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EOH HOLDINGS LIMITED - Reviewed Condensed Consolidated Results for the Year Ended 31 July 2017

Release Date: 19/09/2017 07:05
Code(s): EOH     PDF:  
Wrap Text
Reviewed Condensed Consolidated Results for the Year Ended 31 July 2017

EOH Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1998/014669/06
JSE share code: EOH
ISIN code: ZAE000071072

EOH
2017
Reviewed condensed consolidated results
for the year ended 31 July 2017

Highlights
REVENUE
UP 21%
R15 490 million

OPERATING PROFIT
UP 29%
R1 792 million

EARNINGS PER SHARE
UP 17%
825 cents

HEADLINE EARNINGS PER SHARE
UP 16%
832 cents

Dividends
UP 16%
215 cents

CASH
UP 29%
R2 507 million

The results were approved on behalf of the Board by Zunaid Mayet, Group Chief Executive Officer, on 15 September 2017

About EOH
EOH is the largest technology services company in Africa and has a wide range of solutions in Industry Consulting, IT
Services, Software, IT Infrastructure, Industrial Technologies and Business Process Outsourcing.

EOH's 12 500 staff members deliver these services to over 5 000 large enterprise customers across all major industries
throughout South Africa, Africa and the Middle East. EOH is present in 134 locations in South Africa, and has a growing
international footprint with over 50 points of presence in the rest of Africa and internationally. EOH is committed to
transformation and is a Level 2 Broad-based Black Economic Empowerment (BBBEE) contributor.

As a proudly South African business, EOH is committed to sustainable transformation and making a positive, meaningful
contribution to society.

The EOH purpose
To provide the technology, knowledge, skills and organisational ability critical to the development and growth of the markets
we serve

To be an ethical and relevant force for good and to play a positive role in society, beyond normal business practice

The EOH philosophies
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 number one in every domain in which we operate 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 through its industry specialisation.

The business segments of the Group have been identified based on the nature of the business activities of the major divisions
of EOH.

IT Services              IT consulting services; systems integration; IT managed services; application support; IT management; software
                         development, implementation and integration services; information services; network solutions; IT security solutions; cloud
                         solutions and digital solutions.

Software                 Software sales and maintenance revenue for vendor owned software and EOH's niche software sales and maintenance
                         revenue.

IT Infrastructure        Sale of IT hardware, network, telecommunication, office automation and storage products.

Industrial Technologies  Sale of services, products, software and technology solutions relating to industrial automation, data centre and connectivity 
                         solutions, energy services and water, transport, safety and security and environmental solutions.

BPO                      Sale of services and technology solutions relating to Human Capital Solutions, claims and payment processes, finance,
                         admin and outsourced marketing services.

Sustainability
Sustainable transformation
Transformation is one of EOH's key business philosophies. EOH's transformation initiatives are wide-ranging and include
employment equity initiatives; skills training and development; gender diversity; enterprise and supplier development;
preferential procurement and black ownership.

EOH understands that youth development is paramount to a prosperous South Africa. To this end, EOH's corporate social
investment (CSI) activities include programmes and initiatives focused on the youth. These programmes include financial
support for the Maths Centre which focuses on teaching mathematics, science, technology and entrepreneurship; health
screening and intervention programmes in partnership with the South African Business Coalition on Health and Aids (SABCOHA);
and the EOH Youth Job Creation Initiative.

EOH is certified as a Large Enterprise Level 2 Contributor with BBBEE Procurement Recognition of 156% as a value adding
vendor. 56% of EOH's staff and 64% of its Board members are black.

The EOH Youth Job Creation Initiative
The EOH Youth Job Creation Initiative has grown from strength to strength since its inception in 2012. Initiated by our
founder, Asher Bohbot, the Initiative is deeply entrenched in our business, and has extended to make a positive impact with
our partners and customers who have adopted the Initiative by getting involved. Since 2012, in partnership with customers
and business partners, over 35 000 learners and graduates have been reached, with 20 500 of them completing learnerships and
internships.

Of the individuals taken through the programme, 83% have been placed in employment within EOH and through our partner networks.
Lives are changed when business gets involved.

702 media campaign
In July 2016, EOH partnered with 702 and the South African National Treasury to encourage the spread of the message that a
young person with a year's long work experience has an 80% higher probability of being formally employed. The intent was to
educate and galvanise 702's broad listener base as well as South African role-players of the economy, specifically CEOs,
into action by getting them involved in the Youth Job Creation Initiative and Challenge. The campaign reached more than 750
000 active listeners and resulted in a database of over 300 large corporates and SMMEs showing an interest in participating
in creating jobs using the EOH Youth Job Creation model. The Initiative continues to grow in leaps and bounds and makes an
impact in the markets we serve.

Sustainable business
EOH believes that people, business and the community is inseparable if a company is to be sustainable. Our approach is
underpinned by our strong appreciation that South Africa's development and growth are the responsibility of both government
and business.

EOH's sustainability strategy is founded on its guiding philosophies. These philosophies demonstrate EOH's commitment to
sustainability by making a meaningful contribution to transformation and BBBEE in South Africa, being a responsible employer,
delivering an excellent service to customers, being ethical and fair in all business relationships and by maintaining a low
environmental footprint.

'Best People' is built on the premise that 'Technology makes it possible - People make it happen'. We value the contribution
made by every employee and empower each employee to develop their own career path.

'Partner for Life' is about trust, loyalty and long-term mutually beneficial relationships. EOH's strategy is to build
confidence through good governance, strong delivery and mutual respect.

'Right 1st Time' is to reduce business risk and ensure successful delivery and customer satisfaction by having the
appropriate skills, processes and structures. We have programmes, methodologies and training courses to ensure success in all
areas.

'Sustainable transformation' is about embracing and valuing diversity which leads to a better understanding of, and
engagement with, the people we work with, the customers we serve and the communities in which we operate.

