EOH set to report big full-year loss next month

Troubled tech group EOH expects to report a headline loss per share of at least R18 for the year ended July 31, 2019, with the number impacted by impairments, it warned yesterday. The shares plunged 12%.

The earnings per share (EPS) loss from continuing operations is expected to be least R27. This should be “seen in the context of the EPS loss of R20.73/share in the audited results for the six months ended January 31, 2019”, it said. The numbers will also be impacted by the classification under accounting rules of certain businesses as either continuing or discontinued, including assets held for sale.

The expected headline loss of at least R18/share compares to the audited profit of R2.78/share a year ago and excludes the impact of a forensic investigation by ENSafrica into “suspicious transactions” involving the group’s public sector contracts, which “predate the existing EOH management team”.

“The group expects, at the time of releasing the financial 2019 results, to provide more clarity of the impact (of this investigation) on the financial statements.”

It “continues to focus on building a more appropriate capital structure and has already realised more than R400 million of cash from its debtors’ book and approximately R566 million from the sale of assets between February 1 2019 and July 31, 2019”.

“This enabled a settlement of an outstanding R250 million bridge loan facility and a payment of about R455 million into existing banking facilities at yearend. Further deleveraging of the balance sheet is expected. As at July 31, 2019, the group had cash of approximately R1.35 billion.”

EOH said it remained under “sales and margin pressure” as a result of “governance issues” that have plagued it, coupled with the slowdown in SA’s economy. However, it said, “good progress has been made on key strategic initiatives. The benefit of these initiatives will only be seen in the next financial year”.

EOH renamed its ICT services business iOCO. Last month it described the creation of iOCO as “a key milestone in the internal reorganisation process, aimed at simplifying the ICT business, integrating client offerings under one brand, driving governance imperatives, and aligning the service delivery model and offerings for the cloud economy and fourth industrial revolution”.

In April, EOH outlined how it would focus the business on three key pillars: the ICT business, Nextec and intellectual property.

The extensive restructuring comes as EOH continues to battle the fallout from allegations of corruption involving some public sector dealings, including a dodgy Microsoft licensing contract with the department of defence.

EOH is expected to publish its full-year results on October 15.

McLeod is editor of TechCentral, where this article was first published.

EOH still under sales and margin pressure