EOH shareholders show discontent

LOW VOTES FOR REMUNERATION

EOH shareholders have made their unhappiness known, with sizeable votes against five executive directors and significant resistance to its remuneration policy at Thursday’s AGM.

Nine directors had been appointed to the board since the last AGM, and the second resolution asked shareholders to vote on each. Of the eight directors voted on, only one received an overwhelming number of votes in favour: independent non-executive Moretlo Molefi (99.4%).

New CEO Zunaid Mayet had 15.4% of shareholders vote against his executive director appointment. This is highly unusual. Phumeza Bam, group executive for people and transformation at Liberty Group, had 25.2% of shareholders vote against her non-executive appointment.

Shareholders clearly voiced their dissatisfaction with the five other executive directors. Rob Godlonton, CEO of EOH’s ICT and Technology division, had 32.2% vote against his appointment, while Brian Gubbins (business development director), Ebrahim Laher (international division head), and Johan van Jaarsveld (business process outsourcing CEO) each had 33.1% vote against theirs. Jehan Mackay, CEO of EOH’s Public Sector division, had 38.1% vote against his appointment.

Work-in-progress as disclosed by the group nearly doubled between end-January 2017 and end-January 2018 (from R999 million to R1.7 billion). Its situation with trade debtors is worse, with it carrying a balance of over R3 billion for over a year.

As at the end of January 2018, trade debtors totalled R3.8 billion. This increased by R390 million in the six months from yearend (July 2017). It pointed out in its first-half results that “the group has received payments totalling over R500 million from outstanding public sector debtors”. The public sector accounted for 17% of group revenue from continuing operations.

It’s the non-binding votes on remuneration where shareholders really voiced their displeasure. Only 55.1% endorsed the implementation of the policy, while 55.8% endorsed the actual policy.

A 2017 analysis of the top 100 JSE companies by Moneyweb revealed that only two companies – TFG (52.72%) and Anglo American (58.49%) – had fewer than 60% of votes in favour of their remuneration policies. These were for 2016 AGMs. Even Shoprite, where remuneration has been under the spotlight for years, only had 29.89% of shareholders against its remuneration policy at the 2017 AGM.

Given the low votes in favour, EOH has invited shareholders who voted against the non-binding endorsement of the remuneration policy and its implementation “to engage with EOH in writing”. EOH didn’t allow shareholders to vote on remuneration in 2017 or 2016.

This discontent seems to be pretty widespread, as there are no significantly large shareholders of EOH stock. As at July 31, 2017, its largest shareholders were the Government Employees Pension Fund (via the PIC) with 11.12%, Fidelity (7.48%), Tactical Software Systems (4.76%) and Bejaled Trust (4.36%). This trust is the vehicle in which former CEO and founder Asher Bohbot holds his stake. Since resigning, he hasn’t sold one share.

Hilton Tarrant has shares in EOH