Technology services group EOH Holdings will report a huge loss for the six months ended 31 January 2019 on the back of significant impairments as the new management team, led by CEO Stephen van Coller, moves to clean up the business.

EOH will post a headline loss per share of R9.93, it said in a statement to shareholders on Friday before markets opened in Johannesburg.

The group’s share price plunged as much as 19.8% to R9/share shortly after markets opened, but later staged a significant recovery, ending the session 1.6% higher at R11.40.

Revenue will remain stable at R8.4-billion and operating costs will be flat, after the exclusion of the impairments and other one-off items. Normalised earnings before interest, tax, depreciation and amortisation from continuing operations will come in at R387-million.

“The group has recently completed a strategic review of the business and presented a strategic plan to the board which was adopted in late March 2019,” EOH said. “The strategic review necessitated a review of the carrying value of intangible assets, the identification of business lines no longer core to the adopted strategy and a review of minority investments.”

Losses

The impact on earnings per share, which will be a loss of R20.99, include:

Impairments to goodwill, intangible assets and equity-accounted investments of R10.92/share;
Losses on business identified for close-out in the interim period of R3.72/share;
Impact of additional specific impairment provisions of trade receivables and other financial assets under IFRS 9 accounting standards of R1.42/share;
Impact of the Lebashe empowerment transaction of R1/share; and
Loss on the disposal of an equity-accounted investment in Zimbabwe of 93c/share.

Furthermore, a financial review has resulted in a restatement of the full-year results for the 2018 financial year, with Heps declining from the reported R2.78 to 18c (or from R2.83 to 23c when discontinued operations are included). The restatement relates to an impairment booked against the unwinding of the acquisition of GCT and the TTCS equity-accounted investment in Zimbabwe, the group said.

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 is “substantially above” the group’s market capitalisation, it said.