Wrap Text
Provisional Condensed Consolidated Results for the Year Ended 31 July 2015
EOH Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1998/014669/06
Share code: EOH
ISIN: ZAE000071072
EOH PROVISIONAL CONDENSED
CONSOLIDATED RESULTS
FOR THE YEAR ENDED
31 JULY 2015
Revenue up 35% to R9 734 million
PAT up 41% to R692 million
EPS up 26% to 561 cents
HEPS up 29% to 575 cents
Cash up 56% to R1 664 million
Dividends up 25% to 150 cents
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 PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 31 July 2015
Reviewed Audited
31 July 2015 31 July 2014
R'000 % change R'000
Revenue 9 733 992 35 7 220 372
Cost of sales (6 532 019) (4 631 650)
Gross profit 3 201 973 2 588 722
Operating profit before interest and impairments* 1 046 605 719 514
Investment income 37 785 29 676
Finance costs (118 799) (80 434)
Share of profit from equity-accounted investments 10 736 337
Impairment of assets (25 000) -
Profit before taxation 951 327 42 669 093
Taxation (259 533) (176 930)
Profit for the year 691 794 41 492 163
Other comprehensive income:
Items that may be classified subsequently to profit or loss
Exchange differences on translating foreign operations 27 144 12 636
Total comprehensive income for the year 718 938 42 504 799
Profit attributable to:
Owners of the parent 690 692 487 608
Non-controlling interest 1 102 4 555
Profit for the year 691 794 492 163
Total comprehensive income attributable to:
Owners of the parent 717 342 500 244
Non-controlling interest 1 596 4 555
Total comprehensive income for the year 718 938 504 799
Earnings per share
Earnings per share (cents) 561 26 447
Diluted earnings per share (cents) 534 28 418
* Operating profit before interest and impairments includes:
- Depreciation 151 984 102 315
- Amortisation of intangibles 114 726 97 543
- Share-based payment 42 848 24 470
- Changes in fair value 13 669 21 390
HEADLINE Earnings PER SHARE
for the year ended 31 July 2015
Reviewed Audited
31 July 2015 31 July 2014
R'000 % change R'000
Headline earnings per share
Headline earnings per share (cents) 575 29 447
Diluted headline earnings per share (cents) 548 31 418
Headline earnings reconciliation
Profit after taxation attributable to ordinary shareholders 690 692 487 608
Adjusted for:
Profit/(loss) on disposal of assets 1 914 (532)
Gains on bargain purchases (no tax effect)* (9 474) -
Impairment of assets (no tax effect)** 25 000 -
Total tax effect of adjustments (357) 149
707 775 487 225
Number of ordinary shares
Total number of shares in issue (000's) 132 039 118 653
Weighted average number of shares in issue (000's) 123 031 109 086
Weighted average diluted number of shares (000's) 129 271 116 587
* The fair values determined for the net assets of certain acquirees exceeded the related consideration giving rise to gains on
bargain purchases. These are included in operating profit in the statement of profit or loss and other comprehensive income.
