iOCO Limited (IOC) Earnings Call Transcript & Summary

Good morning, everyone, and welcome. The EOH Board and management team is pleased to report that despite the ongoing challenging operating environment, this 6-month period marks the successful completion of EOH's targeted turnaround strategy, with the group reporting its first positive headline earnings per share of ZAR 0.41 from a ZAR 0.36 loss per share in the previous period. This is a 214% improvement. Total revenue stabilized at around ZAR 3.5 billion for the half year. This included around ZAR 500 million from assets sold in the period. The decrease from the prior year was largely attributable to disposals and the closeout of negative EBITDA contracts as the group continued to execute on its stated strategy of exiting nonperforming as well as noncore businesses. Q2 revenue was up on Q1 as an early indication of the normalization. Total operating expenses decreased by 22% from ZAR 1.1 billion to around ZAR 880 million in the current year. The decline in operating expenditure is a result of extremely hard work, with cost-saving initiatives across the property portfolio and staff efficiencies as well as a signal that the one-offs have finally reduced to negligible numbers and the legal and advisory fees have largely come to an end. Total adjusted EBITDA for the period was ZAR 339 million compared to ZAR 347 million in the prior year. The group saw an improvement in EBITDA margins from 8% in the prior year to 10% in the current year. But it is the operating profit in continuing operations that has jumped from ZAR 12 million last period to ZAR 162 million. That bears testament to the massive shrinking in admin costs as being the last piece in the puzzle to achieving a sustainable turnaround. NEXTEC's focus has remained on achieving quality earnings through derisking the profile of deals signed and focused offerings to customers. NEXTEC has made significant progress in this regard, achieving an improvement in gross margins to 29% from 23% in the prior year, and more importantly, an adjusted EBITDA margin of 7.6% compared to negative EBITDA in the prior year. They are now sustainably self-sufficient. A big well done to all the teams for sticking to the plan through some very adverse conditions, a testament to the culture within EOH. This turnaround completion allows us to go get our future. The Q1 on Q2 OCO revenue uplift gives some glimmer of hope as the green shoots start showing in the economy. It is early days, but certainly an indication we have finally cleaned out most of the negative EBITDA businesses. And this level of revenue is sustainable going forward. What has helped is the fact our customers and partners have totally bought into our turnaround, including the cleanup and long-term contracts have now become the norm. Some of the examples are on the screen. I included the Financial Services AWS deal, as this is a very significant win for us. This represents a great partnership building opportunity with AWS. It is a very strategic client for EOH and possibly the most vocal AWS customer in the SA market about their intent to move most of their workloads to AWS. So to be doing this is incredible and gives us a multiyear, multi-country possibility if we succeed on Phase 1. This is a big enterprise customer entrusting us with a core transformational project for the move to the cloud. But also, this put us on the map for other large corporates cloud transformational journeys. Really, this is just the proof in the pudding that our relationships with our partners and customers are now normalized. This is one of my favorite slides. Normally, I don't like uphills, but these 2 I just love. More importantly, we have hit our 30% GP and 10% EBITDA margin targets way ahead of schedule. This is massively exciting for us. And again, it's just another proof point in the return to normal. While we met our GP and EBITDA targets, the most exciting part is that operating profit in continuing operations that has jumped from ZAR 12 million last period to ZAR 162 million. This is the evidence of the massive shrinking and admin costs as being the last piece in the puzzle to achieving a sustainable turnaround. Some huge changes have happened. Property rationalization started in 2019. And we have exited 146 leases, saving an estimated ZAR 256 million in annual costs. We anticipate saving a further ZAR 38 million in 2023 based on 25 lease exits in the '22 financial year as we close out this chapter. We have had similar success in reducing legal entities from 272 to around 100 by financial year-end. And this has massive admin tax audit financial efficiency implications, not to mention the reduction in business risk. We will continue to rationalize the legal entities as we get certifications and license moved as well as implementing a fit-for-purpose ERP system due to go live this year. I thought this slide was really interesting. The Zondo Commission has been a long process with differing views. One thing I can attest to is the fact that the recommendations are world-class and comprehensive. More importantly, EOH has already implemented all 10 recommendations as part of our cleanup. They work for sure. It is really great to see EOH as leading the charge again. As you are all acutely aware, the lenders asked us to embark on a process with shareholders, potential investors and BEE or strategic partners. This was to look at a solution for the final portion of the bridge facility of around ZAR 750 million that will not be covered by the sale of assets. Also, there were a number of business benefits for closing the bridge out. Firstly, we will be able to deliver a sustainable capital structure with simplified banking facilities. This will give us an improved cost of capital with lower rates on debt, which are currently at around 12% on the bridge. We believe allowing efficient management of cash will save around ZAR 20 million per annum. Normal terms will give us flexibility to operate with cash available to invest in growth. We engaged with more than 50% of our shareholder base. The feedback was interesting and helpful. Also, in the meantime, significant progress has been made with disposals. The bridge facility with a 12-month maturity to the 1st of April 2023 was concluded as well as the ZAR 500 million 3-year term loan. However, there was a general preference for the use of year-end audited accounts for a rights issue. As a result, we will continue to engage with strategic capital providers. And we'll reengage with shareholders with more concrete options at the appropriate time, taking into account all the feedback. Megan will now take you through the financial detail, hopefully, unbridged for us.

