Group’s balance sheet stengthens in half year
EOH’S SHARE price tumbled 4 percent after the JSE yesterday imposed the maximum fine of R7.5 million on the company for failing to comply with important provisions of the listing requirements.
The share fell to an intraday low of R4.75, before closing the day at R5.58, 12.73 percent up after releasing a profit of trading update late yesterday.
The JSE said it had, however, decided to suspend R2.5m of the fine for a period of five years on condition that EOH was not found to be in breach of material and important provisions of the listings requirements during the period of suspension.
The bourse said that it had decided to reduce the fine after considering the relevant facts, including: EOH’s internal review that uncovered the irregular accounting and other practices; its full co-operation and assistance in the JSE’s investigation; the current economic climate; the remedial actions undertaken by the board; and the interests of shareholders, the JSE and the investing public.
The JSE said the investigation into the conduct of individuals that presided at the company during the periods in question and who were bound by the listings requirements was ongoing.
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auditors of EOH
EOH, THE JSE-listed tech stock, yesterday shook off its troubles as it reported a stronger balance during the six months ended July, saying its liquidity had improved significantly.
The group said this resulted from the successful implementation of the first phase of a formalised treasury function.
Cash balances grew from R893 million of positive cash balances reported at June 3 to R1.004 billion of positive cash balances as at July 28. have been referred to the Independent Regulatory Board of Auditors for their separate investigation,” said the JSE.
EOH, the JSE tech stock, which had been rocked by over indebtedness and discovery of corruption in certain subsidiaries, published its financial statements for the year ended July 31, 2019, on November 13, 2019, and its unaudited interim financial results for the six months ended January 31 on April 7, which contained restatements to previously published results to correct a substantial number of prior period errors in accordance with International Financial Reporting Standards.
The JSE said the errors were material and extended over a number of years. It said that in correcting these errors, the company restated its annual financial statements for the year ended
EOH said the new cash pooling process implemented by the treasury function also made a significant difference to liquidity.
Chief executive Stephen van Coller said: “I am very excited that EOH has returned to a stable and cash generative organisation in such a short period, notwithstanding the negative effects of Covid-19.”
EOH, which committed to a R1.6bn de-leverage plan with its lenders effective from May last year, said to date
July 31, 2018, and restated the opening balances for the year ended July 31, 2017.
Consequently, EOH restated its interim financial statements for the six months ended January 31, 2019, to correct these material errors.
“A lack of governance and oversight mechanisms, inadequate and ineffective controls and systems in prior financial periods which arose during it had repaid the lenders R542m of this target principally from disposal proceeds.
“Disposal proceeds in the current financial year totalled R421m and capital repayments to lenders totalled R292m over the same period,” said the group, adding it had serviced R319m in interest costs on this debt in the current financial year.
The lower outstanding debt balance of R2.5bn, combined with the sizeable reduction in interest rates, would result the tenure of previous executive management resulted in irregularities and fraudulent contracts, premature revenue recognition, unsubstantiated tender payments, and lack of impairment of financial assets, despite impairment indicators that were present.
“Further, EOH incurred VAT and tax liabilities on suspicious payments regarding fraudulent public sector contracts,” said the JSE.
in materially lower financing costs for the going forward.
EOH informed investors in January that eight of the 54 legacy public sector contracts had negatively impacted the financial performance of the business.
The company said yesterday that the operational and financial viability of these contracts had been closely managed and tracked on an ongoing basis.
“Of the eight contracts one has been exited, two normalised and positive progress is being made with normalising the remaining five contracts,” said the company.
OLD MUTUAL Insure said yesterday that it would provide business interruption (BI) support to its small and medium enterprise (SME) customers across all industries.
“These SMEs have been hard-hit by the lockdown and are less likely to have the financial resources to survive the lockdown.
“We will make commercial settlements to compensate our customers, with an annual sum insured of R5 million or below, for their BI losses based on specific criteria to enable them to continue operating during this difficult time,” it said. The insurer said the settlement applied to all its qualifying SME customers who had the infectious disease extension at the time of loss.
The announcement comes after some of the country’s biggest insurers this month reached an agreement with the Financial Sector Conduct Authority, the Prudential Authority and some major insurers on interim relief for business interruption claimants.
Santam at the weekend set aside a R1 billion relief fund for potential business interruption claims from its policy holders.
Old Mutual Insure estimated that these financial settlements, combined with already submitted BI claims, would amount to more than R650m and provide settlement for half the customers with the infectious disease extension.
However, it added the caveat that Old Mutual Insure was “still of the view that a suspicion or the general widespread occurrence of Covid-19 in the area or any steps taken by the government, as an example, to limit the spread of Covid-19 nationally, will not constitute an interruption or interference of the business under the infectious disease extension.”
The group was awaiting legal certainty.
“With regards to customers that do not qualify for the commercial settlement, our dedicated team of BI claims specialists continues to carefully consider their BI claims on a case-bycase basis,” it said.