** The carrying amount of certain cash-generating units was determined to be less than their recoverable amounts using value-in-use
calculations. Impairment losses were recognised for these and allocated to goodwill.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 July 2015
Reviewed Audited
31 July 2015 31 July 2014
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 412 159 404 572
Goodwill and intangible assets 2 989 582 2 001 181
Equity-accounted investments 351 852 2 090
Finance lease receivables 130 459 114 462
Other financial assets 18 437 3 676
Deferred tax 107 337 212 021
Current assets
Inventory 195 665 142 221
Finance lease receivables 86 955 66 136
Other financial assets 61 467 61 017
Current tax receivable 47 955 26 031
Trade and other receivables 2 307 021 1 588 132
Cash and cash equivalents 1 663 818 1 064 522
Total assets 8 372 707 5 686 061
EQUITY AND LIABILITIES
Equity attributable to owners of the parent 4 499 952 2 618 163
Non-controlling interest 8 672 10 647
4 508 624 2 628 810
Non-current liabilities
Finance lease obligations 21 010 40 820
Other financial liabilities 1 068 477 730 007
Deferred tax 137 930 169 249
Current liabilities
Trade and other liabilities 2 314 814 1 694 752
Deferred income 264 508 372 958
Current tax payable 57 344 49 465
Total equity and liabilities 8 372 707 5 686 061
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 July 2015
Shares Total
to be attributable Non-
Stated issued Retained to controlling Total
capital to vendors Reserves earnings shareholders interest equity
R'000 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 1 620 324 403 1 620 727
Total comprehensive income for the year - - 12 636 487 608 500 244 4 555 504 799
Dividends - - - (99 793) (99 793) - (99 793)
Share-based payment - - 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 237 414 - - - 237 414 - 237 414
Movement in treasury shares (9 317) - 141 282 - 131 965 - 131 965
Audited balance at 31 July 2014 627 006 371 066 349 106 1 270 985 2 618 163 10 647 2 628 810
Total comprehensive income for the year - - 26 650 690 692 717 342 1 596 718 938
Dividends - - - (140 970) (140 970) - (140 970)
Share-based payment - - 42 848 - 42 848 - 42 848
Non-controlling interest acquired - - - (7 684) (7 684) (3 571) (11 255)
Shares to be issued - 292 395 - - 292 395 - 292 395
Issue of shares 964 689 - - - 964 689 - 964 689
Movement in treasury shares (58 532) - 71 701 - 13 169 - 13 169
Reviewed balance at 31 July 2015 1 533 163 663 461 490 305 1 813 023 4 499 952 8 672 4 508 624
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 July 2015
Reviewed Audited
31 July 2015 31 July 2014
R'000 R'000
Cash generated by operating activities 908 567 718 891
Investment income 37 571 29 676
Finance costs (117 549) (80 434)
Taxation paid (301 143) (260 695)
Net cash inflow from operating activities 527 446 407 438
Net cash outflow from investing activities (326 865) (343 322)
Net cash inflow from financing activities 398 093 347 301
Total cash inflow movement for the year 598 674 411 417
Cash and cash equivalents at the beginning of the year 1 064 522 653 007
Effect of exchange rate movement 622 98
Cash and cash equivalents at the end of the year 1 663 818 1 064 522
ABOUT EOH
Nature of business
EOH is the largest technology services provider in South Africa. EOH has been listed on the Johannesburg Stock Exchange ('JSE')
since 1998 and has consistently delivered strong financial results. EOH is committed to transformation, is a Level 2 contributor
and has the highest BBBEE rating of its peers.
EOH is the largest implementer of enterprise applications and has a wide range of Outsourcing, Cloud, Managed Services, Industrial
Technologies and Business Process Outsourcing ('BPO') solutions.
EOH's 10 000 staff members deliver these services to over 2 000 large enterprise customers across all major industries and has
134 points of presence in South Africa and activities in 32 other African countries.
EOH remains entrepreneurial despite its size. It has a strong brand and is expanding into new territories.
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 in all that we do
Sustainable Transformation
To transform and celebrate diversity
Lead and Grow
Strive to be #1 in every domain that we operate in whilst remaining entrepreneurial
Operating model
EOH's operating model is two dimensional, focused on key business areas and industry verticals. EOH offers solutions across the
spectrum through a simple 'Design, Build and Operate' approach and is able to offer its customers tailored, flexible and robust
solutions.
