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EOH HOLDINGS LIMITED - EOH Reviewed Condensed Consolidated Results For the six months ended 31 January 2015

Release Date: 11/03/2015 07:05
Code(s): EOH     PDF:  
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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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