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EOH to post huge loss on impairments – shares plunge

The group’s share price plunged as much as 19.8% to R9/share shortly after market open.

Technology services group EOH Holdings will report a huge loss for the six months ended January 31, 2019 on the back of significant impairments as the new management team, led by CEO Stephen van Coller, moves to clean up the business.

EOH will post a headline loss per share of R9.93, it said in a statement to shareholders on Friday before markets opened in Johannesburg. 

The group’s share price plunged as much as 19.8% to R9/share shortly after markets opened, but soon recovered some lost ground. By 9.26am, the shares were trading down 13.2% at R9.74.

Revenue will remain stable at R8.4-billion and operating costs will be flat, after the exclusion of the impairments and other one-off items. Normalised earnings before interest, tax, depreciation and amortisation from continuing operations will come in at R387-million.

“The group has recently completed a strategic review of the business and presented a strategic plan to the board which was adopted in late March 2019,” EOH said. “The strategic review necessitated a review of the carrying value of intangible assets, the identification of business lines no longer core to the adopted strategy and a review of minority investments.”

Losses

The impact on earnings per share, which will be a loss of R20.99, from the reported numbers from a year ago, include:

  • Impairments to goodwill, intangible assets and equity-accounted investments of R10.92/share;
  • Losses on business identified for close-out in the interim period of R3.72/share;
  • Impact of additional specific impairment provisions of trade receivables and other financial assets under IFRS 9 accounting standards of R1.42/share;
  • Impact of the Lebashe empowerment transaction of R1/share; and
  • Loss on the disposal of an equity-accounted investment in Zimbabwe of 93c/share.

Furthermore, a financial review has resulted in a restatement of the full-year results for the 2018 financial year, with Heps declining from the reported R2.78 to 18c (or from R2.83 to 23c when discontinued operations are included). The restatement relates to an impairment booked against the unwinding of the acquisition of GCT and the TTCS equity-accounted investment in Zimbabwe, the group said.

EOH emphasised that its net asset value — “notwithstanding the non-cash-flow items” — was R4.6 billion, including cash of R957 million, at the end of January 2019. This is “substantially above” the group’s market capitalisation, it said.

The group will publish its interim results on 16 April.  — © 2019 NewsCentral Media

This article was originally published on TechCentral here.

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Who were the directors when this rot was covered up? They need to be exposed and held accountable. Non executives get away with gross incompetence, they must be brought to account.

And this, dear reader, is the true cost of the legalized corruption known as BEE. BEE has the seeds of disaster and uncompetitiveness built into its DNA.

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