iOCO’s (formerly EOH Holdings) plans to reduce debt in the second half of its financial year, and it may consider share buybacks or acquisitions after that, co-CEO Rhys Summerton said on Wednesday.

Summerton spoke in an online presentation after the technology group reported six consecutive months of profitability, and a focus on growth initiatives, strategic investments and working capital management which was expected to maintain the momentum of profitability for the rest of the year.

iOCO has been through a long period of “doing some things right and doing some things wrong”.

When Summerton came to the group at the end of 2024 it was producing some R6 billion in cash a year, putting it among the most cash generative South African companies on the JSE, but its profits ranked it among the bottom of companies on the JSE.

He said they were pursuing a three-pronged strategy to become more profitable, cost cuttting, most of which had already been done, with only the loss of less than 100 staff out of 4 500 currently empployed; decentralised management or “radical autonomy”, the major executive appointments for which had been made; and capital and resource allocation.

He said they planned to reach a point, given the much improved free cash flow and profitability, to reduce debt in the second half to a ratio of 1:1 in terms of debt and earnings before interest, tax, depreciation and amortisation (EBITDA). Debt was R613m at the end of the interim period.

Over the longer term, he said they were confident that the group was capable of double-digit free cash flow per share growth off the 2025 base.

iOCO on late Monday announced its first profitable interim period in three years following a turnaround strategy that involved disciplined execution, strategic cost management, and a streamlined operating structure.

He said they believed the new streamlined group structure, with four incentivised executives running the four major businesses in South Africa “as if it were their own”, while two executives were appointed to run the international cloud-based and UK business, would result in revenue growth for the group.

On a question about whether the new management structure was stable considering the frequent management changes in the group in the past, Summerton said the management structure would likely remain stable if the businesses deliver on performance, and management would be changed where the business did not deliver.

In the six-month period, revenue declined 6.4%, while EBITDA increased by 159.3% to R252m. Headline earnings per share (HEPS) increased to 19 cents, compared to an 11 cent loss per share a year previously.

Summerton said part of the revenue decline was intentional given the efforts to improve profitability, and one opportunity they foresee is to gain a bigger percentage of revenue from public sector work, and there was opportunity to increase this from the current low teens as a percentage of revenue ,to higher than 20 percent, which the group had managed to achieve in previous years.

“The results demonstrate the tangible impact of our strategic reset. We have stabilised the business, improved our financial position, and are well-positioned for sustainable growth. Onerous or loss-making businesses have been eliminated, with a renewed focus on core competencies,” he said.

Gross profit (excluding non-recurring sold entities) increased by 2.8% to R823m and resulted in the gross margin improving to 30% from 27% to 30%. Summerton said the margin increase demonstrates strong efficiency and productivity management.

Chief financial officer Ashona Kooblall said this interim period marked a turning point for iOCO.

She said operational highlights included Connected Industrial Ecosystems (CIE): Revenue growing by 3.5%, driven by strong demand for operational technology and industrial software.

Digital: Software revenue increased 15%, contributing to a 54% improvement in EBITDA. The International business reported a resilient performance despite external economic pressures, with ongoing expansion efforts.

Outsourced Knowledge Solutions (OKS) significantly improved EBITDA due to operational efficiencies and targeted sales investments.

“All our businesses were profitable in the first half. Our turnaround strategy is delivering real results, and we are now entering a phase of focused execution,” he said.

The share today was R2.89, well up from R1.11 a year ago

BUSINESS REPORT