EOH slumps 15% after reporting impairments
After impairments, the embattled technology company expects an interim headline loss of R9.73 per share, down 409% year on year
Embattled technology and consulting group EOH’s share price slumped to a more than nine-year low on Friday, after it said expected a drop in headline earnings of 409% for the six months to end-January.
The company’s earnings have been hit by a strategic review of its assets, but it said on Friday that revenue remained stable at R8.4bn during the period, while operating costs remain flat.
The strategic review necessitated a revision of the carrying value of intangible assets, the identification of business lines no longer core to the adopted strategy as well as a review of minority investments, EOH said in a statement.
PODCAST | Consumers are fed up with Telcos
The company noted that despite the hit to its cash flow, its net asset value remained substantially above its current market capitalisation of R1.85bn, at R4.57bn. The latter figure includes cash of R957m as of the end of January.
At 9.05am EOH’s share price had slumped 15.15% to R9.52, and is now down almost two thirds so far in 2019. This represents its worst level since December 2009.
The company share price has been battered recently by a series of events, including an 8% drop on March 20, when it announced the delay of its results, due to the need to conduct the strategic review. The results are due for release on April 16.
In March, EOH confirmed that US tech giant Microsoft has officially terminated its contract with the company, which is probing its past bids for state projects due to concerns about its dealings with various government departments.
The stock has now lost nearly two thirds of its value so far in 2019, extending the heavy losses incurred in the two previous calendar years.
In late 2016, EOH’s shares were trading above R170.
Microsoft SA served EOH’s subsidiary, EOH Mthombo, with a cancellation notice in February after an anonymous corruption complaint. EOH hired a forensics team to look into the matter and has since suspended or received resignations from those implicated, new CEO Stephen van Coller said in a letter to staff in February.
With Nick Hedley