Technology firm iOCO is planning to use its cash resources to buy back its shares and pay down debt, a move that would add to the number of local firms using the tactic to boost shareholder value.
“As soon as we have shareholder approval, we want to utilise available cash to pay down debt and do share buybacks,” co-CEO Rhys Summerton told Business Day on Wednesday as the group — previously trading as EOH — reported half-year earnings.
In recent times, a number of JSE players, including Momentum, Metropolitan, Karooooo, Old Mutual, Glencore, Netcare and Ninety One have been buying up their own shares — a sign they see their stock is undervalued.
Perhaps the largest example of this is the Naspers stable, which launched a buyback programme in 2022 after winding down an unpopular cross-shareholding structure with Prosus.
By reducing the number of outstanding shares, a company increases its earnings per share, which often translates to a higher stock price. This is particularly attractive when management believes the shares are undervalued.
When a company announces a share buyback, it can signal to the market that management is confident about the company’s future prospects.
By the end of the year, iOCO aims to have a net debt to earnings before interest, tax, depreciation and amortisation (ebitda) ratio of 1x, “and so we hope to use some of the money to buy back shares,” said Summerton.
This comes as the technology group lauded the restructuring of its business, underscored by an intense approach to shareholder activism, reporting the first interim profit in three years.
Ravaged by scandal, the company has made a concerted effort to salvage its reputation after allegations of malpractice and tender irregularities under its previous leadership.
Disillusioned with the resulting erosion of value at the once-thriving tech firm, shareholders initiated a plan aimed at revitalising it in 2024. The strategy includes expanding the iOCO and international unit, cutting unnecessary costs and changing leadership if required.
“The company has streamlined its group structure, yielding clear benefits. This restructuring has enabled reinvestment in growth through diversification across an expanded product and geographic base, with services now delivered across five operating companies,” said the group.
Despite reporting a drop in revenue, the group reported increased profits across various metrics.
Group revenue excluding non-recurring sold entities for the six months to end-January was down 6.4% to R2.7bn compared with the year-earlier period. Gross profit, on the same basis, stood at R823m for the period, 2.8% higher, with gross margin improving from 27% to 30%.
Ebitda rose 159.3% to R252m.
Profit after tax for the period was R123m, “marking the first profitable period in three years”.
Headline earnings per share (HEPS) — stripping out the impact of one-off financial events — was 19c after a loss of 11c previously.
Total cash generated from operations was R302m, up 50% year on year.
Debt has been cut by half to R613m over a two-year period.
In February, former acting boss Marius de la Rey stepped down as interim CEO and executive director of the company.
The group announced the appointment of joint CEOs Dennis Venter and Summerton to fill the leadership gap. Both had been nonexecutive directors of the group and hold 25% of iOCO’s equity between them.
In March, former Dimension Data MD Nompumelelo Mokou joined the board of iOCO as an independent nonexecutive director as the group bulks up its board with technology skills.
EOH’s share price has plunged almost 90% in the past five years, well underperforming the JSE all share index, the broadest measure of SA’s stock market performance.
The share price closed 1.27% higher at R3.20 on Wednesday, valuing the company at just over R2bn on the JSE.
Update: April 2 2025
This story has been updated with new information and the latest share price.
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