EOH makes progress with turnaround

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EOH makes progress with turnaround

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Published Date: 2021-02-01 | Source: Stephen Gunnion | Author: Stephen Gunnion

EOH makes progress with turnaround

The technology services company expects to report positive first-half operating profit as it trims debt and cuts costs.

EOH has continued to reduce debt as it sells non-core assets. Declining interest rates have also cut its interest bill and CEO Stephen van Coller says the company is in much better shape than it was when he took over two years ago.

In a pre-close update to shareholders, the technology services group said it had repaid a further R409 million since the end of its last financial year in July, mostly using the proceeds from disposals. Falling interest rates and a lower outstanding gross debt balance of about R2 billion had resulted in materially lower and more manageable financing costs.

EOH is under pressure to cut debt, which amounted to about R4 billion when Van Coller took over the management of the company. When it released its 2020 annual results last month, it said talks with its lenders to finalise a long-term capital structure were advanced. However, if refinancing was not concluded before debt became due in April, its auditors said a material uncertainty existed that may cast doubt on its ability to continue as a going concern.

Recent disposals include the R250 million sale of its stake in Dental Information Systems (DENIS), the disposal of its remaining 30% stake in CCS for R143 million and the sale of MARS and its principal business Syntell for R211 million. While its IP businesses are also up for sale, the company said last month that it was crucial that it achieved fair value and that they weren't sold at suboptimal prices due to the environment created by Covid-19.

Year to date, EOH said total group revenue remained resilient despite the disruption caused by the pandemic as it continued to benefit from the turnaround efforts executed in its 2020 financial year. It said it was likely to post both an operating profit and positive earnings before interest, tax, depreciation and amortisation (EBITDA) for the six months to end-January - before any normalisation adjustments. It also continued to focus on cost control and efficiency measures having exited a further 7,034 square metres of property, resulting in savings of about R3 million. Cash generation from operations was positive with a cash balance of R591 million at the end of January.

EOH's shares closed 2.4% up at R8.82 on Friday.





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