DURBAN - EOH holdings shares fell more than 21percent on the JSE yesterday after the information and communications technology company flagged that its headline earnings per share would decline as much as 25percent in the six months to the end of January.
The company said in its trading update that it expected headline earnings per share from continuing operations to be between 312cents and 333c, compared with 416c during the corresponding period last year. EOH said the decline would be between 20 and 25percent.
The price plunged to R58.97 a share in early trade from Tuesday’s closing price of R75.30 a share.
EOH said it expected a further decline in earnings before interest, tax, depreciation and amortisation to between R980million and R1.04billion, reflecting a decrease of between 5percent and 10percent compared with last year.
It said an anticipated 16percent increase in revenue to R8.4bn for the period would likely offset the negative results, and the group attributed the increase to an increase in market share.
“Despite the challenging general market conditions during this period, most areas of the business coped well. However, certain areas in the business, particularly those operating in the public sector, have under-performed and did not timeously adjust their cost base,” the group said.
EOH said it adopted a deliberate customer retention strategy, while sacrificing some margin, in an effort to address the challenges experienced during the period. It said it remained confident of its businesses model and strategic review released on Monday.
EOH said in the strategy it would form two independent businesses units for the long-term benefit of all stakeholders, each with its own identity and brand growth strategy; a go-to-market approach; business model and culture.
It said the first business would trade under the EOH brand and focus on ICT services and solutions, while the second business, called NewCo for now, would be characterised by a high degree of specialisation in each business area. Growth in the second business would be driven equally by acquisitions and organic growth.
EOH said it hoped to reap the benefits in the long term by having two highly focused businesses, and this would enable each business to realise its full potential with clarity of brand and identity, a simplified business model and reduced complexity, greater oversight and stronger governance.
EOH said it has signed a long-term partnership with Lebashe, a 100percent black-owned investment holding company. “The transaction will result in an equity investment by Lebashe of R250m and the provision of a funding facility of R3bn. EOH will have access to such facility for growth opportunities while significantly increasing its BEE ownership by a minimum of 20.3percent,” the group said.
The group expects to release its results on March 28.
EOH shares closed 20.98percent lower on the JSE yesterday at R59.50.