EOH Holdings’ share price fell almost 5% yesterday after it warned that operating profit for the six months to January 31 would decline substantially over the same period a year before.
The technology services group involved in the entire ICT value chain said in a trading statement that revenue from continuing businesses fell between 2% and 4% in the six months, compared with the same period a year before.
Revenue had increased through the first three months, but despite an improvement in trading and tendering activity in the second three months, the tough environment led to lower revenue, EOH directors said.
Gross profit margins were stable over the previous six months to end-July 2023, but they would be between 26% and 28% lower over the same period a year before.
As a result, interim operating profit would be between R5 million and R15m for the second half of the 2024 financial year, a big slump from the R142m at the same time last year.
The interim headline loss per share would be between 10 cents and 12c.
Total cash generated from operations was expected to be between R190m and R210m. The net cash balance ended at R300m (R198m).
“The core Digital Enablement business, including International, saw good revenue growth, but there were reductions in other areas, particularly in the Operational Technologies division, which was negatively impacted by delays in closing Public Sector contracts and contracting delays with large mining customers,” directors said.
They said that one of the major challenges facing the South African IT industry was finding and retaining appropriately skilled talent, so EOH had taken the decision to retain highly skilled staff who were not fully productive, in anticipation of improved trading.
Operating costs were a focus, and EOH was on track to eliminate at least R50m from the 2023 financial year cost base. The interest charge fell to about R68m from R102m in the second half of 2023, as a result of the R600m capital raise and the refinancing of consortium facilities with a single bank at improved interest rates.
EOH recently announced the agreement with the SA Revenue Service (Sars) on the last remaining legacy issue that has been holding the company back from finalising a restructure and getting back to business as usual. EOH plans to publish its interim results on March 26, 2024.
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