“We are committed to building a sustainable, agile and competitive business. This includes preserving the future of our business, the country and the futures of a significant number of honest and hardworking EOH people” Stephen van Coller, CEO.


EOH affirms its commitment to building a sustainable, agile and competitive business

  • EOH remains an integral technology partner for major South African corporates as well as key metros and government departments.
  • New leadership appointed which has:
    • initiated a significant internal governance review and undertaken remedial action; and
    • conducted an extensive group-wide strategic and balance sheet review.
  • Meaningful progress made towards addressing legacy governance issues, future-proofing the business and aligning financial performance.

Key financial indicators

  • Normalised revenue – R8 194 million (R8 193 million)
  • Normalised EBITDA – R387 million (R1 088 million)
  • Available cash of R957 million (R1 418 million)
  • Net asset value of R4 574 million*.
* Restated (refer to note 5 and the operating segments).


The period under review marks the dawn of a new era for EOH. The appointment of key executive team members, including a new Group CEO and CFO, a revitalised strategic intent and transparent approach have greatly assisted the Group in navigating its way through the challenges to date and to set the direction for the future.

An extensive Group-wide strategic review identified the need to refocus the businesses, including the identification and ultimate elevation of the IP businesses. Meaningful progress has been made on implementing this as well as towards addressing legacy governance issues, future-proofing the business and aligning strategic and financial performance. While much of the execution to create focus and additional liquidity is yet to be concluded, EOH is well positioned to commence the process.

Group remains committed to ethical leadership and robust and transparent governance practices. EOH has a zero-tolerance approach to unethical or fraudulent business practices and is committed to removing any such activities in a responsible and effective manner. The building of a sustainable, agile and competitive EOH includes preserving the future of the business, the country and the jobs of the talented and hardworking people at EOH. A turnaround of EOH is imperative for driving South Africa’s fourth industrial revolution.

EOH is supported by the leading talent in the technology industry. It remains an imperative to ensure that the conduct of a few individuals, who may have been implicated in any wrongdoing, does not taint the 11 000 strong committed workforce. EOH has been in ongoing communication with clients and feedback has overwhelmingly been that their relationships with EOH are long term in nature and that the service they continue to receive is of the highest standards.

Notwithstanding the ongoing challenges, from a financial perspective:

  • Revenue remains stable at R8 428 million and operating costs remain flat, after the removal of once-off items;
  • Normalised EBITDA from continuing operations for H1 2019 is R387 million;
  • The net asset value of the Group is R4 574 million, including cash of R957 million as at 31 January 2019; and
  • The net asset value of the Group remains substantially above the market capitalisation of R1 855 million.

Building the EOH of the future

These last six months, including events post-period end, have been extremely challenging for the Group.

In addition to difficult trading conditions, EOH has been the subject of ongoing governance allegations, compounded by Microsoft cancelling its Channel Partner Agreement. This has accelerated shareholder value destruction and raised further questions about historic governance practices.

In addition to difficult trading conditions, EOH has been the subject of ongoing governance allegations, compounded by Microsoft cancelling its Channel Partner Agreement. This has accelerated shareholder value destruction and raised further questions about historic governance practices.

(i) Skilled and experienced executives in place to drive change

The leadership team of the Group has been bolstered by the appointment of skilled and experienced executives appointed to drive change. These include:

  • Stephen van Coller, Group Chief Executive (started 1 September 2018);
  • Megan Pydigadu, Chief Financial Officer (started 15 January 2019);
  • Lufuno Nevhutalu, Executive Head for Public Sector in the ICT business (assumed new role 15 March 2019);
  • Fatima Newman, Group Chief Commercial Officer (started 8 April 2019); and
  • Debbie Millar, Treasury and Investor Relations (started 15 November 2018).

Additionally, the Group has retained the leading talent in the technology industry who are driven to provide globally best-in-breed technology platforms and services.

EOH is evolving to ensure fully King IV™* compliant and aligned boards, both at the operating company level as well as at the corporate holding company level. At a holding company level these include the appointment of two highly qualified and experienced independent non-executive Board members, Ismail Mamoojee and Jesmane Boggenpoel. Asher Bohbot, founder, non-executive Chairman and CEO for 19 years, and Rob Sporen, founding member of EOH and non-executive director have resigned, to assist with King Code Compliance in terms of Director independence. A process to appoint an independent Chairman and further independent Board members is under way at both a Group and operational unit level.

(ii) Reorganisation to ensure core businesses remain competitive

The Group has recently refined its operational structure into four distinct operating units to allow for leaner and more agile core businesses with separate capital and governance structures. Each Group business will be accountable for their own governance as well as risk and compliance, with oversight by their respective boards. These board appointments are expected to be concluded by 31 May 2019.

