EOH share price leaps as it tells of cutting losses

Troubled technology group EOH’s share price rose more than 14% on Thursday after it said that it trimmed losses for the six months to end-January.

In a trading update, EOH said it expected to report a headline loss per share on total operations of up to 525c for the period compared with the 993c loss previously. The headline loss per share on continued operations was expected to be no more than 500c.

There had been an improvement of at least 64% on the previously reported total loss per share, which was expected to be no more than 750c, compared with R20.99 in the six months to end-January 2019. The loss per share on continuing operations was set to be 600c, from a R20.73 loss in the previous matching period.

EOH has been battling to improve its image after corporate governance issues emerged following an investigation by ENSafrica.

As part of clean-up efforts, CEO Stephen van Coller has said EOH Mthombo, the business unit implicated in alleged fraud and which was primarily responsible for securing publicsector contracts, will be closed down. EOH Mthombo accounts for 18% of the companys ’ revenue of nearly R12bn.

EOH’s share price, which was as high as R178 about three years ago, was 14.58% higher at R2.75 a share at close of trade.

EOH intends to continue with its strategy of selling assets, which raised more than R1bn in the past year, in an attempt to reduce debt.

The group said this week that it was about 12 months into a turnaround plan expected to take at least two years.

“Good progress on key strategic initiatives in respect of the evolving business model, cost savings and capital structure initiatives has continued over the past six months.”

EOH said work was continuing on the remaining inherited legacy issues, including the identified public-sector contracts together with its noncore, underperforming Nextec businesses, and the interest burden associated with its debt.

In addition, the company said that it had identified a need for a cost-cutting programme that had resulted in 21 rental properties being sold in the past six months as well as reduction of more than 1,000 people in its workforce.

Referring to the coronavirus, the group said that it had a crisis team in place monitoring the situation daily.

EOH said that the pandemic might have an effect on its business but that it was too soon to say what it would be.