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EOH announces 16% rise in profit

Cape Town – JSE-listed technology firm EOH announced a 16% rise in profit for the year ended July 31.

The IT software and services firm was reporting its annual results for the year ended July 31, which saw the firm’s headline earnings per share rise by 16% to R8.32 a share. Revenue grew by 21% to R15.490bn, while operating profit rose by 29% to R1.792bn.

While a quarter of the firm’s operations take place outside South Africa in the rest of Africa and the Middle East, it still gets over 90% of its revenue from South Africa.

By 09:25 on Tuesday, it was trading over 4% higher at R108 a share. However, by 15:45, it was trading 1.2% lower.

With all eyes on private firms that have contracts in the public sector, EOH made it clear that it had a responsibility when working with the public sector.

“EOH intends to continue its involvement in all tiers of government and state owned entities to improve service delivery,” it explained in its annual results [JSE:EOH] on Tuesday. “EOH sees its involvement in the public sector as both a business opportunity and as a responsibility.”

The caution of seeing it as a responsibility is an important point as SA firms have come under increasing scrutiny for the work they have done in the public sector, from Eskom to the SA Revenue Service.

Poor performance on JSE

Despite the positive results, EOH has seen its share price decline by almost 30% in the last six months. This can be compared to its 166% share price increase in the last five years. The firm has a market capitalisation of R15.36bn.

One of the events that caused the share decline was EOH founder Asher Bohbot's announcement in May that he was stepping down at the end of June, according to Tech Central. Bohbot was succeeded by Zunaid Mayet. In addition, there were several board member changes.

EOH was also on the receiving end of negative press in the Business Report in July, when former board member Danny MacKay and his son, Jehan, an executive director, were compared to the Gupta family.

The report cited an earlier story by amaBhungane in April, which asked questions around EOH's role with the South African Social Security Agency (Sassa). EOH denied all the allegations, saying the IT services it provided Sassa for eight years were based on merit.

amaBhungane managing partner Sam Sole criticised the story in Business Report on August 31, when he gave a keynote address to Rhodes University's 21st Highway Africa journalism conference.

"The group's largest and most influential publication, Business Report, is now led by a PR lightweight, who has, worryingly, indicated a willingness to use the paper to publish a poorly substantiated smear-story against a commercial target, in this case the listed technology group EOH – a worrying precedent," he said.

EOH focuses on IT

EOH said its resilience in the face of a weak economy is attributable to its wide solutions offering, collaborative business model, strong leadership, skilled people and diverse customer base.

“EOH has continued to focus on new solutions and service offerings, strategic acquisitions and increasing the solutions introduced to existing customers,” it said. “The group's solutions are particularly relevant to South Africa and emerging markets. The landscape remains competitive but EOH is undoubtedly gaining market share.”

Most of its revenue came from IT services, which grew 21% to R5.2bn, which translated into R552m profit. “The ICT on IT services spend in South Africa is growing at 5.6% per annum (internationally at 4.2% per annum) as companies need to spend on IT services to remain competitive, become more efficient and effective and to improve service delivery,” EOH explained.

“Customers are spending on maintaining their legacy systems, integrating with best of breed applications, whilst embracing the digital world and cloud computing.

“The growth drivers in this division have been and remain transformational outsourcing, ERP upgrades and re- implementation, digital transformation, cloud, application development, Internet of Things, big data and analytics.”

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