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EOH
EOH
EOH Holdings Limited - Interim results for the six months ended 31 January 2006
EOH Holdings Limited
(formerly Enterprise Outsourcing Holdings Limited)
(Incorporated in the Republic of South Africa)
(Company registration no: 1998/014669/06)
Share code: EOH ISIN: ZAE000071072
("EOH" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JANUARY 2006
- Revenue up 26%
- PBT up 61%
- HEPS up 25%
GROUP INCOME STATEMENT
Reviewed Reviewed
New IFRS New IFRS
6 months to % 6 months to
(R"000) 31.1.06 increase 31.1.05
Revenue 236 610 25.82 188 050
Operating income 26 253 17 571
Interest 383 317
Impairment of goodwill - (1 389)
Net income before taxation 26 636 61.44 16 499
Taxation (9 504) (6 229)
Earnings 17 132 66.82 10 270
Add back - Impairment
of Goodwill - 1 389
Headline earnings 17 132 11 659
Shares in issue ("000) 69 213 51 267
Weighted shares
in issue ("000) 58 852 50 087
Diluted shares
in issue ("000) 67 787 60 307
Earnings per
share (cents) 29.11 20.50
Diluted earnings
per share (cents) 25.27 17.03
Headline earnings
per share (cents) 29.11 25.04 23.28
Diluted headline
earnings per
share (cents) 25.27 19.33
Reviewed Unaudited Audited
Old SA GAAP New IFRS Old SA GAAP
6 months to 12 months to 12 months to
(R"000) 31.1.05 31.7.05 31.7.05
Revenue 188 050 420 225 420 225
Operating income 17 611 39 203 39 252
Interest 317 597 597
Impairment of goodwill (1 389) (3 348) (3 348)
Net income before taxation 16 539 36 452 36 501
Taxation (5 919) (13 286) (12 699)
Earnings 10 620 23 166 23 802
Add back - Impairment
of Goodwill 1 389 3 348 3 348
Headline earnings 12 009 26 514 27 150
Shares in issue ("000) 51 267 51 267 51 267
Weighted shares
in issue ("000) 50 087 50 305 50 305
Diluted shares
in issue ("000) 60 307 62 585 62 585
Earnings per
share (cents) 21.20 46.05 47.32
Diluted earnings
per share (cents) 17.61 37.02 38.03
Headline earnings
per share (cents) 23.98 52.71 53.97
Diluted headline
earnings per
share (cents) 19.91 42.36 43.38
EARNINGS RECONCILIATION
Reviewed Reviewed Unaudited
6 months to 6 months to 12 months to
(R"000) 31.1.06 31.1.05 31.7.05
Old SA GAAP 18 378 10 620 23 802
IAS 16: Property, plant and
equipment 75 (94) (157)
IFRS 2: Share-based payments (1 667) (966) (1 932)
IAS 38: Intangibles assets 635 1 020 2 040
IAS 17: Leases (117) - -
Deferred tax on above (172) (310) (587)
New IFRS 17 132 10 270 23 166
Net change (1 246) (350) (636)
GROUP CASHFLOW STATEMENT
Reviewed Reviewed Reviewed
New IFRS New IFRS Old SA GAAP
6 months to 6 months to 6 months to
(R"000) 31.1.06 31.1.05 31.1.05
Operating income 26 253 17 571 17 611
Non-cash items 4 340 3 789 3 749
Working capital changes (13 562) 9 044 9 044
Cash generated by operations 17 031 30 404 30 404
Taxation paid (10 361) (4 178) (4 178)
Dividend paid (6 646) (5 063) (5 063)
Interest 363 317 317
Cash from operating activities 387 21 480 21 480
Cash utilised by investing
activities (6 155) (42 537) (42 537)
Cash generated from/
(utilised by) financing
activities 2 047 20 383 20 383
Net cash change for period (3 721) (674) (674)
Cash at beginning of period 68 357 61 695 61 695
Cash at end of period 64 636 61 021 61 021
Unaudited Audited
New IFRS Old SA GAAP
12 months to 12 months to
(R"000) 30.6.05 30.6.05
Operating income 36 452 36 501
Non-cash items 10 614 10 565
Working capital changes 11 919 11 919
Cash generated by operations 58 985 58 985
Taxation paid (9 148) (9 148)
Dividend paid (5 063) (5 063)
Interest 597 597
Cash from operating activities 45 371 45 371
Cash utilised by investing activities (17 808) (17 808)
Cash generated from/
(utilised by) financing activities (20 901) (20 901)
Net cash change for period 6 662 6 662
Cash at beginning of period 61 695 61 695
Cash at end of period 68 357 68 357
GROUP BALANCE SHEET
Reviewed Reviewed Reviewed
New IFRS New IFRS Old SA GAAP
(R"000) 31.1.06 31.1.05 31.1.05
Assets
Non-current assets
Property, plant and equipment 11 670 10 271 10 571
Intangible assets 71 967 70 559 76 145
Loans receivable 132 443 443
Investment in associate 918 311 311
Deferred tax 4 219 3 447 2 520
Current assets
Trade receivables 94 730 63 536 63 536
Other receivables 2 044 2 490 2 490
Inventory 1 343 1 273 1 273
Cash 64 981 61 021 61 021
Total assets 252 004 213 351 218 310
Equity and liabilities