Thanks, Stephen, and good morning. Once again, we have shown our results from a total perspective, including both continuing and discontinued. We are nearing the end of our disposals and discontinued results. Continuing operations is a good proxy for a forward view of the EOH group. More importantly, it is pleasing to see the significant improvement in operating profit from continuing operations, ZAR 162 million versus ZAR 12 million in the prior year. We also posted a profit after tax on a continuing and total basis. This is a significant milestone for us and shows the turnaround is gaining momentum even whilst we still have an over-indebted capital structure. Moving on to revenue. From a revenue perspective, we have seen our revenue stabilizing and actually growing over the first 2 quarters of financial year 2022. The decrease in revenue from the prior year is primarily as a result of sold businesses, completing legacy contracts and exiting low-margin contracts. We continued to execute and close out on badly negotiated contracts with poor commercial terms to the detriment of EOH. This was to ensure we did not destabilize our customers' operations as we are generally integral and very systemic to the operations. An example of this is in the public sector where we completed a multiyear ERP implementation at a loss to EOH. Our cash costs came to ZAR 330 million, whilst we only received ZAR 120 million. We have successfully now exited this contract and received final payment. Another example is in the private sector, where we were managing services for our customer on a multiyear contract where our costs were ZAR 116 million and our revenue only ZAR 111 million. We have also exited this customer in FY 2021. From a continuing revenue perspective, we have shown what revenue looks like for IOCO and NEXTEC at ZAR 3 billion for the first half. Historically, our revenue is normally skewed to the second half as there is a level of seasonality, and we would expect to post more revenue in H2. This is also my favorite slide, just like Stephen's. The consistent improvement over the past 3 years has played out across all our main metrics. We have gone from an earnings per share loss of ZAR 0.83 to ZAR 0.13 in the current year. HEPS, we have gone from a loss of ZAR 0.36 to ZAR 0.41 profit. These are significant milestones considering the burden of interest we still carry. Our margins have also shown good improvement, with gross profit margins at 30%, EBITDA at 10% and operating profit at 5%. With IOCO closing out on legacy contracts in the prior year and the turnaround in the NEXTEC results in the current year, this has all contributed to the improvement in margins seen. Our total operating expenses are down 22% from HY '21 to ZAR 881 million. The savings after removing discontinued relates to less impairments on intangibles and financial assets. This also shows our credit management is improving and savings on payroll costs, which talks to efficiency, and then savings on property coming through in our IFRS 16 depreciation. We also expect to see further savings coming through in 2023. In 2023, we realized our optimal property structure. We have exited 146 leases since 2019 and expect to reduce our rental costs by a further ZAR 38 million. We are also close to landing our new ERP. From ERP costs alone, we expect to save ZAR 16 million. This is before we look at the efficiencies we get from the digitization journey. We also had significant legal costs related to the debt restructure and wouldn't expect them to continue either. These tables show the reconciliation of operating profit to adjusted EBITDA and earnings to headline earnings. Our adjusted EBITDA at ZAR 339 million are slightly less than the prior period but up 2% from a margin perspective. H1 of 2021 includes ZAR 50 million additional EBITDA from discontinued and sold businesses. Headline earnings for H1 is significantly up from the prior year at ZAR 69 million from a loss of ZAR 62 million in the prior period. The IOCO business is now a well-balanced business with a focused strategy and end-to-end offering to customers in the ICT space. Gross profit margins remained strong in the IOCO business, in excess of 29% compared to 26.6% in 2021 and EBITDA margin stable at 10.2%. iOCO Digital is at the heart of 4IR and delivered a solid performance, albeit with a reduction in revenue. Revenue reduced as a result of the closeout of a nonrecurring contract, which was partially offset by new business. The business has focused strongly on cost management and productivity and saw an improvement in adjusted EBITDA margins to 10% from 8%. The business remaining in the iOCO technology cluster comprises enterprise applications and the software reseller business, which saw a reduction in EBITDA margins. The reduction in adjusted EBITDA margin to 9% was as a result of OEMs reducing margins to resellers of software and the enterprise application business performing at suboptimal levels. The performance of our enterprise applications business is being addressed. And our OEM strategy for software resellers has been refined. We do however see margin pressure from OEMs to resellers as a long-term trend. iOCO has established infrastructure services as an end-to-end service offering. The infrastructure services offering