IT outsourcing helps EOH gain 38.4% in revenueComment on this story
Johannesburg - The growing number of companies that are resorting to outsourcing their information technology (IT) requirements is expected to have a positive impact on EOH Holdings, which yesterday reported a 38.4 percent increase in revenue for the six months to January.
EOH said organic growth and recent acquisitions had added to the gain in revenue.
Chief executive Asher Bohbot said major growth was expected from managed services because the increasing complexity of IT had made it incrementally difficult for firms to run new IT processes without expert assistance.
“It’s got so complex… we see and believe this trend will continue for a long time to come,” he said, adding that growth in managed services was driven by demand from the financial services, telecommunications and retail sectors.
Managed services included the provision of IT services through cloud computing, the outsourcing of network services and mobility solutions to EOH. Mobility included the technology services associated with the use of mobile devices such as smartphones and media tablets that were linked to corporate networks. EOH said it also expected further demand for applications tailored to enterprises and for information analytics services.
Bohbot said the firm intended to increase its services to the public sector where “the need for system applications and the right processes is huge.” The public sector contributes 20 percent to its overall business.
Ankit Trivedi, an industry analyst at consulting firm Frost & Sullivan, said: “Services have emerged as the leading revenue contributor as the demand trends have shifted from software and infrastructure products to corresponding services as the latter offers painless upgrades, lower initial costs and customers enjoy the plugging in and subscribing to services via the internet.”
Trivedi said the service model “enabled scalability”, which ensured repeat business for companies such as EOH.
Yesterday, EOH, one of the largest IT service providers in the country, said revenue from the provision of services jumped 42 percent to R2.4 billion over the period under review. Software sales gained 20.8 percent to R423 million. Sales of infrastructure increased 39.3 percent to R527m.
EOH services industries including telecommunications, the public sector, mining, manufacturing and retail in South Africa as well as west and central Africa and the UK.
Profit after tax increased by 51 percent to R247m. Earnings a share gained 30.3 percent to R2.298. Headline earnings a share grew 34 percent to R2.296. Cost of sales grew 46 percent to R2.03bn as most of the firm’s costs are people based.
Bohbot said EOH brought 600 “young people” into the business annually as it geared up for growth and its incremental expansion in Africa, which contributes about 10 percent to the company’s revenues.
Shares in EOH fell as low as R88.55 before closing 0.58 percent lower at R88.98.
Jean Pierre Verster, an analyst at 36One Asset Management, said the results were expected. “It will become progressively harder for EOH to follow their historic strategy of a balance between organic and acquisitive growth as they become larger and necessarily need to find bigger acquisition targets.”
Bohbot declined to comment on potential acquisitions in the pipeline. - Business Report