EOH Holdings subsidiary EOH Abantu has resolved an outstanding dispute with the taxman, a move that outgoing CEO Stephen van Coller said resolves the last-remaining “legacy issue” facing the JSE-listed IT services business.
The longstanding dispute involved the payment of PAYE taxes to the South African Revenue Service (Sars), with the group agreeing to cough up R112-million by Friday.
“This amount is in line with Abantu’s year-end provisions and therefore has no effect on the group income statement,” EOH said in a statement to shareholders on Thursday.
Under the terms of the agreement, Abantu will also forfeit a tax credit of R6.9-million and its assessed loss of R34.5-million.
The tax credit was not provided for and will not negatively impact the income statement or the tax line, EOH said. Similarly, the scrapping of the assessed loss will have no impact on the group’s income statement or balance sheet as no deferred tax provision had been raised previously, it said.
To settle the tax debt, EOH has reached an agreement with its lender, Standard Bank, for a “temporary increase” in the group’s facilities to allow for payment to be made by 1 March.
“Due to successful sale of non-core assets, the additional facility requirements are limited to R63-million,” it said.
Last ‘legacy issue’
However, an agreement to waive the loan covenants for a period of 12 months to allow additional loan repayments will reduce the group Ebitda-to-total-debt-covenant ratio to below the 2:1 requirement level. (Ebitda refers to earnings before interest, tax, depreciation and amortisation, a measure of operating profit.)
“At year-end, the group reported it would raise at least R75-million in sale proceeds. The group is on track to meet this commitment,” it added.
In a statement, Van Coller sought to put a positive spin on the tax settlement with Sars, saying EOH is “extremely excited to close out our last significant legacy issue”.
Read: How did Stephen van Coller really do as EOH CEO?
“While this negotiation was frustrating at times from an EOH business perspective, I would like to assure South Africans that in solving this very technical and complex issue, the senior Sars officials were extremely diligent in ensuring the best possible outcome for South Africa.
“This large legacy issue was the final piece of the very complicated puzzle that was needed to be solved to allow the EOH Group to operate as a normal business.”
Read: EOH under pressure as Van Coller exit nears
Following the disclosure, EOH shares were trading 1.9% higher in Johannesburg on Thursday morning at R1.08 apiece. They have lost a quarter of their value since the beginning of the year. — © 2024 NewsCentral Media