comprises the managed services and connectivity businesses and the compute platform businesses, which were previously included in iOCO Technology. The establishment of IS and consolidation of costs has resulted in higher adjusted EBITDA margins from the combined business for the half year to 6% from 4% in the prior year. The iOCO platform business houses our knowledge outsourced businesses and early platform businesses. This business saw consistent performance, with a slight increase in margin. Digital Industries provides OT solutions to customers in the mining and heavy industry space and posted adjusted EBITDA margins at 18%. Digital Industry margins decreased slightly as a result of investment in growth and opportunities to grow the business into Africa and the Middle East. Our legacy contracts closed out in the current year, and the drag on margins is now out of the system. Turning to NEXTEC. The business is focused on turning around the business over the last 3 years, getting it into a manageable and coherent space and developing a strategy for the business, which is now made up of 2 main pillars: people outsourcing solutions and infrastructure solutions. The focus has remained on achieving quality earnings through derisking the type of business taken on and focusing on the offerings to customers. NEXTEC has made significant progress in this regard, with gross profit margins up to 28.9% from 22.9% in the prior year, adjusted EBITDA margins of 5% compared to negative returns in the prior year. The NEXTEC Infrastructure Solutions business was impacted by contract delays and international supply challenges. However, this was partially offset by the outperformance of projects in the mining industry related to demand for mesh communication networks and the positive momentum in our consulting businesses. The activity in our consulting businesses is a leading indicator for industrial development in the country. The Infrastructure Solutions business delivered a positive EBITDA for the first time in 3 years with an EBITDA margin of 1%. The NEXTEC People Outsourcing Solutions business performed well, seeing an expansion in EBITDA margins to 9% from 7% in the prior period. From a balance sheet perspective, the balance sheet has remained stable, with an improving net asset value and with very little movement from year-end. The remaining goodwill in the business of ZAR 693 million is split between our iOCO and NEXTEC, with 2/3 attributable to iOCO. From a debt perspective, we have made good progress and hit some key milestones. We have signed our CTA with the 4 banks, which gives us a ZAR 500 million bridge facility repayable in 3 years with a bullet and then a ZAR 1.5 billion bridge facility repayable on 1 April 2023. We have already paid a portion of the bridge back subsequent to the half year through the receipt of proceeds from Sybrin and some smaller disposals of ZAR 359 million. We then expect a further ZAR 535 million in from Information Services and Network Solutions. This will leave around about ZAR 665 million of the bridge to be resolved through the fixing of the capital structure. We have also shown how the covenants are calculated, which is based on the term facility only. We have annualized the half year results and then calculated the covenants. Although we are well within the covenants, the terms of the debt are onerous and it makes it difficult to operate. We would ultimately look to have a simplified debt structure where we can optimize our cash resources with our debt and preferably a single bank for debt. Our net working capital continues to remain in a controlled space at ZAR 299 million. We have also seen an improving credit management. And as a result, our expected credit losses have decreased from 13% to 9%, with a ZAR 20 million released to the income statement. This slide shows our current provisions for legacy issues and our expectation of cash outflows of these items on settlement. These legacy issues include a PAYE provision related to a dispute with SAS for indirect taxes for a business that outsources staff and then a provision related to the SRU for the Department of Defense settlement that we are currently paying off related to overbilling of licenses. We have a similar matter of overbilling of licenses on Department of Water and Sanitation. We are still in discussions with the SRU to settle. From other risks in the business that we have historically faced the NEXTEC, the Piersolar projects have now been handed over to the customers, and we are in the warranty phase. And then the Auto spec project, where we're electrifying water pump stations, is now in a controlled space and drawing to a close. This is probably my second favorite slide. We have had a good 6 months from a cash perspective. Our EBITDA to cash conversion was at over 75%. We have seen good cash generation for the 6 months at ZAR 290 million from operations. And have been able to cover off all our costs even with our suboptimal capital structure and expensive interest costs. The legacy cash outflows have come down significantly from the prior year, where they were at over ZAR 200 million. We saw proceeds of ZAR 78 million from disposal of assets, which have subsequently been used to reduce the debt after the half year. With that, back to Stephen.

