007
Effects of exchange rate fluctuations (outflow)/inflow (1 862) (116) 98
Cash and cash equivalents at end of period 1 465 601 785 351 1 064 522
ABOUT EOH
Nature of business
EOH is the largest ICT services provider in South Africa and is committed to providing the technology, knowledge, skills and organisational ability critical to
Africa's development and growth. EOH has been listed on the JSE Limited ('JSE') since 1998 and has consistently delivered strong financial results.
EOH is a customer and people-centric organisation and its approach to business relationships and technology partners is firmly embedded in its philosophy of 'Partner
for Life'.
EOH's reputation for consistently delivering value to its customers is due to EOH's deep industry expertise, great people, an understanding of clients' businesses
and a 'Right 1st Time' approach to service delivery.
EOH provides end-to-end service offerings. EOH is the largest implementer of enterprise applications and has a wide range of outsourcing, cloud, managed services and
Business Process Outsourcing ('BPO') solutions.
EOH's 9 000 staff members deliver these services to customers across all major industries with a focus on the financial services, telecommunications, public sector,
mining, manufacturing and retail.
EOH operates from 134 points of presence in South Africa, 29 countries in Africa and has offices in the UK.
EOH is a Level 2 contributor and has the highest BBBEE rating of its peers on the JSE.
EOH Philosophy
Best People
To attract, develop and retain the best people led by great leaders.
Partner for Life
To nurture lifelong partnerships with its customers and business partners.
Right 1st Time
To ensure professional planning and execution and have pride in all that it does.
Sustainable Transformation
To transform and celebrate diversity.
Lead and Grow
Strive to be #1 in every domain in which EOH operates whilst remaining entrepreneurial.
COMMENTARY
Basis of preparation
The reviewed condensed consolidated results for the six months ended 31 January 2015 have been prepared by the Group Financial Director, John King, CA (SA), in
accordance with 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 Companies Act, 2008 (Act 71 of 2008), as amended 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 six months 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 2014.
New standards and interpretations, which became effective during the period under review, have been adopted. There has been no material impact on the Group's
financial results.
Review opinion
The condensed consolidated results for the six months ended 31 January 2015 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 may obtain further information
regarding the nature of the auditor's engagement by obtaining a copy of the auditor's report together with the accompanying financial information from EOH's
registered office.
The performance of the business
During the six months to 31 January 2015, revenue increased by 39,4% to R4 610 million and profit after tax increased by 37,7% to R340 million, when compared with
the comparative period. The growth is attributable to a combination of strong organic growth and recent acquisitions. Organic growth accounted for 73% of revenue
growth and contributed 69% of the growth in profit before tax. Earnings per share ('EPS') increased by 26,3% and headline earnings per share ('HEPS') increased by
26,4% with cash increasing to R1 466 million. EOH is in a strong financial position and has sufficient cash resources to ensure sustainable future growth.
Growth through business combinations
During the period under review, EOH continued its strategy to consolidate and complement its existing service offerings in its Information Technology, Outsourcing
and Industrial Technologies businesses.
EOH specifically focused on growing its international IP software business and its service offerings in the financial services, telecommunications, energy and local
government sectors. EOH also expanded its activities in Africa. During the period, EOH acquired the businesses of Construction Computer Software Proprietary Limited
('CCS'), Managed Integrity Evaluation Proprietary Limited and Afiswitch Proprietary Limited ('MIE Group'), and several smaller businesses.
CCS
100% of the share capital of CCS was acquired with effect from 19 September 2014. CCS develops and markets software products used by the construction industry. EOH
acquired CCS to enhance its offerings to the construction industry.
MIE Group
During the period, EOH acquired 100% of the share capital of the MIE Group with effect from 1 November 2014. MIE offers electronic verification services using its
own proprietary software.
Accounting for business combinations
Where contingent consideration is applicable, the fair value of the contingent arrangement was initially estimated by applying the income approach assuming that the
relevant profit warrant will be fully achieved.
The fair value of the contingent consideration is subsequently measured using the income approach to calculate the present value of the expected payments using the
latest approved budgeted results and reasonable growth rates for the remainder of the relevant warranty periods. Contingent consideration classified as equity is not
remeasured and settlement is accounted for in equity.
