More authorities await EOH to come clean
The R7.5 million fine and public censure of JSE-listed technology services firm EOH is now a closed chapter, as the company shifts its focus to clear its name with more regulatory authorities.
So said EOH Group CEO Stephen van Coller yesterday, in a telephonic interview with ITWeb, adding the company is impressed with the progress its recently-launched iOCO brand is making in the reorganisation of EOH.
Last week, EOH acknowledged the JSE fine and public censure after its previously published financial information for the periods 2017 to 2018 were deemed incorrect, false and misleading.
The results in question were published before Van Coller took the reins at the company, and since taking over, he has been trying to rebuild the company’s battered image.
An investigation into the company revealed several acts of wrongdoing, especially in relation to public sector contracts.
According to Van Coller, while EOH has made significant progress in clearing the legacy issues, it still has to face the Special Investigating Unit (SUI) as well as the South African Revenue Service (SARS).
“We have cleared up a lot of stuff. We are currently dealing with different authorities that regulate different things. The JSE just regulates our listing, so the big thing is we have closed that chapter with them.
“We are busy with the SIU at the moment and I am hoping in the next couple of months, we would have closed that chapter as well. That will be a big one. We are busy with SARS – we are nearly done with that,” Van Coller says.
In acknowledging the accounting blunders last week, EOH said it is committed to pursuing legal action against the main perpetrators identified to try to recover losses caused by the culprits.
“We are just moving forward one by one and we will get through each and every one of them. We have got information that we have been able to share with any of the regulators,” Van Coller notes.
Digitally native combo
Besides the troubles besetting EOH, Van Coller is excited with the progress of the company’s iOCO brand, which was announced last year.
On 1 August 2019, the group announced it would be “simplifying the ICT business, integrating client offerings under one brand, driving governance imperatives, and aligning the service-delivery model and offerings for the cloud economy and fourth industrial revolution”.
This led to the launch of iOCO.
According to EOH, the name iOCO is the combination of the digitally native “Internet organisations” (iO) and “creative organisations” (CO) of the future, but symbolises more than four simple letters.
Van Coller explains that before iOCO, EOH was made up of a number of businesses. “We had a number of brands – whether in the fintech business or information services. We had Nextec, which was an engineering business. We also have an ICT business.”
He points out that the problem with the ICT business was because it was a regional operation, it was also called EOH, so there was confusion between EOH Holdings and EOH – the ICT business.
“This is what really drove the decision to change the ICT business so that as we create transparency, people would know which business we will be talking about.
Although there have been media reports suggesting the organisation is driving the iOCO brand while pushing the tainted EOH brand to the periphery, the CEO says: “The company has not yet made a decision on whether to change the holding company’s brand or not, but there was just confusion between EOH Group, which was a number of companies and the ICT systems integration brand which was also EOH.
“So we had EOH Holdings and EOH Muthombo and so forth. So it was just creating confusion in the market and we wanted to get rid of that confusion.”
He notes the iOCO business is made up of four parts.
“The first part is the service part, which I call the infrastructure layer, which is the connectivity layer where we run people’s server farms, data storage farms, desktops and so forth.”
Van Coller says this is an outsourced service and iOCO is seeing more business in that space, as organisations want their IT to be always on.
“It’s a bit like not so long ago. We would have to come home, fire up a generator or put up a fire on the boiler to get your hot water going. But now you walk in and flip the switch and you basically have outsourced your electricity to the likes of Eskom.
“So outsourcing is an important part of the business and we are seeing that grow, especially in the medium and small business space which cannot afford a full service IT.”
The second part of the iOCO business is the original equipment manufacturer, says Van Coller. “That’s the SAP, Oracle, IBM, Dell and Microsoft. These are big global companies that have got their own strategies. So they use companies like EOH in South Africa to be their agents. They pay us a margin for doing that.”
The other business units that fall within iOCO are open source as well as sales solutions and advisory services.
He believes its diverse portfolio makes iOCO a serious contender in the market.
Van Coller has been amazed at how quickly iOCO has managed to consolidate from about 50 businesses into four main units.
“I talk about them as being 50 speed boats with no communication, just going out into the ocean to execute a battle. Now they have put themselves up as four destroyers fully communicating between each other in sharing IP, sharing customers as well as sales. This is what is making them a powerful force.
“We are probably six months ahead of where we expected us to be at the moment and it’s very exciting. iOCO currently contributes about 65% of revenue and about 60% of EBITDA, but this will change as the businesses that EOH sold are no longer in the revenue set.”
In closing, Van Coller says: “We have managed, across the six-month period, for the first time to keep our cash flows stable and slightly positive as we accelerate our repayments to the banks. I think this is why our share price has reacted quite favourably over the past three months as people see that we have stabilised the business.
“What’s really important about that is that we have largely stopped the bleeding and move the business forward to a much more positive frame.”