EOH’s shares continued their strong rally into Tuesday as CEO Stephen van Coller told investors that a new base had been established for the technology services group’s future growth.
Since their low point last Friday of R9/share to Tuesday morning’s peak of R16.71, the share price has rallied by an incredible 85% as investors turn more positive on the group’s prospects.
The group on Tuesday reported a loss of R3.3 billion for the six months ended January 31 2019 on the back of significant impairments. Normalised revenue was steady at R8.2 billion, with cash on the balance sheet of almost R1 billion.
The shares rallied more than 25% in morning trade on the JSE, extending a recovery that began on Monday when they rose by more than 14% at the close of the session.
“The period under review marks the dawn of a new era for EOH,” the group said in notes accompanying the financial results.
“The appointment of key executive team members, including a new group CEO (Van Coller) and chief financial officer (Megan Pydigadu), a revitalised strategic intent, and transparent approach, have greatly assisted the group in navigating its way through the challenges to date and to set the direction for the future.”
Speaking to analysts and investors in Sandton on Tuesday, Van Coller said that EOH plans to dispose of non-core assets that should raise more than R1 billion over the next three to 12 months, which will help strengthen its balance sheet.
“This is really about getting a flexible balance sheet so that in future we go back to being a consolidator of the fragmented IT industry,” he said.
Van Coller vowed to continue to tackle any corruption that is uncovered and to deal with rogue employees.
He said EOH is investigating five suspect contracts with law firm ENSafrica.
This comes after Microsoft terminated channel supply agreements with EOH over alleged malfeasance involving a contract with the South African department of defence, which is now the subject of a probe by the US Securities and Exchange Commission.
Van Coller expressed frustration that Microsoft has not been more transparent in its dealings with EOH as he works to fix the issues. He even suggested at Tuesday’s presentation that corporate South Africa should take open-source software — which competes with Microsoft’s proprietary solutions — more seriously. He took a further jab at the software giant, saying: “You can’t be corrupt on your own.”
In its results statement, EOH said it has made meaningful progress in “addressing legacy governance issues, future-proofing the business and aligning strategic and financial performance”.
“While much of the execution to create focus and additional liquidity is yet to be concluded, EOH is well positioned to commence the process.”
It said it has actively engaged with clients and that feedback has “overwhelmingly been that their relationships with EOH are long term in nature and that the service they continue to receive is of the highest standards”.
“The group remains an ethical, relevant force for good and will continue to play a positive role in society, beyond business as normal,” it said.
“We’ve set the foundation and now it’s all about execute, execute, execute,” said Van Coller at the conclusion of the presentation.
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