Technology group EOH is making headway in recovery as it reported profitability in its annual results and plans to raise capital to settle its bridge facility.
EOH has been battling debt and has implemented a turnaround strategy to save the firm.
In its annual results released on Thursday, the group said it generated a total operating profit of R282 million for the year ended 31 July 31, 2022, following a total operating profit of R147m for the year ended 31 July 2021, an increase of 92%.
Operating profit from continuing operations improved by 82% to R100m full year (FY) 2022 from R55m in FY2021.
EOH said it recorded an improvement of 91% in total loss per share to 15 cents for the 2022 financial year from 166 cents for the 2021 financial year.
The group saw revenue of R6 billion from continuing operations. and had a total adjusted Ebitda of R504m for the 2022 financial year at a margin of 7.3%.
EOH said the capital that it intends to raise would be through an R500m rights issue and an additional R100m through a broad-based black economic empowerment deal with its strategic partner Lebashe Investment Group.
The group refinanced its debt into an R500m three-year term senior facility and a bridge facility with R728mcurrently outstanding, repayable on 31 December 2023. This has created more certainty around the capital structure and near-term liquidity.
EOH CEO Stephen van Coller said, “I am really proud of the fact that we have rebuilt EOH in such a short time frame. Just two and a half years ago the new EOH management team initiated a massive turnaround strategy for the group.
"For the first time since I arrived, our current assets exceed our current liabilities, and we are well-positioned to progress the transformed EOH in supporting our customers to solve their business challenges using our innovative technology offerings. Today EOH is streamlined, profitable, and is winning new public and private sector contracts across multiple geographies.”
According to the group, it had a net cash balance on July 31, 2022, R459m, with unutilised direct short-term facilities of R250m.
"The group repaid R733 million of debt during the 2022 financial year and had gross debt of R1.3 billion on July 31, 2022.
"Subsequent to year-end the sales of the Network Solutions business EOH-NS and Hymax SA Proprietary Limited Hymax SA were concluded resulting in a further R104 million of debt being repaid," it said.
In an interview, EOH chief financial officer Megan Pydigadu said she thought the firm's results were more than sustainable.
"We've looked at it to show what it looks like going forward. When we look at our revenue, and you take out all the leadership contracts, and all the projects that we were getting out of, we had low or no margin, we've seen a 4% growth year on year in our business. So this year compared to last year, we saw a 17% growth in revenue. So that's been really good to see and then the other thing that we have been taking costs out of the business, I think we always talk about our property costs, that we've got another R45 million of costs that will come out the 2023 financial year.
"We have 80 legal entities. So all of that creates simplification, takes customers out of the system, and then puts together revenue growth that we've seen in some of our businesses. I think we've got a sustainable business story that is starting to emerge of what the future looks like," Pydigadu said.
She said the balance sheet had been stable over the last year, but there hasn't been much movement in terms of networking capital.
Looking ahead, Van Coller said: “As a group, we remain cautiously optimistic around the recovery of the economy over the next few months and how emerging economic trends may impact our business. Regardless of the economic conditions, we are 100% committed to delivering value to our clients through our SOLVE mindset.”
BUSINESS REPORT