EOH hopes restructuring will create new growth platform

19th October 2018 By: Schalk Burger - Creamer Media Senior Contributing Editor

JSE-listed information technology group EOH has efforts into two companies as part of its work to renew the business and position it for growth.

The EOH-branded information and communication technology (ICT) business will focus on digital services in a digitalising economy and the Nextec company will develop and provide specialist solutions for industry.

In its financial results for the year ended July 31, the group reports an 8% year-on-year increase in revenue to R16.28-billion, up from R15.13-billion in 2017, but normalised operating profit is down by 32% to R1.19-billion from R1.74-billion in 2017.

Revenue is split evenly between the two companies, although profits are predominantly on the EOH company side, with EOH contributing R1.11-billion and Nextec R660-million.

Lower group profits are partly a result of the R400-million impact, owing to the disposal of controversial government ICT service provider GCT, which the company had acquired.

“The results reflect the company and the country navigating a tough year. There was pressure on profits and margin squeeze. The two main impacts, on profits were the unbundling of the GCT group, which we did towards the end of this month, and our decision to discontinue some of our public-sector businesses,” says outgoing EOH CFO John King.

Incoming EOH group CEO Stephen van Coller, who is a veteran CEO with deep experience in the telecommunications and banking industries, highlights the strategic considerations the company will take over the coming year to capitalise on the restructuring and new opportunities to gain additional clients that the digitalisation of the economy represents.

Van Coller says the company has to look at its customer ecosystem and to position the three main businesses of EOH, including its smaller international software business, to capitalise on their strengths. The businesses require different capital structures to support growth, which was not the case under the single EOH company and the executive will work through the allocation of the correct working capital required by each over the coming year.

He notes opportunities to create and manage digital ecosystems for companies as a potential growth avenue and the provision of corporate governance tools as a service, especially since EOH is developing a digital governance system based on the methodical and measurable International Standards Organisation 37001 set of standards to manage its own corporate governance processes, as a potential additional service that its Nextec business can provide.

Additionally, the executive will be working to determine the strategy to support growth in all its businesses over the next three years and then consider whether to split the companies again, to approach new partners or to list some of the businesses, if suitable, he adds.

However, Van Coller notes that he does not want to lose the entrepreneurial flair of the company nor the passion of its people and will continue to try to attract the best talent and to focus on the group’s people-centred philosophy.

He points to potential short-term efficiency gains in the company and adds that the company was well positioned to assist with infrastructure renewal efforts that are anticipated in the country.

Nextec provides industry- and domain- specific ICT solutions and is well positioned to grow with the introduction of Internet of Things and Fourth Industrial Revolution changes in the industrial sectors, says former EOH CEO and Nextec CEO Zunaid Mayet.

The EOH ICT business has good growth prospects as a digital services provider and systems integrator and will further develop Big Data and analytics services to capitalise on the volumes of data that its customers had, which also leverages its investments in cloud infrastructure and capabilities, says EOH ICT CEO Rob Godlonton.

EOH founder, former CEO and nonexecutive chairperson Asher Bohbot believes the business is well positioned and stronger since it conducted a deep governance and business model review over the past 18 months and he adds that Van Coller represented fresh eyes to look at the company and to position it for the next 20 years of growth.

“Over the past tough year, the executive has focused on reclaiming the narrative of EOH and reclaiming this great business on behalf of our people and the 100 000 people who depend on our services,” he says.

EOH has grown from an initial headcount of 20 people and one client in 1998 to a company with a market capitalisation of about R6-billion and employing 11 500 people.