The IT services group that used to be EOH sold barely more this year than last, and still grew its profit by 39%, to R357 million. iOCO's results for the year to July, out on Tuesday, show where that came from, and it was mostly not customers.
Revenue rose just 2.7%, to R5.73 billion. Most of the profit growth came from spending less instead: the wage bill fell by R288 million, and finance costs dropped by close to a third as the company paid down debt.
Tax did the rest. iOCO's effective tax rate, the share of profit it actually hands over, fell to 15.5% from 22.5%, because it could use tax losses it had never previously counted on its balance sheet. Lower costs and a smaller tax bill, between them, did most of the work that more customers would normally do.
The cash that did not come back
Profit and cash are different things, and this year they went in opposite directions. Net cash from running the business fell 44% to R239 million. The reason sits in last year's numbers: in the previous financial year customers paid down what they owed iOCO by R293 million, which released cash, and this year that did not happen. Before that swing, the business actually generated more cash than a year earlier.
There was no dividend. Instead iOCO spent R69 million buying back about 2.6% of its own shares, which is more than the R62 million of debt it repaid.
Buying the growth it is not making
The core of the business is shrinking. Services, iOCO's biggest line and the heart of any IT services company, fell 6.6% to R3.9 billion, while hardware sales rose by half. At iOCO International, which works across sub-Saharan Africa, Europe and the Middle East, operating earnings fell by a third. The statements give no reason.
So iOCO is shopping. Chief financial officer Ashona Kooblall told Business Day that acquisitions are "the No 1 priority" for its spare cash, and that the group has looked at close to 24 possible deals over the past six months to a year. It bought MySky, an enterprise networking business and its first acquisition in eight years, and in July announced a takeover of Astraia Technology, a cloud software firm, for an undisclosed sum.
iOCO has told the market to expect operating earnings of at least R680 million in the year to July 2027. Any deals that help it get there, Kooblall says, will be announced as the legal documents are signed.
