EOH share price sinks to three-month low as governance concerns squeeze tech firm
Companies / 2 August 2019, 09:00am / Sandile Mchunu
DURBAN – EOH Holdings share price dropped more than 8 percent to its lowest level in three months after the information technology group said yesterday that it remained under pressure due to the weak macro environment and concerns around the company’s governance.
The stock declined by more than 8 percent to R15.70 a share on the JSE, down from Wednesday’s closing price of R17.78.
The shares recovered in the afternoon to close at R16.36.
Chief executive Stephen van Coller said some improvements were seen following the release of the interim update on the forensic investigation by ENSafrica as clients resumed business with the group.
“However, the benefits will not be realised until after year end.
“This has resulted in revenue remaining under pressure, which has increased further in the second half of the year, in part due to one-off hardware sales not being repeated in the second half of the year,” Van Coller said in the trading update.
The group expects gross margin to remain flat when compared to the first half of the year, before the impact of discontinued businesses, including Construction Computer Software (CCS).
At the beginning of last month, EOH holdings subsidiary, EOH Umthombo, entered into a share purchase sale agreement with RIB Limited in which EOH will dispose of 70 percent of the issued ordinary share capital of CCS for R444.39 million.
The group has entered into agreements for the disposal of EOH’s 49 percent shareholding in Twenty Third Century Systems and its 100 percent shareholdings in Enablemed, which were expected to close soon.
It also expect to complete the sale of its 100 percent shareholdings in Afon and iSquared and its 51 percent shareholding in Sukema, which have already closed, with a combined consideration of an additional R122m.
EOH operates three key pillars, ICT, NEXTEC and IP.
Towards the end of July, EOH re-launched its ICT business, which has been renamed iOCO.
“This represents a key milestone in the internal reorganisation process aimed at simplifying the ICT business, integrating client offerings under one brand, driving governance imperatives and aligning the service delivery model and offerings for the cloud economy and fourth industrial revolution,” Van Coller said.
Van Coller and financial director, Megan Pydigadu, have assumed a caretaking leadership role for iOCO and NEXTEC business units on an interim basis following the resignations of their chief executives, Rob Godlonton and Zunaid Mayet.
The group said it was working on the NEXTEC strategy, including how iOCO, NEXTEC and the IP businesses would work together to optimise value.
EOH said it would publish its full-year results on October 15 and provide a strategic update and update on the ENSafrica forensic investigation.