Listed technology group EOH Holdings will meet with investors in the coming days to assess its “strategic options” after it said in January that it was considering the possibility of going to shareholders to raise new equity to reduce the debt burdening its balance sheet.
EOH reiterated on Monday that its management team, led by CEO Stephen van Coller, is “actively considering options for raising of liquidity to pay down a portion of the R1.5-billion bridge facility” it has from lenders.
In an investor presentation published on its website, it said interest and debt repayments of about R674-million/year are absorbing operational cash flows. A reduction in gearing via a capital raise would free up this cash flow for investment in growth opportunities.
EOH had almost R2.1-billion in gross debt at the financial year-end in July 2021, the group said in the presentation. That was down from R3.4-billion in 2018, but was still too high.
The R1.5-billion debt facility matures in October 2022.
In its presentation, EOH said it is now considering a “potential equity raise or other strategic options” to raise R750-million, with another R750-million expected to come from the sale of “non-core assets”.
The group is concluding a “common terms agreement” with its lenders for a R500-million facility repayable in three years’ time and for the R1.5-billion bridge facility due in October.
“EOH is at the point where it requires a right-sized capital structure to set the business up for the resumption of a growth-led strategy driven by cross-selling opportunities,” according to a slide in its investor presentation.
“Right-sizing the capital structure will allow EOH to pursue a growth strategy, immediately improve earnings, and ultimately lead to a value unlock for shareholders.”
It noted that its share price is trading at a “deep discount” to its peers. “We believe there’s significant value in EOH relative to peers, particularly as the equity markets begin to develop and appreciation of our growth story.”
Key to unlocking a rerating in EOH’s valuation include the right-sizing of the business operations and the capital structure; reducing uncertainty around the operations; clearly articulating the key business drivers and drivers of future growth; and delivering on financial performance, it said.
EOH shares fell 5.3% to R5 on Monday after news of the planned investor meetings emerged, giving it a market capitalisation of R932-million. Over the past year, the share has lost 36% of its value. – © 2022 NewsCentral Media