Key business areas
Applications
Enterprise applications
Information management
Information services
Software development and integration
Digital
Own niche applications
IT Management
IT performance management and optimisation
IT security and governance
IT infrastructure
Datacentre and virtualisation
End-user computing and mobility
Cloud services
IT Outsourcing
Applications
Infrastructure
Unified communications
Network solutions
Industrial Technologies
Connectivity infrastructure
Security and safety
Automation and control
Energy infrastructure and services
Infrastructure engineering
BPO
Human capital solutions
Learning and development
Workplace health
Customer services outsourcing
Legal services
Health
COMMENTARY
Basis of preparation
The provisional condensed consolidated results for the year ended 31 July 2015 have been prepared by the Group Financial Director,
John King, CA(SA), in accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS), the Financial Reporting Guides as issued by the Accounting Practices Committee of the South
African Institute of Chartered Accountants, the Companies Act, the JSE Listings Requirements and containing the information
required by IAS 34 - Interim Financial Reporting.
Accounting policies
The accounting policies and methods of computation applied in the preparation of these results 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 2014.
New standards and interpretations, which became effective during the year under review, have been adopted. There is no material
impact on the Group's financial results.
Review opinion
The provisional condensed consolidated results for the year ended 31 July 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.
Business performance
During the year ended 31 July 2015, revenue increased by 35% to R9 734 million and profit after tax increased by 41% to
R692 million, when compared with the previous year. The growth is attributable to a combination of strong organic growth and
recent acquisitions. Organic growth accounted for 56% of revenue growth and contributed 51% of the growth in profit before tax.
Earnings per share ('EPS') increased by 26% and headline earnings per share ('HEPS') increased by 29% with cash increasing to
R1 664 million. EOH is in a strong financial position and has sufficient cash resources to ensure sustainable future growth.
Businesses joining EOH
During the year under review, EOH continued its strategy to consolidate and complement its existing services with strategic
acquisitions.
EOH 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 by acquiring a significant
interest in the Twenty Third Century Systems Group ('TTCS'). During the year, EOH also 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 develops and markets software products used by the construction industry and
the MIE Group 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 is initially estimated by applying the
income approach assuming that the relevant profit warrant will be 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. Upwardly revised performance expectations or growth rates would result in an increase in the related liability
limited to the terms of the applicable warranty agreement. 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 R771 million (R441 million as at 31 July 2014)
in relation to contingent consideration. The movement relates to additions through new business combinations of R523 million,
settlements of R218 million, changes in fair value of R14 million (mostly unrealised) and foreign exchange effects of R11 million.
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 reports
directly to the Group Financial Director who oversees all significant fair value measurements.
The goodwill associated with all acquisitions relates primarily to future profits and the anticipated synergies to be derived by
these businesses as a result of joining EOH.
Business combinations
CCS** MIE** Other 2015
R'000 R'000 R'000 R'000
Fair value of assets and liabilities acquired
Property, plant and equipment 3 258 5 893 28 845 37 996
Intangible assets 113 110 111 610 100 373 325 093
Inventory - 1 854 18 971 20 825
Other financial assets 16 1 292 11 400 12 708
Trade and other receivables (fair value*) 34 828 20 133 151 348 206 309
Cash and cash equivalents 34 578 4 412 124 510 163 500
Non-controlling interest - - 3 572 3 572
Reserves - - 7 685 7 685
Trade and other payables (36 169) (16 002) (97 068) (149 239)
Other financial liabilities - - (66 484) (66 484)
Deferred income (9 298) (302) (17 831) (27 431)
Net deferred tax liabilities (23 606) (28 717) (15 465) (67 788)
Net current tax payable (8 305) (1 875) (7 773) (17 953)
Gain on bargain purchase - - (9 474) (9 474)
Goodwill 241 145 139 926 270 153 651 224
349 557 238 224 502 762 1 090 543
Net cash inflow/(outflow) on acquisition
Cash consideration paid (27 535) (60 000) (149 047) (236 582)
Cash acquired 34 578 4 412 124 510 163 500
7 043 (55 588) (24 537) (73 082)
Consideration
Cash paid (27 535) (60 000) (149 047) (236 582)
Shares issued (123 696) (23 082) (62 783) (209 561)
Cash to be paid (171 535) (56 634) (175 754) (403 923)
Shares to be issued (26 791) (98 508) (115 178) (240 477)
Total consideration (349 557) (238 224) (502 762) (1 090 543)
Contribution to trading results for the year
Revenue 168 022 120 090 808 324 1 096 436
Profit before tax 43 273 14 550 80 787 138 610
Adjusted as if acquired with effect from 1 August 2014
Revenue 194 692 147 095 1 071 972 1 413 759
Profit before tax 53 363 16 928 96 590 166 881
Acquisition related costs 19 600
* 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 R159 million.
