EOH to report a massive full-year loss

Troubled technology group EOH Holdings expects to report a headline loss per share of at least R18 for the year ended 31 July 2019, with the number impacted by impairments, it warned shareholders on Wednesday. The shares plunged 12%.

The earnings per share loss from continuing operations is expected to be least R27. This should be “seen in the context of the EPS loss of R20.73/share in the audited results for the six months ended 31 January 2019”, it said. The numbers will also be impacted by the classification under accounting rules of certain businesses as either continuing or discontinued, including assets held for sale.

The expected headline loss of at least R18/share compares to the audited profit of R2.78/share a year ago and excludes the impact of a forensic investigation by law firm ENSafrica into “suspicious transactions” involving the group’s public sector contracts, which “predate the existing EOH management team”.

“The group expects at the time of releasing the financial 2019 results to provide more clarity around the impact (of this investigation) on the financial statements,” it said.

It added that it “continues to focus on building a more appropriate capital structure and has already realised more than R400-million of cash from its debtors’ book and approximately R566-million from the sale of assets between 1 February 2019 and 31 July 2019”.

“This enabled a settlement of an outstanding R250-million bridge loan facility and a payment of about R455-million into existing banking facilities at year-end. Further deleveraging of the balance sheet is expected. As at 31 July 2019, the group had cash of approximately R1.35-billion.”

Under pressure

It said it remains under “sales and margin pressure” as a result of “governance issues” that have plagued it, coupled with the slowdown in the South African economy. However, it said “good progress has been made on key strategic initiatives”.

“The benefit of these initiatives will only be seen in the next financial year.”

Last month, EOH said it had renamed its ICT services business iOCO. It described the creation of iOCO as “a key milestone in the internal reorganisation process, aimed at simplifying the ICT business, integrating client offerings under one brand, driving governance imperatives, and aligning the service delivery model and offerings for the cloud economy and fourth Industrial Revolution”.

In April, EOH outlined how it would focus the business on three key pillars, namely the ICT business, Nextec (which would focus on new growth opportunities) and intellectual property.

“Work on the Nextec strategy continues, including how iOCO, Nextec and the IP businesses will work together to optimise value for EOH shareholders, with umbrella shared services being provided by EOH,” the group said at the time.

The extensive restructuring comes as EOH continues to battle the fallout flowing from allegations of corruption involving some of its public sector dealings, including a dodgy Microsoft licensing contract with the department of defence, first revealed in a TechCentral exposé earlier this year.

EOH is expected to publish its full-year results on 15 October, when it will provide a strategic update, including more information on the status of the ENSafrica investigation.  — © 2019 NewsCentral Media