HARD REBOOT AT EOH

The allure of starting afresh can be powerful — wipe the slate clean of past mistakes and reset to zero. Stephen van Coller has done exactly this at IT services firm EOH, writing off intangible assets worth almost R11 a share. That’s no mean feat considering EOH’S share price, before its results were released this week, was hovering at around R13.50. Put another way, EOH impaired almost its entire market value. It’s an acknowledgment that its incredible growth story — sold so convincingly by founding CEO Asher Bohbot and FD John King — was built on ephemera.

In a way, theirs was an accountingapproved, market-sanctioned Ponzi scheme: buy a business on a lower p:e, enjoy the earnings boost that it gives, and repeat. It all goes swimmingly until it doesn’t. Now investors, as well as wouldbe EOH buyers, have to work out what the company is really worth.

Under Van Coller and his clean-up team, we have a better idea. NAV, apparently, is R4.6bn. That’s still far ahead of its market cap, though that gap narrowed on Tuesday as EOH released its interims. But EOH has to begin making cash on a sustainable basis and regain the confidence of the business community. And that, given the reputational catastrophe and the spectacular share implosion, aided by lingering suspicion of improperly awarded contracts, is going to be a tough ask.

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