Photo:  Supplied.
Photo: Supplied.

EOH continues to slide on profit warning

By Dineo Faku Time of article published Mar 26, 2019

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JOHANNESBURG – EOH holdings, the troubled Johannesburg-headquartered technology services company, continued its slide on the JSE yesterday after it flagged that its profits could take a hit on the back of the termination of a contract with Microsoft.

The group said it was disappointed that the multinational technology firm had decided officially to terminate a contract it had with its subsidiary, EOH Mthombo, on the expiry of the 30-day notice period.

EOH, which has shed 13.05percent of its value in five days, fell nearly 10percent in early trade yesterday before closing 3.84percent weaker at R13.52 as allegations of fraud continue to haunt the share that has lost 56percent in the year to date, valuing the company at R2.39billion.

“While we understand the need for Microsoft to interrogate and finalise their own investigations, we are disappointed at the unilateral manner in which Microsoft has terminated the relationship prior to giving consideration to the impact on South African corporates,” the company said.

The group warned shareholders that its profits would take a R20million before tax plunge during the current financial year, bringing the total impact of Microsoft exposure to a R30m profit before tax plunge, sending the share price tumbling.

It said senior executives and local Microsoft leadership were involved in ongoing discussions about the impact of these terminations and were seeking a responsible solution that would limit the impact on all affected customers.

“While the immediate short-term impact can be managed, EOH is assessing and discussing various alternatives to ensure the long-term continuity of service to all customers and to maximise value for shareholders. EOH is confident that this can be achieved,” the company said.

The company last month said that the channel partner agreement was not material to EOH, and had reported a total profit before tax of about R10m during the last financial year.

The company said various investigations were progressing to determine any wrongdoing on the part of EOH, its customers, its partners or its employees.

“To date, we have migrated the legacy public sector business under a new structure, and employees implicated in wrongdoing have either been suspended or have resigned,” the company said.

It said it had committed to concluding the reviews as quickly as possible and had a team of people under the auspices of law firm ENSafrica.

The company previously attributed the termination of the contract to a Microsoft audit initiated in September 2017 on public-sector licence deals that concluded in July 2018, and ENSafrica was reviewing all those documents.

“We have also implemented a new framework under which all public sector transactions and related enterprise development partners are reviewed, screened and independently vetted by ENSafrica,” the company said.

Stephen van Coller, the company’s chief executive, previously said that the implicated division represents less than 12percent of EOH’s total turnover.

“We have either suspended or received resignations from involved employees, resulting in none of the employees currently implicated remaining in the business,” he said.


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