Shares in EOH Holdings soared nearly 25% on Monday, ahead of interim results on Tuesday, as investors began taking the view that the worst may be over for the battered JSE-listed technology services group.

The shares were up as much as 24.9% at their peak in intraday trading in Johannesburg following a trading update published last week in which EOH warned that its earnings would plummet on the back of major impairments.

Its shares touched a near-decade low of R9 — an intraday loss of 19.8% — after the update was released on Friday, but they have since rallied strongly as investors warmed to CEO Stephen van Coller’s efforts to clean up the company.

EOH said it would post a headline loss of R9.93/share for the six months ended 31 January 2019. However, revenue would remain stable at R8.4-billion and operating costs would remain roughly unchanged (after the exclusion of the impairments and other one-off items).

Normalised earnings before interest, tax, depreciation and amortisation would be R387-million.

EOH’s share price has fallen spectacularly this year, in part after TechCentral revealed in March that Microsoft had terminated its channel partner agreements with the company over possible malfeasance involving a department of defence contract.

The company said on Friday that interim earnings — a loss of R20.99/share — would be impacted by, among other things, impairments to goodwill, intangible assets and equity-accounted investments of R10.92/share.

EOH emphasised that its net asset value — “notwithstanding the non-cash-flow items” — was R4.6-billion, including cash of R957-million, at the end of January 2019. This was “substantially above” the group’s market capitalisation, it said. — (c) 2019 NewsCentral Media