A review of the business by JSE-listed EOH CEO Stephen van Coller during his first 100 days in the position has led the company to refine and expand its reporting and management into four distinct operating units, which enables it to better support these businesses with different focuses, capital structures and management, the company said in a Sens announcement on Tuesday.
EOH ICT, the largest business unit, is a largely cloud-based digital, data and applications business. The second strategic pillar is Nextec, which offers domain consulting, advisory and knowledge process outsourcing options and various other solutions.
Third are the EOH Own Software businesses, where the assessment has uncovered many significant opportunities to unlock value, said Van Coller.
Lastly, the EOH International business requires focused attention and is at an early stage of being implemented with an enhanced ability to ensure a better global delivery model, he added.
“The new structure also presents opportunities for better cross-selling, as well as significantly enhanced and improved collaboration, business-unit empowerment and accountability to enable a fully customer-centric approach that focuses on holistic solutions over products,” said Van Coller.
Further, a detailed optimisation of the EOH property portfolio is being implemented, as well as the centralisation of treasury management and procurement on large items. This should deliver significant annual cost savings, he noted.
“EOH remains a sound business. However, specific legacy issues have affected the company’s value and capital structure. These include the assets from the group’s international businesses that, in some cases, are in a growth phase and not paying dividends and, in other cases, cash is trapped in [other] countries.”
There have also been significant delayed payments from public sector transformational projects. Resolution of these issues is expected over the coming 18 months.
“Important progress has been made at EOH over the last few months, with a lot to do. Our strategic intent and alignment is now better focused, which will enable us to maintain and improve margins, while allowing our businesses to flourish separately and start moving to an increased software and solution mix to create a more diverse business.
“We are bolstering our financial and other reporting processes, have provided a business-enabling governance framework and will also build a central treasury management function.”
Strategies for next year are based on core principles and will include a focus on cash conversion, saving to invest and creating the right partnerships for scale, he said.
“It is an imperative that EOH’s value proposition aligns with current market trends, which demand a shift from complex, labour-intensive, slow-moving piecemeal applications and products to more simplified, agile, efficient solutions that intelligently answer customers’ needs.”
EOH pointed out that professional services and advisory firms were undertaking a full assessment of the group’s compliance and governance and providing guidance on tools to improve the corporate structure and cash management, as well as assisting with the strategic implementation of the key business components and capital structure of the group.
Difficult trading conditions have continued in the first three months of the group’s current financial year, exacerbated by the constrained South African economy, as well as the government’s public sector austerity measures. Despite these challenges, EOH has enhanced its focus and remained a key partner to its diversified client base.
“Excluding long-outstanding public sector debt, group working capital management has improved. Organic revenue growth has remained in the low single digits and margins remain similar to 2018,” concluded Van Coller.Creamer Media Senior Deputy Editor Online