EOH Holdings loss for the year from continuing operations of R81 million was, however, an improvement on last year’s R160m loss. Picture: Karen Sandison/African News Agency(ANA)
EOH, the South African IT services provider that is shaking off corruption and other legacy issues from previous years, yesterday reported a narrower loss for the full year to July 31 as it also announced the resignation of its CEO and chief financial officer (CFO).
The JSE-listed company and its former executives in 2019 came into the spotlight after having benefited from participation in an illegally awarded contract worth up to R1.2 billion.
The company is currently also battling to settle a payee dispute with the South African Revenue Service (SARS) and says it is close to striking a settlement with the liquidator of Mehleketo.
EOH’s financial woes have been multi-pronged; it also almost got into trouble with its banks as it carried as much as R4 billion in debt that it almost defaulted on. This was against an Ebitda of R1bn, prompting the company to dispose of some of its businesses to avoid a blacklisting by the banks.
“We were in a difficult position with the banks. … and we were going into a rising interest rate environment and the business could not pay the debts. The banks said how do you pay your debt and we had to sell some businesses (and) that has allowed us to save some jobs and to save the businesses (as) we didn’t have a choice,” Stephen van Coller, the CEO for EOH, said at the company’s results briefing yesterday.
Van Coller would leave the company next year for personal reasons, he added. CFO Megan Pydigadu is also leaving the company.
EOH is pursuing a restructuring strategy post the tender scandals that have rocked it.
The company has had to go “hard at the corruption issues” against those involved as the issue had damaged its credibility and reputation. Some contracts were at stake as stakeholders queried how the company was handling the manner it was handling the corruption scandal.
“When we went to see our customers they were very clear that if you want us to continue with the contracts, this is what you have to do (dealing with the corruption). I had to listen to our customers and that’s why we had to go hard otherwise we wouldn’t have got our credibility back and we have got that back and you have seen the longer term contracts and you have seen the revenue growing,” added Van Coller.
Outgoing CFO Pydigadu said the company, which deals in IT services with private and public companies in South Africa, Europe and the Middle East, had raised revenues and cash generation for the full year period to end July 31, 2023.
Shares in EOH were down 2.1% in afternoon trade on the JSE at R1.40 yesterday even as Van Coller said the company had now emerged from the shackles of the corruption scandal. No comment could be obtained from Lebashe, the majority shareholder in EOH.
With a tough operating environment in South Africa due to high inflation and high interest rates that have put consumers, companies and the public sector under extreme pressure and dampening growth forecasts for the economy, EOH has remained in loss making.
Its loss for the year from continuing operations of R81 million was, however, an improvement on last year’s R160m loss.
“The loss is directly attributable to the heavy interest burden, which is now resolved and should not be a factor in the new year. We saw an improvement of 32% against the prior year’s continuing re-measured headline loss per share from 28 cents to 19 cents and continuing re-measured loss per share showed 47% improvement, from 38 cents to 20 cents,” the company reported.
Top-line revenue growth of 3% from continuing operations was attained for the period under review. The international and digital segments saw growth of 22.5% and 2.6%, respectively, with the international segment hitting close to the R500 million revenue mark, contributing to overall revenue position for the period of R6.2 billion, largely made up of the primary South Africa market.
“We spent R20 million on legal costs related to refinancing of our debt and costs related to legacy issues. The legacy issues have decreased considerably, but we have not succeeded to date on our historical issues with SARS,” Pydigadu told analysts at the results briefing.
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