Technology firm EOH has reported another strong performance largely helped by existing businesses, which accounted for 80% of revenues for the six months to January. But an analyst warned the group’s growth was starting to slow down.
EOH’s revenue for the half-year to January rose 21% to R7.2bn while headline earnings per share were up 22% to 438c. Net profit rose 29% to R597.4m.
EOH has reported steady growth over a decade, helped by acquisitions and existing businesses. It has expanded into more than 20 countries across Africa and the Middle East.
EOH provides a range of software and hardware services and products and also business process outsourcing services.
CEO Asher Bohbot said all EOH’s operations had recorded strong performances and the trend was expected to continue. "EOH responds to the needs and requirements of the economy and all its customers," he said.
Bohbot said the main growth drivers remained the development of new and additional software products and expansion into new territories to meet clients’ needs.
It would further grow the distribution of its own niche software products internationally. The group would also increase its involvement in the public sector, which contributes about 15% of revenue.
The company believes its solutions could contribute to improving service delivery. Bohbot said EOH views its involvement in the public sector as "both a business opportunity and as a responsibility".
Mergence Investment Managers portfolio manager Peter Takaendesa said EOH’s interim results were largely in line with guidance and with adjusted market expectations as reflected in the steady share price performance.
EOH’s revenue growth rate remained well ahead of the South African information and technology market, which implied the company was continuing to gain market share through acquisitions of other business as well as strong organic growth.
However, Takaendesa said EOH’s growth rate was starting to slow as the group became bigger but the growth rate remained "quite healthy" despite a tough economic environment.
The rest of Africa and Middle East expansion could help offset the relatively mature South African market over the next five years but the risks were also relatively higher in some of their new markets, he said.
"EOH continues to be an impressive South African corporate story and we will be watching closely if some of that success can be replicated in other tougher African markets," said Takaendesa.
Kaplan Equity Analysts MD Irnest Kaplan said it was "generally business as usual".
"The company continues to do well in all areas," he said, although he was concerned about a cash outflow from working capital of R624.5m.