'Lead and grow' is premised on the basis that we have many stakeholders who require EOH to lead responsibly, ensure that EOH
remains relevant to the markets that it serves, is profitable in its endeavours and plays a positive role in society.

EOH responds to the needs and requirements of the economy and all its customers. We collaborate with both the public and
private sector and use our technology, skills and know-how to make South Africa a better place. Our service offerings have
helped, and continue to help, public sector organisations deliver basic social services more efficiently and effectively.

Corporate governance is integral to EOH's business philosophy of ethical leadership. There is no doubt that good corporate
governance is a key element in ensuring sustainability, constant growth, ongoing economic efficiency and enhancing investor
confidence.

COMMENTARY
Group Performance
EOH has delivered a good set of results for the year under review. The Group's resilience in the face of a weak economy is
attributable to its wide solutions offering, collaborative business model, strong leadership, skilled people and diverse
customer base. EOH has continued to focus on new solutions and service offerings, strategic acquisitions and increasing the
solutions introduced to existing customers. The Group's solutions are particularly relevant to South Africa and emerging
markets. The landscape remains competitive but EOH is undoubtedly gaining market share.

EOH's focus on providing technology, knowledge, skills and organisational ability critical to its customers and markets it
serves, has ensured that EOH has enjoyed profitable growth over many years and will continue to do so.

Revenue has increased in all areas of the business as a result of strong organic growth, complemented by strategic
acquisitions. Organic growth accounted for 63% of the increase in consolidated revenue, contributing 68% of the profit before
tax.

During the year under review, EOH continued its strategy to consolidate and complement its existing offerings with strategic
acquisitions in South Africa, augmented by investments in companies in the rest of Africa, the Middle East and other emerging
markets. The businesses that join EOH are successfully integrated into the EOH management structure, operating model and
ecosystem. This enables EOH to quickly and seamlessly complement and enhance its solution offerings to customers. During the
year, a number of businesses joined the EOH family, including the Cornastone group of companies, PIA Solar SA Proprietary
Limited and the Syntell group of companies.

Financial results
EOH's revenue for the period grew by 21% to R15 490 million (2016: R12 762 million) with contributions from all businesses
across the board. EOH's share of revenue relating to equity accounted investments, not included in consolidated revenue, is
R545 million (2016: R346 million).

Revenue from services accounts for more than 77% of total revenue, a significant portion of which is annuity revenue, based
on multiple year contracts. EOH is the largest technology company in Africa but still derives more than 90% of its revenue
from South Africa.

Operating profit has increased by 29% to R1 792  million (2016: R1 393 million). EOH has continued its expansion into
Africa and the Middle East. The strategy is generally to acquire a minority or joint interest in a business. These interests
are equity accounted. The sale of software to the customers in these regions is now procured and sold from South Africa and
the revenue and profits associated therewith is reflected in the consolidated results. As a consequence, the profit
contributed by equity accounted investments is lower - R39 million (2016: R73 million).

Operating margins have increased from 10,8% to 11,5% as a result of increased software sales, efficiencies and on-going cost
containment. The effective tax rate has decreased from 29,7% to 28,3% as a result of the utilisation of tax deductions
associated with our learnership/intern programmes.

EBITDA increased to R2 278 million (2016: R1 830 million) and EBITDA margins increased from 14% to 15% reflecting the
results of on-going efficiency and Right 1st time initiatives. EBIT margins have also increased from 17% to 18%.

Headline earnings per share (HEPS) increased by 16% and Earnings per share (EPS) increased by 17%, with cash reserves
increasing by 29% to R2 507 million.

Cash generated by operations before changes in working capital increased to R2 298 million (2016: R1 810 million). Working
capital has increased primarily as a result of funding the growth of the business and increased work-in-progress relating to
ongoing long-term projects. Cash generated by operations, after changes in working capital, increased to R1 314 million
(2016: R917 million). Cash generated by operations is used primarily to fund operations and organic growth. Cash utilised in
investing activities is R489 million (2016: R462 million).

Non-cash related expenses have increased by R177 million to R663 million (2016: R486 million). These include the
amortisation of identifiable intangible assets when businesses are acquired of R179 million (2016: R154 million); IFRS 2 -
share based payment expenses of R95 million (2016: R56 million); Depreciation of Property Plant and Equipment (PPE) of R171
million (2016: R146 million) and the amortisation of computer software of R97 million (2016: R64 million).

Acquisitions are settled through the issue of shares and the payment of cash on an earn-out basis, typically over a two year
period. Medium term funding (three to five years) is raised for such purpose.

Net finance costs increased to R186 million (2016: R121 million) as a result of interest-bearing debt to fund investments
and to pay vendors for acquisition on the meeting of their profit warrants.

Operational reviews
Below is an overview of the revenue and the profit contributions of the reporting segments of EOH. The combined revenue
derived from services (IT services, Industrial Technology services and BPO services) is R11 862 million (2016: R9 815
million) representing 77% (2016: 77%) of total revenue. Revenue from software is R2 338 million (2016: R2 023 million)
representing 15% (2016: 16%) of total revenue and revenue from IT Infrastructure is R1 290 million representing 8% (2016:
7%) of total revenue.

All areas of business benefit from EOH's collaborative operating model and its shared services and they share in these
overhead costs. The business focuses on three primary revenue streams, those from services, software sales and infrastructure
sales. A summary of the revenue and profit before tax and equity-accounted profits from these three revenue streams is
depicted below.