Rothschild & Co, the international investment bank, is working closely with the Group to assist in reorganising the business for enhanced growth and customer value. Rothschild & Co’s experience will add immense impetus to the reorganisation process.

(iii) Governance

EOH’s work to build a sustainable business that is untainted by unethical practices continues.

The EOH leadership team, with assistance from legal advisers, ENSafrica, are well progressed in tightening the Group’s governance structures and in implementing a new, streamlined bid approval process. A variety of governance tools, processes and initiatives are being implemented, aimed at ensuring that any instances of wrongdoing within the Group are identified and removed. ENSafrica has been spearheading the current investigations which are expected to be concluded by 31 May 2019. As part of this process, obligations to report irregularities under various Acts will be fulfilled as required. One such report has already been filed.

ENSafrica’s work to date has included:

Large public sector investigations – The challenges presented by the EOH public sector business over the last few years have provided sobering lessons about the importance of stricter governance and compliance processes. Existing public sector contracts have been ring-fenced to allow for focused governance and control and the Group has embarked on a radically different approach to mitigating risk in this area. ENSafrica is currently performing a prioritised investigation and accounting investigation into four large public sector transactions.

Furthermore, EOH has been conducting ongoing internal investigations and co-operating with relevant authorities as EOH address certain activities that may have tainted a very small minority of its business contracts over the past few years.

Enhanced risk and compliance governance framework update – Management has also been working together with the University of Stellenbosch School of Business to play a supporting role in respect of additional initiatives to assist in improving governance, managing risk and restoring trust in the EOH brand. A new Code of Conduct and Anti-Bribery and Corruption Policy has been rolled out across the Group. The Group is also in the process of becoming ISO 37001 compliant.

(iv) Building a more appropriate capital structure

The Group has historically raised the vast majority of its funding centrally, while permitting the separate legal entities to manage their own cash and without a corporate treasury function.

A process to simplifying the operational structure is currently under way and will better enable a more efficient capital structure that is less dependent on cash balances but consequently also less dependent on such large funding facilities. To retain the debt quality, the lower anticipated longer-term sustainable EBITDA will also require a lower level of debt.

Deleveraging is anticipated to take place primarily from the sale of non-core assets, following the strategic refocus, and identified assets selling a portion to strategic partners. Total expected proceeds from the sale of assets over the next three to 12 months are R1 billion, which will be applied against gross borrowing.

Ultimately, each of the two anticipated remaining operating units and each individually owned IP-based business will be individually leveraged based on their respective needs and capacity.

The corporatising of the working capital management cycle, including credit control, centralised procurement and property management is also anticipated to significantly improve these metrics as well as reduce targeted operating overhead costs. Releasing cash out of debtors is a key priority and a target of releasing R1 billion over the next 12 to 18 months has been set.

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Ongoing committment

EOH is a business powered by its purpose to provide technology, skills and organisational ability which are critical to the development and growth of the markets served. The Group remains an ethical, relevant force for good and will continue to play a positive role in society, beyond business as normal.

EOH is encouraged by the active support of its clients, technology partners and employees to help build the EOH of the future. The Group’s commitment to ethical leadership and robust and transparent business practices has been reaffirmed and includes preserving the sustainability of the business and the jobs of 11 000 committed people.

Business performance

The combination of a continued, stressed macroeconomic environment and close out of discontinuing projects, combined with the poor performance from the Middle East and Africa Enterprise Resource Planning (‘ERP’) business have negatively affected the results for the six months ended 31 January 2019.

EOH’s revenue from operations remained stable at R8 428 million (2018: R8 354 million). Revenue has been under pressure in both the International ERP implementation business due to a slowdown in project awards and also a slowdown in the NEXTEC Industrial Engineering sector where there have been delays in the commencement of infrastructure projects.

Gross margin for the half year reduced from 32% to 20%. The impact on the margin from the prior year is as a result of continued losses on the close out of large multi-year public sector contracts and the closure of projects in the industrial technology area related to electrical infrastructure in the water space. Together this accounted for a 3.4% decline in margin. The International business in the Middle East also faced difficulties in project execution contributing to a 2.2% decline in the Group’s margin. Sales mix contributed to a 1.8% decline in Group margin as a result of extraordinary hardware sales. The remaining decline in margin is as a result of margin pressure in the ICT business of 3.5% and then underperformance in the Water and Energy space resulting in a 1.1% decline.

Operating expenses increased by R2 148 million as a result of once-off items. Once these once-off items are excluded, operating expenses were flat. Once-off items include impairment of assets of R1 719 million, a R157 million IFRS 2 charge related to the Lebashe Holdco and its subsidiaries (‘Lebashe’) deal and R146 million on the disposal of the equity investment in Twenty Third Century Systems (‘TTCS’). TTCS has previously been held as an equity investment. With effect from 17 January 2019 although the percentage holding in TTCS remained unchanged at 49%, EOH gained effective control of the board. This resulted in a disposal of TTCS as an equity investment and a subsequent acquisition of TTCS as a subsidiary.

