Our opinion on the current state of EOHEnterprise Outsourcing Holdings (EOH) was once Africa's largest information technology company, involved in almost every aspect of computer applications. At its peak, the company had 11,000 staff members, though this number has since been reduced to 6,151. EOH was a star performer on the JSE until August 2015, with a long history of steady profit growth. Its share price peaked at R178 per share with a P:E ratio of 35. However, after an unsuccessful attempt to exceed that high in September 2016, the share price began a steady decline, reaching a low of 146c in February 2023.
The fall in share price coincided with allegations of involvement in state capture in collaboration with the Gupta family. The company's founder and CEO, Asher Bohbot, resigned in May 2017, handing over leadership to Zunaid Mayet, and later to Stephen van Coller. Bohbot's departure was seen as a major blow, as the company had been strongly driven by his leadership. Following the leadership changes, EOH's 200 subsidiaries were consolidated into three divisions with centralized debt collection and procurement.
In July 2021, Business Day reported that EOH could potentially be "blacklisted" by the South African government due to past tender fraud, which would have severely impacted the company's future prospects.
To address its financial difficulties, on 11th November 2022, EOH announced a R500 million rights issue and a R100 million private placement, primarily to reduce its debt. By 13th February 2023, the rights issue had been 135.8% over-subscribed, reflecting strong investor interest. However, in its results for the year ending 31st July 2024, EOH reported a 3.1% decline in revenue and a headline loss per share of 0.21c, compared to a loss of 21c the previous year.
The company has undertaken a turnaround plan, with a special board subcommittee formed in June 2024 to oversee restructuring and rationalization initiatives. EOH expects cost savings of between R160 million and R200 million going into FY25, thanks to the successful restructuring of corporate and administrative costs.
On 31st May 2024, several directors resigned, and Marius de la Rey was appointed as interim CEO, adding further to the company's ongoing transformation.
From a technical perspective, the share made a "double bottom" in April and May 2024, indicating a potential reversal of its long-term downward trend. Following this, the share began an upward trend, which suggests that the company may be on the road to recovery. If the restructuring efforts prove successful, EOH has the potential for further growth, especially as it works to stabilize and rebuild its business.