Thank you, Megan. The turnaround strategy was focused on returning the business to sound footing. The Phase 1 strategy focused on credibility, liquidity and transparency. The return to a bottom line profit, normalization of margins as we do the right business with the right customers in the right way as well as the normalization of our cost base and procedures now allows us to go get our future. This strategy will focus on growth, efficiency and talent. This is incredibly exciting for all our people, especially the timing that allows us to capitalize on the post-COVID digitization dividend of work and shop from anywhere. We are now very clear on how we drive growth through our business model. And given the breadth of our business, we are well balanced and sustainable, with the solid foundations to drive future growth. Given our strength and long longevity in the market, we have a sizable market share in our iOCO Tech OEM business and NEXTEC Infrastructure businesses. These businesses are solid and established businesses, which we expect to grow in line with GDP. We will continue to optimize to ensure these businesses are lean and can deal with competition in an agile way. The significant growth engines are businesses in high-growth markets, iOCO Digital taps into the 4IR market trends with growth of 15% to 20% expected. Digital Industries is directly positioned in the rapid growth area of the OT and IT intersection. The Infrastructure Services business creates the ideal platform for clients to outsource their IT infrastructure. This business unit speaks directly to clients' needs to optimize costs and continue to migrate away from inefficient legacy systems and move into the cloud. All of these businesses are currently significant contributors to revenue and are earnings accretive. Our future foundations comprise our IP companies, companies which are ready for scaling and geographic expansion, while currently small contributors of less than 10% of group revenue, that present exciting opportunities for business build-out into untapped areas of the market. These businesses are significant drivers of margin in the next 5 to 10 years. All these businesses require us to invest some capital to grow and expand. Our presence in markets with strong growth fundamentals is growth theme #1. Although the ICT market is very correlated to GDP, it tends to grow faster than GDP and proved to be resilient during COVID, rather flatlining than shrinking. We have estimated EOH's SA market share for services at around 5.5% and packaged software at around 7%. This makes up 90% of our revenue. Our hardware market share is around 4.5%. We believe we can now increase these market shares given our consolidated business strategy being more fit for purpose. Our expansion opportunities relate to actively selling software development, data analytics, cybersecurity, move to the cloud and our own IP products. We will continue to find new clients and expand our wallet with existing clients using our newly established focused go-to-market team. We already have seen dividends in this regard. Furthermore, we will follow clients we have in South Africa into the U.K. and EU and expand our presence as required. This geographical expansion with EOH's partners and vendors will focus on where we have core skills and dominant partnerships. Attacking the Middle East through our long-standing Egypt business has great potential in the current oil price environment. Egypt also has the potential to support the South African, U.K. and EU with cost-effective outsourcing. This is a program we have already started. Our second growth theme rests on the fact that we have an amazing and diverse customer and OEM partner base. We are a premier partner to global technology providers and represent over 50 strategic OEM partners. We have been through rigorous compliance and governance checks and have managed to renew our partnerships and cement a few more. We deliver services to major telcos, banks, insurance companies, retail companies and mining conglomerates. And as shown previously, we are attracting good quality multiyear deals, which reflects our customers' confidence in our capabilities. Our diverse customer base alongside the fact that software and services make up around 90% of our revenue makes us a resilient business. We have proved this twice by coming through 2 major crises stronger and better each time. I am now even more confident that EOH is one of the market leaders in the African IT sector, with a diverse service offering that is well positioned to meet the needs of our clients. Our client value proposition is our third growth theme and is designed to align to our clients' business transformation journey. We deliver value with 2 goals in mind: digital business enablement and optimizing the IT engine room, with efficiency and