EOH Holdings’s share price stumbled to close 16.61 percent lower at R5.27 on Friday after it said its board was considering an equity raise among the options that might be required to further whittle down its debt and improve liquidity.
It said a R1.5 billion bridge debt facility maturing in October 2022 would be partially repaid using proceeds from asset disposals, and the board was considering options to settle the remaining R750m, as well as raise liquidity to pursue growth opportunities.
These options included the possibility of an equity raise, the introduction of mezzanine debt, a combination of these, or further asset disposals, even though the asset disposal process was now considered largely complete.
“New investors may include investors that could assist with increasing the group’s BEE ownership as well as potential strategic partners.
“Given the current high costs of debt funding, capital scarcity and arrangements with lenders, the optimisation of the balance sheet is a key priority for the EOH Board and management team,” the group said.
The board said the trading position was now improving, this after a substantial restructuring, and “the EOH board and management team believe this is the appropriate time to engage with shareholders, lenders and the market more broadly to determine the optimal solution for the company”.
EOH, a technology service provider with more than 5 000 clients, has been restructured through cost cuts, closing out loss-making contracts, improving earnings quality, a corporate governance overhaul and stabilisation of the capital structure.
This saw a 96 percent improvement in headline loss per share to 22 cents in the year to June 2021.
A number of the group’s businesses were being sold and EOH expected cash proceeds from disposals to be R750m by financial year-end, which would be used to deleverage the balance sheet, the group said in a trading update on Friday.
Although first half revenues faced headwinds due to the weak economy and the Omicron impact, margins were maintained largely due to improvements in the quality of the revenue base, a focus on cost and closing all legacy loss-making contracts.
The unbundling of the “cumbersome operating structure” through the consolidation of shared services was near completion.
iOCO continued to post an operating profit and positive adjusted earnings before interest tax depreciation and amortisation (Ebitda) in the first half.
iOCO had established “Infrastructure as a Service” (IaaS) as an end-to-end service offering, comprising the Managed Services and Connectivity businesses and the Compute platforms business.
The focus on IaaS, particularly on cloud solutions, had positioned iOCO to take advantage of a large secular trend in technologies services that was expected to continue growing in the long term.
iOCO Digital also delivered a solid performance
The NEXTEC business focused on achieving quality earnings and it reported improved gross profit and adjusted Ebitda margins in the first half.
NEXTEC People Solutions was tracking ahead of Ebitda expectations.
The NEXTEC Infrastructure Solutions business was impacted by contract delays and international supply challenges.
However, this was partially offset by projects in the mining industry related to demand for mesh communication networks, and positive momentum in the consulting businesses, which is a leading indicator for industrial development in the country.
BUSINESS REPORT