Technology

EOH loss widens over 1,600%

EOH’s loss for the six months through January 2024 widened by over 1,600% as the company continued to struggle with declining revenue.

EOH released its financials for the six months ended 31 January 2024 today, which revealed another poor set of results for the company. 

Revenue from continuing operations decreased slightly by around 2% to R3.15 billion from R3.21 billion the year before.

EOH’s Digital Enablement business showed good revenue growth at 9% and its International business continued strong growth at 11%. 

However, this growth was offset by reductions in other areas, particularly in the Operational Technologies division, which has been negatively impacted by delays in closing public sector contracts and contracting delays with large mining customers.

This saw the company’s loss for the period decline from R5.33 million to R91.38 million – an over 1,600% increase. 

EOH’s loss per share deepened from 3 cents to 15 cents, or from 14 to 15 cents when excluding discontinued operations.

“As reported at the 2023 financial year-end, EOH experienced a challenging second half of FY2023. This trend continued through the first three months of HY2024,” the company said. 

“Despite an improvement in trading and tendering activity in the second three-month period, the challenging environment has led to a reduction in revenue.” 

“One of the major challenges facing the South African IT industry is finding and retaining appropriately skilled talent.” 

Therefore, despite the impact on gross margins and overall profitability, EOH said it took the decision to retain highly skilled staff that were not fully productive in anticipation of improved trading. 

“Management believes this is the correct medium-term approach in order to resource an anticipated increase in activity appropriately but will continue to monitor the economic environment closely.”

EOH added that operating costs continue to be a core focus, and it is on track to eliminate at least R50 million from the FY2023 cost base on an annualised basis. 

Investor pain

Former EOH CEO Stephen van Coller

Investors in EOH have seen their wealth disappear after corruption was uncovered in the company back in 2017.

The company has since promised a turnaround strategy, which was set in motion with the appointment of its previous CEO, Stephen van Coller.

As part of this strategy, EOH sold many of its businesses at prices much lower than their book values to rid itself of debt.

However, although this helped reduce debt, the company’s revenue streams dried up even faster as a result.

By the end of 2022, EOH had little capital left and was close to technical insolvency when it announced that it would issue a R500 million rights offer.

The company said this would lead to a new and improved EOH 2.0 and lay the foundation for growth. However, this never happened.

Shortly after the rights offer concluded, Van Coller notified the market that he would be stepping down as CEO.

Investors have yet to see the turnaround EOH promised years ago and have lost 55% of their wealth since the announcement of the rights offer.

EOH is battling with cost management and growing revenue streams, and the R730 million company is now only a shadow of the R24 billion company it once was.

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