Divorce from police supplier to cost EOH R400m
EOH’s acrimonious divorce from Grid Control Technologies (GCT) and its associated companies will reduce its 2018 financial year earnings by about R385m, the IT group said on Wednesday.
Companies within the GCT group included Forensic Data Analysts, whose founder, Keith Keating, recently issued a media release claiming his company "has been exposed to hostile corporate takeover tactics, which began with a demand to hand over shares in the company without compensation".
Keating did not name EOH in his statement, but alluded to some shareholder in Forensic Data Analysts, which he accused of using takeover tactics "reminiscent of the methods employed to force Optimum Coal into business rescue, allowing it to be bought for scraps by Tegeta and to take over Optimum’s government coal supply contracts".
EOH said in a statement in November that it was in the process of "unwinding" an investment in the GCT group it made in 2015.
"These discussions were initiated as a result of a significant underachievement against performance warrantees. Recent media allegations relating to Mr Keith Keating caused EOH to expedite the unwinding and conclusion of the sell-back agreement."
Keating’s lengthy media statement argued that reports that he had had a corrupt relationship with police officials and had rung up R5.5bn in sales for items such as "R300,000 torches" were part of a smear campaign to steal his business away from him.
According to Keating, a year-long investigation by the Independent Police Investigative Directorate (Ipid) and other law enforcement authorities had resulted in no prosecution against his company.
Regarding reports that his company had sold the police the pricey torches, Keating said these were "complete Rofin forensic light source kits", which cost "$16,500 each, which price excludes shipping costs, taxes and duties, storage, transport and logistics costs, maintenance costs and other business expenses, that enable continued supply to the South African Police Service at the required standards as agreed during procurement."
Keating said contracts directly between his company and the police amounted to R457m, "which is also billions of rand less than the amounts being reported on".
Regarding photos of himself with police officials in the trophy room of Manchester United, Keating said the party in the photo was in the UK for an officially sanctioned conference in Cambridge, which his company did not pay for.
EOH said on Wednesday: "The unwinding involves selling back the companies in the GCT Group to the former shareholders for an amount of R365m, which is equal to the cash originally paid and the value-adjusted EOH shares originally transferred.
"The unwinding is expected to result in a noncash, once-off reduction in consolidated earnings of R385m for the financial year ending July 31."