operational excellence at the core. I call this change or digitize your business and manage your business/IT engine room. We enable CIOs to manage the IT engine rooms with access to world-class services and capabilities. It enables them to focus on the front end of the business, with all the back-end support of a multinational. We have organized our rail tracks in a way that highlights all the components that should be considered, with devices, IT management, networks, move to the cloud and manage connectivity, all key offerings with security built into every layer. True to our EOH legacy, manage and operate continues to drive strategic value across our stack of services as well as into our clients as they journey to anything and everything as a service. Cloud clearly sits at the center of the model, and we are cloud first in all we do, be it hybrid, public or private. As I said earlier, security is not an afterthought, but rather built into every layer. This cluster of businesses have now been consolidated and operate under a single banner to simplify this critical offering to our customers. The digital transformation layer represents our core capabilities in the fields of enterprise applications, application and software development and industrial application solutions. Here, we may solve a process problem to deliver an outcome or a solution for our clients and their customers, deliver an automation outcome, a functional requirement or a product that is ultimately consumed and drives revenue. In the industrial space, we deliver and digitize industrial manufacturing outcomes and work with 4IR technologies to drive transformation. Ultimately, this all enables the digital agenda for business as they deal with work and shop from anywhere requirements as well as take costs out of their business and deliver a better client experience. Quality assurance and testing are fundamental to our application centers of domains. The outsourcing of application management to iOCO frees up capacity and optimizes cost to allow business to realize maximum value from the application ecosystem. We believe that automation is a strategic imperative for all our clients, and we hold automation capability across the entire stack. Data remains the most valuable asset in our clients' world on which they are building and leveraging to deliver a competitive advantage. Our newly formed Rocket Lab Ventures will house all current and future own IP platforms. These businesses will benefit greatly in the future from the significantly added attention and capital allocation as they look to scale. While less than 10% of revenue now, given our return to profit, we can now allocate some of this hard-earned capital to their future growth. This is very exciting for all our businesses as they can now focus on not only delivering key solutions to our customers, but also commercializing our own IP as well as adding value to the commercialization of potential partners' IP using our extensive internal capabilities as well as our unrivaled go-to-market capabilities. Efficiency is the E in the GET strategy. We have navigated 2 crises in 3 years and have come out stronger each time. We did not let the first crisis go to waste. We learned a few very valuable lessons from that experience, which then allowed us to evolve into a nimble and agile business that is well able to manage volatility, case in point, COVID-19. We have learned that one can never predict what is coming and have sought to ensure that our business is optimized to weather any storms. The right capital structure will enable us to significantly reduce our heavy interest burden and give the headroom to take advantage of opportunities aligned to our growth strategy. We were able to take costs out of the business while still growing margins. We have always maintained that one of our core focus areas is to create an anti-fragile organization that is able to adapt to the changing environment. The business has been strongly focused on a rightsized cost base, which includes the simplification of the business structure. This goes hand in hand with our investment in the digitization of our shared services in order to improve efficiencies. We are embedding our safe to invest mindset to optimize our use of resources. There are further property leases to run off in our new ways of work environment. We expect a further ZAR 38 million of savings in 2023 as we exit more leases. We are targeting 100 legal entities by July 2022, down from 272 originally and 60 finally. This will make a huge difference in normalizing tax, admin, audit costs, not to mention the simplification of business risks. The closeout of the cleanup has seen significant reduction in bank fees, legal fees and interest costs, which has made its way directly to our bottom line. Furthermore, the recap and normalization