Technology services company EOH says its plan to reduce its debt level is on track and it has since paid the R540 million it agreed with lenders, well ahead of the 31 August deadline.
The JSE-listed company has been battling with debt for some time, with Megan Pydigadu, EOH group financial director, telling ITWeb recently that the company has R2.9 billion worth of debt and its aim is to deleverage this by R1.5 billion in the next 18 months.
EOH’s problems surfaced after Microsoft in February last year terminated its contract with the IT services company after an anonymous whistle-blower filed a complaint with the US Securities and Exchange Commission about alleged malfeasance to do with a R120 million contract with the SA Department of Defence.
Ever since, EOH has been trying to improve its image after corporate governance issues emerged following an investigation by ENSafrica, which unearthed suspicious transactions worth about R1.2 billion.
In a market update today, EOH says since 1 August 2018, the group has repaid R1.77 billion to its lenders – R1.1 billion in capital and R626 million in interest.
In a statement, EOH says it continues to service its interest obligations to lenders and paid R75 million in interest in May.
“As previously communicated to the market, the group has looked to deleverage its balance sheet primarily through the sale of non-core assets. Since 1 February 2019, the group has signed agreements for the disposal of non-core assets in excess of R1.4 billion (including extinguished liabilities), receiving a total of R865 million in cash to date,” says EOH.
Turning to its financial performance and liquidity in the last quarter, the company says despite the headwinds created by COVID-19, “the group’s financial performance has remained resilient over the last quarter, highlighting the relevance of EOH’s products and services and the value that the group is able to deliver to its clients in an increasingly digitised world”.
For the quarter ended 30 April, it says, revenue did experience some downward pressure as a result of the lockdown but “the group delivered a positive EBITDA as a result of the focus by management on costs and the elimination of unnecessary spend”.
EOH says it also saw positive cash generation from operations for the quarter.
“The group has continued to see good collections from its debtors book for the months of February, March, April as well as May, with all months recording collections in excess of R1 billion. As at 3 June 2020, the group had cash balances of R893 million, while also deleveraging in line with its strategy.”
Additionally, it recently completed a detailed strategic review of the iOCO business which has been co-created and built from the bottom up.
The company says its management remains “invigorated and excited about the scale of the opportunity and the offering that EOH presents in the digitisation journey of customers and the country as a whole. This scale has been evidenced in the over 70 products that have been marketed to EOH customers to specifically assist them in solving their COVID-19 business challenges.”
On the impact of the deadly COVID-19 pandemic on its operations, EOH says the national lockdown has necessitated the review and assessment of ways of working differently, and adopting a cost-conscious mindset and focus on liquidity.
“At the half-year results presentation, the target of removing R400 million of cash costs from the business for the four months to the end of July 2020 (R100 million a month) was stated. The project has been very successful and is expected to surpass its target versus budget for the period to the end of July,” says EOH.
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