** CCS was acquired on 19 September 2014 and MIE on 1 November 2014. In both cases 100% of the share equity was acquired.
Segmental reporting
EOH's revenue is derived from Services, 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 increased by 27% to R7 003 million and is further segmented into revenue from Systems
Integration, Outsourcing and Industrial Technologies and accounts for 72% of total revenue.
Systems Integration activities account for 36% of Services revenue and include system applications and technology solutions;
software development and integration; cloud solutions; information management; security services; digital solutions; and
industry-based consulting services.
Revenue from outsourcing activities, which accounts for 46% of Services revenue, includes infrastructure managed services;
application managed services and BPO.
Industrial Technologies Services which includes energy management and infrastructure services; automation and control;
infrastructure engineering; safety and security solutions and connectivity infrastructure, accounts for 18% of Services revenue.
The revenue derived from Software increased by 60% and the revenue from Infrastructure products increased by 58%.
Performance of segments
Revenue Profit before tax Margin
R'000 R'000 %
2015 2014 2015 2014 2015
Services* 7 002 948 5 501 221 701 325 522 455 10
- Systems Integration 2 492 733 1 872 470 226 085 166 663 9
- Outsourcing 3 258 282 2 699 588 305 130 244 925 9
- Industrial Technologies 1 251 933 929 163 170 110 110 867 14
Software 1 179 856 737 219 175 188 92 435 15
Infrastructure products 1 551 188 981 932 77 326 67 790 5
Not specifically allocated - - (2 512) (13 587) -
Total 9 733 992 7 220 372 951 327 669 093 10
* During the year the categorisation of services revenue was further refined and the comparative figures reflect such
refinement.
Transformation and social responsibility
Transformation is part of EOH's business strategy and 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. 54% of EOH's staff and 67% of
its board members are black. EOH's current black shareholding is 39%.
Enterprise development
EOH has several enterprise development initiatives aimed at developing black-owned companies by providing both financial and
non-financial support.
Women in business
EOH has embarked on a initiative to uplift and empower black female-owned businesses. EOH will focus on assisting black women
build sustainable businesses in the technology and knowledge services sectors.
Corporate Social Investment
EOH believes that youth development is paramount to a prosperous South Africa. To this end EOH's Corporate Social Investment
('CSI') programme includes:
- The EOH Youth Job Creation Initiative, which equips young people with the necessary skills and experience to enable them to have
a job for life.
- Financial support for the Maths Centre 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.
- EOH provides support to the child and youth development programmes of Afrika Tikkun with the objective of providing a future for
children living in townships.
- EOH has partnered with SABCOHA (South African Business Coalition on Health and AIDS) who will test at least 25 000 people for
Aids and TB this year.
EOH believes that all businesses have a responsibility to help solve the problem of youth unemployment
The EOH Youth Job Creation Initiative
EOH launched the successful EOH Youth Job Creation Initiative in 2012 with the aim of working with its business partners,
customers and government to stimulate job creation. EOH believes that all businesses have a responsibility to help solve the
problem of youth unemployment. To date, EOH has engaged with the media and various SETAs (Sector Education and Training Authorities)
and formed an EOH-led team to work with its customers and technology partners to give young black people the opportunity to obtain
skills in the workplace and to bring offshored jobs back to South Africa.
As part of this programme, EOH launched its Internal Learnership Programme in March 2012.
In 2013, 620 young people participated in this programme and in 2014 a further 600 interns were recruited. To date, more than 70%
of these interns have been permanently employed by EOH. This year another 600 interns and learners are participating in EOH's
learnership programme.