Ordinary shareholders" interest 128 616 71 468 76 427
Non-current liabilities
Borrowings 5 996 7 962 7 962
Current liabilities
Trade and other liabilities 81 466 60 550 60 550
Vendors for acquisition 2 224 40 481 40 481
Bank overdraft 345 - -
Deferred revenue 26 097 26 491 26 491
Taxation 7 260 6 399 6 399
Total equity and liabilities 252 004 213 351 218 310
Net asset value per share (cents) 185.83 139.40 149.08
Unaudited Audited
New IFRS Old SA GAAP
(R"000) 31.7.05 31.7.05
Assets
Non-current assets
Property, plant and equipment 8 929 9 291
Intangible assets 71 622 76 188
Loans receivable 132 132
Investment in associate 815 815
Deferred tax 4 889 4 240
Current assets
Trade receivables 82 589 82 589
Other receivables 4 081 4 081
Inventory 1 295 1 295
Cash 69 080 69 080
Total assets 243 432 247 711
Equity and liabilities
Ordinary shareholders" interest 84 759 89 038
Non-current liabilities
Borrowings 3 653 3 653
Current liabilities
Trade and other liabilities 76 190 76 190
Vendors for acquisition 32 864 32 864
Bank overdraft 723 723
Deferred revenue 36 456 36 456
Taxation 8 787 8 787
Total equity and liabilities 243 432 247 711
Net asset value per share (cents) 165.33 173.68
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS" INTEREST
Share Share
(R"000) capital premium Reserves
31.7.2004 Audited - old SA GAAP 471 8 306 471
IAS 16: Property, plant and equipment
IFRS 2: Share-based payments 1 772
IAS 21: Forex reserve adjustment 300
IAS 38: Intangibles assets
Deferred tax on above
31.7.2004 Unaudited - new IFRS 471 8 306 2 543
Treasury shares - consolidation 24 2 353 31
Share issues 6 912
Earnings - as previously reported
Earnings - IFRS adjustments 966
Dividends
31.1.2005 Unaudited - new IFRS 501 11 571 3 540
Treasury shares - consolidation (14) (1 264) 100
EOH Share Trust - consolidation 14 490 272
Currency translation differences (169)
Earnings - old GAAP
Earnings - IFRS adjustments 966
31.7.2005 Unaudited - new IFRS 501 10 797 4 709
Treasury shares - consolidation 2 487 255
Share issues 179 54 392
EOH Mthombo Trust - consolidation (92) (22 859)
EOH Share Trust - consolidation 4 112 (739)
Currency translation differences (31)
Earnings - IFRS 1 667
Dividends
31.1.2006 Unaudited - new IFRS 594 42 929 5 861
Retained Shareholders"
(R"000) earnings interest
31.7.2004 Audited - old SA GAAP 58 300 67 548
IAS 16: Property, plant and equipment (206) (206)
IFRS 2: Share-based payments (1 772) -
IAS 21: Forex reserve adjustment (300) -
IAS 38: Intangibles assets (6 606) (6 606)
Deferred tax on above 1 237 1 237
31.7.2004 Unaudited - new IFRS 50 653 61 973
Treasury shares - consolidation 2 408
Share issues 918
Earnings - as previously reported 10 620 10 620
Earnings - IFRS adjustments (350) 616
Dividends (5 067) (5 067)
31.1.2005 Unaudited - new IFRS 55 856 71 468
Treasury shares - consolidation (1 178)
EOH Share Trust - consolidation 776
Currency translation differences (169)
Earnings - old GAAP 13 182 13 182
Earnings - IFRS adjustments (286) 680
31.7.2005 Unaudited - new IFRS 68 752 84 759
Treasury shares - consolidation 744
Share issues 54 571
EOH Mthombo Trust - consolidation (22 951)
EOH Share Trust - consolidation (623)
Currency translation differences (31)
Earnings - IFRS 17 132 18 799
Dividends (6 652) (6 652)
31.1.2006 Unaudited - new IFRS 79 232 128 616
COMMENTARY
Group profile
EOH is a business and technology solutions provider creating lifelong
partnerships by developing business and IT strategies, supplying and
implementing solutions and managing enterprise-wide business systems and
processes for medium to large clients.
EOH operates as a fully integrated business in the following three clusters of
business units:
Consulting - under the EOH Consulting brand are business units
offering services ranging from strategic and business process consulting,
programme and project services, change management, supply chain optimisation
and education. This cluster also develops IT strategy, advises on enterprise
architecture, IT governance and risk management.
Technology - through a number of subsidiary companies, EOH is able to sell,
implement and support a range of world-class business applications including:
ERP, CRM, Business Intelligence, Advanced Planning and Scheduling, e-Commerce,
Manufacturing Execution Systems (MES), Technology Performance Management
Solutions and BTO solutions.