Other financial liabilities disclosed in the Statement of Financial Position include R680 million (R441 million as at 31 July 2014) in relation to contingent
consideration. The movement relates to additions through new business combinations of R373 million, settlements of R154 million and changes in fair value of
R20 million (mostly realised). The fair value of these balances has been categorised as a level 3 fair value based on the valuation techniques used. There have been no
transfers between levels. Changing the unobservable inputs to reflect reasonably possible alternative assumptions does not significantly change the fair value.
EOH has an established control framework with respect to the measurement of fair values.
This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, and reports directly to the Group Financial
Director.
The goodwill associated with all acquisitions relates primarily to future profits of these businesses and the anticipated synergies to be derived as a result of
joining EOH.
Business combinations during the six months to 31 January 2015
CCS MIE Other 2015
R'000 R'000 R'000 R'000
Fair value of assets and liabilities acquired*
Property, plant and equipment 3 226 6 080 14 454 23 760
Intangible assets 112 700 83 992 36 587 233 279
Inventory - 1 854 17 379 19 233
Other financial assets 16 1 291 9 761 11 068
Trade and other receivables (fair value**) 34 828 20 133 115 817 170 778
Cash and cash equivalents 34 578 4 412 88 042 127 032
Non-controlling interest - - (1 004) (1 004)
Trade and other payables (45 467) (16 304) (83 104) (144 875)
Other financial liabilities - - (43 375) (43 375)
Net current tax payable (8 305) (2 262) (3 402) (13 969)
Net deferred tax liabilities (23 482) (21 228) (4 717) (49 427)
Goodwill 241 462 160 256 154 126 555 844
349 556 238 224 300 564 888 344
Net cash inflow/(outflow) on acquisition
Cash consideration paid (10 222) (60 000) (63 969) (134 191)
Cash acquired 34 578 4 412 88 042 127 032
24 356 (55 588) 24 073 (7 159)
Consideration
Cash paid (10 222) (60 000) (63 969) (134 191)
Shares issued (123 695) (23 082) (55 814) (202 591)
Cash to be paid (contingent consideration) (188 848) (56 634) (127 355) (372 837)
Shares to be issued (contingent consideration) (26 791) (98 508) (53 426) (178 725)
Total consideration (349 556) (238 224) (300 564) (888 344)
Contribution to trading results for the six months
Revenue 71 878 38 085 244 728 354 691
Profit before tax 10 337 6 328 24 893 41 558
Adjusted as if acquired with effect from 1 August 2014
Revenue 85 616 66 219 276 851 428 686
Profit before tax 12 329 10 992 26 370 49 691
* Based on provisional best estimates of fair value.
**The gross contractual value of trade and other receivables of CCS and MIE approximated their fair value. For other acquisitions the gross contractual value was
R122 million.
Segmental reporting
EOH's revenue is derived from the provision of Services (Systems Integration, Outsourcing and Industrial Technologies), Software (software sales and maintenance
revenue) and Infrastructure products (traditional IT hardware, network infrastructure, telecommunications infrastructure and the hardware associated with security
solutions).
The revenue derived from Services is primarily from three sources: Systems Integration, Outsourcing and Industrial Technologies. Systems Integration includes
services relating to applications, technology solutions, information management, security, digital and knowledge consulting businesses and accounts for 35,3% of
services revenue.
Outsourcing includes infrastructure managed services, application managed services and BPO and accounts for 46,7% of services revenue. Industrial Technologies
includes energy management, automation controls and connectivity infrastructure and accounts for 18,0% of services revenue.
EOH has recently revised its reporting systems which will enable EOH to report comparative figures for the year ending 31 July 2015.
The revenue derived from Software increased by 7,4% and the revenue from Infrastructure products increased by 50,3%.