The Youth Job Creation Programme is now a permanent part of EOH's development programme. We will continue to broaden our scope and
build on this programme by stimulating conversations, sharing ideas and supporting customers with similar initiatives.
Our objective is to create 50 000 jobs by 2020. To date the programme has created over 8 000 jobs.
Future plans
EOH will continue to develop new solutions, new lines of business, enhance its industry-specific businesses and expand its service
offerings into new territories. EOH is a diversified business with a wide service offering and the ability to meet the challenges
of a continually changing landscape. EOH has the ability to attract the best people and to offer comprehensive complex solutions to
its many and varied customers.
EOH has five large integrated divisions - Information Communication and Technology ('ICT in the Private Sector'); Smart Government
('ICT in the Public Sector'); Industrial Technologies; BPO and Industry Services.
The prospects and opportunities for growth in each of these areas are good. Each of these areas is growing both organically and through
strategic acquisitions.
EOH is a Pan-African company and will continue to grow its business in the rest of Africa. This growth is expected to accelerate
following the joining of forces with TTCS. EOH will continue to increase its in-country presence, form joint ventures and partnerships
and acquire businesses in Africa.
EOH sees its involvement in the public sector as both a responsibility and a business opportunity and through its wide range of
offerings can contribute to improving service delivery. EOH intends to further increase its involvement in the Public Sector in all
tiers of government - National, Provincial and Local.
EOH has developed, owns and is acquiring industry specific niche IP software applications. EOH is already selling its niche software to
users across the globe and intends to intensify its efforts in this regard. EOH is executing on its plan to market and distribute these
software applications internationally.
EOH has exciting prospects and opportunities in South Africa and the rest of the continent
EOH is committed to further advancing its transformation efforts through increased black ownership, encouraging and supporting
enterprise development and increasing its spend on skills development and aims to be majority black owned.
EOH is recognised for the quality of its people and its strong delivery capabilities. By continually driving its philosophy of
recruiting and retaining the best people and its 'Right 1st Time' quality initiatives, EOH expects to maintain and in time, to
increase its operating margins. 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 July 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 as directors. Rob Sporen, Prof Tshilidzi Marwala, Tebogo Skwambane and Lucky Khumalo were elected to the Audit Committee
until the next AGM. There have been no other changes to the board since the AGM.
Dividend declaration
Notice is hereby given that a gross dividend of 150 cents (2014: 120 cents) per ordinary share ('the dividend') has been declared
in respect of the year ended 31 July 2015 and is payable to shareholders recorded in the books at the close of business on
Friday, 30 October 2015. Shareholders are advised that the last day of trade cum the dividend will be Friday, 23 October 2015.
The shares will trade ex the dividend as from Monday, 26 October 2015. Payment will be made on Monday, 2 November 2015.
Share certificates may not be dematerialised or rematerialised during the period Monday, 26 October 2015 to Friday, 30 October 2015,
both days inclusive.
- The dividend should be treated as an income payment and is being paid out of income reserves.
- The local dividend tax rate is 15%.
- The gross local dividend is 150 cents per share for shareholders exempt from paying Dividend Tax.
- The net local dividend amount is 127,5 cents per share for shareholders liable to pay Dividend Tax.
- EOH's tax reference number is 9248321847.
- There are 132 038 520 ordinary shares in issue.
Asher Bohbot
Chief Executive Officer
16 September 2015
Executive directors
Asher Bohbot (Group CEO)
John King (Group FD)
Pumeza Bam
Dion Ramoo
Jane Thomson
Non-executive directors
Sandile Zungu (Chairman)
Lucky Khumalo
Danny Mackay
Tshilidzi Marwala
Thoko Mnyango
Tebogo Skwambane
Rob Sporen (Dutch)
Company secretary
Adri Els
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
Sponsor
Merchantec Capital
Auditors
Mazars (Gauteng) Inc.
www.eoh.co.za
Date: 16/09/2015 07:11:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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