Revenue
Figures in Rand thousand    Reviewed for       %     Audited for
                          the year ended  change  the year ended
                            31 July 2017            31 July 2016
IT Services                    5 215 214      21       4 309 821
Software                       2 337 776      16       2 023 100
IT Infrastructure              1 289 500      40         923 620
Industrial Technologies        3 703 625      30       2 845 302
BPO                            2 943 409      11       2 659 967
Total                         15 489 524      21      12 761 810

Profit before taxation and equity-accounted profits

Figures in Rand thousand    Reviewed for             Audited for       
                          the year ended       %  the year ended       %
                            31 July 2017  margin    31 July 2016  margin
IT Services                      552 687    10,6         379 680     8,8
Software                         434 790    18,6         341 433    16,9
IT Infrastructure                 50 942     4,0          36 692     4,0
Industrial Technologies          317 515     8,6         305 869    10,7
BPO                              240 006     8,2         187 737     7,1
Total                          1 595 940    10,3       1 251 411     9,8

IT services
The revenue from IT services has grown from R4 310 million to R5 215 million representing a 21% increase in activity.
Profit before tax has increased by R172 million to R552 million (2016: R380 million). Margins have also improved from 8,8% to
10,6%.

The ICT sector remains strong and fairly resilient despite prevailing market conditions. The ICT on IT services spend in
South Africa is growing at 5,6% per annum (internationally at 4,2% per annum) as companies need to spend on IT services to
remain competitive, become more efficient and effective and to improve service delivery. Customers are spending on
maintaining their legacy systems, integrating with best of breed applications, whilst embracing the digital world and cloud
computing. The growth drivers in this division have been and remain transformational outsourcing, ERP upgrades and re-
implementation, digital transformation, Cloud, application development, Internet of Things (IoT), big data and analytics.

Software
The revenue from software has grown from R2 023 million to R2 338 million representing a 16% increase in activity. Profit
before tax has increased by 27% to R435 million. Margins have also improved from 16,9% to 18,6%.

Software relates to software sales and maintenance revenue for vendor owned software and EOH's niche software. EOH's niche
software revenue accounts for 31% of total software revenue and amounts to R715 million. The operating margins for such
software are much higher than 'purchased' vendor software. Revenue for software maintenance accounts for 50% (2016: 48%) of
total software revenue and will continue to decline as an overall percentage of overall software revenue as EOH increases
the sale of its own niche software.

IT Infrastructure
The revenue from IT Infrastructure has grown from R924 million to R1 290 million representing a 40% increase in activity.
Profit before tax has increased by 39% to R51 million. Margins have remained steady at 4,0% (2016: 4,0%).

IT infrastructure sales have increased significantly as a result of incorporating a full year's results of Aptronics
Proprietary Limited for the first time and several large one-off sales. Margins remain tight in this highly commoditised
space. The growth drivers remain large scale transformational opportunities, digital and cloud platforms, upgrades of
networks of service providers and other customers and 'Big data' and BI (Business Intelligence) platforms.

Industrial Technologies
The revenue from Industrial Technology services has grown to R3 704 million (2016: R2 845 million) representing a 30%
increase in activity. Profit before tax has increased by 4% to R318 million.

Growth in Industrial Technology is up primarily as a result of significant water management and efficiency technology
engagements. There have been long delays in the awarding of energy related contracts primarily due to the economic
environment which has impacted on the margins in the energy cluster. The prospects are promising with several contracts
having recently been awarded.

Growth drivers include smart city initiatives, smart water technologies and solutions, energy management and efficiency
programmes, telecommunications technologies and broadband roll outs, public safety and security solutions and intelligent
transport technology solutions. The relevancy of Industrial technology solutions in Africa, the Middle East and other
emerging markets creates significant growth opportunities.

Business Process Outsourcing (BPO)
The revenue from BPO has grown from R2 660 million to R2 943 million representing a 11% increase in activity. Profit before
tax has increased by 28% to R240 million (2016: R188 million). Margins have also improved from 7.1% to 8,2%.

The majority of BPO engagements are multiple year contracts and as such a significant portion of revenue is annuity based.
The growth in revenue is predictable with the profit before tax and margins increasing significantly as a result of process
and technology efficiencies. Customers continue to outsource activities for cost and efficiency purposes. The complexity of
solutions also contributes to customers outsourcing processes to highly skilled technology services providers. Off-shoring
opportunities continue to fuel growth in this area.

Prospects
The technology sector remains resilient in a very tough economic environment and EOH sees continued growth for the
foreseeable future in South Africa, the rest of Africa and the Middle East.

The Group will continue to develop new services, products and solutions; meet our clients' ever-increasing technology needs;
partner with new vendors both locally and abroad; build stronger partnerships with our existing customers and provide more of
their technology needs through our strategic account partnership model.

The Group will also be particularly deliberate in finding suitable businesses to join EOH to complement and supplement our
existing solution clusters both in South Africa and the rest of Africa, the Middle East and identified emerging markets.

We will continue to develop, distribute and implement EOH's niche software and own IP solutions across our existing footprint
and into new territories.

EOH intends to continue its involvement in all tiers of government and state owned entities to improve service delivery. EOH
sees its involvement in the public sector as both a business opportunity and as a responsibility.

EOH is committed to continue its transformation efforts through its Youth Job Creation Initiative; employment of more black
people in managerial positions; increased black ownership; enterprise development; supplier and preferential procurement and
increasing its spend on skills development. EOH has a number of initiatives in this regard and is making good progress on all
fronts.

By continually driving our philosophy of recruiting and retaining the best people, driving through our 'Right 1st Time'
quality initiatives, EOH expects to continue to grow for many years to come. EOH has the people, the scale, the offerings,
the financial resources, the agility and the know-how to continue to make a significant contribution to all its stakeholders.

