EOH shuns big public-sector projects
Newly appointed EOH CEO has taken a radical decision to let go of large public-sector projects
EOH is no longer keen to take on large projects for the public sector, which owes the technology group about R600m, says new CEO Stephen van Coller.
Van Coller, who joined the company from MTN in September, said that while the public sector tended to pay on time for annuity-type contracts, state entities were less punctual when it came to multiyear “complex transformational projects”, mainly due to frequent leadership changes.
“You end up having three or four bosses while you’re implementing a fairly complex project, and because of all the changes, you also end up with cost overruns.”
In the public sector, EOH would now focus on annuity work, he said.
Of its long-outstanding public-sector debt, the group had secured payments worth about R70m from the state in the past six weeks.
“We’ll continue to work through it. At the moment I’m less worried about write-offs thanabout getting cash in the bank,” Van Coller said.
EOH said on Tuesday trading conditions remained difficult, “exacerbated by the constrained South African economy as well as the government’s public sector austerity measures”.
Organic revenue growth remained in the low single digits in the three months ended October and margins remained similar to those in the 2018 financial year, the group said.
Van Coller said not many businesses were allocating funds towards large transformational projects.
As part of its efforts to contain costs, EOH would consolidate its properties, many of which were brought into the group through acquisitions.
“As an example, we’ve got 110,000m² of property in Johannesburg, for 5,500 employees … You should have about 9m²per employee, but we’ve got more than 20m²and quite a few of our staff work flexibly and some work in clients’ offices and maybe need an office two days a week.
“That’s a massive inefficiency. We spend probably R600m a year on property,” Van Coller said.
EOH said on Tuesday it had restructured itself into four units.
“This will allow us to better support these businesses as they need different focus, capital structure and management,” Van Coller said. “We are bolstering our financial and other reporting processes and we have also provided a business enabling governance framework and will build a central treasury management function."