EOH, whose share price has lost almost two thirds of its value so far in 2019 over corporate governance issues, will press criminal charges against employees implicated in corruption.
Once a high-flying tech outfit, EOH is in the middle of restoring its reputation and cleaning its balance sheet following allegations of underhand dealings involving its employees and client, the government. The allegations cost the company one of its key contracts with Microsoft.
A forensic report by law firm ENSafrica, which was appointed by EOH before CEO Stephen van Coller joined the company, flagged "suspicious transactions" totalling R1.2bn between 2014-2017.
Further investigation into the transactions found evidence of governance failings and wrongdoing including unsubstantiated payments, tender irregularities and unethical business practices, the firm said.
"ENSafrica have assisted EOH in submitting further reports to the authorities in line with our statutory reporting obligations, and well beyond, as well as proceeding with criminal charges and other legal processes to recover losses caused by the perpetrators of wrongdoing," the company said in a note advising shareholders to be cautious in trading its shares.
The stock closed 4.6% lower at R11.90, a dramatic turnaround of fortunes for the company whose share price reached a high of R180 in 2015. The share price has dropped 61% so far in 2019, wiping R3.4bn off the company’s market value.
EOH has also been assessing the effect of the corporate governance failures on its balance sheet but has warned it would likely fall into a 973c headline loss per share from continuing operations from a profit of 278c per share in the previous reporting period.
The figure did not include the potential effect of the findings of the ENSafrica forensic investigation, which predates current management, EOH said.
The company is due to release its annual results on October 15.
Under Van Coller, who took the helm in September 2018, EOH has largely cleared out its longstanding leadership structure with the departure of several executives, including founder and chair Asher Bohbot and most recently directors Zunaid Mayet, Rob Godlonton and Pumeza Bam.
As part of clean-up efforts, he has also taken steps to shut down the business unit EOH Mthombo, where eight of its employees allegedly made payments to people who had done little to no work; engaged in unethical business practices; conspired with suppliers to inflate software sales; and inappropriately gave individuals gifts to secure contracts.
The unit brings in 15%-20% of the company’s R18bn annual revenue. Earlier this week, its competitors such as Altron moved in to fill the void, with an announcement that it had been awarded a licence to sell products and service support to clients on behalf of Microsoft.
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