Condensed consolidated statement of financial position
as at 31 July 2017

                                                                         Reviewed at    Audited at
Figures in Rand thousand                                       Notes    31 July 2017  31 July 2016
Assets
Non-current assets
Property, plant and equipment                                      6         677 719       492 221
Goodwill and intangible assets                                             6 074 699     5 144 242
Goodwill                                                           7       4 625 403     3 894 720
Intangible assets                                                  8       1 449 296     1 249 522
Equity-accounted investments                                       9         847 917       626 085
Other financial assets                                                       214 156       162 038
Deferred taxation                                                            196 764       162 110
Finance lease receivables                                                    169 611       203 773
                                                                           8 180 866     6 790 469
Current assets
Inventory                                                         10         599 764       468 392
Other financial assets                                                       141 112       207 212
Current taxation receivable                                                   84 383        21 694
Finance lease receivables                                                     74 610        87 122
Trade and other receivables                                       11       5 132 697     3 664 333
Cash and cash equivalents                                                  2 506 551     1 949 399
                                                                           8 539 117     6 398 152
Total assets                                                              16 719 983    13 188 621
Equity and liabilities
Equity
Equity attributable to the owners of EOH Holdings Limited                  8 505 188     6 576 167
Non-controlling interest                                                      56 416         9 678
                                                                           8 561 604     6 585 845
Liabilities
Non-current liabilities
Other financial liabilities                                       12       3 017 416     2 451 968
Finance lease payables                                                        65 594        26 366
Deferred taxation                                                            406 132       340 864
                                                                           3 489 142     2 819 198
Current liabilities
Other financial liabilities                                       12       1 523 676     1 163 713
Current taxation payable                                                     148 182       119 210
Finance lease payables                                                        41 187        25 406
Trade and other payables                                          13       2 466 647     1 876 472
Deferred income                                                              489 545       598 777
                                                                           4 669 237     3 783 578
Total liabilities                                                          8 158 379     6 602 776
Total equity and liabilities                                              16 719 983    13 188 621

Condensed consolidated statement of  profit or loss and other comprehensive income
for the year ended 31 July 2017

                                                                        Reviewed for             %     Audited for
                                                                      the year ended        change  the year ended
Figures in Rand thousand                                        Notes   31 July 2017                  31 July 2016
Revenue                                                                   15 489 524            21      12 761 810
Cost of sales                                                            (10 409 487)                   (8 656 183)
Gross profit                                                               5 080 037                     4 105 627
Operating expenses*                                                       (3 298 291)                   (2 733 206)
Operating profit before interest and share of
equity-accounted profits                                          14       1 781 746                     1 372 421
Investment income                                                             72 743                        49 379
Share of equity-accounted profits                                             39 241                        72 510
Finance costs*                                                              (258 549)                     (170 389)
Profit before taxation                                                     1 635 181            24       1 323 921
Taxation                                                                    (462 098)                     (393 554)
Profit for the year                                                        1 173 083            26         930 367

Profit attributable to:
Owners of EOH Holdings Limited                                             1 164 234                       927 354
Non-controlling interest                                                       8 849                         3 013
                                                                           1 173 083                       930 367

Other comprehensive income:
Item that may be reclassified subsequently to  profit or loss
Exchange differences on translating foreign operations                       (44 627)                       35 955
Total comprehensive income for the year                                    1 128 456                       966 322

Total comprehensive income attributable to:
Owners of EOH Holdings Limited                                             1 121 277                       963 877
Non-controlling interest                                                       7 179                         2 445
                                                                           1 128 456                       966 322

Earnings per share
Earnings per share (cents)                                        15             825            17             704
Diluted earnings per share (cents)                                15             801            20             668

* Comparative amounts have been reclassified for improved disclosure. Refer to note 14 for further detail.

CONDENSED CONSOLIDATED  STATEMENT OF CHANGES IN EQUITY
for the year ended 31 July 2017

                                                                            Shares to                              Non-      
                                                               Stated       be issued           Other   Retained  controlling      Total
Figures in Rand thousand                                      capital      to vendors        reserves   earnings     interest     equity

Balance at 1 August 2015                                    1 533 163         663 461         490 305  1 813 023        8 672  4 508 624
Profit for the year                                                                                      927 354        3 013    930 367
Other comprehensive income  for the year                                                       36 523                    (568)    35 955
Issue of shares                                               894 015        (554 537)                                           339 478
Non-controlling interest acquired                                                                         (1 062)      (1 439)    (2 501)
Movement in treasury shares                                  (163 871)                         20 290                           (143 581)
Remaining shares to be issued to vendors                                    1 055 946                                          1 055 946
Share-based payments                                                                           55 897                             55 897
Dividends                                                                                               (194 340)               (194 340)
Balance at 1 August 2016                                    2 263 307       1 164 870         603 015  2 544 975        9 678  6 585 845
Profit for the year                                                                                    1 164 234        8 849  1 173 083
Other comprehensive income  for the year                                                      (42 956)                 (1 671)   (44 627)
Issue of shares                                             1 194 809        (562 098)                                           632 711
Non-controlling interest acquired                                                                        (12 581)      39 560     26 979
Movement in treasury shares                                  (124 438)                         10 887                           (113 551)
Remaining shares to be issued to vendors                                      459 242                                            459 242
Transfer within equity                                                        (48 205)                    48 205                       -
Share-based payments                                                                           94 991                             94 991
Dividends                                                                                               (253 069)               (253 069)
Balance at 31 July 2017                                     3 333 678       1 013 809         665 937  3 491 764       56 416  8 561 604

