EOH deal unwind to hit earnings


EOH deal unwind to hit earnings


Published Date: 2018-01-04 | Source: Stephen Gunnion | Author: Stephen Gunnion

EOH deal unwind to hit earnings

The group will take a non-cash hit as it sells back the GCT Group

EOH says it will take a once-off earnings reduction of R385 million as it unwinds three acquisitions made two years ago. The technology group is selling back Grid Control Technologies, Forensic Data Analysts and Investigative Software Solutions to its former shareholders.

Last month EOH said while the groups hadn't met their performance warranties, recent negative media around Keith Keating, a director of all three companies, had forced it to expedite the unwinding and conclusion of the sell-back agreement. Daily Maverick reported that Keating was implicated in alleged procurement irregularities in the South African Information and Technology Agency and South African Police Service amounting to about R6.1 billion.

Unwinding the transactions involves selling back the companies in the GCT Group for an amount of R365 million, which is equal to the cash originally paid and the value-adjusted EOH shares originally transferred.

It said the non-cash reduction is made up of R169 million in previously recognised profits for the past three years being unwound, and R216 million in EOH share-related effects arising as a result of the reversal of anticipated share transfers as well as the reduction in the value of the shares returned due to share price movements. It doesn't expect any impact on headline earnings.

Its shares gained 0.4% to R69.07 yesterday. They have recovered 53% since closing at R45 on 7 December.


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