EOH HOLDINGS LIMITED - Trading Statement

Release Date: 06/09/2018 07:07
Code(s): EOH
Wrap Text
Trading Statement

Incorporated in the Republic of South Africa
(Registration number 1998/014669/06)
Share code: EOH ISIN: ZAE000071072
(“EOH” or “the Company” or “the Group”)


In terms of paragraph 3.4 (b) of the JSE Limited (“JSE”) Listings Requirements, companies are
required to publish a trading statement as soon as they have reasonable certainty that the
financial results for the next period to be reported upon will differ by more than 20% from that of
the previous corresponding period.

EOH is currently finalising its annual results for the twelve months ended 31 July 2018.

The year under review was a year of two different halves.

First six months ended 31 January 2018

-   The disposal of the GCT group of companies had a negative impact on earnings of R399
    million (non-cash, once-off deduction).

-   Fake news stories adversely impacted the business necessitating intense stakeholder

-   In view of EOH’s specific market challenges during the period, the Group adopted a
    deliberate customer retention strategy whilst sacrificing some margin.

-   As a result of the above, fewer major contracts were awarded to the EOH Group adversely
    impacting the business in the second half of the 2018 financial year.

Second six months ended 31 July 2018

-   The EOH Group was reorganised into two independent focussed businesses, EOH and
    NEXTEC, creating two growth platforms, each with its own identity, brand, strategy and go-to-
    market approach resulting in major benefits.

-   EOH Group’s public sector focussed division was dissolved by incorporating the majority of
    its activities into NEXTEC and EOH, and discontinuing the remainder of the business. The
    associated operating loss and restructuring cost amounted to approximately R380 million.

-   Various businesses went through right-sizing. The cost thereof and other once-off costs
    amounted to approximately R120 million.

-   The impairment of goodwill, investments and other assets, amounts to approximately R90

-    As a result of the non-tax deductible charge associated with the unwinding of GCT, and the
    varying degree of performance of the businesses in the Group, the tax charge is much higher
    than would normally be expected.

-   The increased focus on working capital management resulted in a reduction of accounts
    receivable and an improvement in cash compared to the 2018 half-year interim results.

-   The Board has been reconfigured and further strengthened with the appointment of two
    independent non-executive directors. Mr Asher Bohbot was appointed Non-Executive
    Chairman and Mr Stephen van Coller as Group CEO.

-   The Group’s strategic partnership and BEE transaction with Lebashe was concluded subject
    to shareholder approval. This will result in a total equity investment by Lebashe of R1 billion
    over 12 months of which R500 million will be injected shortly after shareholder approval,
    providing significant growth capital for the Group.

-   The BEE transaction further underpins the EOH Group’s commitment to transformation, and
    once finalised, will see the Group’s BEE ownership increase to over 51% percent.

-   Over the last three months, the EOH Group has seen a marked increase in the number of
    large contracts awarded to it indicating the normalisation of business activities.

Estimated financial results for the year ended 31 July 2018

-   Revenue is expected to increase by 8% to approximately R16,3 billion (2017: R15,1 billion).

-   Normalised EBITDA from continuing operations is expected to be between R1 710 million
    and R1 938 million, reflecting a decrease of between 15% and 25% compared to R2 280
    million for the previous corresponding period.

-   Headline Earnings per share is expected to be between 250 cents and 374 cents reflecting a
    decrease of between 55% and 70% compared to 832 cents for the previous corresponding

-   Normalised Headline Earnings per share from continuing operations is expected to be
    between 438 cents and 558 cents, reflecting a decrease of between 30% and 45% compared
    to 797 cents for the previous corresponding period.

-   Earnings per share (including the after tax, non-cash, once-off deduction of R392 million from
    the disposal of businesses), is expected to be between a loss per share of 124 cents and an
    earnings per share of 41 cents, reflecting a decrease of between 95% and 115% compared to
    825 cents for the previous corresponding period.

Although challenging, the past year has re-focussed, energised and strengthened the business
and made it more resilient. EOH’s new strategy, structure and operating model will enable the
business to return to past performance.

The information on which this trading statement is based has not been reviewed or reported on
by EOH’s auditors. EOH's annual financial results for the twelve months ended 31 July 2018 will
be released on SENS on 3 October 2018.

6 September 2018

Merchantec Capital

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