CONDENSED CONSOLIDATED STATEMENT  OF CASH FLOWS
for the year ended 31 July 2017

                                                                         Reviewed for     Audited for
                                                                       the year ended  the year ended
Figures in Rand thousand                                         Notes   31 July 2017    31 July 2016
Cash flows from operating activities
Cash generated before working capital changes*                     18       2 298 320       1 809 743
(Increase) in inventories                                                     (97 177)       (108 592)
(Increase) in trade and other receivables                                    (527 870)       (550 449)
(Increase) in work in progress receivables                                   (508 336)       (478 112)
Increase/(decrease) in trade and other payables                               314 377         (89 662)
(Decrease)/increase in deferred income                                       (165 250)        334 269
Cash generated from operations                                              1 314 064         917 197
Investment income                                                              72 681          49 269
Finance costs*                                                               (201 715)       (166 698)
Taxation paid                                                                (524 111)       (401 465)
Net cash inflow from operating activities                                     660 919         398 303
Cash flows from investing activities
Additions to property, plant and equipment                                   (231 121)       (194 068)
Proceeds on the sale of property, plant and equipment                          44 306          64 358
Intangible assets acquired                                                   (284 419)       (183 656)
Net cash inflow/(outflow) from businesses acquired                 19          46 037         (71 222)
Cash outflow on investment in equity-accounted investments                    (91 377)              -
Cash inflow/(outflow) relating to financial assets                             27 910         (77 604)
Net cash (outflow) from investing activities                                 (488 664)       (462 192)
Cash flows from financing activities
Proceeds from the issue of shares                                             613 213         300 037
Proceeds from other financial liabilities                                   1 293 455       1 471 509
Repayment of other financial liabilities                                   (1 030 810)     (1 038 462)
Purchase of treasury shares                                                  (171 941)       (145 572)
Finance lease payments                                                        (50 401)        (31 902)
Dividends paid                                                               (253 019)       (194 300)
Net cash inflow from financing activities                                     400 497         361 310
Net increase in cash and cash equivalents                                     572 752         297 421
Foreign currency translation                                                  (15 600)        (11 840)
Cash and cash equivalents at the beginning of the year                      1 949 399       1 663 818
Cash and cash equivalents at the end of the year                            2 506 551       1 949 399

* Comparative amounts have been reclassified for improved disclosure. Refer to note 14.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 July 2017

1. Reporting entity
EOH Holdings Limited (the company) is a holding company domiciled in South Africa, that is listed on the JSE Limited under
the category Technology: Software and Computer Services. The condensed consolidated financial statements of the company
comprise the company and its subsidiaries (together referred to as 'the Group' or 'EOH') and the Group's interests in
associates and joint ventures.

2. Statement of compliance
These condensed consolidated financial statements have been prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by Financial
Reporting Standards Council, and contains at a minimum the information required by IAS 34, the JSE Listings Requirements, and
the Companies Act of South Africa.

3. Basis of preparation
The accounting policies applied in the presentation of the condensed consolidated financial statements are consistent with
those applied for the year ended 31 July 2016, except for the new standards that became effective for the Group's financial
period beginning 1 August 2016.

The condensed consolidated financial statements have been prepared on the historical cost basis, under the supervision of 
John King CA(SA), Group Financial Director.

4. Changes in accounting policies
The Group has adopted IAS 1 Presentation of Financial Statements, with a date of initial application of 1 August 2016. 
The adoption of this new standard did not have a significant impact on the Group's condensed consolidated financial statements.

5. Review opinion
The condensed consolidated financial results for the year ended 31 July 2017 have been reviewed by the Group auditors, Mazars
(Gauteng) Inc., 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 as per inspection of the report available at
the registered office of EOH.

Figures in Rand thousand                                                   Reviewed at       Audited at
                                                                          31 July 2017     31 July 2016
6. Property, plant and equipment
Opening balance                                                                492 221          412 159
Additions                                                                      271 740          221 948
Acquired through business combinations                                         131 987           64 693
Foreign currency translation                                                      (227)             684
Transfers                                                                            -            2 960
Disposals                                                                      (47 313)         (64 649)
Depreciation                                                                  (170 689)        (145 574)
Closing balance                                                                677 719          492 221

7. Goodwill
Opening balance                                                              3 894 720        2 398 604
Acquired through business combinations                                         743 561        1 488 899
Foreign currency translation                                                   (12 878)          25 538
Impairment                                                                           -          (18 321)
Closing balance                                                              4 625 403        3 894 720

8. Intangible assets
Opening balance                                                              1 249 522          590 979
Additions                                                                      284 419          183 656
Acquired through business combinations                                         186 236          675 552
Foreign currency translation                                                     5 727           21 085
Transfers                                                                            -           (2 960)
Amortisation                                                                  (276 608)        (218 790)
Closing balance                                                              1 449 296        1 249 522

Figures in Rand thousand                                                   Reviewed at       Audited at
                                                                          31 July 2017     31 July 2016
9. Equity-accounted investments
Opening balance                                                                626 085          351 852
Additions                                                                      219 678          159 801
Foreign currency translation                                                   (37 087)         (43 067)
Disposals                                                                            -           (1 145)
Share of equity-accounted profits                                               39 241           72 510
Closing balance                                                                847 917          626 085

10. Inventory
Finished goods                                                                 568 024          389 584
Consumables                                                                     23 308           29 028
Work in progress                                                                28 396           61 517
                                                                               619 728          480 129
Inventory write-downs                                                          (19 964)         (11 737)
                                                                               599 764          468 392

Cost of goods sold during the year amounted to:                              2 478 318        2 386 848

11. Trade and other receivables
Financial instruments                                                        4 867 742        3 421 103
Trade debtors                                                                3 416 075        2 536 380
Work in progress                                                             1 368 571          860 234
Other receivables                                                               83 096           24 489
Non-financial instruments                                                      264 955          243 230
Prepayments                                                                    218 411          198 405
VAT receivable                                                                  24 724           27 007
Other receivables                                                               21 820           17 818

                                                                             5 132 697        3 664 333

Figures in Rand thousand                                                   Reviewed at       Audited at
                                                                          31 July 2017     31 July 2016
12. Other financial liabilities
Interest bearing liabilities                                                 3 298 497        2 290 367
Interest bearing bank loans secured by trade receivables                     2 681 237          675 354
Unsecured interest bearing bank loans                                          544 578        1 600 000
Interest bearing bank loans secured by property                                 72 682           15 013
Non-interest bearing liabilities                                             1 242 595        1 325 314
Vendors for acquisition                                                      1 167 453        1 284 763
Other non-interest bearing liabilities                                          75 142           40 551

