Segment results

for the six months ended 31 January 2020

The reportable segments of the Group have been identified based on the nature of the business activities. A significant amount of time has been spent refining and revising the strategy of EOH. A major focus included the critical analysis of the portfolio; both in terms of refining the Group's focus and clarifying drivers of value over the longer term. This resulted in a more streamlined business, comprising three major segments with clearer alignment of focus and groupings of value. This basis is representative of the internal structure of the Group for management purposes. The Chief Operating Decision Maker ('CODM') is EXCO.

iOCO consists of the Information and Communications Technology ('ICT') operations in South Africa and internationally.

The iOCO business has performed well evidenced by a stabilisation of the core business and the contracting sales pipeline with gross profit margins above 20% for the period under review, before taking account of the public sector contracts mentioned above. The public sector remains important for the Group, however, eight of the public sector projects remain problematic out of the 54 originally identified as requiring attention. Management is actively working with these customers to remedy the pertinent issues.

NEXTEC consists of Industrial Technologies.

NEXTEC remains challenging, with the majority of these businesses unlikely to form part of the Group going forward. More than 40 businesses have been sold or closed since 31 January 2019.

IP comprises businesses which have developed proprietary software and solutions for customers.

The IP businesses also performed well over the period, recording sound revenue growth as well as retaining gross profit margins above 30%. As has been previously communicated to the market, the majority of these businesses are being disposed of in order to normalise the capital structure and are classified as discontinued. Significant progress in this regard has been made. Non-binding offers have been received and the process is ongoing.

The CODM is not presented with secondary information in the form of geographic information and as a result, it is not disclosed in the segment results. Liabilities and assets are also not regularly provided to the CODM and are not disclosed in the segment report.

Revenue and normalised EBITDA from continuing operations:

 

 

Unaudited for the six months ended 31 January 2020
Figures in Rand thousand iOCO   NEXTEC   IP   Recon-
ciliation^
  Total  
Revenue
External 3 575 754   1 980 993   796 831     6 353 578  
Intersegment 100 351   135 999   789   (237 139)    
Discontinued operations 342 059   933 251   534 095     1 809 405  
Continuing revenue 3 334 046   1 183 741   263 525   (237 139)   4 544 173  
Gross profit
Gross profit 922 534   274 012   322 485   (21 397)   1 497 634  
Discontinued operations 128 649   55 630   246 476     430 755  
Continuing gross profit 793 885   218 382   76 009   (21 397)   1 066 879  
Continuing gross profit (%) 23,8%   18,4%   28,8%       23,5%  
Normalised EBITDA** 212 823   (32 978)   14 761   (124 669)   69 937  
Non-core business lines to be closed~ 187 744   22 754       210 498  
Normalised EBITDA 400 567   (10 224)   14 761   (124 669)   280 435  
Normalised EBITDA (%) 12,0%   (0,9%)   5,6%       6,2%  
Unaudited restated* for the six months ended 31 January 2019
Figures in Rand thousand iOCO   NEXTEC   IP   Recon-
ciliation^
  Total  
Revenue
External 4 693 444   2 547 438   887 104     8 127 986  
Intersegment 84 301   134 630   23 551   (242 482)    
Discontinued operations 628 151   1 225 750   772 005     2 625 906  
Continuing revenue 4 149 594   1 456 318   138 650   (242 482)   5 502 080  
Gross profit
Gross profit 848 856   375 920   381 932   (16 145)   1 590 563  
Discontinued operations 226 122   178 545   318 089     722 756  
Continuing gross profit 622 734   197 375   63 843   (16 145)   867 807  
Continuing gross profit (%) 15,0%   13,6%   46,0%       15,8%  
Normalised EBITDA** 123 530   (143 672)   47 836   (177 664)   (149 970)  
Non-core business lines to be closed~ 370 142   214 582       584 724  
Normalised EBITDA 493 672   70 910   47 836   (177 664)   434 754  
Normalised EBITDA (%) 11,9%   4,9%   34,5%       7,9%  
* Comparative figures previously reported have been amended to reflect continuing operations and segments prevailing for six months to 31 January 2020, as well as correction of prior period errors.
** Normalised EBITDA is defined as continuing losses before interest income and expense, tax, depreciation, amortisation, impairments, gains or losses on disposal of businesses and equity-accounted investments. Normalised EBITDA excludes once-off cash and non-cash items.
^ Reconciliation comprises elimination of intersegment transactions and includes head office expenses.
~ Non-core business lines to be closed reflect businesses identified to be shut down in that year and preceding years

 

Figures in Rand thousand 31 January
2020
  Restated*
31 January
2019
 
EBITDA reconciliation        
Operating loss before interest and equity-accounted losses from
continuing operations
(728 216)   (2 408 373)  
Depreciation 118 025   100 713  
Amortisation 57 402   134 953  
Impairment losses 152 452   1 334 569  
Loss on disposal of assets 93 948   156 686  
Share-based payments 16 807   200 825  
VFA re-estimation 11 260   (20 715)  
Income from joint venture 2 178    
EBITDA (276 144)   (501 342)  
Impairment of inventory 14 090   43 996  
Specific IFRS 9 impairments and provisions 149 245   199 300  
Advisory and other 90 619   108 076  
IFRS 15 adjustments 6 729    
Retrenchment and settlement costs 36 260    
Onerous contracts and other provisions 49 138    
Normalised EBITDA** 69 937   (149 970)  
Non-core business lines to be closed~ 210 498   584 724  
Normalised EBITDA from continuing operations 280 435   434 754  
* Comparative figures previously reported have been amended to reflect continuing operations and segments prevailing for six months to 31 January 2020, as well as correction of prior period errors.
** Normalised EBITDA is defined as continuing losses before interest income and expense, tax, depreciation, amortisation, impairments, gains or losses on disposal of businesses and equity-accounted investments. Normalised EBITDA excludes once-off cash and non-cash items.
Non-core business lines to be closed reflect businesses identified to be shut down in that year and preceding years.