Operational performance of segments
Revenue Profit before tax Margin
R'000 R'000 %
2015 2014 2015 2014 2015
Services* 3 362 923 2 357 123 354 105 249 674 10,5
- Systems Integration 1 188 704 149 026 12,5
- Outsourcing 1 571 997 138 080 8,8
- Industrial Technologies 602 222 66 999 11,1
Software 454 880 423 571 60 023 53 786 13,2
Infrastructure products 791 820 526 854 54 077 32 111 6,8
Total 4 609 623 3 307 548 468 205 335 571 10,2
Assets and liabilities for each segment
Assets Liabilities
R'000 R'000
2015 2014 2015 2014
Services* 5 497 505 3 170 170 (2 661 636) (1 735 073)
- Systems Integration 1 997 122 (1 072 637)
- Outsourcing 2 220 752 (1 044 763)
- Industrial Technologies 1 279 631 (544 236)
Software 673 975 569 663 (358 011) (311 787)
Infrastructure products 887 685 708 577 (453 195) (387 815)
Not specifically allocated 338 975 244 677 (30 372) (32 775)
Total 7 398 140 4 693 087 (3 503 214) (2 467 450)
*Comparative figures for the composition of services are not available
Transformation and social responsibility
EOH's Employment Equity ('EE') initiatives are fully integrated into EOH's business strategy. Sustainable transformation is a key philosophy and business objective
of EOH. EOH is certified as a Large Enterprise Level 2 Contributor with BBBEE Procurement Recognition of 156% as a Value Adding Vendor. EOH's current black
shareholding is 36,3%. 54,1% of EOH's staff and 67% of its board members are black.
Enterprise development
EOH has several enterprise development initiatives aimed at developing black-owned ICT companies by providing both financial and non-financial support.
Corporate Social Investment
EOH has a comprehensive Corporate Social Investment ('CSI') programme and has partnered with organisations to help realise and support this vision. These initiatives
include-
Maths Centre for Professional Teachers
EOH has supported the Maths Centre for several years which focuses on teaching 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.
Afrika Tikkun
EOH provides support to the child and youth development programmes of Afrika Tikkun with the objective of providing a future for children in townships.
Tutudesk Project
EOH supports the Tutudesk Project which provides portable school desks to children in sub-Saharan Africa where over 95 million school children do not have a
classroom desk.
The EOH Youth Job Creation Initiative
EOH launched its successful EOH Youth Job Creation Initiative in 2012 having recognised that business has a responsibility for empowering school leavers and
graduates with skills through learnership and internship programmes.
In 2013, 620 young people participated in EOH's learnership and intern programmes. EOH directly employed 450 of these candidates and managed to place the remaining
people at its customers. In 2014, EOH took on another 600 interns to provide opportunities for young graduates to gain valuable knowledge and experience in business.
The 2015 programme will commence shortly and another 600 people will participate in the programme.
If every business in South Africa were to do the same, it would mean the employment of hundreds of thousands of young South Africans, resulting in the eradication of
youth unemployment.
EOH has continued with its broader Youth Job Creation Initiative by stimulating conversations, sharing ideas through workshops and supporting its customers with
similar programmes. To date, thousands of jobs have been created by EOH, its customers and partners as a result of this initiative. This is a permanent function in
EOH and EOH will continue to make a difference in the years to come.
Future plans
EOH plans to continue to grow aggressively in all areas through the introduction of new lines of business, industry specific solutions and new domains. Growth will
be organic complemented with strategic acquisitions.
EOH's foray into Africa will accelerate through the increase of its in-country presence, partnerships, joint ventures and acquisitions. EOH's offerings are relevant
to the African continent.
EOH sees its involvement in the public sector as both a responsibility and a business opportunity. EOH's range of offerings, expertise and experience can be applied
to improve public sector effectiveness and service delivery.
EOH owns various niche IP software applications serving different industries. EOH is executing on a plan to market and distribute these niche applications
internationally.
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.
Subsequent events and capital commitments
There have been no significant events and no significant capital expenditure authorised since 31 January 2015.
Directorate
At the AGM held on 11 February 2015, the directors who were eligible for re-election, being Rob Sporen, Lucky Khumalo and Thoko Mnyango, were re-elected. Rob Sporen,
Prof Tshilidzi Marwala, Tebogo Skwambane and Lucky Khumalo were elected to the Audit Committee until the next AGM. There were no other changes to the board.
Asher Bohbot
Chief Executive Officer
11 March 2015
Executive directors
Asher Bohbot (Group CEO)
John King (Group FD)
Pumeza Bam
Dion Ramoo
Jane Thomson
Non-executive directors
Sandile Zungu (Chairman)
Rob Sporen (Dutch)
Lucky Khumalo
Danny Mackay
Tshilidzi Marwala
Thoko Mnyango
Tebogo Skwambane
Company secretary
Adri Els
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
Sponsor
Merchantec Capital
Auditors
Mazars (Gauteng) Inc.
Date: 11/03/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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