EOH’s focus is to trim debt burden

• Finance chief talks about clean-up

Technology group EOH is on track to halve its debt, which is more than four times its current market value, by February 2021, finance chief Megan Pydigadu says. The troubled company is cleaning up its image after allegations of underhand dealings with the government, forcing the company into taking billions of rand in writedowns and losing nearly R1bn.

Technology group EOH is on track to halve its debt, which is more than four times its current market value, by February 2021, finance chief Megan Pydigadu said in an interview.

The troubled company is cleaning up its image after previous allegations of underhand dealings with the government, forcing the company into taking billions of rand in writedowns and losing nearly R1bn.

The group has been taking measures such as disposing of assets to reduce its debt burden, which fell to R2.99bn at the end of its six months to end-January, from R4.1bn at the end of the prior comparative period.

Pydigadu, who has been in the role for about a year as part of CEO Stephen van Coller’s new team tasked with turning the business around, said that when she came in she was “actually pretty shocked” to see that EOH, a listed company, did not have certain things in place.

“We’ve put a treasury department in place, we manage our cash properly; we manage it by entity. Previously it was all managed as one. We’ve also put better systems in place. With better systems, it’s easier to see what’s going on in the business.

“We’ve broken the business into logical parts so that we can understand what’s going on in the business and measure performance in the various areas, where it was wasn’t always clear who was performing and who wasn’t performing,” she said.

EOH has a plan to reduce its borrowings by R1.6bn by February

2021. By that time, debt should have been cut by half, she said.

So far R430m has been paid back to lenders, with plans for another R70m to be paid by August. A further R700m should have been returned to lenders by November. The remaining R400m is expected to be paid by February 2021.

Pydigadu said that EOH has too much legacy debt at the moment.

Her goal is to have the group’s debt at between R500m and R1bn in the next three years. Ultimately, “EOH should have no long-term debt” on its books, she said, explaining that the services business model that management is trying to put in place would see EOH only having credit facilities to finance working capital needs.

Much of the money to reduce debt will come from the sale of assets. Sales concluded during the interim period to end-January include that of Dental Information Systems, a Cape Townbased health-care technology group, for R250m to AfroCentric.

Before Van Coller and his team came in, EOH was made up of 268 different entities and operations, which it is working to consolidate and bring under three business units: iOCO, Nextec and IP. So far, 40 business have been sold for about R1.2bn, taking the number of operations down to 181, said Pydigadu, with plans to reduce this to just 34 by January 2021.

But EOH has recorded about R205m in losses from selling poorly performing subsidiaries, with some of these outside SA.

Pydigadu said EOH had sold most of its international subsidiaries. The company has retained its operations in Egypt, which she said are doing well.

Another cash drain for the business has been the amount spent on property leases over the years, Pydigadu said. “Every time we bought a business, there was a lease that came with it.” As part of its cost reduction, some business units will have to share space. Having exited 31 properties so far out of a possible 45, the company is saving R70m a year.

Last week, EOH announced that its group’s executive committee members will cut their salaries by a quarter. The group also proposes a 20% reduction in salaries for staff paid more than R250,000 a year.

Pydigadu said cutting pay across the group could save the company R40m-R50m a month in people-related costs. EOH aimed to save up to R100m in total monthly costs during the Covid-19 crisis, she said.

EOH has reduced its staff count by 3,000 since August 2018 to about 8,400.