EOH softens earnings blow


EOH softens earnings blow

Published Date: 2019-10-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

EOH softens earnings blow

The group says its headline loss from continuing operations will not be as big as previously forecast.

EOH says its full-year loss from continuing operations won't be as bad as previously predicted, despite the impact of a probe into R1.2 billion of suspicious payments made by the group.

In an updated trading statement, the technology services group said the loss for the year to end-July was likely to be in the region of R24.64 per share, down from a profit of 202c per share a year ago. Headline earnings would swing from 278c in 2018 to a loss of R13.52 this year. That's lower than the loss per share of at least R27 and headline loss per share of R18 forecast in a trading statement last month.

However, including discontinued operations, its loss per share widens to R29.95 and its headline loss per share is also bigger at R16.81.

It said the revised numbers included the current potential impact of the findings by law firm ENSafrica, which conducted a forensic investigation into irregular transactions at the company. The investigation found evidence of a number of governance failings and wrongdoing at EOH, including unsubstantiated payments, tender irregularities and other unethical business practices. The transactions were primarily limited to the public sector business centralised in EOH Mthombo and to a limited number of EOH employees. EOH Mthombo was the division that Microsoft cancelled important partnership agreements with earlier this year.

The company said its financial performance was also affected by a number of businesses that had been reclassified as discontinued since the half-year stage, as well as impairments. It said there was a disagreements with its auditors on the timing of the impairments and whether they constituted prior year restatements.

Separately, the group announced that empowerment partner Lebashe had informed it that it wouldn't subscribe for a third tranche of shares worth R250 million for the time being. It already invested R750 million in the company in the two previous tranches. It said the empowerment investment company had taken a conscious decision to allow EOH to establish a new independent board of directors without representation from Lebashe until after the conclusion of the ENSafrica investigation.

EOH's results are scheduled for release tomorrow.

Its shares closed 7.2% higher at R12.76 on Friday. The updated trading statement was released after the close of trade. The announcement regarding Lebashe was made while the market was still trading.

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