of the capital structure will not only significantly reduce the perceived risk in the business, but will allow us to invest in our future. This is incredibly exciting. And if we have proved anything, we have proved that EOH team can execute very successfully. We aim to continue this in our Phase 2 GET strategy. Talent is the T in our GET strategy. We have made great progress towards creating a compelling and future-focused EVP, which includes a strong focus on employee attraction, retention and engagement. Our new ways of work model is centered around establishing EOH as a best place to work by designing a networked talent ecosystem that is location agnostic. This includes creating a digital workforce that is exceptionally effective and efficient in terms of capacity, capability and time utilization. Some of the initiatives introduced include the Rise Up Academy, which was launched in 2021. It allows for continuous e-learning and development. This is a platform where our people can reskill and upskill themselves and has helped create a proactive learning culture. My Next Move is a program to help promote internal mobility at EOH. All vacancies are first advertised internally, where all our people are given the opportunity to apply. In 2021, My Next Move facilitated the promotion of many of our people. Of the people promoted, 50% were people of color and 37% were females. We are also promoting a culture of volunteerism, which adds significantly to our team culture. Wellness Wednesdays are aimed at promoting employee well-being on a holistic level. Sessions are held twice a month, and it covers various topics across physical, emotional and mental health. This has been immensely important post COVID. Lastly, we are implementing a robust approach to remuneration. Our focus is on fair and equitable remuneration, and we are driving a pay-for-performance philosophy. As a proof point of the early success of the EVP, 88% of staff interviewed in their exit interviews would consider returning to EOH should the opportunity arise in the future. EOH continues to make a huge difference to the lives of less fortunate South Africans. In 2021, we impacted 4,066 youth through life schools programs, work readiness programs and our ICT program. Afrika Tikkun is our partner in transformative development. They grow, nurture and establish young lives from cradle to career with sustainable opportunities. The focus is to empower young people. Afrika Tikkun is working hard to bridge the gap between the ICT job market and the young disadvantaged South Africans by helping them develop their STEM skills and improve their employability. The Belgian campus and IT Versity trains young people to work in the ICT industry and equips them with the necessary soft skills, attitudes and behaviors to make them work ready. In 2021, 80 students, of which 17 are living with a disability, were supported by EOH financially to study for a Bachelor of Computing degree or a diploma in IT. EOH partnered with Prime Stars and the step-up to a green startup, a program which is aimed at inspiring young entrepreneurs to find opportunities in the green economy through the provision of practical process that young entrepreneurs can follow to start their green businesses. This is but a few of our initiatives driving employment for the unemployed. We are back in the black, ahead of schedule due to an excellent team effort. We have regained our credibility with our customers and partners by providing differentiated solutions and delivery excellence, while being totally transparent and ethical to the market. We are now confidently doing the right business with the right customers in the right way. We are now able to go get our future. G is for growth. We operate in a fantastic industry growing faster than GDP, what I call the digitization dividend. We have a broad set of skills, allowing product-agnostic solutioning for our customers. We have over 5,000 certifications across more than 50 OEMs. Around 4,200 customers, including most blue-chip companies in South Africa, with 90% of our revenue in services and software, which is the sweet spot in the ICT space. E is for efficiency. A great team effort, a significantly reduced costs, allowing double-digit EBITDA margins. There is more still to come as we consolidate the. T is for talent. We believe our broad solutions offering, large client base and diverse OEM partner base provides an unparalleled learning ground for young talent. We continue to work on becoming the coolest place to work. EOH is now back in the black, and we are ready to go get our future. I'd just like to say a huge thank you to all our partners, clients, people and shareholders for their support and patience. Because of all of you, many jobs and livelihoods have been saved. We will now have a short Q&A session. [Presentation]

