Technology group, EOH, which is in the process of rebuilding its business and image after it was hit by governance failures and corruption involving public sector contracts, says its turnaround is bearing fruit as it saw improvement in its financial results for 2021.
The company which derives about 20% of its revenue from the public sector, saw its operating profit recover from a R1.3 billion loss in 2020 to a R147 million profit in the full 2021 financial year, while total headline loss per share from continuing and discontinued operations improved by 96%, with losses reducing to 22 cents from 534 cents in the previous year.
CEO Stephen van Coller who has been driving the company's turnaround, which included a series of asset disposals said he was proud of what had been achieved since two and a half years ago the new EOH management team initiated a "massive turnaround strategy" for the company.
"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," he said.
Total operating expenses decreased by 46% to R2 billion, from R3.7 billion, as the remaining legacy issues were concluded and the benefits of cost-saving initiatives were realised. However, debt remains a headache for the company, although it has declined significantly since 2018.
Gross debt balance stands at around R2 billion, a slight climb down from R2.4 billion in 2020, and the company admitted that the rate had not declined as fast as it would have liked.
Reducing the core legacy debt and the finalisation of the long-term overall capital structure remains a business imperative.
"Good progress has been made on this front with the conclusion of a common terms agreement with the lenders, structured into a R500 million three-year senior term loan facility and a R1.5 billion bridge facility repayable on 31 October 2022."
During the year, a total of R433 million was paid to lenders principally from assets disposal proceeds. Following the disposal of its traffic law enforcement services and systems business in Syntell in November 2020 for R211 million, EOH concluded the disposal of digital platform Sybrin in June 2021 for R334 million.
"Conclusion of the sales of the remaining IP [intellectual property] assets will further reduce the group's debt to a more manageable level," the company said.
It said business disposals and the close-out of loss-making legacy contracts accounted for approximately 75% of the revenue decline. While its recovery has come with a bit of pain, the company took heart in realising that its streamlined operations were profitable and winning new public and private sector contracts across different geographies.