EOH tumbles 9% as investors digest trading statement

September 28, 2023 Siyabonga Mtangana

EOH Holdings CEO Stephen van Coller

EOH Holdings, fresh from a rights issue, saw its share price fall more than 9% on Thursday on higher than usual volume after the IT services group issued a full-year trading update that disappointed investors.

The fall in the share price came despite EOH saying that for the year ended 31 July 2023, it would report a 20-50% increase in operating profit from continuing operations. The figure is expected to be between R120-million and R150-million, from R100-million a year ago.

Other highlights of the trading statement include:

An improvement in the headline loss per share from continuing operations of between 53% and 62%.
The total loss per share from continuing and discontinued operations increasing to between 12c and 14c, compared to 9c in 2022.
Net cash on hand as of 31 July was R204-million, with gross leverage of about R687-million and unused short-term facilities of about R218-million.

These will be the first financial results EOH will publish since its recent rights offer, which raised R500-million from shareholders. The group also raised R100-million from empowerment partner Lebashe Investment Group. The proceeds were used to reduce debt, which it said will lead to a “significant” reduction in debt servicing costs and allow it to “invest for growth”. It will also provide it with greater flexibility in managing the business and its cash flows, it said.

EOH, which is led by CEO Stephen van Coller, has been through a tough time in the past five years after it became embroiled in corrupt dealings with various government departments and agencies. The group made various detailed disclosures about this, including at the Zondo commission of inquiry into state capture, winning Van Coller plaudits for his openness and transparency. The group has sued its former CEO, Asher Bohbot, and other former top executives for billions of rand for their role in the governance failures.

Difficult environment: EOH

On the 2023 financial year’s performance, EOH said the period was “characterised by an increasingly difficult trading environment, with the effects of high inflation and the South African Reserve Bank’s response of continued interest rate increases starting to have significant negative impacts on corporate strategy, spending and cash management”.

EOH CFO Megan Pydigadu headed to troubled Spar Group

“This is complicated by the ongoing disruption of the Russia-Ukraine war, the grey listing of South Africa earlier this year and impacts thereof, combined with South Africa’s persistent low growth and high unemployment rate. Compounding these effects, the public sector’s and state-owned enterprise’s investment in technology remain significantly constrained.”