                                                                             4 541 092        3 615 681
Non-current financial liabilities                                            3 017 416        2 451 968
Current financial liabilities                                                1 523 676        1 163 713
                                                                             4 541 092        3 615 681
Financial liabilities
Measured at amortised cost                                                   3 373 639        2 330 918
Financial liabilities carried at fair value through profit or loss           1 167 453        1 284 763
                                                                             4 541 092        3 615 681

Figures in Rand thousand                                                   Reviewed at       Audited at
                                                                          31 July 2017     31 July 2016
13. Trade and other payables
Financial instruments                                                        1 758 664        1 312 538
Trade payables                                                               1 113 313          764 903
Other accrued expenses                                                         643 839          529 220
Other payables                                                                   1 512           18 415
Non-financial instruments                                                      707 983          563 934
VAT                                                                            119 645          108 097
Payroll accruals                                                               588 338          455 837

                                                                             2 466 647        1 876 472

14. Operating profit before interest
Figures in Rand thousand                                              Reviewed for the  Audited for the
                                                                            year ended       year ended
                                                                          31 July 2017     31 July 2016
Operating profit before interest is stated after taking
into account, among other items, the following:
Amortisation                                                                   276 608          218 790
Amortisation included in cost of sales                                          20 257                -
Amortisation not included in cost of sales                                     256 351          218 790
Depreciation                                                                   170 689          145 574
Depreciation included in cost of sales                                          69 431           39 035
Depreciation not included in cost of sales                                     101 258          106 539
Employee costs                                                               5 314 775        4 198 335
Employee costs included in cost of sales                                     3 338 117        2 710 850
Employee costs not included in cost of sales                                 1 881 667        1 431 588
Share-based payments expense                                                    94 991           55 897
Impairments of assets                                                            9 784           20 514
Foreign exchange loss/(profit)                                                  20 720          (30 677)
Fair value (gain)/loss on remeasurement of contingent consideration*           (35 764)          35 619
Fair value (gain) through profit or loss                                       (20 089)          (7 499)
Loss on disposal of property, plant and equipment                                3 007              854
Operating lease charges                                                        231 540          193 236
Operating lease charges on immovable property                                  211 575          176 185
Operating lease charges on movable property                                     19 965           17 051

* Comparative amounts have been reclassified following recommendations emanating from the JSE's proactive monitoring
process. The impact resulted in no change to profit before taxation nor cash flows from operating activities. An amount
of R44 078 was reclassified from 'finance costs' to 'operating expenses' under 'fair value loss/(gain) on remeasurement
of contingent consideration'.

                                                                      Reviewed for the  Audited for the
                                                                            year ended       year ended
                                                                          31 July 2017     31 July 2016
15. Earnings per share
Earnings per share (cents)                                                         825              704
Diluted earnings per share (cents)                                                 801              668

16. Headline earnings per share
Headline earnings per share (cents)                                                832              719
Diluted headline earnings per share (cents)                                        808              682
Profit attributable to owners of EOH Holdings Limited                        1 164 234          927 354
Adjusted for:
Loss on disposal of property, plant and equipment                                3 007              854
Loss on deregistration of foreign operation                                          -            1 246
Impairment of assets                                                             9 784           18 321
Total tax effects of adjustments                                                (3 581)            (540)
Headline earnings                                                            1 173 444          947 235
Ordinary shares (000)
Total number of shares in issue                                                150 095          140 752
Weighted average number of shares in issue                                     141 072          131 754
Weighted average diluted number of shares in issue                             145 300          138 850


Figures in Rand thousand                                                   Reviewed at       Audited at
                                                                          31 July 2017     31 July 2016
17. Stated capital
Reconciliation of the number of shares in issue (000's):
Opening balance                                                                140 752          132 039
Shares issued for cash                                                           3 757            2 492
Shares issued for businesses acquired                                            4 160            4 939
Specific shares issued to the Group Share Incentive schemes                      1 426            1 282
Shares in issue at year end                                                    150 095          140 752
Less:
Treasury shares held in the Group Share Incentive schemes                       (2 066)          (2 568)
Treasury shares held by a wholly owned subsidiary of
the Company that will not be cancelled                                          (4 494)          (3 352)
                                                                               143 535          134 832

Figures in Rand thousand                                                   Reviewed at       Audited at
                                                                          31 July 2017     31 July 2016
Stated capital
Opening balance                                                              2 263 307        1 533 163
Shares issued for cash1                                                        580 904          300 037
Shares issued for businesses acquired2                                         581 598          571 429
Specific shares issued to the Group Share Incentive schemes3                    32 307           22 548
Treasury shares4                                                              (124 438)        (163 870)
                                                                             3 333 678        2 263 307
1 At fair value
2 In terms of purchase and sale agreements
3 In terms of the Group share incentive schemes
4 Average price paid for treasury shares amounts to R110,63 per share

Figures in Rand thousand                                              Reviewed for the  Audited for the
                                                                            year ended       year ended
                                                                          31 July 2017     31 July 2016
18. Cash generated from operations
Profit before taxation                                                       1 635 181        1 323 921
Adjusted:
Amortisation of intangible assets                                              276 608          218 790
Depreciation of property, plant and equipment                                  170 689          145 574
Foreign exchange loss/(profit)                                                  20 720          (30 677)
Impairment of assets                                                             9 784           20 514
Loss on disposal of property, plant and equipment                                3 007              854
Fair value (gain)/loss on remeasurement of contingent consideration*           (35 764)          35 619
Fair value (gain) through profit or loss                                       (20 089)          (7 499)
Share-based payment expense                                                     94 991           55 897
Investment income                                                              (72 743)         (49 379)
Share of profits of equity-accounted investments                               (39 241)         (72 510)
Finance costs*                                                                 258 549          170 389
Other non-cash items                                                            (3 372)          (1 750)
Cash generated before changes in working capital                             2 298 320        1 809 743

* Comparative amounts have been reclassified for improved disclosure. Refer to note 14.

