EOH makes progress on multibillion-rand debt repayment
JSE-listed technology services firm EOH is making progress on repaying its debts.
The company yesterday issued a trading statement, saying it has repaid R580 million of the R1.6 billion target agreed with lenders to be settled by the end of February 2021.
The JSE-listed company has been battling with debt for some time, with Megan Pydigadu, EOH group financial director, in April telling ITWeb that the company had R2.9 billion worth of debt and its aim was to deleverage this by R1.5 billion in the next 18 months.
In yesterday’s statement, EOH says on 13 December 2019, it advised shareholders that a sales agreement had been entered into between EOH Abantu, a wholly-owned subsidiary of EOH and a subsidiary of Afrocentric Investment Corporation, in terms of which EOH Abantu disposed of all of its shares in Dental Information Systems (Denis) for a total consideration of R250 million.
“EOH is pleased to inform shareholders that all suspensive conditions pertaining to the Denis transaction have now been fulfilled and the first R234 million payment related to the transaction was settled on 30 September 2020, with R16 million being held in escrow until 1 April 2022,” says the company.
It adds that on 20 April 2020, EOH announced the sale of the remaining 30% stake in Construction Computer Software (CCS) to RIB, a wholly-owned subsidiary of RIB Software, for a total consideration of R143 million.
In addition to the early exercise of the call option, RIB agreed to release the full cash amount in escrow of R47 million, by no later than 30 September 2020, which has now been completed, EOH notes.
However, it points out that disposal proceeds from both Denis and the 30% stake in CCS have not been included in the R580 million repayment.
“It is anticipated that an additional R207 million in respect of these proceeds will be applied to debt repayment,” says EOH.
According to the firm, the total outstanding debt is R2.4 billion as at 19 October 2020 before these proceeds are applied and, therefore, will be R2.2 billion thereafter.
“Notwithstanding the large capital repayments to the lenders, cash balances remain healthy and were R943 million as at 19 October 2020,” it says.
“The group had access to a further R335 million of overdraft facilities as at year-end as the benefits of the new cash pooling process were realised. EOH remains committed to deleveraging the balance sheet and normalising the capital structure of the business as this will provide the group with optionality as it seeks to define its future growth path.”
In its trading statement, EOH says shareholders are advised the company anticipates an improvement of between 67% and 73% to the total loss per share and an improvement of between 70% and 76% to the total headline loss per share for the group for the year ended 31 July 2020 (FY2020) compared to the previous corresponding period, being the 12 months ended 31 July 2019 (FY2019).
It explains this improved financial performance was largely as a result of the positive progress made towards stabilising the business model while still navigating the difficult economic environment brought about by the COVID-19 pandemic; the work done towards establishing a fit for purpose cost structure; and significantly reduced one-off costs and legacy issues that were a substantial burden on the financial performance and cash flow of EOH during the previous corresponding period.
According to EOH, trading conditions were impacted by the effects of COVID-19 in the second half of FY2020, which placed some customers under pressure and a slight softening of revenue was experienced as a result.
It adds that progress was, however, made on key initiatives including optimising cost structures, dealing with legacy issues and delivering on the deleveraging strategy which enabled the group to post a much stronger H2 2020 financial performance in comparison to H1 2020.
The continued assessment of the balance sheet had a significantly smaller impact on impairment costs for FY2020 when compared to FY2019. The group continued to deliver strong positive operating cash generation in the second half of FY2020 and for the full year.
“We are also pleased to report both positive EBITDA [earnings before interest, taxes, depreciation and amortisation] and positive normalised EBITDA for the full year, in line with our trajectory at the half-year,” it concludes.