EOH inches closer to tearing down public sector contracts

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

EOH is moving towards settling dodgy legacy public sector contracts that have bedevilled the technology group over the years.

In an update to shareholders yesterday, EOH said notable progress had been made in settling and closing the troublesome contracts.

EOH has eight sticky public sector contracts that have negatively impacted on the company’s financial performance.

The JSE-listed IT services group has been on the mend under CEO Stephen van Coller since an ENSafrica investigation that EOH requested revealed many instances of governance failings and wrongdoing.

EOH had appointed ENSafrica to conduct a proactive, comprehensive investigation into the company’s contracts and identify any wrongdoing or criminal conduct in the acquisition, awarding or execution of contracts.

The probe found R1.2 billion worth of suspicious transactions at EOH, which mostly involved transactions within the public sector contracts.

The company then went on to say it was looking to “ring-fence” its problematic contracts into a single entity before blacklisting 50 corruption-tainted entities within the group.

Now, providing a market update ahead of its half-year results, which will be released in two weeks, EOH said five of the eight problematic public sector contracts have been settled.

According to the company, one is currently in arbitration, one is concluding at the end of April and another is in the process of being terminated, with handover discussions now under way.

“The public sector remains a valuable segment for the group and now forms part of our centres of excellence. Following our settlement with the SIU [Special Investigating Unit] on the Department of Defence contracts, we are in final negotiations with the SIU on the Department of Water and Sanitation contracts, and anticipate this to be settled in H2 2021,” said EOH.

This, the company noted, will bring to a conclusion the legacy contracting issues.

Looking ahead, EOH said in the six months ended 31 January 2021, the company had seen progress in its key strategic initiatives, including optimising the cost structure and capital structure, as well as focusing on quality of earnings.

Furthermore, it said reducing debt and proactively engaging with lenders remains a strategic priority for EOH.

Year-to-date, EOH said it had repaid its lenders a further R409 million principally from disposal proceeds. This brings the total legacy debt repayment since July 2018, including vendors for acquisition liabilities, to R2 billion, leaving current debt levels at R2 billion.

In the period under review, EOH received the first R234 million payment related to the disposal of its shares in Dental Information Systems Holdings (DENIS) on 30 September 2020, with R16 million being held in escrow until 1 April 2022.

The company had announced its plans to offload shares in DENIS for a total of R250 million.

In another transaction, EOH sold the remaining 30% stake in CCS to RIB Limited, a wholly-owned subsidiary of RIB Software SE, for a total consideration of R143 million.

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