EOH is looking for growth opportunities outside of the country.
- EOH says it is well placed to expand into new markets, with sub-Saharan Africa, the UK and the EU as targets.
- The technology group sold non-core assets to free up cash to reduce debt.
- Data analytics, cybersecurity and cloud consulting to new customers are seen as another growth area.
Technology group EOH – which embarked on a recovery strategy following the outbreak of a corruption scandal involving senior executives – plans to expand into new markets as part of its growth strategy.
The company is in the process of engaging investors to define its strategic options and is seeking South African companies with a UK or EU presence for potential growth opportunities. Increasing sales of software development, data analytics, cybersecurity, clean IP products and cloud consulting to new customers are seen as another growth area.
“EOH is at the point where it needs a right-sized capital structure to prepare the business for the resumption of a growth-oriented strategy driven by cross-selling opportunities,” the company said.
The company sees itself as well positioned to expand into new markets and customers through a profitable service offering, focused in sub-Saharan Africa, Egypt and the UK.
Part of its turnaround involved debt reduction, which led it to sell some of its assets. The company’s debt stood at just over R4.5 billion in the 2018 financial year, which it said was the result of an “aggressive acquisition growth phase”.
Debt has been reduced to around R2 billion, with R1.4 billion repaid.
Its high debt levels have been compounded by a “complicated structure” with 272 legal entities and duplicate management, sales structures and real estate leasing inefficiencies. It posted a loss of R1.3 billion in 2020 and turned profitable in the full 2021 financial year.
An amount of R750 million is expected from the disposal of non-core assets.
“Resizing the capital structure will allow EOH to pursue a growth strategy, immediately improve earnings and ultimately create shareholder value.”
EOH’s reputation took a hit in 2019 when an ENSafrica investigation uncovered a web of bribery, bribery and overpayment of corporate development providers in a circle involving its senior executives. Most of the questionable transactions involved the firm’s subsidiary, EOH Mthombo, which had major contracts with the public sector.