Technology group iOCO recently reported its first interim profit in three years.
Ravaged by scandal, the company — formerly EOH — has made a concerted effort to salvage its reputation after allegations of malpractice and tender irregularities under its previous leadership.
Strategies include expanding the international unit, cutting unnecessary costs and changing leadership if required.
Recently appointed co-CEO Rhys Summerton spoke to Business Day about the group’s plans for growth and continued profit.
With the business now trading in the black, what are your priorities for cash?
As soon as we have shareholder approval, we want to utilise available cash to pay down some more of our debt. By the end of this year, net debt to earnings before interest, tax depreciation and amortisation (ebitda) will be at 1x. We also hope to use some of the money to buy back shares.
At that 1x net debt to ebitda level, is that a comfortable level for iOCO’s debt or do you still want to take it down further?
Yes, we’ll take it down from there. Eventually, in the long term, we want to have no debt on the balance sheet.
Where is the growth for iOCO in SA?
The growth out of SA will be in two areas.
The first is that cloud is still growing quickly in SA and iOCO has taken its eye off the ball in focusing on cloud growth. That’s something that we are addressing. Richard Vester has been appointed as CEO for the cloud business. So we want to focus on that and we think there is a lot of growth still to be had over the next couple of years there.
The second part is the public sector. A few years ago, nearly 30% of iOCO’s revenue came from government business. Today it’s 11%. Part of that is because of all the prior misdemeanours in the EOH days.
There’s also been this idea that we can’t just go after public sector work, but since Dennis [Venter] has joined, we’ve restructured the teams in the business units that are targeting that kind of work. We don’t know when it’s going to come through, but at some point it will and that will provide future growth.
Another possibility is to take on more original equipment manufacturing clients.
What about the international market?
The focus there is on the Middle East. We have a very good business in Egypt and that’s doing well. But we want to expand that into the Middle East, where we think there are opportunities in places like Saudi Arabia to grow.
There are some opportunities in the UK, especially with SA businesses that have expanded there. We will try to get more business from them.
AI is big at the moment. Where is the opportunity for iOCO?
I think it’ll principally be in cloud business. That’s where we’ve seen interest. It’s still early days. Even overseas, it’s early days. But at some point that’ll come through as well and there’ll be further opportunities.
But AI is far more difficult to monetise outside the cloud.
EOH infamously lost its lucrative contract and relationship with Microsoft a few years ago. How is the relationship with Microsoft now?
It’s worse than strained. I think the relationship was cut off, really. And it’s a very long road to get back there, if ever, because the decision doesn’t seem to be made in SA.
We are trying to get back on their radar. But I’m not holding my breath.
What we are doing is looking at other alternatives to get that business back. That would be a game changer for the group if we were able to re-establish some sort of relationship there, on a formalised basis.
The point is that iOCO has a completely different leadership and management team now than was the case before. All that past stuff has been cleared out.
It puts us at an interesting junction to try to repair the relationship somehow.
We think we will eventually be successful but I don’t think it’s going to be in the short term.
What is the working relationship with your co-CEO, Venter, like? How have you split the responsibilities?
Dennis and I work together seamlessly. It works well because he concentrates on driving revenue opportunities while I focus on how we can make the best use of our capital.
We work as a trio because we’ve also got [CFO] Ashona Kooblall who is based at our headquarters every day. She really pulls the whole thing together, then Dennis and I also come up with the strategy.
It’s taken a lot of our time. Dennis is very dedicated to the cause.
I work around the world with different people and it’s a great experience working with Ashona, Dennis and the rest of the team. One of the biggest attractions for me with iOCO is definitely the people.
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