EOH says with its deleveraging strategy approaching completion, it has been actively assessing its strategic options with regard to achieving an optimal long-term capital structure.
Technology group EOH Holdings remains on track to deliver the R60 million of cost savings highlighted in its first half presentation for 2023.
EOH has been paring down its debt as part of a turnaround strategy, after a corruption scandal in 2018 involving senior directors.
In the pre-closing stakeholder update for the financial year ending July 31, 2022 released on Friday, the group said despite the difficult operating environment, EOH continued to demonstrate resilience and affirm its profitability.
Chief executive Stephen van Coller said: “The final step is now to optimise the capital structure, and we are confident that we can deliver in this regard in order to pursue our growth strategy.”
EOH said with its deleveraging strategy approaching completion, it had been actively assessing its strategic options with regard to achieving an optimal long-term capital structure, which would allow EOH to pursue its growth strategy, immediately improve earnings, and ultimately lead to unlocking value for shareholders.
“The board and management continue to assess the group’s capital raising options and expect to announce its capital raising plans alongside the release of its year-end results,” it said.
EOH continued to closely manage its working capital and liquidity, with gross cash balances of R540m as of July 27, 2022 including foreign and restricted cash but excluding its R250m overdraft facility.
“The reduction of EOH’s debt and finalisation of an overall sustainable capital structure remains a key priority for EOH’s management team and board,” EOH said.
The group said while the conclusion of the Common Terms Agreement with the lenders had brought more stability to its capital structure, the cost of debt and refinancing costs had increased the finance cost line.
“When combined with the increase in the repo rate we have seen our blended cost of debt increase by 230 basis points. The final phase of resolving the capital structure remains a business imperative, particularly in the context of the current rising interest rate environment,” it said.
EOH said following negotiations with lenders, it successfully refinanced the existing R1.9 billion debt into a R1.4bn senior bridge facility repayable on or before April 1, 2023 an R500m three-year senior term loan, due on April 1, 2025.
“Proceeds from the sale of Sybrin and the Information Services Group have reduced the senior bridge facility to R832m. The proceeds from the sale of Network Solutions and Hymax SA, a significant portion which is expected to be received during the third quarter of the year, will further reduce the outstanding bridge facility by about R100 million,” the group said.
According to the EOH, its strong first-half year performance continued into the second half of the year.
“The drive to remain agile at an operating expense-level was maintained and as a result, group earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins are also expected to be consistent with those delivered in the first half of the year,” EOH said.
Infrastructure Solutions Business, NEXTEC, had a tough second-half year due to the effects of supply chain delays.
iOCO, its data analysis and management business, despite the prevailing headwinds, continued to perform in line with the first half of the year, maintaining gross profit and Ebitda margins and continuing to deliver from a top-line revenue perspective.
Looking forward, the group said it was intensifying its focus on its growth efficiency and talent strategy, as introduced in the half-year presentation, which would see the business driving a three-pronged approach.
BUSINESS REPORT