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Stephen Van Coller, EOH’s [JSE:EOH] new chief executive officer, has said he will use a R1bn cash injection from a stake sale to black investors to pay for acquisitions and decrease the group’s bank debt.
EOH, a South African information, communications and technology firm, said earlier this year it would split into two units and work to improve its corporate governance amid a slump in its share price. Its founder, Asher Bohbot, returned as chairperson when Sandile Zungu resigned after more than four years in the position.
Van Coller, a former vice president of MTN [JSE:MTN], who was head of Absa’s investment banking unit before that, was named CEO in July and tasked with EOH’s turnaround.
"The cash will be used to pay for outstanding acquisitions, which is about R500m over the next 12 months, and bank debt that needs to be serviced," Van Coller said by phone from Johannesburg on Wednesday.
"There is still some balance sheet clean-up that needs to be done; we need to centralise cash flow, for instance."
During the year, EOH bought LSD Information Technology and a few other smaller businesses, with the consideration for acquisitions totalling R511m. EOH earlier on Wednesday reported a full-year loss of R101m, and said it wouldn’t pay a dividend.
The group’s unit focused on government contracts was dissolved by incorporating the majority of its activities into EOH’s two separate businesses with the remainder of that unit being discontinued. EOH also bought back a business unit.
"Those two impairments cost us about R800m, as we also had to pay out cash for some retrenchments that came with closing the public sector business," said Van Coller. Such large impairments are not expected to happen again, he said.
EOH dropped 1.35% to R35.01 as of 11:43 in Johannesburg. The stock has declined 49% this year.
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