EOH shrugs off costly graft missteps, expects quality earnings
Embattled technology group EOH says it is focusing on quality earnings, as it seeks to rehabilitate itself after a series of costly missteps by the previous management team.
The JSE-listed group provided a pre-closing update on Friday, saying it expects to post a gross profit margin improvement of four to six percentage points, compared to the prior full year (FY2020: 22%).
EOH says although total group revenue in the second half of FY2021 was negatively impacted by the prevailing economic conditions, its turnaround plan remains on track and is underpinned by stable revenue and quality earnings.
Since the allegations of corruption and poor governance emerged, shareholders have lost about R24 billion. The company is now suing a number of former EOH executives, including Asher Bohbot, founder and former CEO; John King, former CFO; Jehan Mackay, former head of public sector; and Ebrahim Laher, former head of EOH International, for a total of R6.4 billion in damages.
On Friday, in the notice to shareholders, CEO Stephen van Coller said: “The group’s turnaround strategy, which has been focused on restoring credibility, increasing transparency and improving liquidity, remains on track despite the ongoing challenges in the local and global environment. By focusing on these priorities, the new EOH board and management team have made a distinct break from the past and have successfully rebuilt a sustainable organisation with clear alignment and focus.
“The EOH board and management team have dealt with the individual challenges as they have arisen over the last six months by activating a clear vision through consistent communication and being proactive with rapid and considered decision-making. Building resilience throughout the organisation has been an ongoing imperative.
“The group continues to manage working capital and cash tightly. Cash generation from business as usual (before finance costs and once-off legacy costs) for the full year continues to be positive, with a significant reduction in one-off legacy costs in H2 2021 compared to H1 2021. Net cash balances at 28 July 2021 were R605 million.”
Further, Van Coller said, the near-term priorities for the 2021 financial year have been a continued focus on quality earnings, cost reduction and solving for the group’s substantial legacy debt and inefficient capital structure.
According to Van Coller, EOH has also been keenly focused on enhancing its end-to-end technology solutions with future-generation offerings such as application development, security, automation, robotics and data analytics.
Turning to EOH’s international operations in the Middle East, UK and Europe, Van Coller said they remain exciting platforms from which to pursue exponential growth across application development, security and cloud solutions.
“In addition, these geographies provide opportunities for EOH’s IP platforms and potential strategic in-country partnerships.”