Outsourcing - EOH offers comprehensive maintenance and support of clients" IT
infrastructure and applications through the rendering of full IT Outsourcing,
Application Hosting and Managed Services. In addition EOH offers full Business
Process Outsourcing services.
EOH has a presence in all major centres in South Africa and Botswana and also
operates elsewhere in Africa.
Basis of preparation
With effect from 31 July 2004 (`the transition date"), the Group has adopted
the International Financial Reporting Standards (`IFRS") making use of certain
exemptions provided for under IFRS 1 (First time adoption of IFRS). These
interim results are prepared in accordance with IAS 34 (Interim Financial
Reporting) and the South African Companies Act, 1973.
The Group"s auditors, IAPA Johannesburg, Chartered Accountants (SA), have
reviewed the financial information for the period to 31 January 2006.
Effect of the first time adoption of IFRS
In accordance with the first time adoption of IFRS (per IFRS 1), the Group has
prepared an opening balance sheet at 31 July 2004 (`the transition date balance
sheet"). Changes to the transition date balance sheet are recorded through the
statement of changes in ordinary shareholders" interest.
As reported last year, the effect of implementing IAS 17 (Leases) was not
considered material and no adjustment was made. IAS 17 is now applied to all
new leases entered into after 31 July 2005 and the effect of this application
is shown separately in the results.
IAS 16 (Property plant and equipment) requires that the useful life and
residual values of all assets be reassessed at each balance sheet date. Under
SA GAAP the useful life and residual value of an asset were determined on
recognition of the asset and depreciated accordingly.
IAS 38 (Intangible assets) requires that the useful life of intangible assets
be reassessed at each balance sheet date. Under SA GAAP the useful life of an
asset were determined on recognition of the intangible asset and amortised
accordingly.
IFRS 2 (Share-based payments) requires that a company expense the cost of share
options granted to employees.
The effect of applying the above statements has been accounted for, where
appropriate, as follows:
# via the statement of changes in ordinary shareholders" interest
# by restating the prior year comparatives and opening retained earnings
# by correctly reporting them in this year"s Income statement
The following exemptions have been applied in preparing the results:
Share-based payments
The Group has elected not to apply the provisions of IFRS 2 to share-based
awards granted either on or before 7 November 2002 or that had not vested by 1
January 2005 (the effective date of IFRS 2).
Cumulative foreign currency translation differences
The Group has elected to reset the cumulative foreign currency translation
differences on foreign operations to zero at the transition date. From that
date on, all foreign currency translation differences on foreign operation will
be recognised directly to equity.
Business combinations
The Group has elected not to apply the requirements of IFRS 3 (Business
Combinations) retrospectively to acquisitions prior to the transition date. As
a result, the goodwill, net of amortisation, at the transition date becomes the
carrying value of that goodwill thereafter.
Financial Results
The board is satisfied with the performance for the period under review. Revenue
growth has been achieved substantially from organic growth as there were no
acquisitions in the last 18 months. The operating margin improvement is
attributable to the continued focus on the operations efficiency, the
centralising of our facilities and the implementation of a shared services
model. During the year we have invested in new infrastructure, facilities and
technology, as well as in new business initiatives that are yet to reach
maturity.
Future Plans
EOH has achieved critical mass and is considered a leader in the consulting,
technology and outsourcing space. EOH"s position as a major player in this arena
has been further enhanced with business being won across all spheres of
operations. The wide range of solutions offered to various industries in both
the public and private sector, in conjunction with a well proven business model,
strong management and financial strength, bode well for its future growth.
EOH sees the strong market conditions, specifically those in the technology
field, continuing with EOH well positioned to capitalize on these. EOH"s growth
strategy remains focused on organic growth, supplemented by strategic
acquisitions.
Transformation
The Mthombo Trust is now fully operational. With the implementation of the PDI
employee ownership trust, EOH now has 25.1% black ownership. 38% of EOH
employees are PDI"s, so is 40% of our board.
In addition to this, EOH is making progress in our 7-point strategy of equity
ownership, management and control, employment equity, skills development,
preferential procurement, enterprise development and corporate social
investment.
We see transformation as an ongoing process to which all our people are
committed to and involved in.
Dividends
It is the Group"s practice to declare dividends at the end of the financial
year. A dividend of 11.5 cents per share was paid to shareholders recorded in
the books of EOH at the close of business on Friday, 28 October 2005.
Asher Bohbot
Chief Executive Officer
22 March 2006
REGISTERED OFFICE
Block D, Gillooly"s View, 1 Osborne Lane, Bedfordview, 2008
Tel: (011) 607 8100
Fax: (011) 616 9929
website: www.eoh.co.za
e-mail: info@eoh.co.za
DIRECTORS
Dr Mathews Phosa (Non-executive Chairman), Asher Bohbot (Chief Executive
Officer), Rob Sporen (Dutch), Lucky Khumalo, Jane Thomson, Ken Cullinan,
John King, Dion Ramoo, Nkosinathi Khumalo, Steven Evans.
COMPANY SECRETARY
S P Matheson
For further information, please contact:
Rob Sporen on the above numbers or on cell: 082 444 7533
Date: 22/03/2006 08:00:12 AM Produced by the JSE SENS Department
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