Yes. It's been very interesting to see how, first of all, the team responded to COVID environment and how we will manage to really get ourselves really efficient and a fit for purpose. But also how the market has now moved into what I call the digitization dividend. And we're seeing a lot more contracts closing and people actually wanting to digitize their business and this work from anywhere, shop from anywhere. And obviously, we're in that space. So it's an exciting space to be in. And we're starting to get some of that benefit.

We'll hear from the CFO. How is the Financial Director feel at this point in the EOH journey?

I'm having far less sleepless nights on when compared to when I first started. So no, very excited. And that it's been a massive team effort to get here. And it's really been single-minded focus and everyone pulling their effort in terms of getting here, focusing on making sure we do good business in terms of top line from a revenue perspective, focusing on costs and making sure we've got an efficient cost structure. And then also just turning around the businesses. And I think a big shout-out also to NEXTEC in terms of where we've come from. I don't think any of us were expecting NEXTEC to turn around so quickly and post good EBITDA profits for the half year now. So all of those have combined for us to be able to have a positive HEPS and EPS for the first time in 3 years and then also a total bottom line profit. And even when you think about the fact that we had a heavy interest burden, we managed to pay our interest and still deliver a profit. I think that's fantastic.

The general environment in South Africa, we're still not out of the woods. From an outlook perspective, where do you stand?

Yes. I think we've sort of been, I suppose, in a way, a benefactor of this Ukrainian war because you've seen the commodity drive, and the -- so the rand's come back and everything. But longer term, this global inflation, I think, is going to be an issue. We haven't done very well in creating new jobs. I mean, we saw the new jobs. I mean the unemployment hit nearly 1/3. I mean that's a disastrous number for in the economy. And so we're really going to have to work hard as corporates to create jobs in the country and create productivity. And this is why we get involved in so many of those things around the ICT industry. I do think it is one of the industries that if you get right, you can actually drive growth within a country. So I'm quite excited about our participation in that. But I think it's going to be a tough 2 years ahead.

So maybe a number of questions coming through on the capital structure and finding the optimal capital structure, which you have alluded to in the verbiage this time around. Where are we? And what are the plans going forward?

So in terms of our debt, I think we've made good progress. Our debt was at just over ZAR 2 billion at the 31st of January. Since then, we've paid down ZAR 360 million. And we've also announced our sales of Information Services and NS, which should bring in another ZAR 500 million. So all in all, we'll be around ZAR 1.2 billion debt after we've taken that into account. So I think we're in a good place in terms of where the debt is down, being able to service the interest costs related to that. And that gives us a level of ability to look at various options. So we did say to the market that we were looking at the various options from a capital raise perspective, engaging with strategics. We have done that over the last 6 weeks or so. And we've had good feedback, and we'll continue on that path. Some of the feedback we have received, which Stephen alluded to in his presentation, was the fact that, obviously, if we were to go and do any type of capital raise, it would have to be off the back of audited accounts. So that would put anything like that towards the end of the year, but we...

But you're not under pressure?

No. I mean I think this is what has given us the optionality. We're generating cash as Megan slide showed. But more importantly, we've covered all our interest costs, all our one-off costs, all our tax, everything, out of that operating cash flow, which wasn't the case previously. And that gives us lots of options. And so we can go and have a look and have a -- and we are having discussions with shareholders and what do they want us to do. At the end of the day, it's a fair business. And then we will then take guidance from them. But as a management, we need to give them options so that they can decide what is the best for them at the end of the day. And so we'll continue that process into year-end. And pretty excited that by the end of this calendar year, we'll have this all wrapped up and be able to move forward.

