JSE-listed technology services group EOH Holdings posted a headline loss per share of 11 cents on Tuesday for the six months ended 31 January 2024.
Despite the headline loss per share for the interim period, the loss came in lower than the 17 cents per share loss in its 2023 half-year. The group noted in a statement that the challenges it experienced in the second half of its 2023 financial year continued into the first three months of 2024.
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Read: Caution against service firm turnarounds
EOH, which featured prominently in the Zondo Commission of Inquiry into State Capture, reported that group operating profit for the six months was R9 million down from R142 million recorded for its 2023 half year.
Group revenue for the six months came in lower at R3.1 billion, compared to R3.2 billion recorded in the corresponding interim period.
EOH said its working capital remains tightly managed. For its latest half year, the group had a net cash balance of R300 million and unutilised short-term facilities of R133 million. Interest on debt decreased to R68 million from R102 million, thanks to a R600 million capital raise last year through a rights issue.
Meanwhile, after four years at the negotiating table, EOH has finally reached an agreement with the South African Revenue Service (Sars) about the last remaining legacy issue that has been holding it back from finalising its restructuring.
The issue revolved around a PAYE dispute which the group was contesting. It relates to Abantu, a wholly owned subsidiary, which had an ongoing tax dispute dating back to 2012 related to a PAYE dispute in two of its staff outsourcing businesses.
A final settlement has been negotiated between the group and Sars and an amount of R112 million was paid on 1 March 2024.
The amount is in line with the provision raised and therefore will not have an effect on its interim condensed consolidated statement of profit or loss and other comprehensive income, the group noted.
A relieved outgoing CEO …
Outgoing group CEO Stephen van Coller said he is relieved that the issue has been closed.
“The negotiation with Sars will certainly go down as one of the toughest negotiations of my corporate career,” he added.
During the ‘state capture’ years, EOH spent R865 million on kickbacks and commissions to politically connected intermediaries, and in return received multi-million-rand contracts with the City of Joburg, the Department of Defence, and the Department of Water Affairs, among others.
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“For many years we have been battling the effects of the corruption scandals, unprofitable legacy contracts, inefficient corporate structures, huge debt burdens, and a highly inefficient capital structure,” Van Coller noted.
“Following EOH’s R600 million capital raise in 2023 through a rights issue, and the closure of the last legacy issue, EOH can now focus on its Growth-Efficiency-Talent strategy,” he added.
Read:
EOH’s Stephen van Coller exits after five years
EOH announces R600m rights issue to ease crippling interest bill
These former market darlings were down over 40% last year [Jan 2023]
Van Coller joined EOH in September 2018 to help clean up the affairs at the beleaguered IT company. He retires at the end of March 2024, after agreeing to extend his five-year term by another six months.
Andrew Mthembu, EOH’s chair, will run EOH from 1 April. He was appointed to the EOH board in 2019 as an independent non-executive chair.
“This has been a tough six-month period for EOH, but the lead indicators are moving in the right direction. [Stephen] and his team … have reduced a R5 billion legacy debt burden to R700 million,” said Mthembu.
Listen to van Coller speaking on the Executive Lounge segment of SAfm Market Update:
You can also listen to this podcast on iono.fm here.