                                                                                 Total            Total
Figures in Rand thousand                                                          2017             2016
19. Acquisition of businesses
Fair value of assets and liabilities  acquired
Property, plant and equipment                                                  131 987           64 693
Intangible assets                                                              186 236          675 552
Other financial assets                                                          12 764          204 323
Finance lease receivables                                                          614                -
Inventory                                                                       34 195          164 113
Trade and other receivables1                                                   381 905          349 323
Cash and cash equivalents                                                      226 984          253 825
Other financial liabilities                                                    (67 506)        (245 915)
Finance lease payables                                                         (57 468)          (9 315)
Net deferred taxation liabilities                                              (33 014)        (185 305)
Net current taxation payables                                                  (22 633)         (45 789)
Trade and other payables                                                      (268 119)        (286 584)
Deferred income                                                                (56 018)        (258 420)
Net assets acquired                                                            469 927          680 501
Non-controlling interests measured at their share of the
fair value of  net assets                                                      (51 885)               -
Amount capitalised                                                             418 042          680 501
Goodwill                                                                       743 561        1 488 899
Purchase price                                                               1 161 603        2 169 400
Cash consideration paid                                                       (180 947)        (325 047)
Less: Cash and cash equivalents acquired                                       226 984          253 825
Net cash inflow/(outflow) on acquisition                                        46 037          (71 222)
Consideration payable
Cash paid                                                                     (180 947)        (325 047)
Shares issued2                                                                 (95 501)        (272 830)
Cash to be paid                                                               (559 934)        (761 356)
Shares to be issued                                                           (325 221)        (810 167)
Total consideration                                                         (1 161 603)      (2 169 400)
Effective date of acquisition
Contribution to trading results for the year
Revenue                                                                      1 018 100        1 241 404
Profit before taxation3                                                         99 226          152 948

1 The gross contractual value of trade and other receivables for all acquisitions was R394 million
2 Shares are issued at fair value at the effective date
3 Shown after the effect of amortisation on identifiable assets of R21.6 million (2016: R85 million)

                                                            Total      Total
Figures in Rand thousand                                     2017       2016
Contribution had the effective date been from 1 August
Revenue                                                 1 665 867  2 261 441
Profit before taxation                                    167 295    266 361

Acquisition related costs of R25 million (2016: R22 million) are included in operating expenses in the statement of profit or
loss and other comprehensive income.

The contribution to the trading results of businesses acquired, has been accounted from the effective date of the business
combination. In determining the purchase consideration paid, the profit history of the relevant business and its growth
prospects in the EOH group are considered. The fair value of shares issued as part of the purchase price was determined based
on the share price at the effective date. The accounting of these subsidiaries and businesses is based on best estimates and
provisional fair values. 

The Group has not yet completed its assessment of the fair value of all identifiable assets, liabilities and/or contingent
liabilities. The fair values will be accurately determined within twelve months from the date of acquisition. Goodwill
relates mainly to future profits of these businesses and the anticipated synergies to be derived as a result of joining EOH.
The total purchase consideration for the current year acquisitions is R1 162 million, consisting of R741 million in cash
and 2 657 731 EOH shares. With the exception of a 70% investment in the ASSET Technology Group and a 65% investment in the
VILT Group, in all other instances 100% of the shares were acquired. Additional funding was obtained to finance
acquisitions. 

For details of acquisitions made in the prior year, refer to the 2016 Annual Integrated Report. 

Figures in Rand thousand                                          Reviewed at    Audited at
                                                                 31 July 2017  31 July 2016
20. Financial instruments
The following table summarises the carrying amount of financial
instruments as well as the classification of each class of
financial assets and liabilities:
Financial assets
Loans and receivables:
Other financial assets                                                236 847       203 721
Finance lease receivables                                             244 221       290 895
Trade and other receivables                                         4 867 742     3 421 103
Cash and cash equivalents                                           2 506 551     1 949 399
Fair value through profit or loss:
Other financial assets - level 3                                       39 462             -
Other financial assets - level 1                                       78 959       165 529
                                                                    7 973 782     6 030 647
Financial liabilities
Measured at amortised cost:
Other financial liabilities                                         3 373 638     2 330 918
Finance lease payables                                                106 781        51 772
Trade and other payables                                            1 758 664     1 312 538
Fair value through profit or loss:
Vendors for acquisition - level 3                                   1 167 453     1 284 763
                                                                    6 406 536     4 979 991

The Group does not have any financial instruments that are subject to offsetting. The carrying amounts of all financial
assets and liabilities approximate their fair values.

Fair value through profit or loss:
Financial assets measured at fair value through profit or loss, in terms of the hierarchy, are classified as level 1 based on
quoted prices (adjusted) in active markets for identical assets that the Group can access at the measurement date and as
level 3 where the valuation technique used is based on unobservable inputs for the asset.

Financial liabilities measured at fair value through profit or loss, in terms of the hierarchy, are classified as level 3
as the valuation techniques used are based on unobservable inputs for the liability.

Other financial assets
Other financial assets (level 1) relate to investments acquired as part of a business combination in the prior year. The fair
value of the investment is determined by reference to the performance of indices in the active market.

Other financial assets (level 3) relate to non-controlling interests in unlisted businesses. The valuation is based on a
discounted cash flow model which has been adjusted for risk inherent in the investees' nature of operations.At 31 July 2017 
the carrying value of the level 3 financial asset, based on the directors' evaluation, is R39,5 million.