On that note, is there a possibility EOH might delist coming through?

That's an interesting question. I mean that's not really our decision as -- even as directors, at the end of the day, to delist on each shareholder approval. But also to -- for shareholders to give you approval, you have to have someone outside the company come and offer a big check that is acceptable to shareholders. So that is not an offering at the moment. But shareholders will have to decide whatever comes in what they want to do. It's not really my decision.

Megan, Microsoft reseller agreements, that was canceled. Has that been resigned?

That hasn't been resigned. We've obviously tried to engage with Microsoft. They're running their own processes with the SEC. And we don't think that there will be any contact in South Africa until that's resolved from an SEC perspective. I think they've got some bigger issues with some of the other press that's come out related to the Middle East. So I think once they have solved their issues, hopefully, we can reengage with them again.

Stephen spoke about the GET strategy: growth, efficiency and talent. In terms of efficiency, is there much more to come from a cost perspective?

So we did try and show that through the cost slide. And as Stephen said, on the property side, we really hit 2023 as our year where we hit property optimization, and we've got about ZAR 40 million of costs to come out there. Then from an ERP perspective, we're doing a whole lot of digitization and are back into. And so that should be going live in the next few months. And we would expect over the longer term that there's some efficiency still to come through there. But I think we're probably get into the place where we at an optimum cost structure. And so it is really about growing out the top line now because we've got the right cost base.

Yes. I think that's a really important point. I mean there's been a lot of criticism on the size of operator -- admin cost, and there was, because we had a lot of legal costs, we had a lot of advisory costs. We had a lot of banking costs, and we had a lot of one-off costs. But you've seen how those have come down over the last 3 years. We've worked really hard. I mean we took nearly ZAR 250 million out of our operating costs. And this is why we've ended up with a -- and that's for a half year, by the way. And that's why we've ended up with a profit. The issue -- if you have a look now, you've got your 30% margin, GP margin. You had a 10% EBITDA. You've got a 5% profit margin. How you grow that now is to grow your revenue without growing your admin costs? And why we're confident about that is we've digitized everything. As I've said, everything we do in the back office, if people want to spend money, then is do it as a service. It must be good to sell to other people. Otherwise, it's not good enough for us. And that's been quite exciting. And so as this new ERP comes in and the digitization of all our GRC pieces, they're very...

GRC being global risk?

Yes. And compliance.

And compliance.

The government's risk and compliance processes. But you -- now that they're digitized, you can grow without having to spend more money. And that's what's quite exciting.

And then just a final question on the outlook in terms of the trends that you're seeing from your clients. We see a number of headlines being picked up in the media that you are confident in terms of what you're seeing from a digitization perspective as your clients continue on their digitization journeys and that you are well placed to service them anywhere along the IT stack.

Yes. I think, first of all, as I said earlier, a big shout out to our customers. I mean they've really -- you have to trust the process. They put us all through processes. Those processes have worked. And they're now entrusting us to a lot of their longer-term plans. And we're seeing that in the 2-, 3-, 4-, 5-year contracts that are now coming back. But what's happening is quite interesting, is there's this hard push now to either outsource the infrastructure so that they can focus on their front end what they're good at, and they want world-class back end. We can do it at scale because we're doing it more customers, so you get like a multinational service, but you only pay for what you use. That's very exciting. We're seeing that really come hard. And then a lot of people wanting to move a lot of their scale and cost into the cloud that you can -- especially a few in multi-countries or multi areas, you can cut and paste, do it once, and cut and paste across all other businesses. And we're seeing a big push on that now. A lot of our contracts are around that. And that for me is very exciting. And then also, I mean, you saw yesterday, the announcing that they're going to do this a bit around. We've been waiting for that for ages. I mean it's so awesome that South Africa is leading the charge on that. But that also creates a whole new possibility with e-commerce as a service. And we're very well placed for that. So very excited about what we can do in the future and how we can grow our market share.

Well, congratulations on a successful turnaround and that being evidenced by the profit EOH back in the black. This is the interim results period. And thank you very much for your participation.