EOH reduces headcount by 1 500

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EOH group CEO Stephen van Coller.
EOH group CEO Stephen van Coller.

JSE-listed technology services company EOH reduced employee headcount by over 1 500 in six months ending January.

This morning, the JSE-listed technology services firm announced its interim results for the six months ended 31 January, attributing the jobs bloodbath to asset disposals and contracts not being renewed.

EOH says due to the strategic disposal of non-core assets and exiting under-performing businesses, it is now a more sustainable enterprise, delivering better quality of earnings.

The jobs carnage at EOH comes as the company has been under a lot of scrutiny due to legacy issues such as graft allegations when it comes to public sector contracts.

Governance issues have engulfed the JSE-listed organisation, including how former rogue employees and directors thrived on tender fraud, incentivising politically connected individuals to secure contracts.

Besides the alleged corruption improprieties, EOH revenues have also plummeted, forcing the management to reset.

In the current reporting period, EOH’s total revenue decreased to R4.3 billion from R6.1 billion in the prior period.

“Our business, while smaller from a revenue perspective due to the strategic disposal of non-core assets and exit of under-performing businesses, is 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,” says CEO Stephen van Coller.

“The local and global economy remains constrained as we have seen the negative impact on some of our 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 says EOH has made great progress towards building a sustainable organisation and the business is now more focused and less complex.

Commenting on the job losses, he says: “Headcount was further reduced by 1 566 (excluding new hires and resignations) primarily due to asset disposals and contracts not being renewed.

“Cost reductions have continued across the major expense categories, such as travel, marketing and administrative expenses, and a 5% reduction in costs on the remaining business has been realised over the six-month period.”

EOH top executives were not spared as the changes were implemented in the last 24 months.

Uppermost executives had to take salary cuts of up to 25% last year, as the firm battled to stay afloat amid the COVID-19 lockdown in SA.

At the time, Megan Pydigadu, EOH group financial director, said the move was necessary in order to avoid retrenchments and save R40 million to R50 million per month.

Restoration of trust

Today, EOH also notified shareholders it has made significant progress with troublesome legacy contracts.

It had a number of sticky public sector contracts that had negatively impacted on its financial performance. Van Coller says five of the eight problematic public sector contracts have been settled, with one having been ceded to a sub-contractor, with a settlement currently in arbitration and another concluding at the end of April.

“We anticipate that all these contracts will be satisfactorily closed out by the end of the current financial year. 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.

“Furthermore, final negotiations with the SIU on the Department of Water and Sanitation contracts are under way and it is anticipated settlement will take place in H2 2021.”

This, he says, will bring to a conclusion the overbilling issues.

Van Coller says while the public sector division is an important business for the group, project delivery has been streamlined through the existing centres of excellence to ensure consistency in quality delivery.

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