JSE-listed outsourcing group EOH is examining the market for possible takeover targets, and has enough cash in the bank to speed up any potential deals.
The company this morning released a strong set of results for the six months to January. It said revenue was up 40.6%, to R787 million, while profit before tax improved 37.7%, to R73 million.
EOH says the improvement is split between organic growth and recent acquisitions. CEO Asher Bohbot says the company is looking to acquire new operations in areas in which it wants to grow. He explains that acquisitions are quicker than starting from scratch.
The company aims to grow its managed services business in both infrastructure and application managed services, and will provide these services onsite at the client and remotely through its hosting and networking facilities. EOH will also expand its business process outsourcing suite of offerings and IT security services and solutions.
Bohbot says, however, that the company takes a conservative approach to acquisitions and any targets must fit into its culture and strategy. He adds that EOH aims to add to its annuity revenue stream.
EOH has R213 million in bank balances and no debt, which Bohbot says is important, as it allows it to move quickly to purchase businesses without having to raise debt. He explains that EOH is growing quickly and needs the cash on hand in order to fund increased operating costs.
Well placed
“EOH has seen good growth in managed services in particular,” says Frost & Sullivan ICT analyst Silvia Hirano Venter. “Companies are slowly opening up to a business model that involves outsourcing different aspects of their IT operations, and EOH is well positioned to deliver on their needs.”
Venter believes more work could still be done on providing transparency to the market on the cost-effectiveness of outsourcing IT services. The culture of outsourcing is not yet strong in most sub-Saharan African countries, despite the opportunities that exist.
Venter expects that managed services will continue to be a strong driver of revenue growth for EOH. “Every company wants to save money without jeopardising quality,” she explains.
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