EOH manages to reduce its half-year loss by more than 80%
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DURBAN - EOH HOLDINGS yesterday said it had managed to reduce its half-year loss by 83 percent as it continued to clean up an image tarnished by problematic legacy contracts that almost brought the company to its knees.
The information technology group said it made significant progress in closing out the contracts and five of the eight that were in the public sector had been settled.
It said one of the contracts was ceded to a subcontractor with settlement currently in arbitration, another would conclude at the end of the month while the last had been terminated with handover discussions currently underway.
Chief executive Stephen van Coller said the company restored its reputation by appearing before the Deputy Chief Justice Raymond Zondo’s Commission of inquiry into state capture in November last year after an independent forensic investigation conducted by ENSAfrica revealed that some corrupt activities took place in the company.
“We anticipate that all these contracts will be satisfactorily closed out by the end of the current financial year,” Van Coller said.
“With respect to the overbilling uncovered in the ENSAfrica investigation, EOH has settled with the special investigating unit (SIU) on the Department of Defence contracts and has begun repayment.”
Van Coller said that final negotiations with the SIU on the Department of Water and Sanitation contracts were ongoing with anticipation that that a settlement would be reached in the second half 2021.
He said the moves would bring to a conclusion the overbilling issues.
EOH reported a headline loss including discontinued operations of 60 cents a share, although it improved 83 percent from last year’s loss of 350c.
Total revenue fell 29 percent to R4.38 billion in the six months to end January, impacted by Covid-19 as customers delayed spend on large, planned information technology projects specifically in the hardware space.
The group said it generated a positive operating profit of R59 million compared with a loss of R915m posted last year.
Van Coller said EOH, though smaller from a revenue perspective due to the strategic disposal of non-core assets and exit of under-performing businesses, was now a more sustainable business delivering better quality of earnings. “We have seen a significant reduction in one-off costs and are confident that our legacy issues are now under control,” he said.
EOH sold Denis and the remaining 30 percent stake in CCS, and in November it concluded the sale of 100 percent of the issued share capital of Mars Holdings. The sale enabled the group to reduce its debt from R4bn in 2018 to R2bn at the end of the period.
Looking ahead, Van Coller said the local and global economy remained constrained with noticeable negative impact on clients.
“However, we have also seen increased cloud uptake and spend on automation and application development in line with global trends since the beginning of the pandemic. Over the coming months, our focus will be on deleveraging, enhancing margins and remaining antifragile,” he said.
EOH shares declined 5.50 percent on the JSE yesterday to close at R8.08.