Other financial assets
                                       Reviewed at   Reviewed at    Audited at
Figures in Rand thousand              31 July 2017  31 July 2017  31 July 2016
                                           Level 3       Level 1       Level 1
Reconciliation of movement:
Balance at the beginning of the year             -       165 529             -
Raised through business combinations             -             -       152 030
Transfer from loans and receivables         25 983             -             -
Addition                                         -             -         6 000
Disposal                                         -       (94 659)            -
Net changes in fair value                   13 479         8 089         7 499
Balance at the end of the year              39 462        78 959       165 529

Vendors for acquisition
The vendors for acquisition balance relates to the contingent consideration where business combinations are subject
to profit warranties. The profit warranties allow for a defined adjusted value to the consideration payable in the event
that the warranted profit after tax is not achieved, or in the event that it is exceeded, an agreed sharing in the surplus.
The fair value of the contingent arrangement is initially estimated by applying the income approach assuming that the
relevant profit warrant will be achieved. Subsequent measurement uses the income approach to calculate the present value of
the expected settlement payment using the latest approved budgeted results and reasonable growth rates for the remainder
of the relevant warranty periods taking into account any specific circumstances. Profit warrant periods normally extend over
a 24-month period.

Upwardly revised performance expectations would result in an increase in the related liability limited to the terms of the
applicable purchase agreement. Unobservable inputs include budgeted results based on margins and revenue growth rates
historically achieved by the various segments. Changing such inputs to reflect reasonably possible alternative assumptions
does not significantly change the fair value of the vendors for acquisition liability. 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.

Vendors for acquisition
Figures in Rand thousand                                  Reviewed at       Audited at
                                                         31 July 2017     31 July 2016

Reconciliation of movement:
Balance at the beginning of the period                      1 284 763          771 009
Raised through business combinations                          559 934          805 676
Raised as investments in joint ventures and associates        152 203          143 239
Acquisitions of remaining non-controlling interests            14 279                -
Foreign exchange effects                                      (10 812)          27 640
Net changes in fair value                                     (35 764)          35 619
Paid to vendors                                              (797 150)        (498 420)
Balance at the end of the year                              1 167 453        1 284 763

21. Events after the reporting date
There have been no significant events between the reporting date and the date of authorisation other than the dividend
declaration. 


Dividend
Notice is hereby given that a gross dividend of 215 cents (2016: 185 cents) per ordinary share (the dividend) has been
declared in respect of the year ended 31 July 2017 and is payable to shareholders recorded in the books at the close of
business on Friday, 3 November 2017. Shareholders are advised that the last day to trade cum-dividend will be Tuesday, 31
October 2017.

The shares will trade ex-dividend as from Wednesday, 1 November 2017. Payment will be made on Monday, 6 November 2017. Share
certificates may not be dematerialised or rematerialised during the period Wednesday, 1 November 2017 to Friday, 3 November
2017, 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 20%.

The gross local dividend is 215 cents per share for shareholders exempt from paying Dividend Tax.
The net local dividend amount is 172 cents per share for shareholders liable to pay Dividend Tax.
EOH's tax reference number is 9248321847.

There are 150 095 467 ordinary shares in issue. On Friday, 15 September 2017 the directors declared a gross ordinary dividend
of 215 cents per ordinary share, payable on Monday, 6 November 2017 to ordinary shareholders recorded in the books of the
Company at the close of business on Friday, 3 November 2017.

22. Directorate
There were a number of changes to the company directorate during the year:

Grathel Motau was appointed as a non-executive director and member of the audit committee with effect from 1 March 2017; and

Pumeza Bam resigned as an executive director and was appointed as a non-executive director with effect from 1 March 2017.
On 12 May 2017 the following changes were effected:
- Zunaid Mayet was appointed as the Group Chief Executive Officer;
- Rob Godlonton, Brian Gubbins, Ebrahim Laher, Jehan Mackay and Johan Van Jaarsveld were appointed as executive directors;
- Dion Ramoo and Jane Retief (nee Thomson) resigned as executive directors;
- Danny Mackay resigned as a non-executive director; and
- Moretlo Molefi was appointed as a non-executive director.

Asher Bohbot resigned as an executive director of the company, effective 30 June 2017.

Audrey Mothupi resigned as a non-executive director of the company, effective 31 August 2017, due to conflict of business
interests.

CORPORATE INFORMATION
Directorate
Non-executive
Sandile Zungu (Chairman)
Rob Sporen* (Lead Non-executive Director)
Pumeza Bam (Appointed 1 March 2017)
Lucky Khumalo
Tshilidzi Marwala
Moretlo Molefi (Appointed 12 May 2017)
Grathel Motau (Appointed 1 March 2017)
* (Dutch)

Danny Mackay (Resigned 12 May 2017)
Audrey Mothupi (Resigned 31 August 2017)

Executive
Zunaid Mayet (Group Chief Executive Officer) (Appointed 12 May 2017)
Rob Godlonton (Appointed 12 May 2017)
Brian Gubbins (Appointed 12 May 2017)
John King (Group Financial Director)
Ebrahim Laher (Appointed 12 May 2017)
Jehan Mackay (Appointed 12 May 2017)
Johan Van Jaarsveld (Appointed 12 May 2017)

Pumeza Bam (Resigned 1 March 2017)
Asher Bohbot (Resigned 30 June 2017)
Dion Ramoo (Resigned 12 May 2017)
Jane Retief (nee Thomson) (Resigned 12 May 2017)

EOH Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1998/014669/06
JSE Share code: EOH 
ISIN Code: ZAE000071072

Registered address
Block D, EOH Business Park
Osborne Lane, Bedfordview, 2007
PO Box 59, Bruma, 2026
Telephone: +27 (0) 11 607 8100
Website: www.eoh.co.za
Investor e-mail: eohir@kris.co.za

Group Company Secretary
Adri Els

Auditors
Mazars (Gauteng) Inc.
Registration number: 2000/026635/21
Erasmus Forum A, 434 Rigel Avenue South, Erasmusrand, Pretoria, 0181

Sponsor
Merchantec Capital
Registration number: 2008/027362/07
2nd Floor, North Block, Hyde Park Corner Office Towers
Corner 6th Road and Jan Smuts Avenue
Hyde Park, 2196
PO Box 41480, Craighall, 2024

Transfer secretaries
Computershare Investor Services Proprietary Limited
Registration number: 2004/003647/07
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
PO Box 61051. Ma
Date: 19/09/2017 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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