EOH CEO Stephen van Coller is a hero – but not to everyone

EOH CEO Stephen van Coller is widely hailed as a hero for exposing corruption at his company, but many stakeholders argue he is a villain for destroying tremendous value.

When Van Coller was appointed EOH CEO on 1 September 2018, his mandate was simple – create value by growing EOH and creating jobs.

He inherited a company with R16.3 billion in revenue, a net profit of R288 million, equity of R8.1 billion, and 11,500 employees.

When Van Coller took the reins, the share price was on a downward trend. It traded at R40 per share, well below its highs of over R100 two years earlier.

The company was under pressure because of its growing debt burden, reports of corruption and mismanagement, and poor corporate governance.

He was there to fix the problems created by his predecessors while growing the company and creating shareholder value.

Van Coller decided to focus heavily on the previous corruption at EOH. He fired employees implicated in financial maleficence and renegotiated problematic contracts.

He also testified at the Zondo Commission, sued former executives for R6.4 billion, and laid criminal charges against employees implicated in corruption.

His public fight against corruption made him a hero among South Africans who were sick and tired of maleficence – especially following the Zuma era.

He is justifiably seen as a beacon of light in the battle against corporate corruption when most other chief executives turned a blind eye or wiped it under the carpet.

Van Coller did exactly what the state and other institutions expected when corruption was uncovered, and he did it well.

However, it came at a price. EOH, along with Steinhoff, became the poster child for corporate corruption and got hammered as a result.

Another problem is that time and money are limited resources. Van Coller focused on spending resources on past corruption instead of future growth.

For example, he was accused of unnecessarily spending R245 million with legal firm ENS Africa and another R190 million on consultants. This was something EOH could not afford.

Another criticism is that Van Coller was obsessed with the banks getting their money to the detriment of EOH.

He was accused of selling many profitable businesses below market value to get money to pay the banks.

Van Coller said he was very proud that EOH never missed an interest payment and that the banks got all their money.

While the banks were happy with Van Coller, other EOH stakeholders, like employees and shareholders, had a far tougher journey.

During Van Coller’s tenure as chief executive, shareholders lost most of their money, and many employees lost their jobs.

The table below shows EOH’s performance under Van Coller.

EOH	July 2018	October 2022	Difference
Revenue	R16.3 billion	R6.0 billion	-63%
Operating profit	R977 million	R150 million	-85%
Profit after tax	R288 million	-R160 million	-156%
EBITDA	R1.4 billion	R0.5 billion	-64%
Total assets	R16.0 billion	R3.6 billion	-78%
Total liabilities	R7.9 billion	R3.6 billion	-54%
Total equity	R8.1 billion	R21 million	-100%
Employees	11,500	6,111	-47%
Share price	R40.00	R1.55	-96%

Detractors, including a group called “Save EOH”, alleged that Van Coller served his personal ambitions instead of looking after EOH.

They argued that EOH was a healthy, growing company when Van Coller took over but that he favoured the banks and his image as a corruption fighter over EOH’s welfare.

Save EOH further said that while employees had to take salary cuts and forfeit bonuses, Van Coller ensured that he and his executive team received huge salary packages.

The image below shows the increase in CEO and CFO salaries after Van Coller took the reins at EOH.

Disappointing results

After losing most of their money over the last few years, EOH shareholders were optimistic that the company was set for a rapid recovery.

In February, Van Coller said the successful rights issue welcomed a new era for EOH, dubbed EOH 2.0, with a new strategy.

The company raised R500 million through its shareholders, which was used to restructure its debt at lower interest rates.

Van Coller added that the company was now well-positioned to make significant investments in the growth of the business.

All eyes were, therefore, on EOH’s next set of results to see whether the company’s promised turnaround materialised.

Unfortunately, EOH’s latest trading statement for the financial year ended 31 July 2023, released on Thursday, was another disappointment.

The company is still loss-making, although it did show an improvement in the headline loss per share and loss per share from continuing and discontinued operations.

The market did not like what it saw, and the EOH share price plummeted 9% on the trading update.

Besides the disappointing results following the rights offer, EOH’s finances became increasingly difficult to follow.

Although EOH is trying to put a positive spin on its results, it failed to deliver improvements in any concrete area.

EOH would boast about improvements in “continuing adjusted EBITDA” figures or “increases in continuing normalised EBITDA”.

However, unlike net income or revenue, these are non-standardised financial measures that can be adjusted according to subjective interpretation. It causes unease among investors.

Another red flag is EOH’s continued restatements of figures. It makes comparative period evaluation and analysis difficult, and persistent occurrences tend to put off investors.

The complexity of the reporting, combined with the disappointing results and failure to deliver the promised turnaround, caused many investors to lose faith in the EOH story.

It is, therefore, unsurprising that the EOH share price is down 45% over the last year, with investors feeling there are better opportunities in the local market.