Information technology services company EOH on June 9 reported that it had achieved positive earnings before interest, taxes, depreciation and amortisation (Ebitda) during the third quarter, ended April 30.
While revenue did experience downward pressure owing to the lockdown, the company achieved a positive Ebitda as a result of the focus by management on costs and the elimination of unnecessary spend. The company also achieved positive cash generation from operations during the quarter.
"The group's financial performance has remained resilient over the last quarter, highlighting the relevance of EOH's products and the service value that the group is able to deliver to its clients in an increasingly digitised world," the group noted in a trading statement.
Further, EOH has continued to see good collections from its debtors book for the months of February, March, April and May, with all months recording collections in excess of R1-billion. At June 3, the company had cash balances of R893-million, while also deleveraging in line with its strategy.
"The national lockdown has necessitated the review and assessment of ways of working differently and to adopt a cost-conscious mindset and focus on liquidity," the company said in the trading statement.
As stated during the company's half-year financial results presentation, the company had a target of removing R400-million of cash costs from the business for the four months to end-July.
The project was successful and was expected to surpass its target versus budget for the period. Various initiatives were implemented, including salary adjustments, rental holidays and extensions with landlords, significant reduction in travel, entertainment and marketing spend, continuing removal of unnecessary costs and ensuring cost structures are as flexible as possible to reduce fixed costs.
Meanwhile, the group had agreed to a R1.6-billion deleverage plan with its lenders. On the back of the group's improved financial performance for the quarter, combined with the recent sale of the remaining 30% stake in Construction Computer Software, EOH had achieved its first capital repayment milestone, having repaid R540-million, in excess of the R500-million agreed with lenders and well ahead of the August 31 deadline.
"Since August 1, 2018, the group has repaid R1.77-billion to its lenders, R1.14-billion in capital and R626-million in interest," the company said in the trading statement.
EOH has aimed to deleverage its balance sheet, primarily through the sale of noncore assets. Since February 1, 2019, the company has signed agreements for the disposal of noncore assets in excess of R1.4-billion (including extinguished liabilities), receiving a total of R865-million in cash to date.
The sale of Dental Information Systems (Denis) signed for R250-million has been approved by the Competition Commission without any conditions and is now before the Competition Tribunal awaiting approval.
The sales processes for two of the intellectual property (IP) assets were ongoing and in the final stages with bidders. The sales process for the third IP asset was launched in May with significant interest received from various bidders, EOH said.
Additionally, the group has been able to reduce its liabilities for acquisitions from R204-million at the end of January to R114-million at the end of May.