EOH has released its interim results for the six months ended 31 January 2020, which showed that total revenue decreased by 21.8% to R6.35 billion.
This decline is mainly a result of lower hardware and software sales, as well as legacy public sector ERP implementation deals which were not repeated in the current period.
While this revenue decline is putting strain on EOH, there was also good news in the latest results.
EOH’s total gross profit margin improved to 23.6% from 19.6%, thanks to a reduced contribution from hardware sales as well as improved efficiency in the iOCO businesses.
Total operating expenses decreased by 31.5% to R2.28 billion from R3.34 billion, largely driven by lower provisions and write-offs as well as cost efficiencies.
EOH turnaround plan
EOH is 12 months into its two-year turnaround plan, with some encouraging results shown to date.
EOH sold over 40 businesses, which generated R1.17 billion for the company. This helped it to pay lenders R1.5 billion in the last 19 months.
Its real estate programme is also on track to close a further 24 property leases by 2021. It has already closed 31 leases with savings in excess of R70 million per annum.
The company also reduced its legal entities from 272 to 185 to make the company more efficient, and collected R400 million in long outstanding debt.
Additionally, EOH has completed its forensic investigation and established robust corporate governance structures across the group.
Drastic measures implemented amidst lockdown
EOH recently announced drastic measures to ensure the sustainability of the company during the COVID-19 pandemic.
The company is a core IT supplier to 5,000 clients, which include banks, telecoms companies, Eskom, municipalities, and government agencies.
“The board and management of EOH felt it necessary to take proactive steps to ensure EOH is prudent in these times of uncertainty,” the company said.
As a result, EOH has now initiated a number of initiatives in this regard.
- The CEO and executive committee take a salary reduction of 25%.
- A proposed 20% reduction across the board in cash salaries, with the exception of those earning less than approximately R250,000 per annum.
- Negotiating rent holidays.
- A review of all fixed-term and consultant contracts.
- Reassessing the retirement policy for those over 65 years old.
- A review of variable pay elements, including reimbursive travel and overtime.
- A review of discretionary spend on travel, entertainment, and events.