Normalised EBITDA for the period amounted R387 million (2018: R1 088 million). The impact of the previously discussed once-off items and impacts on gross margin has resulted in a reduction in the profitability measures. Headline loss/earnings per share (HEPS) and loss/earnings per share (EPS) from continuing operations were 973 cents (2018: 314 cents) and 2 073 cents (2018: 320 cents), respectively.

Cash generated from operations after changes in working capital was R82 million (2018: R59 million).

As part of the half-year review, the balance sheet at 31 July 2018 was reviewed. Impairment indicators were re-evaluated related to the GCT Group receivable, resulting in a prior year adjustment of R124 million. TTCS was also reassessed which resulted in a prior year restatement of R542 million, due to impairments booked against the equityaccounted investment, loan receivable and trade receivable.

The Group has a positive net asset value of R4 574 million (2018: R7 462 million) with cash balances of R957 million (2018: R1 418 million).

EOH’s R1 billion strategic BEE transaction advances

EOH and Lebashe entered into a landmark BEE transaction on 30 July 2018, making EOH one of the largest, majority black-owned technology companies in Africa.

On 11 December 2018, EOH shareholders were advised that, following receipt by EOH of R250 million from Lebashe pursuant to the Second Tranche of the Subscription Undertaking, a further 8 346 199 EOH ordinary shares were issued to Lebashe.

Lebashe now holds 62 760 193 EOH ordinary shares, amounting to 29.0% of the total votable EOH shares in issue and a further 40 million A shares.

EOH is certified as a Large Enterprise BBBEE Level 1 contributor.


The Group expects the remainder of the 2019 financial year to be under pressure as a result of a slow-down in the economy, the delay of large infrastructure projects and the resultant Group reorganisation as a result of the new adopted strategy.

Approved on behalf of the Board of directors of EOH (‘the Board’).

Stephen van Coller
Chief Executive Officer

16 April 2019

Operating segments

The reportable segments of the Group have been identified based on the nature of the business activities. This basis is representative of the internal structure of the Group for management purposes. As mentioned in the Group CEO’s 100-day update on 11 December 2018, the current structure of the Group is being reviewed.

EOH ICT consists of EOH ICT operations in South Africa, EOH International and certain IP businesses. NEXTEC consists of Industrial Technologies, Business Process Outsourcing and certain IP businesses.

Corporate largely comprises head office expenses including salaries, advisor fees and JSE fees, among other costs.

Normalised revenue and EBITDA from continuing operations:

  Unaudited for the six months
to 31 January 2019
Figures in Rand thousand EOH ICT   NEXTEC   Corporate   Total  
Revenue 4 634 899   3 793 381     8 428 280  
Discontinuing (62 441)   (171 662)     (234 103)  
Normalised revenue 4 572 458   3 621 719     8 194 177  
Gross profit 880 418   786 832     1 667 250  
Discontinuing 126 946   157 500       284 446  
Normalised gross profit 1 007 364   944 332     1 951 696  
Normalised gross profit (%) 22.0   26.1     23.8  
EBITDA** (283 150)   (177 796)   (329 781)   (790 727)  
Discontinuing 370 142   214 582     584 724  
Once-off, cash normalisation
86 912   12 850   83 055   182 817  
Non-cash normalisation
148 654   64 278   197 047   409 979  
Normalised EBITDA 322 558   113 914   (49 679)   386 793  
Normalised EBITDA (%) 7.1   3.1       4.7  

  Restated unaudited* for the six months
to 31 January 2018
Figures in Rand thousand EOH ICT   NEXTEC   Corporate   Total  
Revenue 4 863 718   3 489 888     8 353 606  
Discontinuing (161 094)       (161 094)  
Normalised revenue 4 702 624   3 489 888     8 192 512  
Gross profit 1 656 915   1 025 365     2 682 280  
Discontinuing 1 303       1 303  
Normalised gross profit 1 658 218   1 025 365     2 683 583  
Normalised gross profit (%) 35.3   29.4     32.8  
EBITDA** 649 267   386 853   (31 700)   1 004 420  
Discontinuing 88 939       88 939  
Once-off, cash normalisation
Non-cash normalisation
    (5 180)   (5 180)  
Normalised EBITDA 738 206   386 853   (36 880)   1 088 179  
Normalised EBITDA (%) 15.7   11.1       13.3  
* Comparative figures previously reported have been amended to reflect continuing operations and segments prevailing during the period ended 31 January 2019.
** EBITDA is defined as continuing earnings before interest, tax, depreciation, amortisation, impairments, gains or losses on disposal of businesses and equity-accounted investments and includes profit or loss from equity-accounted investments