EOH boss sets deadline for investigation conclusion
Stephen van Coller, group CEO of troubled EOH, has written a letter to stakeholders detailing the challenges faced over the past few months and the measures it is taking to resuscitate the business.
EOH's problems surfaced after software giant Microsoft in February terminated its contract with the IT services company after an anonymous whistle-blower reportedly filed a complaint with the United States Securities and Exchange Commission about alleged malfeasance to do with a R120 million contract with the SA Department of Defence.
Since the reports surfaced, the JSE-listed EOH's share price has taken a knock, with the share price falling to below R10 for the first time in nine years.
At the time of publishing, EOH's share price was trading at R11.
Over the past year, the company's stock has plummeted 71.9% and its market cap is now sitting at around R3 billion.
Van Coller has since proactively initiated an internal investigation, supported by ENSafrica, into EOH Mthombo's channel partner business unit.
"These last few months have certainly been the most challenging time in the history of the EOH group," says Van Coller in the letter.
"However, it is in moments like these that the true character of a business and its people emerge. Franklin D Roosevelt [former US president] once said: 'A smooth sea never made a skilled sailor.' Since my last letter to you, the senior team and I have spent much time with clients and other stakeholders to share our plans about our ongoing efforts to create a well-governed and sustainable business."
He points out EOH is working to build a sustainable business that is untainted by unethical practices.
"We are strengthening our leadership team, instituting stronger governance processes and reorganising our group structure. We are fully committed to addressing the Microsoft issue that has recently come to light which is limited to a few individuals, but which has had a disproportionate impact on EOH's reputation."
According to Van Coller, all investigations are expected to be completed by 31 May.
He notes EOH's legacy ICT public sector business has been migrated into a new structure where all public sector transactions and related enterprise development partners are reviewed and independently vetted by ENSafrica.
"Additionally, we are reviewing our accounting policies to ensure we deliver a sensibly valued balance sheet by year-end. This process will result in the release of our interim financial results on 16 April. The EOH-wide whistle-blower app, EXPOSE-it, has been launched to support confidential and anonymous disclosure for any unethical conduct."
According to Van Coller, the EOH board has approved a refinement of the group structure which provides for separate capital and governance structures.
He points out that a further update will be provided in the coming weeks. Each group business will be accountable for their own governance, risk and compliance, with oversight by their respective boards. All these board appointments are expected to be concluded by 31 May.
He adds that Rothschild & Co, the international investment bank, is working closely with EOH on reorganising the business for enhanced growth and stakeholder value.
"We believe their experience will add immense impetus to the reorganisation process. This reorganisation process needs skilled and experienced people to lead the change. Potential candidates for the independent non-executive chair and other EOH group board roles are being shortlisted and we will communicate when these appointments are made."
He notes that a chief commercial officer, starting on 8 April, has been appointed with executive responsibility for implementing more stringent risk, compliance, procurement and enterprise development procedures.
Her extensive financial services and large listed company risk and compliance experience will allow EOH to split the finance function, providing a second line of governance oversight, says Van Coller.
"Key employees will be incentivised in their respective businesses to ensure they are directly remunerated for performance and contribution. We are very optimistic about the potential for this to significantly future-proof the businesses.
"While there have been headwinds on our path, I am constantly reminded that over 11 000 people at EOH continue to drive innovation and real value for our clients every day. The changes we are making have put in place the building blocks for our businesses to grow at their own pace in specialised markets.
"The leadership team and I are very encouraged by the active support of our clients, technology partners and employees to help build the EOH of the future," he concludes.