EOH in reconfigured corporate structure
Its share price fell to R8.69 despite the group’s assuring the market that it had steadied the ship
EOH HOLDINGS fell 1.81 percent to R8.69 yesterday despite the under fire information and technology group’s assuring the market that it had steadied the ship.
The company told the market in an update that it had managed to keep afloat and reconfigured its corporate structure since the suspicious transactions scandal that whipped off billions off its market cap last year.
EOH said it had configured its business into three key pillars, namely iOCO, NEXTEC and IP, but in future the company would look to flatten the structure and integrate into a single business unit.
The company’s share price has fallen almost 30 percent in a year to date after an ENSafrica investigation uncovered eight questionable contracted public sector contracts.
But EOH said the once-off advisory costs related to the continued ENSafrica investigation, disposals and reorganisation of the business remained a drag on cash flow.
The group said its reorganisation of the business had seen it make strides in cost savings.
“Progress has been made in the implementation of cost-saving initiatives primarily aimed at facilities and overhead costs,” it said.
“This is to ensure the group is right-sized, agile and efficient on a go-forward basis.”
EOH also said it was now considering selling certain assets and the whole or part of the IP businesses.
The group has already disposed of its non-core assets, such as stakes in Construction Computer Software, Data World group of companies and others, for a combined price of more than R1 billion.
“As part of EOH’s stated deleveraging strategy, the group is considering all viable options to enable a more fit-for-purpose capital structure appropriate for a large services business,” it said.
“This process is currently focused on the sale of certain assets and the whole or part of the IP businesses to strategic partners over the next 12 to 18 months.”
The IP portfolio consists of high potential platform companies ready for the next stage of scaling.
The sale of the group’s whole or part of its IP businesses through strategic partnerships had made good progress and would form the key pillar to address capital structure.
The group said trading remained under pressure due to the weak macro environment, which had resulted in companies reducing their IT spend.
It said the lingering effects of the public sector legacy contracts that were still being exited had continued to have a negative impact on the group’s performance.