EOH shares slip, rebound as it warns of likely loss
In last year’s results, the group reported earnings per share (Eps) of 320c. It said the main areas impacting its Eps were once-off and included impairments to goodwill, intangible assets and equity accounted investments of 1092c.
The other reasons the group gave for the decline are losses on business identified for close-out during the first half of this year of 372c, the impact of additional specific impairment provisions of trade receivables and other financial assets in terms of IFRS 9 of 142c, the impact of the Lebashe BEE transaction IFRS 2 costs of 100c, and finally, the loss on the disposal of an equity accounted investment in Zimbabwe of 93c.
The stock declined to its lowest level since 2009 to R9.58 a share on Friday morning after the release of the trading update. However, it recovered in the afternoon to R10.36, before closing at R11.40 at the end of the day.
The share is one of the worst-performing counters on the JSE in the past 12 months, having declined by more than 77percent. About this time last year the share was trading around R45.75.
The new chief executive, Stephen van Coller, has his work cut out to turn the business around.
“The group has recently completed a strategic review of the business and presented a strategic plan to the board which was adopted in late March. The strategic review necessitated a review of the carrying value of intangible assets, the identification of business lines no longer core to the adopted strategy and a review of minority investments,” the group said in a trading update.
Despite the expected weak results, the group said revenue would remain stable at R8.43billion and operating costs remain flat, after the removal of once-off items, while normalised earnings before interest, tax, depreciation and amortisation from continuing operations for the period will be R387million.
The group also expects to report a headline loss per share, including discontinued operations, of 973c, compared with headline earnings per share of 314c last year.
EOH said its net asset value at the end of January was R4.57bn, including cash of R957m, with its net asset value remaining substantially higher than its current market capitalisation of R1.86bn.
The group expects to release its results tomorrow, after it postponed the earlier release date of March 26 in order to conduct a strategic review.
In March, EOH was notified by Microsoft that it was planning to terminate the contract with its subsidiary, EOH Mthombo, causing a 30percent decline in the share price in one day.