EOH share price slides as it flags further loss

EOH shareholders were left unimpressed by the latest trading statement from the technology group after it flagged a further loss in its next annual results as discontinued operations weighed on its performance.

The share price of the company, valued at about R967m on the JSE, was down 5% to R1.52 by 12.26pm after it said that its headline loss per share, a common profit measure in SA that excludes certain items, would widen by 72.7%-109.1% to 19c23c, but narrow 53%-62% to 17c21c when only looking at continued operations, in its results for the year to end-July.

One of the myriad challenges EOH highlighted was that spending by the public sector and state-owned enterprises on technology remained “significantly constrained”.

It added that its 2023 financial performance was also characterised by the effect of a tougher trading environment as high inflation and interest-rate hikes rippled through to EOH’s strategy, spending and cash management.

“This is complicated by the ongoing disruption of the Russia-Ukraine war, the greylisting of SA earlier this year and impacts thereof, combined with SA’s persistent low growth and high unemployment rate,” said.

EOH’s management has been salvaging the company’s reputation after allegations of malpractice and tender irregularities under the previous leadership, while it also had to deal with a mountain of debt accumulated during that period, when it focused on acquisitions to expand the business, especially in the public sector.

Law firm ENSafrica was hired to investigate the allegations and it found R1.2bn worth of suspicious transactions, mostly involving public-sector contracts that ensnared the group in state capture.

The technology group agreed in November 2022 to pay R177m in a final settlement after a Special Investigating Unit (SIU) investigation into allegations of corrupt dealings with the department of water & sanitation it over four IT contracts worth R474m.

Over the past year, EOH generated R500m via a rights offer and another R100m from private equity firm Lebashe Investment Group (which owns Business Day via Arena Holdings), of which the proceeds were used to cut its debt levels and its spending on interest.

It was a move by CEO Stephen van Coller to put EOH back on a growth path after revelations of underhand dealings between an employee and public sector officials that punched a R1bn hole in its balance sheet.

The forecast for continuing operations looks rosier, with a 2%-4% rise in revenue and 20%50% jump in operating profit from continuing operations to R120m-R150m expected.

EOH expects to publish its annual results on October 18.

THIS IS COMPLICATED BY THE RUSSIAUKRAINE WAR, THE GREYLISTING OF SA ... WITH SA’S LOW GROWTH AND HIGH UNEMPLOYMENT RATE