EOH expects massive loss as it buckles under weight of investigation

Under pressure technology firm EOH Holdings says it expects to report a headline loss per share of at least 1 800 cents for the year ended July 2019, from a profit of 278 cents per share in the prior year.

The group said that it expects earnings per share to show a loss of at least 2 700 cents, from a profit of 202 cents per share before.

“The figures as stated do not include the potential impact of the findings of the ENSafrica forensic investigation into suspicious transactions that predate the existing EOH management team,” it said in a statement to shareholders.

The group expects at the time of releasing the FY2019 results to provide more clarity around the impact on the financial statements, it said.

An investigation into EOH was conducted after software and technology group Microsoft terminated longstanding partner agreements with the tech firm. This, after a contract worth R120 million – awarded to subsidiary EOH Mthombo by the Department of Defence – was questioned.

ENSafrica was appointed to conduct an investigation into a number of public sector contracts, amid allegations of corruption and poor governance and compliance.

EOH chief executive Stephen van Coller said that the investigation identified approximately R1.2 billion in suspicious payments at the company, taking place between 2014 and 2017.

Van Coller noted that there was a silver lining in the findings in that the dodgy payments were picked up quickly and there was a swift response from the company.

Specifically, EOH largely has a new board which have adopted a zero tolerance policy towards bribery and corruption. The business has also split the finance and compliance/legal risk functions so that those signing the deals aren’t also signing the cheques.

He added that the company will pursuing criminal charges against those identified in the investigation and will also proceed with civil claims where possible to recoup money lost.

EOH said on Wednesday that it continues to focus on building a more appropriate capital structure, and has already realised more than R400 million of cash from its debtors book and approximately R566 million from the sale of assets between 1 February 2019 and 31 July 2019.

This enabled a settlement of the outstanding R250 million bridge loan facility and a payment of about R455 million into existing banking facilities at year end. Further deleveraging of the balance sheet is expected. As at 31 July 2019, the group had cash of approximately R1 350 million, it said.

Shares in EOH declined markedly in early trade, before recovering by mid-day.

Read: EOH chief exec clears the air on corruption report and resignations

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EOH expects massive loss as it buckles under weight of investigation